Medicare vs. Medicaid: Key Differences in Coverage and Benefits

In this article...
  • What are the differences between Medicare and Medicaid? How do they work together, and can the same person use both for full health insurance plan coverage?

Healthcare in the United States can be confusing for new beneficiaries. This is especially true for Americans who may qualify for Medicare and/or Medicaid health coverage.

People who are currently, or who soon will be, eligible for Medicare need to know about the differences between the Medicare and Medicaid programs, including the benefits that are offered by each type of coverage. 

What Is Medicare?

Medicare is a health insurance program offered by the federal government through the Social Security Administration (SSA). This program provides health drug coverage for over 60 million Americans, most of them older adults aged 65 and over. Generally, seniors can choose to participate in Medicare in two basic ways.

Original Medicare

Original Medicare is divided into two parts, Medicare Part A and Part B.

Part A covers inpatient care costs during stays in the hospital, skilled nursing facility or other inpatient facilities. Part B covers outpatient services including doctor’s office visits and some durable medical equipment.

Many Medicare beneficiaries are automatically enrolled in Part A and Part B, and most receive premium-free Part A. Some beneficiaries may have to pay a monthly premium for Part A.

Part B charges a monthly premium of $144.60 in 2020. This can be higher, depending on the beneficiary’s income. 

Medicare Part D and Medicare Advantage Plans

Medicare beneficiaries can get prescription drug coverage in one of two ways:

  • They can purchase a standalone Medicare Part D prescription drug plan (PDP)
  • They can enroll in a Medicare Advantage (Part C) plan that includes prescription drug coverage

Beneficiaries who are enrolled in Medicare Part A and Part B can consider enrolling in a Medicare Part D drug plan.

Medicare Advantage plans are issued by private insurance companies that agree to provide all of the same covered services as Parts A and B. Many Part C plans also add in extra benefits, such as routine vision and dental care, which Original Medicare doesn’t cover. Most Medicare Advantage plans include prescription drug coverage.

What Is Medicaid?

Medicaid is a joint federal and state health insurance program that delivers low-cost and free medical care to qualifying beneficiaries. The program pays some or all of the cost of basic health care, as well as many diagnostic or treatment-based interventions.

Medicaid also helps pay for many prescription medications. Some participants are able to get secondary services through Medicaid health insurance programs, such as non-emergency transportation and durable medical equipment.

Qualifying for Medicaid

Each state administers its own Medicaid program, and participation criteria vary by state. Many states use the Federal Benefits Rate to calculate the maximum income level for participation, and several others automatically offer coverage to pregnant women, children and seniors.

Some states require that adults also have a qualifying medical condition before coverage can be approved. 

Medicare vs. Medicaid Benefits

Medicare and Medicaid are different programs that offer some overlapping benefits. Where they differ is mainly in their eligibility standards and their methods of delivering care.

Medicare is principally intended for seniors aged 65 and over, while Medicaid is mainly intended for low-income citizens and members of at-risk groups.

Qualifying for Both Medicare and Medicaid

Some seniors rely on Medicaid as well as Medicare benefits. In these cases, Medicaid helps Medicare beneficiaries pay for things that aren’t covered by Medicare, such as some personal care and nursing home care.

Medicare typically pays first for services that are covered by Medicare Part A or Part B. Medicaid can then help the beneficiary pay for costs like Medicare deductibles, coinsurance or copays.

Medicaid beneficiaries automatically qualify for Medicare Extra Help, which is a program that helps pay for Medicare prescription drug costs and makes prescription drugs much more affordable for beneficiaries. Medicaid also covers some prescription drugs that Medicare doesn’t cover.

If someone is eligible for Medicare and Medicaid, they are sometimes referred to as “dual-eligible.”

Dual Eligible Medicare Advantage Plans

Some private insurance carriers offer a type of Medicare Advantage plan that’s called a special needs plan (SNP) for enrollees with specific chronic conditions and for beneficiaries who are eligible for both Medicare and Medicaid.

If someone is dual-eligible, they may be able to enroll in a special needs plan for dual-eligibles (D-SNP) if one is available where they live. These are often structured in a way that maximizes the benefit coverage of both Medicare and Medicaid.

Medicare vs. Medicaid for Seniors

Both Medicare and Medicaid offer basic and extended health services for enrollees. Their core populations of beneficiaries are different, but seniors with low or fixed incomes may qualify for both insurance plans.

Because the enrollment, coverage and benefit details vary from person to person, and each state has its own rules about participation in Medicaid, it is always best to speak with a qualified Medicare or Medicaid counselor before making decisions about long-term health coverage.

Most plans also have case workers who can answer questions about Medicare vs Medicaid, coverage types and how to get your benefits working together.