THE RELATIONSHIP BETWEEN MEDICAID AND MEDICARE

The Medicare program (Title XVIII of the Social Security Act) provides hospital insurance (HI) -- also known as Part A coverage -- and supplementary medical insurance (SMI) – also known as Part

B coverage. For people aged 65 and older (and for certain disabled persons) who have insured status under Social Security or Railroad Retirement, HI coverage is automatic. SMI coverage, however, requires payment of a monthly premium. Some aged and/or disabled persons are covered under both the Medicaid and Medicare programs.

For those Medicare beneficiaries who are also fully eligible for Medicaid, Medicare coverage is supplemented by health care services that are available under each State's Medicaid program. If a person is a Medicare beneficiary, payments for any services covered by Medicare are made by the Medicare program before any payments are made by the Medicaid program. Medicaid is always "payor of last resort." Based on elections in each State, such services as eyeglasses, hearing aids, and nursing facility care which are not covered by Medicare may be provided by the Medicaid program.

And there are some Medicare beneficiaries who, though not fully eligible for Medicaid, do receive some help through the State Medicaid program's payment of part of the person's Medicare premiums and cost-sharing expenses. Qualified Disabled and Working Individuals (QDWIs) who lose Medicare benefits because of their return to work are allowed to purchase Medicare HI and SMI coverage. However, the HI premium must be paid by the State Medicaid program for those QDWIs with income below 200 percent of the Federal Poverty Level. Medicaid does not pay SMI premiums for those recipients.

For certain poor Medicare recipients who are known as "Qualified Medicare Beneficiaries" (QMBs) (those beneficiaries with incomes below the Federal poverty level and with resources at or below twice the standard allowed under the SSI program), the Medicaid program pays the Medicare premiums and cost-sharing expenses for Medicare HI and SMI. For "Specified Low-Income Medicare Beneficiaries" (SLMBs) (those like QMBs, but with slightly higher incomes), the Medicaid program pays only the SMI premiums.

Payment for Medicaid Services

Medicaid operates as a vendor payment program – meaning that payments are made directly to the health care providers. Providers participating in Medicaid must accept the Medicaid reimbursement level as payment in full. Within federally-imposed upper limits and specific restrictions, each State has broad discretion in determining both the reimbursement methodology and resulting rate for services, with three exceptions: (1) for institutional services, payment may not exceed amounts that would be paid under Medicare payment rates; (2) for disproportionate share hospitals (DSHs), different limits apply; and (3) for hospice care services, rates cannot be lower than Medicare rates.

States may impose nominal deductibles, coinsurance, or copayments on some Medicaid recipients for certain services, but emergency and family planning services are exempt from such copayments. And certain Medicaid recipients must be excluded from this cost sharing. They are pregnant women, children under age 18, hospital or nursing home patients who are expected to contribute most of their income to institutional care, and categorically needy HMO enrollees.

Since the amount of total Federal outlays for Medicaid has no set limit (cap), the Federal government must match whatever the individual State decides to provide, within the law, for its eligible recipients. However, reimbursement rates must be sufficient to enlist enough providers so that Medicaid care and services are available under the plan at least to the extent that such care and services are available to the general population in that geographic area.

States must augment payment to qualified hospitals that provide inpatient services to a disproportionate number of Medicaid recipients and/or other low-income persons under what is known as the disproportionate share hospital (DSH) program. Recent legislation has curtailed some States' excessively-large DSH payments (made to many States in order to get higher Federal matching monies with little or no increase in the States' share through refundable donations and provider taxes).

The portion of the Medicaid program which is paid by the Federal government, known as the Federal Medical Assistance Percentage (FMAP), is determined annually for each State by a formula that compares the State's average per capita income level with the national average. By law, the FMAP cannot be lower than 50 percent nor greater than 83 percent. The wealthier States have a smaller share of their costs reimbursed. The Federal government also shares in the State's expenditures for administration of the Medicaid program. Most administrative costs are matched at 50 percent for all States. However, higher matching rates (75, 90 and 100 percent) are authorized by law for certain functions and activities.

THESE MATERIALS WERE EDITED FROM THOSE PROVIDED BY HEALTH CARE FINANCING ADMINISTRATION (HCFA). BECAUSE THESE MATERIALS HAVE BEEN EDITED AND BECAUSE RULES AND REGULATIONS CHANGE REGULARLY, WE SUGGEST THAT YOU CONTACT YOUR LOCAL AUTHORITIES AND QUALIFIED LEGAL COUNSEL PRIOR TO ACTING.