The Difference Between Medicare and Medicaid: Demystifying Health Insurance

2020-10-29 12:00:00

Medicaid is a health care program designed to provide coverage to low-income Americans of any age. Medicare is a federal health care entitlement program for people 65 and over that you pay into while working. 

Medicare and Medicaid are a critical pillar of the United States health care system. In fact, roughly 36.5% of Americans carry either Medicare or Medicaid. These federal government programs provide health care coverage to the poor and elderly.

The long-term future of these programs is a hotly debated topic in the political world. Many states expanded Medicaid coverage under the Affordable Care Act (ACA). Some politicians want to extend Medicare coverage to all Americans.

Many people do not understand the difference between Medicare and Medicaid. Read on for a comprehensive guide to the Medicare vs. Medicaid debate. Explore each program’s objective and who qualifies for coverage.


What Is Medicaid?

Instead of age, eligibility for Medicaid is based on income. It is a health care program designed to provide coverage for low-income Americans.

Medicaid is run by state and local governments. The federal government regulates the program.

The income threshold for Medicaid eligibility varies by state. This is because some states offer expanded Medicaid eligibility under the Affordable Care Act (ACA).

The threshold for income eligibility is 133% of the federal poverty level. This amounts to $14,500 and $29,700 for an individual or family, respectively.

Those that qualify for Medicaid do not pay a monthly premium. Also, they do not need to meet a deductible before coverage kicks in. There may be a small co-payment required for some medical services.


What Does Medicaid Cover?

Medicaid covers most medical services that an individual or family would need. It covers hospitalizations, X-rays, and other laboratory services.

In addition, it covers home health care and nursing facility services. Also, family planning, midwives, and clinical treatments are covered.

It is important to note that some states provide expanded coverage under the Medicaid program. These states may offer additional services like vision, dental, and prescription drugs.

Some companies also extend their product or service to Medicaid recipients. For example, the Lifeline program is offered to individuals and families on Medicaid. This program provides cellular phone service including minutes, unlimited texting, and 3GB of data to Medicaid recipients.


What Is Medicare?

Let’s start off by defining Medicare and explaining the different parts of the program. Medicare is a federal entitlement program that you pay into while working.

You may notice a Medicare tax on your paystub. The U.S. Treasury Department deducts 1.45% on your gross earnings up to $200,000. An additional 0.9% is deducted if you earn more than $200,000 in a calendar year.

You become eligible for Medicare on your 65th birthday. There are certain exceptions in the event of a disability.

The reason Medicare is considered an entitlement program is because you pay into it. Your payroll deductions fund the program, so it is there when you retire.

Medicare is a fee-for-service health care plan that is broken up into four different parts. Read on for a breakdown of each Medicare type:


Part A

So long as you paid into the program, Medicare Part A is premium-free. Most importantly, it covers inpatient hospital care.

Part A also provides coverage for home health care. If you require hospice or a skilled nursing facility, Part A is the coverage vehicle. 


Part B

Your Part B coverage is for medical coverage, specifically diagnosis and treatment. For instance, Part B is used when you visit a medical specialist.

Your doctor then orders a diagnostic test to investigate the root cause of an ailment. This type of medical care is also covered by Medicare Part B. Outpatient care and preventative services also fit in this category.

Part B requires payment of an affordable premium. For people earning less than $87,000 per year, the monthly premium is $144.60. Those earning more than $87,000 will have a higher monthly premium.

For full coverage, the policyholder also has to meet a deductible. In 2020, the Medicare Part B deductible was $198.


Part C

Medicare Part C is commonly referred to as Medicare Advantage. Some people are not satisfied with the coverage provided by Medicare.

Perhaps their doctor does not accept Medicare Part B. Others have expensive medical conditions and want more financial coverage.

The solution is buying supplemental insurance through Medicare Advantage. Here, you reduce out-of-pocket expenses at the hospital or doctor. You can also get prescription drugs cheaper.

Many people opt to get Medicare Advantage for vision and dental coverage. The best way to look at Part C is that it is extra coverage on top of the original Medicare plan’s benefits.


Part D

Prescription drug benefits are at the core of Part D coverage. It also covers shots and vaccines.

It is important to note that private insurance companies manage Part D. They follow the rules set by Medicare, but coverage is not through the government. 

The purpose of Part D is to lower the cost of prescription drugs. Also, provide government protection against future price hikes on your prescriptions.


Can You Have Access to Both Programs?

It is possible for low-income seniors to be eligible for both programs. This scenario is referred to as dual eligibility.

The good news is that most of your health care needs will be covered.

Importantly, Medicare coverage always takes precedence over Medicaid. Consider that you see a specialist and need a prescription drug.

The bill is first paid with Medicare Parts B and D. When all Medicare payments have been made, Medicaid will pick up the remainder of eligible costs.


Do Medicare and Medicaid Cover Long-Term Care?

Many disabled and elderly Americans deplete their savings to pay for long-term care. Unfortunately, Medicare and many private health insurance plans do not cover long-term care.

Fortunately, the government recognizes this dilemma for those in need. They see the financial toll that long-term care places on Americans, especially those with depleted savings.

Therefore, Medicaid is one of the few health care plans that cover long-term care. In fact, it is the single largest source of long-term care funding in the country.


The Difference between Medicare and Medicaid – A Recap:

Both programs are invaluable for providing health care to Americans in need. The primary difference between the two programs is that Medicare largely depends on age. On the other hand, Medicaid eligibility is based on income.

If this article about the difference between Medicare and Medicaid interested you, see if you are eligible for the Lifeline program