You’ve likely heard about Medicare and Medicaid, and maybe you even qualify for one or both programs. Still, you may be wondering what the difference between Medicare and Medicaid truly is. There is actually quite a bit of difference between these two government health programs, as they are aimed at helping different segments of the American population. Let’s dive into both Medicare and Medicaid and see what the difference between these two programs really is.
What is Medicare?
You may be wondering what Medicare is all about and if it’s right for you. Medicare is a federally-run health insurance program that is aimed at helping those who are aging or have disabilities. Since Medicare is a federally-run program, that means it is the same in every part of the country. The plans offered under Medicare are offered by insurance companies that have been approved by Medicare (1).
The Medicare health insurance program is separated into a few main parts. Each part focuses on a different area of health services:
- Medicare Part A – Institutional Insurance: Medicare part A plans cover patient stays in institutions such as hospitals, hospice care, nursing homes, and some other areas.
- Medicare Part B – Medical Insurance: Medicare part B plans are known as medical insurance plans as they cover things such as doctor visits, medical supplies, and preventive services.
- Medicare Part D – Prescription Drug Coverage: Medicare part D plans cover clients’ prescription drug needs. Medicare part D plans can add prescription drug coverage to other Medicare plans: Original Medicare, some Medicare cost plans, some Medicare private-fee-for-service plans, and Medicare medical savings account plans.
- Medicare Part C – Medicare Advantage: The Medicare Advantage plans are known as Medicare part C and are designed to be an all-in-one type of package, which includes parts A and B and usually D.
Who is Eligible for Medicare?
Medicare was created to help the growing population of seniors meet their health care needs. Medicare is available for people age 65 or older, younger people with disabilities and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or transplant) (2).
Some requirements must be met to qualify for premium-free Medicare part A. In most cases, if you or your spouse have worked and paid Medicare taxes for at least ten years, you are generally eligible to receive premium-free Medicare part A. There are some other ways to receive premium-free Medicare part A:
- Receiving benefits from either Social Security or the Railroad Retirement Board
- Eligible to receive benefits from either Social Security or the Railroad Retirement Board but haven’t yet filed to receive them
- You or your spouse were employed by the government and were covered with Medicare
If you are over 65 and do not meet any of these requirements, it may be possible to buy Medicare part A insurance. It may be possible to receive premium-free Medicare part A if you meet one of the following criteria:
- Entitled to Social Security or Railroad Retirement Board disability benefits for 24 months
- Those who have Lou Gehrig’s disease receive Medicare benefits the first-month disability benefits start
- You are a kidney dialysis or kidney transplant patient
Medicare part B is a buy-in only option. This premium is deducted from Social Security, Railroad Retirement, or Civil Service Retirement checks or billed every three months. Medicare part D for prescription drugs comes with most Medicare plans for free (3).
When was Medicare Established?
President Harry S. Truman called for Congress to work towards enacting a form of universal health care, but eventually backed away under calls of socialism from the opposition (4). By this time, the government had realized the populations and needs of older Americans were growing, so they began to focus on a health insurance program aimed at covering these people.
Throughout the 1950s and 1960s, the debate over how to handle the inadequate coverage of private insurers to those who desperately need the help intensified. Over these years, debates were held in the Social Security Administration and Congress, as well as having public hearings on the matter. On July 30, 1965, President Lyndon Johnson signed the Social Security Acts Amendment into law with President Truman as an homage to the work he had done in the early years of this effort.
How to Sign Up for Medicare
Signing up for Medicare is not difficult, and in some cases, it is done automatically. To decide how to best approach receiving Medicare benefits and coverage, you must first look at a few things (5).
- Receiving benefits from Social Security or the Railroad Retirement Board at least 4 months before turning age 65 – There is usually no need to sign up for Medicare parts A or B as your coverage will begin when you turn 65. It will either begin the first day of the month you turn 65, or the first day of the prior month if your birthday falls on the first day of your birthday month.
- NOT receiving benefits from Social Security or the Railroad Retirement Board at least 4 months before turning age 65 – If you will not be receiving these benefits, you will need to sign up for Medicare through Social Security via the website, in person, or over the phone. If you worked for a railroad, you should contact the Railroad Retirement Board.
- Under the age of 65 with a disability – Once you meet one of two criteria, you will automatically be enrolled in both Medicare parts A and B. You must either receive disability benefits from Social Security for 24 months or receive certain disability benefits from the Railroad Retirement Board for 24 months.
- Those with Lou Gehrig’s disease – If you have ALS (Lou Gehrig’s disease), your Medicare benefits will begin the month your disability benefits begin.
- Living in Puerto Rico – If you are a citizen of Puerto Rico, you will automatically be enrolled in Medicare part A. If you want Medicare part B coverage, you must sign up for it.
When to Sign Up for Medicare
If you have to sign up for Medicare parts A or B, you do have a specific Initial Enrollment Period. This is a seven-month enrollment period that begins the three months before your 65th birthday, the month of your 65th birthday, and the three months after your 65th birthday month. If you are eligible for free part A, you can sign up any time during or after your Initial Enrollment Period. To buy parts A or B after your Initial Enrollment Period, you will have to wait until another enrollment period to begin. Not signing up for Medicare part B when first eligible may result in a late enrollment penalty as long as you have part B coverage.
The General Enrollment Period for Medicare is between January 1 and March 31 of each year. During this period, you can enroll in Medicare coverage if you did not do it during your Initial Enrollment Period and are not eligible for a Special Enrollment Period. Special Enrollment Periods may be available for some people depending on various factors and will usually not result in a late enrollment penalty (6).
How Much Does Medicare Cost?
Medicare Part A
For most people, there is no monthly premium for Medicare part A coverage. If you do not meet the requirements for free coverage, there is a premium of up to $437 each month (7). That monthly premium may be lowered if you paid Medicare taxes for 30 to 39 quarters. For Medicare part A hospital inpatient deductibles and coinsurance, you pay:
- $1,364 deductible for each benefit period
- Days 1-60: $0 coinsurance for each benefit period
- Days 61-90: $341 coinsurance per day of each benefit period
- Days 91 and beyond: $682 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
- Beyond lifetime reserve days: all costs
Medicare Part B
Medicare part B is paid for by everyone through a monthly premium. The standard premium amount for Medicare part B is $135.50, but it can be higher depending on your income. The annual deductible is $185 per year, and once that is met, 20% of the Medicare-approved amount for most doctor services (including most doctor services while you’re a hospital inpatient), outpatient therapy, and durable medical equipment.
Medicare Part C
The monthly premiums and costs associated with Medicare part C can vary depending on selected plans.
Medicare Part D
Medicare part D premiums vary based on plan and your income.
What Does Medicare Cover?
The different parts of Medicare handle different aspects of health care. It is impossible to list every procedure, visit, or technique that each part covers, but we can give you some general ideas.
Part A covers (8):
- Inpatient care in a hospital
- Skilled nursing facility care
- Inpatient care in a skilled nursing facility (not custodial or long-term care)
- Hospice care
- Home health care
Part B covers (9):
- Clinical research
- Ambulance services
- Durable medical equipment
- Mental health
- Preventive services
What is Medicare Tax?
The Medicare tax is a payroll tax that both you and your employers have paid into during your working career. If you paid into this Medicare tax for at least ten years, you may be eligible to receive premium-free Medicare part A coverage. For every payment you have made into this tax, your employer has made the same amount on your behalf (10). This tax is meant to help cover the cost of Medicare now and in the future.
How is Medicare Funded?
The Medicare program is funded through several different means (11). While the largest chunk of this funding comes from general revenues, there is also money out into place from other areas such as payroll taxes and beneficiary premiums. The percentage breakdown of Medicare funding is as follows:
- General Revenue – 41%
- Payroll Taxes – 38%
- Beneficiary Premiums – 13%
- Interest and Other Means – 3%
- State Payments – 2%
- Taxation of Social Security Benefits – 2%
What is Medicaid?
Medicaid is a health assistance program that is run by both the federal and state levels of government. This program aims to help provide insurance to those Americans that do not have the resources and income to provide health care for themselves. Medicaid primarily serves low-income families and individuals and those with disabilities, though there are other requirements to be eligible for coverage (12). Medicaid is run primarily by each state doing what it wants within a set of federal guidelines. This leaves the exact details of coverage, eligibility, and other factors to vary widely from state to state.
Who is Eligible for Medicaid?
To be eligible for Medicaid, you must meet certain criteria. The exact requirements needed to meet for approval into the program vary in each state. They will all look at things such as income, family size, disabilities, age, and pregnancy. With Medicaid expansion in many states, those who were not able to receive benefits in the past may now be able to receive benefits (13).
When was Medicaid Established?
On July 30, 1965, when President Lyndon Johnson signed Medicare into law, he also enacted Medicaid under the same legislation. In 1997, the Children’s Health Insurance Program (CHIP) was created to help cover more children that may not get the coverage they need elsewhere. In 2014, the Affordable Care Act greatly expanded the Medicaid program by setting a minimum income level for eligibility and adding in other federal standards (14).
How to Sign Up for Medicaid
As Medicaid is run separately by each state, those wishing to apply for Medicaid will have to find their state’s health insurance marketplace. For example, in Minnesota, residents would visit MNsure.org to apply and check eligibility. Alternately, it is possible to apply for Medicaid through the Health Insurance Marketplace.
When to Sign Up for Medicaid
There is no set time that someone must sign up for Medicaid. You can apply at any time that you feel you have met your state’s requirements. Unlike Medicare, you do not have to wait for open enrollment periods or suffer any sort of penalties for not applying at the right time. It is highly recommended that you apply for Medicaid even if you have been turned down in the past. With recent expansions to the programs of many states, many Americans are seeing acceptance into the program after being denied in the past.
How Much Does Medicaid Cost?
While there is no uniform premium or pay scale for Medicaid, each state has the right to impose copayments, deductibles, and other charges on most Medicaid-covered benefits. These costs are to be based on the income of the individual insured, but can only go up to a certain amount, That amount is based on what each state pays for that service or product (15).
How is Medicaid funded?
Medicaid is a joint program run by the federal government and the states. To help fund this program, the federal government pays each state a specific amount to help cover some of this cost in what is called the Federal Medical Assistance Percentage (FMAP) (16). This amount is based on things such as per capita income, population, and other criteria. The other portion is paid by the states through various means such as taxes and other means.
While Medicare and Medicaid may sound like similar programs, they are two separate programs that are run by the government. Medicare is aimed at helping the older population of Americans receive the care they need to continue to live a happy life. Medicaid is geared to help those that find themselves in the most need and run by each state within federal guidelines. Both are at least partially funded through the federal government.
It is possible to qualify for both Medicare and Medicaid. In this case, it is important to speak with someone about how best to use your coverage to avoid any extra charges and get the most out of your benefits. If you have any questions or concerns, there are Medicare and Medicaid offices in each state, as well as phone numbers and websites to help you find the coverage and answer any questions you may have.