The Difference Between Medicare and Medicaid Explained
Updated December 15, 2022
Reading time: 6 minutes
Medicare is a federal government health insurance program in which covered people share the cost of healthcare. Medicaid is a federal/state assistance program, and covered people typically don’t pay for it. Understanding how each works and which you might qualify for can be confusing.
Below, we tackle the key differences between these two types of coverage so that you can make an informed decision, whether you’re approaching retirement age or just curious about what kind of coverage your state provides through Medicaid.
Medicare is a federal government health insurance program that provides coverage for people who are 65 and older and some younger people with disabilities or other health conditions. Medicare has multiple parts and levels of coverage, and it can be particularly confusing to know which one to enroll in and when to enroll.
People generally sign up for Medicare once per year. You’re first eligible to sign up three months before you turn 65, but you may be able to sign up earlier if you have a disability or other qualifying health condition, such as end-stage renal disease or ALS.
Generally, you’ll need to enroll in Medicare when you turn 65. But if you or your spouse is still working and have health insurance through an employer, the rules can be more complicated. It’s a good idea to check out the rules at Medicare.gov.
Unlike health insurance plans from private insurers, you can’t purchase a Medicare plan for a couple or family — each eligible person must sign up for their own coverage.
Medicare is available to all eligible U.S. citizens and legal permanent residents, regardless of income. But you must have been a legal resident of the U.S. for at least five years to be eligible.
What’s covered by Medicare depends on which of the four parts of Medicare you enroll in:
Part A and Part B are referred to as Original Medicare. Part A covers hospital and hospice expenses and some home healthcare. Part B covers doctor visits, preventative care, and medical supplies. Typically, you can expect Medicare to cover about 80% of hospital and medical expenses. But Parts A and B don’t cover any prescription medications.
Part C is known as Medicare Advantage. This is a Medicare-approved health plan from a private insurance company. You can choose to have Medicare Advantage cover most of your Part A, Part B and Part D benefits instead of Original Medicare. It also offers some extra benefits not covered by Parts A and B, including vision, hearing, and dental services.
Part D provides prescription drug coverage. You can add Part D to Original Medicare or purchase it from a private Medicare Advantage insurer.
Medicare costs depend on which parts you’re enrolled in and how long you (or your spouse) worked and paid Medicare taxes.
For 2023, the monthly premiums are:
Part A: $0 if you paid Medicare taxes long enough while working (usually at least 10 years). Either $278 or $506 per month if you don’t qualify for premium-free Part A, depending on how long you worked and paid Medicare taxes.
Part B: $164.90 or more per month, depending on your income.
Part C: Varies by plan
Part D: Varies depending on which plan you choose, but the average is around $43 per month
Like employer-sponsored health plans, Medicare has an open enrollment period. For Original Medicare, enrollment is from Oct. 15 to Dec. 7 each year. For Medicare Advantage, it’s Jan. 1 to March 31.
Check Out: The 10 Best & Worst Medicare Advantage Plans
Through Medicaid, the federal government works with state governments to provide healthcare coverage for millions of children, pregnant women, seniors, and people with disabilities. It pays for medical care such as doctor visits, hospital stays, home health services, and lab fees. Medicaid may also cover prescription medications, physical therapy, and occupational therapy.
Unlike Medicare, you don’t have to be a senior citizen to qualify for Medicaid — you only need to meet your state’s requirements. Rules differ among states, but typically states consider family size and income when you apply for Medicaid.
Medicaid is administered on a state-by-state basis, and state eligibility requirements can vary widely.
Depending on the state, you may also have to pay a small fee to apply.
Typically, you must be a low-income resident of the state that you’re applying for coverage in and meet other eligibility criteria. Some states also consider your age, household size, and whether you’re pregnant or have a disability to determine eligibility.
The exact benefits available through Medicaid can vary greatly depending on your state. However, federal rules require all state Medicaid programs to cover hospital and doctor visits, laboratory and X-ray services, home health services, and nursing facility services. They’re also required to provide certain screenings, diagnostics, and treatments for children younger than 21.
States may also cover additional services, such as:
Dental care and vision services
Personal care services for seniors and people with disabilities
Most states don’t charge premiums for Medicaid coverage. However, some states may require recipients to share in the costs of some services, such as nonpreventive doctor visits, nonemergency visits to an emergency room, inpatient hospital visits, and prescription medications.
Medicare and Medicaid are two important health insurance programs, but they’re quite different in terms of the services they cover and their eligibility requirements. The following table provides a breakdown of the main differences between these two programs.
|Eligibility||Available to people 65 and older or under 65 with certain disabilities or conditions, regardless of income.||Generally available to people with low income and resources, regardless of age, health, or disability status.|
Federally mandated standards for coverage.
Typically does not cover long-term care services, such as nursing home or in-home support.
Some benefits are federally mandated, while others vary by state.
Medicaid covers long-term care services in a nursing home and in-home care.
|Cost||Most recipients pay monthly premiums, depending on how long they paid into Medicare and which coverage parts they select.||Recipients generally don’t pay monthly premiums but may be required to pay a small copay for some services.|
|How to Enroll||If you receive Social Security benefits, you’ll automatically be enrolled in Medicare Parts A and B when you turn 65. Otherwise, you can sign up for Medicare by visiting your local Social Security office, calling the SSA at 1 (800) 772-1213, or applying online at www.ssa.gov.||Apply for Medicaid by contacting your state Medicaid agency or by filling out an application through the federal Health Insurance Marketplace.|
In some cases, someone may be eligible for both Medicare and Medicaid at the same time. This is known as a dual eligibility status, or “dually eligible” for short.
Generally, this happens when someone qualifies for Medicare based on their age or disability status and Medicaid due to their financial circumstances.
When someone is dually eligible, Medicare pays first for any covered services, and Medicaid pays after all Medicare and private health insurance benefits have been exhausted. As a result, they usually won’t have any out-of-pocket healthcare costs.
While dual eligibility can provide access to more comprehensive coverage and lower out-of-pocket costs, there are also some potential drawbacks. For example, because Medicaid benefits vary by state, recipients may have difficulty navigating each program’s rules and requirements.
Additionally, navigating the complex relationships between Medicare and Medicaid can be challenging, particularly if a provider or other service doesn’t recognize both your coverage sources.
Below, we answer some of the most commonly asked questions about Medicare and Medicaid. If you have additional questions, please consult an experienced healthcare provider or insurance advisor.
To be eligible for Medicare coverage, you must meet certain criteria set by the Centers for Medicare & Medicaid Services (CMS). In general, those who are 65 years of age or older and have been legal U.S. residents for at least five consecutive years qualify for Medicare coverage. Additionally, certain people with disabilities or end-stage renal disease may also qualify for Medicare benefits.
In general, to be eligible for Medicaid coverage, you must have a low income and limited assets. Eligibility requirements vary by state, but in general, the program is designed to provide access to comprehensive healthcare to those who cannot afford private insurance.
Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) provide healthcare coverage to more than 135 million people in the United States, according to recent CMS estimates.
You can apply for Medicaid by contacting your state Medicaid agency or filling out an application through the federal Health Insurance Marketplace. Applying for Medicaid can be a complex process, and the eligibility criteria, paperwork requirements, and deadlines vary from state to state.
Before applying for Medicaid coverage, you should gather documents that demonstrate your current financial circumstances, such as tax returns, pay stubs, the value of your home and vehicles, and other assets you might own.
You will need to submit this information to your state Medicaid office for review, along with any other required supporting materials.
The highest income level to qualify for Medicaid coverage differs from state to state and changes depending on the applicant’s marital status and whether their spouse is also applying for Medicaid.
Generally speaking, the income limit is set at a percentage of the federal poverty level (FPL). For example, in some states, those who earn up to 138% of the FPL are eligible for Medicaid coverage.
You can find the income limits for your state at MedicaidPlanningAssistance.org, a free service offered by the American Council on Aging.
For 2023, Medicare Part A has a $1,600 deductible each time the recipient is admitted to the hospital. Medicare Part B has a $226 annual deductible, and Parts C and D may charge a deductible, depending on the plan.
Medicaid generally doesn’t require deductibles, but recipients may be required to pay small copays for certain services.
Janet Berry-Johnson, CPA is a freelance writer with a background in accounting and income tax planning and preparation. She's passionate about making complicated financial topics accessible to readers. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter. Visit her website at www.jberryjohnson.com.Learn More