At first glance, Medicare and Medicaid might seem like twins, or a dynamic duo, or two peas in a pod—basically, inseparable. They’re both government healthcare programs; they were both created at the same time; they’re both confusing and usually don’t boast the best reimbursement rates; and they even sound alike (they both start with “Medi-,” right?).

In reality, though, these two programs are very, very different. For starters, Medicare is a federally run program, which means it has a uniform set of rules that apply across the entire country. Medicaid, on the other hand, is state-based, meaning the program is a hodge-podge of rules and requirements that vary from state to state. So, the Medicaid rules in Texas aren’t necessarily the same as those in California or New Jersey. And that’s only the beginning! With that in mind, let’s discuss some major billing and reimbursement differences between Medicaid and Medicare.

The State of Rehab Therapy in 2019 - Regular BannerThe State of Rehab Therapy in 2019 - Small Banner


Established in 1965—and now overseen by the Centers for Medicare and Medicaid Services (CMS)—the Medicare program was designed to help our country’s elderly population pay their inpatient and outpatient medical bills. Now, nearly 54 years later, 60.8 million Americans are enrolled in the program, which now covers folks who:

  • are aged 65 and older,
  • are permanently disabled, and/or
  • have end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS). 

Program Basics

The Medicare program is split into four different coverage plans: parts A, B, C, and D. According to the Department of Health and Human Services (HHS), Part A covers “inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care.” Medicare Part B covers other medically necessary costs that aren’t covered by Part A, like outpatient physician and physical therapy services as well as other supplies and medical care. Part C, often referred to as Medicare Advantage, is provided by private companies that have partnered up with Medicare to offer all-in-one inpatient and outpatient coverage—sometimes with prescription plans bundled in. And finally, Part D is a prescription drug plan that’s provided by private companies.

Billing Guidelines

Medicare updates its billing policies each year following the release of the annual final rule. The final rule often introduces and explains coding and billing changes (e.g., when to use the KX modifier or the new X modifiers) and reporting programs (e.g., the implementation of the Merit-Based Incentive Payment System (MIPS) and the death of functional limitation reporting (FLR)). There are many billing rules that participating Medicare providers must adhere to—and I can’t cover them all here. However, some of the most prominent and often-talked about documentation and/or billing policies are: 

When it comes to actually completing and submitting claim forms, Part A requires the use of UB-04 forms, and Part B requires the use of CMS-1500 forms. Part C billing form requirements vary based on payer and state: Mississippi, for instance, requires the use of a specific, state-mandated form. 


Like its billing guidelines, Medicare’s reimbursement rates are updated each year in the annual final rule release. (Fun fact: The final rule is officially called the Physician Fee Schedule, as it determines the fees Medicare will pay providers for certain services.) In 2018, for example, Medicare announced a reimbursement reduction for services provided in part or in full by PTAs or OTAs beginning in 2022. 

All in all, Medicare’s reimbursement rates tend to be a little lower than your average local payer. According to a survey conducted by the Medical Group Management Association, “more than two-thirds (67%) of medical practices report that 2019 Medicare payments will not cover the cost of delivering care to beneficiaries.”

If you want to determine whether accepting Medicare is cost-effective for your practice, the APTA created a handy Medicare reimbursement calculator that accounts for reimbursement-affecting programs and policies like MIPS and MPPR


Established in 1965 alongside Medicare—and also broadly overseen by CMS—the Medicaid program was intended to help America’s impoverished citizens pay their inpatient and outpatient medical bills. In 2019, 75.8 million Americans rely on this program. Medicaid qualifications vary from state to state, but according to this article, folks can typically acquire coverage if they “make less than 100% to 200% of the federal poverty level (FPL) and are pregnant, elderly, disabled, a parent/caretaker or a child.”

Program Basics

Medicaid receives both federal and state funding, but the state governments are responsible for administering the program. As such, the specifics of Medicaid vary from state to state. That said, according to this source, there are only “33 states that provide Medicaid physical therapy services coverage although it is under optional medical service category. This means that the states do not consider physical therapy services as a mandatory or necessary procedure.”

Billing Guidelines

Due to the nature of the program, Medicaid billing rules vary state to state. Each state Medicaid program usually has its own ABN, for instance. (Here’s Oregon Medicaid’s official ABN and a notice of non-coverage that complies with Arizona statute.) That said, here are some general Medicaid billing guidelines from CMS:

  • “Bill only for covered services
  • Ensure beneficiaries are eligible for services where they are furnished
  • Ensure medical records are accurate, legible, signed, and dated
  • Return any overpayments within 60 days”

Keep in mind that because both the federal and state governments have their hands in the Medicaid pot, “Medicaid claims must adhere to both federal and state guidelines.” In other words, if you find conflicting instructions between your state guidelines and federal guidelines, you must adhere to the strictest guideline.

Furthermore, when a patient has coverage outside of Medicaid, the provider should bill the other payer first. Take a look at some advice from that same billing and coding website: “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.”


Like most things Medicaid, reimbursement rates vary from state to state. This is because, according to the official Medicaid website, “states can establish their own Medicaid provider payment rates within federal requirements.” However, despite having the freedom to determine their own reimbursement rates, a large majority of states consistently set low Medicaid reimbursement rates. 

Remember how a large majority of medical practices reported that Medicare didn’t cover the cost of care in 2019? Well, Medicaid providers are braving even worse financial straits. According to a nationwide study conducted by the Urban Institute in 2016, “Medicaid programs paid physicians fees at 72 percent of Medicare rates.” Additionally, Medicaid providers can’t seek additional compensation from patients, as they are typically barred from accepting out-of-pocket payments. These unavoidable rock-bottom rates discourage providers from participating in the Medicaid program, arguably undermining it completely. 

Shift to Value-Based Payment

Medicare and Medicaid do share one monumentally important similarity: both programs are rapidly shifting toward value-based payment models. In other words, CMS wants to encourage providers (and other payers) to focus on quality of care over quantity of care the only way they know how: by fiddling with reimbursement rates. In 2017, for instance, CMS kicked off the Part B-exclusive Merit-Based Incentive Payment System (MIPS), and it has consistently encouraged—and required—more and more providers to participate in MIPS each year. Additionally, in April 2019, CMS and the HHS announced new Medicare payment programs called Primary Care First (PCF) and Direct Contracting (DC). These programs are intended to improve healthcare quality—and they’re “specifically designed to encourage state Medicaid programs and commercial payers to adopt similar approaches,” said HHS Secretary Alex Azar.

Though there isn’t an overarching Medicaid value-based program (yet), many states have stepped up to the plate and implemented their own value-based programs. In Tennessee, for example, nursing facilities’ Medicaid payments are already tied to performance measures. This article from The Healthcare Information and Management Systems Society (HIMSS) even claims that “only four states have had little-to-no value-based payment activity.” The big takeaway is that value-based payment models are the way of the future—regardless of whether you contract with Medicare or Medicaid. 


So maybe Medicare and Medicaid aren’t exactly identical—or even all that similar. The programs may be flawed, but they also provide coverage to many of the country’s most vulnerable patients. That counts for something! 

  • The Rehab Therapist's Guide to Using CMS-1500 Claim Forms Image

    articleJul 29, 2019 | 17 min. read

    The Rehab Therapist's Guide to Using CMS-1500 Claim Forms

    Healthcare billing can get even the best billers tangled up in knots—and it’s no wonder why. Between tracking and adhering to shifting payer guidelines, managing patient claims, verifying insurance , and defending against denials , billers are pulled and twisted in a million different directions. That’s why it’s so important to have a strong billing foundation; a concrete understanding of your billing basics will help you pivot and twirl and handle the whirlwind of the billing office …

  • The Ultimate ICD-10 FAQ: Part Deux Image

    articleSep 24, 2015 | 16 min. read

    The Ultimate ICD-10 FAQ: Part Deux

    Just when we thought we’d gotten every ICD-10 question under the sun, we got, well, more questions. Like, a lot more. But, we take that as a good sign, because like a scrappy reporter trying to get to the bottom of a big story, our audience of blog readers and webinar attendees aren’t afraid to ask the tough questions—which means they’re serious about preparing themselves for the changes ahead. And we’re equally serious about providing them with …

  • The Complete PT Billing FAQ Image

    articleMay 24, 2016 | 25 min. read

    The Complete PT Billing FAQ

    Over the years, WebPT has a hosted a slew of billing webinars and published dozens of billing-related blog posts. And in that time, we’ve received our fair share of tricky questions. Now, in an effort to satisfy your curiosity, we’ve compiled all of our most common brain-busters into one epic FAQ. Don’t see your question? Ask it in the comments below. (And be sure to check out this separate PT billing FAQ we recently put together.) Questions …

  • Common Questions from Our Medicare Open Forum Webinar Image

    articleOct 25, 2018 | 43 min. read

    Common Questions from Our Medicare Open Forum Webinar

    Earlier this week, WebPT President Dr. Heidi Jannenga, PT, DPT, ATC, teamed up with Rick Gawenda, PT—President and CEO of Gawenda Seminars & Consulting—to host a Medicare Open Forum . As expected, we received more questions than our Medicare experts could answer during the live session, so we've provided the answers to the most frequently asked ones below. Don't see the answer you're looking for? Post your question in the comment section at the end of this …

  • Denial Management FAQ Image

    articleMay 26, 2017 | 22 min. read

    Denial Management FAQ

    During our denial management webinar , we discussed the difference between rejections and denials, explained how to handle both, and provided a five-step plan for stopping them in their tracks. The webinar concluded with an exhaustive Q&A, and we’ve amassed the most common questions here. Insurance Issues Claim Quandaries Compliance Qualms Documentation Dilemmas Front-Office Frustrations Insurance Issues We’ve had issues with auto insurances denying 97112 (neuromuscular re-education) for non-neuro diagnoses, even in cases when the patient’s medical …

  • The Dish on Patient Discounts: Can You Charge Different Rates for the Same Service? Image

    articleSep 11, 2019 | 7 min. read

    The Dish on Patient Discounts: Can You Charge Different Rates for the Same Service?

    Let’s start with the bad news. (Spoiler alert!) Patient discounts aren’t anywhere near as straightforward as we’d all like them to be. Getting a hard-and-fast rule from every commercial payer and state government—or even from CMS —can be harder than keeping up with the gossip in a highschool cafeteria. So, naturally, the discounting situation is less “he said, she said” and more “they said, they said, they said, and they said.” It’s hard to know what you …

  • Cashing In on Private Pay: The PT's Guide to Going Out-of-Network Image

    webinarJul 27, 2017

    Cashing In on Private Pay: The PT's Guide to Going Out-of-Network

    For many rehab therapists, submitting a claim to a third-party payer feels a lot like pulling the lever on a slot machine. You never know for sure what you’re gonna get—and most of the time, it’s less than you’d hoped for. With seemingly ever-increasing regulations—and constantly shrinking reimbursements—it’s no wonder so many PTs, OTs, and SLPs feel like the financial odds are stacked against them. [video://] As a result, more and more rehab therapy providers are trying …

  • Breaking News: 2017 MACRA Final Rule Hits Image

    articleOct 17, 2016 | 4 min. read

    Breaking News: 2017 MACRA Final Rule Hits

    After months of heated debate and public commentary—much of it coming from physicians who felt they needed more time to prepare themselves to participate in a brand-new quality reporting program—the Department of Health & Human Services (HHS) on Friday released its final rule on the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) . This act, which will go into effect January 1, 2017, reimburses eligible Medicare physicians based on the quality of care they deliver …

  • The Ultimate ICD-10 FAQ Image

    articleSep 1, 2015 | 21 min. read

    The Ultimate ICD-10 FAQ

    Yesterday, we hosted the largest webinar in WebPT history . Thousands of rehab therapy professionals attended the live session, which focused on ICD-10 coding examples . As expected, we received a lot of questions. Below is a collection of the webinar’s most frequently asked questions. The Seventh Character Craze What is the seventh character? The seventh character didn’t exist in ICD-9 , so it’s caused a great deal of confusion. Essentially, it’s a mechanism for applying greater …

Achieve greatness in practice with the ultimate EMR for PTs, OTs, and SLPs.