Medicare vs. Medicaid: Different health products for different needs
This website is designed for people with Medicare, either those new to the program or long-time enrollees looking for help and information about this popular program for seniors. But “Medicare” can get confused with “Medicaid,” and vice versa. It’s not hard to see why.
Both programs have similar names, were created at the same time, cover health benefits for certain portions of the population and can even serve the same population in some cases.
But Medicare and Medicaid are different. Let’s talk about how.
What is Medicare?
Medicare was created in 1965 with the goal of helping America’s seniors, those aged 65 and older, get affordable health insurance. Since then, the program has evolved in different ways. It now also covers younger people with certain disabilities and offers more benefit options than it did at the outset. As of 2021, Medicare enrollment topped 63.3 million people.
There are four parts to Medicare: Part A (hospital coverage), Part B (medical coverage), Part C (Medicare Advantage) and Part D (prescription drug coverage).
Together, Parts A and B form Original Medicare. This is how a majority of Medicare enrollees (about 58%) get their benefits. Most people get Part A without a monthly premium. That’s thanks to work taxes, which fund this portion of Medicare. Everyone pays a premium for Part B, but the amount can vary depending on your income. Higher-income enrollees will pay more for this coverage.
Regardless of premium, both Part A and Part B come with cost sharing amounts, such as deductibles and coinsurance. Medicare is a low-cost option, but it’s not free.
Part C is also known as Medicare Advantage. This is the private portion of Medicare. These plans are sold by individual companies on the private market, but the federal government still regulates them. By law, Advantage plans have to cover at least the same benefits as Original Medicare.
Beyond that, MA plans can cover a broader range of benefits, including things that Original doesn’t cover. Benefits might include prescription drugs, dental and vision, hearing aids and exams, routine foot care, telemedicine, gym memberships and more.
Part D is prescription drug coverage, a benefit that was added to the Medicare lineup in 2003 (but which took effect in 2006). Like Medicare Advantage, Part D is a private portion of Medicare. It’s a standalone drug benefit for people with Original Medicare because Original Medicare doesn’t cover prescription drugs.
Both Medicare Advantage and Part D come with different premiums and cost sharing amounts. There’s some federal regulation on this, like the fact that Medicare Advantage plans must include a cap on out-of-pocket expenses for the year — unlike Original Medicare, which doesn’t — but generally speaking, private plans set their rates based on different factors. Where you live plays a big role in the plans you have access to and how much they cost.
There are also separate Medicare supplement plans available known as Medigap. These plans are sold by individual companies as well, and they can offset your out-of-pocket costs under Original Medicare. They come with separate premiums but may be worth the added cost. Original Medicare doesn’t limit what you can spend out of pocket for medical care in a year. Medigap helps with this.
How Medicare Works
Most people become eligible for Medicare by aging into the program, but that’s not always the case. You can be eligible for Medicare by:
- Turning 65;
- Receiving retirement benefits from Social Security or the Railroad Retirement Board; or
- Qualifying based on disability
How you enroll depends on how you qualify. For instance, if you qualify for Medicare because you’re going to turn 65 soon, then you’ll have an initial enrollment window to sign up for the program that lasts for 7 full months. You’ll apply for Medicare yourself through Social Security. If you’re retired and receiving retirement benefits before age 65, you’ll get enrolled automatically into the program once you turn 65. And if you qualify based on disability, enrollment is also typically automatic after you’ve gotten disability benefits for two years.
Note: people with end-stage renal disease (ESRD) can qualify for Medicare at any age but don’t get enrolled automatically, while people with amyotrophic lateral sclerosis (ALS or Lou Gehrig’s disease) get enrolled the same day their disability benefits start.
Original Medicare lets you see any provider who accepts Medicare. You don’t need to worry about networks or referrals to see specialists (in most cases). Medicare Advantage plans usually have networks, though some plans are more strict about this than others. The tradeoff for networks is that MA plans tend to offer broader benefits.
Once a year, you can make changes to your current Medicare coverage in a period known as Medicare Open Enrollment. So if you’re not a fan of your plan or you need more or different benefits, use that annual signup period to update your coverage for the following year. It runs from October 15th through December 7th, and changes take effect January 1st.
What is Medicaid?
Medicaid was created in the same legislation that created Medicare in 1965. But this program is intended for people with low incomes who need affordable or no-cost health insurance. Today, Medicaid is one of the largest payers for healthcare in the country. It covers nearly 76 million people as of 2021. The Children’s Health Insurance Program (CHIP) is a related program for children whose parents make too much money for Medicaid but who can’t afford health insurance. Enrollment numbers for Medicaid typically include CHIP numbers, too.
Medicaid is a joint federal and state program. This means it’s funded and administered by both federal and state governments, but individual states set the guidelines for how to implement Medicaid programs in their states. Some states have more generous programs than others, covering a wider range of people, while others have tighter restrictions on who can enroll.
Medicaid eligibility depends on where you live. Generally, though, the program is intended for people who fall below or just at the poverty level based on household size. You also need to be a resident of the state you’re applying for coverage in as well as a citizen or legal resident of the U.S.
If you’re eligible for Medicare, you may also be eligible for Medicaid, too. This is called “dual eligibility” and you can learn more about how to enroll here.
As we mentioned above, some states put tighter restrictions on eligibility than others. For example, you might need to be pregnant or meet certain disability requirements to be eligible.
The Affordable Care Act allowed states to expand Medicaid coverage to low-income adults with an income of up to 133% of the federal poverty level. It’s an optional expansion. And while most states have done this, there are a dozen states that haven’t as of July 2021. They are:
- North Carolina
- South Carolina
- South Dakota
The states that haven’t expanded also tend to have tighter restrictions, making Medicaid harder to get for some people in these states.
What does Medicaid cover?
Medicaid programs are run by individual states, but they operate within federal guidelines. The federal government requires certain mandatory benefits for Medicaid coverage, including:
- Inpatient & outpatient hospital services
- EPSDT: Early and Periodic Screening, Diagnostic, and Treatment Services
- Physician services
- Lab and X-ray services
- Transportation to medical care
- Home health services
This list isn’t exhaustive. Check that link to Medicaid for a full list. There are also optional benefits that states can include as well. These include, among other things:
- Prescription drugs
- Physical therapy
- Dental and vision services
- Occupational therapy
- Glasses, dentures and prosthetics
- Private duty nursing
It’s up to states to create Medicaid programs and benefits that go beyond federal requirements. Funding for the program is a joint effort between states and the federal government, but in expansion states, ACA expansion is funded almost entirely by the federal government.
How do I apply for Medicaid?
The Affordable Care Act created a private marketplace (Healthcare.gov) where people can shop for health insurance. You can also use it to check eligibility and apply for Medicaid. If you’d rather go directly to the source, you can contact your state Medicaid agency. The official Medicaid website offers a roundup of state contact information here.