Medicare and Medicaid: What Are They and How Are They Different?
Medicare vs Medicaid definition – although similar sounding, are very different in what they cover and how to qualify for them.
Both healthcare programs are government-sponsored. We hear people use these two manes interchangeably or take one for the other.
Each program is governed by its own set of rules and regulations. In addition, they cater to the needs and are designed to benefit different groups.
It sometimes happens that some people may fulfill the eligibility criteria of both Medicare and Medicaid. In that case, these individuals are dually eligible for both programs.
To make the right choice and to navigate through the complex maze of rules and regulations of both programs, you need to understand both Medicare and Medicaid. Let’s get started.
What Is the Difference Between Medicare and Medicaid for the elderly?
Medicare and Medicaid differ from each other in more points than one. Both programs were created in 1965, and they are funded by taxpayer money.
The main difference between Medicare is based on age, and the program is managed by the federal government while on the other hand, Medicaid is both federally and state-funded but is governed by the individual states and considers the income of the applicant to assess eligibility. Of course, there are a few more differences and some exceptions too.
What Is Medicare?
Medicare is a federal program that provides medical coverage to two groups of American citizens. So, who is eligible for Medicare?
- Individuals aged 65 and older
- People with certain disabilities
Medicare is a primary medical coverage insurance program that helps millions meet certain healthcare costs. The program has four parts, covering different medical services such as doctor visits, hospitalization, rehabilitation after a three-day stay in the hospital, and prescription drugs.
What Is Medicaid?
Managed at the state level but is a joint federal and state program. Medicaid is designed to cover long-term care and certain healthcare services for Americans in the low-income group.
The eligibility, services, and regulations differ slightly from state to state. Hence, the program might be managed under different names in different states.
Beneficiaries of Medicaid receive healthcare services at no cost at all or a lower cost under certain circumstances. Beneficiaries must recertify each year to remain eligible to receive Medicaid benefits.
Who Is Eligible for Medicaid?
- People 65 and older with income within limits
- People with disabilities including blindness
- Pregnant women
- Children (aged 19 or less) with disabilities
- Individuals who meet income and assets eligibility criteria
What Does Medicare Cover?
Medicare coverage is divided into four parts. The following is a brief overview of the four plans.
Part A: Hospital Insurance
This part of the Medicare program pays for hospital stays and inpatient care. Regardless of the income, this plan covers everyone aged 65 or over.
To qualify, either the spouse or beneficiary must have paid the Medicare taxes for 10 years, at the least.
In the case of Part A coverage, although coinsurance and deductibles apply, most beneficiaries are not obligated to pay a premium for these services.
Monthly Premium (for 2022): $499
Part B: Medical Insurance
Part A – the hospitalization coverage – is just a small part of Medicare. Part B covers other essential services related to healthcare.
Medicare Part B pays for doctor visits, outpatient surgeries and care, disease screening services, flu shots, medical tests including x-rays, accessories such as walkers and wheelchairs, etc.
The beneficiaries pay a premium for Medicare Part B services. The premiums are taken from the individual’s Social Security payments or similar programs.
For individuals earning up to $91,000 annually, the premium is around $170.10. Individuals who earn more have to pay a higher premium for Part B coverage.
In addition, like in Part A, coinsurance and deductibles apply here as well.
Monthly Premium: $170.10
Part C: Medicare Advantage Plan
Part A and B are part of the Original Medicare plan. The other two parts – Part C and D – are offered by private insurance companies approved by Medicare.
Part C or the Medicare Advantage Plan covers both hospitalization (of Part A) and medical services (of Part B). In addition, this plan also pays for dental treatment, hearing and vision care treatments, and prescription drugs.
One of the main advantages of this plan is that the beneficiary can save costs on medical services purchased privately.
Premium: Changes with plan
Part D: Prescription Drug Coverage
Individuals can consider joining Part D if their Part C plan doesn’t cover prescription drugs.
The beneficiaries of Plan D are required to pay monthly premiums. In addition, an annual deductible and copayments for certain prescription drugs also apply.
Premium: Changes with plan
Because Medicare does not pay 100% of your medical bills choosing the right Medicare supplement or Medicare Advantage plan is extremely important.
Be careful before you drop your traditional Medicare supplement plan to move to a Medicare Advantage plan that looks inviting.
Medicare Advantage plans for some can make sense, but for others, they are a financial mistake.
It would be best to speak to a qualified Medicare advisor, not a Medicare supplement or advantage salesperson, only interested in a commission.
What is that old saying, “Buyer beware!”
I believe now you are understanding Medicare vs Medicaid definition.
How Much Will Medicare Pay for Long-Term Care?
Some wrongly believe that Medicare also covers long-term care after hospitalization or otherwise. They are wrong. Medicare’s long-term care coverage is minimal and only for a short period of time.
Medicare doesn’t pay for long-term care!
Long-term care includes services that fulfill personal care needs. Long-term care is not always medical-related. It also includes bathing, dressing, feeding, taking care of the beneficiary’s hygiene, and helping with a person’s daily living activities.
Again Medicare doesn’t cover custodial care (long-term care). Instead, the program provides limited skilled nursing care.
Skilled Nursing Care: Medicare will only pay for the costs of skilled nursing care for the first 20 days, after a minimum of 3-day hospital stay. After the initial period, the individual has to contribute around $185 per day (2021) towards coinsurance. Medicare will cease to pay for skilled nursing care after 100 days.
Home Health Care: Medicare pays for certain skilled care services to individuals who are homebound due to injury or illness. The doctor treating the individual must agree that skilled care (therapy, nurses, etc.) is required. Here too, the contribution of Medicare is limited. The program will pay for only 28 hours of skilled care per week.
Hospice: The program pays for hospice care for terminally ill patients. For Medicare to cover hospice services, the doctor must provide a certificate that the individual might not live longer than six months. To extend the coverage after six months, the doctor must certify the patient is still terminally ill.
Read about Short Term Care vs Long Term Care Insurance.
What Does Medicaid Cover?
As Medicaid is state-managed, the benefits, as well as the program name, vary by state. Nevertheless, the states are obligated by the federal government to include certain compulsory services.
Medicaid benefits are grouped under two categories: Mandatory and Optional. Let’s check some of the benefits under each category.
- Home care services
- Family planning services
- Midwife services
- Nursing facility services
- Outpatient hospital services
- Disease screening services like x-ray, scans, etc.
- Laboratory services
- Counseling services to quit tobacco for pregnant women
- Transportation (related to the hospital, doctor visits, etc)
- Therapy services for language, hearing, and speech disorders
- Dental services
- Case management
- Home maintenance services
- Recreation services
- Travel and transportation services (not related to medical care)
- Personal assistance
- Hospice services
- Personal care
- Physiotherapy and chiropractic services
- Respiratory care services
- Prescription drugs
The Medicaid program funds certain much-needed essential services omitted from Medicare. The program covers the costs of nursing care or other related care services for people who have no means to pay for them. I hope now you know what is difference between Medicare and Medicaid for the elderly.
How to Qualify for Medicaid?
Medicaid is the largest source of healthcare coverage in the U.S. The program covers more than 70 million Americans.
The beneficiaries pay almost nothing for government assistance. In rare instances, some individuals will have to make copayments for some of the benefits. Since Medicaid almost costs nothing there are strict eligibility requirements that may vary by state.
The Affordable Care Act that was introduced to expand the coverage of Medicaid so that more adults could gain eligibility uses the Modified Adjusted Gross Income (MAGI) methodology to assess financial eligibility.
That said the older method of using income methodology adopted by SSI administrators still applies to people who are 65 or older, disabled, or blind.
Individuals who require assistance to fulfill some or all of their daily needs will qualify for Medicaid.
In addition, the program will also cover people suffering from dementia disorders such as Alzheimer’s or who require constant skilled nursing care.
Generally, the assessor would determine medical eligibility by checking the number of ADLs (activities of daily living) the applicant needs assistance with. Applicants who require nursing home level care will qualify for Medicaid.
The administrators will look at the income and assets to determine the eligibility of the applicant.
Individuals applying for Medicaid assistance must have a monthly income not exceeding $2,523 (for 2022). The income of the healthy spouse of the married applicant is not considered to check eligibility.
Medicaid also reviews the assets (or resources) to determine eligibility. To qualify, the applicant must have countable assets of value less than $2,000.
Non-countable assets such as residence (one home), vehicle, irrevocable funeral plans, and burial plots are excluded from scrutiny.
To receive Medicaid benefits the individual must be a resident of the state or plan to stay in the state for a considerable period. American citizens and certain qualified non-citizens are eligible to apply for Medicaid.
What Does It Mean to Be Qualified for Both Medicaid and Medicare?
If an individual is over 65, he/she may qualify for both Medicaid and Medicare. People who qualify for both programs are known as duals or dual-eligible beneficiaries.
They are members of Medicaid (with full benefits) and Medicare Part A and/or Part B. They may also qualify to receive Medicare Advantage Plan (Part C). The dual-eligible people are divided into two groups: Full Duals and Partial Duals.
In the case of full duals, the Medicaid program covers all long-term health care services that are not provided by Medicare.
Individuals with low income and asset levels (below the eligibility limit) become fully dual-eligible. They receive all Medicaid benefits offered by their state.
For beneficiaries in the partial duals group, Medicaid covers certain expenses incurred under Medicare. Medicaid will pay for Part B (of Medicare) premiums.
If applicable, Medicaid will also cover premiums for Part A of Medicare. In certain scenarios, the state-managed Medicaid program will also pay for copayments, coinsurance, and deductibles.
The partial duals group comprises people who receive income and possess assets higher than what’s prescribed by Medicaid but less than 125% of the Federal Poverty Level (FPL).
How Are Medicaid and Medicare Funded?
Medicare and the means-tested Medicaid form the largest social healthcare program in the world.
They serve millions of people in the United States. These programs make health care services affordable to millions of people, especially the elderly, disabled, and those in the low-income groups.
Medicare is a federal program and Medicaid is a joint federal-state program managed by the state. Since they are government-sponsored, both Medicare and Medicaid are indirectly funded by the people – the taxpayers. The Medicaid program is financed by the federal and state governments.
The U.S. Treasury has instituted two trusts to fund Medicare. These are the Hospital Insurance Trust Fund and Supplementary Medical Insurance Trust Fund.
These trusts are funded using money received as payroll taxes from self-employed, employers, and employees. Other sources that fund these trusts include premiums, taxes from social security benefits, and interest earned on trust investment. Periodically, Medicare and Medicaid receive additional funding from the federal government.
Final Thoughts: How Do the Two Programs Differ?
To put it in a nutshell, Medicaid is a social welfare program, whereas Medicare is an insurance program.
Hence, to receive Medicare, the beneficiary must pay a monthly premium directly or through payroll taxes when employed.
In contrast, Medicaid beneficiaries need not pay premiums for the benefits.
Like other social welfare programs, Medicaid is funded by federal and state governments using taxpayer money.
If you are under age 70 and concerned about how you will pay for long-term care, you might want to look into long-term care insurance while you can still afford it.
Thank you for reading our article about Medicare vs Medicaid Definition.
Steve Dabbs is a Certified Medicaid Planner who helps people to qualify for ALTCS. Applying for ALTCS is a quite complicated process but Steve Dabbs can save your Money and Time through his Valuable Consultation. He is also a national mentor, trainer, and consultant in VA benefits and Medicaid planning, actively advising financial planners and attorneys throughout the United States.