Have you ever taken a close look at the receipts you receive from Medicare or your Medicare supplement insurance company? These “receipts,” as I called them, are actually called “Explanation of Benefits,” or EOB’s. These documents explain to the insured individual the complexities of the process of billing and payment for the services rendered by a provider. And complex they are. To understand the categories listed on the EOB, you need a document that explains the explanation. Do you know is meant by each of the categories on the EOB? If you don’t, I’m here to help. This explanation of the explanation of benefits will hopefully give an understanding of just how poorly Medicare pays doctors.
There are seven categories on the EOB, and I will attempt to explain clearly what each of these categories means. The categories are as follow:
Service Dates, Service/Provider, Benefit Description:
Patient’s Name, Claim Number, Member ID, Provider’s Name, Date of Service
What the patient had, what procedure was done, when, and by whom.
Billed Amount:
The total dollar amount the doctor or facility charged for the service.
Allowed Amount:
The maximum amount Medicare will pay the provider for the service provided. The
difference between the charged amount and allowed amount is written off by the doctor.*
Non-Allowed Amount:
The difference between the billed and allowed amounts. This is the amount the doctor or
facility must write off.
Policy Deductible/OOP:
The amount of out of pocket (OOP) expense the patient must pay.
Paid Amount:
The portion of the allowed amount Medicare pays to the provider. **
Remark Codes:
Numbers or letters that explain why certain charges were adjusted or denied. These codes
are listed on the last page of the EOB.
Patient Responsibility:
The amount the patient may owe the provider, ie. deductible, co-payment, co-insurance.
- The service provider can charge any amount he/she wants to, but he/she will not be paid a cent more than the allowed amount. Medicare controls payments and revenues.
** The amount paid by Medicare is usually about 10% of the allowed amount. That’s a discounth
of 90%. Is there any other business you know of that can absorb a 90% reduction in their
revenue? Of course not. This is an outrageous abuse of the medical profession, and a
blatant attempt to bankrupt doctors and force them to accept a different payment model.
I hope this explanation helps you understand the workings of Medicare and Medicare supplemental insurance carriers. When you look at these statements in detail it becomes obvious why physicians are sprinting away from the abysmally low payments from Medicare. Being reimbursed 10 percent or less of what you charge is economic suicide for doctors whose patients are mostly Medicare. So that charge that you think is outrageous is a ruse because Medicare will only pay 10% of the allowed amount.
