You've probably heard the terms Medicare and Medicaid thrown around more times than you could count. But although the two programs happen to sound alike by name, there are some key differences between them. While Medicare is a federal health insurance program that provides medical care to those over 65 as well as those with disabilities, Medicaid is both a federal and state-run assistance program that provides medical care for individuals with low income.
How Medicare works
During your working years, you pay into Medicare the same way you do with Social Security. Once you reach 65, you're eligible to enroll in Medicare coverage. If you're under 65, you may also be eligible for coverage if you're permanently disabled or have end-stage renal disease.
Medicare is managed by the federal government and has several sub-programs that work together to provide comprehensive health coverage. When you apply to Medicare, you are automatically enrolled in Part A, which covers hospital and skilled nursing facility care, as well as certain home health services. Part B, meanwhile, covers preventative services such as doctor visits, as well as services necessary to treat a condition or disease, such as diagnostic tests and durable medical equipment. There's also Part D, the prescription drug plan, and Part C, Medicare Advantage, which offers some additional benefits.
For most people, Medicare Part A is free, while Parts B, C, and D come with premiums that enrollees are required to pay. All Medicare plans typically come with a deductible. For 2016, Part A has a $1,288 deductible for each benefit period, while Part B has a $166 deductible per year. Once you meet your deductible, you usually pay 20% of the Medicare-approved amount for most services. The deductibles for Parts C and D, meanwhile, vary by plan.
How Medicaid works
Medicaid is a joint federal and state program designed to help people with limited income. Unlike Medicare, which has an age requirement, Medicaid is available to people of all ages provided that they meet the income requirements. In fact, Medicaid provides health coverage to more than 8.8 million non-elderly individuals with disabilities.
Each state has its own rules regarding Medicaid eligibility. All states are required to offer certain mandatory benefits under Medicaid, including inpatient and outpatient hospital services, physician services, lab and X-ray services, and family planning services. Individual states, meanwhile, can elect to provide additional Medicaid benefits, including physical and occupational therapy, respiratory care services, dental services, and prescription drugs.
Differences between Medicare and Medicaid
Though both Medicare and Medicaid are medical care programs, Medicare is age-based, while Medicaid is need-based. As such, it costs money to enroll in certain parts of Medicare, and enrollees are subject to deductibles and co-payments. With Medicaid, enrollees generally pay nothing for the care they receive, though individual states are allowed to impose deductibles, co-payments, and other charges on beneficiaries. The amounts charged typically vary based on income.
Another major difference between the two programs is that Medicaid offers certain benefits not typically covered by Medicare. While Medicare provides limited long-term care coverage, Medicaid will typically cover services such as nursing-home care and assisted-living facilities for longer periods of time.
Some people are eligible for both Medicare and Medicaid. A low-income individual over 65, for example, might qualify for both programs. However, those seeking coverage under each program must apply separately. While you'll often hear the terms Medicare and Medicaid used interchangeably, in reality, they are very different beasts, and understanding how each program works can help you get access to the healthcare benefits you need.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.