Medicaid is a program that pays for healthcare for people with low incomes. It's jointly funded by federal and states governments. Each state sets its own guidelines about Medicaid eligibility and services, so the rules and regulations change depending on where you live. This can make Medicaid billing extremely complicated and difficult.

Medicaid is a vendor payment program, which means payments are made directly to the providers. Doctors and other healthcare professionals who participate in Medicaid must accept whatever payment they get in full. Proper medical billing procedures help assure that the providers will get the highest level of payment they qualify for.

Each state can set its own reimbursement rates, with three exceptions: (1) for institutional services, payment may not exceed amounts that would be paid under Medicare payment rates; (2) for disproportionate share hospitals, different limits apply; and (3) for hospice care. This means that whomever is doing the medical billing for a Medicaid patient must be well-versed in billing rules and regulations to make sure reimbursement levels are where they are supposed to be.

States must offer more money to qualified hospitals that provide inpatient services to a disproportionate number of Medicaid recipients and/or other low-income persons. These hospitals must employ medical billing employees or services that are aware of this rule, so that they can collect all the money they are entitled to.

Many doctors and other healthcare professionals who accept Medicaid patients use medical billing services to handle their billing, so that they do not have to deal with complicated billing procedures, thus allowing more time to deal directly with patients.