Medicare vs. Medicaid

Medicare and Medicaid are two separate, government-run health benefits programs. Each one generally serves a different group of Americans, though some people may qualify for both.

Each is funded by different elements of the government, but both are administered by the U.S. Centers for Medicare & Medicaid Services.

While Medicare eligibility coverage is the same across the United States, eligibility for Medicaid varies from state to state. That’s because Medicaid is jointly funded by the federal government and the various states. Different states set different rules.

Medicaid provides health care coverage for roughly one in every five Americans — 63.9 million people, according to the U.S. Centers for Medicare & Medicaid Services. Two-thirds of all Medicaid spending is directed for the care of the elderly and disabled.

Because Medicaid is jointly funded by the federal government and the various states, eligibility requirements vary from state to state.

Some states may also allow out-of-pocket fees for such things as copayments if you are on Medicaid. But children and people living in nursing homes or other institutions are usually exempt from these costs.

Applying for Medicaid varies from state to state. It can take weeks or months after you apply before you find out if you qualify for benefits. States may also require you to take a medical exam or provide documentation of your past and current financial status.

Income Requirements

The size of your household determines the federal poverty level for your household. The larger your family, the higher your income can be and still qualify.

The federal government sets new federal poverty guidelines each year. The levels are the same for the 48 contiguous states. Alaska and Hawaii each have their own levels.

For households with more than eight people, the guidelines add a fixed additional amount for each additional member.

Medicaid Costs

Medicaid costs can vary from state to state. Since Medicaid is tailored to people with limited ability to pay out-of-pocket costs, for the most part, states are prohibited from charging premiums to anyone whose income is less than 150 percent of the FPL.

States must also limit total out-of-pocket costs to five percent or less of family income. States also may not require certain groups of people to pay a greater share of the costs for certain medical services they receive.

However, the federal government has granted waivers to some states allowing them to charge higher premiums or to require people to pay a greater share of the costs for services.

The term “dually eligible beneficiaries” usually applies to people enrolled in Medicare and Medicaid at the same time.

You may qualify for dual eligibility if you are eligible for full Medicare and meet the eligibility requirements for Medicaid or for one of four Medicare Savings Programs that provide assistance or cost sharing.

Dual Eligible Special Needs Plans

People who are dual eligible for Medicare and Medicaid may be able to enroll in a Dual Eligible Special Needs plan, also known as D-SNP.

Any D-SNP provides at least the same coverage as Medicare Part A and Part B along with Part D prescription drug coverage. But they usually include more coverage on top of that.

Extra benefits can include dental, hearing and vision coverage, help buying health-related products and transportation assistance to get to and from a health care provider.

A Dual Eligible Special Needs plan will not replace your existing Medicaid plan or change your eligibility for the program.

If you receive Social Security Disability Insurance (SSDI) benefits, you will automatically qualify for Medicare. If you receive Supplemental Security Income (SSI) benefits, you will also receive Medicaid.

SSDI beneficiaries have to wait two years after they start receiving SSDI payments to receive Medicare benefits. They may also qualify for dual eligibility while on SSDI and may also be eligible for Medicaid coverage. In this case, they will typically receive Medicaid payments for the first two years and will have Medicare premiums paid through Medicare Savings Programs when those payments start.

SSI beneficiaries can’t receive Medicare benefits — only Medicaid coverage — until they turn 65 or have end-stage renal disease. They will have to file an “Uninsured Medicare Claim” to start receiving Medicare when they qualify. They may also have to sign up for Medicaid separately if they receive SSI benefits. This varies by state.

Both Medicare and Medicaid are funded by taxpayers. But the mechanisms by which each is funded are different.

Medicare accounts for 21% of all health care spending in the United States and 12% of the federal budget, according to the Kaiser Family Foundation.

Medicare is funded from general revenues of the federal government, FICA payroll taxes and Medicare premiums paid by beneficiaries.

Taxes on Social Security benefits and payments by states also help fund Medicare.

Money to fund Medicare is placed into two trust funds — the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund.

The HI fund pays for Medicare Part A costs, and the SMI fund pays for Medicare Part B and Part D costs. Each also pays for Medicare’s administrative costs.

Money in the trusts can only be used for Medicare.

Medicaid is funded jointly by the federal government and individual states.

The federal government pays states a specific percentage of what the state spends on Medicaid services. This amount is called the Federal Medical Assistance Percentage (FMAP).

The FMAP is calculated using a formula that considers the average per capita income for each state and compares it to the national average. The federal share of Medicaid funding varies from state to state, but the federal government pays at least 50% of each state’s Medicare costs.

States are required to show they can pay for their share of the costs under their state Medicaid plan.

Each state may set how much they pay doctors, hospitals and other providers — but the rates must be within federal requirements. If states want to change the way they pay providers, they have to first have the Centers for Medicare & Medicaid Services review and approve the changes.

The Centers for Medicare & Medicaid Services (CMS) received $200 million through the CARES Act for the agency’s COVID-19 response in 2020.

The CARES Act is a $2.2 trillion economic stimulus package in response to the COVID-19 pandemic. It was signed into law on March 27, 2020. CARES stands for Coronavirus Aid, Relief, and Economic Security in the act’s title.

At least half of the CARES expenditure had to be spent on nursing home inspections — with a priority placed on nursing homes in places with high community transmission of the coronavirus.

While some of the benefits of CARES Act funding were meant to be temporary — during the COVID-19 pandemic — items such as expanded telehealth services were popular enough for CMS to consider making them permanent.