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Ch. 06

Course 6: Medical Billing for Medicaid/Medicare

This course will teach you everything you need to know about Medicaid and Medicare as a medical billing specialist, including how to complete and process medical billing claims for patients enrolled in each program.

The Difference Between Medicaid and Medicare

Medicaid and Medicare are often mentioned in the same breath, but the two programs perform completely separate functions in the American healthcare system.


Medicare is a federal healthcare program created in 1965 with the passage of the Social Security Amendments to ensure that citizens 65 and older as well as younger persons with certain disabilities have access to quality healthcare. Medicare is administered by the Centers for Medicare and Medicaid Services (CMS). CMS manages Medicare programs by selecting official Medicare administrative contractors (MACs) to process the Medicare claims associated with various parts of Medicare. Medicare as a healthcare plan is divided into different parts, each of which cover a specific healthcare service:

  • Part A (Medically necessary services): Part A of Medicare covers basic healthcare necessary to treat a pressing medical condition. Covered services may include hospital care, skilled nursing care, nursing home care, hospice care, and other support deemed essential to treating an illness or a condition.
  • Part B (Preventive Care): Services covered in Part B include services or supplies needed to treat or prevent a medical condition. Part B of Medicare also covers some preventive care services such as inpatient/outpatient mental health, clinical research, and ambulance services.
  • Part C (Medicare Advantage Plan): Part C of Medicare covers all healthcare services through a provider organization such as a hospital or a private practice. Patients must be enrolled in Medicare Parts A and B to qualify for Part C.
  • Part D (Prescription Drugs): Part D was created in 2003 with the passage of the Medicare Prescription Drug, Improvement, and Modernization Act. It covers many prescription drug costs and is paid for by monthly premiums of Medicare enrollees.

For more information regarding Medicare, check out the federal government’s official page for Medicare.


Medicaid is a program that provides healthcare coverage for low-income families and individuals, for persons with disabilities, and in some cases the elderly. For medical billing purposes, the most important difference between Medicare and Medicaid is the organization of each program. Medicare is a program provided by the federal government through CMS and has universal applications across state boundaries. Medicaid is a program funded by both state governments and the federal government. States provide Medicaid benefits in cooperation with CMS and federal guidelines. Medicaid programs differ from state to state, though they must all meet certain standards established by the federal government.

Medicaid coverage plans can change from state to state. Some states have extended their Medicaid programs to cover comprehensive healthcare issues for recipients, while other states only meet the minimum program requirements as mandated by the federal government. The following are some of the minimum Medicaid services covered:

  • Inpatient/outpatient hospital services
  • Family planning care
  • Pediatric services
  • Prescription drug costs
  • Dental healthcare and services
  • Mental health services
  • Occupational, physical, and speech therapy

Rules of Medicaid eligibility also vary by state. Some states have stricter rules for eligibility, while others are more relaxed. As a medical billing specialist you should understand Medicaid eligibility in your state. You can visit the official Medicaid site in addition to the Medicaid page for your state to learn more.

Medical Billing for Medicaid

Medical billing for Medicaid is more complicated than medical billing for Medicare simply because Medicaid programs differ from state to state. Some citizens eligible for care in one state may not be eligible for care in another state, or they may receive a more or less benefits depending on the state in which they receive care. Billing codes, claim submission protocols, reimbursement rates, and other billing information will vary by state.

You will start the medical billing process for Medicaid by filling out a state claim form for the services and procedures covered. Most state Medicaid claim forms will be divided into main two parts: information regarding the patient and/or the insured person and information regarding the healthcare provider. As you complete the Medicaid form you will input codes from the following code sets:

  • International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) Codes: ICD-9-CM is the system by which official codes are assigned to medical diagnoses and procedures relating to hospital use in the U.S. The ICD-9-CM lists the official disease codes for relevant medical conditions and procedures. ICD-9-CM codes are a series of alphanumeric digits followed by a decimal point followed by one or two numeric digits.
  • Place of Service Codes: Place of service codes specify where the patient received their medical care or supplies. Place of service codes are ascribed to medical facilities such as inpatient hospitals, nursing facilities, and hospices. Place of service codes are typically two digits long.
  • Healthcare Common Procedure Coding System (HCPCS) Level II Codes: HCPCS Level II codes are used to identify and categorize supplies, services, and products not included in CPT codes. HCPCS Level II codes may include ambulance services and prosthetics. HCPCS Level II codes have a single letter followed by four numeric digits.
  • Current Procedural Terminology (CPT) Codes: CPT codes (also known as Level I HCPCS codes) are a subset of the HCPCS and they are used for identifying and categorizing medical procedures and services. CPT codes are created and revised as necessary by an official editorial board in conjunction with the American Medical Association. CPT does are five numeric digits long.

You can check the format of the Medicaid claim form in the state where you live in addition to state Medicaid policies on the official Medicaid webpage.

Medical Billing for Medicare

Medicare functions as a single-payer healthcare system that pays insurance companies on behalf of people enrolled in its various programs. It’s up to medical billing officials to submit claims to appropriate MACs for processing after a person has received care covered by their Medicare plan.

Your duties as a medical billing specialist include inputting information from a provider’s superbill into compatible medical billing software. This includes provider information, patient information, information regarding treatment the patient received, and any relevant medical codes. Once you’ve input the necessary information into the medical billing software, you will either print out a CMS-1500 claim form for submission via mail or you will submit another claim form electronically to MAC for processing. As you file claims associated with Medicare, you will need to input medical codes similar to those you would use for Medicaid claim forms including CPT, ICD-9-CM, and place of service codes.

In order to properly understand how to file claims associated with Medicare coverage, consider the separate parts of the Medicare healthcare program.

Part A: medically necessary services

You will process claims associated with Part A of Medicare (medically necessary services) if you’re a medical billing specialist working with hospitals, clinics, and other facilities that offer inpatient care. You file Part A claims on behalf of your provider using the UB-04 medical claim form (also known as the CMS-1450 form). The UB-04 is the uniform institutional provider hardcopy claim form accepted for billing third-party providers. It is also the only hardcopy claim form that CMS accepts from institutional providers such as hospitals or skilled nursing facilities. When filing the UB-04 form, you should note that not all payers are required to complete the same data fields. Do your research to determine what fields are appropriate for each claim.

Part B: preventative care

As a medical billing specialist working for an outpatient healthcare provider, you will usually process claims associated with Part B of Medicare (preventative care). You file Part B claims using the CMS-1500 form, which is the standard claim form used by healthcare providers to billing Medicare carriers.

These forms must be purchased from legitimate sources other than the CMS, like the National Uniform Claim Committee (NUCC), which is responsible for updating and maintaining the CMS-1500. Be sure to check the guidelines for printing and preparing CMS-1500 forms before you process any claims. Note that the CMS-1500 form can also be used to bill some state Medicaid programs.

Parts C and D: to be filed separately

Claims related to Parts C and D of Medicare are relayed through a private insurer and should never be filed through Medicare. You won’t file Medicare claims with Parts C and D because private health plan carriers have agreements with Medicare to receive a certain amount per member every month. Part D of Medicare coverage may change depending on the person receiving care because coverage depends on the drugs involved. Some drugs aren’t covered by Part D at all. Thus claims filed through Parts C and D of Medicare should be treated like any other claim handled through a private health plan carrier.

Check out the Centers for Medicare and Medicaid Services for detailed information about medical billing and coding procedures related to Medicare.

Processing Claims for Medicare and Medicaid

Know how to handle claims through these government healthcare programs.

Medicare claims

As a medical billing specialist, Medicare claims you file on behalf of the provider are sent directly to nearby MACs for processing. MACs typically take around 30 days to process each claim they receive.

Part A claims: Medicare pays the provider directly. Any deductibles, co-pays, or other fees that apply after Medicare pays the provider must be satisfied by the patient.

Part B claims: Medicare pays either the provider or the patient for care covered by the plan, which depends on who accepts assignment of the claim. If the provider accepts assignment of the claim, Medicare will pay them for 80% of the approved amount. The remaining 20% will be paid to the provider by the patient. If the provider does not accept assignment of the claim Medicare will pay the patient the approved amount for care received, and they will then pay the provider.

Medicaid claims

Processing billing for Medicaid claims can be trickier than those filed under Medicare because Medicaid claims must adhere to both federal and state guidelines. Providers who participate in Medicaid must meet these guidelines, and as a medical billing specialist you should be aware of any discrepancies between federal and state guidelines as you process claims. For example, a provider must adjust the remaining balance once meeting any applicable charges for a co-payment or deductible and after Medicaid has paid what they are allowed to pay under the Medicaid fee schedule.

Note also that Medicaid is officially the payer of last resource for a claim, meaning that if a person has any other health coverage for services rendered, those institutions should be billed before Medicaid.

Wrapping Up Course 6

Medicaid and Medicare are government-sponsored healthcare programs. Because these programs are managed by state and federal governments rather than through health insurance companies, there are special ways to process medical claims associated with these programs. Knowing the ins and outs of Medicare and Medicaid billing processes will help you to serve all patients fairly.

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