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How to Read Your Medical Bill

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According to a 2016 survey of more than 200 US consumers, 72 percent of patients have received medical bills that they found to be confusing. The statistic is hardly surprising - one bill for a single doctor's visit or hospital stay can include dozens of unfamiliar terminology and puzzling abbreviations.

It's tempting to look at the field marked "balance due" or "total balance" and write a check (or go online and pay with your card.) That is always an option, but you might be costing yourself hundreds or even thousands of dollars if there is an error on your bill. It also doesn't tell you whether your insurance is working hard enough to help you cover the costs.

Decoding Medical Bills: "What Does It All Mean?" 

The first thing to look at on your bill is the breakdown of charges and payments. The most significant numbers will probably fall under the total amount billed or total cost. The cost of your care overall is listed here and may charge to your insurer or yourself. You'll want to look further to see the detailed breakdown.

Adjustments

Your bill may include a field marked "adjustments," known to medical billing and coding professionals as "contractual adjustments." A negative number, it refers to the amount the provider has agreed not to charge. These adjustments happen after an agreement between your doctor's office or hospital and the insurance company.  

In most cases, adjustments result from a difference in the provider's charge and the amount that the insurer will reimburse. 

Insurance Payments vs. Patient Payments

The "insurance payment" is your insurer's responsibility, and "patient payments" often refers to what you have already paid in-office. The balance or amount due is what you still have to pay.  

If you want to further understand the breakdown of health insurance and patient payments, you'll need another document known as the explanation of benefits.

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What Is an Explanation of Benefits?

The explanation of benefits (EOB) isn't a bill – in fact, it will usually say "not a bill" right on it – but it will help you to understand how the insurer came up with a particular number for what you owe.

Deductible

Your EOB will probably include what you owe as part of your deductible, which is the total amount that you pay before your health insurance starts to cover your costs.

Copayment

A copayment is a pre-determined fee that you pay for each office visit. Different types of visits will have different co-pays. For example, you may have no co-pay for a preventive care visit but a $15 co-pay for a sick visit and a $20 co-pay for a specialist visit.  

If you have any doubts that the copayment on your EOB is incorrect, you can cross-check it with the summary of benefits that your health insurance company provides.

Co-insurance

While a copayment is a specified dollar amount that you pay for each appointment, co-insurance is the percentage of cost that is your responsibility according to the terms of your policy. Co-insurance will go into effect after you pay your deductible.

Charges Not Covered

Your EOB will have a column with an amount that the health insurance company is not responsible for paying. Each of these charges will appear alongside a remark or reason code. Some common codes indicate that:

  • You visited a physician out of your network

  • You haven't met your deductible yet 

  • Your policy doesn't cover the service you received

Elsewhere on your EOB, you should see an index that gives the reason. It's worth taking a few minutes to check on these in case there is an error.

Looking at Itemized Medical Bills

If you need to check if a particular procedure is covered or not, especially if it is deemed to be not medically necessary, you'll get the most comprehensive information from your itemized bill. You usually need to request these from your provider, as they do not get sent out to patients on a routine basis.

Your itemized bill includes codes for each service you received, from laboratory fees and costs for specific treatments to the amount you pay for your hospital room. If you plan to dispute any charge, it will be beneficial to understand the details. 

You don't need to be an expert in the codes shown on a medical bill. However, if you are interested in having a better understanding of them, let's go over what they mean.

Service Codes

Service (Svc) codes, written under the American Medical Association's Current Procedural Terminology (CPT) system, work in tandem with the Healthcare Common Procedure Coding Systems (HCPCS). The HCPCS system also includes billing or supplies and equipment, which are considered Level II expenses.  

Tests, procedures, and examinations use CPT codes, which are Level I codes under the HCPCS system. Each of these codes links to a diagnostic code from the International Classification of Diseases (ICD-10).

ICD-10 Codes

ICD-10 codes provide a universal classification system for diagnoses. Each service code must link to a diagnosis so that insurers can verify the medical validity of treatment. You should see one ICD-10 code for every condition that the doctor addressed during your visit.

Decoding the Message

People go through intensive schooling to learn and understand these codes. If there is one that you are particularly curious about, you can look it up online. You can do a CPT code search on the American Medical Association website and use the ICD's code search tool on its website. 

If trying to look up codes seems confusing or daunting, you can always call your doctor's office or insurance company and ask them to match CPT codes to a provided service. 

Putting It All Together

It may seem like a lot to think about, but all of the information you'll need to understand your medical expenses are in these four places:

  • the bill you received 

  • the itemized bill, requested from your provider  

  • the explanation of benefits sent by your insurer, and 

  • the plan summary for your health insurance policy.

With these documents and perhaps using a few references, like those described above, you can figure out what your provider is charging you and why. Understanding your medical bills will take some practice and time. However, it's a necessary first step to understanding your health care costs and coverage and help avoid any potential errors.

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