Medicare And Medicaid: The Differences

Updated: Jul 17, 2022

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The healthcare system in the United States can be confusing, to say the least. This rings especially true as you age, which is also when you need healthcare coverage more than before.

Thankfully, there are government programs like Medicare and Medicaid that help the elderly get the care they need at more affordable prices. These programs are often thrown into political debates about whether to fund them more, defund them, expand who can qualify, or tighten the restrictions.

However, it’s important to know that the two programs are vastly different and provide services to different types of people at different ages.

Let’s dig into the differences—and similarities—between Medicare and Medicaid and if you can be covered by both programs at the same time.

medicare vs medicaid

Medicare is a federal healthcare program that was developed in the mid-1960s as a part of the Social Security program started decades earlier.

Social Security was created to help give elderly adults financial security in their later years by taking money from their paychecks in their working years and providing it as income after 65. Medicare was presented in a similar fashion and as a way to give the elderly healthcare post-retirement.


Medicare has helped provide affordable healthcare for elderly people who couldn’t afford it otherwise. It has also helped reduce costs of healthcare for the elderly, who often have much higher medical bills than younger people.

Medicare isn’t as easy as just getting all your medical bills paid for, though. The program has various parts to it that cover various medical costs. 

What Are The Four Parts Of Medicare?

Part A

Covers all hospital costs like hospital stays, hospice care, nursing home care, and other inpatient services.

Part B

Covers outpatient medical costs like doctor visits, medical supplies, and preventative services like shots and screenings. You typically need to pay a premium for these services, which means you pay an out-of-pocket monthly fee. If you don’t sign up for Plan B when you’re first eligible, you can sign up at a later date. However, there will be a 10 percent increase in your premium for every 12 months you don’t have Plan B.

Part C

This is where Medicare can get a little tricky. Part C allows you to have a health plan provided by a private company like Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). This plan is called a Medicare Advantage Plan, and it covers all Part A and Part B costs (and sometimes prescription costs). Part C plans can be cheaper than paying premiums for other Medicare plans, but it depends on the private company you choose to enroll with and their premiums, copayments, and other costs.

Part D

Covers prescription costs and is added on top of whatever other plans you enroll with.

Medicare is funded in part by a tax added to your paycheck (1.45 percent to both you and your employer) as well as premiums paid by Medicare enrollees and funding from the government.

The cost of how much money will come out of your pocket every year is different for each case depending on which plan you enroll in, how often you utilize the services, how much Medicare tax you paid over the course of your working life, and other factors.

Medicare Plan

Who Qualifies For Medicare?

As of 2015, more than 55 million people received Medicare benefits.

who qualifies for medicare

While Medicare was first developed as a way to help give elderly people healthcare in their later years, the program has changed over the years. It also includes people younger than 65 with permanent disabilities and those with end-stage renal disease (ESRD) to help pay for dialysis treatments, home care, and other necessary treatments.

As of 2015, more than 55 million people received Medicare benefits. More than 80 percent of those are elderly people, while nine million younger people with permanent disabilities or those with ESRD receive Medicare.
When you hit 65, you are automatically enrolled in the Medicare program.
If you started receiving Social Security Disability Insurance before you turned 65, you can start receiving Medicare benefits two years after getting your SSDI check.

For example: if you turn 35 after years of working and paying into Social Security but all of a sudden can’t work because of a disability, you can cash in on Social Security Disability Insurance. Then, two years after your first check, you can qualify for Medicare.

The Medicare program is nice because you are automatically enrolled when you turn 65. You typically choose a plan when you sign up to receive Social Security benefits, and your Medicare card is mailed to you when you start to cash in on Social Security.

This doesn’t mean you already have a plan set up for you, though. For instance, you may not want your Social Security benefits yet when you’re 65, but you want to apply for Medicare. You can do this by going to the Social Security website. The process takes less than 10 minutes. You can also go to your local Social Security office or call the SSA.

Medicaid is a healthcare program funded at the federal level, but the money is passed down to each state, which is then allowed to allocate the money for their own healthcare program as they please. So instead of the money coming directly from the federal government, like it is in Medicare, the money is passed to the states, who then develop their own healthcare plan—from who qualifies to who gets funding—for the people who live in their state.

Medicaid was created as a program to help lower income citizens afford healthcare

Developed around the same time as Medicare, Medicaid was created as a program to help lower income citizens afford healthcare. It allows individual states to develop their own healthcare program, though not all states are required to participate in Medicaid.

Despite this, every state has had Medicaid program in place since the 1980s, and many states expanded funding and eligibility. (You can check here for the most up-to-date amendments to Medicaid in your state.)
Medicaid is set up so that the federal government matches each state’s funding. For example, the Georgia Medicaid program spent $9.8 billion in in 2017—$4.9 billion of that came from the federal government. Overall, about $350 billion was spent on Medicaid across the country, which is equal to nearly 10 percent of the entire federal budget.

The Centers for Medicare & Medicaid Services—a branch of the U.S. Department of Health and Human Services—oversee every state’s program to pass out funding and make sure they reach the federal government’s minimum standards.

One of the largest differences between Medicare and Medicaid is who the programs fund, so let’s get into that.

Generally speaking, Medicaid aims to serve healthcare costs for people “with limited income and resources.” With regards to elderly people, Medicaid also “offers benefits not normally covered by Medicare, like nursing home care and personal care services,” according to the Medicare website. You don’t have to have below a certain poverty line or make a certain income to receive benefits.

medicaid vs medicare

Medicaid serves a much wider array of people than Medicare does. The program aims to benefit people with low incomes and/or in poverty of all ages, not just 65 and older (or some younger disabled people) like Medicare does.

This is why there is some crossover between Medicare and Medicaid. An elderly person who doesn’t have a lot of money outside of Social Security benefits can receive Medicare benefits and be considered low income while over the age of 65.

Given that each state has different standards for Medicaid, it’s difficult to pinpoint exactly who qualifies and who doesn’t. To find out if you or an elderly person you know qualifies, you can go to the federal Medicaid website, pick the state you live in, and get the contact info you need. You can also check your eligibility here.

The first thing you should do when it comes to applying for Medicaid is finding out if you are eligible. You family income, size, and what state you live in will be a factor. You can do that here.

After you do that, you should find out if it’s worth it to get Medicaid.

Medicaid, while helpful, isn’t completely free. In this program, similar to Medicare, you will choose a program that fits you and/or your family best. There are premiums (upfront monthly costs) that may come with whatever plan you choose. But if your income is too high, it may be more worth it get a private plan.

It’s worth noting that almost half of the states have contract with MCOs—managed care organizations—that help Medicaid programs best utilize Medicaid funding. You can check if you will save money with Medicaid on the website.

Yes, it is absolutely possible to qualify for and receive both Medicare and Medicaid.

If you have both health insurance options, your Medicare coverage will always be billed first if it can be paid for by Medicare, and then Medicaid will try to cover the remaining costs. Prescriptions will be paid for through Medicare.

If you are covered by both options, you most likely will have all of your healthcare benefits paid for, according to the Medicaid website.

Once you’re 65, you’ll automatically be enrolled in Medicare, and then you will have to apply for your state’s Medicaid program. You may or may not be approved; it is up to the state’s discretion.

If you have any questions regarding Medicare, Medicaid, if you qualify for either service, or how to apply to either service, contact your state government or visit the federal Medicare website.