What Are Medical Codes?

Medical codes are the way doctors and other healthcare professionals describe medical diagnoses and treatments. These codes are important for understanding how medical billing works and can affect what you pay and what is covered under your health insurance. 

Why Are They Important?

The insurance companies who provide your health coverage are often called health plans. Healthcare providers, such as doctors, submit claims to health plans to ask for payment. They use medical codes to show the health plans the services they gave to patients. Health plans use the codes to review whether the services were needed and to decide how much to pay the healthcare providers for their work. If your healthcare providers or health plan make a coding error, your health plan could deny your claim, or you might have to pay more out of pocket.

Are There Different Types of Codes?

Different sets of medical codes are used by healthcare professionals for different reasons. Diagnostic codes from the International Classification of Diseases (ICD) describe the cause of an injury or illness. Current Procedure Terminology (CPT) codes are used to show the medical procedures the doctors and other healthcare providers used. The Healthcare Common Procedure Coding System (HCPCS) is a set of codes used to describe things not covered by CPT codes, such as durable medical equipment, ambulance services, or certain medicines. HCPCS codes are also the official code set used by Medicare and Medicaid. Prescription drugs are identified according a National Drug Code (NDC) and can be found in the National Drug Code Directory.  Other code sets are used for more specific purposes such as describing dental procedures or psychiatric illnesses.

How Can You Use Medical Codes?

The explanation of benefits (EOB) that you get from your health plan will list the codes used to diagnose and treat you. Here are several ways you can use the codes to understand your medical bills and avoid problems that can happen if something is coded wrong:

If you are looking for how much a procedure could cost from different providers, use the procedure code to see how the price varies for the same service.

You can use codes to compare prices for a procedure by using the Texas Healthcare Costs website.

If your health plan won’t pay or wants you to pay more for a service than you thought, talk to your provider and health plan to make sure your procedure was coded correctly.

Review the codes listed in your EOB to make sure they’re right, to make sure your provider is charging you for services you actually got.

Other examples of common mistakes that can lead to wrong codes include:

  • the provider did not give enough info to your health plan;
  • the code sets are out of date; and
  • procedures were coded separately when they should have been bundled together under one code.

*⃣ To learn more about health insurance, visit The Basics, Shopping Guide, and Using Your Insurance sections of our website.