What’s the Difference Between Medicare and Medicaid?

While this Grandmother is probably on Medicare, her grandchildren might be on Medicaid if they're poor.. Image © Thanasis Zovoilis/Getty Images

What’s the difference between Medicare and Medicaid? Medicare is for the elderly and Medicaid is for the poor, but the differences between Medicare and Medicaid are larger than that. Medicare and Medicaid differ in

  • who can enroll
  • who runs them
  • how they work
  • how they're funded
  • what benefits they provide enrollees

Who Gets Medicare vs Medicaid?

Old people get Medicare; poor people get Medicaid. If you’re both old and poor, you can potentially get both.

You’re eligible for Medicare if you’re at least 65 years old and you or your spouse paid Medicare payroll taxes for at least 10 years. Whether you're rich or poor doesn't matter; if you paid your payroll taxes and you're old enough, you'll get Medicare.

You’re eligible for Medicaid if you're poor enough that your income falls below a certain income limit.

There are exceptions to the general rules for both Medicare and Medicaid. For example, you might qualify for Medicare if you're disabled, even if you're not 65 years old yet. If you’re over 65 but didn’t pay Medicare payroll taxes while you were younger, you may still be eligible for Medicare. However, you’ll pay higher premiums.

In some states, being poor isn’t sufficient by itself to qualify for Medicaid; you also have to be a child, pregnant woman, elderly person, blind, or disabled person. In other states, you qualify just because your income is less than 138 percent of federal poverty level.

Who Runs Medicare vs Medicaid?

The federal government runs the Medicare Program. Each state runs its own Medicaid program. That’s why Medicare is basically the same all over the country, but Medicaid programs differ from state to state.

Although each state designs and runs its own Medicaid program, all Medicaid programs must meet standards set by the federal government in order to get federal funds.

The Centers for Medicare and Medicaid Services, part of the federal government, runs the Medicare program. It also oversees each state’s Medicaid program to make sure it meets minimum federal standards.

How Do Program Designs Differ for Medicare vs Medicaid?

Medicare is an insurance program while Medicaid is a social welfare program.

Medicare recipients get Medicare because they paid for it through payroll taxes while they were working, and through monthly premiums once they’re enrolled.

Medicaid recipients need never have paid taxes and likely don’t pay premiums for their Medicaid coverage. Instead, taxpayers provide Medicaid to eligible needy people in a manner similar to other social welfare programs like Temporary Assistance for Needy Families, Women Infants and Children, and the Supplemental Nutrition Assistance Program.

How Are Medicare and Medicaid Options Different?

The Medicare program is designed to give Medicare recipients multiple coverage options. Medicare is composed of several different sub-parts, each of which provides insurance for a different type of healthcare service.

For example, Medicare Part A is hospitalization insurance, Medicare Part B is insurance for outpatient and doctors’ services, and Medicare Part D is prescription drug insurance. Medicare recipients may choose several different types of Medicare insurance at once, or only one type. They can choose a Medicare HMO, or original Medicare. It’s common to have Medicare Parts A, B, and D at the same time. However, some people choose only to have Medicare Part A coverage and then don’t have to pay the monthly premiums for Medicare Parts B and D.

Since Medicaid is a social welfare program, there aren’t usually a lot of choices to be made by Medicaid recipients. A Medicaid recipient may choose whether or not to apply, and whether or not to accept the Medicaid coverage they’re offered once they qualify. But, rather than having a lot of coverage options to choose among, Medicaid is more often a take-it-or-leave-it proposition.

Where do Medicare and Medicaid Get Their Money?

Medicare is funded in part by the Medicare payroll tax, in part by Medicare recipients’ premiums, and in part by general federal taxes. The Medicare payroll taxes and premiums go into the Medicare Trust Funds. Bills for healthcare services to Medicare recipients are paid from the Medicare Trust Funds.

Medicaid is partially funded by the federal government and partially funded by each state. How much the federal government contributes toward funding each state’s Medicaid program depends on the average income of that state’s residents. The federal government generally funds 50 - 75 percent of total Medicaid expenses for each state.

How Do Medicare and Medicaid Benefits differ?

Medicare and Medicaid don’t necessarily cover the same healthcare services. For example, Medicare doesn’t pay for long-term custodial care like permanently living in a nursing home, but Medicaid does pay for long-term care. Medicaid benefits vary from state to state, but each state’s Medicaid program must provide certain minimum benefits. Medicare benefits are the same across the entire country.

You can learn more about what benefits Medicare provides, as well as what to expect for out-of-pocket expenses in this booklet. Learn more about Medicaid’s general coverage benefits here, or go to your state’s Medicaid website to learn about Medicaid benefits in your state.

Visit our Medicare & Medicaid section for extensive, in-depth information about Medicare and Medicaid.

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