Medicare vs. Medicaid
- Medicare is health insurance for those age 65 and up and younger people with specific disabilities or health conditions.
- Medicare coverage is divided into Part A (hospital), Part B (medical), Part C (Medicare Advantage), and Part D (prescription drugs).
- Medicaid is a program offering health insurance coverage for low-income individuals who meet other state-defined requirements.
- Medicaid coverage is generally free, while Medicare can have premium payments for different parts of coverage.
- People with limited income who qualify for Medicare may be eligible to get help paying their monthly premiums.
- People can be dual-eligible for both Medicare and Medicaid coverage.
What You Need To Know About Medicare
Medicare is a federally run health insurance program. It primarily covers people age 65 and older and is also available for certain people with disabilities and those with End-Stage Renal Disease. Medicare coverage is divided into four parts: Part A, Part B, Part C, and Part D.
Each part of Medicare represents coverage for different services. Some Medicare parts require a monthly premium payment.
Original Medicare (Part A & Part B)
Medicare Parts A and B make up what is known as Original Medicare. Medicare Part A is coverage for hospitalization, while Medicare Part B covers other medical expenses. Typically, Original Medicare covers 80% of the cost of covered services, which means the enrollee would be responsible for the remaining 20% of the fees.
People enrolled in Original Medicare have the option to buy a Medigap (also referred to as Medicare Supplemental) plan to help pay for the expenses not covered by Medicare alone.
Part A & B Coverage
Medicare Part A provides coverage for:
- Inpatient hospitalizations
- Hospice care
- Some home health care
- Limited skilled nursing facility care after inpatient hospitalization
Medicare Part B coverage includes benefits for:
- Services from doctors or other health care providers
- Outpatient care
- Preventive services (routine screenings, vaccinations, and annual physicals)
- Wheelchairs, walkers, canes, hospital beds, and other durable medical equipment (DME)
Medicare Advantage (Part C)
Medicare Part C is more commonly referred to as Medicare Advantage. Medicare Advantage is an “all-in-one” alternative to Original Medicare and is offered through private insurance companies. Individuals must elect Medicare Part A and Medicare Part B to be enrolled in a Medicare Advantage plan.
When a person chooses to enroll in a Medicare Advantage plan, the Medicare Advantage plan replaces all the benefits from Original Medicare with one private insurance plan. If enrolled in a Medicare Advantage plan, the beneficiary’s insurance company receives a lump sum payment for the person’s coverage. The insurance company is then responsible for managing the members’ healthcare costs for the plan year.
Part C Coverage
Medicare Advantage plans must cover everything covered under Part A and Part B of Original Medicare. In addition, Medicare Advantage plans typically offer additional benefits beyond what Original Medicare covers. These extra benefits may include:
- Dental coverage
- Vision coverage
- Hearing coverage
- Fitness benefits
- Nutrition and meal benefits after a hospital stay
Prescription Drug Coverage (Part D)
Medicare Part D is Medicare’s prescription drug benefit plan. Since Original Medicare Parts A and B cover very few medications, Medicare enrollees who have Original Medicare must enroll in Part D coverage if they want to have prescription coverage.
Beneficiaries with Medicare Advantage plans may not need to enroll in Medicare Part D coverage as Medicare Advantage covers most drugs (but not all of them, and not every benefit). Medicare recipients cannot be enrolled in a Medicare Advantage plan and a Medicare Part D plan at the same time as not all MA plans contain Rx benefits. Beneficiaries enrolled in a Medicare Advantage plan with prescription drug coverage can enrol in a stand-alone PDP.
Part D Coverage
Medicare Part D coverage is run by private insurance companies who can create their own plan benefits within the rules set by Medicare. Because Medicare Part D plans are not standardized, enrollees need to carefully compare the benefits for each Part D plan, and enrollees pay an additional monthly premium for Part D coverage.
Beneficiaries must be enrolled in Parts A and/or B to enroll in a Part D plan.
Traditionally, Medicare Part D plans had four coverage phases:
- The deductible
- Initial coverage
- Coverage gap or “donut hole”
- Catastrophic benefit period
Part D plans can have an annual deductible of no more than $505 in 2023.
Previously, once in the coverage gap, enrollees would pay nearly the total cost for their medications until they reached a catastrophic spending amount. However, in 2020, this “donut hole” was closed when the coverage gap phase’s cost-sharing structure was altered.
Under the new plan design, beneficiaries in the coverage gap pay no more than 25% of the costs for their covered medications, and the drug manufacturer absorbs most of the remaining costs. Because of this shift in cost-sharing, Medicare Part D beneficiaries now have relatively stable prescription costs after meeting their deductible.
What You Need To Know About Medicaid
Medicaid is a health insurance program run jointly by federal and state governments. It provides medical coverage for people with limited income and may also include nursing home and personal care, transportation to medical appointments, and dental, vision, and hearing benefits.
Medicare & Medicaid Costs
The costs involved in Medicare and Medicaid vary widely and depend on the income and needs of the enrollee.
Each part of Medicare has a different premium amount. For most Medicare beneficiaries, Part A coverage is free. To receive Part B coverage, enrollees must pay a monthly premium deducted from their Social Security benefit. For enrollees with limited income, Medicare Savings Programs may offer extra help with premiums and out-of-pocket expenses.
Individuals with Original Medicare can enroll in Medicare Part D to cover prescription costs. Part D coverage has a separate, additional monthly premium amount. Those with limited income may qualify for the Low-Income Subsidy (LIS), which eliminates the Part D premium for many plans.
Medigap or Medicare Supplement plans are available for Original Medicare enrollees to help pay for the 20% of expenses not covered by Medicare. Some Medigap plans also cover additional “gaps”. Medigap plans are offered in standardized plan options, meaning the benefits for the same plan will be the same with any insurance company. While the plan benefits are the same, the plan premiums are not; premiums vary between insurance companies for the same coverage.
Depending on which plans they elect, Original Medicare beneficiaries may pay separate monthly premiums for their Part B coverage, Part D coverage, and Medigap coverage.
Those enrolling in a Medicare Advantage plan must elect Parts A and B (and pay the Part B premium). In addition, the Medicare Advantage plan may have its own separate premium payment that will vary depending on the plan chosen.
Not all Medicare Advantage plans have a monthly premium. According to KFF, in 2020, 60% of Medicare Advantage plan members paid no additional premium for their plan.
Because Medicaid coverage is for people with low-income, those who qualify do not have a monthly premium payment. While states have the option to have out-of-pocket costs for Medicaid recipients, most state Medicaid plans have no or very minimal copayments for services.
In some instances, people with slightly higher incomes may qualify for limited versions of Medicaid that offer coverage for catastrophic medical expenses.
Who Can Qualify for Medicare?
The following individuals can qualify for Medicare coverage:
- Those 65 and older
- People under 65 with specific disabilities
- People of any age who have End-Stage Renal Disease (ESRD)
Who Can Qualify for Medicaid?
Medicaid is insurance for individuals with limited income. Because states administer Medicaid programs, additional qualifications for the program vary. Those who may be eligible for Medicaid benefits include people with limited income who:
- People over 65
- Children under 19
- Pregnant women
- People with disabilities
- Parents or people caring for a child
- In some states, adults without dependent children
Can You Qualify for Medicare & Medicaid Coverage?
It is possible to be eligible for Medicare coverage and Medicaid coverage at the same time. People with both Medicare and Medicaid coverage are referred to as dual-eligible. People who qualify for Medicare and full Medicaid likely have coverage for most of their out-of-pocket medical costs.