Medicare vs Medicaid

Explore the essential differences between Medicare and Medicaid in this comprehensive guide designed for healthcare professionals.

By Audrey Liz Perez on May 19, 2024.

Fact Checked by Ericka Pingol.

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What is Medicare?

Medicare is a federal health insurance program run by the federal government. It is intended to provide health coverage to people aged 65 and up and younger people with specified disabilities.

As one of the primary health insurance programs in the United States, Medicare covers various medical services, including prescription drug coverage, from hospital to medical insurance. Enrollees may pay monthly premiums to access Medicare Advantage plans, a form of health insurance that bundles the standard benefits with additional services.

Medicare parts

Medicare is divided into numerous segments, each controlled by a federal organization named the Centers for Medicare & Medicaid Services (CMS). Each targets a particular set of healthcare requirements and is partially funded by federal grants with cost-sharing provisions.

  • Part A (hospital insurance): Covers inpatient hospital care, skilled nursing facility care, hospice, and some home health care. This core covering is critical for major medical events and illnesses.
  • Part B (medical insurance): Provides coverage for doctor's services, outpatient care, medical supplies, and preventive services. This part requires a monthly premium and includes cost-sharing for services like physical therapy and durable medical equipment.
  • Part C (medicare advantage): These plans, offered by private companies approved by Medicare, include all of the benefits of Parts A and B as well as many extra services, such as dental care, vision, and hearing aids, tailored to the participants' health and needs.
  • Part D (prescription drug coverage): Helps cover prescription medications, including numerous required immunizations or vaccines. Medicare-approved private companies offer Part D coverage.
  • Medicare supplement insurance (Medigap): Private firms sell this insurance, which helps pay for some of the healthcare costs that Original Medicare does not cover, such as copayments, coinsurance, and deductibles.

This arrangement enables Medicare to act as the major payer for many health services, ensuring all beneficiaries have access to critical medical care at predictable out-of-pocket expenses.

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What is Medicaid?

Medicaid is a federal-state health insurance program that covers qualified low-income individuals, children, pregnant women, the elderly, and persons with disabilities, including those with end-stage kidney disease.

Unlike Medicare, which is a federal program available to all older adults and certain disabled persons, Medicaid assists those with low income and resources in covering medical costs. This program provides various medical services, such as hospital stays, outpatient care, and long-term personal care. Medicaid is frequently coordinated with Medicare for "dual eligible" individuals who qualify for both programs.

Medicaid can cover expenditures that Medicare does not fully cover, such as copayments, deductibles, and extended services. For example, although Medicare Part B provides outpatient medical services and Part D covers prescription pharmaceuticals, Medicaid can help alleviate the financial burden by covering the remaining qualified charges.

This interplay significantly impacts a person's Medicare coverage, highlighting the distinction between Medicare, which includes voluntary private insurance options such as Medicare Advantage plans, and Medicaid, which provides more comprehensive assistance to those in greatest financial need.

Differences between Medicare and Medicaid

Medicare and Medicaid are critical components of the U.S. healthcare system, serving diverse populations with varied requirements. While both are federally regulated public health insurance schemes, there are substantial disparities in eligibility, cost, and service coverage.

Eligibility requirements

Understanding the eligibility requirements for Medicare and Medicaid is critical because they define who can benefit from each program. While Medicare primarily serves people 65 and older or those with special disabilities, Medicaid supports individuals and families with low income and resources.

  • Medicare: Eligibility primarily centers around age (65 and older) and certain disabilities. Individuals under 65 can qualify if they have disabilities or end-stage renal disease. Medicare eligibility does not depend on income level.
  • Medicaid: This program is intended for people and families with low income and resources. Eligibility is highly influenced by income level, and the criteria vary greatly by state.

Cost to beneficiaries

Medicare and Medicaid prices vary greatly, affecting recipients' healthcare spending. Medicare frequently includes premiums, deductibles, and copayments, whereas Medicaid typically reduces out-of-pocket costs to make healthcare more affordable to low-income participants.

  • Medicare: Enrollees typically pay monthly premiums, especially for Medicare Part B (medical insurance) and Medicare Part D (private prescription drug coverage). There are also deductibles and copayments. Medicare offers personalized Medicare guidance to help enrollees manage these costs.
  • Medicaid: Generally has lower or no premiums and minimal copayments, making it more accessible for low-income individuals. The cost to beneficiaries is significantly lower compared to Medicare.

Covered services

Medicare and Medicaid cover a wide range of basic healthcare services, but the coverage area varies significantly. Medicare offers comprehensive coverage, including hospital care and prescription medications. Medicaid also covers long-term care and personal care services that Medicare does not normally cover.

  • Medicare: Original Medicare includes Part A (hospital insurance) and Part B (medical insurance), with optional additions like Medicare Part D for prescription drugs and Medicare Advantage plans that offer expanded coverage. It does not typically cover long-term care in nursing facilities beyond certain limits.
  • Medicaid: Offers a broader scope of services, including some that Medicare does not typically cover such as long-term care in nursing facilities, personal care services, and more extensive mental health services. Medicaid services can vary by state but generally offer more comprehensive coverage.

Funding

Medicare and Medicaid get funding from separate sources, reflecting their diverse operating frameworks. Medicare is primarily funded by federal government grants and beneficiary premiums, but Medicaid is funded by state and federal sources, allowing for diverse coverage among states.

  • Medicare: Funded by payroll taxes, beneficiaries, and federal government premiums.
  • Medicaid: Jointly funded by the state and federal government, with states having considerable flexibility in how they administer programs.

Dependents and benefits

Medicare and Medicaid have quite different approaches to dependents and benefits. Individuals must qualify for Medicare on their own, with no dependent coverage, whereas Medicaid frequently covers entire families under a single plan, offering comprehensive benefits that address households' overall requirements.

  • Medicare: Does not allow dependents to be covered under the same policy; each individual must qualify on their own merits.
  • Medicaid: This program can cover entire families, including children, under a single policy, ensuring comprehensive health coverage for dependents.

The relationship between these programs emphasizes their importance within the federal health insurance structure. Medicare provides broad support mostly based on age or disability, whereas Medicaid provides income-based help, adapting services to the different requirements of its subscribers. Both programs are critical in meeting the health needs of various community segments.

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