Medicare and Medicaid are both government-sponsored medical insurance programs funded by taxes. They sound almost the same and are easily confused. They differ, however, by several factors:
Eligibility
Medicare is a medical insurance program with eligibility to enroll based primarily on age. It is available to individuals aged 65-years and older of any income level. People younger than 65 with certain government-defined disabilities can also qualify for coverage.
Medicaid provides insurance for low income individuals and families of any age. People who qualify for Medicaid often are allowed only a few thousand dollars in assets.
Coverage
Medicare is strictly medical insurance. It helps pay the costs of hospitalization, skilled nursing facilities, hospice, doctors’ visits, outpatient care, home health care, and prescriptions. Medicare does not pay for long-term custodial care and it does not cover non-medical assistance at home, in a nursing home, or in an assisted-living facility. For more information on Medicare insurance, see my blog post “Decoding the Language of Medicare.”
Medicaid has two basic types of coverage:
• Insurance to cover medical services including services labeled “medically necessary” by the federal government
• Long-term custodial care
Administration and Funding
Medicare is administered by the United States government. It has several parts which are funded by payroll taxes on current workers, deductions from enrolled participants’ Social Security benefits, and premiums paid by program participants.
Medicaid is a joint federal and state program funded by tax payers. Each state currently receives up to 50 percent of its Medicaid funding from the federal government. The amount varies by state. The rest is funded by state budgets. Each state administers its Medicaid program resulting in differing eligibility requirements. Common to all, however, is a lack of resources.
Dual coverage
Many low income seniors are enrolled in both Medicare and Medicaid. When low income seniors reach age 65, they enroll in Medicare for their primary medical insurance. If they also qualify for Medicaid, this insurance program functions as secondary insurance covering Medicare’s out-of-pocket costs such as deductibles, co-payments, and premiums. Should a low income senior need long-term custodial care, Medicaid will pay for that, too. Many seniors use all their assets paying privately for long-term care. When they run out of money, they apply for Medicaid.
This is a general overview of these two complex social insurance programs. Key points are:
• Medicare is the primary health insurance for most people age 65 and older. Eligibility is based principally on age or disability, not income.
• Medicaid provides both health insurance and long-term care coverage. Eligibility is based on income and resources. It is often a program of last resort, especially for those needing expensive long-term care.
• Medicare and Medicaid often work together to provide medical coverage for low income seniors and people with certain disabilities.
Resources
If you would like to read more about this topic, visit:
• Medicare.gov
• Medicaid.gov
A great book on this topic is:
• Social Security, Medicare & Government Pensions: Get the Most out of Your Retirement & Medical Benefits, by Joseph Matthews. This book was most recently updated in February 2018.
This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice. Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.
Medicare. Medicaid. What’s the Difference?
