Medicare vs. Medicaid
- Medicare is health insurance for seniors and people with specific disabilities or health conditions.
- Medicare coverage is divided into Part A (hospital), Part B (office visits), 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 seniors 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 outpatient doctor visits. 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 or Medicare Supplement 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
- Home health care
- Limited skilled nursing facility care
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 and usually include prescriptions coverage (Part D).
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
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.
Because they are all-inclusive plans, beneficiaries with Medicare Advantage plans do not need to enroll in Medicare Part D coverage. Medicare recipients cannot be enrolled in a Medicare Advantage plan and a Medicare Part D plan at the same time.
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. While the plan specifics may vary, 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 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 $445 for 2021 or $480 for 2022. After the deductible has been met, the enrollee will enter the initial coverage period, which lasts until they reach the Plan D coverage gap that starts at $4,130.
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 former 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 family size 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. The premium for Part B may vary, but most people pay the standard Part B premium amount, which is $148.50 for 2021. 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. While Part D premiums vary, the average Part D premium for 2021 is $38 per month. 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. 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. The average premium paid for Medicare Advantage plans for 2020 (the latest data available) was $25 per month.
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.
Extra Help programs that help pay for Medicare premiums and out-of-pocket costs are administered through state Medicaid offices. People who qualify for this type of assistance may be eligible for Medicaid coverage that pays for Medicare premiums only but does not cover any out-of-pocket costs for services.