Thursday, December 1, 2022

Medicare Vs Medicaid: What’s The Difference

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With the Social Security Act’s adoption in 1965, Medicare was established to offer health insurance to Americans 65 and older and those with specific chronic disorders.

MEDICARE: What is Medicare?

Medicare‘s fundamental coverage policy is based on whether a service is “medically essential.” If it is, Medicare will pay for it. Local coverage decisions, national rules, and federal legislation all impact this issue.

There are four steps, or parts, in the actual program. Medicare is simpler to comprehend when it is divided into these four steps. Each of these steps has a unique set of monthly rates and frequently includes a preset deductible in addition to coverage.

  • Step 01

The majority of the services in Step 01 are for inpatients. This coverage may cover everything from overnight hospital stays due to an urgent medical issue to hospice care and other protracted stays in a hospital or nursing home. Step 01 has several limitations and requirements designed to control costs and promote better healthcare. For instance, Medicare won’t pay the physician for this service if the patient needs to revisit the hospital for the same surgery within 30 days.

  • Step 02

Step 02 offers medical insurance for procedures and services not covered by Step 01. Along with some forms of nursing care and durable medical equipment like canes and walkers, this includes doctor services like x-rays. The basic Medicare coverage package comprises Step 02 of Medicare and Step 01.

  • Step 03

Step 03, also called the Medicare Advantage plan, enables Medicare members to receive all their coverage from a private company. Private HMO and PPO businesses provide Medicare Advantage. It is not necessary to subscribe to Steps 01 and 02 to Step 03. Medicare Advantage does not involve filing claims with Medicare; instead, the federal government reimburses the private payer.

  • Step 04

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 led to the implementation of Medicare Step 04, the program’s most recent addition. Prescription drug prices are covered by Step 04 of the healthcare system. To receive coverage from this part of Medicare, patients must actively enroll in it (and then pay its monthly payments).

A person must be 65 years old, a citizen of the United States, and enrolled in Social Security to be eligible for Medicare benefits. Medicare allows exceptions for those under the age of 65 who have end-stage renal failure, which necessitates ongoing dialysis, and those under the age of 65 who have additional specific disabilities or illnesses, such as Lou Gehrig’s disease.

MEDICAID: What is Medicaid?

People who might not otherwise be able to afford care can receive it through Medicaid, a joint state and federal healthcare program. Medicaid offers health insurance to low-income families, individuals, people with disabilities, and some older people.

Medicaid rules and restrictions differ from state to state, unlike Medicare, a federal program with uniform criteria. Each state is required to maintain its own Medicaid program (like Medi-Cal in California or BadgerCare in Wisconsin). Even though each state-based Medicaid program must adhere to a set of federally mandated standards, you should anticipate more variance in Medicaid regulations than in Medicare policies.

Let’s concentrate simply on the minimal requirements for the program, as outlined by the CMS and the federal government, as Medicaid coverage varies widely between states. Seven of the fundamental services that Medicaid covers are listed here.

  1. Caring in family planning
  2. Cost of prescription drugs
  3. Hospital inpatient and outpatient services
  4. Children’s services
  5. Care for mental health
  6. Physical, occupational, and speech therapy
  7. Dental services and related healthcare

A person’s eligibility for Medicaid may differ by state, just like the programs that Medicaid offers. However, there are a few generally accepted minimum standards for coverage, such as:

  • Adults with kids who make less than a specified income threshold (varies by state and number of children)
  • People making up to 133% of the federal poverty level (this provision is part of the Affordable Care Act and will go into effect in January of 2014)
  • Those with incomes above the poverty line may still be eligible for Medicaid if they pay an extra premium.
  • Individuals with long-term impairments
  • People who get Social Security benefits may also be Medicaid eligible.

These aren’t strict requirements for enrollment. Medicaid only accepts specific types of subscribers. That is, their eligibility is not only based on their income. Instead, a patient’s eligibility is determined by how well they fall into a specific category, including those who are poor, disabled, pregnant, or nursing moms.

Medicaid functions similarly to Medicare as a third-party payer, paying providers for their medical services. Contrary to Medicare, most Medicaid subscribers are enrolled in a managed care program. Subscribers to this program are required to pay a monthly fee. Older people with lower incomes are more likely to enroll in the Medicaid program’s basic fee-for-service model. In contrast, younger Medicaid enrollees are more likely to choose the managed care option.

These are Medicare and Medicaid’s essential components.


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I am a medical biller, a blogger and have 20 years of experience in medical billing, medical billing management, and medical assistant. My background includes positions as a clinical medical assistant, medical records technician, medical office manager, biller, and coder. I am certified by the American Academy of Professional Coders (AAPC) as a Certified Professional Coder (CPC) and by the Practice Management Institute (PMI) as a Certified Medical Office Manager (CMOM). As an office manager/biller/coder, I was a member of the Michigan Medical Group Managers, Michigan Medical Billers Association. I also served as a committee member of the Michigan Osteopathic Association of Practice Managers Education Committee.

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