Medicare vs. Medicaid - The Difference Between Medicare and Medicaid

What’s the difference between Medicare and Medicaid?

Both Medicare and Medicaid were signed into law by President Lyndon B Johnson as part of the Social Security Amendments of 1965. Due to the similarity in the names and the fact both programs are associated with the government the two programs are often confused with one another.


Medicare is an insurance program started by the U.S. Federal government in 1966. It currently serves over 52 million Americans, the vast majority of which are over the age of 65. Even if you are still employed, once you’ve reached the age of 65 you can qualify for Original Medicare Parts A and B. You may also qualify if your spouse is a “qualified wage earner” who has worked for at least 10 years and had his or her Social Security taxes withheld. Are you still working over the age of 65? Check with your employer to see if your current employer-sponsored health insurance plan works with Medicare. Medicare also covers some individuals under the age of 65 that qualify due to a disability, suffer from Lou Gehrig’s disease (amyotrophic lateral sclerosis), or are experiencing permanent kidney failure which requires dialysis or a kidney transplant. Currently Medicare serves 9 million disabled individuals under the age of 65.

Medicare Part A covers hospital care, skilled facility care, hospice, home health services, and nursing home care. For most individuals Part A is already paid for via paycheck deductions during the 10 or more years they or their spouse were a “qualified wage earner”. Part B, however, which covers medically necessary and preventive services, is paid for by most Medicare beneficiaries through a monthly premium once they turn 65. Medically necessary services are defined as services or supplies which are needed to treat or diagnose a medical condition. Services which Part B covers include durable medical equipment, ambulatory services, and mental health services such as inpatient care, outpatient care, and partial hospitalization. Medicare Part C, commonly known as Medicare Advantage, is a type of plan offered by private insurance companies that is an alternative to Parts A & B. Many Medicare Advantage plans also include prescription drug coverage and these plans are abbreviated as MAPDs. A recent HealthPocket study found that for the typical new Medicare enrollee, Medicare Advantage is the cheapest option.

Finally, Medicare Part D plans, also known as Medicare prescription drug plans, are plans offered by private insurance companies. Each plan has its own formulary, which lists drugs that are covered by the plan, and most plans group drugs in a tier system where different tiers have different costs. Usually a lower tier drug costs less than a higher tier drug. Formularies may change from year to year, but if a change is made to your current plan, then your insurance company must either provide you advance (at least 60 days) notice before the change becomes effective or provide written notice when you ask for a refill as well as provide you a 60-day supply of the drug2. Medicare beneficiaries also have the option to purchase supplemental insurance, also known as Medigap plans. Medigap plans cover different levels of out-of-pocket costs within original Medicare (Parts A & B) and there are 10 standard types in 47 out of 50 states: A, B, C, D, F, G, K, L, M, & N. MA, MN, & WI have state-specific Medigap plans that are named differently than other states.


Medicaid is an assistance program created in the 1960s alongside Medicare which serves low-income children and families. All beneficiaries must be U.S. citizens or legal permanent residents and, unlike Medicare, there is no general age requirement. Currently about 57 million Americans are enrolled in a Medicaid program and approximately 29 million of those enrolled are children. Another difference between Medicare and Medicaid is that Medicaid is implemented at the state-level and enrollees generally pay no cost for medical expenses that are covered, but sometimes a small co-pay for certain medical services is required. Medicaid is funded by both state governments and the Federal government and states must follow federal Medicaid guidelines. Medicaid plans must offer federally mandated core health benefits and cover certain population groups, but individual state plans may differ in elective extra healthcare coverage and basic eligibility requirements.

All Medicaid plans must offer the following core benefits:

  • Inpatient hospital services
  • Outpatient hospital services
  • EPSDT: Early and Periodic Screening, Diagnostic, and Treatment Services
  • Nursing Facility Services
  • Home health services
  • Physician services
  • Rural health clinic services
  • Federally qualified health center services
  • Laboratory and X-ray services
  • Family planning services
  • Nurse Midwife services
  • Certified Pediatric and Family Nurse Practitioner services
  • Freestanding Birth Center services (when licensed or otherwise recognized by the state)
  • Transportation to medical care
  • Tobacco cessation counseling for pregnant women

Along with Medicaid, CHIP (Children’s Health Insurance Program) was created in 1997 to help cover uninsured children in families with incomes too high to qualify for Medicaid but incomes too low to afford healthcare coverage. Medicaid and CHIP currently provide healthcare coverage to nearly 60 million Americans1.

The Affordable Care Act expanded federal funding as well as eligibility for Medicaid, but not all states have embraced the legislation and expanded Medicaid. Visit our “Expansion of Medicaid” page to check your state’s Medicaid expansion status. Under the Affordable Care Act, citizens and legal permanent residents with income up to 138% of the Federal poverty level would qualify for coverage if they lived in a state that expanded Medicaid. The following table displays the annual salary for 138% of FPL for the current year in all states and D.C.:

2020 Poverty Guidelines3

Family Size138% Poverty Level: All States (Except AK, HI) and DC138% Poverty Level: AK Only138% Poverty Level: HI Only
9+Add $4,480 for each additional memberAdd $5,600 for each additional memberAdd $5,150 for each additional member

If you qualify for both Medicare and Medicaid you are known as a dual eligible and may receive “extra help”. To find out more information about dual eligibles, benefits they receive, and extra help, visit our dual eligible page.

HealthPocket’s Medicare and Medigap plan comparison tools can assist you to find the right plan(s) for your specific medical needs in order to minimize your out-of-pocket costs. provides information on insurance products. If you choose to obtain a quote or apply for an insurance plan, you may be transferred to a partner website to complete your request. Always review the privacy and terms of use of the partner website.

HealthPocket is a free information source designed to help consumers find medical coverage. Whether you are looking for Medicare, or an individual and family health insurance plan, we will help you find the right healthcare option and save on your out of pocket healthcare costs. We receive our data from government, non-profit and private sources, and you should confirm key provisions of your coverage with your selected health plan. If you select a plan presented on our site, you will be directed (via a click or a call) to one of our partners who can help you with your application. Our website is not a health insurance agency and not affiliated with and does not represent or endorse any health plan. HealthPocket, Inc. is part of the Benefytt Technologies, Inc. family of companies.