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Medicare vs Medicaid: Everything You Need to Know

If you’re new to US Medical Billing, one of the first concepts you’ll encounter is the difference between Medicare and Medicaid.

Although both are government-sponsored healthcare programs, they serve different populations, follow different billing rules, and have unique reimbursement policies.

Understanding these differences is essential for:

  • Medical Billers
  • AR Callers
  • Medical Coders
  • Eligibility Specialists
  • Prior Authorization Teams
  • Revenue Cycle Professionals
  • Healthcare Students

This guide explains everything from A to Z, including real-world billing examples.

Quick Comparison

FeatureMedicareMedicaid
Administered byFederal GovernmentState Governments (with federal funding)
PurposeHealth insurance for elderly & certain disabled individualsHealthcare coverage for low-income individuals and families
Age RequirementUsually 65+No age requirement
Income RequirementGenerally NoYes
CoversSeniors, Disabled, ESRD, ALSLow-income adults, children, pregnant women, disabled
NetworkNationwideState-specific
Primary FundingFederal TaxesFederal + State
Accepted Everywhere?Most providers accepting MedicareDepends on state enrollment

What is Medicare?

Medicare is a federal health insurance program primarily designed for:

  • Individuals aged 65 years or older
  • People under 65 with qualifying disabilities
  • Patients with End-Stage Renal Disease (ESRD)
  • Patients diagnosed with ALS (Lou Gehrig’s Disease)

Unlike Medicaid, Medicare eligibility is generally not based on income.

Types of Medicare

Medicare Part A (Hospital Insurance)

Covers:

  • Inpatient hospital stays
  • Skilled Nursing Facility (SNF)
  • Hospice care
  • Limited home health services

Example

A patient is admitted to the hospital for pneumonia.

Hospital stay → Covered under Medicare Part A

Medicare Part B (Medical Insurance)

Covers:

  • Physician visits
  • Office visits
  • Preventive services
  • Laboratory tests
  • Durable Medical Equipment (DME)
  • Physical Therapy
  • Outpatient surgery

Example

Patient visits family physician for diabetes follow-up.

Office visit CPT 99213

→ Billed to Medicare Part B

Medicare Part C (Medicare Advantage)

Offered by private insurance companies approved by Medicare.

Examples include:

  • Humana Medicare
  • Aetna Medicare
  • UHC Medicare Advantage
  • BCBS Medicare Advantage

These plans combine:

  • Part A
  • Part B
  • Often Part D

May also include:

  • Dental
  • Vision
  • Hearing

Medicare Part D

Prescription Drug Coverage

Covers:

  • Retail pharmacy medications
  • Generic drugs
  • Brand-name medications

Who Pays for Medicare?

Funding comes primarily from:

  • Payroll taxes
  • Federal government
  • Beneficiary premiums (Parts B and D)
  • General federal revenues

What is Medicaid?

Medicaid is a joint federal and state healthcare program that provides medical coverage to individuals with limited income and resources.

Each state administers its own Medicaid program, so eligibility rules, benefits, and provider participation can vary.

Who Qualifies for Medicaid?

Typically includes:

  • Low-income adults
  • Children
  • Pregnant women
  • Elderly individuals with limited income
  • Disabled individuals
  • Long-term care residents

Eligibility is primarily based on:

  • Household income
  • Family size
  • State-specific guidelines

Who Runs Medicaid?

Federal Government

Provides funding.

State Government

Operates the program.

Each state has:

  • Different payer IDs
  • Different billing rules
  • Different fee schedules
  • Different prior authorization requirements

Medicare vs Medicaid Eligibility

MedicareMedicaid
Age 65+Any age
DisabledDisabled
ESRDLow income
ALSPregnant women
Payroll historyIncome-based

Medicare Cards vs Medicaid Cards

Medicare Card

Contains:

  • Medicare Number (MBI)
  • Effective Dates
  • Part A
  • Part B

Medicaid Card

Contains:

  • Medicaid ID
  • State Name
  • Eligibility Dates

Some Medicaid plans are managed through Managed Care Organizations (MCOs), meaning the patient may also carry a plan card from a private insurer administering Medicaid benefits.

Medicare Costs

Patients may owe:

  • Deductible
  • Coinsurance
  • Premium (Part B)
  • Copayment (Medicare Advantage depending on plan)

Medicaid Costs

Most beneficiaries have:

  • Minimal or no premiums
  • Low or no copayments (varies by state and eligibility category)

Medicare Pays 80%

A common rule under Original Medicare Part B:

After the deductible is met:

Medicare pays 80%

Patient owes 20% Coinsurance

Example

Office Visit

Charge = $200

Allowed Amount = $150

Medicare Pays:

80%

= $120

Patient Coinsurance:

20%

= $30

Medicaid Often Pays Patient Responsibility

If the patient has Medicaid as secondary insurance:

Medicaid may pay:

  • Coinsurance
  • Deductible
  • Copay

However:

Payment depends on:

  • State Medicaid policy
  • Eligibility category (e.g., QMB)
  • Provider participation

What is Dual Eligibility?

Some patients qualify for both Medicare and Medicaid.

These individuals are called Dual Eligible Beneficiaries.

Example

Patient:

Age: 72

Low Income

Has:

  • Medicare Part A
  • Medicare Part B
  • State Medicaid

Primary:

Medicare

Secondary:

Medicaid

Billing Order

For Dual Eligible Patients

Step 1

Bill Medicare

↓

Receive Medicare EOB

↓

Bill Medicaid

↓

Collect remaining balance if allowed by policy

What is QMB?

Qualified Medicare Beneficiary (QMB)

A Medicare Savings Program for individuals with limited income and resources.

QMB generally helps pay:

  • Medicare Part A premiums (if applicable)
  • Medicare Part B premiums
  • Medicare deductibles
  • Medicare coinsurance
  • Medicare copayments

When a patient has QMB, providers who accept Medicare are generally prohibited from billing the patient for Medicare cost-sharing for covered services, subject to program rules.

Example of QMB

Office Visit

Allowed = $100

Medicare Pays = $80

Coinsurance = $20

Patient has QMB

Provider generally should not bill the patient for the $20 Medicare cost-sharing. Payment responsibility follows Medicare and Medicaid/QMB rules.

Medicare Advantage vs Medicaid

Many beginners confuse these.

Medicare Advantage

Private insurance replacing Original Medicare benefits.

Examples:

  • Humana Medicare
  • UHC Medicare
  • Aetna Medicare

Medicaid Managed Care

Private insurance administering Medicaid benefits.

Examples vary by state and may include plans from large insurers.

Can Someone Have Medicare Only?

Yes.

Example:

70-year-old retired teacher.

Income doesn’t matter.

Has:

Part A

Part B

Only Medicare.

Can Someone Have Medicaid Only?

Yes.

Example:

28-year-old unemployed mother with two children who meets state Medicaid eligibility requirements.

Has Medicaid only.

Can Someone Have Both?

Yes.

Example:

74-year-old

Low Income

Receives:

Medicare

Medicaid

This is known as Dual Eligibility.

Medicare Billing Example

Patient:

Age 68

Office Visit

99214

Medicare Part B

Charge = $180

Allowed = $140

Medicare Pays = $112

Patient Responsibility = $28

Medicaid Billing Example

Patient:

Age 25

State Medicaid

Office Visit

99213

Charge = $120

State Medicaid reimburses according to its fee schedule. The payment amount depends on the state’s Medicaid program and the provider’s contract.

Real Medical Billing Scenario

Patient:

Age 76

Insurance:

Primary

Medicare

Secondary

Medicaid

Office Visit

Claim Submission:

Step 1

Submit to Medicare

↓

Medicare Pays

↓

Cross over or submit to Medicaid (depending on state process)

↓

Medicaid Processes Remaining Liability

↓

Patient Responsibility determined according to Medicare and Medicaid rules

Common Denials

Medicare

  • CO-16 – Missing information
  • CO-97 – Service included in another service
  • CO-50 – Medical necessity
  • CO-151 – Missing authorization (when applicable)
  • CO-29 – Timely filing

Medicaid

  • Patient not eligible
  • Invalid Medicaid ID
  • Provider not enrolled
  • Prior authorization required
  • Timely filing exceeded
  • Managed care plan billed incorrectly

Tips for Medical Billers

  • Always verify eligibility before the visit.
  • Confirm whether the patient has Original Medicare, Medicare Advantage, Medicaid, or both.
  • Check primary and secondary payer order before claim submission.
  • Review state-specific Medicaid policies, as benefits and reimbursement vary.
  • Understand Medicare deductible, coinsurance, and crossover rules.
  • Verify whether the patient has QMB or another Medicare Savings Program before billing patient responsibility.
  • Use the correct payer ID and timely filing limits for each payer.

Frequently Asked Questions (FAQs)

Is Medicare free?

Not always. While many people qualify for premium-free Part A based on work history, Part B generally requires a monthly premium, and beneficiaries may also have deductibles and coinsurance.

Is Medicaid the same in every state?

No. Each state administers its own Medicaid program with different eligibility criteria, covered services, and reimbursement rules within federal guidelines.

Can Medicare and Medicaid be billed together?

Yes. For dual-eligible patients, Medicare is generally billed first, followed by Medicaid if applicable.

Does Medicaid always pay the Medicare balance?

No. Payment depends on state Medicaid policies, eligibility category, provider participation, and applicable federal rules.

What is the biggest difference?

Medicare is primarily based on age or qualifying disability, while Medicaid is primarily based on income and financial eligibility.

Final Thoughts

Understanding the differences between Medicare and Medicaid is one of the most important foundations in US medical billing. Correctly identifying a patient’s coverage, verifying eligibility, following the proper payer sequence, and applying program-specific billing rules can reduce denials and improve reimbursement.

Whether you’re an AR Caller, Medical Biller, Medical Coder, or RCM professional, mastering these programs will help you process claims accurately and provide better support to patients and providers.

References

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