What Is The Difference Between Medicare And Medicaid

It's easy to be confused by the details of Medicare and Medicaid. These similar-sounding programs provide medical assistance, as the names suggest, but there are significant ways in which they differ.

For seniors, it's common to have questions like, "What is the difference between Medicare and Medicaid?" And, just as important, "Will I lose my Medicaid if I get Medicare?" These considerations can be of vital importance. 

For many seniors and caregivers, it's important to know about the government-sponsored financial support from these programs. Based on Caring.com's proprietary senior living cost data, independent living facilities cost an average of $3,000/month, while assisted living averages $4,200 monthly. Memory care facilities cost 20-30% more than assisted living. Our subject matter experts suggest that memory care could easily cost around $6,688/month. Location will impact cost.

If you or your loved one needs financial support for their living situation, this guide to Medicaid vs. Medicare can provide critical information on available services.

 

Medicare is a federally funded program that President Lyndon B. Johnson signed into law in 1965. In its original form, it provides fee-for-service (FFS) health care to seniors over 65 and others with qualifying conditions. Benefits remain the same from state to state, and anyone over the age of 65, as well as those with end-stage renal disease, amyotrophic lateral sclerosis (ALS), or a few other disabilities, can qualify.

Original Medicare has three separate parts that pay for different health care needs. 

• Medicare Part A covers institutionalized care, such as hospitals, some home care services, and nursing homes, although long-term care benefits are limited. Medicare Part A has no premiums for qualifying recipients, but deductibles and co-pays can apply, depending on the services or length of stay.
• Medicare Part B provides coverage for most other noninstitutional medical expenses, including physician services, outpatient care, and medical supplies. Medicare Part B has a monthly premium based on income, deductibles, and co-pays.
• Medicare Part D covers prescription drugs and has premiums based on income.

If you have Parts A and B, you may also buy an optional Medigap plan, which can supplement the first two parts of original Medicare to cover copayments, coinsurance, deductibles, and travel outside the U.S. Since Medigap is privately funded, unlike Medicare, plans can vary based on location. 

Several decades after its founding, the government added another option to Medicare: Medicare Part C, also known as Medicare Advantage. This program allowed private insurers to administer Medicare plans through HMOs and other managed care plans instead of the original FFS coverage of Original Medicare. These are not supplemental programs like Medigap but instead allow seniors to obtain their Part A, B, and D services from private insurance companies. 

To qualify for Medicare, you generally need to be 65 or older, and you or your spouse must have paid into the program for at least 10 years, which typically occurs through payroll deductions. You may also be eligible if you are younger but have a qualifying disability or health condition. 

You can find out if you are eligible for Medicare, apply for benefits, or contact the Social Security Administration online for answers to your questions.  

Medicaid is a different program from Medicare, despite the similar name. What is Medicaid? Simply put, it is a federal health coverage program administered by the states for children and vulnerable adults. It was created in 1965, at the same time as Medicare. It is governed by federal guidelines but managed by the individual states, so eligibility and services vary depending on location. As of June 2024, nearly 73 million people in the U.S. received Medicaid support. 

Original Medicaid provides institutional care for those in need. This can include care in hospitals, nursing homes, and other types of residential facilities but does not include assisted living facilities. In an assisted living facility, some of your services may be paid by Medicaid, but generally not your room and board.

Medicaid considers any care you receive that is not considered institutional care as "home care." These services may include assisted living facility care, although that varies among jurisdictions. States can also develop home and community-based service (HCSB) waivers, which can help cover costs for people who prefer to access their long-term care needs in their homes or communities. 

With these waivers, states can tailor services to meet the needs of certain groups of people. For example, if a state has a high percentage of individuals with autism or epilepsy, an HCBS waiver can allow them to offer services directly to these groups. These expanded services could include day care, respite care, or habilitation services — both day and residential.

Eligible Medicaid recipients have historically included low-income children and their parents, pregnant women, people with disabilities, and individuals aged 65 and over with limited assets. The government sets income limits for Medicaid, but states can opt to cover additional people over the federal minimum. 

Anyone who meets the criteria for both programs may participate in both services. These recipients are often called "dual-eligible beneficiaries." Generally, individuals with low monthly income and few assets can qualify. 

HCBS waivers expand eligibility and benefits for Medicaid recipients. Waivers allow for a higher income limit than Original Medicaid state plans. Although this figure can vary, the waiver limit is generally 300% of SSI, which is much higher than most states' Original Medicaid eligibility income limit of 138 percent of the federal poverty level.

For HCBS waivers, the asset limit is typically around $2,000 and usually doesn't include major assets, such as a car, home, or wedding ring. In some cases, you can circumvent asset limits for waiver benefits legally through planning strategies, such as Medicaid asset protection trusts. 

If you do not meet the Medicaid financial requirements, you may still qualify for assistance depending on your state and the type of assistance you need. To apply for Medicaid, contact your state's Medicaid agency.

If you are a senior or are caring for a senior who does not meet the financial requirements for Medicaid but has significant financial restrictions, you may also find assistance with a Medicare Savings Program. There are four of these plans, and although they have income restrictions, they may be higher than those required for Medicaid. These plans can help pay for Part A and Part B premiums, deductibles, coinsurance, and copayments.

As a senior, you are likely to qualify for Medicare and may need to sign up to avoid penalties. If you are a senior with limited resources, you may also qualify for Medicaid. To help you understand what you need to know about the differences of these two programs, consult the table below:

 

Part A Medicare will likely cover a stay in a skilled nursing home facility if you have just finished a qualifying inpatient hospital stay of at least three days and enter the nursing facility within 30 days of leaving the hospital. 

If you are in a Medicare Advantage plan, there may be copayments during the first 20 days. Your stay in the facility is limited to 100 days for each benefit period, regardless of your plan. 

Medicare doesn't cover custodial care, room and board, food, assistance with daily living activities, non-emergency transportation, or any other nonmedical costs related to assisted living. Medicare does, however, cover any health services the senior would otherwise receive in any residential setting, including exams, medications, and medical equipment covered by Medicare Part B.

Yes — Medicaid services cover some long-term care costs as the primary payer for long-term care services in the U.S. More than 30 percent of Medicare funding goes toward long-term care. This may include institutional care and community-based long-term care services and support—which means it will pay for nursing home care as well as home care. 

Most but not all skilled nursing facilities accept Medicaid payments. These payments can cover the cost of room and board, nursing care, meals, medication, and more. Medicaid eligibility varies among states but generally requires that you have a low income and few assets.

They might sound the same, but when comparing Medicare vs. Medicaid, there are significant differences. Medicare is federally funded and provides health insurance for those over 65 (and in a few other categories, like those with end-stage renal disease), regardless of their financial means. Medicaid is administered by the states and is intended for people of any age who are low-income. Because Medicaid is state-administered, the benefits vary based on location, while Medicare's federal funding is generally the same across all states.

• Apply for benefits. (n.d.) U.S. Social Security Administration
• Compare Medigap plan benefits. (n.d.) U.S. Centers for Medicare and Medicaid Services
• Eligibility. (2024) The Medicaid and CHIP Payment and Access Commission
• Estimate my Medicare eligibility & premium. (n.d.). U.S. Centers for Medicare and Medicaid Services
• Home & community-based services 1915(c). (n.d.). U.S. Centers for Medicare and Medicaid Services 
• How can we help? (n.d.) U.S. Social Security Administration
• How to apply for Medicaid and CHIP. (2024). U.S. General Services Administration
• Institutional long term care. (n.d.). U.S. Centers for Medicare and Medicaid Services
• Lockett, Eleesha. (2024).  What to know about Medicare Supplemental Insurance (Medigap). Healthline  
• Mcguire, Thomas G., et al. (2011). An economic history of Medicare Part C.
• Medicaid. (n.d.). U.S. Centers for Medicare and Medicaid Services
• Medicaid and home health care & non-medical, in-home care. (2024). American Council on Aging
• Medicaid income eligibility limits for adults as a percent of the federal poverty level. (2024). KFF.org
• Medicare savings programs. (n.d.). U.S. Centers for Medicare and Medicaid Services
• Skilled nursing facility care. (n.d.). U.S. Centers for Medicare and Medicaid Services 
• Understanding Medicare Advantage Plans. (2023). U.S. Department of Health and Human Services
• What original Medicare covers. (n.d.). U.S. Centers for Medicare and Medicaid Services
• Who's eligible for Medicare? (2022). U.S. Department of Health and Human Services
• 2024 poverty guidelines computations. (2024). Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Resources