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What's the Difference Between Medicare and Medicaid?

By Selena Maranjian - Feb 20, 2016 at 9:02AM

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The difference between Medicare and Medicaid is that one is designed to help older Americans and the other to help lower-income Americans. There are some other key differences, too.


President Johnson signing Medicaid into law, 1965. Photo: White House Press Office, WikiMedia

What's the difference between Medicare and Medicaid? Most of us have heard of both government programs, but some of us don't have a solid understanding of just what each is and how they differ. Let's take care of that right now.

Medicare and Medicare were signed into law by President Lyndon Johnson in 1965 and were part of his "Great Society" suite of new domestic programs targeting major issues such as civil rights, poverty, education, health, housing, consumer protection, and the environment. So what's the difference between Medicare and Medicaid? Both programs provide health coverage to Americans, but, as the U.S. Department of Health and Human Services has explained, Medicare is an insurance program, while Medicaid is an assistance program.

Medicare basics
Workers pay into the Medicare system during their years of employment (just as they contribute to Social Security -- typically with automatic deductions from paychecks) and then, once they hit the age of 65, they can enroll in it. Indeed, many people are automatically enrolled if they're already collecting Social Security once they turn 65 -- and more than 50 million Americans are enrolled in Medicare. Medicare is also available to younger folks with certain disabilities or with end-stage kidney disease.

Medicare is overseen by the federal government. It features several parts, covering healthcare expenses such as doctor visits, outpatient care, and some preventative care (Part B), hospital or skilled nursing facility care (Part A), and prescription drugs (Part D), and you can enroll in one or more. There's a Part C, too, encompassing Medicare Advantage plans. These offer the same coverage as Parts A and B and some include prescription drug, vision, and dental coverage, too. Some parts of Medicare may be free to you, while others will cost a monthly premium that's designed to be affordable. Medicare features deductibles and coinsurance payments. For many services, once you meet your deductible, you'll pay 20% of Medicare-approved costs.

Medicare and Medicaid respectively aid the elderly and poor. Photo: Pixabay.

Medicaid basics
Medicaid, meanwhile, is only meant to serve those with limited income. It's funded by state governments and the federal government, and administered by state governments that must follow federal guidelines. It's available to those of any age who qualify, and its total enrollment recently topped 72 million people, including low-income adults, children, pregnant women, elderly adults and people with disabilities. Many Americans are enrolled in both Medicare and Medicaid -- these would primarily be low-income elderly folks.

Here's another difference between Medicare and Medicaid: While Medicare features deductibles and expects enrollees to often pay a portion of the cost of the care they receive, Medicaid enrollees typically pay nothing for the care they receive, though sometimes there is a small co-payment. The federal government requires state Medicaid programs to offer a certain set of mandatory benefits, and they may also offer various optional additional benefits. Mandatory benefits for Medicaid include physician services, hospital services (inpatient and outpatient), nursing facility services, home health services, laboratory and X-ray services, nurse midwife services, and medical transportation services, among others. Optional additional benefits might include prescription drugs, physical therapy, dental services, hospice, vision, prosthetics, podiatry, case management, and more. Medicaid covers a wider range of health services than Medicare does.

Eligibility requirements for Medicaid vary by state, and you should check with your state Medicaid office (or website) for more information on that and for enrollment information.

The difference between Medicare and Medicaid in a nutshell, then, is this: Medicare is an insurance program primarily for older Americans. It's the same for all Americans, requires them to share some costs, and is administered federally. Medicaid is state-based, though with federally set minimum requirements, and it's for low-income Americans, regardless of age. It's mostly free. Tens of millions of Americans are enrolled in each of these two programs, with many enrolled in both.

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