[trefn]

I don't know if the parent comment is correct and that the difference is tax deductible... but if so it is real money.

If the marginal tax rate for the Dr. is 50% (like it probably is in CA) then a $300 deduction is $150 in tax savings.

[Stratoscope]

The only way the doctor would get a $300 deduction is if they use accrual accounting and had already reported the $400 as taxable income. It's isn't a free deduction that comes out of nowhere.

With accrual, you report income when you bill for it, not when you receive it. Suppose you treat a patient on December 31 and bill the insurance $400 on same day. You report the $400 as income and pay taxes for the entire $400 in that year.

The next year, insurance only pays $100, so now you have a $300 loss to report in the new year. But you only have this loss because you've already reported the $300 as income.

If the doctor uses cash accounting, there would not be a $400 income entry on December. There wouldn't be any income to report until they are actually paid, and then the income is the actual amount they are paid, $100.

[jessaustin]

Thank you for spelling this out. Other comments ITT are confused and confusing...