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What’s the difference between Medicare and Medicaid?

Q: What’s the difference between Medicare and Medicaid?

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A: Medicare is a federal government-sponsored health care program for those 65 and over, and for others with certain disabilities. Most enrollees in Medicare have paid FICA taxes during their working years, and realize the benefits of that tax through Medicare coverage.

Medicaid, on the other hand, is a health care program for low-income individuals who could not otherwise afford health insurance. Medicaid is jointly funded by the government and the state in which the enrollee lives. The states establish their own eligibility standards and services for Medicaid (within general parameters established by the federal government), while the federal government establishes criteria for Medicare.

So Original Medicare coverage is the same in every state, including eligibility, benefits, and premiums. A Medicare beneficiary pays the same price for Medicare Part B, regardless of where she lives (although premiums for Part B vary based on other factors). The private plan options under Medicare — including Medicare Part D (prescription coverage), Medigap (supplemental coverage) and Medicare Advantage — vary considerably from one area to another in terms of which insurers offer coverage and the specific plan designs they offer, but the general regulations that apply to those plans are the same in every state.

Prior to 2014, Medicaid coverage was generally limited to a few specific groups:

  • pregnant women in extreme poverty
  • low-income parents of a sick child 18 years of age or younger
  • low-income seniors over 65, the blind, disabled, and those who need nursing home care, and
  • any U.S. citizen that is terminally ill and needs hospice services.

But the Affordable Care Act expanded Medicaid as of January 1, 2014. Initially, this was intended to be the case in every state, but a Supreme Court ruling in 2012 made Medicaid expansion optional, and as of early 2018, there are still 19 states that have not expanded Medicaid, although Maine is expected to expand Medicaid coverage by the summer of 2018, under the terms of a ballot initiative that Maine voters passed in 2017.

In the District of Columbia and the 31 states where Medicaid has been expanded under the ACA, coverage is available for anyone with an income up to 138 percent of the poverty level (about $16,753 a year for a single adult in 2018). The federal government is paid 100 percent of the cost to cover the newly-eligible population through the end of 2016, after which the states began paying a small portion of the costs. In 2018, the states are paying 6 percent of the cost. By 2020, the states will be paying 10 percent of the cost of Medicaid expansion, and it will remain at that level from that point on.

Here’s more information on Medicaid in each state, and where the states are in terms of Medicaid expansion under the ACA.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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