Medicare vs. Medicaid
Medicare is an insurance program, while Medicaid is an assistance program. Medicare primarily serves people 65 and older, regardless of income. Medicaid serves low-income Americans of all ages. But some people may qualify for benefits from Medicare and Medicaid.
- Written by Terry Turner
Senior Financial Writer and Financial Wellness Facilitator
Terry Turner has more than 30 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®).Read More
- Edited BySavannah Hanson
Savannah Hanson is a professional writer and content editor with over 15 years of professional experience across multiple industries. She has ghostwritten for entrepreneurs and industry leaders and been published in mediums such as The Huffington Post, Southern Living and Interior Appeal Magazine.Read More
- Published: May 8, 2020
- Updated: September 21, 2022
- 10 min read time
- This page features 17 Cited Research Articles
- Edited By
- Medicare and Medicaid are both government programs providing health care benefits to different groups of people.
- Medicare is a federal health insurance program that provides coverage primarily to those 65 and older, regardless of income.
- Medicaid is a state and federal program that provides health care benefits to people with low incomes.
- Some people may qualify to receive both Medicare and Medicaid benefits.
What Is the Difference Between Medicare and Medicaid?
Medicare and Medicaid are two separate, government-run health benefits programs. Each one generally serves a different group of Americans, though some people may qualify for both.
Each is funded by different elements of the government, but both are administered by the U.S. Centers for Medicare & Medicaid Services.
- A federal health insurance program that provides coverage to people 65 and older and to those under 65 who have a disability, regardless of income.
- A state and federal assistance program that provides health coverage to people who have very low incomes.
- Dual Eligibility
- The two programs work together to provide health coverage and lower health costs for people who qualify.
What Does Medicare and Medicaid Cover?
While Medicare eligibility coverage is the same across the United States, eligibility for Medicaid varies from state to state. That’s because Medicaid is jointly funded by the federal government and the various states. Different states set different rules.
|Basic hearing care||Only through some Medicare Advantage plans.||Varies from state to state.|
|Basic vision care||Only through some Medicare Advantage plans.||Varies from state to state.|
|Dental care||Only through some Medicare Advantage plans.||Varies from state to state.|
|Home health care|
|Hospital inpatient care|
|Hospital outpatient care|
|Prescription drugs||Only with a Medicare Part D plan.||Varies from state to state.|
|Preventative care and services|
|Transportation assistance||Generally, no. But it may cover certain nonemergency ambulance transportation to and from your health care provider.|
Who Qualifies for Medicaid?
Medicaid provides health care coverage for roughly one in every five Americans — 63.9 million people, according to the U.S. Centers for Medicare & Medicaid Services. Two-thirds of all Medicaid spending is directed for the care of the elderly and disabled.
Because Medicaid is jointly funded by the federal government and the various states, eligibility requirements vary from state to state.
Some states may also allow out-of-pocket fees for such things as copayments if you are on Medicaid. But children and people living in nursing homes or other institutions are usually exempt from these costs.
- 65 or Older, Blind or Have a Disability
- People in these groups are eligible for Medicare. They may apply for both if they have low incomes or opt for Medicaid only if they can’t afford Medicare’s additional costs.
- Low Income
- Varies from state to state, but you qualify in most states if you make 100 to 200 percent of the federal poverty level (FPL) and meet other criteria — elderly, disabled or have a minor child.
- In most states, you’re limited to $2,000 in countable assets or $3,000 for a married couple. These include stocks, bonds, checking and saving accounts and additional vehicles.
Applying for Medicaid varies from state to state. It can take weeks or months after you apply before you find out if you qualify for benefits. States may also require you to take a medical exam or provide documentation of your past and current financial status.
The size of your household determines the federal poverty level for your household. The larger your family, the higher your income can be and still qualify.
The federal government sets new federal poverty guidelines each year. The levels are the same for the 48 contiguous states. Alaska and Hawaii each have their own levels.
|Persons in Household||FPL for 48 Contiguous States & D.C.||FPL for Alaska||FPL for Hawaii|
For households with more than eight people, the guidelines add a fixed additional amount for each additional member.
- In the 48 Contiguous States
- $4,720 for each household member beyond eight
- $5,900 for each additional person
- $5,430 for each additional person
Medicaid costs can vary from state to state. Since Medicaid is tailored to people with limited ability to pay out-of-pocket costs, for the most part, states are prohibited from charging premiums to anyone whose income is less than 150 percent of the FPL.
States must also limit total out-of-pocket costs to five percent or less of family income. States also may not require certain groups of people to pay a greater share of the costs for certain medical services they receive.
|Service or Product||Less Than 100% of FPL||100% to 150% of FPL||Greater Than 150% of FPL|
|Outpatient services||Up to $4||Up to 10% of the state’s cost||Up to 20% of the state’s cost|
|Nonemergency ER use||Up to $8||Up to $8||No limit|
|Prescription drugs||Preferred: Up to $4
Nonpreferred: Up to $8
|Preferred: Up to $4
Nonpreferred: Up to $8
|Preferred: Up to $4
Nonpreferred: Up to 20% of the state’s cost
|Inpatient services||Up to $75 per stay||Up to 10% of the state’s cost||Up to 20% of the state’s cost|
However, the federal government has granted waivers to some states allowing them to charge higher premiums or to require people to pay a greater share of the costs for services.
Medicare and Medicaid Dual Eligibility
The term “dually eligible beneficiaries” usually applies to people enrolled in Medicare and Medicaid at the same time.
You may qualify for dual eligibility if you are eligible for full Medicare and meet the eligibility requirements for Medicaid or for one of four Medicare Savings Programs that provide assistance or cost sharing.
- Qualified Medicare Beneficiary Program
- QMB helps pay premiums for Medicare Part A and Part B.
- Specified Low-Income Medicare Beneficiary Program
- SLMB helps pay Medicare Part B premiums.
- Qualifying Individual Program
- QI helps pay Medicare Part B premiums on a first-come, first-served basis.
- Qualified Disabled Working Individual Program
- QDWI pays Medicare Part A premiums for certain disabled and working beneficiaries under 65, those not receiving Medicaid and those who meet state income and resource limits.
Dual Eligible Special Needs Plans
People who are dual eligible for Medicare and Medicaid may be able to enroll in a Dual Eligible Special Needs plan, also known as D-SNP.
Any D-SNP provides at least the same coverage as Medicare Part A and Part B along with Part D prescription drug coverage. But they usually include more coverage on top of that.
Extra benefits can include dental, hearing and vision coverage, help buying health-related products and transportation assistance to get to and from a health care provider.
A Dual Eligible Special Needs plan will not replace your existing Medicaid plan or change your eligibility for the program.
Medicare and Medicaid for SSI and SSDI Recipients
If you receive Social Security Disability Insurance (SSDI) benefits, you will automatically qualify for Medicare. If you receive Supplemental Security Income (SSI) benefits, you will also receive Medicaid.
SSDI beneficiaries have to wait two years after they start receiving SSDI payments to receive Medicare benefits. They may also qualify for dual eligibility while on SSDI and may also be eligible for Medicaid coverage. In this case, they will typically receive Medicaid payments for the first two years and will have Medicare premiums paid through Medicare Savings Programs when those payments start.
SSI beneficiaries can’t receive Medicare benefits — only Medicaid coverage — until they turn 65 or have end-stage renal disease. They will have to file an “Uninsured Medicare Claim” to start receiving Medicare when they qualify. They may also have to sign up for Medicaid separately if they receive SSI benefits. This varies by state.
How Medicare and Medicaid Are Each Funded
Both Medicare and Medicaid are funded by taxpayers. But the mechanisms by which each is funded are different.
How Medicare Is Funded
Medicare accounts for 21% of all health care spending in the United States and 12% of the federal budget, according to the Kaiser Family Foundation.
Medicare is funded from general revenues of the federal government, FICA payroll taxes and Medicare premiums paid by beneficiaries.
Taxes on Social Security benefits and payments by states also help fund Medicare.
|Medicare Part||Primary Funding Sources|
|Medicare Part A hospital insurance|
|Medicare Part B medical insurance|
|Medicare Part D prescription drug insurance|
Money to fund Medicare is placed into two trust funds — the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund.
The HI fund pays for Medicare Part A costs, and the SMI fund pays for Medicare Part B and Part D costs. Each also pays for Medicare’s administrative costs.
Money in the trusts can only be used for Medicare.
How Medicaid Is Funded — Federal Medical Assistance Percentage
Medicaid is funded jointly by the federal government and individual states.
The federal government pays states a specific percentage of what the state spends on Medicaid services. This amount is called the Federal Medical Assistance Percentage (FMAP).
The FMAP is calculated using a formula that considers the average per capita income for each state and compares it to the national average. The federal share of Medicaid funding varies from state to state, but the federal government pays at least 50% of each state’s Medicare costs.
States are required to show they can pay for their share of the costs under their state Medicaid plan.
Each state may set how much they pay doctors, hospitals and other providers — but the rates must be within federal requirements. If states want to change the way they pay providers, they have to first have the Centers for Medicare & Medicaid Services review and approve the changes.
CARES Act and COVID-19 Relief for Medicare and Medicaid
The Centers for Medicare & Medicaid Services (CMS) received $200 million through the CARES Act for the agency’s COVID-19 response in 2020.
The CARES Act is a $2.2 trillion economic stimulus package in response to the COVID-19 pandemic. It was signed into law on March 27, 2020. CARES stands for Coronavirus Aid, Relief, and Economic Security in the act’s title.
At least half of the CARES expenditure had to be spent on nursing home inspections — with a priority placed on nursing homes in places with high community transmission of the coronavirus.
- Expanded Medicare telehealth services
- Medicare and Medicaid expansion of home health care services
- Increased payments to hospitals for treating people on Medicare with COVID-19
- Covered testing and vaccine costs for people on Medicare and Medicaid
- Allowed Medicaid programs in states that have not expanded Medicaid coverage to cover uninsured people who had need for COVID-19 services
While some of the benefits of CARES Act funding were meant to be temporary — during the COVID-19 pandemic — items such as expanded telehealth services were popular enough for CMS to consider making them permanent.
17 Cited Research Articles
- Laurence, B.K. (2022, April 19). Does Medicare or Medicaid Come with Disability? Retrieved from https://www.disabilitysecrets.com/will-i-get-medicare-medicaid-with-disability.html
- Moss, K. et al. (2022, April 9). The Coronavirus Aid, Relief, and Economic Security Act: Summary of Key Health Provisions. Retrieved from https://www.kff.org/coronavirus-covid-19/issue-brief/the-coronavirus-aid-relief-and-economic-security-act-summary-of-key-health-provisions/
- Tolbert, J. et al. (2022, March 28). Implications of the Lapse in Federal COVID-19 Funding on Access to COVID-19 Testing, Treatment, and Vaccines. Retrieved from https://www.kff.org/coronavirus-covid-19/issue-brief/implications-of-the-lapse-in-federal-covid-19-funding-on-access-to-covid-19-testing-treatment-and-vaccines/
- Rudowitz, R. et al. (2021, May 7). Medicaid Financing: The Basics. Retrieved from https://www.kff.org/report-section/medicaid-financing-the-basics-issue-brief/
- Cubanski, J., & Neuman, T. (2021, March 16). FAQs of Medicare Financing and Trust Fund Solvency. Retrieved from https://www.kff.org/medicare/issue-brief/faqs-on-medicare-financing-and-trust-fund-solvency/
- Kaiser Family Foundation. (n.d.). Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier. Retrieved from https://www.kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/
- U.S. Centers for Medicare & Medicaid Services. (n.d.). Financial Management. Retrieved from https://www.medicaid.gov/medicaid/financial-management/index.html
- U.S. Centers for Medicare & Medicaid Services. (2020, April). What’s Medicare? Retrieved from https://www.medicare.gov/Pubs/pdf/11306-Medicare-Medicaid.pdf
- Brooks, T., et al. (2020, March 26). Medicaid and CHIP Eligibility, Enrollment and Cost Sharing Policies as of January 2020: Findings from a 50-State Survey. Retireved from https://www.kff.org/report-section/medicaid-and-chip-eligibility-enrollment-and-cost-sharing-policies-as-of-january-2020-findings-from-a-50-state-survey-premiums-and-cost-sharing/
- U.S. Centers for Medicare & Medicaid Services. (2020, February). Dually Eligible Beneficiaries Under Medicare and Medicaid. Retrieved from https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Medicare_Beneficiaries_Dual_Eligibles_At_a_Glance.pdf
- U.S. Department of Health & Human Services. (2020, January 8). Poverty Guidelines. Retrieved from https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines
- U.S. Centers for Medicare & Medicaid Services. (2020, January). January 2020 Medicaid & CHIP Enrollment Data Highlights. Retrieved from https://www.medicaid.gov/medicaid/program-information/medicaid-and-chip-enrollment-data/report-highlights/index.html
- Benefits.gov. (2019, November 24). Medicare vs. Medicaid: What’s the Big Difference? Retrieved from https://www.benefits.gov/news/article/384
- Rudowitz, R., Garfield, R., and Hinton, E. (2019, March 6). 10 Things to Know About Medicaid: Setting the Facts Straight. Retrieved from https://www.kff.org/medicaid/issue-brief/10-things-to-know-about-medicaid-setting-the-facts-straight/
- U.S. Department of Health and Human Services. (2015, October 2). What Is the Difference Between Medicare and Medicaid? Retrieved from https://www.hhs.gov/answers/medicare-and-medicaid/what-is-the-difference-between-medicare-medicaid/index.html
- Centers for Medicare & Medicaid Services. (n.d.). Medicaid. Retrieved from https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/medicaid
- AARP. (n.d.). Medicare, Medicaid and Dual Eligibility. Retrieved from https://www.aarpmedicareplans.com/medicare-education/medicare-medicaid-dual-eligibility.html
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