Health Insurance Medicare What’s the Difference Between Medicare and Medicaid? By Elizabeth Davis, RN linkedin Elizabeth Davis, RN, is a health insurance expert and patient liaison. She's held board certifications in emergency nursing and infusion nursing. Learn about our editorial process Elizabeth Davis, RN Fact checked by Fact checked by Ashley Hall on March 12, 2020 linkedin Ashley Hall is a writer and fact checker who has been published in multiple medical journals in the field of surgery. Learn about our editorial process Ashley Hall Updated on November 24, 2020 Print Medicare and Medicaid both provide healthcare coverage via government programs, but they have some important differences. Essentially, Medicare is for people who are over age 65 or have a disability, while Medicaid is for people with low incomes. Some people are eligible for both. However, the differences between Medicare and Medicaid are larger than that. They differ in: Who can enrollWho runs themHow they workHow they're fundedWhat benefits they provide Thanasis Zovoilis / Getty Images Who Gets Medicare vs Medicaid? Older and disabled people get Medicare; people with a low income get Medicaid. If you’re both elderly or disabled and have a low income, you can potentially get both. Medicare Most Medicare beneficiaries are 65 or older. However, as of 2017, about 9 million people—15% of the Medicare population—with Medicare coverage were younger than 65. These people were eligible for Medicare because they had a disability. In most cases, you have to receive 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 oldAND 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. For most people, Medicare Part B premiums are $148.50 a month (in 2021 rates). However, you'll pay higher premiums for Medicare Part B and Part D if your income is higher than $87,000 per year for a single person, or $174,000 per year for a married couple. If you’re at least 65 but didn’t pay Medicare payroll taxes while you were younger, you may still be eligible for Medicare, but Part A isn't free. You’ll pay higher total premiums—the regular premium for Part B in addition to a premium for Part A. In 2021, the Part A premium for people who don't have enough work history is as high as $471 a month. Very few Medicare beneficiaries pay a premium for Part A, though, as most people have a work history (or a spouse's work history) of at least ten years by the time they're eligible for Medicare. Medicaid Under the Affordable Care Act, you’re eligible for Medicaid if your household income is less than 138% 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 childA pregnant womanElderlyBlindDisabledA very low-income parent of minor children Twelve states haven't expanded Medicaid to people earning up to 138% of the poverty level (although two of them—Missouri and Oklahoma—will expand their coverage in 2021). In 11 states, there's a coverage gap (i.e., no realistic coverage options) for childless adults living below the poverty level. In addition to income-based Medicaid eligibility, 32 states and the District of Columbia automatically provide Medicaid benefits to aged, blind, or disabled people who are deemed eligible for Supplemental Security Income. See Medicaid Eligibility by State Who Runs Medicare and 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 the Programs Differ 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 (although some states require those on the higher end of the eligible income scale to pay nominal premiums). 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. Different Options The Medicare program is designed to give Medicare recipients multiple coverage options. It's composed of several different sub-parts, each of which provides insurance for a different type of healthcare service. Medicare Part A is hospitalization insurance.Medicare Part B is insurance for outpatient care and doctors’ services.Medicare Part D is prescription drug insurance.Original Medicare is A and B combined with an option to add D.Medicare Part C, also called Medicare Advantage, combines A, B, and sometimes D into one plan. Opting for Part A Only 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. If you still have insurance through an employer (yours or your spouse's), you can add the other parts later with no penalty.However, if you decline Parts B and D and don't have another insurance plan in place, you'll face a late enrollment penalty when you add the other parts later. In the past, Medicaid programs typically didn't offer a lot of choice in terms of plan design. Today, most states utilize Medicaid managed care organizations (MCOs). If there's more than one MCO option in a given area of the state, you may be allowed to select the one you prefer. Should You Choose Original Medicare or Medicare Advantage? Medicare and Medicaid Funding Medicare is funded: In part by the Medicare payroll tax (part of the Federal Insurance Contributions Act or FICA)In part by Medicare recipients’ premiumsIn 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 that fund. Medicaid is: Partially funded by the federal governmentPartially funded by each state The federal government pays an average of about 60% of total Medicaid costs, but the percentage per state ranges from 50% to about 77%, depending on the average income of the state's residents (wealthier states pay more of their own Medicaid costs, whereas poorer states get more federal help). Under the ACA's expansion of Medicaid, however, the federal government pays a much larger share. For people who are newly eligible for Medicaid due to the ACA (i.e., adults with income up to 138% of the poverty level, who would not be eligible for Medicaid without the ACA's expanded eligibility rules), the federal government paid 100% of the costs from 2014 through 2016. States began to pay 5% of the cost in 2017, and that increased to 6% in 2018, and to 7% in 2019. From 2020 onward, states will pay 10% of the cost and the federal government will pay 90%. How 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. The majority of nursing home residents in the U.S. are enrolled in Medicaid. 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, and some areas don't have any Medicare Advantage plans available at all. 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 the "Medicare and You" handbook, published each year by the federal government. More Resources Medicare and You 2021 HandbookMedicaid's General Coverage BenefitsYour state’s Medicaid websiteMore Medicare & Medicaid information from Verywell Was this page helpful? Thanks for your feedback! Sign up for our Health Tip of the Day newsletter, and receive daily tips that will help you live your healthiest life. Sign Up You're in! Thank you, {{form.email}}, for signing up. There was an error. Please try again. What are your concerns? Other Inaccurate Hard to Understand Submit Article Sources Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Kaiser Family Foundation. Distribution of Medicare beneficiaries by eligibility category. 2017. Norris, L. Medicareresources.org. Medicare eligibility for ALS and ESRD patients. Updated January 10, 2019. Social Security Administration. Medicare premiums: Rules for higher-income beneficiaries. Medicare.gov. Part A costs and Part B costs. Kaiser Family Foundation. Status of state action on the Medicaid expansion decision. November 15, 2019. Social Security Administration. What is supplemental security income? 2019. Medicaid.gov. About Section 1115 demonstrations. Kaiser Family Foundation. Total Medicaid MCOs. 2017. The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. 2019 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds Communication. April 22, 2019. Rudowitz R Orgera K, Hinton E. Kaiser Family Foundation. Medicaid financing: The basics. March 21, 2019 Kaiser Family Foundation. Medicaid’s role in nursing home care. June 20, 2017. Jacobson G, Freed M, Damico A, Neuman T. Kaiser Family Foundation. Medicare Advantage 2020 spotlight: First look. October 24, 2019. Additional Reading Medicaid.gov. Medicaid and CHIP Eligibility Levels. Cubanski, Juliette; Neuman, Tricia; Damico, Anthony. Kaiser Family Foundation. Medicare's Role for People Under Age 65 With Disabilities. August 2016.