What term refers to the difference between billed charges and the allowed amount?

• A. Adjustment
• B. Deductible
• C. Copayment
• D. Coinsurance

Answer: (A)

The difference between billed charges and the allowed amount is called an adjustment, specifically a contractual adjustment. After a provider and insurer agree on an allowed amount, the provider often writes off the difference as an adjustment because the negotiated rate is considered payment in full for that service. This reduces the amount the payer will consider for payment and what the patient may owe as part of cost-sharing.

Deductible, copayment, and coinsurance describe patient cost-sharing amounts, not the write-off from the contracted rate. The deductible is what the patient must pay before coverage kicks in; the copayment is a fixed amount paid at the time of service; coinsurance is the percentage of costs the patient pays after meeting the deductible.