What’s the Difference Between Medicare and Medicaid?

While this Grandmother is probably on Medicare, her grandchildren might be on Medicaid if they're poor. Image © Thanasis Zovoilis/Getty Images

What’s the difference between Medicare and Medicaid? Medicare is for the elderly and disabled, while Medicaid is for the poor (some people are eligible for both), but the differences between Medicare and Medicaid are larger than that. Medicare and Medicaid differ in

  • who can enroll
  • who runs them
  • how they work
  • how they're funded
  • what benefits they provide enrollees

Who Gets Medicare vs Medicaid?

Elderly and disabled people get Medicare; poor people get Medicaid. If you’re both elderly and poor or disabled and poor, you can potentially get both.


Most Medicare beneficiaries are 65 or older, but as of 2016, there were more than 9 million people (about 16 percent of the full Medicare population) under age 65 with Medicare coverage. These individuals were eligible for Medicare because they were disabled (in most cases, you have to be receiving Social Security disability benefits for two years before you become eligible for Medicare, but there are exceptions for people with end-stage renal disease and amyotrophic lateral sclerosis). 

You’re eligible for Medicare if you’re at least 65 years old and you or your spouse paid Medicare payroll taxes for at least 10 years. Whether you're rich or poor doesn't matter; if you paid your payroll taxes and you're old enough, you'll get Medicare. In that case, you'll get Medicare Part A for free. And for most people, Medicare Part B premiums are around $135.50/month in 2019. But you'll pay higher premiums for Medicare Part B and Part D if your income is higher than $85,000/year for a single person, or $170,000/year for a married couple.

If you’re over 65 but didn’t pay Medicare payroll taxes while you were younger, you may still be eligible for Medicare. However, you’ll pay higher total premiums, as you'll have to pay the regular premium for Part B, in addition to a premium for Part A. In 2019, the Part A premium for people who don't have enough work history is as high as $437/month. But very few Medicare beneficiaries pay a premium for Part A, as most people have a work history (or a spouse's work history) of at least ten years by the time they become eligible for Medicare.


Under the Affordable Care Act, you’re eligible for Medicaid if your household income is less than 138 percent of the federal poverty level. However, some states have rejected this provision, and have kept their Medicaid eligibility as it was prior to the ACA, which generally means that in addition to being low-income, you also have to be a child, a pregnant woman, elderly, blind, disabled, or a very low-income parent of minor children.

There are 18 states where Medicaid has not been expanded to cover people up to 138 percent of the poverty level, and in 17 of them, there's a coverage gap (ie, no realistic coverage options) for childless adults with income below the poverty level. But four of those states—Utah, Idaho, Nebraska, and Maine—Medicaid expansion is expected in 2019 under the terms of ballot initiatives that voters approved in each state. Throughout 2017 and 2018, there were 19 states that hadn't expanded Medicaid, although that dropped to 18 when Virginia began enrolling people in the state's newly expanded Medicaid program, with coverage effective January 1, 2019.

This chart shows Medicaid eligibility levels (by percentage of the federal poverty level) for various populations in each state.

In addition to income-based Medicaid eligibility, 32 states and DC automatically provide Medicaid benefits to aged, blind, or disabled people who are deemed eligible for Supplemental Security Income.

Who Runs Medicare vs Medicaid?

The federal government runs the Medicare Program. Each state runs its own Medicaid program. That’s why Medicare is basically the same all over the country, but Medicaid programs differ from state to state.

Although each state designs and runs its own Medicaid program, all Medicaid programs must meet standards set by the federal government in order to get federal funds. The Centers for Medicare and Medicaid Services, part of the federal government, runs the Medicare program. It also oversees each state’s Medicaid program to make sure it meets minimum federal standards. In order to make significant adjustments to their Medicaid programs, states must seek permission from the federal government via a waiver process.

How Do Program Designs Differ for Medicare vs Medicaid?

Medicare is an insurance program while Medicaid is a social welfare program.

Medicare recipients get Medicare because they paid for it through payroll taxes while they were working, and through monthly premiums once they’re enrolled.

Medicaid recipients need never have paid taxes and most don’t pay premiums for their Medicaid coverage (some states require Medicaid enrollees on the higher end of the eligible income scale to pay nominal premiums). Instead, taxpayer funding provides Medicaid to eligible needy people in a manner similar to other social welfare programs like Temporary Assistance for Needy Families, Women Infants and Children, and the Supplemental Nutrition Assistance Program.

How Are Medicare and Medicaid Options Different?

The Medicare program is designed to give Medicare recipients multiple coverage options. Medicare is composed of several different sub-parts, each of which provides insurance for a different type of healthcare service. For example, Medicare Part A is hospitalization insurance, Medicare Part B is insurance for outpatient and doctors’ services, and Medicare Part D is prescription drug insurance.

Medicare recipients may choose several different types of Medicare insurance at once, or only one type. They can choose Medicare Advantage or original Medicare. It’s common to have Medicare Parts A, B, and D at the same time. However, some people choose only to have Medicare Part A coverage so that they don’t have to pay the monthly premiums for Medicare Parts B and D (it's generally unwise to do this unless you have other creditable coverage in place—otherwise, you'll face a late enrollment penalty when you eventually sign up for Parts B and D, and the penalty will remain in place for the rest of your life).

In the past, Medicaid programs typically didn't offer a lot of choice in terms of plan design. But today, most states utilize Medicaid managed care organizations (MCOs). If there's more than one MCO option in a given area of the state, enrollees may be allowed to select the one that they prefer.

Where do Medicare and Medicaid Get Their Money?

Medicare is funded in part by the Medicare payroll tax (part of FICA), in part by Medicare recipients’ premiums, and in part by general federal taxes. The Medicare payroll taxes and premiums go into the Medicare Trust Fund. Bills for healthcare services to Medicare recipients are paid from the Medicare Trust Fund.

Medicaid is partially funded by the federal government and partially funded by each state. How much the federal government contributes toward funding each state’s Medicaid program depends on the average income of that state’s residents. The federal government pays an average of about 62 percent of total Medicaid costs, but the percentage ranges from 50 percent to more than 75 percent, depending on the state (wealthier states pay more of their own Medicaid costs, whereas poorer states receive more help from the federal government).

But under the ACA's expansion of Medicaid, the federal government pays a much larger share. For people who are newly-eligible for Medicaid due to the ACA (ie, adults with income up to 138 percent of the poverty level), the federal government paid 100 percent of the costs from 2014 through 2016. States began to pay 5 percent of the cost in 2017, and that increased to 6 percent in 2018, and to 7 percent in 2019. After that, from 2020 onward, states will pay 10 percent of the cost and the federal government will pay 90 percent.

How Do Medicare and Medicaid Benefits differ?

Medicare and Medicaid don’t necessarily cover the same healthcare services. For example, Medicare doesn’t pay for long-term custodial care like permanently living in a nursing home, but Medicaid does pay for long-term care. Medicaid benefits vary from state to state, but each state’s Medicaid program must provide certain minimum benefits. Medicare benefits are the same across the entire country, although people who purchase private Medicare Advantage plans will find that there's some variation from plan to plan. Medicare Advantage plans are provided by private insurers, and although they have to cover all of the basic benefits that Part A and Part B would cover, insurers are free to add additional benefits, which aren't standardized.

You can learn more about what benefits Medicare provides, as well as what to expect for out-of-pocket expenses in this booklet.

Learn more about Medicaid’s general coverage benefits here, or go to your state’s Medicaid website to learn about Medicaid benefits in your state.

Visit our Medicare & Medicaid section for extensive, in-depth information about Medicare and Medicaid.

Was this page helpful?

Article Sources