What is the Difference Between Medicare and Medicaid?

What is the Difference Between Medicare and Medicaid?

what-is-the-difference-between-medicare-and-medicaid
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Established by the Social Security Amendments of 1965, Medicare and Medicaid are government-funded programs that provide health care assistance to certain qualified individuals. Because they offer overlapping benefits, it is easy to confuse the two. In some cases, you may be able to sign up for both.

 

The key difference between the programs is that Medicare is age-based and Medicaid is income-based. Read on to learn about who qualifies, what’s covered, and the associated costs of each program.

 

What is Medicaid?

Medicaid is a joint state and federal program that provides low-cost or free health coverage to millions of Americans with limited income. It covers children, pregnant women, the elderly, and people living with disabilities. Medicaid also offers some benefits that Medicare does not, including personal care services and nursing home care.

 

The federal government imposes guidelines that states must follow when running their Medicaid programs. But different states may have different eligibility requirements, depending on factors like household size, family status, or disability. Some states have unique names for their Medicaid programs; for example, California Medicaid is called Medi-Cal.

Medicaid Eligibility

Medicaid is an entitlement program, so anyone who satisfies the eligibility requirements can enroll. Through the program, states are also guaranteed federal financial support for part of their health care costs. The federal government requires states to cover:

 

  • Children younger than 18 in low-income families.
  • Pregnant women.
  • Certain caretakers or parents with low income.
  • Most senior citizens and disabled individuals who receive Supplemental Security Income benefits.

 

 Medicaid eligibility depends on your personal finances as well as assets of anyone in your household. When you apply, your modified adjusted gross income is calculated as a percentage of the federal poverty level. In most states, you qualify for Medicaid if your household income is less than 138% of the federal poverty level.

 

Eligibility for Medicaid may also depend on the assets of members of your household, including bank accounts, cash, stocks, bonds, non-owner-occupied real estate, and certain trusts. Assets like your home and vehicles are excluded from the determination of eligibility.

 

You must also satisfy general requirements to qualify for Medicaid.

 

  • Residency. You must live in the state offering the Medicaid program that you want to apply for.
  • Citizenship. You must be a U.S. citizen or an immigrant who has been admitted as a permanent resident.
  • Age. You must have attained the qualifying age.
  • Medical assessment. You qualify for some Medicaid services only after meeting the relevant medical requirements.

 

In states that run an expanded Medicaid program, you can qualify for coverage based on income alone. Check your eligibility by visiting the Medicaid website of your state or through the health insurance marketplace.

Medicaid Coverage

Under federal guidelines, states must provide certain benefits, called mandatory benefits. States may also provide optional benefits. The table below lists examples of both.

 

Mandatory Benefits

Optional Benefits

Inpatient and outpatient hospital services

Prescription drugs

Nursing facility and healthcare services

Physical therapy

Physician services

Clinic services

Laboratory and x-ray services

Podiatry services

Family planning services

Optometry services

Nurse midwife services

Dental services

Transportation to medical care

Speech, hearing, and language disorders

Rural health clinic services

Hospice and personal care

Freestanding birth center services

Chiropractic services

 

Medicaid Costs

Medicaid costs vary. States may charge premiums and other cost-sharing expenses on most covered benefits, such as copayments, coinsurance, and deductibles. States may also charge higher amounts if qualifying individuals have relatively high incomes. But out-of-pocket costs are limited to a certain maximum.

 

Out-of-pocket charges apply to all enrollees except those who are exempted by law, such as children and terminally ill individuals. Since Medicaid covers low-income and sick patients, you can’t be denied services for failing to pay. But you can be held liable for any unpaid copayments.

 

No out-of-pocket charges are imposed for emergency services, pregnancy-related services, family planning services, or preventive services for children.

 

What is Medicare?

Medicare is a national program administered by the federal government that provides health care coverage for persons 65 years old and older, people under 65 years old who are living with certain disabilities, and persons diagnosed with end-stage renal disease. Medicare has four parts. Medicare Part A and Part B are administered by the federal government. Medicare Part C and Part D are federally regulated but provided by private insurers. Enrollees can pick the plan that best suits their needs.

Medicare Eligibility

Although whether you qualify for Medicare does not depend on your income, age is not the only requirement. If you are 65 or older, you qualify for full Medicare benefits if:

 

  • You are a U.S. citizen or permanent legal resident.
  • You are eligible for or are already receiving Social Security or Railroad Retirement benefits.
  • You are a government employee or retiree, or your spouse is.

 

If you’re younger than 65, you may be eligible if:

 

  • You qualify for Social Security disability benefits.
  • You receive a disability pension from the Railroad Retirement Board.
  • You have Lou Gehrig’s disease (i.e., amyotrophic lateral sclerosis).
  • You have permanent kidney failure.

 

Medicare Coverage

The different parts of Medicare cover different services.

Medicare Part A (Hospital Insurance)

You are automatically enrolled in Part A when you apply for Medicare. Part A covers inpatient care in hospitals, care in skilled nursing facilities, and short-term nursing home care. It also covers hospice care and some longer-term home health care.

 

Most enrollees won’t pay a premium for Medicare Part A, since they or a spouse has already paid into the system through payroll deductions. But Medicare Part A is not free. You pay a deductible each time you’re admitted to a hospital. The deductible changes every year. In 2021, the Medicare deductible was $1,484.

Medicare Part B (Medical Insurance)

Part B covers doctor visits, diagnostic screenings, lab tests, ambulance transportation, and other forms of outpatient care. It may also cover some medical services that Part A excludes, like some home health care and some physical and occupational therapy services.

Medicare Part C (Medicare Advantage)

Medicare Advantage is the all-in-one private health insurance alternative to Original Medicare. It combines various parts of Medicare into a single plan. Medicare Advantage plans must cover what Original Medicare covers as well as additional benefits that Original Medicare doesn’t cover, including dental, vision, and hearing care.

 

Medicare Advantage plans usually require the covered person to use preferred provider organizations (PPOs) or health maintenance organizations (HMOs). PPOs have designated doctors and facilities that you can use without being referred. HMOs let you choose a primary care doctor who directs your care and provides a referral when you need to see a specialist.

Medicare Part D (Prescription Drugs)

Medicare Part D helps cover the cost of both generic and brand-name prescription drugs as well as many recommended vaccines. Part D is available to everyone enrolled in a Medicare-approved plan that provides drug coverage, such as Medicare drug plans and Medicare Advantage Plans that provide drug coverage.

 

Cost of Medicare

Being enrolled in Medicare does not mean that the federal government pays every health-care-related cost. If you add up the premiums, deductibles, copays, and coinsurance that you must pay for Medicare each year in which you receive substantial medical care, you may suffer a severe case of sticker shock. Medicare enrollees can spend several thousand dollars a year to get medical care. Here are the costs for each part of Medicare in 2021.

Part A

If you paid Medicare taxes when you were working, you won’t pay a monthly premium for Part A after age 65. If you don’t qualify for premium-free Part A, you must pay up to $471 each month, depending on how long you or your spouse paid Medicare taxes. You also pay a $1,484 deductible per benefit period.

Part B

The standard premium for Medicare Part B is $148.50 or more, depending on your income. You pay an annual deductible of $203.

Part C and Part D

The monthly premiums of Medicare Part C and Part D vary by plan. But expect to pay more for Part D if you have a relatively high income.

 

Can You Have Both Medicare and Medicaid?

Yes. You may be eligible for Medicare if you are 65 years old or older or living with a disability. You may also be eligible for Medicaid if you satisfy the requirements for Medicaid in your state.

 

If you have both Medicare and full Medicaid, most of your health care costs are likely to be covered. Medicare covers your part D prescription drugs, and Medicaid may cover some drugs and forms of care that are not covered by Medicare.

 

Takeaways

  • Medicare is federally managed, and eligibility is mainly based on age. Medicaid is state-managed, and eligibility is mainly based on income.
  • Medicare has four parts: Part A (hospital coverage), Part B (medical coverage), Part C (supplemental coverage), and Part D (prescription drug coverage).
  • Medicaid has certain mandatory benefits that are the same in each state as well as optional benefits that may differ in different states.
  • Persons enrolled in Medicare may also be able to obtain Medicaid to help pay for monthly premiums and out-of-pocket costs.



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