The federal government offers two key programs that provide healthcare coverage to U.S. citizens. One of the most widely used programs is Medicare. It provides healthcare benefits to more than 18 percent of the population, primarily for those over 65.
A similar program is Medicaid, which also provides healthcare benefits but primarily for low-income families.
While these programs are both types of health insurance, they aren’t interchangeable. If you’re curious about the difference between Medicare and Medicaid, keep reading. Our guide will shed some light on where the two programs overlap and where they diverge.
What Is Medicare?
Medicare is primarily health insurance that covers a variety of health insurance costs either in part or in full. It’s an age-based program, which means anyone who reaches the age threshold becomes eligible for the program. The federal government administrates the Medicare Program directly.
The program is divided into specific areas that we’ll cover in depth in the next section.
Types of Medicare
The different types of Medicare handle specific aspects of healthcare. It simplifies administration by keeping the areas segregated for health care providers. It’s divided into four primary sections.
Medicare Part A
Medicare Part A deals primarily with hospitalization and most related in-patient services. Covered services include things like surgery and nursing.
Other covered services include:
- Semi-private room
- Nursing facilities
- Hospice care
- Limited home healthcare services
Medicare Part A does not provide complete coverage. You must typically make a deductible payment, as well as coinsurance payments for stays beyond a certain number of accumulated days per year. You may also owe some of the doctor’s charges for surgical procedures.
Medicare Part B
Medicare Part B deals primarily with outpatient care you receive from your primary care physician. It may also cover care from other kinds of outpatient health care professionals.
In addition, Part B helps cover the cost for:
- Durable medical equipment
- Preventative care
- Home health care services
Durable medical equipment typically includes things like wheelchairs, canes, and hospital beds. Preventative care covers a lot of ground but includes vaccinations and health screenings. Home health care services include things like physical and occupational therapy, part-time health aides or nurses, and home-use medical supplies.
Medicare Part C
Medicare Part C isn’t technically part of the government-run program. Instead, they are private health insurance plans that provide equivalent coverage to Medicare Part A and Part B.
As a general rule, these Medicare plans will also fold in Part D coverage for prescriptions. Many will offer additional benefits you don’t get with Medicare, such as dental insurance or vision coverage.
Medicare Part D
Medicare Part D deals with coverage for any prescription drugs you may need. While it’s technically optional, it’s generally wiser to enroll when you become eligible than not enroll. If you enroll later, it can add a number of ongoing surcharges to your premium.
Who Does Medicare Cover?
For most people, you become eligible for Medicare at 65. While you can and probably should sign up for it a few months in advance of your 65th birthday, it won’t become active until you actually turn 65.
People under 65 with disabilities can qualify for Medicare if they get Social Security Disability benefits for two years. Those with end-stage renal disease and ALS qualify automatically.
What Is Medicaid?
Medicaid provides health insurance coverage for low-income individuals and low-income families. Eligibility is based on income level. As of Sept. 2022, 39 states adopted the expanded Medicaid coverage option from the federal government that puts the income eligibility at 133% of the federal poverty line.
Who Runs Medicaid?
Unlike Medicare, which the federal government administrates directly, Medicaid programs operate as joint state-federal programs. That means that each state sets up and runs its own Medicaid program with funding and input from the federal government.
This can mean that specific rules, costs, or coverages will vary from one state to the next.
What Does Medicaid Cover?
While states can provide a wide range of optional medical coverage, the federal government requires that all states provide specific kinds of healthcare services as part of Medicaid.
Some of the mandatory services include:
- Hospital inpatient care
- Hospital outpatient care
- Doctors outpatient services
- Lab and X-ray services
- Family planning
- Birth center services
Some of the optional services include things like:
- Dental coverage
- Prescription drug coverage
- Physical therapy
- Respiratory care
As noted above, each state has discretion about which, if any, of the options services it folds into its Medicaid coverage. You can check your state’s Medicaid website for more details about what services it does and does not cover.
Who Does Medicaid Cover?
Unlike Medicare, which has very explicit rules about who becomes eligible based on age, eligibility for Medicaid will vary from state to state and even based on economic conditions.
For example, in a good economy with low unemployment, more people will benefit from employer-provided health benefits. That will reduce the number of eligible people based on their income, their available benefits, or both.
In a poor economy, when people lose their jobs and benefits, the number of eligible people will go up. This is particularly true of children, who may qualify for Medicaid coverage even if their parents do not qualify.
It is an explicitly need-based program, rather than a benefit enjoyed by anyone who reaches a certain age.
Understanding the Difference Between Medicare and Medicaid
The principle difference between Medicare and Medicaid is the group of people who are eligible. With Medicare, anyone who reaches the threshold age of 65 becomes automatically eligible. You literally just apply when you reach the right age.
For Medicaid, you typically only become eligible if your income falls below a certain threshold. That means that you may very well become eligible and lose eligibility based on your job or the economic conditions in the country.
Looking for more information on health insurance coverage and government health insurance programs? Check out our Health section for more posts.