Medicare vs. Medicaid: Healthcare Plan Cost Differences You Need to Know

Here's what you need to know about Medicaid vs. Medicare: what they cover, what they don't and who they're designed to serve.

Medicare and Medicaid are both government healthcare programs that benefit different segments of the population. Medicare is a federal program for older Americans or those with ailments and disabilities. Medicaid, on the other hand, helps lower-income people secure health coverage. Some differences exist in how the two programs are governed and administered. With change on the political horizon, new legislation could impact Medicare and Medicaid.

Here’s what you need to know about Medicare and Medicaid.

Medicare vs. Medicaid: How They Compare

Here’s a quick guide to compare Medicare with Medicaid.

Medicare vs. Medicaid
What It ProvidesA selection of insurance plans that cover different medical expenses, such as doctor visits, hospital care and inpatient careA series of mandatory coverages that states must offer as well as several optional coverages
What It Does Not ProvideFree healthcare for most seniorsCoverage for anything that could be covered by Medicare or an employer plan
Who’s Eligible?Americans over the age of 65; Some younger Americans with certain ailments and disabilitiesLow-income Americans
CostsDepends on a range of variables, including premiums, deductibles, copays and chosen plansDepends on a range of variables, including premiums, deductibles, copays and state rules.
AHCA ChangesNo direct changesCloses Medicaid expansion in 2020 to people and states; Puts caps on per-person federal funding to states

Find Out: 10 Ways to Survive Rising Healthcare Costs

Everything You Need to Know About Medicare

The federal government runs Medicare, which is a health insurance program for Americans over the age of 65. Medicare also covers people of all ages with certain ailments like ALS and chronic kidney disease.

Medicare coverage depends on which of three available healthcare plans a recipient chooses.

  • Part A: covers services and care at skilled nursing centers, hospitals and inpatient facilities
  • Part B: covers outpatient care and doctor visits; certain preventative care is also covered
  • Part D: covers prescription drugs
  • Medicare Advantage: combine parts A, B, and frequently D, all in one plan

Just as with most health insurance plans, Medicare healthcare costs are steered by variables like coinsurance, deductibles, premiums and copays. If you’re not one of the many Americans enrolled in parts A and B automatically at age 65, check your eligibility with a Social Security office near you. Some people may also be eligible for a Medicare Savings Program, which allows recipients to use state money for help with premium payments. Other qualified recipients may be entitled to a Medicare Extra Help program.

President Trump and House Republicans recently revealed their long-promised Affordable Care Act replacement: the American Health Care Act. The act echoes President Trump’s healthcare plan promises from his campaign, including the repeal of the long-contested individual insurance mandate enforced by the IRS. Although the House GOP crafted the bill, if the president signs it into law, it will become the de facto Donald Trump Healthcare Plan. The House GOP web page exclusively dedicated to the bill does not mention Medicare once.

The AARP recently came out against the GOP plan, stating that it “weakens Medicare,” turns too much power over to insurance companies and shifts too much risk and cost to seniors. The AARP also says the plan harms older Americans who are nearing the age of Medicare eligibility.

Related: 50 Things Every 50-Something Should Know About Retirement

Everything You Need to Know About Medicaid

Medicaid exists to offset healthcare costs for low-income Americans. Like Medicare, Medicaid is funded by the federal government, but those funds are distributed by the state. Because each state runs its own program, Medicaid comes with many extra variables. How much recipients pay and how they get coverage, for example, depend on the rules of the individual state.

Although states govern their own programs, they are required to follow certain federal guidelines. States can choose not to offer some optional benefits, but all states must provide several mandatory benefits, including:

  • Doctor care
  • Nurse, midwife and certified pediatric practitioner services
  • Licensed freestanding birth centers, qualified health centers and rural health clinics
  • Skilled nursing home care
  • In-hospital care

The Affordable Care Act expanded Medicaid to anyone under the age of 65 who earns up to 138 percent of the federal poverty line, which USA Today reported to be about $16,643 a year. The extension — and the federal funding that comes with it — is only available in states that chose to implement the expansion. In the end, the ACA added 11 million new people to Medicaid.

If enacted, the GOP plan would result in significant changes to Medicaid.

  • The plan stops all new enrollment after Dec. 31, 2019.
  • Anyone who enrolls before 2020 stays on the program, but if their coverage lapses for more than a month, they cannot re-enroll.
  • Any state that doesn’t expand by Dec. 31, 2019 is locked out for good.
  • The bill also limits the amount of federal money states can receive for each enrollee, unlike the ACA, which guarantees matching funds to the states without regard to cost.

Related: 21 Hacks to Reduce Your Healthcare Costs This Year

Medicare and Medicaid are government-run programs that date back to 1965. Medicare is for older Americans, no matter how much they earn. Medicaid eligibility is limited to low-income individuals and families who wouldn’t be able to afford coverage on their own. Some Americans are dual eligible and receive assistance from both programs at the same time. Both programs–especially Medicaid–are likely facing changes in the near future with the proposed American Health Care Act.

About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for, a financial publication in the heart of Wall Street’s investment community in New York City.