Terry Turner, writer and researcher for RetireGuide
  • Written by
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner has more than 35 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®).

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    Savannah Pittle, senior financial editor for RetireGuide

    Savannah Pittle

    Senior Financial Editor

    Savannah Pittle is a professional writer and content editor with over 16 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.

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    Eric Estevez

    Owner of HLC Insurance Broker, LLC

    Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.

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  • Published: May 8, 2020
  • Updated: October 9, 2023
  • 10 min read time
  • This page features 17 Cited Research Articles
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How to Cite RetireGuide.com's Article

APA Turner, T. (2023, October 9). Medicare vs. Medicaid. RetireGuide.com. Retrieved July 24, 2024, from https://www.retireguide.com/medicare/compare/medicare-vs-medicaid/

MLA Turner, Terry. "Medicare vs. Medicaid." RetireGuide.com, 9 Oct 2023, https://www.retireguide.com/medicare/compare/medicare-vs-medicaid/.

Chicago Turner, Terry. "Medicare vs. Medicaid." RetireGuide.com. Last modified October 9, 2023. https://www.retireguide.com/medicare/compare/medicare-vs-medicaid/.

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Key Takeaways
  • 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.

Examples of What Medicare and Medicaid Cover
Service Medicare Medicaid
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.
Doctor visits
Home health care
Hospice care
Hospital inpatient care
Hospital outpatient care
Long-term 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.
Have you selected your 2024 Medicare plan?
Maximize your Medicare savings by connecting with a licensed insurance agent. Annual Enrollment is open until December 7th.

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.

Examples of Who May Qualify for Medicaid
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.

Income Requirements

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.

Federal Poverty Levels
Persons in HouseholdFPL for 48 Contiguous States & D.C.FPL for AlaskaFPL for Hawaii

For households with more than eight people, the guidelines add a fixed additional amount for each additional member.

FPLs for Households of Eight or More
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

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.

Allowable Cost Sharing Amounts for Adults in Medicaid by Income
Service or ProductLess Than 100% of FPL100% to 150% of FPLGreater Than 150% of FPL
Outpatient servicesUp to $4Up to 10% of the state’s costUp to 20% of the state’s cost
Nonemergency ER useUp to $8Up to $8No limit
Prescription drugsPreferred: 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 servicesUp to $75 per stayUp to 10% of the state’s costUp 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.

Will Howery, MBA | 1:13 What is a Medicaid spend down?
What is a Medicaid spend down? - Featuring Will Howery, MBA
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Learn what a Medicaid "spend down" is from William Howery, a Medicare expert who has a decade of experience in the insurance industry.

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.

Medicare Savings Programs
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.
Anne Novak | 0:37 What does dual eligibility mean?
What does dual eligibility mean? - Featuring Anne Novak
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Replay Video
Learn what it means to have dual eligibility for Medicare and Medicaid from Anne Novak, who is licensed in Life and Annuities, Sickness, Accident and Health by the Nebraska Department of Insurance.

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.

Primary Funding Sources for Medicare, 2019
Medicare PartPrimary Funding Sources
Medicare Part A hospital insurance
  • Medicare payroll tax (88%)
Medicare Part B medical insurance
  • General revenues (72%)
  • Beneficiary premiums (27%)
Medicare Part D prescription drug insurance
  • General revenues (71%)
  • Beneficiary premiums (17%)
  • State Medicaid payments for dual eligibility beneficiaries (12%)

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.

Highlights of CMS funding from CARES Act, 2020
  • 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.

Last Modified: October 9, 2023

17 Cited Research Articles

  1. 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
  2. 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/
  3. 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/
  4. 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/
  5. 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/
  6. 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/
  7. U.S. Centers for Medicare & Medicaid Services. (n.d.). Financial Management. Retrieved from https://www.medicaid.gov/medicaid/financial-management/index.html
  8. U.S. Centers for Medicare & Medicaid Services. (2020, April). What’s Medicare? Retrieved from https://www.medicare.gov/Pubs/pdf/11306-Medicare-Medicaid.pdf
  9. 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/
  10. 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
  11. U.S. Department of Health & Human Services. (2020, January 8). Poverty Guidelines. Retrieved from https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines
  12. 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
  13. Benefits.gov. (2019, November 24). Medicare vs. Medicaid: What’s the Big Difference? Retrieved from https://www.benefits.gov/news/article/384
  14. 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/
  15. 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
  16. Centers for Medicare & Medicaid Services. (n.d.). Medicaid. Retrieved from https://www.medicare.gov/basics/costs/help/medicaid
  17. AARP. (n.d.). Medicare, Medicaid and Dual Eligibility. Retrieved from https://www.aarpmedicareplans.com/medicare-education/medicare-medicaid-dual-eligibility.html