Medicare vs. Medicaid: An Overview
MedicareandMedicaidare U.S. government-sponsored programs designed to help cover health care costs for certain American citizens. Established in 1965 and funded by taxpayers, these two programs have similar-sounding names, which can trigger confusion about how they work and the coverage they provide.
Medicare provides medical coverage for many people age 65 and older and those with a disability. Eligibility for Medicare has nothing to do with income level. Medicaid is designed for people of any age with limited income and is often a program of last resort for those without access to other resources.
Key Takeaways
- Medicare is the primary medical coverage provider for seniors and those with a disability.
- Medicaid is designed for people with limited income.
- Medicare has four parts that each cover different things—hospitalization, medically necessary services, supplemental coverage, and prescription drugs.
Medicare
Medicare helps provide health care coverage to U.S. citizens who are 65 years of age or older, as well as people with certain disabilities. The four-part program includes:
Part A: Hospitalization Coverage
Medicare Part A provides hospitalization coverage to individuals 65 years or older, regardless of income. You or your spouse must have worked and paid Medicare taxes for at least 10 years to qualify. Most people don't pay a premium for Part A, but deductibles and coinsurance apply.
Part B: Medical Insurance
Those eligible for Medicare Part A also qualify for Part B, which covers medically necessary services and equipment. This includes doctor’s office visits, lab work, x-rays, wheelchairs, walkers, and outpatient surgeries, as well as preventive services such as disease screenings and flu shots.
For 2024, the standard Part B premium is $174.70, up from $164.90 in 2023. This is generally deducted from Social Security or Railroad Retirement payments. Deductibles and coinsurance apply. Individuals whose modified adjusted gross income (MAGI) is more than $103,000 per year ($206,000 for a couple)are obligated to pay more for this program.
Individuals are not mandated to sign up for Part B as soon they are eligible if their employer’s insurance still covers them. However, it may still cost more to join later in life due to a late-enrollment penalty.
Part C: Medicare Advantage Plans
Individuals eligible for Medicare Part A and Part B are likewise eligible for Part C, also known as Medicare Advantage. Medicare Part C plans are offered by private companies approved by Medicare.
In addition to providing coverage offered by Parts A and B, most Part C plans offer vision, hearing, and dental coverage. Some also provide prescription drug coverage. In that way, it functions much like the health maintenance organizations (HMOs) and preferred provider organizations (PPOs) through which many people receive medical services during their working years.
Medicare Advantage can be beneficial for some, but can lead to higher out-of-pocket costs for others due to coinsurance, deductibles, and copays. Evaluate your health status along with the plan's structure and coverage to see if it's right for you.
Medicare Supplement Insurance, known as Medigap, may be purchased to help cover expenses such as copayments, coinsurance, and deductibles that go with Original Medicare. However, physicians who do not take Medicare also do not accept Medigap.
Part D: Prescription Drug Coverage
Medicare Part D provides prescription drug coverage. Participants pay for Part D plans out of pocket and must pay monthly premiums, a yearly deductible, and copayments for certain prescriptions. Most Medicare Part C plans will not allow you to buy Part D if their plan has no prescription drug coverage.
The annual Medicare open enrollment period runs from October 15 to December 7 every year.
| 2024 Medicare Costs at a Glance | |
|---|---|
| Part A premium | Free for most people who paid Medicare taxes for 40 or more quarters. If you paid Medicare taxes for less than 30 quarters, $505. If you paid Medicare taxes for 30–39 quarters, $278. |
| Part A hospital inpatient deductible and coinsurance | $1,632 deductible for each benefit period, which covers the first 60 days of your stay Days 61–90 of your stay: $408/day coinsurance Days 61–90: $816/day coinsurance for "lifetime reserve days" (up to 60 days over your lifetime) |
| Part B premium | $174.70 |
| Part B deductible and coinsurance | Deductible of $240 and then you pay 20%. |
| Part C premium | Varies by plan |
| Part D premium | Varies by plan |
Medicaid
Medicaid is a joint federal and state program that helps low-income Americans of all ages pay for the costs associated with medical and long-termcustodial care. Children who need low-cost care but whose familiesearn too much to qualify for Medicaid are covered through theChildren's Health Insurance Program (CHIP), which has its own set of rules and requirements.
Medicaid Eligibility and Costs
The partnership between the federal and state governments means there are different Medicaid programs in each state. Through the Affordable Care Act (ACA), signed into law in 2010, President Barack Obama attempted to expand health care coverage to more Americans. As a result, all legal residents and citizens of the United States with incomes 138% below the poverty line qualify for coverage in Medicaid participating states.
While the ACA has worked to expand both federal funding and eligibility for Medicaid, the U.S. Supreme Court ruled that states are not required to participate in the expansion in order to receive their current level of Medicaid funding. As a result, many states have chosen not to expand funding levels and eligibility requirements.
Those covered by Medicaid pay nothing for covered services. Unlike Medicare, which is available to nearly every American of 65 years and over, Medicaid has strict eligibility requirements that vary by state. For a state-by-state breakdown of eligibility requirements, visit Medicaid.gov.
When Medicaid recipients reach age 65, they remain eligible for Medicaidandalso become eligible for Medicare. At that time,Medicaid coverage may change based on the recipient's income. Higher-income individuals may find that Medicaidjust pays their Medicare Part B premiums. Lower-income individualsmay continue to receive full benefits.
Medicaid Benefits
Medicaid benefitsvary by state, but the Federal government mandates coverage for a variety of services, including:
- Inpatient hospital services
- Outpatient hospital services
- EPSDT: Early and Periodic Screening, Diagnostic, and Treatment Services
- Nursing Facility Services
- Home health services
- Physician services
- Rural health clinic services
- Federally qualified health center services
- Laboratory and X-ray services
- Family planning services
- Nurse Midwife services
- Certified Pediatric and Family Nurse Practitioner services
- Freestanding Birth Center services (when licensed or otherwise recognized by the state)
- Transportation to medical care
- Tobacco cessation counseling for pregnant women
Each state also has the option of including additional benefits, such as prescription drug coverage, optometrist services, eyeglasses, medical transportation, physical therapy, prosthetic devices, dental services, and much more.
Medicaid is also used to fund long-term care, which is not covered by Medicare or most private health insurancepolicies. In fact, Medicaid is the primary payer of long-term care across the nation and often covers the cost of nursing facilities for those who deplete their savings to pay for health care and have no other means to pay for nursing care.
The Bottom Line
Medicare and Medicaid are both government-run programs that cover health care costs. Medicare is open to Americans age 65 or older or who meet certain criteria, while Medicaid is designed for low-income Americans of any age, but with strict income requirements that vary by state.
Frequently Asked Questions
What's the Difference Between Medicaid and Medicare?
Medicare is available to individuals based on age or disability. If your eligibility depends on age, you can't access the program until you turn 65. Medicaid is designed for individuals in low-income situations or other special circ*mstances.
How Can I Get Medicaid?
Not everyone qualifies for Medicaid. If your income falls below the poverty level, determined by your state, you might qualify. There are also a number of mandatory eligibility groups, including some pregnant women and children, and individuals receiving Supplemental Security Income.
Who Is Eligible for Both Medicare and Medicaid?
Medicare eligibility is for people who are 65 or older, or who have a disability, end-stage renal disease, or ALS (Lou Gehrig's disease). Medicaid is for low-income people or those who need long-term care and have run out of other resources for those payments. You may be dually eligible for both if, for instance, you are already on Medicaid and turn 65. People of any age with end-stage renal disease or ALS are also dually eligible.
