Government won't pay for your funeral with tax dollars. I don't believe that one should be cremated/body donation just for the sake of saving money. BUT if they are your first choice...do it. You can create your own memorial service at home, church, social hall or outdoors with candles, family and friends. If you want a full service funeral: get off this site now and call your trusted funeral home and ask about planning in advance :)
start calling around, most funeral homes offer what they call a very basic cremation-some as low as $600-but be sure and call around. Almost all states have a cremation society-I think the basic is around rate is around $700-although some states are higher than others. If possible, if you can afford it-do a prepaid cremation and you are locked in that price.
No, Medicaid will not pay to bury your parents. I'm afraid that funeral costs are on the shoulders of the family. If there is no money, some places will provide a pauper burial or cremation. Sometimes these are donated by kindly funeral homes, but they aren't required of them. You can ask around your community and see what might be available for people with no money.
Although medicaid will not help to bury your parents, through Social Security, one may qualify for "A Special Lump-Sum Death Payment" if you meet certain criteria in the amount of $225. Contact your local Social Security office. http://www.ssa.gov/survivorplan/ifyou7.htm