Medicare and Medicaid are the two types of government-run health insurance programs that allow those in need to access healthcare. Medicare is federally run and for those who are over the age of 65 (or under 65 and meet certain criteria, which we’ll explain later on). In contrast, Medicaid is funded on a federal and state level and helps those who have a low income, are disabled, or otherwise can’t afford health insurance.
Both of these programs play an essential role in providing health coverage to a large number of Americans. 18.7% of the U.S. population was covered by Medicare as of 2022, and over 89 million people were covered by either Medicaid or the Children's Health Insurance Program (CHIP) as of 2023.
In this simple guide to Medicare and Medicaid, we'll break down how these programs work, the differences between them, and how to know if you qualify for them.
While Medicare and Medicaid are both government programs that provide healthcare coverage, they have different eligibility qualifications and may cover different services.
Medicare is broken up into four parts: A, B, C, and D. Each covers different services, including hospital services, outpatient services, prescription drug coverage, and more.
Each type of Medicare has its own fees and may have out-of-pocket costs, depending on the plan.
Medicaid is a public health insurance program for low-income individuals, and certain states have adopted and implemented state-level expansion programs.
What is Medicare?
Medicare is the federal government program that provides health care coverage (health insurance) if:
You are 65+
You are under 65 and receiving Social Security Disability Insurance (SSDI) for a certain amount of time
You are under 65 and diagnosed with End-Stage Renal Disease (ESRD)
Medicare coverage is broken into four parts: Part A, B, C, and D. Each part covers different services, which we’ll explain more in-depth.
Medicare Part A Explained
You can think of Medicare Part A as “hospital insurance.” Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. You’ll automatically have Part A coverage once you enroll in Medicare.
Most people do not pay a monthly premium for Part A if they qualify for “premium-free part A”. If a person is not eligible for “premium-free part A”, they will likely pay a monthly premium for Part A.
Medicare Part B Explained
Part B covers certain doctors' services, outpatient care, medical supplies, and preventive services. Everyone pays a monthly premium for Part B. While Medicare Part B is optional (those who are employed and have coverage through their job may not need this coverage), those who want coverage should sign up during the enrollment period to avoid paying higher premiums or fees.
So, what do premiums typically look like for Medicare Part B?
If you get benefits from Social Security, the Office of Personnel Management, or the Railroad Retirement Board, then your premiums will be deducted from those benefit payments. If you don’t receive any of the previously mentioned benefits, your premium will be determined by your modified adjusted gross income (MAGI) from two years prior.
Medicare Part C Explained
Medicare Part C, or a Medicare Advantage Plan, is another Medicare health plan choice you may have as part of Medicare. Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by private companies approved by Medicare.
Those who enroll in Medicare Advantage Plans usually choose this type of coverage to get services covered that usually wouldn’t be available with Original Medicare. However, people who have Medicare Advantage Plans still have Medicare available to them.
Advantage Plans may offer extra coverage, such as vision, hearing, dental, or health and wellness programs. Most include Medicare prescription drug coverage (Medicare Part D).
The costs for this type of coverage will depend on what kind of plan you enroll in.
Medicare Part D Explained
Medicare drug coverage helps pay for prescription drugs you need. To get Medicare drug coverage, you must join a Medicare-approved plan that offers drug coverage (this includes Medicare drug plans and Medicare Advantage Plans with drug coverage).
Each plan can vary in cost and specific drugs covered but must give at least a standard level of coverage set by Medicare. Medicare drug coverage includes generic and brand-name drugs. Plans can vary the list of prescription drugs they cover (called a formulary) and how they place drugs into different "tiers" on their formularies.
Plans have different monthly premiums. You’ll also have other costs throughout the year in a Medicare drug plan. How much you pay for each drug depends on which plan you choose.
What is Medicaid?
Medicaid is the national public health insurance program for people with low income and/or disabilities. The program covers approximately 20% of Americans, including many individuals with complex and costly medical needs. Medicaid is the principal source of long-term care coverage for Americans.
The qualifications for being eligible to receive Medicaid vary by state, but you can generally qualify based on factors like income, family status, disability, amount of people in your household, and more.
Medicaid is the nation’s public health insurance program for people considered by the federal government to have a low income
Medicaid is a partnership between the federal government and state governments, and the program is jointly financed by the federal government and state governments
Medicaid covers a broad range of health and long-term care services
Medicaid spending is concentrated on the elderly and people with disabilities
Many states have adopted and implemented state-level expansion programs.
What is the Difference Between Medicare and Medicaid?
Medicare is an insurance program. Medical bills are paid from trust funds which those who are covered have paid into. It serves people over 65 primarily, whatever their income; and serves younger disabled people and dialysis patients. Patients pay part of costs through deductibles for hospitals and other costs. Small monthly premiums are required for non-hospital coverage. Medicare is a federal program that is fairly consistent from state to state.
Medicaid is an assistance program. It serves low-income people of every age. Patients typically do not pay any costs for covered medical expenses, but sometimes a small co-payment may be required. Medicaid is a federal-state program that varies from state to state. A federal-state program is a program that is jointly run and funded by the federal government and the states.
Next Steps and Registration
We hope this simple guide to Medicare and Medicaid gives you a better understanding of how these government programs work and are used. Medicare and Medicaid may seem confusing at first, but once you become more familiar with the general concepts and their requirements, you will know what to do if you ever need to use these services. While you may not be currently eligible, a family member or friend may be eligible today or become eligible in the near future.