Medicare and Medicaid are government-backed health insurance policies for individuals. Since the two programs have similar-sounding names, there is a tendency to confuse them. While both provide general health benefits, there are key differences in eligibility and coverage. Here is an explanation of each program and general eligibility information.
What Is Medicare?
Medicare is federally backed health insurance for individuals 65 years and older, younger individuals with disabilities, and people with ALS or end-stage renal disease.
Medicare eligibility is based on age, citizenship (or legal residency), and years worked in Medicare-covered employment. Eligibility for Medicare is not based on income. Because most working Americans pay Social Security tax, they automatically become eligible to enroll in the program when they turn 65.
There are several parts to Medicare labeled A, B, and D. Each part covers different types of coverage, from hospitalization to more routine care. Part A is hospital insurance and, in most cases, does not have a premium. Part B includes broader medical coverage and does have a premium. To confuse matters, there are Medicare Advantage Plans (formerly Part C), which cover parts A and B, and Medicare Supplement plans, which help cover costs. Part D is prescription drug coverage.
Eligible individuals may sign up for Medicare during specific enrollment periods. The first enrollment period occurs in the year you turn 65. There is also an annual open enrollment period for anyone who wishes to change previous enrollment elections.
What Is Medicaid?
Medicaid is a federal and state health care program for individuals with limited income.
In the United States, Medicaid provides health coverage for 80 million people. This needs-based program became law as a part of Title XIX of the Social Security Act.
Eligibility for coverage differs from state to state, but the following rules usually apply:
- You must meet residency requirements in the state where you apply.
- You are a US citizen or a qualified noncitizen (a lawful permanent resident).
- Your income level is below a state established threshold.
Federal Medicaid guidelines require states to cover the following groups of people:
- Qualified pregnant women and children
- Low-income families
- Adult children with disabilities
- Older adults and people getting Supplemental Security Income (SSI)
Although Medicaid benefits may vary, federal rules mandate that regardless of the state, all individuals covered under Medicaid are eligible for the following:
- Inpatient and outpatient hospital services
- Early and periodic screening, diagnostic, and treatment services
- Nursing facility services
- Home health services
- Physician and rural health clinic services
- Lab and X-ray services
- Family planning and nurse midwife services
- Certified pediatric and family nurse practitioner services
- Freestanding birth center services
- Transportation to medical care
Depending on the state, recipients may be eligible for other benefits like prescription drug coverage, physical therapy, optometrist and dental services, prosthetic services, medical transportation, and other services. Medicaid can also fund long-term care, which isn’t an option under Medicare or private insurance.
Comparing Medicare and Medicaid
Key differences exist between Medicare and Medicaid, and it is helpful to compare them side-by-side based on funding, eligibility, application for enrollment, out-of-pocket costs, and coverage.
|Program Funding||Funded by the federal government.||Funded by the state and federal governments.|
|Eligibility||Individuals must be 65 years or older or with a disability||Individuals and families must fall below a certain income level that varies state by state|
|Enrollment||Accepts applications during specific enrollment periods||Accepts applications at any time|
|Out-of-Pocket-Costs||Copays, coinsurance, and deductibles||None or minimal|
|Coverage||Coverage is dependent on enrollment.||Comprehensive coverage including long-term care, prescription drugs, as well as other add-on benefits|
MedicareFunded by the federal government.
MedicaidFunded by the state and federal governments.
MedicareIndividuals must be 65 years or older or with a disability
MedicaidIndividuals and families must fall below a certain income level that varies state by state
MedicareAccepts applications during specific enrollment periods
MedicaidAccepts applications at any time
MedicareCopays, coinsurance, and deductibles
MedicaidNone or minimal
MedicareCoverage is dependent on enrollment.
MedicaidComprehensive coverage including long-term care, prescription drugs, as well as other add-on benefits
Can an Individual Have Both Medicare and Medicaid?
People who meet the income threshold for Medicaid and the age limit or disability requirements for Medicare may be eligible for both programs. People who are “dual eligible,” get both Medicare and Medicaid coverage.
You must pay your monthly premium to stay enrolled in Medicare Part B. Because co-payments, deductibles, and out-of-pocket costs can be prohibitive, individuals who qualify for Medicaid often receive assistance paying their out-of-pocket Medicare costs.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.