Medical Billing Terms M: Medicare Billing, MAC and Medical Necessity Terms
Medicare billing is the process of submitting and getting paid for services to Medicare beneficiaries. This page defines Medicare and the terms from Medicaid spend-down to opt-out affidavit, including MAC, Medicare Advantage, medical necessity, MBI and PECOS. Each entry gives a plain definition, why it matters, an example, and an official source. MCM South Medical Billing Service, LLC works only in mental and behavioral health billing.
On this page (20 terms)
- Medicaid Spend-Down
- Medicaid State Plan
- Medicaid Work Requirements
- Medical Billing Company
- Medical Decision Making (MDM)
- Medical Loss Ratio (MLR)
- Medical Necessity
- Medical Necessity Criteria
- Medical Record Audit
- Medically Unlikely Edit (MUE)
- Medicare
- Medicare Administrative Contractor (MAC)
- Medicare Advantage
- Medicare Appeals Council
- Medicare Beneficiary Identifier (MBI)
- Medicare Benefit Policy Manual
- Medicare Claims Processing Manual
- Medicare Coverage Database (MCD)
- Medicare Enrollment (PECOS)
- Medicare Opt-Out Affidavit
How to use these Medicare Billing definitions
Use this page as a quick reference for Medicare Billing, from Medicaid Spend-Down to Medicare Opt-Out Affidavit. Each entry gives a plain definition, why it matters to a mental health practice, and an official source. When a rule changes by payer or state, the entry says so, so confirm Medicare Billing details with the payer before you bill.
Checklist: put the medicare billing definitions to work
- Check the medicare billing entries above before you send a claim that depends on them.
- Share this medicare billing page with front-desk and billing staff so everyone works from the same definitions.
- When a payer letter mentions medicare billing, find the matching entry and note the date you checked it.
- Keep your medicare billing notes next to your payer contracts, because a contract can define a term differently.
- Ask the payer to confirm in writing how it applies medicare billing before you change a workflow.
- Train new staff on medicare billing first, then move on to the rest of the glossary.
- Log any medicare billing question that comes up twice, then add the answer to your billing procedures.
Medicaid Spend-Down
Also called spend down; share of cost
- Definition
- A Medicaid feature in some states where a person with income above a limit becomes eligible after incurring medical expenses equal to the excess.
- Why it matters
- Eligibility can change month by month.
- Illustrative example
- A patient meets a spend-down and is eligible for the rest of the month.
Related termsMedicaidRetroactive Eligibility
Reference sourceMedicaid.govchecked 10/9/26
Medicaid State Plan
Also called state plan; Medicaid state plan; approved state plan
- Definition
- A Medicaid state plan is the agreement between a state and the federal government that describes how the state runs its Medicaid program, including who is eligible and which services are covered.
- Why it matters
- It explains why Medicaid differs from state to state. Covered behavioral health services, provider types, and rates come from the plan and from state rules.
- Illustrative example
- A practice reads its state's Medicaid plan and manual to see which provider types can bill therapy codes.
Related termsState Plan Amendment (SPA)Medicaid1115 WaiverSection 1915(c) Waiver
Reference sourceMedicaid.govCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
CategoriesMedicare & Medicaid Terms
Medicaid Work Requirements
Also called community engagement requirements
- Definition
- Rules some states apply that require certain adults to work or participate in activities to keep Medicaid, subject to federal and state law.
- Why it matters
- Can change eligibility and cause coverage loss.
- Illustrative example
- A patient's coverage ends after missing requirements.
Related termsMedicaidCoverage Termination Date
Reference sourceMedicaid.govCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
Medical Billing Company
Also called billing service; outsourced billing; third-party billing
- Definition
- A company that handles billing and collections for practices under a services contract, and that is a business associate under HIPAA.
- Why it matters
- Requires a BAA and clear expectations on reporting, access, and payment flow.
- Illustrative example
- A practice outsources claims, follow-up, and denials to a billing company.
Related termsBusiness Associate Agreement (BAA)Revenue Cycle Management (RCM)
Reference sourceHHS (U.S. Department of Health and Human Services)HHS Office for Civil Rights (OCR)checked 10/9/26
CategoriesRevenue Cycle MetricsAudits & Compliance
Medical Decision Making (MDM)
Also called MDM; level of medical decision making; E/M MDM
- Definition
- Medical decision making is the way a clinician's work is measured for many E/M codes. It looks at the number and complexity of problems addressed, the amount and complexity of data reviewed, and the risk of complications or management.
- Why it matters
- A prescriber can choose the E/M level by MDM or by total time on the date of the encounter. Use MDM to pick the level when a psychotherapy add-on is billed.
- Illustrative example
- A psychiatrist manages one stable condition with a prescription refill, which supports low MDM and a 99213.
Related termsE/M CodeCPT 99213Total Time on the Date of the EncounterDocumentation
Reference sourceAMA, CPT code set overviewCMS Coverage Database, Article A57480 (WPS)checked 10/9/26
CategoriesClaims Processing
Medical Loss Ratio (MLR)
Also called MLR
- Definition
- The share of premium revenue that an insurer spends on medical claims and quality improvement, rather than administration and profit; some markets have minimum MLR rules.
- Why it matters
- Affects plan financial behavior and rebates.
- Illustrative example
- An insurer must rebate if its MLR falls below a required level.
Related termsCapitationValue-Based Care
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
CategoriesQuality & Risk Adjustment TermsBCBS, UHC & Commercial Payer Terms
Medical Necessity
Also called medically necessary; medical necessity denial
- Definition
- The standard payers use to decide whether a service is appropriate for diagnosis or treatment and meets accepted standards of care.
- Why it matters
- The most common reason behavioral health claims and authorizations are denied.
- Illustrative example
- A payer denies continued weekly therapy as not medically necessary.
Related termsMedical Necessity CriteriaLetter of Medical NecessityUtilization Review (UR)
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
Medical Necessity Criteria
Also called level of care criteria; InterQual; MCG; LOCUS; CALOCUS
- Definition
- The clinical guidelines payers use to judge medical necessity, such as proprietary criteria sets or level of care tools.
- Why it matters
- Knowing which criteria the payer uses helps shape documentation and appeals.
- Illustrative example
- A payer cites its level of care criteria in a denial letter.
Related termsMedical NecessityUtilization Review (UR)Level of Care
Reference sourceAmerican Psychiatric Associationchecked 10/9/26
CategoriesPrior Authorization TerminologyBehavioral Health Specific Terms
Medical Record Audit
Also called chart audit; documentation audit
- Definition
- A review of clinical records to confirm they support the codes billed.
- Why it matters
- Internal audits find problems before payers do.
- Illustrative example
- A practice reviews a sample of notes for time and diagnosis support.
Related termsAuditDocumentationCompliance ProgramGuide: Payer audits
Reference sourceAHIMAchecked 10/9/26
CategoriesAudits & Compliance
Medically Unlikely Edit (MUE)
Also called MUE; units of service edit
- Definition
- A CMS edit setting the maximum units of a service that a provider would normally bill for one patient on one date of service.
- Why it matters
- Explains unit-based denials.
- Illustrative example
- A claim billing more units than the MUE is reduced.
Related termsNCCI EditsUnitsGuide: NCCI edits
Reference sourceCMS (Centers for Medicare & Medicaid Services)CMS National Correct Coding Initiative (NCCI)checked 10/9/26
CategoriesClaims ProcessingAudits & Compliance
Medicare
Also called Original Medicare; Medicare Part A and B; federal health insurance for older adults
- Definition
- The federal health insurance program for people 65 and older and some younger people with disabilities. Part A covers hospital care, Part B covers outpatient care including most mental health services, and Part D covers drugs.
- Why it matters
- Outpatient psychotherapy and psychiatry for Medicare patients bill under Part B.
- Illustrative example
- A clinical social worker bills Medicare Part B for psychotherapy.
Related termsMedicare AdvantageMedicare Administrative Contractor (MAC)Medigap
Reference sourceCMS (Centers for Medicare & Medicaid Services)CMS Medicare Learning Network (MLN)checked 10/9/26
CategoriesMedicare & Medicaid Terms
Medicare Administrative Contractor (MAC)
Also called MAC; Medicare contractor; Part B MAC
- Definition
- A private company that processes Medicare fee-for-service claims and handles enrollment and provider education for a geographic jurisdiction.
- Why it matters
- Local coverage rules come from the MAC for the provider's jurisdiction.
- Illustrative example
- A practice checks its MAC's local coverage article for psychotherapy.
Related termsLocal Coverage Determination (LCD)Redetermination
Reference sourceCMS (Centers for Medicare & Medicaid Services)CMS Medicare Learning Network (MLN)checked 10/9/26
CategoriesMedicare & Medicaid Terms
Medicare Advantage
Also called MA; Medicare Part C; Medicare managed care
- Definition
- Private plans that contract with Medicare to provide Part A and B benefits, often with networks, prior authorization, and different billing rules from Original Medicare.
- Why it matters
- Claims go to the private plan, not the MAC, and network status is key.
- Illustrative example
- A patient's card shows a Medicare Advantage plan, so the claim goes to that plan.
Related termsMedicareStar RatingsPrior AuthorizationGuide: Medicaid managed care
Reference sourceCMS (Centers for Medicare & Medicaid Services)CMS Medicare Learning Network (MLN)checked 10/9/26
CategoriesMedicare & Medicaid Terms
Medicare Appeals Council
Also called MAC appeal; fourth-level appeal
- Definition
- The fourth level of Medicare appeals, reviewing ALJ decisions.
- Why it matters
- Part of the full appeal ladder.
- Illustrative example
- A party appeals an ALJ decision to the Council.
Related termsAdministrative Law Judge (ALJ) Hearing
Reference sourceCMS (Centers for Medicare & Medicaid Services)CMS Medicare Learning Network (MLN)checked 10/9/26
Medicare Beneficiary Identifier (MBI)
Also called MBI; Medicare number
- Definition
- The identifier that replaced the Social Security-based number on Medicare cards.
- Why it matters
- Claims need the MBI.
- Illustrative example
- A card shows an 11-character MBI.
Related termsMedicareMember ID
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
Medicare Benefit Policy Manual
Also called Benefit Policy Manual; Chapter 15 Covered Medical and Other Health Services; CMS IOM 100-02
- Definition
- The Medicare Benefit Policy Manual is a CMS manual that explains what Medicare covers. Chapter 15 covers medical and other health services, including rules that relate to incident-to services and other coverage details.
- Why it matters
- Billers and compliance staff use it to check whether Medicare covers a service and under what conditions. It carries more weight than a blog or a payer summary.
- Illustrative example
- A compliance officer checks Chapter 15 before allowing incident-to billing for a supervised clinician.
Related termsIncident-To BillingMedicare Claims Processing ManualLocal Coverage Determination (LCD)National Coverage Determination (NCD)
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
Medicare Claims Processing Manual
Also called Claims Processing Manual; Pub. 100-04
- Definition
- The CMS manual that gives detailed billing and claims processing instructions for Medicare contractors and providers.
- Why it matters
- A primary source for Medicare billing questions.
- Illustrative example
- A biller cites Chapter 1 for filing rules.
Related termsMedicareMedicare Administrative Contractor (MAC)
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
CategoriesMedicare & Medicaid Terms
Medicare Coverage Database (MCD)
Also called MCD; CMS coverage database; NCD LCD article search
- Definition
- The Medicare Coverage Database is CMS's searchable database of national coverage determinations, local coverage determinations, and local coverage articles.
- Why it matters
- It is the place to check a Medicare contractor's coverage and billing rules for a code. Articles such as A57480 in the database are cited throughout this glossary.
- Illustrative example
- A biller searches the MCD for the LCD and article that apply to psychotherapy in their MAC's region.
Related termsLocal Coverage Determination (LCD)Local Coverage Article (LCA)National Coverage Determination (NCD)Medicare Administrative Contractor (MAC)
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
Medicare Enrollment (PECOS)
Also called PECOS; Provider Enrollment, Chain and Ownership System; Medicare provider enrollment
- Definition
- The CMS system and process for enrolling in Medicare and maintaining enrollment records.
- Why it matters
- An unenrolled or outdated Medicare enrollment blocks payment and can cause claim denials.
- Illustrative example
- A newly licensed clinical social worker completes Medicare enrollment before billing Medicare.
Related termsCMS-855Medicare Administrative Contractor (MAC)Opt-Out (Medicare)Guide: Medicare behavioral health billing
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
CategoriesCredentialing & EnrollmentMedicare & Medicaid Terms
Medicare Opt-Out Affidavit
Also called opt-out affidavit; private contract
- Definition
- A written statement filed by an eligible practitioner to opt out of Medicare for a period and contract privately with beneficiaries.
- Why it matters
- Strict rules apply; errors risk payment problems.
- Illustrative example
- A practitioner files an affidavit and uses private contracts.
Related termsOpt-Out (Medicare)Private ContractGuide: Medicare behavioral health billing
Reference sourceCMS (Centers for Medicare & Medicaid Services)checked 10/9/26
CategoriesMedicare & Medicaid TermsCredentialing & Enrollment
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Quick answer: Medicare Billing
What is Medicare?
Medicare is the federal health insurance program for people 65 and older and some younger people with disabilities. Part A covers hospital care, Part B covers outpatient care including most mental health services, and Part D covers drugs.
Frequently asked questions: Medicare Billing
What is Medicare Advantage?
Private plans that contract with Medicare to provide Part A and B benefits, often with networks, prior authorization, and different billing rules from Original Medicare. Claims go to the private plan, not the MAC, and network status is key.
What is a Medicare Administrative Contractor (MAC)?
Medicare Administrative Contractor (MAC) is a private company that processes Medicare fee-for-service claims and handles enrollment and provider education for a geographic jurisdiction. Local coverage rules come from the MAC for the provider's jurisdiction.
What is medical necessity?
Medical Necessity is the standard payers use to decide whether a service is appropriate for diagnosis or treatment and meets accepted standards of care. The most common reason behavioral health claims and authorizations are denied.
Related resources
Where MCM South works
MCM South serves psychotherapists and psychiatrists in ten states: Georgia, Massachusetts, Connecticut, Texas, Florida, New York, Colorado, Tennessee, North Carolina and Illinois.
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