Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid


Examining Differences Between Medicare, Medicaid Reimbursement

By Ryan Mcaskill

While Medicare and Medicaid are similar programs, there offer different challenges when it comes to reimbursement.

- Medicaid and Medicare services are often lumped together because they are both government-sponsored healthcare programs. It is possible for individuals to be eligible both, and they are governed by the same bodies. However, there are many differences between the programs that affect patient care and the revenue cycle.

First it is important to layout the differences in the programs.


Medicaid is an assistance program that covers low-to-no-income families and individuals. Children are more likely than adults to be eligible for coverage. There are strict income requirements related to the Federal Poverty Level (FPL). With expansion from the Affordable Care Act, 26 states cover at or below 138 percent of the FPL.

The program covers routine and emergency care, family planning, hospice, some substance and smoking cessation programs. There is also limited dental and vision coverage.

READ MORE: CMS Suggests Hospital Medicare Reimbursement Policy Changes

The cost to enrollees varies by state, with some imposing deductibles. The program is jointly governed by the federal and state governments, though the Affordable Care Act is attempting to make some rules universal. Funding comes from a variety of taxes and 57 percent comes from the federal government.


Medicare is an insurance program that primarily covers seniors aged 65 and older and disabled individuals who qualify for Social Security. Regardless of income, anyone turning 65 can enroll in Medicare so long as they paid into Medicare/Social Security funds. Individuals of any age with severe disabilities and end-stage renal disease are also eligible.

Coverage is very similar to Medicaid, covering routine and emergency care, hospice, family planning, some substance and smoking cessation programs, with limited dental and vision.

Part A costs nothing for those individuals that paid Medicare taxes for 10 years of more. Part B in 2014 costs $104.90 a month for most. Part D costs vary, usually around $30 per month. Medicare Advantage costs can vary. The entire program is governed by the federal government and it is funded by payroll taxes, interest earned on trust fund investments and Medicare premiums.

READ MORE: Oncologist Org Opposes MedPAC Medicare Reimbursement Changes


One of the biggest differences between Medicare and Medicaid services is reimbursement. It is also this aspect that have some physicians hesitant to accept patients that use these programs.

Medicare reimbursement refers to payments hospitals and doctors receive as a result of services provided to patients that are covered under Medicare. The reimbursement goes to the billing provider. Doctors can choose to accept the rate that Medicare has set for the services they have provided. Medicare pays 80 percent of these costs.

Medicare is primary funded through payroll taxes collected through the Federal Insurance Contributions Act and the Self-Employment Contributions Act. The money is set aside from in a trust fund that the government uses to reimburse doctors, hospitals and private insurance companies. Additional funding for Medicare services comes from premiums, deductibles, coinsurance and copays.

Medicaid reimbursement is similar to Medicare reimbursement in that the payment goes to the provider. However, doctors who chose to be Medicaid providers are required to accept the reimbursement provided by Medicaid as payment in full for the services provided. Certain groups are exempt from most out-of-pocket payments.

READ MORE: AMGA: Align Medicare Reimbursement, Measures for High-Value Care

Medicaid does not pay money to individuals, but operates in a program that sends payments to the health care providers. States make these payments based on a fee-for-service agreement or through prepayment arrangements such as health maintenance organizations. The state is than reimbursed for a share of their Medicaid expenditures from the Federal Government through the Federal medical Assistance Percentage, which is determined each year and depends on the State’s average per capita income level. While richer states receive a smaller share poorer states, the law requires the percentage to be between 50 percent and 83 percent.

Depending on the location, finding a doctor or specialist who accept Medicaid or Medicare may be difficult. In locations, where it is extremely difficult to find a practice that will accept the programs or if the nearest providers are a significant distance away, Medicaid and Medicare recipients may be allowed to visit any local doctor, who will be reimbursed for providing health services.

Many doctors also have to deal with different rates when it comes to reimbursement of Medicare and Medicaid. According to a study from Forbes, Medicaid pays out an estimated 61 percent of what Medicare does nationally for outpatient physician services. This rate varies from state to state, but if the average is 61 percent, it is to believe that some areas are well under that mark.

“Physicians interviewed in the study explained that they felt it was their duty to see some amount of Medicaid patients in their practice,” the article reads. “They recognized the moral need to provide care for this population. But they did not want to commit career suicide – they did not want good deeds to bankrupt their clinical practices.”

The rates are not the only concern as physicians in the survey also cited long and sometimes “unacceptable” wait times to receive reimbursement from their state Medicaid programs. When this is factored in with complex paperwork, it makes more physicians think twice about accepting these patients.



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