Understanding the Difference Between Medicaid and Medicare 

Medicaid and Medicare are two of the most prominent government-run healthcare programs in the United States. Although they share similarities, they cater to different groups of people and have distinct eligibility requirements, coverage, and funding sources. Understanding the differences between the two is essential for navigating the U.S. healthcare system, particularly when deciding which program might apply to you or a loved one. 

1. Overview of Medicaid and Medicare 

• Medicaid is a state and federal program that provides health coverage for low-income individuals and families. It is designed to assist those who may not have the financial means to afford private health insurance or other healthcare services. Medicaid is managed at the state level, which means each state has its own set of eligibility rules and benefits, though they all must meet basic federal guidelines. 

• Medicare, on the other hand, is a federal program that provides health coverage for individuals aged 65 and older, as well as some younger individuals with disabilities or specific health conditions (such as end-stage renal disease). Medicare is uniform across all states, meaning the same benefits are available to anyone who qualifies, regardless of where they live. 

2. Eligibility Requirements 

• Medicaid Eligibility: Medicaid eligibility is largely based on income level, household size, disability status, and other factors such as pregnancy or age. Generally, Medicaid covers low-income adults, children, pregnant women, elderly individuals, and people with disabilities. Each state has its own guidelines for income limits and other criteria, so eligibility can vary depending on where you live. 

• Medicare Eligibility: Medicare eligibility is generally based on age and disability status. Most individuals become eligible for Medicare when they turn 65, regardless of income. However, people under 65 can qualify if they have a qualifying disability or suffer from end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS). There is no income requirement for Medicare, although certain premiums and out-of-pocket costs can vary depending on income. 

3. Coverage Differences 

• Medicaid Coverage: Medicaid covers a wide range of healthcare services, including but not limited to hospital visits, doctor’s appointments, long-term care (like nursing home care), prescription drugs, preventive services, and mental health services. Since Medicaid is managed by the states, each state may offer additional benefits beyond the federally mandated services. States also have the flexibility to determine copays and other cost-sharing arrangements. 

• Medicare Coverage: Medicare is divided into several parts, each offering different types of coverage: 

• Part A: Hospital Insurance – Covers inpatient hospital care, skilled nursing facility care, hospice care, and some home health care. 

• Part B: Medical Insurance – Covers outpatient care, doctor’s services, preventive services, and some home health care. 

• Part C: Medicare Advantage – A private insurance plan that combines parts A and B and often includes additional benefits like prescription drug coverage, vision, dental, and hearing services. 

• Part D: Prescription Drug Coverage – Helps cover the cost of prescription medications. 

While Medicare provides a comprehensive range of benefits, it does not cover everything. For instance, it typically does not pay for long-term care, dental care, or eye exams for glasses. Beneficiaries often need supplemental insurance, such as Medigap (a supplemental policy), or rely on Medicaid if they qualify for both programs. 

4. Funding Sources 

• Medicaid Funding: Medicaid is funded jointly by the federal government and the states. The federal government provides a portion of the funding, and each state contributes a share based on its income and other factors. The federal government’s share can range from 50% to over 75%, with poorer states receiving a larger percentage of funding. 

• Medicare Funding: Medicare is funded primarily through two trust funds: the Hospital Insurance Trust Fund (for Part A) and the Supplementary Medical Insurance Trust Fund (for Parts B and D). Part A is funded by payroll taxes collected from workers, while Part B and Part D are funded through premiums paid by beneficiaries and general revenue from the federal government. 

5. Costs for Beneficiaries 

• Medicaid Costs: Medicaid generally has lower out-of-pocket costs compared to Medicare. Many Medicaid beneficiaries pay little to no premium, copays, or deductibles, but the exact costs can depend on the state’s program. Some individuals may be required to share a small portion of their healthcare costs, especially those with higher incomes. 

• Medicare Costs: Medicare generally involves several costs, including premiums, deductibles, and copayments. Part A is free for most people who have worked and paid Medicare taxes for at least 10 years, but there are still deductibles and copayments for hospital stays. Part B requires a monthly premium, which is based on income, and there are also deductibles and copays. Parts C and D have additional costs depending on the plan chosen. 

6. Dual Eligibility: Medicaid and Medicare 

Some individuals qualify for both Medicare and Medicaid, referred to as “dual eligibles.” This usually applies to low-income seniors and individuals with disabilities. For dual eligibles, Medicaid can help cover Medicare’s out-of-pocket costs, such as premiums, deductibles, and copayments. Additionally, Medicaid may offer services that Medicare does not cover, such as long-term care, helping to bridge gaps in coverage. 

7. Key Differences at a Glance 

While Medicaid and Medicare both play vital roles in the U.S. healthcare system, they serve different populations and have different requirements, coverage, and funding mechanisms. Medicaid is focused on providing assistance to low-income individuals, while Medicare primarily serves seniors and those with specific disabilities. Knowing which program you qualify for and understanding the benefits of each can help ensure that you or your loved ones receive the necessary healthcare coverage and services. 

The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Katherine Sullivan, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security, or any security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. 

This is not endorsed by the U.S. government or associated with any federal Medicare program.