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Medicare vs. Medicaid: What’s The Difference?

Medicare and Medicaid are often confused for one another because they have similar sounding names. While both are government-funded programs that cover healthcare costs, they serve different populations.

Put simply, Medicare provides care for the elderly and disabled while Medicaid provides care for individuals with limited income. An easy way to remember the difference is: MediCARE provides CARE for the elderly while MedicAID provides AID for those with limited income.


Medicare is a federal program funded by a combination of payroll taxes, premiums and surtaxes from Medicare beneficiaries, and general revenue. U.S. citizens 65 and older as well as those with certain disabilities are eligible. In 2017, over 59 million people were enrolled in Medicare. According to the Henry J Kaiser Family Foundation, 15% of federal funding was spent on Medicare-related costs.

In order to qualify for Medicare, you must fit one of the descriptions below:

  • You are 65 years or older and a US citizen or have been a permanent legal resident for 5 continuous years and you or your spouse (or qualifying ex-spouse) has paid Medicare taxes for at least 10 years.
  • You are under 65, disabled, and have been receiving either Social Security SSDI benefits or Railroad Retirement Board disability benefits; You must receive one of these benefits for at least 24 months from date of entitlement (eligibility for first disability payment) before becoming eligible to enroll in Medicare.
  • You are get continuing dialysis for end stage renal disease or need a kidney transplant.

If you qualify, you can determine the extent of coverage you’d like. Medicare has four parts:

  • Part A is hospitalization coverage.
  • Part B is medical insurance.
  • Part C, also known as Medicare Advantage, is offered by private companies approved by Medicare. Typically these plans cover A, B, D and additional services like vision, hearing, and dental coverage. Medicare pays a fixed amount to these companies directly.
  • Part D is prescription drug coverage.

Part A and B are paid for by payroll taxes and social security deductions. Part C and D are paid out-of-pocket.


Medicaid is joint-funded by state and federal governments. The extent to which the federal government contributes to funding in states varies. Medicaid covered 74 million individuals, 1 in 5 Americans, in 2017.

Unlike Medicare, services offered through Medicaid vary state to state. However, some services are deemed mandatory for states to provide while others are optional. See the list here. Optional service coverage will vary state to state.

Eligibility requirements also vary state to state. Income requirements for states with expanded Medicaid can qualify based on income alone. You can check if you’re eligible using this tool. If your state does not have expanded Medicaid, they will take into account income, disability, age, and more. Because each state is different, the only way to know if you qualify is by putting in an application.

Once enrolled in Medicaid, costs can include premiums, deductibles, copays and coinsurance. This will depend on your income and the rules of your state. Some groups are exempt from most out-of-pocket costs.

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