Medicare vs. Medicaid: Differences and Costs

Medicare and Medicaid are two government health care insurance programs created in 1965 as part of President Johnson's "Great Society" to help older Americans and impoverished Americans get good health insurance, but that's where the similarity ends.

Both government-backed health care insurance programs deliver coverage to U.S. individuals, but under different plan funding, different plan management, and different plan products.

How can you tell the difference between Medicare and Medicaid? Start by understanding what each program does, and how each program works, and go from there.

What Is Medicare and How Much Does It Cost?

Medicare is a government-run health care insurance program run by the U.S. Centers for Medicare & Medicaid Services that primarily serves U.S. adults 65 years or older, and also serves Americans under the age of 65 who are disabled. Any medical bills incurred by Medicare enrollees are paid for by a trust fund that is funded by a small percentage (2.9% in 2018) of money taken out of working American's paychecks.

Medicare enrollees don't get 100% of their health care costs covered by Medicare. Depending on the specific Medicare program they choose, Medicare enrollees pay a portion of those costs, via deductibles for most health care services.

While Medicare covers Americans 65 years old and over, U.S. citizens under the age of 65 can qualify for Medicare under these conditions:

  • If the individual has at least 24 months of Social Security disability benefits or a disability pension from the Railroad Retirement Board (RRB).
  • If the individual has permanent kidney failure and requires routine dialysis treatment or a kidney transplant.
  • If the individual has amyotrophic lateral sclerosis, also known as Lou Gehrig's disease, named after the New York Yankee's baseball great who died from the disease.

Service-wise, Medicare is broken down into an "alphabet soup" of letter-based coverage categories, each with different costs, different eligibility requirements, and different coverage levels:

Medicare Plan A

Also known as Original Medicare, Medicare Plan A offers health care coverage for inpatient hospital services, inpatient stays at professional nursing centers, and hospice and home health care services. By and large, most Americans don't pay a premium for Medicare Part A, but for those who do, the standard premium is $422 per month if you paid Medicare taxes for less than 30 quarters. If you paid Medicare taxes for 30-39 quarters, expect to pay a standard Part A premium of $232.

Medicare Part B

Medicare Part B covers specific physician services, outpatient care, medical supplies, and preventive services. The standard Medicare Part B premium cost is $134. If you're paying under a deductible plan (with an average premium cost of $183 annually), expect to pay 20% of medical costs after the deductible is met.

Medicare Part C

This category, also known as Medicare Advantage, combines Part A (hospital insurance) and Medicare Part B (medical insurance) into one Medicare plan. Medicare Part C can also be combined into Medicare Part D prescription drug coverage. Costs vary, dependent on the plan you choose.

Medicare Part D

Medicare Part D is geared specifically toward prescription drug coverage. It can serve as standalone coverage or merged with another Medicare program category. Basically, Plan D helps Medicare enrollees helps pay for the costs of prescription drugs. Plan costs vary, depending on the plan you choose.

All of the above health care coverage plans are offered by private health insurers. If you're unsure of what plan you need, or even what Medicare plan you hold, check your Medicare card - it should cite the specific coverage right on the card. If not, call the Medicare phone number on the back of the card.

Goal-wise, Medicare hasn't changed all that much since its rollout in 1965. The idea has been, and is now, to help Americans 65 and over pay for later-in-life health care costs, and to help the disabled of any age get good health care coverage treatment.

If there is one big difference with Medicare in 1965 and Medicare today, it's based on politics.

Increasingly, politicians on the Democrat side of the aisle are touting "Medicare for All" as a way to curb skyrocketing private health care insurance costs. Under that proposal, Americans of all ages could avail themselves of Medicare coverage that's available now to current Medicare enrollees.

For now, Medicare for All is a political pipe dream, but it is an issue worth tracking in the next several years, as the political pot continues to boil over private and public U.S. health care options.

What Is Medicaid and How Much Does It Cost?

Like Medicare, Medicaid is a federal government health care insurance program, but its coverage responsibilities differ. Also like Medicare, Medicaid was signed into law by President Johnson, on June 30, 1965, as part of the Johnson administration's Great Society.

Medicaid covers low-income Americans for all ages. According to Medicaid data, as of January 2018, 32 U.S. states cover Americans with incomes up to 138% of the federal poverty level - that's $28,676 per year for a family of three and $16,753 per year for an individual. Note that income guidelines on Medicaid aren't uniform, and can be implemented on a state-by-state basis.

There are several health care services covered under Medicaid that are also covered by Medicare. Examples include inpatient and outpatient hospital care and doctor services. Alternatively, on a state by state basis, Medicaid may cover ancillary - but still important health care services - such dental work, visiting an eye doctor, or personal care.

Here's a complete list of health care services/costs that are covered by Medicaid:

  • Specific health care inpatient services.
  • Specific health care outpatient hospital treatment.
  • Nursing home costs.
  • At home health care services.
  • Regular physician services (like checkups, blood tests, and extended treatment.)
  • Rural health care clinic costs.
  • Family planning and maternal services
  • Specific pediatric and nursing practitioner costs.

Differences Between Medicare and Medicaid

While both programs are offered under Uncle Sam's direction, Medicare and Medicaid differ in multiple ways. Let's examine the key differences:

  • Equal but separate. While both Medicare and Medicaid are both government-sponsored health care insurance programs, they are managed by different government agencies, funded separately by Congress, and are geared toward different demographics.
  • Different goals. Medicare is a government program that provides health care coverage for Americans 65 years old or older. It also provides care coverage if you're incapacitated by ill health or by a severe disability. Medicaid is a government program run at both the federal and state level that provides health care coverage for low-income Americans.
  • Cost differences. The financial costs incurred for both Medicare and Medicaid depend on the coverage options chosen by program enrollees. Pocketbook costs can include premiums, deductibles, copays and coinsurance. Medicaid costs are treated differently than Medicare. Unlike Medicare, Medicaid costs are not fixed, and are formulated based upon income and eligibility rules in states that offer Medicaid. Those costs can include premiums, deductibles, copays and coinsurance.
  • Who is eligible? American citizens age 65 and older are automatically enrolled in Medicare on their 65th birthday. If you're younger than 65, but suffer from debilitating illnesses covered by Medicare, like Lou Gehrig's disease, you can check your Medicare eligibility through Medicare.gov or through the U.S. Social Security Administration. For Medicaid recipients, eligibility requirements vary on a state-by-state basis. To find out if you qualify for your state's Medicaid program, visit the Healthcare.gov site.

Note that it's possible to be dually-eligible for both Medicare and Medicaid, if you're 65 or over, and if you meet government annual income benchmarks that allow you to be eligible for Medicaid.

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