Medicaid vs Medicare: What's the Difference?

If you’re a senior 64 or older, you probably have considered or have already enrolled in Medicare. Whether you haven't enrolled yet or are considering making a change, it’s always a good idea to refresh your memory about Medicare before you choose your plan.

Many people wonder about Medicaid vs. Medicare. The names sound similar, and both are related to healthcare, but how are they different, and which may apply to you? Explore the details of both programs to determine your eligibility.

Medicaid vs. Medicare: What’s the Difference?

In the U.S., you must pay for healthcare services. Both Medicare and Medicaid are government programs that provide healthcare benefits to qualifying individuals, but they are very different. Before getting into more detail, here’s a quick summary of the key points of each.

Both programs were established by legislation signed by President Lyndon B. Johnson on July 30, 1965. They were designed to save lives, protect Americans’ well-being and health, and improve the country’s economic security.

Both Medicare and Medicaid have changed since their founding. More people can receive coverage, and enrollees may get benefits for more services.

One federal agency, the Centers for Medicare & Medicaid Services, oversees both programs. CMS runs Medicare and monitors state-run Medicaid programs.

Medicare

As people age, they tend to need more medical care than they did when younger. This means more medical expenses at a time when most people have retired and live on a fixed income. The Medicare program provides healthcare insurance to seniors at no charge in some cases.

Medicaid

Many people need healthcare but are unable to afford private insurance. In most instances, Medicaid assists these people by paying for the total costs of many medical care services. It also pays for nursing home care in most states for those who qualify.

Medicaid vs. Medicare: Who Is Eligible?

Eligibility requirements for the two programs are vastly different. Medicare is based primarily on age, while Medicaid coverage depends mostly on income.

Medicare

Most people who receive Medicare benefits are 65 or older, but others also qualify in some cases. You won’t have to pay premiums for Part A if:

• You are 65 or above, AND you or your spouse paid 10 years or more of Medicare taxes through working.
• Your spouse or you were a government employee covered by Medicare.
• You could receive benefits from the Railroad Retirement Board or Social Security but haven’t filed for them yet.
• You already get Railroad Retirement Board or Social Security retirement benefits.
• You are entitled to receive Railroad Retirement Board or Social Security disability benefits for at least 24 months, even if you’re not yet 65.
• You’re under 65 but are a kidney transplant or dialysis patient.

You can possibly buy Part A coverage if you’re at least 65, a permanent resident or U.S. citizen, and your spouse or you didn’t have Medicare taxes deducted from your pay when you were working.

Medicaid

When the Affordable Care Act became law, it established a new way of determining Medicaid income eligibility. States use a Modified Adjusted Gross Income figure to check if residents qualify for the Children’s Health Insurance Program, Medicaid, and Health Insurance Marketplace cost-sharing reductions and premium tax credits.

Applicants can fill out one application that works across all of the programs. Most adults, parents, children, and pregnant women use MAGI calculations.

Some people and groups don’t have to use these income eligibility rules, including individuals who have a disability, are blind, or are over 65 years old. Exempt groups include:

• Those in the breast and cervical cancer treatment and prevention program
• SSI recipients
• Young adults who were in foster care
• Children under an adoption assistance agreement

Most Medicaid recipients must reside in the state providing the coverage. They also need to be U.S. citizens or in specific categories of qualified noncitizens. Some groups also limit eligibility by age, parenting status, or pregnancy.

Medically needy persons can receive Medicaid benefits in states which offer that option. Some states have to allow a spend down to adjust income eligibility requirements for those who have a disability, are blind, or are 65 or older.

Medicaid vs. Medicare: How Are They Funded?

Although both programs have government funding, it comes from different sources.

Medicare

If you or your spouse work, you’ll see payroll deductions for Social Security and Medicare. Your employer must match these amounts and make payments when they submit payroll taxes to the federal government. The U.S. Treasury holds two earmarked trust funds that pay for Medicare.

The Hospital Insurance trust fund receives money from:

• Payroll taxes
• Trust fund investment interest
• Social Security benefit income taxes
• Premiums for Medicare Part A

The HI fund pays for Medicare Part A insurance coverage along with Medicare Program administration costs.

The Supplementary Medical Insurance trust fund gets money through:

• Medicare Parts B and D premium payments
• Congress-authorized funds
• Other sources such as trust fund investment interest

The MI trust fund pays for Part B benefits, Part D, and Medicare Program administration expenses.

Medicaid

Each state has different healthcare costs and needs and per-capita income figures. The federal government funds a portion of a state’s Medicaid expenditures and calculates most of these sums using the federal medical assistance percentages formula.

The FMAP is lower for wealthier states and higher for those with a lower income. In 2021, California received 56%, while Mississippi got 84% of federal funding. In some cases, the federal government may provide enhanced funds-matching rates.

States must finance 40% or more of the nonfederal share of Medicaid costs using state funds, supplying the remaining 60% from provider fees or taxes, local government monies, and other sources. Medicaid typically accounts for a state’s most significant budget expenditure.

Medicaid vs. Medicare: When Can You Enroll?

Each program has significantly different times for enrollment.

Medicare

You can only enroll for Medicare during specific time frames. If you receive Social Security benefits on your 65th birthday, you will automatically be enrolled in Medicare Parts A and B. You will have to register for Parts A and B yourself if you don’t receive retirement benefits. Everyone must enroll for Part D themselves if they want this coverage.

• Your initial period for enrollment begins three months before your 65th birthday and ends three months afterward.
• If you don’t enroll during this period, you must wait for the annual enrollment period, unless you’re eligible for special enrollment.
• The annual enrollment period is October 15 through December 7 every year.

You may qualify for special enrollment periods if you:

• Choose to enroll in other insurance plans
• Lose current insurance coverage
• Move
• Experience a change to your plan’s contract with Medicare
• Have other qualifying special situations

Medicaid

You can apply to receive Medicaid at any time. However, it’s wise to keep the private insurance plan annual enrollment period in mind. This period begins on November 1 of every year and ends in many states on January 15 of the following year.

Suppose your income is slightly over the Medicaid limit. In that case, you can receive substantial cost-sharing subsidies and premium tax credits that reduce the amount you’ll have to pay for private insurance through the Health Insurance Marketplace.

You might think that your income qualifies you for Medicaid coverage. If you don’t, you’ll have to wait until the next Marketplace annual enrollment period unless a qualifying event takes place.

Medicaid vs. Medicare: What Do They Cover?

Medicare enrollees can choose the types of coverage they want, while Medicaid recipients receive state-chosen benefits.

Medicare

Those eligible for Medicare benefits can choose between Original Medicare and Medicare Advantage (Part C) plans.

Original Medicare

This option includes Medicare Part A and Part B coverage. When you choose Original Medicare, you can visit any U.S. hospital or physician that accepts Medicare insurance.

Part A benefits are to help pay for:

• Home health care
• Hospice care
• Inpatient hospital stays
• Nursing facilities

Part B benefits help cover:

• Doctor and healthcare provider services
• Durable medical equipment
• Home health care
• Outpatient care
• Select preventive services

Medicare Advantage

Part C is a private, bundled insurance plan approved by Medicare. It combines Part A and Part B coverages and typically includes Part D as well.

Although the Part C out-of-pocket costs are sometimes less than Original Medicare expenses, you’ll probably have to use in-network healthcare providers. These plans may include additional benefits, including dental, hearing, and vision services.

Part D

Medicare Part D plans cover a portion of prescription medication costs, including some recommended vaccines. Private insurance companies provide Part D drug plans in accordance with Medicare rules.

Medigap

If you choose Original Medicare coverage, you can purchase a Medigap plan offered by private insurance companies. These policies help pay your portion of Original Medicare expenses.

Medicaid

Every state sets its own service coverage benefits using federal guidelines. However, federal law requires that each state provide specific mandatory benefits, including these services:

• Inpatient and outpatient hospital
• Family planning, midwife, and licensed birth center
• Physician
• Home health and nursing home
• Lab, X-ray, screening, and diagnostic
• Certified Family and Pediatric Nurse Practitioner
• Medical care transportation

States can choose to provide optional benefits, including:

• Dental and vision
• Chiropractic
• Occupational and physical therapy
• Prescription medications
• Specialists
• Inpatient psychiatric care for those under 21 years old
• Hospice
• Private nursing

Medicaid vs. Medicare: Can You Qualify for Both?

Some people can receive benefits from Medicare and Medicaid simultaneously. These dual eligibles are either partial- or full-benefit beneficiaries, depending on the type of Medicaid coverage they receive. Each state sets its own eligibility requirements for MSP and Medicaid programs, using federal guidelines.

People who get partial Medicaid benefits can get additional benefits through a Medicare Savings Program, meaning that some have three types of coverage. An MSP helps pay for Medicare copays and premiums.

People who have both Medicare and Medicaid coverage may wonder which entity pays for healthcare expenses first.

• If both programs cover the expenses, Medicare pays first.
• For long-term care patients, Medicare pays for covered services such as physical therapy or skilled nursing care, and Medicaid pays for the remainder.
• If patients have additional coverage, including a Medigap (MSP) policy, the payment order is Medicare, Medigap, then Medicaid (if each program covers the expenses.)

People with dual eligibility have the opportunity to enroll in a special needs plan (D-SNP) that pays for both Medicaid- and Medicare-covered healthcare costs. A D-SNP might also provide payments for things not covered by standard Medicaid or Medicare policies, such as dental care, hearing aids, over-the-counter products, and vision care.

These dually eligible enrollees can make Medicare coverage changes quarterly. They can switch between Medicare Advantage and Original Medicare and enroll in a different Part D plan.

Get the Information You Need on Medicaid vs. Medicare

People are often confused when considering Medicaid vs. Medicare. Both programs provide healthcare coverage and are government-run. However, there are many differences in what they offer and who is eligible for them. For further information about Medicaid and Medicare, along with other topics relevant to seniors, you can count on Total Senior Guide. We provide information, resources, and comparisons of your coverage options, along with connecting you with reputable providers of walk-in tubs, dentures, and more.

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Sources:

• https://www.investopedia.com/articles/pf/07/medicare-vs-medicaid.asp
• https://www.hhs.gov/answers/medicare-and-medicaid/what-is-the-difference-between-medicare-medicaid/index.html
• https://www.usa.gov/medicaid
• https://www.cms.gov/About-CMS/Agency-Information/History
• https://www.medicare.gov/about-us/how-is-medicare-funded
• https://www.pgpf.org/budget-basics/budget-explainer-how-do-states-pay-for-medicaid
• https://www.medicareresources.org/faqs/can-i-be-enrolled-in-medicare-and-medicaid-at-the-same-time/
• https://www.totalseniorguide.com/#about
• https://www.medicaid.gov/medicaid/eligibility/index.html
• https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html
• https://www.medicare.gov/eligibilitypremiumcalc
• https://www.medicare.gov/when-can
• https://www.healthinsurance.org/faqs/if-i-qualify-for-medicaid-should-i-worry-about-the-deadline-for-open-enrollment/
• https://www.medicaid.gov/medicaid/benefits/mandatory-optional-medicaid-benefits/index.html
• https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare