What Are the Differences Between Medicare and Medicaid?

Medicare is a federal health insurance program for most Americans age 65 and older and some younger people with a qualifying disease or disability.

Medicaid is a joint federal-state program that helps cover health care costs for some qualified people who have limited incomes and financial resources.

Medicare and Medicaid are similar in many ways. They are both government-sponsored programs that can help qualified people with some of their health care costs. They are both tax-payer funded, and they were both started in 1965 under President Lyndon Johnson.

Medicare and Medicaid are both operated under the same organization, the Centers for Medicare & Medicaid Services (CMS).

Doctor holding a piggy bank

The differences between Medicare and Medicaid

Below are the answers to some common questions about how Medicare and Medicaid are different.

How are Medicare and Medicaid funded?

Medicare is a federal program that is funded by: 

  • Payroll taxes
  • Funds authorized by Congress
  • Income taxes from Social Security benefits
  • Interest earned on Medicare trust fund investments
  • Medicare Part A premiums paid by enrollees who aren’t eligible for premium-free Part A
  • Medicare B and Part D premiums

Medicaid is a joint program funded and operated by both federal and state level governments. Unlike Medicare, there is a separate Medicaid program for each state. The federal government funds 50 percent of each state’s Medicaid program, while state taxes make up the remaining 50 percent.  

What do Medicare and Medicaid cover?

Medicare features a number of different coverage options. Medicare Part A and Part B (also known as Original Medicare) are standardized throughout the country in terms of cost, coverage and availability.

Learn more about what is covered by Medicare Part A (hospital insurance) and Medicare Part B (medical insurance)

There are certain types of Medicare coverage sold by private insurance companies that offer certain federally mandated benefits and follow CMS guidelines.

  • Medicare Part C plans (also called Medicare Advantage plans) offer the same benefits as Original Medicare. Some Medicare Advantage plans may offer additional benefits, such as coverage for prescription drugs, vision, hearing, dental and more.
  • Medicare Part D plans (Medicare prescription drug coverage) cover some of the costs of many prescription drugs.
  • Medicare Supplement Insurance plans (also called Medigap) can help cover some of the out-of-pocket costs that aren’t covered by Original Medicare, such as Medicare deductibles, copayments and coinsurance.

Medicare Advantage, Medicare Supplement Insurance and Medicare Part D plan availability varies by location. 

Medicaid has a list of federally-mandated benefits that must be covered in all state Medicaid programs. These include many of the same benefits covered by Medicare. Some benefits covered by Medicaid include:

  • X-rays and lab services
  • Family planning
  • Nurse Midwife services
  • Transportation to medical care
  • Rural health clinic services
  • Nursing facilities
  • Tobacco cessation counseling for women who are pregnant

Each state Medicaid program has the option of providing other benefits in addition to the required benefits.

Here you can find a list of both required and optional Medicaid benefits.

Who is eligible for Medicare and Medicaid?

Medicare is available to all U.S. citizens age 65 and older, as well as some people under 65 who have a qualifying disability. There are no eligibility restrictions based on one’s income. 

Medicaid eligibility varies by state, and there are eligibility restrictions based on income and other financial resources. Eligibility can also vary for families, children, pregnant women, the disabled and the elderly.

Some people qualify for and receive both Medicare Part A and Part B and Medicaid benefits. This is often called being dual eligible.

How much do Medicare and Medicaid cost?

Medicare Part A is premium-free for most people, while Part B comes with a standard premium of $135.50 (in 2019).

Because Medicare Advantage, Medicare Part D and Medicare Supplement Insurance are sold by private insurers, costs can vary from one location to the next. Each part of Medicare is potentially subject to premiums, deductibles and cost-sharing  such as copyaments or coinsurance.

Medicaid costs differ by state, and each state Medicaid program has the option of setting its own premiums, deductibles and cost-sharing measures.

These costs are typically based on how much income you earn, with higher-earners having to pay more for their coverage. People who earn lower incomes generally pay lower premiums or nothing at all for their Medicaid coverage.

Find answers to your Medicare questions

If you have more questions about Medicare and the Medicare coverage options available in your area, speak with a licensed insurance agent who can help answer your questions. Call  TTY Users: 711 24 hours a day, 7 days a week to speak with a licensed agent.

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