Medicare

Medicare vs. Medicaid

Medicare and Medicaid are both public health insurance programs that help people in the U.S. access healthcare. Learn about Medicare vs. Medicaid, including who these programs serve and what they cover.

Medicare vs Medicaid

Medicare is a health insurance program that helps people 65 years and older, younger adults with disabilities, and those with End-Stage Renal Disease access healthcare in the United States. More than 64.2 million people are enrolled in Medicare nationwide as of December 2021. 

There are 2 ways to get Medicare coverage: Original Medicare (Parts A and B) and Medicare Advantage (Part C). Those enrolled in Original Medicare may supplement their coverage with Medicare Part D or a Medigap plan. 

This article offers an overview of Medicare and how it works, as well as the difference between Medicare and Medicaid.

Medicare vs. Medicaid At a Glance

Medicare and Medicaid are both public health insurance programs. However, Medicare provides health coverage to eligible older adults and people with disabilities, while Medicaid serves people with lower incomes.

MedicareMedicaid
EligibilityAge or health-basedIncome-based
CostDependent on plan selectedDependent on income
CoveragesDependent on plan selectedDependent on state
Enrollment Period(s)Limited to certain timesYear-round enrollment

Understanding Medicare

Medicare was originally established in 1965; it is a health insurance program for eligible older adults, people with disabilities, and people with End-Stage Renal Disease (kidney failure). People with Medicare can choose to receive their benefits through Original Medicare or Medicare Advantage. The former is the traditional program managed by the government, while the latter is an alternative provided by private insurance companies. 

Medicare-approved private companies also sell optional health insurance policies to complement Original Medicare. For example, those who want to add drug coverage to Original Medicare may choose to buy a Medicare Part D policy, which is a separate policy that covers prescription medications beyond the limited drug coverage that Original Medicare provides. Medicare members who want help paying for their share of costs may also purchase Medicare Supplement insurance, also known as a Medigap policy.

How much you pay for Medicare may vary depending on which parts you sign up for and the specific plans you choose if you enroll in Medicare Advantage or Part D drug coverage. Some basic costs to be aware of include:

  • Premiums: Premiums are the monthly fees you pay for Medicare and can vary depending on your plan choices.
  • Deductibles: The deductible is the amount of money you spend out of pocket before Medicare starts paying.
  • Coinsurance/copayments: Your share of the cost of a covered service, which may be expressed as a fixed dollar amount or a percentage of the cost.

Medicare Eligibility

Medicare is a program for people 65 and older, as well as people under 65 who have certain disabilities or End-Stage Renal Disease. People who are turning 65 are eligible for Medicare, and may be automatically enrolled if they already receive Social Security retirement benefits or are eligible to receive those benefits. Older adults who are not eligible for retirement benefits may still be eligible for Medicare if they’re U.S. citizens or permanent residents.

Those under 65 years of age may be eligible for Medicare if they’ve received Social Security Disability Insurance benefits for at least 24 months. Younger adults with End-Stage Renal Disease may receive Medicare if they’re SSDI-eligible or paid Medicare taxes while working.

What Medicare Covers: Original Medicare (Parts A and B)

Original Medicare includes Part A (Hospital Insurance) and Part B (Medical Insurance). Each part covers a different set of services, and eligible people may choose to sign up for one or both parts. 

Part A offers coverage for services related to hospital care. These services include:

  • Inpatient hospital services
  • Short-term skilled nursing facility care
  • Home health care
  • Hospice care

Part B covers a wide variety of services that may be necessary to prevent, diagnose, or treat medical conditions. Some examples of Part B-covered services include:

  • Emergency transportation
  • Outpatient hospital services
  • Durable medical equipment 
  • Physical, occupational, and speech therapies
  • Outpatient mental health services
  • Screening tests 
  • Immunizations

However, Parts A and B exclude coverage of long-term care, routine eye exams, hearing aids, and other coverages not directly related to hospital service or direct medical treatment. Original Medicare also doesn’t generally cover prescription drugs you fill at a pharmacy, instead only covering drugs administered during surgery. However, Medicare beneficiaries can choose to enroll in Medicare Part D, which does cover prescription drugs.

What Medicare Covers: Part D

Medicare Part D is optional prescription drug coverage. People with Original Medicare may choose to buy a standalone Part D plan, though some Medicare Advantage plans include Part D.

Part D plans cover both name brand and generic prescription drugs, but insurers can choose which specific drugs to cover as long as they follow guidelines set by Medicare. Each plan has a list of covered drugs, known as the formulary. You can check this list to find out if the plans cover the drugs you’re currently taking.

Keep in mind that Part D does not cover every drug, as weight loss drugs, fertility drugs, and over-the-counter drugs are generally excluded.

What Medicare Covers: Medicare Advantage (Part C)

Medicare Advantage plans are required to cover at least the same services as Original Medicare, and they may include additional coverages not offered through Original Medicare. Each plan can set its own rules about how it covers Part A and B services. For example, members may be required to get care from healthcare providers that are within the plan’s network, unlike Original Medicare, which is accepted at any healthcare facility that accepts Medicare in general.

Part C typically includes coverages that aren’t part of Original Medicare. Depending on the plan, these might include:

What Medicare Covers: Medicare Supplement

Medicare Supplement insurance, also known as Medigap, is an optional supplemental insurance policy for people with Original Medicare. These plans are sold by private insurance companies and may help cover some of the costs that aren’t covered by Original Medicare, such as deductibles and copayments. 

Medigap plans are standardized and are generally identified with the letters A, B, C, D, F, G, K, L, M, or N. Keep in mind, though, that while Medicare follows federal guidelines, Medigap plans can include state-specific rules. For example, Massachusetts, Minnesota, and Wisconsin offer different standardized plans altogether. Depending on the plan you choose, Medigap may help cover out-of-pocket costs such as:

  • Hospital coinsurance
  • Hospice coinsurance
  • Skilled nursing facility coinsurance
  • Coinsurance or copayments for Part B services
  • Part B excess charges

How to Enroll in Medicare

People who are already receiving other benefits from Social Security may be automatically enrolled in Medicare when they become eligible. For example, someone who’s receiving retirement benefits may automatically get Parts A and B when they turn 65. People who aren’t automatically enrolled can apply for Medicare.

You can sign up for Medicare at certain points throughout the year during specific enrollment periods.

  • Initial Enrollment Period. If you are eligible due to age, this 7-month period starts 3 months before your 65th birthday and ends 3 months after your birthday month. If you become eligible due to disability, it starts 3 months before your 25th month of disability benefits and ends 3 months after.
  • General Enrollment Period. People who don’t enroll in Medicare during their Initial Enrollment Period can enroll from January 1 to March 31 each year. Coverage would then start July 1. It’s important to note that a monthly late enrollment penalty may apply. 
  • Special Enrollment Period. People who experience specific life events can sign up for Medicare outside of the regular enrollment periods. For example, if you’re still working and have job-based health insurance, you may be eligible for a Special Enrollment Period when your employment or coverage ends.     

People who are enrolled in Medicare can make changes to their coverage during the annual Open Enrollment Period, which runs from October 15 to December 7. For example, a person who initially enrolled in Original Medicare might switch to a Medicare Advantage plan, or vice versa. Changes would take effect on January 1.

If you want to enroll in Medicare, there are a couple of ways to apply:

  • Submit an online application at ssa.gov
  • Visit your local Social Security office
  • Call 1-800-772-1213. TTY users can dial 1-800-325-0778

Understanding Medicaid

Medicaid is a U.S. government program that helps low-income people access healthcare services. As of January 2022, 79.9 million people were enrolled in Medicaid.

Though Medicaid is federally funded, each state runs its own Medicaid program. This means covered services may vary depending on where you live. Each state is required to cover certain benefits, such as doctor visits, X-ray services, and inpatient hospital stays. However, states may choose to cover or exclude an array of other benefits, such as dentures or physical therapy.

Medicaid Eligibility

Medicaid provides health coverage to eligible low-income people, but eligibility requirements may vary from one state to another. States may offer coverage to specific groups of people, such as families with children, older adults, people with disabilities, and pregnant people. In addition, income limits may vary for each group.

Some states have expanded Medicaid eligibility to cover more residents with lower incomes. In these states, adults with household incomes below 138% of the federal poverty level may be eligible for coverage. This works out to about $18,750 per year for an individual in 2022 and about $25,270 for a couple.

What Medicaid Covers

Medicaid coverage may vary significantly from state to state. Federal law requires each state to offer coverage for certain core services, but states may set rules about how members access those services. Some of the services that states must include in their Medicaid programs include physician services, inpatient hospital stays, outpatient hospital services, and laboratory and X-ray services. The scope of coverage for these benefits may vary between states. For example, some states cap the number of doctor visits Medicaid covers per year.

States can also choose to cover an assortment of optional benefits. Some examples of these include:

  • Skilled therapies, such as physical, speech, or occupational therapy
  • Dental services, such as routine exams and dentures
  • Optometry services, such as routine exams and eyeglasses
  • Medical equipment, such as dentures, eyeglasses, and prosthetics
  • Outpatient prescription drugs

For details about what Medicaid covers in your state, and the limitations for each covered service, contact your state’s Medicaid agency.

How to Enroll in Medicaid

If you’re interested in getting Medicaid coverage, you can apply through the federal Health Insurance Marketplace or through a state-based exchange if your state operates its own. You can also contact your state’s Medicaid agency directly. Unlike Medicare, which adheres to strict enrollment periods, you can enroll in Medicaid at any time of the year.

States are required to review Medicaid members’ eligibility on an annual basis. People with Medicaid may become ineligible if begin earning more than their state’s income limit. However, people who are disenrolled may be eligible to join a Marketplace plan outside of the regular enrollment periods.

Can You Have Both Medicare and Medicaid?

People who meet the eligibility requirements for both Medicare and Medicaid can enroll in both programs. This situation is not uncommon; in 2020, 12.3 million people were enrolled in both Medicare and Medicaid.

Medicaid members who become eligible for Medicare can keep their Medicaid coverage so long as they continue meeting their state’s eligibility requirements. When people are dual-eligible for Medicare and their state’s Medicaid plan, the programs work together to cover services. Medicare is the primary payer, which means it pays for covered services before Medicaid. Medicaid may help cover out-of-pocket costs for these services, as well as benefits that aren’t part of Medicare, such as long-term care.

Some people with Medicare who aren’t eligible for full Medicaid benefits may be eligible for other help from Medicaid. Medicare Savings Programs are Medicaid-administered programs that can help cover Medicare costs. There are 4 different programs:

  • Qualified Medicare Beneficiary. This program helps people with Medicare pay for Part A and B premiums, as well as deductibles, coinsurance, and copayments.
  • Specified Low-Income Medicare Beneficiary. This program helps people with Part A pay for their Part B premiums.
  • Qualifying Individual. This program helps people who aren’t eligible for Medicaid pay for their Part B premiums.
  • Qualified Disabled and Working Individuals. This program helps eligible working people with disabilities pay for Part A premiums.