Medicare and Medicaid are two government-run health programs that provide health insurance benefits to a significant number of Americans. While there are some similarities between the two programs, there are many differences in the benefits provided, criteria for enrollment, and enrollment periods. Both Medicare and Medicaid are government-run programs; however, they are operated and funded by different parts of the government. Medicare is run by the federal government, and Medicaid programs are run by individual states and the federal government together.
At the most basic level, Medicare provides health coverage to those who are 65 years old and older or those under 65 with a disability. Age or disability are the primary determinants of eligibility for Medicare, not income. Medicaid is a state and federal program that provides health coverage to those with very low incomes and assets regardless of age. You can be eligible for both Medicare and Medicaid (dual eligibles) and be enrolled in both programs. In that case, the two programs work together to provide comprehensive health coverage and lower or eliminate your out-of-pocket costs. There are also Medicare Advantage plans called Dual Eligible Special Needs Plans (D-SNP) that are designed for dual eligibles. They provide additional benefits and conveniences on top of what Medicare and Medicaid provide. There are a few critical differences between the two programs in terms of eligibility, premiums, and benefits provided that are essential to understand.
Medicare and Medicaid Eligibility Requirements
When you turn 65, you are eligible for Medicare if:
- You either receive or qualify for Social Security retirement cash benefits or,
- currently reside in the United States and are either: A U.S. citizen or a permanent U.S. resident who has lived in the U.S. continuously for five years before applying
If you are under 65, you become eligible for Medicare if:
- You have received Social Security Disability Insurance (SSDI) checks for at least 24 months
- You have been diagnosed with End-Stage Renal Disease (ESRD)
- You are eligible for Medicare due to a disability
To be eligible for Medicaid, you must meet specific non-financial eligibility criteria, including:
- Medicaid beneficiaries generally must be residents of the state in which they are receiving Medicaid.
- They must be either citizens of the United States or certain qualified non-citizens, such as lawful permanent residents.
- In addition, some eligibility groups are limited by age or by pregnancy or parenting status.
The methodology for determining income eligibility for Medicaid is based on Modified Adjusted Gross Income (MAGI). MAGI is the basis for deciding Medicaid income eligibility for most children, pregnant women, parents, and adults. The MAGI-based methodology considers taxable income and tax filing relationships to determine financial eligibility for Medicaid.
States may also establish a “medically needy program” for those with significant health needs whose income is too high to qualify for Medicaid under financial eligibility criteria.
Medicare and Medicaid Premiums
There are two main parts of Medicare Part A (hospital insurance) and Part B (medical insurance). For most who enroll in Medicare, there are premiums that you will have to pay for Part B and, in some cases, Part A. Most people won’t have to pay a monthly premium for Part A If they have earned 40 “credits” or “quarters” by paying Social Security and Medicare payroll taxes while working. Equal to about ten years of work. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $471 in 2021. If you paid Medicare taxes for 30–39 quarters, the standard Part A premium is $259 in 2021. Most people will pay the standard Part B premium of $148.50 in 2021, but you could pay more based on your income level. The Income Related Monthly Adjustment Amount (IRMAA) adjust Part B premiums according to your income. You can find the 2021 IRMAA adjusted Part B premiums here. IRMAA also increases the amount you pay for Part D prescription drug benefits according to your income level.
While most of those eligible for Medicare will not have to pay any premiums, states have the option to charge limited premiums and enrollment fees on the following groups of Medicaid enrollees:
- Pregnant women and infants with family income at or above 150% FPL
- Qualified disabled and working individuals with income above 150% FPL
- Disabled working individuals eligible under the Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA)
- Disabled children eligible under the Family Opportunity Act (FOA)
- Medically needy individuals
If applicable in your state, the Medicaid premiums are generally limited to very low amounts for the populations they are applied to.
Medicare and Medicaid Benefits
Medicare Part A (hospital insurance) covers care that is provided in a health care facility. It includes the following types of care:
- Inpatient hospital care
- Skilled nursing care
- Home health services in certain conditions
- Nursing facility care provided it is not custodial or long term care
- Hospice care
Most Medicare beneficiaries will not have to pay a premium for Medicare Part A if they have worked and paid Medicare taxes for at least 40 quarters (10 years).
Medicare Part B (medical insurance) covers medical services provided by doctors, nurses, and other health care professionals. Part B coverage includes outpatient care, ambulance services, preventive services, and durable medical equipment. It also covers part-time home care and rehabilitative services, including physical therapy. The services covered under Part B are defined as:
- Medically necessary services provided by doctors, nurses, and other health care professionals and supplies needed to diagnose or treat your medical condition.
- Preventive services to prevent illness (like the flu) or detect diseases at an early stage when treatment is likely to be the most effective. In most cases, you will not pay anything for preventive services if the services are provided by a doctor who accepts Medicare assignment.
Each state Medicaid program determines the type, amount, duration, and scope of services within broad federal guidelines. Federal law requires states to provide certain mandatory benefits and allows states the choice of covering other optional benefits.
Mandatory benefits include:
- Inpatient hospital services
- Outpatient hospital services
- EPSDT: Early and Periodic Screening, Diagnostic, and Treatment Services
- Nursing Facility Services
- Home health services
- Physician services
- Rural health clinic services
- Federally qualified health center services
- Laboratory and X-ray services
- Family planning services
- Nurse Midwife services
- Certified Pediatric and Family Nurse Practitioner services
- Freestanding Birth Center services (when licensed or otherwise recognized by the state)
- Transportation to medical care
- Tobacco cessation counseling for pregnant women
Optional benefits can include:
- Optional Benefits
- Prescription Drugs
- Clinic services
- Physical therapy
- Occupational therapy
- Speech, hearing, and language disorder services
- Respiratory care services
- Other diagnostic, screening, preventive, and rehabilitative services
- Podiatry services
- Optometry services
- Dental Services
- Chiropractic services
- Other practitioner services
- Private duty nursing services
- Personal Care
- Case management
- Services for Individuals Age 65 or Older in an Institution for Mental Disease (IMD)
- Services in an intermediate care facility for Individuals with Intellectual Disability
- State Plan Home and Community Based Services
- Self-Directed Personal Assistance Services
- TB Related Services
- Inpatient psychiatric services for individuals under age 21
- Health Homes for Enrollees with Chronic Conditions
- Other services approved by the Secretary that include services furnished in a religious nonmedical health care institution, emergency hospital services by a non-Medicare certified hospital, and critical access hospital (CAH)
Medicaid also covers certain inpatient, comprehensive services commonly known as long-term care. This is very different than Medicare which does not cover long-term care services.