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What Is The Difference Between Medicare And Medicaid?

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what is the difference between medicare and medicaid

Programs like food stamps, unemployment insurance, Medicaid, and job retraining help Americans get back on their feet when they are down and out and laid off through no fault of their own. – Hank Johnson

Medicare and Social Security have created the healthiest and most financially secure generation of senior citizens in American history. – Jim Walsh

Similar to any developed country, United States also provides its citizens health care. Health insurance can be defined as a program that assists in paying for medical expenses; it may be through social insurance, social welfare program; or privately purchased insurance, of course, funded by the Government. The other terms used for ‘health coverage’ are ‘health care coverage’ or ‘health benefits.’ In this article on what is the difference between Medicare and Medicaid information has been given on the major dissimilarities and advantages of participating in these two programs.

what is the difference between medicare and medicaid

The health care industry is by large, owned/operated by many private sector businesses. It has been estimated that sixty to sixty-five percent of healthcare and spending is provided by programs such as Veterans Health Administration, Health Insurance Program, Medicare and Medicaid. As per a survey conducted, many of the population beneath the age of 67 have been insured either by a family member’s employer or their family member. In other cases, some people buy health insurance themselves and the rest of the population remains uninsured. When it comes to public sector employees, health insurance is provided by the Government.

Medicaid as well as Medicare are among a few of the most popular Government sponsored, tax payer funded (health care programs) in the United States. Both the programs have considerable differences in terms of their governance, funding and also in terms of their coverage. They are, however, managed/governed by the Centers for Medicare and Medicaid Services (division of US Department of Health and Human Services). Both the Medicare and Medicaid programs were initiated in the period of President Lyndon B. Johnson when he signed the amendment for the Social Security Act on July 30, 1965.

Difference Between Medicare And Medicaid


The program covers most senior people, in the ages of or more than 65 (they must have worked and paid taxes to the Government). Medicare also covers the disabled individuals who have qualified for Social Security and others with amyotrophic lateral sclerosis and end-stage renal disease. The year of initiation of the program began in 1966, and in recent times, around thirty insurance companies around US are providing Medicare.

In 2010, the program had provided insurance to 48 million – the number of senior citizens came to 40 million and the handicapped individuals were estimated to be eight million. Among the other programs in the ring, Medicare (47.2 percent), paid inpatient hospital stay costs ($182.7 billion) for 15.3 million Americans in 2011. On an average, the amount of costs borne by an individual insured by Medicare comes to 48 percent. The other percentage of cost has to be borne by the enrollees with the other insurance or pay from the pocket. The main costs for the uncovered services might be hearing, dental, vision care and long-term diseases. 15.6 percent of Americans were in the lists of Medicare in 2014, and the number is estimated to increase to 95.8 million by 2050. The four-part programs of Medicare are: the first two parts are mainly for hospital along with medical insurance, while the other two parts are for providing flexibility and prescription of drugs.

Part A: Hospitalization coverage

This coverage assists in paying for hospital stays, and the accessories are medical supplies, meals, testing and a semi-private room. The other factors covered are occupational, physical and speech therapy offered on a part-time basis and if it is mandatorily necessary. You can get treatment in the best hospitals and, disabled persons can get wheel chairs and walkers. It is available easily, as you do not have to pay the premium – the reason – pay roll taxes funding are used for covering the costs.

Part B: Medical Insurance

Also called as Supplementary Medical Insurance (SMI) – it assists in the payment of physician visits, hospital visits, health care costs in the home along with services for aged and disabled persons. Some of the coverage by Part B are – chemotherapy, hormonal treatments, immunosuppressive drugs given after organ transplants, selected vaccinations and blood transfusions. A monthly premium has to be paid, and enrollment in this part is not mandatory.

Part C

It can be a private purchased supplemental insurance that can offer additional services, by which all the services offered by Medicare (part A and part B) can be used for getting the maximum benefit. It is also known as Medicare Advantage Plans that offers users to put together a scheme that is in tandem to their medical requirements. Some of the private insurance companies assist in some coverages, although they can vary according to the eligibility and program selected by the patient. The plan can also be linked to Health Maintenance Organizations (HMOs) or others such as PPO (Preferred Provider Organizations) for offering health care with specialist services. Some of the programs can also concentrate on special disease affected persons (example – diabetes).

Part D: Drug coverage by prescription

Out of the four above mentioned parts, A and B get paid by payroll taxes as well as deductions from the Social Security Income. The other parts are paid by the participants out of their pocket. It was in the year 2006 that the Part D or prescription drug coverage was added to Medicare to tackle the main concern about expenses incurred in buying of drugs.


It can be best explained as an assistance program developed for assisting low to no income individuals and families in providing health care (long-term custodial and medical care options). Described by the Health Insurance Association of America as the “”government insurance program for persons of all ages whose income and resources are insufficient to pay for health care”. It has to be noted that not all persons who are in the low-income line can qualify for Medicaid. This program has been jointly funded by both Federal and State Governments. The State Government, however, holds governance to decide the individual who is eligible for receiving the aid. To qualify, every person must be legal permanent residents of US and should have low income. Some people with rare disabilities are also covered.

The amount of funding by Federal Government comes to fifty percent for each State’s program. If the State has more productivity and affluent, it receives less funding and because of this distinction, every State has its individual programs.

Each State governs the Medicaid program and has established its individual standards; it also determines the amount, type, duration along with scope of services, makes the perfect rate for payment of services and has its individual Medicaid program.

Medicare is available for all, but this program is governed by strict laws. The rules vary according to the State, but every individual should have only a few thousand dollars (when it comes to liquid assets) to qualify for the program. The other major preferred groups for this program are families of specific groups, pregnant women, the disabled, elderly and children. The services may also vary by States, but the Federal Government has made the coverage for these services as “mandatory”: Laboratory services, hospitalization, health care services by physicians or doctors, family planning, surgical and dental services etc.

The other facilities that are covered under the program for people (in the age of 21 or older) are – clinic treatment (inpatient and outpatient hospital services), prenatal care, midwife services, home health care to the disabled and screening, children vaccines, family planning services/supplies, rural health programs and clinic services, lab and x-ray services, Federally qualified health-center (FQHC) services along with ambulatory services, treatment and diagnosis for individuals (less than age 21).

If you are a person who has qualified for the Medicaid program, in addition to the above mentioned facilities, each State also provides other benefits such as medical transportation, prosthetic devices, dental services and optometrist services, intermediate care facilities for mentally retarded persons, rehabilitation, physical therapy and prescription drug coverage. You do not have to pay anything for these services. This program can be defined as the last resort for people who do not have any other options to pay for the health costs.

The program is the best, preferred by most people as it can be considered the largest source for long-term funding when compared with Medicare and other private health institutions (insurance policies). In recent times, a new cottage industry has spread in the form of individuals who take advice charges for people to divest their liquid and other assets in such a way they can qualify for Medicaid.

Although these programs are different, few individuals may qualify for both of them under some circumstances. They are referred to as “dual eligible.”

Comparison Chart: What Is The Difference Between Medicare And Medicaid?



It is mainly an assistance program that is effectively used to cover the health and medical costs of low-to-no-income individuals and families. Children are more eligible for coverage. This program covers any person above the age of 65 (or maybe older) as well as disabled individuals (who qualify for social security regardless of age). Other persons covered are those affected with end stage renal disease or any rare disease.
Every State has its individual requirements. Conditions, however, matter according to income and lifestyle. The income requirements are related to the Federal Poverty Level. As per the Affordable Care Act, 226, as many as 26 States cover at or under the 138% of FPL. The remaining States, however, have various income requirements. Income is not a priority and any individual who has turned 65 can become a member of this program as they have paid taxes into Social Security funds or Medicare funds. Other eligibilities are persons (regardless of age) suffering from disabilities and end-stage renal disease.
The services provided are family planning, routine emergency care, and some drug rehabilitation programs. For more information, read the full description above for Medicaid. However, this program provides limited dental and eye health care services. The same as Medicaid.
The eligibility varies according to State with some strict restrictions. The cost may be low, depending on the assets and income. If you are one of those individuals, who have paid Medicare taxes for ten years or more, then you do not have to pay in case of Part A. The same eligibility can come in a similar situation if you have a spouse who has paid on the same general terms.The average cost of Part B will come to $104.90 per month for many of the people. The other parts, C and D, might vary according to conditions.
The program is governed both by the State and Federal Governments. The entire governance is in the hands of Federal Government.
The funding part comes from different taxes, but the majority (about 57 percent) comes from the Federal Government. Both Medicare and Medicaid account for around 25 percent of the Federal budget. Funding comes from mainly payroll taxes, interest earned from Medicare premiums and trust fund investments.
User satisfaction is more User satisfaction is a little less compared to Medicaid.
Medicaid has covered almost all States, Native American reservations and territories. About 20 percent of the adult population, 40 percent of children and half the number of all regular HIV/AIDS patients are covered by this program. All states have Medicare and around 15 percent of the total American population have enrolled on this program.