Medicare and Medicaid sound similar but are very different. Both can help you pay for healthcare, but Medicare is an entitlement for seniors 65 and over – and some younger people with disabilities – while Medicaid is a public-assistance program for needy Americans of all ages. Here’s how to tell them apart and discover whether you qualify for either or both of them.
Think of Medicare as a health insurance policy offered to seniors 65 and over, along with people under 65 with certain disabilities. Medicare is an entitlement because its costs were deducted from your wages throughout your working years. Enroll in the program at some point after age 65 to receive the benefits you already paid for.
Benefits under Medicare Medicare comes in four parts. Some parts require payment of a monthly premium similar to private health insurance, but the program is not based on financial need.
Part A – Hospital care – Covers the cost of being in a medical facility.
Part B – Covers doctors, medical tests and procedures – basically, anything done to you.There is a monthly premium for Part B coverage.
Part C – Medicare Advantage – Part C is an alternative to traditional Medicare coverage. Coverage often includes Parts A, B and D. Medicare Advantage plans are administered by private insurance companies.
Part D – Prescription drug coverage – D is administered by private insurance companies, and you are required to have it unless you have coverage from another source. Part D requires you to pay a monthly premium in most cases.
To learn more, see Medicare 101: Do You Need All 4 Parts?
Medicare isn’t a comprehensive health insurance plan. If you only have traditional Medicare, there are gaps in coverage. For example, Medicare doesn’t cover long-term care unless you purchase a Medicare Advantage or Medigap policy. Read more about this in Medigap Vs. Medicare Advantage: Which is Better?
Medicaid is a public assistance program based largely on financial need. Federal, state and local governments pay medical bills for qualifying recipients using public money collected through taxes.
Unlike Medicare, a program largely standardized by the federal government, state and local governments administer Medicaid using federal guidelines. Each state can shape the program to its individual needs.
Providing there is a financial need, you likely qualify for Medicaid if you fall into one of the following groups.
1) You're pregnant – Whether you’re single or married, apply for Medicaid if you are pregnant. You and your child will be covered.
2) Parent of a minor or a teenager living alone – If you have a child under 18 and you have financial need, you can apply. Also, if your child is sick and needs nursing-home care but could stay home with quality medical care, Medicaid might be able to help. Finally, Medicaid covers teenagers living on their own. Some states allow for coverage for “children” up to 21 years old.
3) Aged, blind or disabled – Medicare comes with sometimes-sizable premium payments. If you are over 65 and can’t afford healthcare coverage, apply for Medicaid as well. People with medical need may apply regardless of age.
4) No disabilities, no children under 18 – The Affordable Care Act gives states the opportunity to provide Medicaid to low-income individuals under the age of 65 without a disability or minor children. Check with your state agency for more information. You can see whether your state is expanding its Medicaid coverage here.
Benefits under Medicaid Although benefits vary by state, each is required to cover certain mandatory benefits. These include inpatient and outpatient hospital services, nursing-home and home healthcare, laboratory and x-ray diagnostic services, transport to a medical facility and tobacco-cessation counseling for pregnant women.
States may provide benefits beyond the mandatory requirements including prescription drug coverage, physical and occupational therapy, optometry, chiropractic services, dental care and more.
The Medicaid Spend Down
Since Medicare has very limited coverage for nursing homes, seniors who need it sometimes try to qualify for Medicaid, especially when they are trying to ensure they have enough money for living expenses for a spouse who isn't going into care. Since Medicaid is a needs-based program, individuals who apply cannot hold more than around $2,000 in liquid assets, depending on the state. Married couples can hold $3,000. Some assets don’t count towards the total – a home, car, personal effects, home furnishings and household goods, among others.
People who have more than the allowable amount of assets have to “spend down” until they reach an income level that qualifies them for Medicaid.
Spending down works differently depending on your state, but you may be able to pay off debts, prepay a mortgage and other loans, repair or renovate a home, prepay funeral expenses and purchase certain investment products, depending on what the state allows.
If you fit into any of the above groups, you may be able to receive Medicaid benefits even if you’re above the income limits if your state has a Medicaid Excess Income Program. Similar to a deductible, you may be required to pay a certain amount of your expenses each month before Medicaid benefits take over.
To learn more about spending down, and Medicare and Medicaid's coverage of long-term care, read Long-Term Care: More Than Just A Nursing Home. If you or a member of your family is considering this step, consult an experienced elder-care attorney before proceeding.
Can You Qualify for Both?
Yes. If you qualify for both Medicare and Medicaid, Medicaid will pay for most of your Medicare Parts A and B premiums (if you have premiums), along with deductibles and co-payments you may have.
The Bottom Line
As a taxpaying citizen, you paid into Medicare and will receive Part A coverage probably at no cost to you. Additional coverage, such as Parts B and Part D, might be required and come with a monthly premium. Because Medicare has gaps in coverage, you’ll likely need additional coverage that might come with an extra monthly premium on top of what you already pay.
Medicaid is a needs-based program. Although states have the option of charging out-of-pocket fees, certain groups, such as children and people living in institutions, are generally exempt from these costs.
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