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There are two government-sponsored health insurance programs available to Americans. Medicare primarily covers adults 65 and over, while Medicaid covers low-income individuals and families.
There are two government-sponsored health insurance programs available to Americans: Medicare and Medicaid. Medicare primarily covers adults 65 and over, while Medicaid covers low-income individuals and families. Medicaid is jointly funded by the states, so eligibility for the program varies. Medicare eligibility, conversely, is standardized across the nation. Here is a look at the differences between Medicare and Medicaid.
|When did it begin?||1965||1965|
|Who funds it?||The federal government||Federal & state governments|
|Who runs it?||The federal government||State governments|
|Who is primarily eligible?||Americans 65 & over||Low-income, needy Americans|
|What can it cover?||Hospital/doctor care & medication||Hospital/doctor care & medication|
|Coverage varies by||What plans you buy||Income & state guidelines|
|What does it cost?||Varies, but includes premiums, deductibles & copays||Varies, but can include low out-of-pocket costs|
|Where can you apply?||Through the Social Security Administration||Healthcare.gov or state Medicaid website|
Medicare is the federal health insurance program for Americans and permanent U.S. citizens 65 and over. Younger Americans with certain disabilities or illnesses, including Lou Gehrig’s disease and terminal kidney failure, are also eligible for Medicare. However, Medicare is primarily thought of as a social health insurance program designed to help retired Americans pay their medical expenses. It's not free. Medicare is funded by taxpayer dollars and premiums paid by beneficiaries.
Income does not affect your Medicare eligibility. In fact, Americans 65 and over who are receiving federal retirement benefits are automatically enrolled in Medicare Part A and Medicare Part B (jointly known as Original Medicare).
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Americans who are 65, but not yet on federal retirement benefits, have to enroll in Original Medicare during an 11-month initial enrollment period. It kicks off three months before you turn 65 and ends three months after your 65th birthday. If you miss initial enrollment, you can only sign up for Medicare during a special or general enrollment period.
Medicare is run by the Centers for Medicare and Medicaid Services (CMS), but, given its relationship to retirement benefits, if you aren’t automatically enrolled, you must apply through the Social Security Administration.
Learn more about applying for Medicare.
Medicare comes in four different parts, each responsible for covering different health care costs:
Your specific coverage varies depending on what route you go. The big choice Medicare beneficiaries face is whether to opt for Original Medicare and purchase a Medicare Part D plan or to enroll in Original Medicare and purchase a Medicare Part C plan to serve as their primary coverage.
Our partner Via Benefits can help you compare and purchase Medicare plans in your area.
The cost of Medicare varies, depending on your elections, state and income. However, Medicare beneficiaries are generally expected to pay premiums, deductibles and coinsurance or copays once they enroll.
Learn more about the costs of Medicare.
Medicaid is a jointly funded federal and state health insurance program for needy Americans. It’s voluntary, meaning states can offer Medicaid to residents, but they don’t have to. If a state offers Medicaid — and every one currently does — they must meet certain parameters to obtain federal funding. But they also have a lot of control over eligibility and covered services, which is why Medicaid programs vary so widely from state to state. Having said that, Medicaid qualifications are broadly based on:
CMS monitors Medicaid programs, but they are administered by their respective states. You can find a state-by-state guide to Medicaid requirements here. If you qualify, you can apply for the program through Healthcare.gov all year round.
Former president Barack Obama’s health care law attempted to standardize Medicaid requirements across states to cover any American making up to 133% of the federal poverty line in exchange for more federal funding. That provision was ultimately overturned by the Supreme Court and, like the Medicaid program itself, became optional.
To date, 33 states (plus Washington, D.C.) have expanded Medicaid. However, several of these states, including Arkansas, Indiana and Kentucky, have added work requirements to their expansion programs. To keep coverage, low-income individuals in this group must work, train, volunteer, take classes or engage in other job-related activities to keep their coverage. Medicare — which is primarily for retirees — does not have work requirements.
Broadly, Medicaid covers major medical expenses, but specific services and prescription drug coverage varies by state. Each state, however, is required by the federal government to cover the following care in order to receive funding:
Optional covered services include prescription drug, physical therapy, occupational therapy and dental, vision or hearing insurance.
States can require Medicaid beneficiaries to pay nominal premiums, deductibles and copays/coinsurance for services and prescription drugs. These out-of-pocket costs are capped, but those caps are based on how much the states pay for services, so they’ll vary by where you live, what your income is and what care you’ve received.
Certain Medicaid beneficiaries are exempt from most or all out-of-pocket costs. These beneficiaries typically include pregnant women, children, terminally ill individuals and patients living in a health care institutions.
Some low-income, elderly Americans are “dual-eligible” for Medicare and Medicaid. These individuals are enrolled in Original Medicare, but receive Medicaid benefits through a Medicare Savings Program. These programs include:
Learn more about Medicare Savings Programs.
CMS releases the criteria for each dual-eligibility each year. Given these programs tap Medicaid resources, they are income-driven. You can find 2020 requirements here.
If you have both Medicare and Medicaid, Medicare serves as your primary form of coverage. Medicaid only pays for health care services or supplies after Medicare, employer group health plans, and/or Medicare Supplement (Medigap) Insurance have been exhausted.
Jeanine Skowronski is the head of content at Policygenius in New York City. Her work has been featured in The Wall Street Journal, American Banker Magazine, Newsweek, Business Insider, Yahoo Finance, MSN, CNBC and more. She has also appeared as an analyst on Good Morning America, The Willis Report, ABC World News with David Muir, NPR’s Marketplace and other local television and radio stations.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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