Medicare vs. Medicaid: An Overview
Medicare and Medicaid are Federal U.S. government-sponsored programs designed to help cover health care 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 helps provide health care 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 free hospitalization coverage to individuals who are 65 years or older, regardless of income, as long as they or their spouses worked and paid Medicare taxes for at least 10 years. But take note: while the hospital coverage is free, without any monthly premiums, copays and deductibles for services do apply.
Part B: Medical Insurance
Those eligible for Medicare Part A also qualify for Part B, which covers medically necessary services and equipment, including doctor’s office visits, lab work, x-rays, wheelchairs, walkers, and outpatient surgeries, as well as preventive services like disease screenings and flu shots.
Part B requires monthly premium payments (generally deducted from Social Security or Railroad Retirement payments), as well as yearly deductibles. Individuals who earn in excess of $85,000 per year ($170,000 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 eligible for Medicare Part A and Part B are likewise eligible for Part C, also known as Medicare Advantage, which refers to private insurance plans rather than federal government programs. In addition to providing coverage offered by Parts A and B, Part C also offers vision 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.
It is important to know the times of year people can switch plans, which is October 15 to December 7, in 2019. Delaying the application will result in a penalty rate once Part D is finally acquired.
This handy chart, courtesy of medicare.gov, provides an overview of the expenses associated with the various parts of Medicare.
2019 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 $437 each month. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $437. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $240.|
Part A hospital inpatient deductible and coinsurance
- $1,364 deductible for each benefit period
- Days 1-60: $0 coinsurance for each benefit period
- Days 61-90: $341 coinsurance per day of each benefit period
- Days 91 and beyond: $682 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 $135.50 (or higher depending on your income). However, some people who get Social Security benefits will pay less than this amount ($130 on average).
Part B deductible and coinsurance
$185 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, 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.
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 health care 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 percent of the federal poverty level. A Healthcare.gov reports stated: “Because of the way this is calculated, it turns out to be 138 percent 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 which 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 health care 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 health care and have no other means to pay for nursing care.
- Medicare is the primary medical coverage provider for many persons ages 65 and older and for 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 free hospitalization coverage to individuals 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.