How American Healthcare Is Funded
Medicare, Medicaid, Insurance, and How Providers Get Paid
How American Healthcare Is Funded
Medicare, Medicaid, Insurance, and How Providers Get Paid
The US healthcare system has no single payer. Coverage depends on age, income, employment, and military service. As an APP, you will practice across all of these payers — sometimes in the same clinic day.
Part 1 — The Five Major Coverage Categories
| Payer | Who Qualifies | Key Points |
|---|---|---|
| Medicare | Age 65+; or disabled; or ESRD/ALS | Federal program. Parts A, B, C, D (see below). |
| Medicaid | Low-income adults, children, pregnant women, disabled | Federal-state partnership. Income-based, not age-based. Expanded under ACA. Varies by state. |
| Private Insurance | Working-age adults (employer) or marketplace enrollees | Employer-sponsored covers most working adults. ACA marketplace for self-employed or uninsured. COBRA continues employer coverage temporarily after job loss. |
| VA / TRICARE | Veterans (VA); active military and dependents (TRICARE) | Federal programs. VA is comprehensive care for veterans. TRICARE functions like private insurance for military families. |
| Uninsured | Those who fall through every gap | Emergency care required (EMTALA). Charity care and safety net hospitals absorb costs. Patients often delay care until crisis. |
Medicare Parts — what each covers:
| Part | Covers | Note |
|---|---|---|
| Part A | Hospital inpatient, SNF, hospice | Premium-free for most; funded by payroll taxes |
| Part B | Outpatient visits, professional fees, DME | Monthly premium; covers your services as an APP |
| Part C | Medicare Advantage (bundled A+B, often D) | Offered by private insurers under Medicare contract; prior auth common |
| Part D | Prescription drugs | Separate plan; formulary varies by plan |
Private insurance — terms every APP must know:
| Term | What It Means |
|---|---|
| Premium | Monthly payment to maintain coverage (whether or not care is used) |
| Deductible | Amount patient pays out-of-pocket before insurance starts covering costs |
| Copay | Fixed dollar amount per visit or service (e.g., $30 per office visit) |
| Coinsurance | Patient’s percentage share after deductible is met (e.g., 20% of the bill) |
| Out-of-pocket max | Annual cap on patient spending; insurance covers 100% beyond this |
| In-network | Providers who have contracted rates with the insurer; lower cost to patient |
| Out-of-network | Non-contracted providers; patient pays significantly more |
Part 2 — How Providers Get Paid
There are two dominant payment models in the US. Both affect how you practice.
| Model | How It Works | Implication for APPs |
|---|---|---|
| Fee-for-Service (FFS) | Payment per service rendered (visit, procedure, test). More volume = more revenue. | Still dominant. Incentivizes volume, not necessarily outcomes. |
| Value-Based Care | Payment tied to quality metrics, outcomes, or cost targets. Includes APMs, bundled payments, and shared savings programs (e.g., Medicare ACOs). | Incentivizes efficiency, care coordination, and keeping patients out of the hospital. |
Prior Authorization: Before many high-cost services (advanced imaging, specialist referrals, branded drugs) can be performed, the insurer must approve them in advance. Denial requires appeal. This is a daily reality in outpatient cardiology.
Formularies: Each insurance plan publishes a drug formulary — a tiered list of covered medications. A medication you prescribe may be covered at Tier 1 (low cost) or Tier 3 (high cost) or not covered at all. Formulary status directly determines whether your patient fills the prescription.
Formularies: Each insurance plan publishes a drug formulary — a tiered list of covered medications. A medication you prescribe may be covered at Tier 1 (low cost) or Tier 3 (high cost) or not covered at all. Formulary status directly determines whether your patient fills the prescription.
Clinical Rule
Every clinical decision has a payment context. Before prescribing, ordering, or referring, know what your patient’s coverage looks like — because coverage determines access. A medication without coverage is a medication the patient will not take.
This is one of 13 free reference sheets from the APP Cardiology Academy — no account required.