Allowed Amount

Key facts

Includes

Plan payment plus patient deductible, copayment and coinsurance

Medicare version

Medicare-approved amount, from fee schedules or prospective payment systems

Medicare limiting charge

Non-participating providers may bill up to 115 percent of the non-par amount

Commercial disclosure

Transparency in Coverage machine-readable files, since July 1, 2022

What is an allowed amount?

When a provider submits a claim, the billed charge is usually much higher than what anyone pays. The payer replaces it with the allowed amount: the contracted rate for an in-network provider, the fee schedule amount in Medicare or Medicaid, or a plan-determined amount for an out-of-network provider.

The allowed amount is split between the plan and the patient. If the allowed amount is $100 and the patient owes 20 percent coinsurance after meeting the deductible, the plan pays $80 and the patient pays $20. An in-network provider writes off the difference between its billed charge and the allowed amount.

In Original Medicare, the allowed amount is called the Medicare-approved amount. Providers who accept assignment take it as payment in full, while non-participating providers who do not accept assignment may charge up to a limiting charge of 115 percent of the non-participating fee schedule amount.

Billed charges vs allowed amounts vs paid amounts

Claims data and price files use several related figures that are easy to confuse:

• Billed charge (submitted charge): the list price the provider puts on the claim, often from a hospital chargemaster.
• Allowed amount: the maximum the payer recognizes for the service, including patient cost sharing.
• Paid amount: what the plan actually pays after deductibles, copayments and coinsurance.
• Balance bill: an amount an out-of-network provider bills the patient above the allowed amount, now restricted in many situations by the No Surprises Act.

Why the allowed amount matters

Allowed amounts are the closest widely available measure of real prices. Medicare utilization files report average allowed amounts by provider and service. The Transparency in Coverage rule requires most group health plans and insurers to publish in-network negotiated rates and out-of-network allowed amounts, and hospitals disclose payer-specific negotiated charges under hospital price transparency rules.

Comparing allowed amounts across payers, sites of service and markets shows where a procedure or drug administration is reimbursed well and where margins are thin. Using billed charges instead overstates prices, often by a wide margin.