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What is the difference between Medicare and Medicaid?


They may sound alike and are spelled similarly but Medicare and Medicaid are two very different entities. Both are government health insurance programs established July 30, 1965, when President Lyndon B. Johnson signed the Medicare and Medicaid Act— also known as the Social Security Amendments of 1965 — into law.

Medicare is a health insurance program for older Americans, while Medicaid provides health insurance for people with limited incomes. Eligibility and coverage for both programs have expanded since they began.

Medicare covers medical expenses for more than 66 million Americans age 65 and older as well as younger people who qualify because of a disability. Medicare eligibility is not based on income or assets and you can’t be denied coverage or charged more because of preexisting medical conditions.

Medicaid is run jointly by federal and state governments to provide health care and long-term care coverage for more than 81 million Americans, including children, parents, low-income adults, older adults and people with disabilities. The government sets general standards for Medicaid, but specific eligibility requirements and coverage details vary by state. Your income must fall below certain levels to qualify.

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What does Medicare cover?

Medicare covers any doctor or hospital in the United States that participates in the Medicare program, which encompasses a vast majority of providers. Also known as original Medicare or traditional Medicare, this coverage has two parts: Part A and Part B.

  • Medicare Part A helps pay for inpatient stays in hospitals and skilled nursing facilities, some home care and end-of-life hospice care.

Medicare doesn’t cover everything. Many people with original Medicare choose to buy a Medicare supplement policy, also known as Medigap, to help cover deductibles and copayments.

And Medicare doesn’t automatically cover medications, but you can buy a Part D prescription drug policy from a private insurance company to help cover those costs.

Another coverage option: Some people choose to get coverage from a private Medicare Advantage plan, also known as Part C, rather than original Medicare. These plans must provide at least the same coverage as Medicare Part A and Part B, but they may have different deductibles and copayments, and they usually have provider networks. They may also provide additional coverage for prescription drugs and some dental, hearing and vision care.

Who is eligible for Medicare?

You can qualify for Medicare coverage in two ways:

  • At age 65 if you’re a U.S. citizen or permanent legal resident who has lived in the United States for at least five years.

How much does Medicare cost?

Most people won’t pay Part A premiums because you or your spouse paid Medicare payroll taxes when working for at least 40 calendar quarters (10 years). But you’ll pay Part B premiums, typically $174.70 a month in 2024, unless your income is high, which means you’ll pay more.

How do I sign up for Medicare?

If you received Social Security or Railroad Retirement Board benefits for at least four months before your 65th birthday, you’ll be enrolled automatically in Medicare.

Otherwise, you’ll need to take steps to enroll. You can sign up during your initial enrollment period, which begins three months before the month you turn 65 and ends three months after your birthday month.

If you or your spouse is still working and you have health insurance from that employer, you may delay signing up for Medicare without having to pay a late enrollment penalty, as long as you enroll no later than eight months after losing that coverage.

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What does Medicaid cover?

Low-income Americans of any age with Medicaid receive comprehensive health care, including doctor services, home health care, inpatient and outpatient hospital care, lab tests and X-rays, and rural health clinic services. People who meet additional requirements can qualify for nursing home care.

Other coverage varies by state. Some state Medicaid programs also cover dentistry, physical and occupational therapy, prescription drugs, vision services and some personal care services such as help with bathing and dressing.

Some state Medicaid programs also offer home- and community-based service (HCBS) waiver programs that let you receive care at home or in an assisted living facility rather than in a nursing home. Waiver programs vary significantly by state.

To qualify, you must meet income and asset levels. Medicaid waiver programs may also have separate requirements for different coverage levels, based on help you need with activities of daily living.

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Who is eligible for Medicaid?

Eligibility for Medicaid varies by state, but it’s usually based on your household income, age, disability, family size and sometimes assets.

You can get a quick estimate of Medicaid eligibility in your state using the eligibility tool at HealthCare.gov. If you don’t qualify for Medicaid based on your income, you could be eligible if you have children, have a disability or are pregnant. Contact your state Medicaid office for more information.

Those 65 or older, blind or disabled have different requirements. Eligibility is based on income and assets; you can keep up to $2,000 in countable assets to qualify. Some states allow you to keep more.

How much does Medicaid cost?

Federal regulations allow states to pass along small charges as copayments, coinsurance, deductibles and sometimes premiums. But the government limits those charges based on your income.

How do I sign up for Medicaid?

Unlike Medicare, which has limited enrollment periods, you can apply for Medicaid any time, either through your state Medicaid agency or by submitting a form through HealthCare.gov. If the marketplace determines that you or someone in your household qualifies for Medicaid, it will forward the information to your state agency.

Keep in mind

More than 12 million people called “dual eligibles” qualify for both Medicare and Medicaid at the same time.

If you qualify for both programs, Medicare will pay covered expenses first. Then Medicaid will fill in some gaps, such as Medicare Part A and Part B deductibles, copayments and coinsurance. If you qualify for Medicaid, you’re automatically enrolled in the Extra Help program that helps pay Part D premiums, deductibles and copays for prescription drugs.

Medicaid can also pay expenses that Medicare doesn’t cover, like nursing home care and other long-term care expenses. In some states, Medicaid covers dental care, glasses, physical therapy, transportation to and from doctor visits and other services.

If you don’t qualify for Medicaid, you could be eligible for help with Medicare’s out-of-pocket costs from a Medicare Savings Program (MSP), which has higher income cutoffs that also vary by state.

For more information about eligibility and coverage for Medicare, Medicaid and Medicare Savings Programs in your state, contact your State Health Insurance Assistance Program (SHIP).

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