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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 younger people who are disabled (16 percent of all Medicare beneficiaries nationwide were under age 65 as of 2016). 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 federal 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 do 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, the specific plan designs they offer, and the pricing. But most of the general regulations that apply to those plans are the same in every state. State regulations for Medigap plans do vary considerably, however. Federal rules do not require Medigap insurers to offer coverage to disabled enrollees under age 65, but the majority of the states have implemented their own rules to ensure at least some access to Medigap plans for these enrollees. You can click on a state on this map to see applicable Medigap rules.

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 2019, there are still 17 states that have not expanded Medicaid, although Nebraska, Utah, and Idaho are working towards Medicaid expansion under the terms of ballot initiatives that passed in each state in the 2018 election.

In the District of Columbia and the 33 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 $17,236 a year for a single adult in 2019). The federal government 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. 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.

As of 2016, nearly 12 million Americans were covered by both Medicare and Medicaid. This dual eligibility applies when a person is elderly or disabled and is also eligible for Medicaid due to their financial situation. You can read more here about dual-eligibility for Medicare and Medicaid.

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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