Payment for Services Provided by Medicaid

Payment for Services Provided by Medicaid

Who pays for services provided by Medicaid?

Medicaid does not pay money to individuals, but sends payments to the health care providers. States make the payments based on a fee-for-service agreement or through prepayment arrangements such as Health Maintenance Organizations (HMOs).

The Federal Government then reimburses the States for a share of their Medicaid expenditures. Every year the Federal Medical Assistance Percentage (FMAP) is determined which depends on the average per capita income level of the State. Richer states receive a smaller share than poorer states. By law the FMAP must be between 50% and 83%.

States may impose nominal deductibles, coinsurance, or copayments on some Medicaid beneficiaries for certain services. However, the following Medicaid beneficiaries must be excluded from cost sharing:

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• Pregnant women,
• Children under age 18, and
• Hospital or nursing home patients who are expected to contribute most of their income to institutional care.

All Medicaid beneficiaries must be exempt from copayments for emergency services and family planning services.