The default legal situation has always been that the patient must pay out-of-pocket in full for all services rendered, as with any other service industry; this business model is known as "fee-for-service." But today, fee-for-service applies only to the minority of Americans who are not covered by any kind of insurance, a situation further discussed below.

Most Americans are covered by some kind of cost-spreading mechanism (i.e., insurance) which distributes the risk of illness and the cost of health care among a group of people. This means that each individual or their employer pays predictable monthly premiums, so that when any given individual needs health care, they will have to pay up-front one of the following: (1) nothing (increasingly rare), (2) a minimum part of the total cost (a deductible), or (3) a small part of the cost of every single procedure (a co-payment).

The entity that provides the health care is usually not the same entity that does the task of spreading the cost of it. The exceptions are health maintenance organizations like Kaiser Permanente which run their own hospital and clinic networks to control costs, and a few employers which employ an in-house physician (e.g., Google) or even operate their own outpatient clinics.

Instead, most Americans receive their health insurance coverage through benefits programs provided by employers. Most of the remainder are covered by government insurance programs like Medicare (United States) and Medicaid, and various state and local programs for the poor.

Either way, health care providers must bill a patient's insurer for the cost of services rendered. The billing process is considered by critics, to be inefficient, if not wasteful, for the following reasons:

1) The lack of a national identity card forces insurers to impose many bureaucratic procedures like pre-authorization of non-emergency procedures upon both providers and patients to guard against fraud;

2) The insurers have a financial interest in denying coverage for any reason, and providers and patients have a financial interest in fighting denials of coverage, and both end up wasting time and money in the process;

3) The extreme fragmentation of the entire industry forces all entities to waste a lot of time learning about each other's bureaucratic procedures, because of the low probability that any pair of provider and insurer will regularly encounter each other; and

4) Much of the health care industry still operates on inefficient paper documents, because no entity outside the federal government has the market power to impose a single standard for digital transmission of health care information, and the federal government has been unable to create such a standard as of 2005.

The process of selecting the appropriate billing code for each procedure completed has become so intricate that there is an entire industry of clerks devoted to it (complete with its own professional association, the American Academy of Professional Coders).

All text is available under the terms of the GNU Free Documentation License (see Copyrights for details).