What’s the Difference Between Medicare and Medicaid?

Most people know that Medicare and Medicaid are both government-funded healthcare programs. But there's sometimes confusion about their functions and the people they serve. Broadly speaking, Medicare covers people who are age 65 and older and people with disabilities. Medicaid assists people with lower incomes.

But Medicare and Medicaid coverage sometimes overlaps. For example, a Medicare program called Extra Help assists people with lower incomes in paying for prescription medications. And Medicaid supports many older people by paying for nursing home care — a benefit that’s not covered by Medicare. And, in some cases, people qualify for both Medicare and Medicaid coverage — a status called “dual eligibility.”

So how are Medicare and Medicaid different? Below, we provide a basic overview of these programs, including what they cover, who is eligible, and how much the coverage costs.

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Comparing Medicare vs. Medicaid

Medicare

Medicare is a federally funded health insurance program that serves people age 65 and older. It also covers younger people with certain disabilities and people with chronic conditions, such as end-stage renal disease (ESRD). The program is run by the Centers for Medicare & Medicaid Services (CMS).

Medicare has four basic parts:

1. Part A: Hospital coverage

2. Part B: Medical coverage

3. Part C: Medicare Advantage (MA)

4. Part D: Prescription medication coverage

Together, Medicare Part A and Part B are called original Medicare. While you can expect to pay a monthly Part B premium, most people have worked long enough to avoid being charged Part A premiums.

Through Medicare Part C, or MA, a private plan replaces Part A and Part B. MA plans typically offer additional benefits — such as vision, dental, and hearing coverage — that are not provided by original Medicare. But you are still responsible for paying a Part B premium if you have an MA plan.

If you need prescription medication coverage and you have original Medicare, you will need to buy a Part D plan. While most MA plans include Part D, there are some that don’t — meaning, that you’ll have to purchase prescription medication coverage separately.

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Coverage

As briefly mentioned above, different parts of Medicare cover different services:

• Part A covers hospital inpatient care.

• Part B covers outpatient care, such as healthcare provider visits, medical tests, outpatient therapy, and durable medical equipment like walkers and wheelchairs.

• Part C (or MA) plans cover the same services as original Medicare but may provide additional benefits and have a cap on the amount you can spend out of pocket. 

• Part D covers prescription medications.

As mentioned, unlike some MA plans, original Medicare doesn't offer coverage for:

• Most dental care or dentures

• Vision exams or eyeglasses

• Hearing exams or hearing aids

• Long-term care

Who is eligible for Medicare?

As mentioned, you can qualify for Medicare if you are:

• 65 or older 

• Have a disability for which you receive Social Security Disability Insurance (SSDI)

• Have a condition such as amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease) or ESRD (permanent kidney failure)

If you’re like most Medicare enrollees, you’ll sign up for coverage around the time you turn 65. Your 7-month, initial enrollment window starts 3 months before the month you turn 65.

If you sign up before your birthday, your Medicare coverage will start the month you turn 65. If you sign up after your birthday, your coverage will start within 1 to 3 months after you apply. 

Medicaid

Medicaid is a health insurance program that’s jointly funded by the federal government and states or territories It provides free or low-cost coverage for low-income adults, pregnant people, children, and other groups. A related program, the Children's Health Insurance Program (CHIP), extends Medicaid coverage to a larger pool of children — those who are from households with slightly higher incomes than children covered under the traditional program.

Medicaid and CHIP are run by state and local agencies in all 50 states, Washington, D.C., and 5 territories. Each state or territory has its own eligibility standards, but they must follow guidelines from the CMS.

Benefits

Medicaid benefits vary by state or territory, but there are minimum requirements set by the federal government. These mandatory benefits include coverage for hospital services, healthcare provider services, lab tests, X-rays, and home health services.

State programs may or may not offer coverage for services like physical therapy, vision care, and dental care.

Who is eligible for Medicaid?

You can qualify for Medicaid if your income is below your state’s eligibility threshold. States have the option to set income eligibility at or below 133% of the federal poverty level (FPL) for adults. (The way income is calculated makes the actual figure 138% of the FPL.) Financial eligibility for children is at least 133% of the federal poverty level in every state.

Alternatively, you can qualify for Medicaid if you belong to a group with mandatory eligibility, which includes: 

• Qualified children and pregnant people

• Recipients of Supplemental Security Income (SSI)

Each state or territory determines whether to offer coverage to additional groups, such as children in foster care or people in need of nursing home care.

Once you're approved, your Medicaid coverage dates back to the day you applied or the first day of the month you applied. If you were eligible for weeks or months before applying, your coverage may be retroactively applied for up to 3 months before your application date.

States can also choose to offer Medicaid to “medically needy” individuals. If your income is too high to qualify for Medicaid, you can become eligible by spending down your resources to the state's designated income threshold — such as by putting your assets in a trust.

Here are a few ways that you can get to get eligibility and enrollment information for your state or territory’s Medicaid program: 

• Find your state or territory on Medicaid’s beneficiary resources page.

• Go to www.healthcare.gov, and find out if you qualify for Medicaid based on your income alone.

• Check your eligibility for Medicaid, CHIP, and other programs at www.benefits.gov.

Medicare vs. Medicaid costs

Medicare

Most people don’t pay premiums for Medicare Part A. You only pay these premiums if you or your spouse has worked and paid Medicare taxes for less than 10 years. For people responsible for a monthly Part A premium in 2023, it’s either $278 or $506. 

Part B has a monthly premium and a deductible. Many people will pay the standard $164.90 monthly premium in 2023, but those who earn more pay more — up to $560.50 a month, depending on income. After you meet your annual deductible, you’re also responsible for coinsurance, which is 20% of the cost of services.

If you have an MA plan, you must still pay a Part B premium and some MA plans also have an additional monthly premium.

Part D premiums and deductibles vary by plan. High-income beneficiaries also pay a premium surcharge. The deductibles for Part D plans can’t exceed $505 in 2023, and some Part D plans have no deductible at all. 

Medicaid

Federal guidelines determine how much Medicaid enrollees pay out of pocket. States and territories cannot require Medicaid premiums from people with incomes under 150% of the federal poverty level, unless the state or territory has a special waiver to do so.

With Medicaid and CHIP, there’s a limit on out-of-pocket costs, which is set at 5% of a beneficiary’s income. With Medicaid, there’s typically a copayment of $10 or less for medications and covered services. 

Can you have both Medicare and Medicaid?

Yes, you can have dual eligibility for Medicare and Medicaid. People known as “dual eligibles” receive either full or partial Medicaid benefits along with Medicare coverage.

If you have dual eligibility, most of your healthcare costs will be paid in full with little or no out-of-pocket costs. And you'll automatically qualify for the Medicare Part D Extra Help subsidy. For healthcare expenses covered by both plans, typically Medicare pays first and Medicaid pays the rest.

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Written by:

Jeanne Lee

Jeanne Lee is a freelance writer who covers consumer health and personal finance topics. She specializes in bringing clarity to complex issues and enjoys helping people hack their finances.

Edited by:

Cindy George, MPH

Cindy George is the senior personal finance editor at GoodRx. She is an endlessly curious health journalist and digital storyteller.

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