[MCD 101] Lesson 1: What is Medicaid?

Lesson Goal

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For you to understand the Medicaid program at a high level including who is eligible, what services they can receive and who provides them.

Lesson Summary

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Medicaid is a public health insurance program funded by taxes to provide medical services and drugs for disabled and poor people.  It is operated and funded via a partnership between the federal government, each of the 50 states and several U.S. territories (such as Guam and the US Virgin Islands). There are some minimum required services as well as some minimum eligibility requirements that the federal government sets, but each of the states and territories maintain a high degree of flexibility in designing their programs.

In short, there is not one Medicaid program, but 50 plus programs. Medicaid consumed an average of 21% of state budgets in 2010.

The Big Topics in This Lesson

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1- Understanding the Basics

The information under this topic covers high level concepts related to program operations and the joint federal-state nature of the program.

2- Key Medicaid Regulations

The information under this topic introduces the major federal and state regulations that govern the program.

3- Medicaid Providers

The information under this topic explains the various types of Medicaid providers and how they participate in the program.

Lesson Video

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Lesson Q & A

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Click on each question to learn more

Q1: What does it mean that Medicaid is an insurance program?


Just like any other health insurance program, the payer (in this case the taxpayers and the government) pays providers for healthcare services for members at a negotiated rate. Members have to be eligible and enrolled, and get a Medicaid card they show at doctor’s offices. Some Medicaid programs have premiums that get paid to managed care companies, either by the state or the member. One of the biggest mistakes people make when learning about Medicaid is thinking its not a health insurance program. It is. Although its different in many ways, in most ways it is the same as other insurance programs like Blue Cross Blue Shield, or CIGNA or Aetna. In fact, those companies actually operate Medicaid programs in many states. Its just the populations are very different.

Q2: What does it mean that Medicaid is a partnership between the federal government and the states?


The federal government has certain high level oversight responsibilities, and some Medicaid rules are actually in federal law. But for the most part, each state runs its own Medicaid program. The federal government pays a large share of the costs, though. The federal agency that runs the federal side of Medicaid is known as CMS. This stands for the Center for Medicare and Medicaid Services.

Q3: What do you mean there are 50 different Medicaid programs?

Although there are some rules all programs have to follow, each state has a lot of discretion in how they run their programs. There are different rules, rates and programs in every single state. And when you add in the territories (like Guam) that also have Medicaid programs, you get the idea behind the industry cliché “If you’ve seen one Medicaid program, you’ve seen one Medicaid program.”

Q4: What are the federal laws and regulations that govern the Medicaid program?


Medicaid was established in law in parts of the Social Security Act (SSA). There are also regulations that the Centers for Medicare and Medicaid Services (CMS) update for Medicaid in volume 42 of the Code of Federal Regulations (CFR). The Patient Protection and Affordable Care Act (PPACA, or “ObamaCare”) also includes several sections related to Medicaid. CMS also issues guidance to Medicaid programs in the form of the CMS State Medicaid Manual and State Medicaid Director Letters.

Q5: What are the state laws and regulations that govern the Medicaid program?


State Medicaid agencies include the rules for their programs in various documents. The highest level is found in the State Plan, which has to be approved by CMS. State Medicaid agencies also include rules in waiver program application documents, which also have to be approved by CMS. A state agency may also promulgate rules and regulations related to Medicaid as part of the rule making process in their state.

Q6: What are the regulations used for each provider or service type in program operations?


Detailed rules for billing and service provision are included in the Medicaid Provider manuals. Each state creates its own provider manuals, and updates them as needed. These manuals are the binding policy for providers enrolled in Medicaid.

Q7: Who can be a Medicaid provider?


Most people think of doctors as Medicaid providers, and that’s about it. Did you know ambulance companies can be Medicaid providers? What about in home nurses? Or companies that make wheelchairs. Facilities such as hospitals and nursing homes are also considered providers. There are many, many provider types that can be reimbursed by Medicaid.

Q8: How do you become a Medicaid provider?


The process is a little different depending on the type of provider you are, but all providers have to enroll in the Medicaid program in a state. When they enroll, they will be assigned a Medicaid provider number (which may or may not be their NPI, or National Provider Identifier). Providers also generally have to show certain documentation related to competency or certification in their profession. Facilities usually have to go through a Certificate of Need (CON) process. Each Medicaid agency has a “provider enrollment department” or similarly-named unit that handles provider applications.

Q9: What are some of the challenges of being a Medicaid provider?


Many doctors report that Medicaid is harder to accept than other insurance programs. On the administrative side, the top reasons consistently cited are low reimbursement rates, payment lags, and too much paperwork. On the clinical side, providers report that members have more complex needs, are less likely to comply with treatment regimens and are harder to refer out to specialists.

Medicaid Dictionary

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 New Terms from this lesson:

CFR – Code of Federal Regulations. The set of regulations used to govern Medicaid that is updated by CMS.

CMS – Center for Medicare and Medicaid Services. The federal agency that oversees Medicaid and Medicare funding and operations.

CON – Certificate of Need. A process and document used to determine whether a new provider (usually a facility) is needed in an area.

Member – Any Individual enrolled with CMS Medicaid Program receiving medical help from a provider. Also referred to as clients, enrollees or beneficiaries.

NPI – National Provider Identifier. A billing number used by healthcare providers.

PPACA (or “ObamaCare”) – Patient Protection and Affordable Care Act. Legislation that included many important changes to Medicaid and all forms of healthcare in the United States.

Provider – Any Individual or Organization enrolled with CMS Medicaid Program providing services to help patients, directly or indirectly.

SSA – Social Security Act. Federal law that established Medicare and Medicaid and set out the basic rules for each program around services and eligibility.

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