I recently went through a medical billing hassle that was such a PITA that I decided to do a special podcast episode about it because it has such direct impact on saving money on healthcare.
So in episode 20 this week, I talk about how medical billing and health insurance claims work.
Using my own experience as an example, I share tips on how to be vigilant about health insurance so you save yourself from unpleasant surprise costs.
What you’ll learn in this episode:
- Why it is so difficult to get transparent healthcare price information in the US
- How medical billing works and why it can lead to some very big unpleasant surprise costs
- What CPT codes and ICD 10 codes are, and exactly how they are used to determine how much you vs. insurance pays
- A 5-step checklist of actions to take so you never get stuck with surprise medical costs
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Links mentioned in this episode:
- Health savings account rules
- How Medicare works: eligibility, enrollment, cost, and coverage options, with Danielle Roberts (HYW048)
- HYW private Facebook community
Read this episode as a post:
CPT codes and ICD 10 codes: Why knowing how to look them up will save you money on health insurance claims
I recently had an extremely frustrating experience dealing with my health insurance company that could have ended up being very expensive.
Thankfully it didn’t turn out that way.
It involved something technical called CPT codes and ICD 10 codes.
A CPT code is a medical procedure code. It refers to the procedure the doctor or care provider will do on you.
An ICD 10 code is a diagnosis code. It refers to the REASON the procedure is being performed in the first place.
So, to give an example, if you get heart surgery, the surgery is the actual procedure. That will have a CPT code.
But to authorize that procedure, it must be accompanied by a reason, a diagnosis. That’s the ICD 10 code. You cannot just get surgery because you feel like it.
CPT codes and ICD 10 codes are important health insurance codes used to lookup how to process your medical treatment procedure claims for insurance reimbursement. They are used to figure out how much insurance is responsible for vs. how much you are responsible for.
Understanding how to lookup CPT code and ICD 10 code information is not some obscure thing that you should think doesn’t apply to you.
If you are a human and have ever gone to a doctor, then CPT codes and ICD 10 codes are being used in the background to pay money from your insurance company to your doctor’s office for all medical treatments.
And because doctor’s offices and insurance companies screw up billing ALL the time, being proactive and diligent about your medical costs and verifying what is and isn’t covered by your insurance can literally mean the difference between paying thousands of dollars or saving thousands of dollars in medical bills.
My recent experience dealing with medical billing was so harrowing that today I actually want to share best practices I learned when dealing with medical billing and health insurance claims that will hopefully help you deal with your health insurance more effectively than I did, and help you get clear answers on medical procedure prices before you undergo a potentially expensive medical procedure.
I’m going to lay out the exact steps you should take to verify that your health insurance will, in fact, cover any specific medical procedure, so that you can avoid unpleasant surprises when the hospital or clinic bills you for payment.
CPT codes and ICD 10 codes are specific to the US private healthcare insurance system
I’ll start by saying, if you come from a universal or single payer healthcare system, then consider yourself blessed — at least when it comes to medical billing and insurance claims. You don’t have to deal with the mess I’m going to explain in this post.
But if you are in the US healthcare system, which is a mostly private sector health insurance and care provider system, then it is extraordinarily complex. And that is where CPT codes and ICD 10 codes come into play.
In fact, sometimes it can feel like you need to be a lawyer to understand the intricacies of how the billing and claims process works.
I don’t say this lightly, because I am actually a Harvard educated lawyer licensed to practice in 3 states and even I still find myself often in such convoluted billing and claims phone calls with my insurance and care providers that it literally makes my head want to explode.
The situation where there is the most uncertainty and back and forth head-exploding “busy work” when it comes to verifying whether your insurance covers a medical procedure is for non-acute health conditions that could potentially become serious if they are left untreated long-term AND which are billed out at expensive rates. Meaning they have a high sticker price.
I recently went through exactly this experience.
And it was so painful that it sparked urgency in myself to record a special podcast episode on this, just so that I can help save you some of the same hair pulling I went through, the next time you have an expensive but non-acute medical treatment you need to get done.
Before I explain what happened, I want to clarify upfront exactly what I mean by non-acute but potentially serious health condition:
I am NOT talking about preventative things like getting vaccinated or getting tested for breast cancer. Things like this will almost always be covered by any insurance plan without question.
I am also NOT talking about emergencies — like getting hit by a car or breaking a leg.
And I am NOT talking about presently serious conditions — like getting cancer, diabetes, or heart disease. Things like that are also generally going to be covered by all insurance.
I am talking about medical treatments that are in the middle — such as chronic back pain or neck pain, or any other non-acute but potentially serious condition, where the gravity of the condition increases over time if left untreated, AND that is expensive to diagnose or treat upfront.
So let me share some context about my own situation to help explain what I mean.
Sleep Apnea
I snore a bit when I sleep.
It used to be moderate enough that my wife wouldn’t be too perturbed by it.
But in recent years she said it has gotten bad. Sometimes she’ll leave the bedroom in the middle of the night. And I find her on the couch in the morning.
Or if she goes to sleep before me, I’ll sometimes just spare her the sleep deprivation and, like Katniss Everdeen, “offer myself up as tribute” by sleeping on the couch myself.
My wife is a medical professional and she told me I probably have a condition called “sleep apnea.”
This is a condition that degrades the quality of your sleep because your air passageway in your nasal and throat closes up and reduces the oxygen flow to your body when you sleep at night.
Treatments for this are normally not a big deal.
The typical treatment is:
(1) Go to a sleep doctor for an initial consultation.
(2) The doctor will often recommend to do a sleep study. This is where you go to a sleep clinic and sleep overnight. They hook you up to a bunch of machines and sensors so they can monitor your sleep overnight.
(3) If the doctor confirms you have sleep apnea, she will prescribe you to get a machine that you wear over your face while you sleep at night that pushes extra oxygen to you as you sleep.
In my case, I went to a sleep study doctor who prescribed a sleep study, which ultimately confirmed that I do have sleep apnea. The doctor prescribed me to get the oxygen machine.
The initial consultation, the sleep study, and the machine were all expensive.
The consult was $900.
The sleep study was $13,000.
And the machine is more than $1,000.
In total, the cost of all this was about ~$15,000.
Given the cost of all this was more than the cost of 2018 Honda Civic Hatchback, I wanted to be extra sure that it was, in fact, going to be covered by my insurance before I started the process.
I didn’t want to be on the hook to pay $15,000 out of pocket if I got a surprise bill stating that my insurance didn’t cover it.
This is why I say, if you live in a country with a single payer healthcare system, you are blessed that you don’t have to deal with these kind of shenanigans.
In the US healthcare system, it is incredibly difficult to get answers to basic questions about whether your medical treatment will, in fact, be covered by insurance.
Why it is so hard to get CPT codes, ICD 10 codes, and clear billing information
The main reason why it is so hard to get CPT codes, ICD 10 codes, and clear billing information from healthcare providers is because, in a hospital or medical clinic, every employee who works there stays strictly in their own “swimlane.”
Navigating the internal maze of a healthcare organization involves many departments, and no single person working there will be able to tell you all the pieces of information you need so that you can call your insurance company exactly ONE TIME to ask whether your medical procedure will be covered and get a straight answer you can confidently rely on.
Furthermore, no one working there will proactively take responsibility to help you — the patient — connect the dots inside the organization to get the answers you need.
To answer the simple question: “Does my insurance cover this?” you need to do a lot of legwork on your own.
Specifically, you will need:
(1) The name of the procedure or series of procedures that will be done for you. This includes every consultation, evaluation, and treatment. Anytime you are interacting with a human in a healthcare organization, other than the front desk, you are paying for it.
(2) The CPT codes and ICD 10 codes for every single procedure / interaction you have.
(3) A documented response from your insurance company confirming which codes are covered.
The problem is, in our healthcare system, no one person has all these pieces of information.
The doctor knows the procedure names but not the CPT or ICD 10 codes. It is also extremely difficult to get hold of doctors because their time is so limited.
The admin person you speak to at the front desk will not know the name of the procedure or the codes used for billing, and frankly they won’t care. You will be able to detect that within 10 seconds of talking to them.
They just answer the phones, and they have practically zero medical knowledge.
The billing department is hard to get hold of. Often, the front desk admins won’t want to or care to connect you to them. You should insist. If the alternative means potentially risking $15,000 out of pocket, then I’m willing to be a tad pushy to get them to transfer me to the billing department.
The billing department person will be able to give you the CPT code, but they won’t be able to give you any prices.
That is because the sticker price charged for any medical procedure is NOT the price you will most likely pay. It’s the price that someone walking in off the street with no insurance would be asked to pay.
Your insurance company will get a lower rate for every procedure through its contract with the healthcare organization. These are known as contractually adjusted rates, and it is these rates that are ultimately billed to your insurance.
It is very unlikely that the person working in the billing department will know what the contractual rate with your insurance company is. You will have to call your insurance company to ask for that.
When you call your insurance company, they will say that in order to give you a definitive answer on what is covered vs. not, they will need both the CPT code and the ICD 10 code from the hospital or clinic’s billing department.
But when you ask the billing department, they will often be able to give you the CPT code, but will probably push back on giving you the ICD 10 code.
They may not know it. They may say you don’t need it to inquire about billing to your insurance company.
That is 100% WRONG.
Dig in and don’t let them off the hook.
Your insurance cannot give you a definitive answer without both codes because they will not authorize a medical procedure if it is not medically necessary. The ICD 10 code, which is the diagnosis code, tells them whether it’s medically necessary.
The billing department must be able to produce that information, because that is the ONLY way they can actually submit a claim to your insurance company and get paid.
And believe me, they want to get paid. So make them produce it.
Be aware that when you ask for this information from the billing department, you will have to give exact instructions.
If the procedure name you tell them is slightly off, or worded in a way they’re not familiar with, they won’t be able to lookup the codes. And many times, the person will not proactively help you try to figure out what else it could be.
In addition, they may not give you an exact code. They might give you a range of codes instead.
This is because CPT codes can have many numbers that refer to the same procedure, each with slightly different variations in the procedure, or each one different based on which ICD 10 diagnosis code is used.
So a single procedure can have multiple codes that refer to it.
An example of this might be all codes ranging from 94510-94515 that refers to the same procedure.
If the billing department gives you a range of such codes, as was the case in my own situation, then you will either have to get them to narrow it down, which they may not be able to do, because they’ll say it depends on what the doctor prescribes, or you will have to call your insurance company and get them to run every single code combination through their computer system.
By doing this, you will make their head want to explode. But since misery loves company, that may be worth it to you to get the answer you need.
It is this level of complexity in the healthcare system that makes it virtually impossible to get a straight answer on “what does this cost?” and “will my insurance cover this?” for medical treatment procedures.
And furthermore, it is because of this that no single person in the hospital or clinic or insurance company can answer these same two questions.
It is the equivalent of being told that you need to go to a particular college because it’s the best option for your life and career, but having no way to know upfront what the college will charge in tuition, and being forced to decide based on only what your high school counselor tells you.
Only after you graduate do you find out whether you got any financial aid (i.e. insurance) and how much debt you owe (i.e. your out of pocket cost), but by then it is too late to do anything about it. Even if the college right next door (i.e. a different doctor or clinic) might have provided literally the exact same service for 1/10th of the cost.
This is exactly what happened to me.
I found an out of network provider that cost about $2,000 all in for all the consultations, the sleep study, and all the services and equipment involved. But that provider was not in network for my insurance.
The only in network provider for my insurance charged more than 7x that amount.
So with those kind of dollars on the line, I was going to be darn sure my insurance covered it.
Ultimately, the problem with medical billing is that:
(1) No one talks to each other inside the hospital or clinic. Each worker is siloed and completely unincentivized to learn about the other people working other functions in their office.
(2) The siloed workers don’t care. So often, the administrators you talk with on the phone have zero medical training, zero empathy for patients, and sometimes even open disdain for them…this is even though you are literally paying their bills and salary.
(3) Lack of coordination incentives. The insurance company and the care provider are both not incentivized to actually coordinate with each other to make this process easier and make it easier for patients to get clear answers on billing.
(4) It depends. Finally, even if you are able to talk to someone in the billing department, they might actually just tell you, “it depends”…right before they unload a bunch of different code combinations on you.
Checklist for how to make sure your insurance will cover your medical procedure
And so what I want to teach you today is the exact checklist of steps you need to do to avoid the back and forth runaround so that when you have an expensive medical procedure you need to get done and you want to be 100% sure your insurance covers it, you will quickly be able to get that answer.
Here is exactly what you need to do:
Step 1: Call up the hospital or clinic
Step 2: Ask the front desk admin who picks up the phone for the exact name of the medical procedure you are seeking. They should be able to get this by asking the doctor directly or asking someone medically trained on the staff.
Step 3: Once you have the procedure name, ask to be transferred to the billing department. Before they transfer you, ask for the billing department’s direct phone number, so that if you have to call back for any reason, you don’t have to go through them again. You can just call the billing department directly.
Step 4: When you get hold of the person in the billing department, ask them what the CPT code of the procedure name is.
Then ask them what the diagnosis code or ICD 10 code is. They will usually be able to tell you the CPT code, but they may resist giving you the ICD 10 code.
They might say they don’t know it. Or they might say you don’t need it. That is wrong. They have to know it because that is the only way they can submit a claim to the insurance company and get paid.
If all else fails, you can Google the name of the diagnosis + the term “diagnosis code” or “ICD 10 code” and find an ICD 10 code on Google search. It is still a very good idea to explicitly verify this code with the billing department to make sure that they themselves plan to use that same code.
I have found in the past that sometimes there are differences between what I thought the ICD 10 code would be based on a Google search vs. what the actual ICD 10 code turned out to be based on the doctor prescribing a slightly different diagnosis. In some cases, that can make an important difference in terms of what is covered or not.
Step 5: Call your insurance company. For your insurance to give you a definitive answer on whether something is covered by insurance or not, you will need to give them the CPT code and the ICD 10 diagnosis code together. The two together is what matters. You do not want to just give them the CPT code alone, because if it is billed under the wrong diagnosis code, you are SOL.
After the insurance person tells you the answer, always:
- Take down the name of the person you are speaking with
- Get their employee ID number if at all possible
- Get a reference number for the call if possible
- Note the day and time of the call in your records
- Ask if the call is being recorded – ideally it will be, so that you can refer to it if need be, and if it is not, you might want to consider requesting that it be recorded. If you are getting the runaround, you may want to record all your phone call interactions yourself (but be sure to announce that you are doing this to make sure it’s legal)
- And finally, ask them to email you a written confirmation of the answer they provided to you afterward
It is not fair that you as a patient may have to do all this legwork just to get the answer to the simple question of “what does this cost?” and “will my insurance cover this?”
This is especially true for people with little medical knowledge and zero knowledge of how the healthcare organization and insurance company operate internally.
But because you as the patient have the most incentive to get the answer, you may be forced to be the messenger on phone calls relaying messages back and forth between a single organization’s own employees to get a definitive answer to your question.
I’m a super educated, proactive, analytical consumer, so I can take care of myself and my family even under the byzantine US healthcare system.
But all of my experiences with the US healthcare system, both with my sleep apnea situation and in many other situations in the past, have given me tremendous empathy for other patients and families who do not have the knowledge or skills to navigate complex organizations, to know what kind of questions to ask, and when to call BS.
I can only imagine how challenging and intimidating the healthcare system must be for old people, sick people, poor people, immigrants.
Vulnerable constituents like that frankly end up getting bad healthcare, getting billed wrong amounts (usually way too much), and not getting their insurance to pay even when they’re entitled to it.
Many people simply suffer for it, get sicker, and even die.
So again, if you are in a single payer universal healthcare system, consider yourself blessed that you don’t have to deal with this type of complexity in your medical life.
But if you are not, if you are doing your best to navigate the US healthcare system, hopefully you learned a few insights today that will help you get clear answers on medical billing and claims in the future, so that you don’t get any surprise bills that you weren’t expecting.
If you liked this post, I also encourage you to check out my blog post on HSAs, which will help you save costs even further.
HSAs allow you to use pre-tax money for paying for medical procedures, supplies, deductibles, co-pays, and everything in between.
They are my favorite tax-advantaged account, and they are by far the account with the most efficient tax profile on the planet — even better than Roth IRAs.
To get all the details on why, be sure to check out that post.
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