2.3 Medicaid & Dual-Eligibles

Medicaid Is a Federal-State Partnership

Quick Answer: Medicaid is jointly funded by the federal government and the states. Federal law sets mandatory benefits; states add optional ones. Medicaid is the payer of last resort, and patients with both Medicare and Medicaid are "dual-eligible."

Medicaid provides health coverage to low-income individuals and families, established under Title XIX of the Social Security Act. Unlike Medicare, which is uniform nationwide, Medicaid is administered by each state within federal rules, so eligibility, covered services, plan names, and reimbursement vary by state. The CPB exam tests the federal framework and the concept of state variation rather than any single state's fee schedule.

How Medicaid Is Funded — FMAP

The federal government matches state Medicaid spending through the Federal Medical Assistance Percentage (FMAP). The FMAP is higher for states with lower per-capita income, so the federal share ranges roughly from 50% to about 77%. FMAP is a funding mechanism, not something a biller calculates per claim, but it explains why Medicaid policy differs across states and why expansion-state eligibility looks different from non-expansion states.

Mandatory vs Optional Services

A frequent surprise: outpatient prescription drugs are an optional benefit federally, even though every state in practice offers it. Adult dental and vision are likewise optional and commonly limited or excluded. Other mandatory benefits include rural health clinic and federally qualified health center (FQHC) services, nurse midwife and nurse practitioner services, family planning, and transportation to medical care.

Many states deliver Medicaid through managed care organizations (MCOs), so the biller may submit to a private MCO that contracts with the state rather than to a state fee-for-service program — the verification step (checking the patient's specific Medicaid plan card) is therefore critical.

EPSDT for Children

Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) is a mandatory, comprehensive benefit for Medicaid-enrolled children under age 21. It requires states to cover all medically necessary screenings and any treatment a screening identifies — even services that are optional for adults in that state. EPSDT is a frequent exam topic precisely because of this broad mandate: if a screening finds a condition, the state must cover the corrective treatment for the child regardless of its adult coverage rules.

Payer of Last Resort

Medicaid is the payer of last resort. Federal law requires that all other liable third parties — commercial insurance, Medicare, workers' compensation, auto/liability coverage — be billed before Medicaid. A biller who sends a claim to Medicaid while other coverage exists will trigger a denial for third-party liability (TPL). The correct workflow is to exhaust the primary payer, attach the primary remittance, then bill Medicaid for any residual it covers.

Dual-Eligible Beneficiaries

A dual-eligible beneficiary qualifies for both Medicare and Medicaid. For these patients, Medicare pays first and Medicaid may cover Medicare cost-sharing such as deductibles and coinsurance, depending on the program. Coordination here is a common source of claim errors because the provider must crossover the Medicare remittance to Medicaid rather than billing the patient. Dual-eligibles are often grouped as full-benefit (entitled to the state's complete Medicaid package plus cost-sharing help) versus partial-benefit (a Medicare Savings Program pays only premiums and/or cost-sharing, with no full Medicaid coverage).

Medicaid's payment of the Medicare coinsurance is frequently limited to the state's Medicaid allowable, so a provider may receive nothing beyond Medicare's payment if Medicare already paid more than the Medicaid rate — but the provider still cannot bill the dual-eligible patient for the difference.

Medicare Savings Programs

For a QMB patient, providers may not bill the patient for Medicare cost-sharing — this is the QMB balance-billing prohibition, and violating it is a compliance issue that can lead to sanctions. The exam often contrasts QMB (broadest help, including cost-sharing) with SLMB and QI (premium-only). Remember the order of generosity: QMB > SLMB > QI, with QDWI as the narrow working-disabled Part A program. QI and SLMB have higher income thresholds than QMB, and QI funding is capped annually and awarded first-come, first-served; a person cannot be enrolled in QI and full Medicaid at the same time.

Billing Workflow for Dual-Eligibles

When a patient has Medicare and Medicaid, follow this order:

1. Bill Medicare first as the primary payer and obtain the Medicare remittance advice.
2. Crossover or submit to Medicaid for the residual cost-sharing Medicaid covers, attaching the Medicare payment information.
3. Do not bill the patient for Medicare deductibles or coinsurance if they are a QMB or full-benefit dual — write off any amount Medicaid does not pay.

Many states have an automatic crossover arrangement through the Benefits Coordination & Recovery Center, so the Medicare remittance flows to Medicaid without a second manual claim. The exam emphasizes that Medicaid's status as payer of last resort governs this entire sequence: every other source — Medicare, commercial insurance, comp, auto — is exhausted before Medicaid pays a dime, and the patient is protected from balance billing in QMB cases regardless of what Medicaid ultimately reimburses.