What Is the Difference Between Medicare and Medicaid?

We know you’ve been there. Scratching your head over which one you mean: Medicare or Medicaid? There are literally only two letters that make them different so don’t feel bad. The person who thought of those names should be fired. Oh wait, it was the government . . . hmm, well?

We won’t fire the government just yet. But let’s dig into the differences between Medicare and Medicaid so you’re never stuck wondering What is the difference between Medicare and Medicaid? again!

What Is Medicare?

Medicare is a health insurance program run by the federal government for people 65 and older and those with disabilities. It covers things like hospital visits, doctor visits and other medical services. It doesn’t matter how much income you have—qualification is just based on your age. Because it’s very complex, most people need help figuring out how to use Medicare.

What Is Medicaid?

No, it’s not a sports drink with electrolytes. Just kidding, we know you didn’t think that. Medicaid is a joint federal and state health care assistance program for Americans with limited income. It covers things like nursing home care, personal care and premium assistance for Medicare. But it isn’t insurance—it’s more like an aid program that helps low-income folks pay for things.

Because states are involved, Medicaid works a little differently depending on which of them you’re in. This includes the eligibility requirements. President Obama tried to expand eligibility by making it so any legal resident or citizen with an income below 138% of the poverty level qualified. But states still get to opt in or out of that rule. In all cases though, eligibility depends on your level of income (but it varies by state).

Benefits are also different by state, so the federal government created a list of mandated minimum coverages that all states must offer.

These include:

• Inpatient and outpatient hospital services
• Transportation to medical services (think ambulance)
• Physician services
• Home health services
• Nursing facility services
• Rural health clinic services
• Certified pediatric and family nurse practitioner services
• Laboratory and X-ray services
• Nurse midwife services

There’s a long list of other optional services that states may offer, including things like physical therapy, dental, vision and hospice services.

Typically, if you qualify for Medicaid, you don’t have to pay any sort of premium because it’s not insurance. But most states require some form of out-of-pocket copayment or cost sharing for certain services. Other services like a trip to the emergency room never require any copayment.

Whether you qualify for Medicaid is based on your finances—your income and assets. The levels for eligibility vary by state (pretty sure we’ve heard that before). States will look at your income from sources like these:

• Salaries
• Wages
• Pensions
• Interest from bank accounts and certificates of deposit
• Dividends from stocks and bonds
• Regular benefit payments (like Social Security or disability payments)
• Veterans’ benefits
• IRA withdrawals

Key Differences Between Medicare and Medicaid

Okay, now that we’ve summarized them, let’s look at the key differences between Medicare and Medicaid (besides the i and the d and the r and the e).

Eligibility Requirements

Whether you qualify for one or the other depends on very different things.

• Medicare: Eligibility is age based (you have to be 65). To enroll, you sign up as soon as you turn 65 or during the General Enrollment Period every year.

• Medicaid: Whether you qualify is income based (you must make below a certain percentage of poverty level, regardless of your state of residence). People in need of Medicaid can apply through their state whenever they need it.

Coverage Scope

Since Medicare is a federal program while Medicaid is a joint effort between federal and state, the coverage offered by each is different.   

• Medicare: Everyone nationwide gets the same standardized benefits.

• Medicaid: What is covered varies by state but is more extensive (than Medicare) because it’s for low-income people.

Cost to Beneficiaries

Medicare comes with the typical costs associated with health insurance, while as an aid program, Medicaid is free.

• Medicare: You’ll pay premiums and out-of-pocket costs.

• Medicaid: Costs are generally minimal or none.

Administration

Like we’ve mentioned before, there are core differences between who administers each of these programs.

• Medicare: Administered by the federal government with uniform benefits.

• Medicaid: Joint federal and state program with state-specific variations.

How to Choose or Combine Coverage

Now that we’ve answered the question What is the difference between Medicare and Medicaid? let’s go over how to choose which program to enroll in or apply for—and whether you might qualify for both.

For Eligible Seniors

If you’re nearing 65 years old and you need health insurance coverage, Medicare is what you’re after. You have an opportunity to enroll when you turn 65—called the initial enrollment period—that starts three months before your birthday and goes for a total of seven months. You can also sign up during the General Enrollment Period, which runs January 1–March 31 every year.

Connect With Our Recommended Medicare Advisors Now

What you’d typically sign up for during this time is Original Medicare: Parts A and B (hospital and provider care) and maybe Part D for drug coverage. But that’s not enough coverage for everyone. Extra coverage is available through a little something called Medicare Supplement Insurance (or Medigap). It fills the gaps that Original Medicare doesn’t cover.

If you need Medigap, you’ll want to sign up for that right after you sign up for Medicare, during the same enrollment period.

For Low-Income Individuals

If you are a low income individual or family, Medicaid could help you. Because every state’s rules around Medicaid are a little different, who qualifies and how you apply are going to depend on where you live. Generally though, if your income is near or below 138% of the poverty level, you may qualify.

Usually, your state will have counselors you can call who help you figure out if you’re qualified. And it’s likely you’ll need to prove both your need and income level with things like bank statements, pay stubs, tax returns and medical bills. You’ll also need to provide ID like a Social Security card or birth certificate.

You can apply various ways depending on the state you’re in. Options include:

• Online
• Over the phone
• Using a paper application

Dual Eligibility

Since one is health insurance and the other is financial aid, these two programs can sometimes be used together. Medicaid can be used to help cover premiums and out-of-pocket costs from Medicare for low-income seniors, disabled people, and anyone with end-stage renal disease or ALS. There are people (like our friends at Chapter) who can help you figure out whether you qualify for Medicaid to help with Medicare costs.

You’ll need to check your state’s Medicaid eligibility requirements, but if you do qualify, Medicaid can go toward your Medicare premiums and any deductibles and coinsurance for services and prescription drugs you get.

Generally, Medicare will always pay first for any services you need. Medicaid will then kick in and help pay for your coinsurance.

If you’re on both Medicare and Medicaid, you’ll likely be enrolled automatically in a Medicare Savings Program (MSP). Depending on your income level, your Medicare Part B premium and potentially cost-sharing responsibilities will be covered through this. Folks who qualify for an MSP also automatically qualify to receive Extra Help, a program that helps cover Part D prescription drug costs. (Heads up: You may also qualify for Extra Help even if you don’t qualify for Medicaid. A Medicare advisor can help you figure this out.)

Some states also require folks on Medicaid to enroll in a Medicaid Managed Care Plan (MMC), which is a private health plan. MMCs offer optional enrollment into a Medicare Advantage Plan. The idea is that the Advantage Plan better coordinates the two programs, but you can’t be forced to sign up for one.

Find Reliable Help as You Shop Medicare

Have you seen that meme with the lady’s face covered in math equations looking confused? (If you haven’t, get your kids to show you.) We’re willing to bet that might sum up how you feel right now—because that’s how pretty much everyone feels after looking into Medicare. But it’s not hopeless. There are people who understand this stuff and they’ll help you figure it out too—for free!

The folks at Chapter Medicare were once in your shoes—confused and totally frustrated with the maze of Medicare. So they they learned everything there is to know about Medicare, started Chapter, and now help people figure out how to make Medicare work for them with personalized advice. And once you’re enrolled, they’ll keep checking in to see that you’re getting the most out of your benefits. Chapter’s goal is to make sure you’re clear on what you need while keeping your costs down so you can get back to the important stuff: reading book number 158 to your grandkids.