Medicare and Medicaid are U.S. government-sponsored programs designed to help cover healthcare costs for 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 is the primary medical coverage provider 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.
- Medicare Part A provides hospitalization coverage to people who are 65 years or older, regardless of income.
- Medicare Part B covers medically necessary services and equipment, including doctor’s office visits, lab work, x-rays, wheelchairs, walkers, and outpatient surgeries.
Medicare Vs. Medicaid
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:
Part A: Hospitalization Coverage
Medicare Part A provides hospitalization coverage to individuals who are 65 years or older, regardless of income. To qualify, you or your spouse must have worked and paid Medicare taxes for at least 10 years. Most people don't pay a premium for Part A, but deductibles and coinsurance apply.
Part B: Medical Insurance
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 2020, the standard Part B premium is $144.60 (generally deducted from Social Security or Railroad Retirement payments). Deductibles and coinsurance apply. Individuals who earn more than $87,000 per year ($174,000 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 they are still covered by their employer’s insurance. However, it may cost more to join later in life, due to a late-enrollment penalty.
Part C: Supplemental Insurance
Individuals who are 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, Part C offers vision, hearing, and dental 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.
Enrolling in Part C may reduce the costs of purchasing services separately. Individuals should carefully evaluate their medical needs because Part C participants generally pay out-of-pocket for the associated services.
It is worth noting that 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 and Part B. However, physicians who do not take Medicare also do not accept Medigap.
Part D: Prescription Drug Coverage
Medicare Part D provides prescription drug coverage. Participants pay for Part D plans out-of-pocket, and must pay monthly premiums, yearly deductible, and copayments for certain prescriptions. Those enrolled in Medicare Part C are typically eligible for Part D.
The annual Medicare open enrollment period runs from Oct. 15 to Dec. 7 for 2020.
|202 Medicare Costs at a Glance|
|Part A premium||Most people don't pay a monthly premium for Part A (sometimes called "premium-free Part A"). If you buy Part A, you'll pay up to $458 each month. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $458. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $252.|
Part A hospital inpatient deductible and coinsurance
- $1,408 deductible for each benefit period
- Days 1-60: $0 coinsurance for each benefit period
- Days 61-90: $352 coinsurance per day of each benefit period
- Days 91 and beyond: $704 coinsurance per each "lifetime reserve day" after day 90 for each benefit period (up to 60 days over your lifetime)
- Beyond lifetime reserve days: all costs
Part B premium
The standard Part B premium amount is $144.60 (or higher depending on your income).
Part B deductible and coinsurance
$198 per year. After your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you're a hospital inpatient), outpatient therapy and durable medical equipment (DME).
Part C premium
The Part C monthly premium varies by plan.
Part D premium
The Part D monthly premium varies by plan (higher-income consumers may pay more).
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/state partnership results in 50 different Medicaid programs, one for each state. Through the Affordable Care Act, President Barack Obama attempted to expand healthcare coverage to more Americans by having the Federal government cover most of the cost of Medicaid at the state level for persons with an income level below 133% of the federal poverty level.
A Healthcare.gov reports stated: “Because of the way this is calculated, it turns out to be 138% of the federal poverty level. A few states use a different income limit.” While 33 states have opted into the program, political efforts to roll back coverage continue.
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 require Medicaid recipients to have no more than a few thousand dollars in liquid assets in order to participate. There are also income restrictions. For a state-by-state breakdown of eligibility requirements, visit Medicaid.gov and BenefitsCheckUp.org.
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:
- Laboratory services
- Doctor services
- Family planning
- Nursing services
- Nursing facility services
- Home healthcare for people eligible for nursing facility services
- Clinic treatment
- Pediatric and family nurse practitioner services
- Midwife services
Each state also has the option of including additional benefits, such as prescription drug coverage, optometrist services, eyeglasses, medical transportation, physical therapy, prosthetic devices, and dental services.
Medicaid is also often used to fund long-term care, which is not covered by Medicare or by most private health insurance policies. In fact, Medicaid is the nation's largest single source of long-term care funding, which 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.
CARES Act of 2020
On March 27, 2020, President Trump signed a $2 trillion Coronavirus emergency stimulus package, called the CARES (Coronavirus Aid, Relief, and Economic Security) Act, into law. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also:
- Increases flexibility for Medicare to cover telehealth services.
- Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.
- Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment.
For Medicaid, the CARES Act clarifies that non-expansion states can use the Medicaid program to cover COVID-19-related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option.
Medicare.gov. "Medicare Costs at a Glance." Accessed March 28, 2020.