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Medicare and Medicaid are U.S. government-sponsored programs designed to help cover healthcare costs for certain American citizens. Established in 1965 and funded by taxpayers, these two programs have similar-sounding names, which can trigger confusion about how they work and the coverage they provide.
Medicare provides medical coverage for many people age 65 and older and those with a disability. Eligibility for Medicare has nothing to do with income level. Medicaid is designed for people with limited income and is often a program of last resort for those without access to other resources.
If you qualify for Medicare and don't know where to start, eHealth Medicare—independent insurance broker and partner of Investopedia—has licensed insurance agents at 1-855-977-6435. They can help connect you with Medicare Advantage, Medicare Supplement Insurance, and Prescription Drug Part D plans.
Medicare vs. Medicaid: An Overview
- Medicare is the primary medical coverage provider for seniors and those with a disability.
- Medicaid is designed for people with limited income.
- Medicare has four parts that each cover different things—hospitalization, medically necessary services, supplemental coverage, and prescription drugs.
Medicare helps provide healthcare coverage to U.S. citizens who are 65 years of age or older, as well as people with certain disabilities. The four-part program includes:
Medicare Part A provides hospitalization coverage to individuals 65 years or older, regardless of income. You or your spouse must have worked and paid Medicare taxes for at least 10 years to qualify. Most people don't pay a premium for Part A, but deductibles and coinsurance apply.
Those eligible for Medicare Part A also qualify for Part B, which covers medically necessary services and equipment. This includes doctor’s office visits, lab work, x-rays, wheelchairs, walkers, and outpatient surgeries, as well as preventive services such as disease screenings and flu shots.
For 2022, the standard Part B premium is $170.10 (generally deducted from Social Security or Railroad Retirement payments). Deductibles and coinsurance apply. Individuals who earn more than $91,000 per year ($182,000 for a couple) are obligated to pay more for this program.
Individuals are not mandated to sign up for Part B as soon they are eligible if their employer’s insurance still covers them. However, it may cost more to join later in life due to a late-enrollment penalty.
Individuals eligible for Medicare Part A and Part B are likewise eligible for Part C, also known as Medicare Advantage. Medicare Part C plans are offered by private companies approved by Medicare.
In addition to providing coverage offered by Parts A and B, most Part C plans offer vision, hearing, and dental coverage. Some also provide prescription drug coverage. In that way, it functions much like the health maintenance organizations (HMOs) and preferred provider organizations (PPOs), through which many people receive medical services during their working years.
Medicare Advantage can be beneficial for some, but can lead to higher out of pocket costs for others due to coinsurance, deductibles, and copays. Evaluate your health status along with the plan's structure and coverage to see if it's right for you.
Medicare Supplement Insurance, known as Medigap, may be purchased to help cover expenses such as copayments, coinsurance, and deductibles that are not covered by Parts A. However, physicians who do not take Medicare also do not accept Medigap.
Medicare Part D provides prescription drug coverage. Participants pay for Part D plans out-of-pocket and must pay monthly premiums, a yearly deductible, and copayments for certain prescriptions. Those enrolled in Medicare Part C will only want to consider Part D if their plan has no prescription drug coverage.
The annual Medicare open enrollment period runs from October 15 to December 7 for 2022.
|2022 Medicare Costs at a Glance|
|Part A premium||If you paid Medicare taxes for less than 30 quarters, $499 If you paid Medicare taxes for 30–39 quarters, $274. Free for most people who paid Medicare taxes for 40 or more quarters.|
|Part A hospital inpatient deductible and coinsurance||$1,556 deductible for each benefit period Days 1–60: $0 coinsurance Days 61–90: $389 coinsurance per day of each benefit period Days 91 and on: $778 coinsurance per "lifetime reserve day" (up to 60 days over your lifetime)|
|Part B premium||$170.10|
|Part B deductible and coinsurance||Deductible of $233 and then you pay 20%.|
|Part C premium||Varies by plan|
|Part D premium||Varies by plan|
Medicaid is a joint federal and state program that helps low-income Americans of all ages pay for the costs associated with medical and long-term custodial care. Children who need low-cost care but whose families earn too much to qualify for Medicaid are covered through the Children's Health Insurance Program (CHIP), which has its own set of rules and requirements.
Medicaid Eligibility and Costs
The federal and state partnership results in different Medicaid programs for each state. Through the Affordable Care Act (ACA), signed into law in 2010, President Barack Obama attempted to expand healthcare coverage to more Americans. As a result, all legal residents and citizens of the United States with incomes 138% below the poverty line qualify for coverage in Medicaid participating states.
While the ACA has worked to expand both federal funding and eligibility for Medicaid, the U.S. Supreme Court ruled that states are not required to participate in the expansion to continue receiving already established levels of Medicaid funding. As a result, many states have chosen not to expand funding levels and eligibility requirements.
Those covered by Medicaid pay nothing for covered services. Unlike Medicare, which is available to nearly every American of 65 years and over, Medicaid has strict eligibility requirements that vary by state.
However, because the program is designed to help the poor, many states have stringent requirements, including income restrictions. For a state-by-state breakdown of eligibility requirements, visit Medicaid.gov.
When Medicaid recipients reach age 65, they remain eligible for Medicaid and also become eligible for Medicare. At that time, Medicaid coverage may change based on the recipient's income. Higher-income individuals may find that Medicaid pays their Medicare Part B premiums. Lower-income individuals may continue to receive full benefits.
Medicaid benefits vary by state, but the Federal government mandates coverage for a variety of services, including:
- Inpatient hospital services
- Outpatient hospital services
- EPSDT: Early and Periodic Screening, Diagnostic, and Treatment Services
- Nursing Facility Services
- Home health services
- Physician services
- Rural health clinic services
- Federally qualified health center services
- Laboratory and X-ray services
- Family planning services
- Nurse Midwife services
- Certified Pediatric and Family Nurse Practitioner services
- Freestanding Birth Center services (when licensed or otherwise recognized by the state)
- Transportation to medical care
- Tobacco cessation counseling for pregnant women
Each state also has the option of including additional benefits, such as prescription drug coverage, optometrist services, eyeglasses, medical transportation, physical therapy, prosthetic devices, dental services, and much more.
Medicaid is also often used to fund long-term care, which is not covered by Medicare or most private health insurance policies. In fact, Medicaid is the primary payer of long-term care across the nation and often covers the cost of nursing facilities for those who deplete their savings to pay for healthcare and have no other means to pay for nursing care.
What's the difference between Medicaid and Medicare?
Medicare is available to individuals based on age or disability. If your eligibility depends on age, you'll have access to the program once you turn 65. Medicaid is designed for individuals in low-income situations or other special circumstances.
How can I get Medicaid?
Not everyone qualifies for Medicaid. If your income falls below the poverty level, determined by your state, you might qualify. There are also a number of mandatory eligibility groups, including some pregnant women and children and individuals receiving Supplemental Security Income.
What is the CARES Act?
The CARES Act expanded coverage and was signed into law by President Trump on March 27, 2020. This $2 trillion stimulus package ensures that Medicare coverage expands to cover Americans impacted by COVID-19. It increases healthcare flexibility, like covering more telehealth services. The CARES Act allows Medicaid programs in non-expansion states to cover uninsured individuals' COVID-19 needs.