Private pay vs Medicaid: which payer fits your agency?
By Scott McKenzie, founder of Home Care Agency Blueprint · Updated
Private pay gives you control of prices and paperwork but limits your clients to people who can pay. Medicaid opens your agency to eligible clients in programs your state runs, in exchange for state-set payment, enrollment screening and program documentation. Some owners use both; the right mix depends on your state’s programs and your budget.
The differences that matter
| Factor | Private pay | Medicaid |
|---|---|---|
| Price | You set it, and can change it. | Set by the state’s rate or fee schedule, or by a managed care plan’s contract. |
| Services you can bill | Whatever your license allows and clients will buy. | The services defined in the state plan or waiver, delivered under each client’s plan of care. |
| Clients | People who can pay. | People the state finds eligible. Waivers target groups such as older adults or people with disabilities who need an institutional level of care, and states choose how many people a waiver serves. |
| Entry requirements | State licensing, if your state requires it. | Licensing plus Medicaid enrollment: disclosures, screening by risk level, and revalidation at least every five years. |
| Visit records | Your own system. | Program documentation, and electronic visit verification for Medicaid personal care and home health visits. |
| Cash flow | You choose when to invoice and how to collect. | You are paid after you submit claims, on the state’s or plan’s schedule. |
We do not publish payment rates, because they differ by state, program and plan and change over time.
When Medicaid may fit
- A program in your state covers the services you want to provide.
- The state’s published rate covers your cost per hour of care, including payroll taxes and supervision.
- You can fund payroll while you wait for enrollment and for claims to be paid.
- You are ready to document visits the way the program requires, including EVV.
- There is demand from Medicaid clients in the area you serve.
When private pay may fit better for now
- No Medicaid program in your state pays for the services you plan to offer.
- The published rate does not cover your costs.
- Your budget cannot carry payroll while claims are processed.
- You want to build your systems before adding program rules and screening.
Some agencies start with one payer and add the other later. That is a business decision, not a rule; use the readiness checklist to see which questions are still open for you.
Questions to ask your state Medicaid agency
- Which program and provider type cover the services I plan to offer?
- Where is the current rate or fee schedule for that service published?
- Is the service delivered through managed care plans, and if so, which ones?
- Which EVV system do providers use?
Your state sets the details. Federal rules set minimum screening steps. Each state Medicaid agency decides its own provider types, forms, fees, order of steps and payment rates. Confirm every requirement with your state Medicaid agency; Medicaid.gov lists contacts for each state.
What to do next
Frequently asked questions
Can an agency take both private pay and Medicaid clients?
Ask your state Medicaid agency about its conditions. The federal enrollment rules cited on this site do not bar an enrolled agency from also serving private-pay clients. Federal rules do require Medicaid providers to accept the Medicaid payment, plus any cost sharing the state plan requires, as payment in full for covered services. That means you cannot bill a Medicaid client or family extra for those services. Your state and any managed care contracts may set other conditions.
Does Medicaid pay more or less than private pay?
It depends on your state, program and prices. Compare the state’s published rate with your own costs; we do not publish rates.
Want to talk through your options?
A free 15-minute clarity call with Home Care Agency Blueprint. It helps people start home care agencies, so expect that perspective. You do not need to finish the checklist first.
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