WASHINGTON (AP) _ Millions of Americans who think they're paying 15 percent or 20 percent of the cost of medical procedures actually are paying a far bigger share, according to representatives of consumers and the elderly.

Patients typically get a bill for a procedure and are charged a percentage co-payment. Their insurance pays the rest. What they don't know, according to consumer activists, is that insurers often negotiate deep discounts with hospitals. So, patients _ in percentage terms _ are paying much higher co-payments than they think.

It works like this, according to an example used during hearings last year of the Senate Permanent Subcommittee on Investigations:

A medical bill is $1,000, the co-payment is 40 percent and the subscriber pays $400. But the insurance company has a confidential agreement with the hospital that gives it a 30 percent discount, so the actual cost is $700, not $1,000.

The patient ends up paying $400 (40 percent of $1,000 but 57 percent of $700) and the insurer pays the remaining $300. If the discount had been shared proportionately by the patient and insurance company, the patient would have paid $280 instead of $400.

Robert Hunter, director of insurance for the Consumer Federation of America, said the billing practice, by law, is standard under Medicare for outpatient procedures from CT scans to cataract removal. But it also is becoming increasingly common among private insurers, he said.

``It's at least deceptive and may be illegal,'' he said. ``Insurance is supposed to be a business of utmost good faith. You give your money to somebody and they give you a piece of paper. They're supposed to live up to their end of the deal.''

The practice, little known at first, is coming under increasing fire and more than 20 class-action lawsuits have been filed challenging it, Hunter said.

``People see a bill and they pay it. What they don't realize is the hospital is sending a different bill to the insurance company. There are two sets of books,'' he said.

Insurers, however, defended the practice and said it helps restrain increases in premiums.

``Our size allows us to negotiate significant discounts for our subscribers. These discounts are anything but private and they are one of the reasons we are able to keep premiums low for 65 million subscribers,'' said Alixe Glen, spokeswoman for the Blue Cross and Blue Shield Association.

``Blue Cross and Blue Shield does not realize any windfall whatsoever,'' she said.

But Sen. Sam Nunn, D-Ga., in last year's hearings said the practice _ by increasing co-payments and reducing premiums _ ``amounts to a transfer from the sick to the well.''

The insurers say employers they deal with know about and approve of the arrangement, which should be disclosed in employee handbooks.

However, Mary Ellen Bliss, an analyst with the American Association of Retired Persons, said only an expert would be able to know what's going on.

``It's totally hidden. There is no way you can figure it out from the paperwork alone,'' she said. ``Nobody is being straight about this. They don't outright lie. It's just explained in terms no one can understand.''

One person who did understand was Gerald Haeckel of Scottsville, Va., a retiree who spent years working in corporate finance.

In October 1992, his wife had a small malignancy removed from her breast in an outpatient procedure. He noticed a discrepancy between the statement they received from the hospital and the statement from his insurer.

His persistent questioning and letter-writing helped spotlight the problem for Nunn and triggered an investigation by Virginia regulators that led in September 1994 to his insurance plan paying a $5 million fine and a $23 million repayment to its 132,000 customers.

``I'm retired. This gives me something to do. It was their misfortune to pick on somebody who was retired,'' he said.

Haeckel's case was featured in stories Monday in The Washington Post and The Wall Street Journal.