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Key Differences between Medicare and Medicaid

Medicare and Medicaid are two governmental health insurance programs that sound similar. The similarity may confuse you, but they’re entirely different programs. They usually cover different sets of people depending on age and income.

You don’t choose between Medicare and Medicaid. There are times when you might be eligible for both Medicare and Medicaid. One example is if you’re elderly and receive care in a nursing home. However, most people have either coverage depending on their age or income.

Let’s take a look at the two programs, how they differ, and who’s eligible for each.

 

What is Medicare?

Medicare is a federal health insurance program available for people when they reach 65. The program is also for younger people with specific illnesses, such as end-stage renal disease (ESRD) and amyotrophic lateral sclerosis (ALS), also called Lou Gehrig’s Disease.

As you near 65, you’ll get information about Medicare. There are different types of Medicare plans. People either sign up for Parts A, B, and D or Part C (Medicare Advantage).

Here’s what Parts A, B, and D cover:

  • Part A (hospitals) -- This coverage protects you if you’re hospitalized.
  • Part B (doctors) -- The second part of what’s called original Medicare or traditional Medicare, Part B handles your outpatient care, such as doctor appointments.
  • Part D (prescription drug coverage) -- Offered by a private company, Part D helps pay for prescription drugs. Part D is only available for people with Parts A and/or B. It’s not offered to those with Part C. That’s because Part C often has its own prescription drug coverage.

 

About 36 percent of Medicare beneficiaries have a Medicare Advantage plan. There are now about 3,700 Medicare Advantage plans that cover 22.6 million people. A benefit of Medicare Advantage is it offers everything under one plan:

  • Part C (Medicare Advantage) -- Private insurance companies offer Medicare Advantage. These plans combine the coverage you’d get from Parts A, B, and D. Medicare Advantage also provides supplemental benefits, such as vision, dental, and even population health initiatives, including transportation costs to doctors’ appointments. You can compare plans by their star rating. The Centers for Medicare and Medicaid Services (CMS) rates each plan. CMS gives the plan a quality rating of up to five stars. Nearly three-quarters of Medicare Advantage plans have a quality rating of at least four stars in 2019.

 

There’s another part of Medicare that’s an option for beneficiaries with Parts A and B. Medigap is a supplemental plan that helps you pay for your out-of-pocket Medicare services.

CMS divides Medigap plans into 10 standardized policies. The classification depends on the level. In that way, CMS makes it easier for people to choose the level of Medigap coverage they want.

A bonus to Medigap is that it may pay for international health care. So, if you travel to foreign countries and wind up needing health care there, your Medicare plan won’t cover it, but Medigap may pay up to 80 percent of the care costs.

 

What is Medicaid?

Medicaid is a federal/state health insurance program for low-income Americans. You have the same protections found in most employer-sponsored health plans.

Federal poverty level guidelines

Persons in HouseholdFederal poverty level for continental U.S.Premium subsidy threshold (400% of federal poverty level)
1$12,140$48,560
2$16,460$65,840
3$20,780$83,120
4$25,100$100,400
5$29,420$117,680
6$33,740$134,960
7$38,060$152,240
8$42,380$169,520

Regardless of the plan, the federal government requires Medicaid plans cover hospitalizations, home health care, physician appointments, labs and x-rays, maternity and pediatric, and preventive care. Medicaid also covers dental care for children.

Typically, Medicaid is available to anyone with an income below 100 percent of the federal poverty level. You may also be eligible if your income is below 200 percent of the federal poverty level and you’re pregnant, disabled, elderly, or a parent or caregiver.

Three dozen states have also expanded Medicaid eligibility. The Affordable Care Act allows states to expand Medicaid up to 138 percent of the federal poverty level. Most states have expanded the program and others are exploring the option.

Medicaid coverage can be provided by the state or private insurance company. Medicaid managed care, which is offered by a private insurer, has become increasingly common.

You still sign up through your state, but an insurance company is the one providing coverage and communicating with you about your health care.

 

Key differences between Medicare and Medicaid

Medicare and Medicaid are public health insurance programs, but they differ in multiple ways. Here are some differences:

 

Eligibility

The biggest difference between Medicare and Medicaid is who’s eligible. Medicare is based on age or disability. Medicaid is based on income:

  • You’re eligible for Medicare if you’re 65 or over or have a specific illness.
  • You’re eligible for Medicaid If your income is below a certain level depending on your state.

You could be eligible for both if you meet income and age requirements for each program. Many people in nursing homes are eligible for both programs.

 

Disability can make you dual eligible

You could be eligible for both if you’re on disability:

  • You’re eligible for Medicare if you’re on Social Security Disability insurance (SSDI). However, you have to receive two years worth of SSDI payments before becoming eligible.
  • You’re eligible for Medicaid if you’re approved for Supplemental Security Income (SSI). There’s no waiting period in that case, so you can get Medicaid immediately.

 

Medicare doesn’t have family plans

Another vital difference is Medicare doesn’t provide family coverage. So, if you’re on Medicare and you have a dependent, that person can’t get on your plan.
However, Medicaid covers dependents. In fact, Medicaid and the Children’s Health Insurance Program covers more than 45 million children.

 

Open enrollment

Medicare open enrollment is from Oct. 15 to Dec. 7. That’s the time you can make changes to your plan. You also have three months after you turn 65 to sign up for a Medicare plan.

Medicaid, on the other hand, doesn’t have an open enrollment period. Instead, you can sign up for a Medicaid plan any time of the year if you’re eligible.

 

Medicare gives many options

Medicare offers a wealth of choices. You may have more than a dozen Medicare Advantage options alone. There could be a similar number of Part D avenues for you.

Once you decide whether you want a Medicare Advantage or original Medicare plus Part D, you’re able to narrow your focus and select the best Medicare plan for you.

Premiums, deductibles, and out-of-pocket costs can vary greatly, so make sure you compare each cost.

Medicaid, on the other hand, will likely give you one or very few choices. That plan could be through the state, or it could be a managed care plan offered by a private insurer.

Differences aren’t just between Medicare and Medicaid. The different types of Medicare plans also vary. Here’s how Medicare and Medicaid plans compare:

Type of planWhat is coveredWho's eligibleWhen you can applyAverage monthly premiumOut-of-pocket/deductible
Medicare Part AHospitalizationPeople 65 and over and younger people with specific disabilities and people on SSDIDuring open enrollment and when you turn 65Most people pay $0$1,364 annual deductible
Medicare Part BPhysicians/outpatientPeople 65 and over and younger people with specific disabilities and people on SSDIDuring open enrollment and when you turn 65$135.50$185 annual deductible and then pay 20 percent of Part B costs
Medicare Part C (Medicare Advantage)All health care, including supplemental benefitsPeople 65 and over and younger people with specific disabilities and people on SSDIDuring open enrollment and when you turn 65$28, but many plans have $0 premiumsOut-of-pocket max is $6,700 for in-network and $10,000 for out-of-network
Medicare Part DPrescription drug coverage for people with Parts A and B plansPeople with Parts A and/or BDuring open enrollment and when you turn 65$35Can't acceed $415 deductible. Beneficiaries must pay for a larger portion of costs when they reach the so-called donut hole, which is betwen $3,820 and $5,100 of out-of-pocket costs.
MedigapSupplemental coverage to help pay for out-of-pocket costsPeople with Parts A and/or BDuring open enrollment and when you turn 65Varies, can be less than $100Varies by plan
MedicaidAll health careBased on income, which varies by stateAnytimeDepends on income and can be as low as $0Minimal if any

 

How Medicaid works with Medicare

If you do have both Medicare and Medicaid, you don’t have to worry about which one pays first. There’s a system set up that decides the insurer that pays first. It’s called coordination of benefits (COB).

If you have both Medicare and Medicaid, which is common for people in nursing homes, Medicare pays for care first. Medicaid is considered the secondary payer. Just make sure to get care from providers that accept both plans. Otherwise, you could more pay out-of-network costs if the provider doesn’t take both.

 

Signing up for Medicare and Medicaid

If you’re eligible for Medicare, make sure you sign up for at least Medicare Part A. Part A is free to nearly all Americans, so you might as well take advantage of the coverage. The only people aren’t eligible for no-premium Part A are those who didn’t pay 10 years worth of Medicare taxes.

If you’re still working or on your spouse’s insurance, you may decide to stay on that plan for physician services and wait to sign up for Part B until later. You can do that, but beware that you may pay higher premiums once you sign up for Part B. CMS will charge you a 10 percent premium penalty for every 12 months that you don’t enroll in Part B. That penalty will get added to your premiums once you get Part B.

Here’s another reason to sign up for Medicare when you turn 65. You may have to wait until the open enrollment period if you don’t sign up when you become eligible.

Getting covered by a Medicare or Medicaid plan is simple. Whether you need a Medicaid or Medicare plan, an excellent place to start is the federal health care site. That will direct in the right direction depending on your situation.

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