Decoding & Understanding Those Dreaded Medical Bills

Updated: Apr 12

As part of our ongoing efforts to empower readers to be better health care consumers, this entry is intended to help you untangle medical bills’ jargon and ambiguity. For previous or future entries and updates, visit our blog page here.





Unwelcome Communication

When a medical bill finally arrives, it is not a welcome delivery. Beyond the obvious, there are many other reasons:

• According to Forbes, 50% of all Americans carry medical debt, and more than half of that group (56%) owe more than $1000.00.(1) Those figures do not even include credit card balances and unpaid medical bills that haven’t yet hit consumers’ credit reports. When accounting those categories, the debt held by Americans may total one trillion dollars.(2)

• It is the number one cause of debt collections.(2)

• Pricing opaqueness: rarely do consumers know what a procedure or medication will cost. This lack of transparency has been addressed many times in our previous blogs.(3-11) and is a significant concern. After all, what other large purchases would a customer make not knowing the price? 

• Finally, just deciphering the bill can be an arduous task itself (see below).

However, understanding this correspondence is crucial to being accurately charged and catching mistakes!


Some Words About Rights and Responsibilities


A recent social media post by consumer health care advocate Marshall Allen, author of “Never Pay the First Bill,” suggests that you should carefully examine the wording when signing a financial responsibility contract (standard before the onset of care).(12) His recommendation can be distilled down to the following: “Everywhere the proposed contract put me on the hook for “charges,” I inserted the word “appropriate,” so the revised version said I agreed to “appropriate charges.”” He also advises that you “Do not agree to a financial agreement with a health care provider that’s unfair to you,” and “Reward the clinicians who are fair with your business. Shun the price gougers.”(12) Even in emergency situations, there is latitude with revising the contract, and since January 1, 2022, the No Surprises Act generally strengthens consumer protections in this area.(10)


Billing Jargon

To address the last bullet point listed above, here are just a few standard terms that one is likely to encounter. Many of these definitions are courtesy of Kaiser Health News, which is an invaluable source of information for the health consumer.(13,14) Others can be found at the bottom of this article, under “Other Resources & References.”


THE PAPERWORK

Explanation of Benefits (EOB) – a statement that often arrives via mail and closely resembles a medical bill. The EOB provides details about a medical insurance claim that has been processed and explains what portion was paid to the health care provider and what amount of the payment, if any, is the patient’s responsibility.

Itemized Bill – a bill listing the cost of each item and/or service that was billed to you and your insurance rather than just the total cost or cost in an umbrella category (e.g., “medication”). A provider is required by law to give you an itemized bill – if you ask for it.


PEOPLE & PLACES

Policyholder – The individual or business (“group”) that has entered a contractual relationship with the insurance company.

Insured – The person with health insurance coverage. You may be both the policyholder and the insured for individual health insurance.

Insurer or carrier – The insurance company that provides coverage to the policyholder.

Provider – Basically, those that offer the product or service, such as a clinic, hospital, doctor, lab, health care practitioner, or pharmacy.

Hospital – an institution that provides medical, surgical treatment, and nursing care for sick or injured people.

Emergency Room (ER) or Emergency Department – generally part of the hospital equipped to deal with sudden and severe – potentially life-endangering – symptoms that must be treated quickly, such as a severe allergic reaction, shortness of breath, or chest pain.


BILLING & INSURANCE TERMINOLOGY

Coinsurance – a portion of insurance in which the policyholder is responsible for a particular share of the prices negotiated between providers and the insurance plan. Coinsurance is generally expressed as a percentage and billed after medical services are rendered.

Copay – an amount that an insurance policyholder pays out-of-pocket for services received, usually at the doctor’s office or hospital. After the copay or copayment, the insurance company will pay its share of the remaining costs.

Balance Billing – When a doctor or hospital bills the patient for any amount beyond that governed by his insurance contract (the insurer’s payment + patient copay). If you stay in your insurer’s network, providers must take the negotiated rate payment and cannot balance-bill. Outside of your network, you have no such protection. Note that even if the procedure is performed at an in-network facility, some other providers (such as anesthesiologists) might be out-of-network.

Chargemaster (also known as Charge Master or Charge Description Master (CDM)) – is a comprehensive listing of the price of all items billable to a hospitalized patient or the patient’s health insurance provider. These are basically “list prices” – no insurer pays them. In 2019, federal officials required hospitals nationwide to post their chargemasters.

CPT Codes – or Current Procedural Terminology codes, or simply “Codes” are the medical codes used to report medical, surgical, and diagnostic procedures and services. Entities such as physicians, health insurance companies, and accreditation organizations use them to identify services rendered. (CPT is a registered trademark of the American Medical Association.)

Final Thoughts Do not be intimidated to ask questions and seek answers from a trusted source or even the billing company. Do not settle until you understand. You are not alone. You are the customer and should know precisely what you are paying for!


References

1. https://www.forbes.com/sites/debgordon/2021/10/13/50-of-americans-now-carry-medical-debt-a-new-chronic-condition-for-millions/?sh=479333cb5e5d

2. https://siepr.stanford.edu/news/americas-medical-debt-much-worse-we-think

3. https://www.cipky.com/blog/no-rhyme-no-reason/

4. https://www.cipky.com/blog/whats-the-411-about-340b/

5. https://www.cipky.com/blog/no-rhyme-no-reason-redux-2/

6. https://www.cipky.com/blog/kentucky-healthcare-legislation-that-may-impact-you/

7. https://www.cipky.com/blog/national-healthcare-legislation-that-may-impact-you/

8. https://www.cipky.com/blog/the-cost-of-prescriptions/

9. https://www.cipky.com/blog/pbm-warnings-ramifications/

10. https://www.cipky.com/employee-benefits/when-no-surprises-are-a-good-surprise/

11. https://www.cipky.com/blog/hidden-costs-of-covid/

12. https://marshallallen.substack.com/p/demand-appropriate-medical-prices

13. https://khn.org/news/your-go-to-guide-to-decode-medical-bills/

14. https://www.cipky.com/group-health-insurance/


Other Resources & References

There is no shortage of websites that offer to explain terms found on medical bills. One key is to avoid those providing support and services that may incur yet another bill! (A good rule of thumb is to first head to those sites ending in .org or .gov) We have listed a few here; there untold others. Reliable ones include state or federal government sites, while others are university medical centers, carriers, and providers.

• examples of bills, with their parts explained: https://www.documentcloud.org/documents/6184507-EOB-ER-Snakebite-CG and https://www.documentcloud.org/documents/6184505-KHN-BOTM042019-Snakebite

https://www.marylandattorneygeneral.gov/Pages/CPD/Tips-Publications/tip41.aspx

https://medlineplus.gov/ency/patientinstructions/000881.htm

https://www.cms.gov/nosurprises/consumers/complaints-about-medical-billing

https://www.uwmedicine.org/patient-resources/billing-and-insurance-2/glossary

https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-costs/

https://www.benefitnews.com/advisers/opinion/why-clients-should-care-about-medical-billing-errors-and-what-they-should-do-about-it

https://www.cms.gov/nosurprises/consumers/understanding-costs-in-advance