As a resident or fellow physician, you have already encountered many patients during your training who are covered by Medicare or Medicaid. And while trainees in some specialties have more interaction with the nation’s largest healthcare payers than do others, there may be intricacies about both models that remain a mystery even after residency and fellowship training end.
With that in mind, you may be asking yourself: What do I need to know as a resident about Medicaid and Medicare, and how can I get myself up to speed as an early-career physician still learning about how the insurers can affect my day-to-day job?
There are several important details to familiarize yourself with about Medicare and Medicaid—among them, the differences between these two major public health insurance programs and the ways they can affect your patients, your work and your compensation, both now and once you have graduated. Read on for the basics and find out where to go for more detailed information.
Big fish in the medical pond
You probably already know the most salient detail about Medicare and Medicaid, which is just how ubiquitous these payers are. Data from the Centers for Medicare & Medicaid Services (CMS) shows that, as of May, 70.5 million people in the U.S. were enrolled in some form of Medicare. And as of the same month, 66.4 million people were enrolled in Medicaid and the related Children’s Health Insurance Program (CHIP).
Medicare is a federal program that provides healthcare coverage, primarily, for those who are 65 or older. Some younger people with disabilities or end-stage renal disease also qualify for Medicare.
Medicaid, on the other hand, is a joint federal-state program for some low-income people including children, pregnant women, older adults and people with disabilities. It is administered by states within federal regulations, so it can be quite different by state in terms of who is eligible and what benefits they qualify for. Aspects that are key to the job of a physician—among them managed-care arrangements, prior authorization rules and physician payments—also vary widely from state to state.
It’s possible to qualify for, and have, health insurance coverage through both Medicare and Medicaid.
The parts of Medicare
Insurance through Medicare is divided into parts, the letters of which indicating what it covers.
- Part A relates to inpatient care, skilled nursing facility care, hospice care and home health care.
- Part B relates to services that include physician payments, outpatient care, home health care, durable medical equipment and some preventive services.
- Part D relates to medication, including some vaccinations.
- Supplemental insurance (called Plan G or Plan K in many states) is private insurance that pays some of a patient’s share of the costs covered by Medicare.
When a patient first signs up for Medicare, and during open-enrollment periods, they can elect either Original Medicare or Medicare Advantage (also known as Part C).
Original Medicare bundles parts A and B, and participants need to join a separate Part D plan for their medications and vaccinations. They can get care from any physician or facility that accepts Medicare. Vision, hearing and dental costs usually are not covered. Participants can pay for supplemental insurance that covers part of their out-of-pocket costs.
Medicare Advantage plans are private, Medicare-approved health insurance plans that bundle parts A and B, and often Part D. They require participants to use in-network physicians and healthcare organizations, and many services and medications require prior authorization. Though out-of-pocket costs might be less than in Original Medicare, that will vary significantly from plan to plan and from patient to patient. Often, the plans cover vision, hearing or dental treatments.
Physicians choose whether to be categorized as “participating” or “nonparticipating” in Medicare. If you choose not to participate, you will decide on a case-by-case basis whether to bill Medicare and you will get 5% less than allowed under the CMS Medicare Physician Fee Schedule. Being a Medicare-participating physician does not require you to accept new patients with Medicare.
Physicians can also formally opt out of Medicare entirely, in which case they would need to create separate payment contracts with individual patients who have Medicare. The opt-out period lasts for two years, in most cases.
Statewide differences crucial to Medicaid
Unlike Medicare, Medicaid health insurance is not the same throughout the country. Since states administer Medicaid in their jurisdictions, the way physicians will interact with the payer will be quite different depending upon where they practice.
There are broad federal guidelines, but within those rules, states make many decisions about what to cover in terms of the type, amount, duration and scope of healthcare services. The federal government does not require that Medicaid cover prescription drugs, case management, physical therapy or occupational therapy.
To learn specific information about patients’ coverage in your state, visit the federal Medicaid benefits website, and select the state where you practice in the “state Medicaid and CHIP profiles” dropdown menu.
Most Medicaid recipients, however, are in managed care organizations, which are private health insurance companies contracted by the state to oversee coverage. States can also provide Medicaid health insurance coverage through a fee-for-service model. For Medicaid managed care, being in-network is usually plan by plan. For Medicaid fee-for-service, it is usually state enrollment that matters.
Learn more about the different types of healthcare payment models with the AMA STEPS Forward® toolkit, “Physician Payment Models Guide.” It is enduring material and designated by the AMA for a maximum of 0.5 AMA PRA Category 1 Credit™. Read up on AMA CME accreditation.
What Medicare and Medicaid mean in practice
There are several things that physicians transitioning to practice on their own should do when it comes to treating patients with Medicaid or Medicare:
- Get your own NPI number, if you don’t already have one.
- If you plan to treat patients with Medicare, enroll in the program, if you haven’t already, and if you will order services or refer patients with Medicare, make sure that you have the correct status in place to do so.
- If you will treat patients with Medicaid, enroll in the program through your state’s Medicaid enrollment portal.
- Understand how to bill your dual-eligible patients, in other words, those who are covered through both Medicare and Medicaid. In most cases, if you are a participating physician and the services are covered, you will bill Medicare first. There are rules about how, when and whether Medicaid will pay remaining balances, and whether physicians can bill patients for what is unpaid by both Medicare and Medicaid.
- Go through payer credentialling and Medicare reassignment procedures. If you will be an employed physician, your employer should guide you through these processes. In private practice, these will be some of the steps to getting your practice up and running.
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Understand the impact on your career
Problems with physician payment and prior authorization have plagued Medicare and Medicaid for years, though traditional Medicare—with the exception of some newer models—typically does not require prior authorization.
A survey by the AMA (PDF) found that one in four physicians say prior authorization has led to a serious adverse health event in one of their patients, and 95% say that it has led to treatment delays. Though some insurers have signed voluntary pledges to improve prior authorization, most physicians do not believe that is enough.
Additionally, Medicare physician payment is failing to keep up with the cost of practicing medicine in the U.S. In the last 25 years, the cost of running a medical practice has increased 63% while, adjusted for inflation, Medicare physician payment fell by 33%.
Read more about the AMA’s work to gain passage for The Patients First Act of 2026 (H.R. 9693), and visit AMA Advocacy in Action to find out what’s at stake in reforming Medicare payment and other advocacy priorities the AMA is actively working on.
