by Allen B. Ury

When it comes to paying bills, most people jump straight to the bottom line. We tend not to pay much attention to the details, descriptions and breakdowns. We just want to know how much we owe.

This general aversion to detail is particularly common when it comes to our medical bills. Medical invoices tend to be highly detailed and contain words and phrases that seem to have been pulled from the Klingon Dictionary. Better to avoid the inevitable headache and just write the check.

But that can be a mistake. Medical bills often contain errors. The National Health Care Anti-Fraud Association estimates that as much of 10 percent of our health care costs are lost to fraud, errors and abuse. That’s $170 billion dollars every year.*

You can help avoid these errors by understanding the form and structure of medical bills. Here are the principal parts of a typical medical bill and what they mean:

Date of Service — This specifies the date on which your examination, test, surgery or other procedure took place. The date may just appear once, or be repeated throughout the bill if multiple procedures were performed. Make sure the indicated date matches up with your personal records.

CPT Codes — Current Procedural Terminology (CPT) is a set of five-digit codes that correspond to the thousands of tests, surgeries and other procedures performed throughout the American health care system. Although you probably won’t be able to authenticate the codes themselves, read the corresponding descriptions carefully to make sure they describe the services you actually received.

ICD Codes — The International Classification of Diseases (ICD) is an even more complex alphanumeric system for coding procedures, diseases and other diagnoses. Because they’re most often used for medical record keeping but not invoicing, you may not see these on your actual bill. But if you do, again make sure the descriptions relate to the procedures you actually received.

Charge — This is what the physician charges based on his/her own fee schedule. This may be higher or lower than prevailing fees for the same services in your area.

Adjustment — This is the difference (if any) between what the physician charges and the “allowable amount” for these services established via negotiation by the insurance company. The “remaining balance” is closer to an “alternate charge,” which is considered for actual payment.

Amount Insurance Pays — The amount paid by your insurance company will depend on, 1) The remaining balance after adjuments, 2) The details of your insurance plan, and 3) Your plan’s deductible, if any, and how much you’ve paid toward that deductible in the current calendar year. Most insurance plans don’t even begin to “kick in” until you’ve fully paid your deductible, which can range anywhere from several hundred to several thousand dollars, depending on the plan you’ve chosen. (Higher deductible plans are generally less expensive than low deductible policies, and are popular with people primarily interested in protecting themselves against the costs of treating “catastrophic” illnesses.)

Balance Due — Take the adjusted charge, factor in your deductible (if any) and the amount your insurance pays, and what’s left is the money you owe. So, for example, if your Adjusted Charge is $5,000, you have a $1,000 deductible and your insurance plan covers 80 percent, then the equation should look like:

Adjusted Charge (Balance): $5,000

Deductible: $1,000

Covered Amount: $4,000

Insurance Covers 80 percent: $3,200

Balance Due: $1,800

Understanding your medical bill can help ensure you only paid what you actually owe, and that you and your insurance company aren’t the victims of bogus charges, be they accidental or intentional.

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