The Difference Between Medicare and Medicaid

Medicare is the federal health insurance program passed back in the '60's that covers Americans over the age of 65 and some blind and disabled individuals who meet certain guidelines.

Everyone who has paid into the FICA system for at least ten years (40 quarters) during their working years, or who has a spouse who paid into the system for 40 quarters, is entitled to receive Medicare benefits when they become eligible by virtue of reaching age 65 or a covered disability. Those with less than ten years of work history can "purchase" Medicare coverage by paying higher premiums when they reach age 65.

Medicare is now divided into several parts:

Medicare Part A covers treatment in a hospital. Part A coverage is available to all fully-qualified Medicare beneficiaries at no cost.

Medicare Part B covers outpatient medical treatment by doctors, laboratories, therapists and other professionals. Medicare charges a monthly premium to all Part B members, and there are deductibles and co-payments required. Medicare Part B is voluntary. Individuals must voluntarily enroll in Medicare Part B when they become eligible.

Medicare Part D provides insurance coverage for prescription drugs. Part D policies are provided by independent insurance companies under the governance of Medicare regulations. These policies are voluntary and paid for privately by the insured person. While all Part D Medicare plans must conform to the same rules, each covers different drugs, and each charges different deductibles and co-payments. Medicare beneficiaries can switch their plans annually as the insurance companies change their plan structures and the drugs they cover.

Medicare Part C "Advantage" programs are private Medicare insurance programs. Medicare pays a premium to private health insurance companies who offer Medicare-qualified individuals the equivalent of Parts A, B and D in one policy. These private companies collect the Medicare Part B premium in payment for this coverage. Some companies charge an additional premium. Most require deductibles and co-payments for both hospital and outpatient treatment as well as prescriptions.

Medicare has no income or asset restrictions, although some high-income individuals pay a higher premium for Medicare Part B.

Medicaid is the joint federal and state insurance program for low-income seniors and those who are blind or disabled with few assets and a low income. Every state also has a Medicaid program designed for eligible children. Medicaid covers the costs of hospitals, outpatient care, and some prescriptions. In many cases Medicaid will cover the cost of nursing home care and some home care for people who meet strict guidelines.

For those who meet the eligibility requirements to be covered by Medicare, Medicaid will often cover the cost of the monthly Part B premium and in some cases the cost of certain Part D drug plans.

While the funding for Medicaid is provided by both the federal government and the individual states, the individual states administer their Medicaid programs. As a result, each state has some differences in what their Medicaid plans cover. However, all must offer the same basic coverage.

Both Medicare and Medicaid require that participants use the services of "participating providers." Doctors, hospitals, and other medical professionals elect to provide patient care to Medicare and/or Medicaid patients, or both. Because of generally lower reimbursement rates, in most areas there are fewer medical providers who will accept Medicaid insurance.