When navigating the health care system, it is important to understand the options available. There are two main programs for individuals ages 65 and over: Medicaid and Medicare. While it’s common to have heard of both programs, knowing the key differences between the two may be a challenge. Here, we explain the differences between Medicare and Medicaid so you can make the best health care decisions for your own situation.
A simple explanation is that Medicaid provides coverage to individuals with low income. In contrast, Medicare provides coverage, regardless of income, to individuals 65 and older or individuals under 65 who have certain disabilities.
Some people can be eligible for both Medicare and Medicaid. In these cases, Medicaid and Medicare will work together to help make health care more affordable. There are other differences between Medicaid and Medicare besides eligibility, such as coverage provided, and the policyholder’s out-of-pocket costs and premium payments.
The following outlines the differences between Medicare and Medicaid, including the programs’ eligibility requirements, the coverage they provide, and the premiums that members pay.
Medicare is the federal health insurance program for people 65 and older, people with certain disabilities, and those with end-stage renal disease.
Eligibility requirements for Medicare
Eligibility for Medicare is based on age or disability requirements. Income is not a factor. Generally, when an individual turns 65, they enroll in Medicare Part A and Part B and have the option of enrolling in additional supplemental coverage.
Original Medicare consists of Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). Both components utilize Medicare’s national network, which includes any doctor or hospital in the United States that accepts Medicare.
Medicare Part A helps cover inpatient hospital care in a hospital, skilled nursing facility, hospice, home health care, or nursing home. Medicare Part B helps cover medically necessary doctor services, outpatient care, home health services, durable medical equipment, mental health services, and other medical services. Most preventative services, such as flu shots, glaucoma tests, mammograms, and prostate cancer screenings, are also covered at no cost.
Additional coverage is also available. One option is to keep Original Medicare (Part A and B) and add a Supplement Medicare Supplement Insurance (Medigap) and/or Medicare drug coverage (Part D). Another option is to enroll in Medicare Advantage which bundles Part A, Part B, and usually Part D.
Most people receive Part A for free if they or their spouse paid Medicare taxes while working for a certain amount of time. The Part B premium is $170.10 per month, however, higher-income enrollees may be required to pay more. If an individual enrolls in additional Medicare coverage, they will incur an additional premium.
In 2022, Medicare Part A has a $1,556 inpatient hospital deductible per benefit period. A benefit period is defined as the day a person is admitted as an inpatient in a hospital and ends when they haven’t received any inpatient hospital care for 60 days in a row. After they meet the Part A deductible, the individual may be responsible for a copayment or coinsurance for Medicare-covered services or items.
In 2022, Medicare Part B has a $233 yearly deductible. Once a Medicare member meets this deductible, the general coinsurance is 20% for Part B services. This means that once the individual meets the deductible, the individual is responsible for 20% of the cost of the services they receive.
Since Medicare Part A and Part B can leave an individual responsible for a hefty out-of-pocket amount, enrolling in additional coverage may be worth it. One option is to keep Original Medicare (Medicare Part A and Part B) and add Medicare Supplement Insurance (Medigap) and/or Medicare drug coverage (Part D). These plans use the National Medicare Network and are sold by private insurance companies to fill “gaps” in Original Medicare coverage.
Another option is to enroll in Medicare Advantage, which bundles Part A, Part B, and usually Part D. In most cases, these plans have their own network of providers and include some extra benefits, like vision, hearing, and dental services.
Medicaid is a joint federal and state program that provides health coverage for low-income adults, children, pregnant women, elderly adults, and people with disabilities.
Eligibility requirements for Medicaid
To be eligible for Medicaid, individuals must have limited financial means. Medicaid eligibility varies by state, but generally takes into consideration the following criteria to determine income: Social Security benefits, veteran’s benefits, alimony, employment wages, pension payments, dividends from bonds and stocks, interest payments, IRA distributions, and estate income. Medicaid applicants may have to provide documentation of their monthly income when they submit their Medicaid application. Healthcare.gov has a quick screening process to help determine Medicaid eligibility.
Each state may establish and administer its own Medicaid program within federal guidelines. Mandatory benefits include services like inpatient and outpatient hospital services, physician services, laboratory and x-ray services, long-term care, home health services, and others. Optional benefits include services prescription drugs, case management, physical therapy, and occupational therapy.
States can adjust Medicaid premiums based on an individual’s income level. Federal law limits the extent to which states can charge premiums and cost-sharing in Medicaid because the Medicaid population is low-income. States may not charge premiums to Medicaid enrollees with incomes below 150% of the federal poverty level (FPL).
Depending on the level of Medicaid for which an individual qualifies, the state may pay the Medicare Part B premium, deductibles, coinsurance, and copayments. The recipient will automatically get extra help paying for some of their prescription drug expenses. Medicaid may pay for other drugs and services that Medicare doesn’t cover.
Qualifying for Both Medicare and Medicaid
Individuals who are eligible for both Medicare and Medicaid coverage are considered “dually eligible.” For these individuals, both programs work together to provide the individual with benefits and access to health care services at a lower cost. Medicare will pay first and Medicaid will cover the remaining cost, provided that they are Medicaid-covered expenses. Dually eligible individuals can also consider specific Medicare Advantage plans for extra coverage.
Medicaid provides state-specific information so you can learn more about the programs available to you. You can also learn about Medicare by visiting Medicare.gov to learn about the plans, how to use your benefits, and access provider information.