Reimbursement

What is Reimbursement in a Healthcare Context?

Health insurance helps patients get the medical care they require
Getty Images/PhotoAlto/Frederic Cirou

What is Reimbursement?

Reimbursement usually means to receive money in repayment for money you have already spent or an expense you have already incurred. It is a term used in a wide variety of ways in business and personal life, but it has a different meaning in healthcare.

It comes from Latin. re (again) in (into) bursa (purse) - putting money back in your purse.

Many of us are familiar with getting reimbursed for expenses.

We go on a business trip and pay for our hotel and meals with our personal funds, then submit the receipts to accounting when we return so they can reimburse us.

Healthcare Reimbursement to Doctors and Hospitals

Healthcare providers are paid by insurance or government payers through a system of reimbursement. They provide medical services to a patient and then file for reimbursement for those services with the insurance company or government agency. It's not the patient who is paying out of pocket and getting reimbursed, it is the doctor who is providing a service and then awaiting reimbursement.

If you were to ask your doctor for a schedule of her fees, you would see what she customarily charges for her services. But that amount is typically far higher than what she is reimbursed by an insurer or Medicare.  If your doctor accepts your insurance for services, that means she accepts your payer's reimbursement schedule.

She does not expect you to pay more for the services, unless she informs you of that fact ahead of time. Billing you for an additional amount, unless you were informed ahead of time, is called "balance billing" and is illegal.

This difference between the stated rate for medical services and what they are reimbursed by an insurer or Medicare gives you room to negotiate if you are not insured for a medical procedure you want.

You can look up a procedure by CPT code to see how much Medicare reimburses your doctor or hospital to perform it. A private insurance company negotiates their own reimbursement schedules with providers and hospitals.

Even with health insurance, you may have to pay a co-pay for a medical procedure, or you may have to pay out of pocket for procedures not covered by your insurance.

Some doctors will not take patients whose insurance or Medicare doesn't reimburse them well enough. This can cause a shortage of providers in some areas and make it difficult to locate a doctor who will accept your coverage.

Health Reimbursement Arrangement (HRA)

Health reimbursement arrangements (HRA) are an employee health benefit offered by some employers in the United States. They reimburse employees for their out-of-pocket medical expenses.They are not offered as the sole benefit, but must be part of a group health insurance plan. An HRA is funded by the employer and the employer gets the tax benefit, while the employee is not taxed on the money as income.

An HRA can be an advantage if the health plan has a high deductible, allowing employees to be reimbursed for expenses they incur before reaching the deductible amount.

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