Medicare and Medicaid are both government health insurance programs, but they serve different populations and cover different services. Many people confuse the two because their names sound similar, but understanding the difference is essential for making informed decisions about healthcare coverage for yourself or a loved one.
The basic difference
Medicare is a federal health insurance program primarily for people aged 65 and older, regardless of income. Medicaid is a joint federal and state program that provides health coverage for people with limited income and resources, regardless of age.
In simple terms — Medicare is based on age, Medicaid is based on income.
What is Medicare
Medicare is administered by the federal government and provides health insurance to:
- People aged 65 and older
- People under 65 with certain disabilities who have received Social Security disability benefits for at least 24 months
- People of any age with end-stage renal disease or ALS
Medicare is divided into four parts — A, B, C, and D — covering hospital care, medical services, Medicare Advantage plans, and prescription drugs respectively. Most people qualify for Medicare regardless of their income or assets.
What is Medicaid
Medicaid is jointly funded by the federal government and individual states, with each state administering its own program within federal guidelines. As a result Medicaid eligibility rules, covered services, and program names vary significantly from state to state.
Medicaid provides health coverage to:
- Low income adults
- Children from low income families
- Pregnant women with limited income
- People with disabilities
- Low income seniors who also qualify for Medicare
Because states run their own Medicaid programs the income and asset limits that determine eligibility differ from state to state. Some states have expanded Medicaid under the Affordable Care Act to cover more low income adults while others have not.
How Medicare and Medicaid work together
Some people qualify for both Medicare and Medicaid at the same time. These individuals are called dual eligibles or dual eligible beneficiaries. This typically applies to low income seniors aged 65 and older who meet both the age requirement for Medicare and the income requirement for Medicaid.
For dual eligibles Medicare typically pays first and Medicaid pays second, covering some or all of the costs that Medicare does not cover such as premiums, deductibles, and copays. Medicaid may also cover services that Medicare does not, such as long term care in a nursing home.
Coverage differences
Medicare and Medicaid cover different services in different ways:
Medicare covers:
- Inpatient hospital care
- Doctor visits and outpatient services
- Preventive care
- Prescription drugs through Part D
- Limited skilled nursing facility care following a hospital stay
- Hospice care
Medicaid covers:
- All services covered by Medicare for dual eligibles
- Long term care in nursing homes — a major benefit Medicare does not fully cover
- Personal care services at home
- Dental, vision, and hearing services in many states
- Transportation to medical appointments in many states
The nursing home difference
One of the most significant practical differences between Medicare and Medicaid involves nursing home care. Medicare only covers skilled nursing facility care for a limited time following a qualifying hospital stay — up to 100 days under specific conditions. It does not cover long term custodial care in a nursing home.
Medicaid on the other hand is the primary payer for long term nursing home care in the United States. For seniors who require extended nursing home care and have limited financial resources Medicaid is often the only program that will cover those costs.
Medicaid planning for nursing home care
Because nursing home care can cost thousands of dollars per month many families engage in Medicaid planning — taking steps to structure their finances in a way that helps them qualify for Medicaid while preserving as many assets as possible. This is a complex area of elder law and the rules vary significantly by state.
Medicaid has a look-back period — typically five years — during which any assets transferred for less than fair market value may be counted against eligibility. This makes advance planning important for families who anticipate needing long term care.
How to apply
Medicare: Most people are automatically enrolled in Medicare Part A when they turn 65 if they are already receiving Social Security benefits. Others need to actively enroll through the Social Security Administration at ssa.gov or by calling Social Security directly.
Medicaid: Applications are submitted through your state’s Medicaid agency. You can also apply through the federal Health Insurance Marketplace at healthcare.gov or through your local Department of Social Services.
Key differences at a glance
- Who it covers — Medicare: primarily age 65 and older. Medicaid: low income individuals of any age
- Who runs it — Medicare: federal government. Medicaid: federal and state governments jointly
- Based on — Medicare: age and work history. Medicaid: income and assets
- Nursing home coverage — Medicare: limited short term only. Medicaid: long term care covered
- Cost — Medicare: premiums, deductibles, and copays. Medicaid: little to no cost for eligible individuals
Key terms to know
- Dual eligible — a person who qualifies for both Medicare and Medicaid
- Look-back period — the period during which Medicaid reviews asset transfers when determining eligibility, typically five years
- Custodial care — non-medical assistance with daily activities such as bathing, dressing, and eating
- Skilled nursing facility — a facility that provides medical care and rehabilitation services
- Medicaid planning — legal strategies used to structure finances to qualify for Medicaid while preserving assets
Sources
- Medicare.gov — Official U.S. Government Medicare Information
- Medicaid.gov — Official U.S. Government Medicaid Information
- Centers for Medicare and Medicaid Services
- USA.gov
This article is for general informational purposes only and does not constitute legal, financial, or medical advice. Laws and program details vary by state and are subject to change. Consult a licensed professional or visit Medicare.gov and Medicaid.gov for the most current information.