The cost of healthcare is generally expensive, and paying for it can be quite challenging for low-income families.
Also, as people grow older and stop working actively, they will need some sort of financial assistance to cater to their frail health.
Thankfully, American citizens and permanent residents can take advantage of government-sponsored programs that cover a significant part of healthcare costs. Medicare and Medicaid are the two healthcare programs established by the U.S. government in 1965 to provide general health insurance benefits to eligible citizens.
The programs are funded by taxpayers but not every American citizen who pays tax is eligible to enroll. The names may sound similar and some people use them interchangeably, but the programs are not the same.
They are designed to meet the needs of different sets of people and each program has its unique set of policies that regulates it.
If you are looking to take advantage of these healthcare programs, it is important to understand the differences between the programs so that you can choose the one that best meets your health needs.
How you choose to get your healthcare benefits and the provider you choose can have a lot of impact on your out-of-pocket costs.
This article will help you to understand the eligibility requirements and the extent of coverage for Medicare vs Medicaid.
What is Medicare?
Medicare is a federal government health insurance policy designed to cover medical care and treatment expenses for American citizens who are 65 years and older.
Senior citizens and their families can get financial support for medical needs from this program, regardless of their income level.
Who is Eligibility for Medicare?
In addition to citizens who are 65 years and older, people diagnosed with ESRD (End-Stage Renal Diseases), which is permanent kidney failure, are also eligible for Medicare.
Certain people who are younger than 65 years can also enroll in the Medicare program if they have disabilities.
By law, a person is said to have a disability if they cannot engage in any substantial gainful activity as a result of a medically proven mental or physical impairment, which may even lead to death. Also, the disability must have lasted or is expected to last for at least 12 months.
If you are younger than 65 but have a disability, you can get Medicare coverage generally after two years of being eligible for disability benefits unless you fall into an exception category.
The Medicare policy is a four-part program designed to cover specific services. These include:
Part A:Also known as Hospital Insurance, Medicare Part A provides coverage for hospitalization (that is, inpatient stays), hospice care, and care received at home and at skilled nursing facilities. This health insurance policy is often called premium-free Part A. That’s because most people don’t pay a monthly premium for it, provided they or their spouse have paid Medicare taxes for over a certain period (usually 10 years) while working. You can buy Part A if you don’t qualify for premium-free Part A. The cost for standard Part A in 2021 is $471 per month if you paid less than 30 quarters of Medicare taxes. The standard Part A premium is $259 per month for those who paid Medicare taxes for between 30 and 30 quarters.
Part B: Medicare Part B (Medical Insurance) covers outpatient care, preventive and diagnostic services, medical supplies, and certain treatment services for health conditions. Part B has a standard premium amount of $148.50 per month as of 2021. Most people will have to pay this premium, which is usually deducted from Social Security. If you are a higher income earner, you will pay more based on your adjusted gross income from your previous two years’ IRS tax return.
Part C: Medicare Advantage, also known as Medicare Part C, is a newer policy that covers Part A and Part B and in many cases, Part D. It is an all-in-one bundle with varying premiums, depending on the specific plan.
Part D: Medicare Part D covers prescription drugs. Part D participants have to pay monthly premiums and yearly deductibles. Also, copayments apply for certain prescription drugs. The monthly premium for Medicare Part D varies by plan. Generally, you can expect to pay more if you earn a higher income.
All of these services are available under two broad plans, namely: Original Medicare and Medicare Advantage.
Most people in the U.S. pay taxes into their Social Security fund during their working years. This automatically qualifies most taxpayers for the Medicare insurance policy when they reach 65 years of age.
However, you are only eligible to enroll in Original Medicare plan by default unless you choose otherwise. Here is a quick look at what Original Medicare and Medicare Advantage offers.
Original Medicare is a government-sponsored insurance policy that includes Hospital Insurance (Medicare Part A) and Medical Insurance (Medicare Part B).
Original Medicare allows you to visit a hospital or doctor when the need arises without prior authorization from your primary care doctor. While doctors and hospitals can charge for your care, there are limits on the amount you pay.
Usually, you will pay a yearly deductible at the beginning of the year plus coinsurance, which refers to 20% of the services you receive. You can also include a separate plan to cover drugs (Medicare Part D) in Original Medicare.
By choosing Original Medicare, you are automatically enrolled into Part A. It is usually best to buy Part B (like most people do), and also add Part D to Original Medicare if you want to get the most comprehensive health insurance policy.
Original Medicare is great, but it has certain gaps in terms of coverage. For this reason, those who want more coverage choices can opt for a Medicare Advantage plan (Part C).
Medicare Advantage plan covers several other medical services, such as hearing, vision, and dental care, plus prescription drug coverage. Typically, Part C, or Medicare Advantage, covers premiums for Part A and Part B, out-of-pocket maximums, as well as deductibles.
Here’s one important thing to keep in mind when comparing Medicare vs Medicaid: you can only access Medicare Advantage policies through private health insurance companies.
Unlike Original Medicare, the plan is not provided by the government. The advantage of this is that you have plenty of policy provides to look at before deciding on the best option that will meet your needs.
If you are unsure which plan to choose between Original Medicare and Medicare Advantage, here is a quick summary of what you get with each:
Original Medicare allows you to visit just about any hospital and doctor in the country. However, there are gaps in terms of coverage that leave more to be desired.
Medicare Advantage plans offer limited networks, meaning you have fewer choices of hospitals and doctors. On the plus side, the plan offers all the services you will typically get under Original Medicare in addition to other care services not covered by the traditional Medicare.
Deductibles, premiums, and coinsurance amounts are set by the federal government for Part A and Part B of Original Medicare.
Participants under Medicare Advantage may be required to pay a premium for their plans in addition to the government-approved yearly Part B standard premium.
What is Medicaid?
In simple terms, Medicaid is a health insurance program provided by the federal and state governments to meet the needs of low-income families with healthcare expenses. The services cover costs of routine medical care, as well as treatment services and hospitalization.
With over 74 million Americans covered as of February 2021, Medicaid is a fairly popular healthcare insurance policy for many people in the United States.
The program is jointly funded by states and the federal government and is administered by different states in keeping with the requirements of the federal government.
Who is Eligibility for Medicaid?
Eligibility is one of the major differences when comparing Medicare vs Medicaid. While the former focuses mainly on age, the latter is primarily concerned with income level and family size.
To qualify for Medicaid, your income should be lower than 133% of the poverty line (or 138% for Medicaid expanded states). This amount translates to about $26,500 for a household of four and $12,880 for an individual.
Others who are eligible to enroll in Medicaid include:
Children up to 18 years of age who are from low-income families
Pregnant women with income lower than 138% of the poverty line
People with disabilities who don’t get SSI
People with pressing medical needs (medically needy people with high medical expenses)
Although the major eligibility requirement for Medicaid is income, not everyone in the low-income bracket can get Medicaid. For example, regardless of how low their income is, persons above the age of 21 are not eligible for Medicaid in states where the Affordable Care Act (ACA) Medicaid expansion has not been implemented.
As of 2021, there are 12 states that have expanded Medicaid eligibility. These include:
However, adults over 21 years in these states can get Medicaid if they are caring for children, are pregnant, have a disability, or are elderly.
Keep in mind that green card holders or lawful permanent residents in the U.S. are not eligible for Medicaid until after five years from when they got their permanent residency status. This is true even if they meet all other eligibility requirements.
Also, people living in the United States (for work, travel, education, humanitarian services, etc) but are not U.S. citizens cannot enroll in Medicaid, regardless of their lawful immigration status.
The medical services covered by Medicaid vary depending on the state. However, states are mandated by the federal government to cover certain services, including:
Home healthcare (specifically for those who qualify for nursing facility services)
Nursing facility services
Pediatric and family nurse practitioner services
In nearly all states, Medicare also offers optional benefits, such as optometrist services, dental services, physical therapy, medical transportation, prosthetic device, vision services, and coverage for prescription drugs.
Medicaid is the preferred choice for many people who want long-term care funding. That’s because most private health insurance policies as well as Medicare usually don’t fund long-term care.
Can You Apply for Both?
Yes, you can apply for both Medicare and Medicaid if you are eligible.
This is known as dually eligible. Having both policies usually means lower healthcare costs. In most cases, people who are covered by both health insurance policies, typically enroll in the Original Medicare while receiving subsidized Medicaid benefits.
Note that you can also get both Medicare and Medicaid if you are approved for disability benefits, whether you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). In fact, you can qualify for both SSDI and SSI at the same time. This is commonly known as “concurrent benefits” in social security.
Both Medicare and Medicaid are government-provided policies designed to help different categories of people have access to healthcare.
Now that you know the eligibility and coverage for Medicare vs Medicaid, you are in a better position to determine which healthcare program best meets your needs.
In comparing both health insurance programs, Medicaid is generally more comprehensive because it covers a wider set of people and it is often the last resort for people who have financial difficulties in meeting medical costs because they are low-income earners.
On the other hand, Medicare does not depend on your income level. Any American citizen can be eligible for the program, provided they are 65 years and older or have a disability.
John E Chambers is an experienced financial advice expert. Born in Chicago, he has a master's in Industrial Finance, but he has spent decades offering investment advice to businesses and individuals alike. He is the founder of RetireeWorkforce.com and wants the website to be valuable for retirement advice. In addition, he writes articles that help users jump-start their retirement plans and choose the best investment options. If not pondering over stock market statistics or reading some magazines, you can find John spending time with his family. As an early retiree, John also offers unique insights into what post-retirement life is like.