Medicare and Medicaid are two terms frequently used to discuss health care coverage. Many people use them interchangeably, although the two are separate and distinct programs.
Medicare is an insurance program, while Medicaid is intended more as an assistance program. So, just what are the differences between the two? Some of the main differences include eligibility requirements and coverage basics.
Keep reading to learn more about each program, what each covers, how to qualify for either, and the critical differences between the two. We’ll also discuss what happens if you are eligible for both programs. Let’s get started.
What’s The Difference Between Medicare and Medicaid
First, let’s take a look at the foundation of the programs themselves. Medicare is a Federally funded program intended to provide health insurance coverage for individuals 65 and older, younger disabled persons, and people receiving dialysis treatment. The history behind the program shows that most people receive their health care coverage through their employment, and upon retirement, people cannot get quality coverage on their own. Hence, Medicare was founded to help bridge this gap and provide coverage for those individuals. The same applies to people with disabilities who were no longer able to work.
On the other hand, Medicaid is a program funded jointly by the federal government and individual states. So, when people ask, “How is Medicaid funded?” the answer is that both the federal and state governments pay for Medicaid funding. Individual states can set their own Medicaid rules, but all states have some common themes. Overall, Medicaid’s purpose is to help provide healthcare for individuals and families with a financial need, regardless of age. This contrasts with Medicare, which allows older individuals irrespective of income level. Let’s dig a little deeper into the eligibility requirements for each program.
Qualification
Medicare has no income-related requirements. There are three ways to qualify for Medicare.
- First, by age alone. Individuals who are 65 and over qualify for Medicare.
- In addition, if you have been deemed disabled by the Social Security Administration, you can qualify for Medicare. There is typically a 24-month waiting period from when your disability begins until your Medicare coverage starts.
- Finally, individuals with end-stage renal disease (ESRD) or receiving dialysis can qualify for Medicare with no waiting period.
To qualify for Medicaid, an individual or family must meet the income thresholds.
- Income must be below 138% of the poverty level (roughly $20,000 for individuals and $37,000 for a family of four). Each state has individual rules about specific eligibility criteria, but low income is the main qualifying factor.
Many states have recently expanded Medicaid coverage, so even if you have been turned down, you should consider reapplying if you think you qualify.
Premiums & Services
Another big difference between these two programs is the cost of premiums and services.
- Since Medicaid is a needs-based program, premiums are not charged. In many cases, healthcare services are also provided at no cost to the recipient.
However, in some states, some services may require small copays or deductibles.
- Medicare is provided at no cost to those 65 and older who have enough work credits to qualify. People receiving disability payments from SSDI and those over 65 who do not have enough work history are generally required to pay monthly premiums for their coverage.
These Medicare premiums can range from $278 to $505, depending on the person’s number of work credits. Medicare requires a small copay or deductible for most medical services.
Coverage Levels
Finally, coverage levels between the two programs vary.
- Original Medicare, or Medicare Part A, is basic hospital insurance. It covers hospital stays, inpatient services, hospice care, and skilled nursing facility care. Recipients may purchase optional Part B, Part C, and Part D coverage.
Part B adds coverage for doctor’s visits, outpatient care, medical equipment, and preventative care or wellness visits. Part C, also known as Medicare Advantage Plans, combines Parts A and B into a single policy administered by private insurance companies that contract with Medicare. Lastly, Part D is optional prescription drug coverage that may be purchased. Many people on Medicare also choose to buy a Medicare supplement, or Medigap, coverage plan, which helps with out-of-pocket costs like copayments and deductibles.
- Medicaid covers a wide range of medical services. When enrolled in Medicaid, you can access hospital coverage, doctor visits, X-rays, necessary medication, long-term care, preventative care, mental care, prenatal care, and dental and vision coverage for children.
Contact your state Medicaid office if you have questions about eligibility or coverage.
KEY TAKEAWAYS
- Medicare and Medicaid are two distinct programs designed to support the healthcare needs of different groups of individuals.
- To qualify for Medicaid, your income must be below 138% of the poverty level. Medicare is not income-based, so anyone over 65 or disabled may qualify.
- Generally speaking, Medicaid provides more coverage than Original Medicare; however, those enrolled in all parts of Medicare have similar coverage as Medicaid.
Can You Have Both Medicare and Medicaid?
Yes, you can qualify for coverage under both programs simultaneously. This is called “dual eligible.” It generally applies to people over 65 or disabled and with very limited income.
You still have the choice to enroll in Original Medicare or a Medicare Advantage Plan. When a person is dual eligible, most medical expenses are entirely covered by one or both programs. Medications are generally covered through a Medicare Part D prescription drug plan, although Medicaid may cover additional medications or other medical services not covered through Medicare.
If you are eligible for both government programs, it is usually a good idea to enroll in each. Go ahead and sign up for Medicare and Medicaid benefits. When enrolled in both programs, a person typically has very little out-of-pocket expense.
What Are The Four Types of Medicare?
Complete Medicare coverage is divided into four parts: Original Medicare, also called Medicare Part A; Medicare Part B; Medicare Part C; and Medicare Part D. Each part covers different healthcare costs. Let’s explore each one a little more.
Medicare Part A
Medicare Part A, commonly known as hospital insurance, provides coverage for inpatient care. It is free to those 65 and older who meet the minimum work history requirements.
Coverage under Part A includes inpatient hospital stays, care in a skilled nursing facility, home health care, hospice care, and some nursing home care. Care in a nursing home must be short-term instead of long-term and must meet the definition of a skilled nursing facility.
Medicare Part B
Medicare Part B is more traditional health insurance coverage. Part B covers doctor visits, outpatient services, durable medical equipment, ambulance services, and other medically necessary services. It provides limited coverage for prescription drugs associated with an outpatient service. Part B also provides preventive services, like vaccines, wellness visits, and other items.
Medicare Part C
Medicare Part C is another term for a Medicare Advantage plan. Part C plans are managed and administered by private insurance companies, so these companies get to set their own rules about coverage and costs. Each plan must provide the same minimum level of coverage as the Original Medicare plan, but many plans offer additional benefits.
These extra benefits might include gym memberships, prescription drug coverage, and other perks. If you choose not to enroll in a Part C plan, you might enroll in a Medicare supplement plan to help with out-of-pocket expenses not covered under Original Medicare.
Medicare Part D
If you decide not to enroll in a Medicare Advantage plan that includes prescription coverage, you might elect to enroll in a standalone Part D drug plan. These plans offer coverage for prescription medications. Since private insurance companies manage these plans, you must refer to your specific plan documentation for details on costs, such as monthly premiums, deductibles, and copayments.
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Who Is Eligible?
As we have previously mentioned, the eligibility rules for Medicare and Medicaid are different. Medicare coverage is based mostly on age, while Medicaid eligibility is income-based. Let’s examine the requirements for each.
There are three ways to qualify for Medicare. Income does not play a role in qualifying for Medicare services. The requirements are as follows:
- Age 65 or older
- Under age 65 with a disability
- Any age with ESRD (requiring dialysis or kidney transplant)
Qualifying for Medicaid services is a little different. Age is not a factor in who is eligible for Medicaid. The main factor in qualification is income. Enrollment is open to U.S. citizens and legal, permanent residents who meet the income requirement. If you have very little income and resources, then you may qualify if you meet any of the following criteria:
- Age 65 and older
- Pregnant
- Under age 19
- A person with a disability
- Adult caring for a child
- Adults with no dependent children (in certain states)
What Is Covered?
We’ve already touched briefly on what services are covered by Medicare and Medicaid plans. As you have already read, Medicare is divided into four separate parts, each covering different services. For purposes of this section, we will assume that a person is enrolled in all four parts or all coverage offered through Medicare. So, let’s dive into the details.
The coverage is quite comprehensive for someone enrolled in all parts of Medicare. The list includes, but is not limited to, the following:
- Inpatient hospital care
- Doctor visits
- Outpatient services
- Physical therapy
- Prescription drugs
- Medical equipment
- Hospice care
- Care in skilled nursing facilities
Medicare coverage does not include dental or vision coverage. Should an individual choose to enroll in those services, they must be purchased outside of the Medicare system. Some individuals may also qualify for Medicare Savings Programs, which are state-run programs designed to assist Medicare beneficiaries with few resources to pay their copays and deductibles.
Now that you know about Medicare, you probably wonder, “What is Medicaid coverage like?” Medicaid coverage, like Medicare, is quite extensive. It covers most routine services and medical necessities. Some items that are covered in the program include:
- Hospital services
- Doctor visits
- Prenatal care
- Mental health care
- Preventative care
- Vaccines and Immunizations
- Prescription drugs
- Surgical and dental services
Unlike Medicare, Medicaid does include routine dental and vision coverage for children in some states.
TIP
You can qualify for coverage under Medicaid and Medicare simultaneously. If you qualify for both, your healthcare costs can be significantly reduced and your out-of-pocket minimal.
How Can I Apply?
Now that you know the differences between the two programs, who is eligible, and what is covered, you are probably wondering how to apply for them.
Medicare Enrollment
Let’s start with Medicare. Enrollment in Original Medicare (Part A) is automatic in many cases. Upon reaching age 65, you will be automatically enrolled in Medicare if you are already receiving Social Security retirement benefits.
Also, you will be automatically enrolled after 24 months of SSDI payments. If you do not receive retirement benefits, you can apply for Part A coverage and start receiving coverage upon paying the premium. You can apply for Medicare through the Medicare website or over the phone.
If you delay enrollment, you can enroll during the yearly Medicare open enrollment period. Waiting too long may require paying a late enrollment penalty to obtain coverage. In addition, if you choose to apply for Part B, C, or D coverage, you should contact your insurance company or agent to discuss those options. Since private companies administer those plans, they each have their own rules about enrollment and pricing.
Medicaid Enrollment
You can apply for Medicaid by contacting your state Medicaid office or using the Medicaid website. You will be assigned a caseworker to review your application and determine your eligibility status. In most cases, if you receive SSI benefits, you are automatically qualified to enroll in Medicaid.
The Affordable Care Act, signed into law in 2010, expanded Medicaid coverage to more people. Therefore, even if you have been denied coverage, you should consider reapplying as you might be approved with today’s new rules.
The Bottom Line
Medicare and Medicaid terms can be intimidating and confusing to those unfamiliar with the programs. Many people believe these programs are the same; however, they are pretty different.
These programs have different costs, coverages, eligibility requirements, and funding. A person can be eligible and enrolled in both programs simultaneously.
Now that you know the differences between these two programs, you can determine your status and whether you should apply for one or both. Being educated about the programs available to you is the first step toward ensuring you have adequate health care coverage and are taking advantage of the benefits to which you are entitled.
Frequently Asked Questions
No, these are two separate and distinct programs. Medicare is a federal program designed to assist older persons with healthcare coverage while Medicaid is funded jointly between the Federal and state governments and assists low income individuals and families.
Yes, you can be “dual eligible” to receive benefits from both programs. Individuals enrolled in both programs typically have coverage for most medical services and incur very few, if any, out of pocket expenses.
There is not a penalty for not signing up, per se, but you may incur a penalty if you decide to sign up at a later time. If you miss your automatic enrollment period, you can still choose to sign up during a later enrollment period, but you will have to pay a late enrollment fee.
If you or your spouse have enough work credits, then Medicare A coverage will be given to you at no cost. If you do not have enough work history, then you may choose to purchase this coverage.
Getting a replacement Medicare card is simple. You can request one through your Medicare account at Medicare.gov, calling the Social Security Administration, or visiting your local SSA office.
You can find a Social Security Administration office near you by using our SSA office locator and searching for your closest location.
