Medicare and Medicaid are two government-sponsored health insurance programs that can be confusing, especially because they both provide health coverage for Americans. But there are actually significant differences between them.

After all, depending on which program you qualify for, you could pay quite a bit more (or less) for your health care. So, let’s have a closer look at Medicare vs Medicaid: what are they, how do they work, and who can qualify for them? Then, keep reading to learn more about how they differ from each other. You might be surprised by what you learn!

Are Medicare and Medicaid the same?

Medicare and Medicaid are two of the nation’s most enduring social security programs, but they are not the same. 

  • Medicare provides federal health coverage for people aged 65 or older and people younger than 65 with certain disabilities or end-stage renal disease. 
  • Medicaid provides joint federal and state health care coverage for low-income adults, pregnant women, and children.

The two programs continue to function separately, but they are both run by the Centers for Medicare and Medicaid Services, CMS.

What is Medicare?

Medicare is a federally funded national health insurance program for adults aged 65 or older, people with certain disabilities, and people diagnosed with end-stage renal disease. It comprises: 

  • Part A (Hospital Insurance): coverage for inpatient hospital stays, skilled nursing facilities, hospice, and some home health services.
  • Part B (Medical Insurance): coverage for outpatient care services like doctor’s visits, lab tests, medical supplies, home health services, and preventive care. 
  • Part C (Medicare Advantage): private insurance alternative that includes all Part A and B benefits and may provide prescription drug coverage and other benefits.
  • Part D (Prescription Drugs): private insurance that provides coverage for prescribed medications.
Medicare is a federally funded national health insurance program for adults aged 65 or older, people with certain disabilities, and people diagnosed with end-stage renal disease.

To qualify for Original Medicare, which includes Part A and Part B, you must be 65 or older or legally disabled. A permanent resident or U.S. citizen who has lived in the country for five years may also qualify. Income and asset restrictions do not apply to Medicare. You can check your Medicare eligibility here

How does Medicare work?

With Medicare, you have options in how you get your coverage. Once you enroll, you’ll need to decide which route to take. In general, there are two ways to do it:

Keep Original Medicare and add coverage:

  • A combination of Part A and Part B
  • The cost of medical services is paid at the time of service. 
  • At the beginning of each year, once your deductible is met, you typically pay 20% of the cost of the Medicare-approved service.
  • You will need to add a prescription drug policy (Part D) to your health plan if you want coverage for prescription drugs.
  • The Original Medicare program covers many costs associated with medical services and supplies.
  • You can also add Medigap insurance which provides coverage for medical expenses such as deductibles, copayments, and coinsurance. 
  • As an additional benefit, Medigap policies can cover emergency medical care abroad in addition to the services not typically covered under the Original Medicare guidelines.

Replace Original with Medicare Advantage:

  • A private plan that offers coverage for health and prescription drugs as an alternative option to Original Medicare.
  • In “bundled” plans, Parts A and B are included, as well as Part D. 
  • There may be coverage available that Original Medicare does not include, such as dental, hearing, and vision care.
  • Medicare Advantage Plans are governed by Medicare’s coverage regulations and regulated by individual contracts with Medicare every year. 
  • Before the new enrollment year begins, the plan will let you know of any changes.
  • Out-of-pocket expenses will vary between Medicare Advantage Plans. You may also encounter different rules regarding how services are delivered.

If you want additional information about your Medicare choices, this is a nice summary.

What is Medicaid?

Medicaid is a jointly-funded state and federal healthcare program for low-income adults, pregnant women, children, seniors, and disabled individuals. 

Medicaid is a jointly-funded state and federal healthcare program for low-income adults, pregnant women, children, seniors, and disabled individuals. 

Medicaid covers a wide range of health-related costs for those who qualify. This can include doctor’s visits, hospitalization, prescription drugs, and preventive care. Medicaid can also provide long-term care services for those who need them.

Medicaid is different from Medicare in that it covers a broader range of people, and it’s also funded differently. Whereas Medicare is funded strictly by the federal government, Medicaid also receives funding from states. This means that eligibility requirements and coverage can differ between states. 

While Medicaid eligibility requirements vary from state to state, most states require that you be a United States citizen or legal resident and have a low income. You may also need to meet other requirements, such as being pregnant, disabled, or blind. In addition, to qualify for Medicaid, you must meet particular income and asset requirements.

In 2010, the Affordable Care Act was passed, allowing nearly all Americans under the age of 65 the opportunity to enroll in Medicaid. Children were guaranteed eligibility at or above 133% of the Federal Poverty Level (FPL) in every state, with most extending coverage to those with higher incomes.

In adults, eligibility was available if their income was 133% or less of the FBL. The majority of states have expanded their coverage to adults, and any state that has not yet done so may do so in the future.

What is the difference between Medicaid and Medicare?

While Medicare and Medicaid are both government-run health insurance programs that offer essential health services to the population, they differ in eligibility requirements and the types of coverage they provide. 

Here are the main ways in which Medicare and Medicaid differ:

Eligibility

  • Medicaid eligibility ultimately depends on each state, but it’s mostly driven by income level
  • Medicare eligibility is mostly driven by age (open to all people 65 and over), with some exceptions for people with certain disabilities and end-stage renal disease
  • There are some people who are eligible for both programs. Read more about dual eligibility here

Coverage

  • Medicare covers essential health services such as hospital care, prescription drugs, and doctors’ appointments, while Medicaid coverage varies by state.
  • Some states offer expanded Medicaid coverage that includes dental and vision care, mental health services, and select medications. 

Cost

  • Medicaid is free or low-cost for qualifying individuals, while the majority of Medicare beneficiaries must pay monthly premiums and copayments

How to apply for Medicare or Medicaid?

You can contact your local state Medicaid office or regional Social Security office with questions about enrolling in Medicare or Medicaid. In addition to seeing if you meet the eligibility requirements for coverage, they can guide you through the enrollment process.

Do I have Medicare or Medicaid?

Which plan you have depends on your circumstances. If you are over 65, it is likely that you have Medicare. If you are low-income or have a qualifying disability, Medicaid may be the more likely option. Ultimately, it is crucial to understand the differences between these two programs to make the best decision for your health care needs.

The Bottom Line

So, what’s the difference? 

To put it simply, Medicare is a government-sponsored health insurance program that covers everyone 65 or older and includes disabled beneficiaries and ESRD patients. Medicaid is a national health insurance program financed by the federal government in partnership with states, covering low-income adults, pregnant women, children, older adults in long-term care facilities, and the disabled.

And remember, since Medicaid is run on a state-by-state basis, the rules and qualifications vary from state to state. 

To enroll in Original Medicare, visit here.

To enroll in Medicaid, visit here and look up your state.

Keep in mind that Original Medicare (Part A and Part B) does not cover the costs of prescription drugs or other medical needs such as routine dental, vision, or hearing services. It also does not cap out your out-of-pocket expenses after you meet your deductible. For Part B, the government pays for 80% of your health care cost, but you are responsible for the remaining 20% of the costs. 

If you are already enrolled in Original Medicare, you can either:

  • replace it with Medicare Advantage (Part C)
  • keep it and add coverage such as Prescription Drug plans and/or Medicare Supplement plans (Medigap)

Learn more about your options if you are already enrolled in Original Medicare.