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 disabled, while Medicaid is for the poor (some people are eligible for both), 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?

Elderly people get Medicare; poor people get Medicaid.

If you’re both old and poor, you can potentially get both.

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.

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 (although you'll pay higher premiums for Medicare Part B and Part D if your income is higher than $85,000/year for a single person, or $170,000/year for a married couple).

Under the Affordable Care Act, you’re eligible for Medicaid if your household income is less than 138 percent of the federal poverty level.

However, some states have rejected this provision, and have kept their Medicaid eligibility as it was prior to the ACA, which generally means that in addition to being low-income, you also have to be a child, a pregnant woman, elderly, blind, disabled, or a very low-income parent of minor children.

There are 19 states where Medicaid has not been expanded to cover people up to 138 percent of the poverty level, and in 18 of them, there's a coverage gap (ie, no realistic coverage options) for childless adults with income below the 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 Medicare Advantage 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.

In the past, Medicaid programs typically didn't offer a lot of choice in terms of plan design. But today, most states utilize Medicaid managed care organizations (MCOs). If there's more than one MCO option in a given area of the state, enrollees may be allowed to select the one that they prefer.

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.

Under the ACA's expansion of Medicaid, the federal government pays a much larger share however. For people who are newly-eligible for Medicaid due to the ACA (ie, adults with income up to 138 percent of the poverty level), the federal government paid 100 percent of the costs from 2014 through 2016. States are paying 5 percent of the cost from 2017 through 2019. After that, from 2020 onward, states will pay 10 percent of the cost and the federal government will pay 90 percent.

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.

Updated by Louise Norris.


Social Security Administration, Medicare Premiums: Rules for Higher-Income Beneficiaries, 2016.