Medicare vs Medicaid

Medicare vs Medicaid: Whats the Difference?

The subject of Medicare and Medicaid can be confusing for all of us. Sure, these two programs help a diverse group of people at various stages of their lives. But they aren’t exactly alike. So, what’s the difference between them?

Medicare is a health insurance program set up by the federal government. The Centers for Medicare & Medicaid administer it uniformly throughout the US. People who are disabled or over 65 can receive benefits. Participants pay into it over several years to provide funding for the plan.

Medicaid is a federal and state-run assistance program for low-income individuals and families. As a result, each state differs in the way they administer the guidelines. Also, there are currently no age restrictions for Medicaid.

Key Takeaways:

  • Medicare is a federal health insurance plan for people 65 and over
  • Medicaid is a federal-state health assistance program for low-income individuals and families
  • Medicare has four parts and can be very complicated to understand
  • Medicaid is much simpler but differs from state to state
  • Combining both programs can provide dual coverage for zero out-of-pocket costs

Quick Navigation

Medicare overview

Medicare is a federal health insurance program for people 65 and older. It also covers those under 65 with certain disabilities.

Eligibility requirements

The following is a list of current eligibility requirements for Medicare:

  • 65 and older and paid into the system for at least ten years
  • Under 65 but have been disabled at least two years
  • You have ALS ( Lou Gehrig’s disease) or End-Stage Renal Disease (ESRD)

Medicare Part A

The primary provision of the program, Part A, concerns hospital visits. It covers both acute care facilities and nursing homes.

You don’t normally have to pay a premium for coverage. But to qualify, you have to previously pay into the system by working for at least ten years.

However, you can still be eligible for part A if you haven’t worked the full ten years. But you may have to pay a premium to offset costs.

Even though Part A covers hospitalization, you still have to pay large deductibles and copayments. There are also daily charges for extended hospital stays.

Medicare Part B

Part B has to do with outpatient services. This is what’s covered:

  • Office visits
  • Lab tests
  • Medication that’s given at a doctor’s office
  • Physical therapy
  • Home health nursing
  • Occupational therapy
  • In-home health equipment

Although this list is extensive, keep in mind that it may not cover 100%. For example, you will be expected to kick in for some of the costs. This may include copays and deductibles.

While enrolled in Part B, you will also be expected to pay a monthly premium. The amount is based on median income levels. But if you make more than that, you will be expected to pay a higher premium.

Medicare Part C

One of the biggest problems with Medicare is overbilling. That is mainly why we now have Part C, which is the Medicare Advantage plan.

Part C is optional and covers everything that is already in A and B. But instead of the government providing benefits, the plan reroutes them through private insurance companies.

The upside to being under a Medicare Advantage plan is that the premiums and copayments are usually less than with Original Medicare. Also, the coverage is typically better since everything goes through a private company.

Medicare Part D

This optional plan covers prescription drugs only from a pharmacy. It does not include medications given in doctors’ offices or hospitals. However, those provisions are covered under Parts A and B. If you have a part C advantage plan, part D is usually bundled in, and then it is not optional.

Keep in mind that part D is only offered through private insurance companies. The nice thing is, you can combine your Part D prescription coverage with a Medicare Advantage plan. This option potentially could save you a lot of money.

Supplemental plans

Parts A and B are referred to collectively as “Original Medicare.” They both contain out-of-pocket costs such as deductibles and copays. And since there is no cap on those expenses, retirees often purchase Medicare supplemental plans.

Private insurance companies provide these policies. Their primary advantage is that they close the cost gaps not covered by original Medicare.

One of the significant benefits of a supplemental plan is freedom of choice. This means you are allowed to see any doctor or specialist you want. Also, you can visit any hospital of your choosing.

As long as your health care provider accepts Medicaid, you are automatically covered by the supplemental insurance.

How it works is, your doctor or other provider bills Medicare directly. After Medicare pays for their portion, they bill the insurance company for the rest. Under federal guidelines, that insurance company has no choice but to cover those additional costs. 

Medicare pros and cons

There are some wonderful things about Medicare, but also some downsides. Here are a few of the pros and cons:

Pros

  • Good insurance coverage for those over 65
  • Fairly flexible, especially with the different advantage plans
  • Covers a wide range of health conditions
  • Has an excellent prescription medication option

Cons

  • Very complicated and difficult to understand
  • Premiums, copayments, and deductibles can be very high
  • No ceiling on out-of-pocket costs
  • Does not cover long-term care

Medicaid overview

Medicaid is a federal-state assistance program designed to provide health care for those with lower incomes and limited resources. Although there are no age restrictions, they may be factored in when deciding state eligibility requirements.

Medicaid boasts almost the same benefits as Medicare. Examples are:

  • Hospitalization
  • Doctor’s visits
  • Labs
  • X Rays
  • Prescription drugs

Because individual states administer Medicaid, benefits may vary widely depending on where you live. And it is usually not identified as Medicaid. Each state typically applies its unique name to the program.

Medicaid is the largest funding source for healthcare in the United States. The Affordable Care Act passed in 2010 has significantly added to the number of people eligible to receive Medicaid benefits in recent years.

Eligibility requirements

States set their income requirements based on a percentage of the federal poverty level. Your modified adjusted gross income usually determines the benefit level. Also, there are restrictions on the amount of real and personal assets you can have when applying for Medicaid.

Medicaid pros and cons

Medicaid helps a lot of lower-income people in the US. But there are also a few problems with the program. This is a list of the pros and cons:

Pros

  • Little or no cost to the recipient
  • Increases health coverage for those who otherwise can’t afford it
  • Financial security is improved for the recipient
  • Often covers services that Medicare doesn’t, such as dental and long-term care

Cons

  • May be difficult to qualify initially
  • Fewer doctors willing to accept Medicaid patients
  • Not transportable from state to state
  • Patient may lose eligibility due to increased income

Dual eligibility

You may be able to qualify for both Medicare and Medicaid at the same time. If that is the case, Medicaid will cover most costs incurred by Medicare Parts A and B. In other words, by having both plans, you could possibly have no out-of-pocket costs for your health care.

Not only that, you can often sign both insurances over to a Medicare advantage plan. The result would be dual coverage that would take care of almost all your healthcare costs. In some cases, you could also receive additional benefits such as transportation to scheduled doctor’s visits.

Final thoughts

According to a survey conducted in 2020 by the Commonwealth Fund, 43.4% of US adults ages 19 to 64 did not have adequate health insurance coverage. Unfortunately, there was no improvement from the previous study conducted in 2018.

Without Medicare and Medicaid, those statistics would be considerably worse. Both of those programs provide much-needed health coverage in the US. So, whatever plan you qualify for, you have the peace of mind knowing you will be taken care of.

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