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What’s the Difference Between Medicare and Medicaid?


Both Medicare and Medicaid offer healthcare coverage through government programs, but there are some significant distinctions between the two. This article will describe how the two programs differ, including the people they serve, their administration and funding procedures, and the advantages they offer participants.

In essence, Medicaid is for those with low earnings while Medicare is for those who are at least 65 years old or have a handicap. Some individuals qualify for both.

Medicaid and Medicare have more significant distinctions than that. They vary in:

  • Who can enroll
  • Who runs them
  • How they work
  • How they’re funded
  • What benefits do they provide

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Who Gets Medicare vs Medicaid?

Medicare is for the elderly and the disabled; Medicaid is for low-income folks. You might be eligible for both if you’re low-income and aged or disabled.


By 2022, over 65 million Americans will be covered by Medicare. The majority of Medicare recipients are 65 or older. However, as of 2022, 12% of those with Medicare coverage, or nearly 8 million people, were under the age of 65. 1

These individuals qualify for Medicare because they are disabled. To be eligible for Medicare, you typically need to be receiving Social Security disability benefits for two years. However, there are exclusions for persons with amyotrophic lateral sclerosis and end-stage renal disease. 2

You qualify for Medicare Part A with no monthly premiums if:

You are disabled or at least 65 years old (as described above)

And for at least ten years, you or your spouse paid Medicare payroll taxes.

No matter your financial situation, if you paid payroll taxes, are old enough, or have a long-term disability, you will be eligible for Medicare Part A without having to pay a monthly premium.

In 2022, the average person’s Medicare Part B premium will be $170.10. However, if your income exceeds $91,000 per year for a single person or $182,000 per year for a married couple, you’ll have to pay a higher premium for Medicare Part B and Part D. (note that those amounts are for 2022 coverage; the income threshold for higher Part D and Part B premiums will increase in 2023). 3

Even though Part A of Medicare isn’t free, if you’re at least 65 and didn’t contribute to the program when you were younger, you can still be eligible. The standard Part B premium as well as a Part A tip will result in more outstanding overall premium payments from you.

The Part A premium for those who don’t have adequate work experience will be as high as $499 per month in 2022.

4 However, very few Medicare recipients pay a Part A premium because, by the time they are eligible for Medicare, the majority of people have worked for at least ten years (or had a spouse who has).


Nearly 82 million Americans had Medicaid coverage as of 2022, while an additional 7 million had Children’s Health Insurance Program coverage (CHIP). 5

According to the Affordable Care Act, Medicaid is available to anyone under 65 whose family income is less than 138% of the federal poverty threshold.

However, several states have rejected this clause and have maintained the Medicaid eligibility requirements that were in place before the ACA, which often means that in addition to having a low income, you must also:

  • A child
  • Pregnant
  • A very low-income parent of minor children
  • 65 or older (asset tests also apply, in addition to income limits)
  • Blind or disabled (asset limits also apply, in addition to income limits)

There is a coverage gap (i.e., no viable options for coverage) for childless individuals living below the poverty line in 11 states, while 12 states have not expanded Medicaid to include persons earning up to 138% of the federal poverty level.

Aged, blind, or crippled people who are eligible for Supplemental Security Income are also automatically given Medicaid benefits in 32 states and the District of Columbia, in addition to eligibility based on income.

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Who Runs Medicare and Medicaid?

The Medicare program is managed by the federal government. Every state oversees its own Medicaid scheme. Because of this, whereas Medicaid programs vary from state to state, Medicare is essentially the same across the nation.

The Medicare program is managed by the federal government’s Centers for Medicare and Medicaid Services. In addition, it keeps an eye on each state’s Medicaid program to make sure it adheres to minimal federal requirements.

Even though each state creates and manages its own Medicaid program, all Medicaid programs must adhere to federal requirements to receive federal funding (Medicaid is jointly funded by the state and federal government, with a matching rate that varies by state8).

States must apply for waivers from the federal government to make significant changes to their Medicaid systems.

How the Programs Differ

Medicaid is a social welfare program, whereas Medicare is an insurance program.

Patients on Medicare are entitled to it since they paid for it by paying payroll taxes while they were employed and monthly premiums once they were enrolled.

Although some states require those with higher incomes who qualify for Medicaid to pay small fees, Medicaid participants do not often have to pay taxes or premiums to maintain their coverage.

Similar to other social welfare programs including Temporary Assistance for Needy Families, Women, Infants and Children, and the Supplemental Nutrition Assistance Program, Medicaid is funded by tax dollars and made available to qualifying needy people.

Different Options

Medicare beneficiaries have a variety of coverage alternatives because of the Medicare program’s design. It is divided into numerous smaller components, each of which offers insurance for a distinct category of medical services.

Hospital insurance is provided under Part A of Medicare.

Outpatient medical treatment and physician services are covered under Medicare Part B.

The prescription drug insurance component of Medicare.

A and B are both included in Original Medicare, with the option to add D. Medigap insurance is frequently added by beneficiaries.

A, B, and typically D are all included in one plan under Medicare Part C, also known as Medicare Advantage.

Opting for Part A Only

Some individuals decide to have Medicare Part A coverage to avoid having to pay the Parts B and D premiums every month. If you or your spouse still have insurance via your present work, you are free to add the additional coverage at a later time.

However, you will incur a late enrollment fee and have more restrictions on when you can enroll in the other sections if you choose not to purchase Parts B and D and do not already have another health plan in place.

Traditionally, Medicaid programs didn’t provide many options for plan design. However, the majority of states now use Medicaid managed care groups (MCOs). 10 You will probably be given the choice to pick your preferred MCO if there are multiple MCO options available in your region of the state.

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Medicare and Medicaid Funding

How Medicare is paid for

by the Medicare payroll tax, in part (part of the Federal Insurance Contributions Act or FICA)

Medicare recipients’ premiums, in part

partially through general federal taxes

The Medicare Trust Fund receives the payroll taxes and premiums. From the fund, medical bills for Medicare enrollees are paid. 11

Healthcare is:

Federal funding is used in part for this project.

financed in part by each state

Depending on the average income of the state’s population, the federal government covers, on average, about 60% of the overall Medicaid costs, but the percentage varies per state from 50% to about 78%. (wealthier states pay more of their own Medicaid costs, whereas poorer states get more federal help).

But when Medicaid is expanded under the ACA, the federal government contributes a lot more.

The federal government covers 90% of the cost while the states only cover 10% of the cost for those who are now eligible for Medicaid as a result of the ACA (adults under 65 with incomes up to 138% of the poverty level, who would not be eligible for Medicaid without the ACA’s expanded eligibility rules).

How Benefits Differ

The healthcare services that Medicare and Medicaid cover are not always the same.

For instance, Medicaid covers long-term care whereas Medicare does not, such as long-term custodial care such as living in a nursing home. In the United States, Medicaid is used by the vast majority of nursing home residents. 13

Although the benefits of Medicaid vary from state to state, each Medicaid program must offer a minimum set of benefits.

The country-wide consistency of Medicare coverage is offset by some diversity across private Medicare Advantage plans and the absence of Medicare Advantage plans in some regions for those who choose to purchase them.

Private insurers offer Medicare Advantage plans, and while they must provide all of the fundamental benefits that Parts A and B would give, insurers are permitted to include extra, non-standard services.

The federal government annually publishes the “Medicare and You” guidebook, which contains more information on the benefits that Medicare offers as well as what to anticipate for out-of-pocket costs.


Important government-run health coverage programs include Medicare and Medicaid. Together, they provide coverage for more than a third of the population in America, including some individuals who are eligible for both programs. About 8 million persons with disabilities and people 65 and older are covered by Medicare. Low-income folks are covered through Medicaid. While each state administers Medicaid and receives funding from both the federal and state governments, Medicare is managed by the federal government.

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A Word From Verywell

Millions of Americans receive essential health coverage via Medicare and Medicaid. And because Medicare does not cover long-term care services, Medicaid becomes more crucial for older people who end up requiring them (the majority of nursing home residents have both Medicare and Medicaid coverage). Medicare will soon be a necessity for almost all Americans. Additionally, Medicaid is used by millions of Americans at some time in their lives. Thankfully, these two initiatives offer a solid safety net.


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