Medicare vs. Medicaid: What are the differences?

Many Americans may be familiar with the concept of Medicare and Medicaid, but what are the key differences between Medicare vs. Medicaid? They are both government-administered health insurance programs to help with healthcare costs. Medicare is a federal program that covers adults who are 65 and older as well as younger people with certain disabilities. Medicaid is funded by the federal and state governments and it covers people of all ages with a low income.

Medicare

Medicare and Medicaid programs came to fruition on Jul. 30, 1965, when President Lyndon B. Johnson signed a bill providing healthcare coverage for older individuals. This “Original Medicare” only included Medicare Part A and B. The first two Medicare beneficiaries were none other than Harry Truman and his wife, Bessie. 

Medicare covers seniors ages 65 and older as well as people younger than 65 with certain disabilities. There are four different parts of Medicare: Part A, B, C (Medicare Advantage), and D. Each part covers different healthcare services.

RELATED: What is Medicare?

Medicaid

Medicaid is a public insurance program for all ages that provides health coverage to certain people with a low income. In addition to funding from the federal government, it is also partially funded by each state’s government. Medicaid can cover certain older adults, people with disabilities, children, pregnant women, parents, and caretakers of children.

RELATED: What is Medicaid?

What is the difference between Medicare and Medicaid?

“They’re both government-run programs, but they cover different populations of people,” explains Kate Ashford, Medicare specialist at NerdWallet. “Medicare mainly covers people ages 65 and older, while Medicaid primarily covers low-income and vulnerable people of any age. And while they’re both federal programs, Medicare is run by the federal government, and Medicaid is run by individual state and local governments.” 

Not everyone is eligible for Medicare and/or Medicaid coverage. Here are the general qualifications and coverage details of each government program.

Eligibility

Medicare eligibility requirements for those 65 and older include:

• You (or a spouse) receive or qualify for Social Security retirement or Railroad Retirement Board (RRB) benefits OR
• You are either: 
  • a U.S. citizen, OR
  • a permanent legal resident living continuously in the U.S. for a minimum of five years prior to applying

It is also possible to qualify on the work record of a deceased or divorced spouse. To be eligible for full Medicare benefits younger than the age of 65:

• You have received Social Security Disability Insurance (SSDI) payments for at least 24 months OR
• You have a qualifying disease:
  • Amyotrophic lateral sclerosis (ALS), also referred to as Lou Gehrig’s disease, and receive SSDI (you do not have to wait 24 months)
  • End-Stage Renal Disease requiring recurring dialysis or if you’ve had a kidney transplant AND
    • you are eligible to receive SSDI or Railroad Retirement Benefits OR
    • you have paid Medicare taxes for a specific amount of time as specified by the Social Security Administration

If you meet the qualifications above and are a citizen or have been a legal resident for a minimum of five years but do not have the work history to qualify for premium-free Medicare Part A automatically, it still may be possible to qualify for Medicare benefits if you have low income and assets. You should contact Medicare, the Social Security Administration, or a local advocacy group for further assistance.

Medicaid eligibility is typically based on income level, size of household, disabilities, and other factors such as pregnancy, but these elements may vary somewhat between states. 

“Qualification for Medicaid varies by state, but it’s generally based on income and the size of your family,” Ashford says. “For instance, in New York, a family of four with an annual income under $38,295 could qualify. Your state health department can give you information on Medicaid rules in your state.”

You can qualify based on income alone in states with expanded Medicaid coverage. If a household income is below 133% of the federal poverty level (but actually 138% because of the way it’s calculated), a person may qualify for this expanded Medicaid coverage. Several states use different income limits. Contact your local state Medicaid agency or healthcare.gov to see if you qualify.

How to qualify for both Medicare and Medicaid

People who qualify for both Medicare and Medicaid are described as “dually eligible beneficiaries,” meaning they are enrolled in both government programs. In these cases, the beneficiary is enrolled in Medicare Part A and Medicare Part B (and typically Medicare Part D) along with Medicaid benefits. 

To qualify for dual-eligible beneficiary coverage, it will depend on the Medicaid requirements for your specific state. If you have Medicare and would also like Medicaid, as it covers some costs Medicare does not cover, such as nursing home care, visit medicaid.gov to see if you qualify. 

Coverage

Many of the services covered by Medicaid and Medicare overlap. Here is an overview of what you can expect to be covered in these two public insurance plans.

Medicare benefits include Part A, Part B, Part D, and Medicare Advantage plans:

• Part A covers inpatient hospital care, skilled nursing facility care, some home health care, and hospice care.
• Part B covers doctor visits and many outpatient services. Part B also covers durable medical equipment, ambulance services, mental health services, and several other outpatient services. Note: Traditional, fee-for-service Medicare Parts A and B are often referred to as “Original Medicare.”
• Part C, also called Medicare Advantage (or MA), is Medicare health coverage provided by a private insurance company instead of directly from the federal government. This is an alternate way to receive Medicare. It includes Part A and B coverage and sometimes covers things that Original Medicare does not, like routine dental and vision care. It typically also covers prescription drugs through the Part D portion of the plan, and extras like meal delivery or transportation to doctor visits. However, unlike Original Medicare which is accepted everywhere that takes Medicare, people with an MA plan are limited to a network of medical providers. The cost structure of Medicare Advantage also differs from that of Original Medicare. 
• Part D is an optional part of Medicare that provides prescription drug coverage and is available only through private plans that have been approved by Medicare.

Medicaid services can vary between states. In general, Medicaid benefits include:

• Inpatient and outpatient hospital services, doctor’s visits, blood tests, X-rays, and home healthcare

There are some services that Medicaid provides that are not covered under Medicare. These services include:

• Optometry services
• Routine dental care 
• Custodial care (daily care, i.e., assistance with Activities of Daily Living [ADLs] like eating and bathing)
• Long-term care in a nursing home

 Costs

Medicaid is free or low-cost, depending on the state. 

If you are dually eligible for Medicare and Medicaid, there is a coordination of benefits in which Medicare pays covered services first.

Medicare is a little trickier. Unless you have a low income, other out-of-pocket costs like Medicare premiums, coinsurance or copayments, and deductibles must be paid.

• Medicare Part A does not have a monthly premium for those who have paid Medicare taxes for 10 years while working. However, those without 10 years of work history could pay up to $505/month in 2024. There is also a $ 1,632 deductible for each benefit period, which begins the day you are admitted to a hospital as an inpatient and ends only when you have been out of the hospital or nursing facility for 60 consecutive days). Additionally, there is hospital and skilled nursing facility daily coinsurance, which can be hundreds of dollars a day without supplemental insurance. Examples of supplemental or secondary insurance include retiree coverage from a union or a privately purchased Medigap policy. 
• Medicare Part B premiums are typically $174.70 per month but can vary based on income, and there is a 20% coinsurance for doctor’s services, outpatient services, and durable medical equipment (if they are Medicare-approved). Secondary insurance such as Medigap or Medicaid may help cover Medicare Part B cost-sharing. The state-administered Medicare Savings Programs (MSPs) will also subsidize the Medicare Part B premiums for those who financially qualify. Contact your state or local Department of Social Services in order to learn more about the MSPs.
• Medicare Part C, or Medicare Advantage, is administered through a private insurer so the cost structure will vary between plans. The average premium in 2024 is $18.50 per month. Deductibles, copays, and coinsurance also may apply but vary by health plan.
• Medicare Part D, like Part C, is administered through private insurers, and costs will vary. Those financially eligible for the federal Extra Help program may have their Medicare Part D costs (premiums, deductibles, copays, or coinsurance) significantly reduced. Go to ssa.gov to learn more about Extra Help and to apply for the benefit. 

Enrollment

Interested in enrolling in Medicare or Medicaid?

As for Medicare enrollment, some people are automatically enrolled in Medicare Part A when they turn 65 years old. Those who receive retirement benefits from Social Security or the RRB are automatically enrolled in Medicare Parts A and B. 

If you were not automatically enrolled and you’re eligible at age 65, the Initial Enrollment Period starts three months before turning 65 and three months after your birthday. If you’ve missed that timeframe, you can also enroll during the general enrollment period from Jan. 1 through Mar. 31. If you miss these timeframes, you could be hit with a late enrollment penalty fee. There is also a Part D annual Open Enrollment Period from Oct. 15 to Dec. 7. You can apply for Medicare through the Social Security Administration’s website.  

RELATED: More about Medicare enrollment periods

As for Medicaid, first, see if your state has expanded Medicaid. Visit healthcare.gov to see if you qualify. To verify your income when applying for Medicaid, you will need to provide proof. This may be with pay stubs, a Social Security income awards letter, or a letter from your employer, for example. There are several other factors, eligibility criteria, and requests for additional information that may be required when applying for Medicaid.

If your state does not have expanded Medicaid, visit your state’s Medicaid website to see if you’re eligible. The federal healthcare marketplace can also tell you what plans are best for you based on your personal factors.

It is possible to receive Social Security benefits while having Medicaid. 

Both programs are incredibly complex and can be difficult to navigate alone. If you are seeking enrollment in either, it’s helpful to have a guide through the process. For Medicare, consult the State Health Insurance Assistance Program, or SHIP, in your state here or call the Medicare Rights Center at 1-800-333-4114. You can also visit cms.gov for help with Medicare or Medicaid enrollment and eligibility.