What is the difference between Medicare and Medicaid?

Together, Medicare and Medicaid provide health insurance to more than 135 million people in the United States. While Medicare is funded by the federal government, Medicaid is through a federal and state budget mechanism calculated specifically for each state.

There are 11 million who are eligible for both programs, each of which serve a specific demographic group. While counted only once for the combined total population enrolled, those persons’ participation is reflected in the enrollment numbers for each program individually, thus they are counted twice, once in each program.

Medicare

Medicare was established in 1966 by the federal government after it became evident that most seniors were uninsured. Medicare is available to seniors, regardless of income, when a person reaches 65 years of age. The program was expanded in the years following to provide coverage to people with disabilities as well.

There are nearly 64 million people who receive healthcare through Medicare. About 54 million enrolled are seniors over sixty-five, and the remainder are people with disabilities. According to a report by the Boards of Trustees for Medicare spending on the program reached $926 billion in 2020.

Medicare offers seniors coverage under a few distinct ‘Parts.” Broadly, Part A and B cover hospital stays, doctors, and medical appointments. Part C, which came into effect, offers Medicare beneficiaries the opportunity to buy additional coverage for dental, vision, hearing, and other specialties. Under Part C, those enrolled can purchase Medicare Advantage Plans, which provide these additional benefits. Part D, which came into effect in 2006, helps beneficiaries cover the costs of prescription drugs.

Those who receive Social Security are automatically enrolled in Parts A and B, and the premiums are deducted from their benefit checks.

Medicaid

Medicaid is run jointly between state and federal governments to provide healthcare to low-income people. In 2021, nearly 78 million people, including almost 33 million children, were enrolled in the program. In 2019, states and federal governments spent around $627 billion to provide this coverage.

Every state, as well as the District of Colombia and US territories, offer Medicaid. To participate, the “federal government requires states to cover certain mandatory populations and services.” If states would like to offer additional services, they can -- creating a complicated and diverse landscape of plans.

The program was initially established to provide coverage “to low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities.” However, the Affordable Care Act allocated funding for states to expand coverage to “non-elderly adults with income up to 133% of the federal poverty level.”

After this piece of the law came into effect in 2014, Medicaid enrollment increased by 8.8%, and in 2015 the figure increased by an additional 7.2%. In the years following, increases have also been seen but have changed between less than one percent and a little more than 3%.

The pandemic also caused a rapid increase in enrollment, as millions lost employer-funded health insurance when they lost their jobs. The federal government reported a 10.2 percent increase between February and September 2020.

What must be covered under Medicaid?

Federal government mandates that all states must provide Medicaid plans that cover the following:

While covering prescription drug costs is considered optional, all states have added the benefit to their plans.