Medical billing is the complex exchange of data and funds between you, your employer, an insurance company and a provider of medical care. Over the past 30 years, payments by insurers and government have largely replaced simple payment for services rendered. The billing process now involves over 172,000 coding and billing specialists.
History
The 1968 passage of Medicare established government health insurance to cover medical expenses for those ages 65 and up. In the late 1970s, private insurers entered the market claiming they could reduce medical costs for employers and consumers. Doctors filed insurance claims as a convenience for patients, and the era of patients directly paying for medical service largely ended.
Your Money
A portion of your pre-tax wages is sent to your insurer. If you get sick, you visit a doctor from a list contracted by your insurance company. You pay a $10 to $30 "co-pay," as partial payment. After the visit, the insurer mails you an Explanation of Benefits form, known as an EOB, listing the "charged" amount, the theoretical charge if you didn't have insurance, the "discounted amount," the amount the insurer will actually pay, and the "you owe," amount, usually zero, unless your state allows balance billing, or if the doctor does not have a contract with your insurer. Each year, you must first pay your deductible, which is the first few hundred to several thousand dollars in medical expenses for that year. You generally pay a separate deductible and co-pay for your medications.
Your Doctor
Your doctor describes your visit in a numeric code called an ICD-9. The codes tell insurance clerks for what ailment or injury what you were treated. The doctor's contract requires him to send these codes in electronic form to the insurer. Your codes are shared with other insurance companies in a database called the MIB. If there are no denials or limitations, the insurer pays the clinic the contracted amount.
Your Insurer
Your insurance company contracts with your employer to take part of your pre-tax paycheck each month. This called your "premium." When your insurer makes a payment to a medical office it is called a "paid claim." The difference between these two amounts is profit. The primary incentive of an insurance company is to maximize premiums while minimizing paid claims.
Your Employer
To survive and profit, your employer's incentive is to buy the lowest cost insurance available. Along with other factors, your group rate is based on claims paid. A few coworkers with high expenses will increase your premium. Employers have an incentive to avoid employees with sick family members, spouses who may become pregnant and to require long employment periods before an employee is eligible for benefits.
Effects
Your doctor must obey your insurer to be paid. Your employer picks your carrier and rate plan, and constantly shops for better plans. Your insurer controls costs by limiting your doctor's procedure and medication choices, denying claims and reducing amounts paid. In a given year, you may spend $10,000 in insurance, yet not see a doctor. Another year, you may say yes to expensive tests and procedures once your deductible is met, because you aren't paying directly. In the end, medical billing is a complex struggle among four differently motivated parties over your pre-tax dollars.
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