Understanding Medicare and Medicaid and how ACA Factors

Medicare/Medicaid and some examples

Although this will primarily be based upon medicare, I think it’s also important to have a good understanding of medicaid as well. It’s something that I was often confused with younger and because their names sound so familiar, it’s understandable if there is often mix up. This was spurred by the following post from Reddit, but since it relates to MACRA and the healthcare insurance sector, I decided to do some more research on it. Source Link The US health system is a composite of multiple subsystems comprising of a mix of public and private elements, from employment, medicare, medicaid, VA and private insurance. This health care system is defined as a combination of functioning public health and personal health care services under control of identifiable agents. 

Medicare So Expensive

Medicare is the nationally and publically funded medical insurance that has different aspects and requirements in order to qualify. In the US, there was a shift towards public provision of health insurance with some state intervention. Mainly private insurances, and the state-run/federally-run insurance policies. From there, social security, age related pensions and insurance was added and Medicare was known as an earned benefit rather than welfare, through dedicated payroll taxes and premiums for those elderly and have paid into the program. The US remains committed to the decentralized private provision of health care although there may be some changes in the upcoming four years with President Trump. Additionally, the US has increasingly intervened in the private marketplace in certain areas, but in certain areas have remained untouched especially with the growing insurance conglomerations that are forming. Into the nitty gritty, it is divided into three parts: A, B, and D and despite it being available for those under 65, there are higher premiums as a way to subsidize the growing cost and portion of healthcare related uses towards the elderly population. Most people with Medicare are 65+ and have paid into it through their taxes.

A – Free, inpatient charges, stays, surgeries etc.

B – Outpatient, visiting doctors for checkups.

C – Medigap, meant to be offered by commercial entities to help cover things that Medicare does not. It’s meant for those with a fixed incomes as it attempts to smooth out the cost of medical care.

D – Pharmacy coverage. Part C is often included with Part D.

Medicaid which is aimed more for the poor, grew slowly but is still largely in use today. It was originally meant to be for the elderly and the nonworking poor, however, the health system underwent “creeping socialization” and further restrictions were added due to the public sector being enraged in the financing in the heavily privatized health care market. It is medical coverage for those without the resources to afford more. It is funded by state exchanges, as opposed to by the nation, and its benefits will vary from state to state, but in general, it is only available for those in severely disadvantaged circumstances; disabled, poverty, orphaned children, etc. It has little, or often no, monthly premium, and offers extreme reductions in costs of medical bills, often 90-95% or more. Through the Obama Administration, there were financial incentives for states that created their own state exchange of health insurance with Medicaid, however, despite the financial incentives there were still plenty of backlash for his policies and Arizona was a state that resisted for a long time.


Health insurance is made up of several major components: The premium, or what you pay each month, the Deductible, or what you pay before the insurance company does, the Copayment, or what you pay, regardless of deductible, for a service, the Coinsurance, or what percentage of the service the insurance company pays, and the Out Of Pocket Maximum, or how much you will pay, in a worst-case scenario, each year. Also note that insurance companies negotiate with the doctor, and lower the costs of services.

The easiest ways to discuss these is to look at various types. For this example, I’ll use a High Deductible plan, a High Premium plan, Medicare, and Medicaid, to lay out the examples.

A High deductible plan might have a premium of $100/mo, a Deductible of $5000, a Copay of $20, a Coinsurance of 85%, and an OOP Max of $10,000

A High Premium plan might have a premium of $250/mo, a Deductible of $1500, a Copay of $10, a Coinsurance of 90%, and a OOP Max of $3000

Medicare (Part B) has a premium of $150/mo, a Deductible of $150, a Copayment of $0, and a Coinsurance of 80%, with no OOP Max.

Medicaid might have a premium of $0, a Deductible of $0, a Copayment of $2, a Coinsurance of 95%, and no OOP Max.

Finally, you have no insurance. It’s free, but under the ACA, if you choose to not have any insurance, you pay a fine of several hundred dollars.


So, let’s say you need to visit a doctor, for a regular checkup visit. The doctor charges $150 for this services.

Under the High Deductible plan, the doctor bills the $150. The insurance then negotiates it down to $110, cutting that $40 off the top. You pay the Copay in the office, that day, of $20. The insurance determines you haven’t met your deductible, so they remove the remaining $90 from your deductible, leaving $4,910 for the year. You then receive a bill for the remaining $90.

Under the High Premium plan, the doctor bills the $150. The insurance then negotiates it down to $100, cutting that $50 off the top. You pay the Copay in the office, that day, of $10. The insurance determines you haven’t met your deductible, so they remove the remaining $90 from your deductible, leaving $1,910 for the year. You then receive a bill for the remaining $90.

Under Medicare, the doctor bills the $150. Medicare negotiates it down to $75, cutting it in half. You do not have a copay. Medicare then determines you have a $150 deductible, and removes the $75 from that, leaving $75 for the year. You then receive a bill for the remaining $75.

Under Medicaid, the doctor bills the $150. Medicaid negotiates it down to $35, reducing it by $115. You pay a $2 copay that day. Medicaid does not have a deductible, so they pay 90% of the remaining $33, or $30. You receive a bill for $3 more.

You have no insurance. You pay $150.


Two months later, you go in for a series of tests, x-rays, and eventually outpatient surgery. This is expensive, but does not require hospitalization. The doctor charges $4000 for these services.

Under the High Deductible plan, the doctor bills the $4000. The insurance then negotiates it down to $3300, cutting that $700 off the top. You pay the Copay in the office, that day, of $20. The insurance determines you haven’t met your deductible, so they remove the remaining $3280 from your deductible, leaving $1630 for the year. You then receive a bill for the remaining $3280.

Under the High Premium plan, the doctor bills the $4000. The insurance then negotiates it down to $3000, cutting that $1000 off the top. You pay the Copay in the office, that day, of $10. The insurance determines you have now met your deductible, so they remove the remaining $1,910 from your deductible, leaving $0 for the year. They then pay 90% of what remains, or $981. You then receive a bill for the remaining $2019, which is the $1910 from your deductible, and $109 left over from the coinsurance.

Under Medicare, the doctor bills the $4000. Medicare negotiates it down to $2700, reducing it by $1300. You do not have a copay. Medicare then determines you have met the deductible, removing $75 to pay for it. They then pay 80% of the remaining $1225, or $980. You then receive a bill for $320, which is the $75 deductible, plus the 20% of $245.

Under Medicaid, the doctor bills the $4000. Medicaid negotiates it down to $2000, reducing it by $2000. You pay a $2 copay that day. Medicaid does not have a deductible, so they pay 90% of the remaining $1998, or $1798.20. You receive a bill for $199.80 more.

With no insurance, you pay the $4000.


Several months later, you have a major surgery. It requires three weeks in the hospital, and is very expensive, costing $100,000.

Under the High Deductible plan, the doctor bills the $100,000. The insurance then negotiates it down to $70,000, cutting that $30,000 off the top. You pay the Copay in the office, that day, of $20. The insurance determines you haven’t met your deductible, so they remove the remaining $1630 from your deductible, leaving $0 for the year. They then pay at 85% of the remaining $68,350, or $58,097.50. You then receive a bill for only $6,630, which is $10,252.50 plus $1630… but you met your Out of Pocket Maximum of $10,000 for the year, so they put a hard cap on it, and paid the remaining $5,252.50 at 100%.

Under the High Premium plan, the doctor bills the $100,000. The insurance then negotiates it down to $80,000, cutting that $20,000 off the top. You pay the Copay in the office, that day, of $10. The insurance determines you’ve met your deductible, so they then pay at 90% of the remaining $79,990, or $71,991. You then receive a bill for only $871, since you’ve now hit your $3000 Out of Pocket Maximum. Your insurance covers everything remaining, which would have been over $7000.

Under Medicare, the doctor bills $100,000. Medicare negotiates it down to $72,000, cutting off $28,000. It then pays 80%, since you have no copay, and met your deductible, or $57,600. You receive a bill for $14,400. (As a side note, I did not work in Hospital billing, so this may be inaccurate for Part A, but it’s a good example nonetheless. I believe Part A and Part B have separate deductibles, but I’m nearing the post limit).

Under Medicaid, the doctor bills $100,000. Medicaid reduces it to $45,000, cutting off $55,000. They pay 95% of it, or $42,750. You receive a bill for $2,250, and likely have to declare bankruptcy.

Under no insurance, you receive a bill for $100,000, and declare medical bankruptcy.

NURRRR!


As a side note, if you have Medicare Part C, and a strong one, you likely would not receive a bill, at all, for any of the Medicare portions.

Total costs of premium+costs:

High Deductible: $11,200

High Premium: $6,000

Medicare: $16,595

Medicaid: $2454.80

No insurance: $104,150+ACA fine

Article by Sir. Lappleton III

I'm a happy-go-lucky college student that started a blog as a way to not only document my education and my experiences, but also to share it with whoever stumbles upon my site! Hopefully I can keep you guys entertained as well as learn about a few things from IT as well as from my time and experiences as I plunge deeper and deeper into healthcare! A couple of my areas of focus is data management, system security (cyber security), as well as information technology policy.

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