One of the most common questions I get from clients is, “What’s the difference between Medicaid and Medicare?”
I understand the confusion, because they can seem to be similar at first glance, but an in-depth review shows that they are quite different concepts. Let’s dive into it.
Medicaid is a federal and state program which provides medical coverage for people with lower levels of income and limited resources. It covers nursing home care and personal care services, which are two facets of care that are typically not covered by Medicare.
The Health Insurance Association of America (HIAA), officially describes Medicaid as being “a government insurance program for persons of all ages whose income and resources are insufficient to pay for health care.”
Poverty alone does not make one eligible, however, as noted in the Affordable Care Act. Cumulatively, Medicaid provides free healthcare insurance to more than 70 million Americans as of 2019. Here are some important details about Medicaid:
- Medicaid is managed by the states, and each one has varying criteria on how to qualify for the program, what services are covered, and how physicians and care providers are reimbursed through the program.
- Medicaid is highly influenced by partisan politics, due to its state-based nature, meaning policies will vary depending on the political philosophy of the state legislature (i.e. Democrat or Republican).
- Unlike Medicare, which is solely a federal program, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines for the state to receive matching funds and grants.
- As of 2014, 26 states have contracts with managed care organizations (MCOs) to deliver long-term care for the elderly and individuals with disabilities. The states pay a monthly capitated rate per member to the MCOs that provide comprehensive care and accept the risk of managing total costs.
- In a 2010 national report for all age groups, the per enrolled average cost was calculated to $5,563 and a listing by state and by coverage age is provided.
- Categories include low-income children below a certain wage, pregnant women, parents of Medicaid-eligible children who meet certain income requirements, low-income disabled people who receive Supplemental Security Income (SSI) and/or Social Security Disability (SSD), and low-income seniors 65 and older.
Let’s contrast this with Medicare; Medicare is a health insurance program begun in 1966 that specializes in providing health insurance for Americans aged 65 or older, younger people with legal disability status, and individuals with late-stage diseases such as ALS and renal disease. As of most recently, Medicare covers over 60 million people, with more than 50 million being aged 65 or older. We will highlight some critical details regarding Medicare
- Medicare is not free, not automatic, and does not cover everything.
- Medicare has four parts (A, B, C, and D).
- All Americans become eligible for Medicare when they turn 65.
- Individuals qualify for Medicare regardless of their health history or preexisting conditions, and there is no income or asset test.
- Retirees over 65 have no choice but to enroll in Medicare, pay the required premiums and obtain healthcare services under the Medicare system.
- Part A covers hospitalization, skilled nursing, home healthcare and hospice, which is free to everyone who has paid the Medicare payroll tax (1.45% of wages) for at least 10 years.
- Part B covers physician’s services, diagnostic X-rays, lab test, and certain preventive services, is available to everyone who is eligible for Medicare. Monthly premiums amount to $135.50 per month.
- Part C is Medicare Advantage plans; Health plans offered by private insurers in an all-inclusive format. These plans provide for all services under parts A and B, as well as usually Part D, and even add additional coverage for some gaps that are not provided by Medicare.
- Part D is Medicare’s prescription drug benefit. It is delivered through private insurance companies that contract with Medicare. Premiums average at about $40.
- Clients do not really have the option to go without Part D, because if they were to need prescription drug coverage in the future, they would have to pay late enrollment fees.
- Notably absent from Medicare coverage is long term care, the type of custodial care many people need as they age.
- Routine dental care, vision care, and hearing aids are NOT covered.
- Part A deductible is $1,364 per spell of illness. Defined as when a beneficiary enters a hospital and has not received a hospital or skilled nursing level of care within the prior 60 days.
- There is no limit on the amount of out of pocket expenses a beneficiary may incur under Part A, Part B.
- Part B deductible is $185 per year. Beneficiaries also pay a 20% co-insurance amount for each service they receive.
- Part D deductible under basic Medicare design is $415 per year; once total drug costs have reached $3820, there is no coverage gap that requires the beneficiary to pay the entire cost of mediations. Catastrophic coverage starts when total drug costs have reached $5100. At this price, the beneficiary is responsible for a small copayment.
- If a client plans to keep working past age 65, and if his employer-sponsored group health plan covers 20 or more employees, he is not required to sign up for Medicare at 65.
That should clear the differences up for you! If not, just give me a call at 305-751-8855 and I can help you through any additional questions you may have.
For additional information, click here to view our in-depth Medicare information guide.
_ _ _