Medicaid and Medicare have similar names and are often confused, but they are very different. Learn about the differences between these two programs to ensure your aging loved one gets the health care coverage they need and qualify for.
The most important differences between these programs are the ways in which they’re funded/administered and the purpose each serves. Medicare is a federal health insurance program for seniors, certain younger individuals with disabilities and people with end-stage renal disease. Medicaid is a jointly funded federal and state medical assistance program that provides health coverage for low-income Americans. Both Medicare and Medicaid are overseen by the Centers for Medicare & Medicaid Services (CMS). Read on to learn more about how these government programs differ.
What Is Medicare?
Medicare was created in 1965 when Title XVIII of the Social Security Act was signed into law. The goal of Medicare is to provide aged and disabled individuals with accessible health care coverage and financial security. Because this program is funded and administered by the federal government, the rules and regulations are the same throughout the United States.
There are several different parts of Medicare. Part A (hospital insurance) covers inpatient hospital stays, care in a skilled nursing facility, hospice care and some home health care services. Part B (medical insurance) covers certain doctors’ services, outpatient care, medical supplies and preventive care services. Together, Medicare Parts A and B are often referred to as “Original Medicare.” Medicare Part D (prescription drug coverage) helps cover the cost of prescription medications and many recommended vaccines. Medicare Supplement Insurance (Medigap) helps to fill in the coverage “gaps” in Original Medicare. Medicare Advantage Plans are often referred to as “Part C” and bundle the benefits of Original Medicare and Part D into one policy. Some of these are options that require Medicare beneficiaries to pay additional premiums.
Read: The 4 Parts of Medicare
People age 65 and over (as well as younger individuals in specific circumstances) are covered regardless of their income, medical history and health status, but coverage is not free. Medicare beneficiaries pay into the program through payroll taxes during their working years and many individuals must pay monthly premiums for coverage (amounts vary depending on the type of coverage one chooses). With Original Medicare, most people get premium-free Part A, but the standard Part B premium in 2021 is $148.50 and is deducted automatically from most beneficiaries’ Social Security benefits. Beneficiaries are also responsible for paying any deductibles, copayments and/or coinsurance out of pocket.
Although Medicare is primarily targeted to providing seniors with medical coverage, it is important to understand that this program does NOT cover long-term care services, such as assisted living, nursing home care or memory care. Medicare Part A only covers short-term stays in skilled nursing facilities for beneficiaries who meet specific criteria.
What Is Medicaid?
Medicaid is a medical assistance program for low-income individuals that was established in 1965 through Title XIX of the Social Security Act. It is need-based and there are strict financial eligibility requirements and other criteria that applicants must meet to qualify. Unlike Medicare, Medicaid is administered by each state in accordance with federal guidelines. This means that the specific types of Medicaid programs and services available in a particular state and the rules they use to determine eligibility vary widely.
Coverage under Medicaid is much broader than under Medicare. Covered low-income populations include children, pregnant women, people with disabilities, seniors and some adults. In addition to larger coverage groups, Medicaid offers broader coverage of services, especially for seniors. Medicaid programs for the elderly and disabled differ from state to state but do cover long-term care services. Nursing home care, in-home care, assisted living and even adult day care may be covered through a state’s Medicaid program (entitlement programs) or through Medicaid waivers (enrollment programs that often have long wait lists).
Since Medicaid is intended to help low-income Americans with limited assets, the program strives to limit out-of-pocket costs for enrollees as much as possible. Some coverage groups and individuals with income that exceeds certain levels may be responsible for monthly premiums and cost sharing in certain states. These amounts are often minimal, but states do have some flexibility in how out-of-pocket costs are determined. Most nursing home costs for Medicaid beneficiaries are covered except for extras like a private room, personal effects (e.g., clothing, cosmetics, reading materials), and television.
Dual Eligibles: Having Both Medicare and Medicaid
Some seniors qualify for Medicare and Medicaid and are referred to as dual-eligible beneficiaries. In addition to Medicare, an elder can receive either partial or full Medicaid benefits. Medicare remains the primary source of coverage and payment for health care services while Medicaid either helps to pay for out-of-pocket costs (partial benefits) or offers full benefits as a secondary or even tertiary payer.
For more information on Medicare, Medicaid and how these two programs overlap, visit CMS.gov.
Sources: What's Medicare? (https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/whats-medicare); Medicare costs at a glance (https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance); An Overview of Medicare (https://www.kff.org/medicare/issue-brief/an-overview-of-medicare/); Medicaid Program History (https://www.medicaid.gov/about-us/program-history/index.html); 10 Things to Know about Medicaid: Setting the Facts Straight (https://www.kff.org/medicaid/issue-brief/10-things-to-know-about-medicaid-setting-the-facts-straight/); Dually Eligible Beneficiaries Under Medicare and Medicaid (https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/medicare_beneficiaries_dual_eligibles_at_a_glance.pdf); Medicaid Nursing Facilities (https://www.medicaid.gov/medicaid/long-term-services-supports/institutional-long-term-care/nursing-facilities/index.html)