What is the Difference Between Medicare and Medicaid?

Medicare and Medicaid are two separate government programs that provide health and medical services to specific groups of people in the United States.

Both programs are administered by the Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services (HHS).

What is the Difference Between Medicare and Medicaid?

Medicare covers hospital and medical services for elderly individuals and people with disabilities. The Medicare program provides insurance coverage for the following groups:

People aged 65 and older;
Younger people with certain types of disabilities;
People with end-stage renal disease — End-Stage Renal Disease (ESRD), requiring dialysis or organ transplants.

Medicare is considered a dual eligibility program under the federal social health insurance program, providing access to healthcare for these groups.

How is Medicare Funded?

The primary source of Medicare funding is payroll taxes, which generally make up 2.9% of wages. These funds are divided between the employee and employer and directed into a trust fund used to reimburse healthcare providers and private insurance companies. Additional funding comes from beneficiary premiums and cost-sharing mechanisms, such as deductibles, co-insurance, and copayments.

What is Medicaid?

Medicaid covers medical services for individuals with limited financial resources, people with disabilities, and low-income families. Medicaid can be either comprehensive or supplemental, depending on whether primary medical services are covered by employer insurance or Medicare.

Medicaid administration is managed both federally and at the state level. The federal government reimburses states for part of Medicaid expenses, while states set their requirements for program participation. Additionally, states can implement cost-sharing mechanisms, except for certain groups such as pregnant women, children under 18, and patients in hospitals and nursing homes.

What is Dual Eligibility?

Dual Eligibility refers to individuals’ eligibility for both Medicare and Medicaid coverage. Dual eligible individuals can combine the following options:

Medicare through Original Medicare (Part A or Part B);
The Medicare Advantage Plan (Part C);
Supplemental Medicaid coverage to pay for services not covered by Medicare.

Individuals with Medicare and full Medicaid insurance receive prescription drug coverage through Medicare Part D.

What is the Difference Between Medicare and Medicaid?