Technical Instruction History
|Description of Change
|Original technical instruction issued
|Technical instruction language updated to clarify the expectation that MEDICAID-PAID-AMT at the line-level only needs to sum to TOT-MEDICAID-PAID-AMT at the header level when PAYMENT-LEVEL-IND is “2”, indicating that the claim payment was determined at the individual claim lines, in alignment with changes to validation rules deployed on 7/23/21.
Brief Issue Description
The T-MSIS data dictionary defines “allowed amount” as the maximum amount “determined by the payer as being 'allowable' under the provisions of the contract prior to the determination of actual payment.” In plain language, the allowed amount represents the maximum payer liability for a given service. It is what the payer would pay if there was no patient liability (e.g., no deductible or co-pay) or other liabilities preceding the payer in the coordination of benefits hierarchy. The allowed amount can be based on the billing provider’s usual, customary and reasonable billing amount, or it can be based on the negotiated rate that the payer and provider have agreed to.
The allowed amount should not be confused with the Medicaid paid amount. The Medicaid paid amount represents the Medicaid/CHIP liability (or, for encounter records, a managed care plan’s liability) of the allowed amount. The allowed amount, on the other hand, encompasses all payments determined by Medicaid (e.g., Medicaid paid amount, co-insurance, deductibles, co-pays, etc.). Allowed amounts should be reported for all services reimbursed on a fee for service basis (including claims paid as fee for service by managed care organizations) as well as any bundled payments or alternative payment models that use allowed amounts as part of payer liability determination.
When evaluating overall spending for medical services, allowed amounts are more useful than paid amounts because they combine all payments determined by the payer and therefore provide a more accurate representation of the overall cost of a given service. Additionally, because the allowed amount captures deductibles and copays, it allows researchers to more accurately evaluate service costs across individuals with different cost-sharing arrangements. For example, the Medicaid paid amount for the same service from the same provider would be lower for individuals with high deductibles than it would be for individuals with lower deductibles. In this situation, if a study were to use paid amounts instead of allowed amounts, researchers may make erroneous conclusions about what factors influence the cost of the service. For this reason, evaluations should use allowed amounts and not paid amounts when comparing service costs in different cost sharing scenarios (or when potential cost sharing differences are not known).
There are several challenges states face when populating allowed amounts:
- Some claims data warehouse structures make it difficult to link allowed amount values to the claim they apply to.
- Managed care organizations (MCOs) often negotiate allowed amounts with providers during provider contracting and may limit the sharing of allowed amounts with outside organizations. However, states are required to collect this and have the authority to do so, as clarified at 42 C.F.R. § 438.242(c)(3).
- Contracting concerns may also make sub-contractors hesitant to share allowed amounts in sub-capitated arrangements.
- Allowed amounts may not be available when payments are not determined on a per-service basis, such as for bundled services or for services paid using an alternative payment models.
- Some states may not have established standardized procedures for passing allowed amounts from the MCO to the state. In such a situation, MCOs may not know how to provide allowed amounts, and if MCOs do share allowed amounts, states may not know where to find them.
Related T-MSIS Data Quality Measures
Allowed amounts are included in the calculation of two T-MSIS Priority Item (TPI) 16 measure components.
- TPI 16: Completeness and Consistency of Claim Payment Data Elements
CMS Technical Instruction
Reporting allowed amounts for fee for service claims vs. managed care encounters
- FFS claims paid by the state: Allowed amounts are a necessary part of the payment determination process for FFS claims so they should be available for all claims paid by the state. Though allowed amounts may be difficult to identify in some data warehouse structures, it should be possible to link services to the appropriate allowed amount. If the state T-MSIS team is not able to identify the appropriate values for allowed amount reporting, they should reach out to others within the state who are familiar with how claim payments are calculated or how payments are maintained in the state data warehouse.
- MCO Encounters: Obtaining allowed amount information for encounters is more complicated than it is for claims paid by the state. Allowed amounts are negotiated by the MCO as part of provider contracting and are often considered trade secrets. Releasing a large quantity of allowed amount information may put an MCO at a competitive disadvantage in their marketplace and it may damage their position in subsequent provider negotiations. Subcontractors may be unwilling to share allowed amounts in sub-capitated arrangements for this same reason. However, 42 C.F.R. § 438.242(c)(3) clarifies that states are authorized and required to collect allowed amount information from MCOs for encounter records.
States should clarify their data sharing expectations with MCOs to reduce confusion and to ensure MCOs are sharing allowed amounts appropriately and in a way that the state can use them. As specified at 42 C.F.R. § 438.242(c)(2) and (4), states must specify in an MCO’s contract the level of detail and specifications for submitting encounter data, including allowed amounts. This could be done via a cross reference in the contract to the state’s electronic data interchange (EDI) companion guide.
Reporting allowed amounts in T-MSIS
Allowed amounts are recorded at the header and at the line for all claim file segments (IP, LT, OT, RX). The total allowed amount reported at the header for a given claim should equal the sum of the line level allowed amounts for that claim when claim payment is determined at the line level. Because the claim allowed amount represents payer liability prior to the determination of other liabilities, the sum of the Medicaid paid amount, the beneficiary coinsurance amount, the beneficiary copayment amount, and the beneficiary deductible amount should not exceed the total allowed amount on a given claim.
|IP, LT, OT, RX
|IP, LT, OT, RX
The ALLOWED-CHARGE-SRC data element is included in the inpatient claim header file segment (CIP00002) and was originally intended to collect information relevant to the allowed amount determination process. However, this data element is scheduled to be retired and states will no longer be required to provide information for this data element going forward. This change will be reflected in future versions of the T-MSIS data dictionary. DQ Measure ID: FFS-49-005-5, FFS-49-006-6, FFS-49-007-7, MCR-59-005-5, MCR-59-006-6, MCR-59-007-7
 DQ Measure ID: FFS-49-011-11, MCR-59-011-11