In 1965, Congress took its first historical step towards the ideal of universally accessible health care services with the enactment of the Medicare and Medicaid programs. These programs are federally subsidized health insurance programs administered by the Health Care Financing Administration within the Department of Health and Human Services. Under the Medicare statute, the federal government reimburses providers of medical services for care rendered to elderly or disabled patients, subject to guidelines and limitations. The Medicare Act establishes the costs allowed for reimbursement for services and authorizes the Secretary of the Department of Health and Human Services (HHS) to promulgate regulations that further interpret the costs. Medicaid, on the other hand, provides health care for the indigent and is funded by both federal and state governments. States which elect to participate in the Medicaid program use federal funds in combination with state funds to reimburse providers for their medical services. The programs may vary from state to state. While each program is designed to meet the needs of the state, it must comply with federal guidelines. Low income Medicare recipients may also qualify for Medicaid, in which case Medicaid will pay the Medicare premium, copayment and deductible. The Secretary of HHS contracts with fiscal intermediaries as agents to assist in the administration of the programs. The intermediaries assist providers in recording and reporting program costs and determining allowable costs, and then distribute funds to the provider to cover the costs. The intermediary is the first line of administrative authority for the resolution of any type of Medicare dispute.
Deborah M. Naglak, Medicare/Medicaid Reimbursement Issues - A Provider's Perspective, 5 J.L. & Health 79 (1990-1991)