What is the Difference Between Medicare and Medicaid?


Medicare is a federal entitlement program designed to provide medical coverage to Americans aged 65 and over. The program also covers all those with End-Stage Renal Disease and many disabled individuals. There are five components of Medicare.

Part A  provides inpatient hospital coverage. Part B provides medical coverage for doctors’ visits, outpatient care, and some preventive services, and costs the same low monthly premium for almost everyone. Combined, Parts A and B make up Original Medicare.

Part C refers to the Medicare Advantage plans available through private health insurance companies which provide all the benefits of Parts A and B. Plans may also cover additional services, such as as vision, hearing, and prescription drug coverage for an extra monthly premium. Part D refers to prescription drug plans available through private insurers. The fifth component of Medicare is the Medicare Supplement Insurance, also know as Medigap. These plans are offered by private insurers to help fill in the gaps in coverage of Original Medicare, including co-payments, co-insurance, and deductibles. Medigap plans have an additional monthly premium.


Medicaid is a similar entitlement program meant to address the needs of a different population: the impoverished, children, pregnant women, and the disabled. Medicaid is a state-federal cooperative effort to provide basic medical assistance to individuals who cannot afford private health insurance on the individual market or through their employer. This means that the federal government contributes a certain portion of the funds necessary to maintain the program to each state, which then administers the program. Medicaid is known by many names, which varies on a state-by-state basis. Available benefits, services, and eligibility requirements also vary by state.

In practice, Medicaid works much like having private health insurance: enrollees are given a card to present at the doctor’s office and, if the doctor participates in Medicaid, the state will pay for the appointment minus the contribution of any other health insurance the individual carries. Medicaid covers the cost of most major medical expenses, such as in- and outpatient hospital care, laboratory services, home health care, nursing home care, and ambulance service. There are different eligibility requirements in each state, but all states have an income ceiling which recipients must be below.

Under the Medicaid umbrella, states have created different programs based on the demonstrated needs of their residents. For example, in most states, Medicaid funds have established programs to benefit pregnant women, the blind, and those requiring managed care. All states have implemented the federal State Children’s Health Insurance Program within their Medicaid plan, which provides basic medical insurance to all children (and sometimes their families, based on income). In some instances, individuals may be eligible for both Medicare and Medicaid, particularly disabled Americans.

Medicare vs Medicaid – A Closer Look

Medicare Compared to Medicaid