Medicare/Medicaid

Medicare and Medicaid

The Medicare and Medicaid Programs were created under Title XVIII of the Social Security Act of 1965. Medicare provides health services for the elderly and some disabled, while Medicaid helps care for the poor of all ages. The programs have become integral components to the practice of most every physician. Provided below is basic practical information on Medicare and Medicaid.

Medicare

The Medicare program, administered by the Centers for Medicare & Medicaid Services (CMS), is the largest purchaser of health care in the U.S.  Medicare offers two primary types of insurance:  Part A inpatient care coverage, and Part B outpatient care coverage, including physician services. 

“Medicare Advantage” managed care plans are available under Medicare Part C, in lieu of Parts A and B.  Established by the Medicare Modernization Act of 2003, Part D provides prescription drug coverage.  Beneficiary enrollment in Medicare Part A is usually automatic, while Parts B and D must be elected and carry certain financial obligations. 

Participation.  Physicians and other health care providers must annually elect whether to participate in the Medicare program.  Participating providers agree to accept legal assignment of Part B payments (i.e., to accept payment directly from Medicare) for all eligible services.  By agreeing to participate, providers accept Medicare’s determined payment rate as payment in full, and agree not to “balance bill” the beneficiary for additional payment.  Non-participating physicians may charge up to 115 percent of the approved Medicare rate for a service (which is 5 percent less than that paid to participating physicians), and may balance bill.  Additional information is available in the AMA’s Participation options (PDF, 36KB) document. 

Medicare pays for physicians services in accordance with the physician fee schedule based on Resource-Based Relative Value Units (RBRVUs) (link /ama/pub/category/16391.html).

Medicaid

The Medicaid program is a state and federal partnership that provides health care coverage to a low-income and medically needy state residents.  The federal government provides matching monetary grants to each state to treat its Medicaid populations.  Each state administers its own plan.  While states have wide discretion to establish program eligibility and coverage criteria, certain “categorically needy” (e.g., low-income children and pregnant women) and “medically needy” (e.g., newborns) population groups must be covered.   

Medicaid programs in each state make payments directly to health care providers for services rendered. 

Since its inception in 1997, the State Children's Health Insurance Program (SCHIP) has worked in tandem with state Medicaid programs to offer children health insurance.  Under SCHIP, uninsured low-income children whose family earns up to a set proportion of the poverty line are eligible for state health coverage subsidized by the federal government.  

Resources

Council on Medical Service Board of Trustees reports on Medicare and Medicaid.

Medicare physician payment reform.  An ongoing advocacy priority of the AMA. 

Additional information

CMS Web site