Allowed Amount: Which statement best defines the Allowed Amount?

Allowed Amount: Which statement best defines the Allowed Amount?

• A. The difference between the allowed and billed amounts.
• B. The total amount allowed as sent by the payer.
• C. The amount billed to the patient.
• D. The total amount allowed as calculated by your contract.

Answer: (B)

Allowed amount is the maximum the payer will reimburse for a service, and it’s the amount the payer communicates as eligible for payment for that claim. It comes from the contract between the payer and the provider, and it’s the figure used to determine what the provider gets paid and what the patient owes after any deductible or coinsurance. That’s why the statement describing it as the total amount allowed as sent by the payer is the best fit. It isn’t the difference between the allowed and billed amounts (that’s the contractual adjustment), nor the amount billed to the patient (the billed charge is what’s charged before insurance applies its rules), and while the contract helps establish the allowed amount, the payer’s communicated figure is the authoritative one for the claim.

Allowed amount is the maximum the payer will reimburse for a service, and it’s the amount the payer communicates as eligible for payment for that claim. It comes from the contract between the payer and the provider, and it’s the figure used to determine what the provider gets paid and what the patient owes after any deductible or coinsurance.

That’s why the statement describing it as the total amount allowed as sent by the payer is the best fit. It isn’t the difference between the allowed and billed amounts (that’s the contractual adjustment), nor the amount billed to the patient (the billed charge is what’s charged before insurance applies its rules), and while the contract helps establish the allowed amount, the payer’s communicated figure is the authoritative one for the claim.