Medicare and Medicaid Defined

First, we need to clarify the difference between Medicare and Medicaid. There always appears to be a little bit of confusion when it comes to the 2 government healthcare programs Medicaid and Medicare, but that is what we are here to clear up. Besides the closeness in the names, both programs are very different. Thus, in case you are curious as to which program is actually for you, here is what you have to know.

Who Administers the Program?

To start, you must understand that both programs are actually regulated by a department of the Human and Health Services Agency commonly known as CMS or Centers for Medicaid and Medicare Services. While the CMS directly oversees the Medicare program, it also is responsible for Medicaid Services (another Federal Program) working in conjunction with every state’s Social Services Department when it comes to Medicaid qualifications and rules.

Who Pays for These Programs?

Medicare-This program is federally funded, Medicare doesn’t rely on state funds, but rather 2 federal trust funds, Hospital Insurance (HI) Trust Fund and Supplementary Medical Insurance (SMI) Trust Fund. The Hospital Insurance Trust Fund is actually funded primarily by payroll taxes, income taxes, interest earned on trust funds, and those that have to pay Medicare Part A premiums paid while the Supplementary Medical Insurance Trust Fund is actually funded primarily by Medicare Part B premiums.

Medicaid—This program is actually funded at the Federal and state level. The federal government only chips in for a fraction of the program’s total expenditures with something called the Federal Medical Assistance Percentage (FMAP).

What’s The Difference Between Medicare and Medicaid?

Medicare and Medicaid are actually both government-funded and sponsored healthcare programs that offer benefits and coverage to Americans, so how are they different? Well, as mentioned above, Medicare is actually funded by a blend of premium payments and payroll/income taxes, where Medicaid is jointly funded by federal and state funds, but there is more. Here is a summary of how Medicaid and Medicare differ from each other.

Who Benefits?

Medicare is actually a program specifically geared towards American seniors. In addition, individuals who have been on disability for a set period are defined by Medicare. Medicaid, on the other hand, aims to offer health coverage for low-income Americans. The most effective way to remember which program is actually appropriate for you, Medicare is primarily designed for seniors (65 and older), and Medicaid is actually for low-income individuals or households at or below the poverty level. Every year the qualification levels vary so be sure to check with your local Social Services Department.


Both Medicare and Medicaid are very extensive government Health Insurance Programs. Yet, this is where the similarities end. Medicare is generally for people that are 65 or older or disabled receiving benefits from Social Security or the Railroad Retirement Board. On the other hand, Medicaid is for people with very limited income and need a “helping hand”. Remember, Medicare is governed by the Federal Government and Medicaid programs are governed by each state department of Social Services.

Please remember that Part A covers hospital stays and most inpatient services. Coverage includes a Semiprivate room, hospital meals, skilled nursing services, care in special units such as intensive care, drugs, medical supplies and medical equipment used during an inpatient stay, lab tests and x-rays while an inpatient, operating room and recovery, some blood transfusions in the hospital or skilled nursing facility, hospice care for terminally ill to include all medications to manage symptoms and control pain.

Part B covers care at a clinic or at the hospital as an outpatient including; doctors visits, wellness visits, ambulatory surgery, ambulance and ER services, skilled nursing services, clinical lab, x-rays, MRI, CT scan, EKGs, smoking cessation programs, obesity counseling, and cardiac rehab, diabetes screening, mental health care, and medical equipment for use at home.

Additionally, there are Medicare Advantage plans, Medicare Supplemental plans, and Medicare Part D plans (prescription coverage) that you are able to purchase to fill in any remaining gaps in coverage. Basically, based on what plans you choose, Medicare is able to cover all your health needs.

Medicaid, on the other hand, is actually a little different. Since Medicaid operates at the state level, the health benefits of yours may change based on where you live. Nevertheless, there are actually mandatory benefits that states are actually forced to cover.

States have the ability to provide optional benefits to Medicaid beneficiaries such as; prescriptions, physical therapy, occupational therapy, respiratory therapy, vision services, dental, hospice, chiropractic services to name a few.

What Does It Cost?

Since Medicaid is actually a low-income health care program, the expenses associated with it are actually minimal. Actually, some individuals might be qualified for free Medicaid, or perhaps heavily subsidized rates.

Medicare, on the other hand, can easily get pricey depending on the coverage you choose. Most Americans are actually eligible for free Medicare Part A, and that is the hospital insurance, but will have to pay a premium for Medicare Part B. The premium for Part B is actually determined by your income level. Many Americans are going to pay a monthly premium of $148.50 in 2021 for Part B coverage, and depending on income, that number could be as high as $504.90

Medicare Part C and Part D are sold through specially licensed insurance agents, so the pricing and plans will vary. Medicare Supplement (Medigap) plans are also purchased through private insurance companies using a licensed insurance agent.