Wait, Who Pays for What?!

The who’s-who of healthcare coverage: Understanding Medicare & Medicaid

Picture this: Me, young, bright-eyed, new to healthcare, trying to act smart while the people around me were casually tossing around things like, “They have to follow Medicare,” or “It’s a Medicare guideline.”

I knew what insurance was… or at least I thought I did. But in my head, I’m thinking:
“What in the h-e-double-hockey-sticks does any of this mean?!”

Maybe you’ve had some of the same questions:

• What’s the difference between Medicare and Medicaid?

• Aren’t they both government programs?

• What does a government program mean?

• Is Medicare free?

• What in the world does commercial mean?

These are fair questions and ones that even people in healthcare don’t always have straight answers to.

Our U.S. healthcare system isn’t just “insurance” in the generic sense. It’s a complex web of public (government) programs, private (commercial) insurance, and a handful of special programs like Veterans Affairs (VA) and TRICARE.

Each one comes with its own rules about:

• What is covered

• Who is covered

• When it’s covered

And how it gets paid

Key Terms to Know Before We Dive In

These are general terms and will be explained in more detail for each insurance type.

One Government, Two Major Programs

Medicare and Medicaid: Similar Names, Totally Different Programs

When people hear “government insurance,” they often lump Medicare and Medicaid together. They are both government-run, and their names are very similar. However, these two programs differ significantly in their operation, funding, and experience. 

Medicare: The Boss of Federal Healthcare

A national program, run by the federal government, with regional quirks.

Let’s start with the one you’ve probably heard about, Medicare. This is the federal health insurance program that covers most Americans when they turn 65 (happy birthday! 🥳), along with some other individuals who meet specific medical conditions.

Medicare has been around since 1965, and even though it is a federal (national) program, it is not entirely standardized (because, of course, there is an exception, it is after all the government 🙂).

Let’s take a quick look at how Medicare is structured, and then we’ll get into the meat of it.

Medicare at a Glance

Medicare at a glance

Eligibility

Medicare is designed for people who have “aged in” (hello, 65!) or who meet specific health criteria. Most people become eligible at age 65, especially if they’ve worked and paid Medicare taxes for at least 10 years. 

But it’s not just for older adults. People under 65 may qualify if they’ve received Social Security Disability for 24 months, or have specific conditions like ESRD (End-Stage Renal Disease) or ALS (Amyotrophic Lateral Sclerosis, also called Lou Gehrig’s Disease).

💡 In short: You either age in, qualify through disability, or have a condition that fast-tracks your eligibility.

Administration

Medicare is a national program administered by the CMS (Centers for Medicare & Medicaid Services), but at a national level, it does not handle everything on its own. There are 12 Medicare Administrative Contractors (MACs) that help run the show. These are private insurance companies that manage the day-to-day operations.

Think of it like CMS is writing the playbook,  rules of a game, and the MACs are the referees on the field making judgment calls in real-time.

Why the regional breakout? Medicare is a federal program, but it's too massive for one central office to handle all the claims processing and paperwork for the entire country.

National vs. Local Policies

Medicare has two levels of policy rules that can be applied when reviewing and determining payment for a claim:

• NCD (National Coverage Determination): These are the federal rules established by CMS that apply nationwide.

• LCD (Local Coverage Determination): These are created by the regional Medicare Administrative Contractors (MACs), which add more detail or nuance based on what's medically necessary in their area.

The NCD is the general rulebook.

The LCD is the local playbook that fills in specifics depending on patient needs, medical practices, and geography.

Let’s look at an example: Physical Therapy for a Bad Knee

National Rule: The National Coverage Determination (NCD) may state that Medicare covers physical therapy for a bad knee if your doctor determines it is medically necessary.

Florida (lots of seasonal snowbird patients), the local MAC may say:

We will cover physical therapy after knee surgery, and we will allow for extra sessions if you continue care in a different state.

Why? There are lots of retirees who get knee replacements in their home state (up north) and then head south before they are fully healed, and they still need to continue the physical therapy.

Montana - Rural Area (long distance to care), the local MAC may say:

We will cover physical therapy, and if you live 50 miles or more from the nearest clinic, we will also cover equipment or virtual physical therapy sessions in your home.

Why? Access to the care they need is often more challenging in remote or rural areas, so local rules provide additional flexibility for these patients.

Coverage

Medicare is split into parts to separate how different types of care are paid for:

• Part A covers hospital stays, skilled nursing, and hospice

• Part B covers outpatient care like doctor visits, lab tests, and preventive services

• Part D helps with prescription drugs (through private plans)

• Part C (Medicare Advantage) is a private plan that bundles A and B (and usually D), sometimes adding extras like vision or dental

💡 Think of it like a healthcare combo meal. You can go à la carte (Original Medicare) or bundle up with Advantage.

Policies

The National Policy (NCD) outlines what’s generally covered across the country.
The local MACs can’t overrule that, but they can add more detail or flexibility based on local needs.

💡A local policy (LCD) can’t contradict a national policy (NCD).
    But it can add extra coverage or clarify how something is handled in that region.

That’s why:

• A treatment covered by national policy should be covered everywhere.

• A procedure may be covered in one state and denied in another, even though both patients are on Medicare.

Costs

Medicare is not entirely free, but it does vary based on which “part” you have. Remember those taxes you’ve been paying into Medicare Tax? This is where it comes in.

• Most people don’t pay premiums for Part A (hospital) if they’ve paid Medicare taxes long enough.

• Part B (outpatient) comes with a monthly premium, a deductible, and typically 20% coinsurance.

You may be asking yourself, Why would I want Medicare if I still have premiums and other costs? 

Because even though you are still paying some, Medicare has pre-negotiated rates with providers and caps on costs. (Remember those discounts from the blog on reading your EOB? That is where you see the Medicare negotiated rates in action.)

Medicare isn’t completely free, but it comes with negotiated rates and spending caps that protect you from surprise bills.

💡 Many people also buy Medigap plans (Medicare Supplements) to cover what Medicare doesn’t. Think of it as your insurance sidekick; it’s not flashy, but it shows up when things get pricey. 

We will cover more of secondary, supplemental, and advantage coverage in future blogs.

WHEW! Now let’s talk about Medicaid, another government program. The same government, but with a completely different setup.

Medicaid

Backed by the federal government but managed by each state.

Medicaid is the other government insurance program, but unlike Medicare, it is not one unified national system; it is a federal and state partnership.

Medicare is like a passport, federally issued and mostly the same for everyone.

Medicaid is more like a driver’s licence; every state has one, but the rules, logo, and issuing are different in every state.

You could qualify for Medicaid in one state and not in another. You may have access to a doctor in one zip code (yes, I said down to the zip code) and “zip” (nada, none) in the next. Same name, totally different experience.

Medicaid at a Glance

Medicaid at a glance

Eligibility

Medicaid is designed for people with limited income, but qualification depends on a combination of federal criteria and where you live.

All states must cover:

• Low-income children

• Pregnant individuals

• Certain people with disabilities

• Low-income seniors (often those who also qualify for Medicare)

Beyond this, each state decides whether to expand Medicaid further.

Under the Affordable Care Act, states were given the option to expand Medicaid to cover nearly all low-income adults. Some states said yes. Other states did not.

Example:

• Sarah and Tom both make $17,000 a year.

• Sarah lives in California (an expansion state), so she qualifies for Medicaid.

• Tom lives in Alabama (a non-expansion state), so he does not qualify, even with the same income.

Same federal program. Different states  = different outcomes.

Administration

Medicaid is one name, but it has literally 50 different flavors. The benefits, experience, access, and coverage can be very different, and it is all based on which state you live in.

That means:

• Each state has its own Medicaid agency

• Each has its own name and branding (e.g., Medi-Cal in California, TennCare in Tennessee, MassHealth in Massachusetts)

• Each sets its own rules about who qualifies, what’s covered, how to apply, and which providers participate.

Some states administer the program themselves. Others contract with private insurance called Managed Care Organizations (MCOs) to do it for them.

How is this different from how Medicare and the National (NCD) and Local (LCD) policies and coverage? 

If Medicare has one big national playbook (with local chapters), Medicaid lets every state write its own book from scratch, as long as it meets a few federal guidelines.

Coverage

There are federal requirements that say all state Medicaid programs must cover certain essential services; after that, it is totally up to the state:

What must be included:

• Hospital and physician services

• Laboratory and X-ray services

• Pediatric and family nurse practitioner care

• Nursing facility care

After the federal requirements, some states may choose to go the extra mile.

Optional but sometimes covered:

• Dental Care

• Vision

• Hearing Aids

• Chiropractic care

• Transportation

Example:

• New York Medicaid may cover routine dental and vision care.

• Texas Medicaid may only cover emergency dental work for adults.

Policy

Ah, where we really get to see the complexity.

Medicaid doesn’t have a single starting playbook like they have with Medicare. Every state writes its guidelines. No shared starting point. No consistent form.

Policies cover things like:

• What services are covered

• How often a procedure is allowed in a timeframe

• What documentation is required

• Which providers are permitted to provide care

Let’s take physical therapy after a car accident.

• In Colorado, you might get 20 sessions a year with no prior authorization.

• In Mississippi, every five sessions might require paperwork and proof of medical need.

• In New York, kids may get unlimited sessions, while adults may have stricter limits.

I know that some of this lingo may be a bit confusing, but the point here is that each state could have very different rules that apply, as well as other “hoops” that need to be jumped through.

Costs

Medicaid, in general, is available at low or no cost to patients. It is intended to assist individuals with limited resources. 

• Most states charge no monthly premium

• Co-pays, if required, are usually just a few dollars

• There’s typically no deductible

But again, it all depends on where you live and how the state has structured its Medicaid program.

By now, you hopefully understand the difference between Medicaid and Medicare.

• Yes, it is government insurance.

• Yes, it is there to help people who need it most.

• But what you get and your eligibility can drastically change from state to state

And if you ever wondered why Medicare doesn’t cover pregnancy, well…
The majority of Medicare beneficiaries are over age 65; we can all agree that would be unusual (we hope!).

Why It Matters

Patients

Understanding the difference between Medicare and Medicaid helps you know what kind of coverage you have, what to expect, and the questions to ask. 

Knowing which one you have or may qualify for can make a significant difference in the care you receive and what you pay.

• Eligibility is completely different

• Medicare is for people over 65 or those with specific medical conditions

• Medicaid is based on income and varies by state

• You may qualify for both, or neither, depending on your situation

• Costs are not the same

• Medicare often comes with premiums, deductibles, and coinsurance unless you have supplemental coverage.

• Medicaid is usually low or no-cost, but it may limit which providers you can see.

• Coverage is not the same

• Medicare covers hospitals, doctors, and outpatient care, but not long-term care, vision, or dental (unless you purchase extra coverage).

• Medicaid often covers things Medicare does not cover, especially when there is a need for ongoing care or assistance.

This can help you:

• Avoid surprise bills

• Know what treatments and services are covered

• Ask the right questions

• Advocate for yourself (or a loved one) with more confidence

• Making informed decisions about enrollment

Are you “Dual Eligible” - you qualify for both

Some people qualify for both Medicare and Medicaid; this is known as “dual eligible”. 

Medicare pays first, and Medicaid may help pay for the Medicare premiums and cost-sharing (e.g., coinsurance, deductibles) and may cover additional services (e.g., long-term care or home support). 

💡If that’s you or someone you care for, knowing how the two work together can help save money and potentially help you with additional care options.

Technical & Product Teams

Designing for Medicare and Medicaid is not a one-size-fits-all. The rules, structure, and coverage vary, and they change fast (and sometimes often).

This means designing products that can manage and maintain the information, stay up to date, and provide the clients with confidence that they can adhere to these regulations.

• Medicare is not the same as Medicaid

• If you are building workflows, logic, content, or policy engines, you must design for each.

• Rules change fast

• Coverage guidelines, policies, and cost-sharing structures can shift quarterly (or faster). 

• Building systems that adapt quickly is a must.

• Location, location, location

• Geography matters a lot.

• Medicare rules vary regionally. 

• Medicaid varies greatly by state, even by zip code.

• Build tools that handle location clearly and accurately.

• Build with flexibility

• Don’t reinvent the wheel every time.

• Reuse common elements where you can to build reusable components.

• Allow for customization and rapid changes.

• Dual Eligible

• Dual eligible logic often needs extra attention and is a growing population.

• For patients with both Medicare and Medicaid, you must know:

• Who pays first

• What is covered by each program

• What patient balance (cost-sharing) may remain

• Requires coordinated logic, and it can be tricky

• Build for compliance and transparency

• Patients and providers need to know what is covered, what isn’t, and why

• Show the logic behind denials or approvals

• Help users ask the right questions, and empower providers

Wrapping it Up

Medicare and Medicaid may sound similar, but they are different in many ways, including how they are funded, who qualifies, and how you receive medical care. Although they are both government programs, they have different rules and nuances, and these rules can change frequently.

Navigating them requires different strategies for patients, providers, and teams building healthcare products (and maybe some patience and a sense of humor). 

Tackling this can give you an advantage and can be exciting (is my nerd showing 🤓)!!

📚 Missed the earlier posts in this series? 

Catch up here: https://coviewconsulting.substack.com/

• Why I Started CoView: Navigating Both Sides of Healthcare

• Speaking the Same Language in Healthcare

• Meet the Players: Patient, Provider, Payer

• Cracking the Code

• Your Claims Post Visit Adventure

What’s Next: Commercial Insurance: The Choose Your Adventure

So far, we’ve walked through the government-run programs where there is a defined rulebook, even if there are a lot of footnotes (and fine print).

Now we are heading into something less predictable. In Part 2, we’ll dive into this “choose your adventure” world of deductibles, prior authorizations, networks, and benefit fine print. It’s a little less predictable, a little more flexible, and a lot more confusing.

Get ready! 

Thanks for reading,

Bonnie

Note from the Author: This series is not a prep course for medical coding exams. It’s designed to help cross-functional teams in the healthcare industry work together more effectively. The skills you'll learn will also empower you to be a more confident advocate for yourself and your loved ones in your personal healthcare matters.

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