Revenue Cycle Foundations

Medicare, Medicaid, and Commercial Payers

Distinguish payer programs, plan administration, member identification, and operational billing differences.

Estimated time: 65 minutes / Reviewed 2026-07-12

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Learning objectives

Explain medicare, medicaid, and commercial payers using current claim facts and official sources.
Apply the 8-step workflow to a de-identified reimbursement case.
Distinguish administrative, coding, coverage, documentation, and procedural-status questions.
Document a bounded conclusion, unresolved facts, and the next supported action.

Core instruction

The payer is determined claim by claim, not by diagnosis or equipment alone. Original Medicare usually processes covered home DME under Part B through a DME MAC; Medicare Advantage claims go to the member's plan; Medicaid follows state and managed-care rules and may be primary or secondary; and commercial payment follows the member's current plan, contract, network, benefit, authorization, and coordination-of-benefits rules.

Learn how Original Medicare, Medicare Advantage, Medicaid, managed care, dual eligibility, and commercial plans determine who processes and pays a DME claim.

Medicare Part A is hospital insurance, Part B is medical insurance and generally contains the DME benefit, Part C is Medicare Advantage delivery through private plans, and Part D covers outpatient prescription drugs rather than the general DME benefit.
For covered DME under Original Medicare, the claim generally routes to the appropriate DME MAC. After the Part B deductible, Medicare commonly pays 80% of the Medicare-approved amount and the beneficiary commonly owes 20%, subject to assignment, secondary coverage, item-specific rules, and other exceptions.
A Medicare Advantage member uses the plan shown on the current card and eligibility response. The plan must cover at least what Original Medicare covers but may use its own network, authorization, supplier, documentation, and cost-sharing rules.
CMS February 2026 data reports 51.2% of Medicare enrollment in Medicare Advantage and other health plans. That dated national statistic never substitutes for checking the individual member's coverage on the date of service.
Medicaid is jointly federal and state administered. DME benefits, limits, fee schedules, prior authorization, supplier enrollment, incontinence-supply coverage, and managed-care routing vary by state, eligibility category, age, and plan.
EPSDT requires states to furnish Medicaid-coverable, medically necessary services needed to correct or ameliorate conditions for eligible members under age 21; this can make pediatric coverage broader than the state's adult benefit but does not eliminate medical-necessity or documentation review.
For a person with both Medicare and Medicaid, Medicare is generally billed before Medicaid for Medicare-covered DME. Verify payer order, QMB status, state crossover behavior, managed-care enrollment, and supplier participation before collecting money.
Federal law prohibits Medicare providers and suppliers from billing QMB members for Medicare Part A or Part B deductibles, coinsurance, or copayments, even when the state pays little or none of that cost sharing.
Commercial DME payment depends on the actual contract and benefit: active eligibility, network status, covered benefit, authorization, medical policy, HCPCS, rental or purchase terms, deductible, coinsurance, coordination of benefits, and timely filing must align.
An insurance card is an identification clue, not proof of active coverage, authorization, network status, medical necessity, or payment. Read the payer and plan identifiers, then verify electronically and resolve inconsistencies before delivery.

Module frame: one account, many dependent decisions

Medical billing is a controlled information system. Patient access, clinical care, coding, charge capture, claims, payment posting, denial work, and account resolution create one chain; an upstream error can survive several handoffs before appearing as a rejection, denial, refund, or audit finding.

Professional work therefore separates the clinical truth, administrative facts, code-set representation, payer rules, transaction status, and financial outcome. The purpose of this module is to make those layers visible before teaching individual claim tasks.

Deep dive

Medicare is a federal program, Medicaid is jointly administered through state programs, and commercial coverage operates through contracts and plan designs. Medicare Advantage uses private plan administration and is operationally different from Original Medicare even when the member card contains Medicare branding.

Program eligibility does not identify the claims destination.
Managed-care rules can differ from fee-for-service rules.
Dual eligibility requires payer-order and beneficiary-liability controls.

Payer pathways

Concept	Meaning	Operational control
Original Medicare	Federal fee-for-service	MAC or DME MAC rules and notices
Medicare Advantage	Private Medicare plan	Plan network, authorization and claims instructions
Medicaid	State program or managed-care plan	State and plan-specific benefits and billing

Decision workflow

01
Capture both sides of every current insurance card and identify the exact legal payer, plan, member ID, group, claims address or payer ID, and service contacts.
Complete workflow control 1, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
02
Run date-specific eligibility and benefits for the DME service type; confirm active dates, plan type, primary and secondary order, deductible, coinsurance, limits, and managed-care enrollment.
Complete workflow control 2, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
03
Confirm the supplier and location are enrolled, credentialed, contracted, or otherwise eligible for that payer and product on the date of service.
Complete workflow control 3, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
04
Research the item using the correct HCPCS, payer medical policy, Medicare NCD or LCD when applicable, state Medicaid manual, quantity, replacement, rental or purchase, and same-or-similar rules.
Complete workflow control 4, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
05
Obtain required prior authorization or pre-service review and ensure the approval matches the member, supplier, item, code, quantity, dates, and place of service.
Complete workflow control 5, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
06
Before delivery, complete a final benefits and documentation check, including order, treating record, medical necessity, delivery method, refill rules, financial notice, and QMB protections.
Complete workflow control 6, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
07
Submit to the correct primary payer with accurate provider roles, modifiers, units, authorization, and coordination data; then route the adjudicated balance to the legitimate secondary payer when required.
Complete workflow control 7, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.
08
Post the remittance by contractual and legal liability, correct root causes promptly, appeal when supported, and never transfer prohibited or unverified balances to the patient.
Complete workflow control 8, retain the supporting evidence, and resolve exceptions before moving to the next claim decision.

Worked case

The Medicare-branded card

Known facts

The card displays a private insurer and Medicare language.
The intake team selected Original Medicare.
The item requires plan authorization.

Decision question

Which payer pathway applies?

Analysis

1. Read the plan and member identifiers.
2. Verify enrollment for the service date.
3. Use the active plan's network and authorization rules.

Resolution: Route the case to the Medicare Advantage plan; Medicare branding alone does not establish Original Medicare processing.

Common failure patterns

Billing Original Medicare because a person has a red, white, and blue Medicare card even though a Medicare Advantage plan controls current benefits.

Why it fails: The conclusion is no longer reliably tied to the controlling facts, source, or procedural status and may produce rejection, denial, incorrect liability, or audit exposure.