Medicare and Medicaid are government programs that provide medical and other health services to some individuals in the United States. Medicaid is a social welfare program, and Medicare is a social insurance program.

Both Medicare and Medicaid help people pay for healthcare, but they are different programs. The Centers for Medicare and Medicaid Services (CMS), a division of the Department of Health and Human Services (HHS), oversees both.

These two programs differ in various ways, including eligibility and coverage. However, some people may qualify for both Medicare and Medicaid.

Read on to learn more about the differences between Medicare and Medicaid.

Glossary of Medicare terms

We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:

  • Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
  • Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
  • Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this is 20%.
  • Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.

The biggest difference between Medicare and Medicaid is eligibility. Medicaid typically serves low income households. Medicare, on the other hand, is typically available to people over the age of 65 years or those with certain health conditions or disabilities.

Medicaid does not have the age limits that Medicare does. It also offers benefits that Medicare does not typically cover.

People with Medicare usually pay part of the costs through deductibles, coinsurance, and premiums for medical and drug coverage. People with Medicaid do not usually pay anything for covered medical expenses, though they may pay a small copayment for some services.

Medicare and Medicaid statistics

  • More than 72 million people were enrolled in Medicaid as of July 2024.
  • In 2023, Medicare had more than 66.7 million enrollees.
  • Medicaid, Medicare, the Children’s Health Insurance Program (CHIP), and other health insurance subsidies represented 24% of the 2023 federal budget, according to the Center on Budget and Policy Priorities.

Medicaid is a means-tested health and medical services program for low income households with few resources. Individuals must meet certain criteria to qualify. These criteria vary between states.

Federal authorities primarily oversee Medicaid, but each state is responsible for:

  • establishing eligibility standards
  • deciding service type, amount, duration, and scope
  • setting the rate of payment for services
  • administering the program

Each state makes the final decisions regarding what their Medicaid plans provide. However, they must meet certain federal requirements to receive federal matching funds.

Not all insurance providers accept Medicaid. Users should check their coverage before receiving healthcare.

People who do not have private health insurance can seek help at a federally qualified health center (FQHC). These centers provide coverage on a sliding scale, depending on the person’s income.

Examples of Medicaid benefits include:

  • doctor services
  • nursing services for people of 21 years or more
  • family planning services and supplies
  • rural health clinic services
  • home healthcare for people eligible for skilled nursing services
  • laboratory and X-ray services
  • pediatric and family nurse practitioner services
  • nurse-midwife services
  • FQHC services and ambulatory services
  • inpatient psychiatric services for people under the age of 21 years

States may also choose to provide additional services and still receive federal matching funds.

Each state sets its own Medicaid eligibility guidelines. The program aims to support people in low income households. However, other eligibility requirements relate to:

  • assets
  • age
  • pregnancy status
  • disability status
  • citizenship

For a state to receive federal match funding, it must provide Medicaid services to individuals in certain categories of need.

For example, a state must provide coverage for some individuals who receive federally assisted income maintenance payments and similar groups who do not receive cash payments.

The federal government also considers some other groups to be mandatory populations. People in these groups must also be eligible for Medicaid.

They include:

  • children under the age of 18 years whose household income is at or below 138% of the federal poverty level (FPL)
  • people who are pregnant with a household income below 138% of the FPL
  • people who receive Supplemental Security Income (SSI)
  • parents who earn an income that falls under the state’s eligibility for cash assistance

States may also choose to provide Medicaid coverage to other, less well-defined groups who share some characteristics of the above.

These groups may include:

  • pregnant individuals, children, and parents earning income above the mandatory coverage limits
  • some adults and older adults with low incomes and limited resources
  • people who live in an institution and have low income
  • certain adults who are older, have vision loss or another disability, and have an income below the FPL
  • individuals without children who have a disability and are near the FPL
  • “medically needy” people whose resources are above the eligibility level their state has set

Medicaid does not provide medical assistance to all people with low income and low resources.

The Affordable Care Act (ACA) of 2012 gave states the option to expand their Medicaid coverage. In the states that did not expand their programs, several at-risk groups are not eligible for Medicaid.

These include:

  • adults over the age of 21 years who do not have children and are pregnant or have a disability
  • working parents with incomes below 44% of the FPL
  • legal immigrants in their first 5 years of living in the United States

Medicaid does not pay money to individuals but sends payments directly to healthcare professionals.

States make these payments according to a fee-for-service agreement or through prepayment arrangements, such as Health Maintenance Organizations (HMOs). The federal government then reimburses each state for a percentage share of their Medicaid expenditures.

This Federal Medical Assistance Percentage (FMAP) changes each year and depends on the state’s average per capita income level.

In the financial year 2023, according to data by the KFF, the federal government paid 68.9% of Medicaid costs, and states covered 31.1%.

In the states that chose to expand their coverage under the ACA, more adults and families on low incomes are eligible, with the new provision allowing enrollment at up to 138% of the FPL. In return, the federal government covers all expansion costs for the first 3 years and 90% of the costs moving forward.

Medicare is a federal health insurance program that funds hospital and medical care for people over the age of 65 years in the United States. Some people with certain conditions, such as end stage renal disease (ESRD) and amyotrophic lateral sclerosis (ALS), also benefit from Medicare.

The program consists of different parts. Part A provides hospital insurance, and Part B provides medical insurance. Part D covers prescription drugs. Part C, or Medicare Advantage, combines parts A and B, and the plans may also offer additional benefits.

Medicare Part A

Medicare Part A helps pay for:

Payroll taxes cover the costs of Part A, so it is not usually mandatory to pay a monthly premium. However, anyone who has not paid Medicare taxes for at least 40 quarters will need to pay the premium.

If a person needs to pay a premium, the Medicare Part A premiums are either $285 or $518 in 2025, depending on how long an individual or their spouse has paid Medicare taxes.

Medicare Part B

Medicare Part B, or outpatient medical insurance, helps pay for specific services.

These services include:

  • medically necessary doctor’s visits
  • outpatient hospital visits
  • home healthcare costs
  • services for older adults and those with a disability
  • preventive care services

For Part B, people must pay a monthly premium, which in 2025 is $185 per month. They must also meet an annual deductible of $257 a year before Medicare covers treatment.

Premiums might be higher, depending on the person’s income and current Social Security benefits.

After meeting the deductible, most people on a Medicare plan will need to pay 20% of costs approved by Medicare.

Enrollment in Part B is voluntary.

Medicare Part D

Several private insurance companies administer Medicare’s Part D prescription drug coverage. Plans vary in cost and cover different drugs.

A person must pay an additional premium with Part D. The amount can depend on a person’s income.

Medicare Advantage

Medicare Advantage, or Part C, are private insurance plans that offer the same coverage as parts A and B. They may also offer additional services, such as dental, vision, and hearing care.

Some Advantage plans team up with HMOs or Preferred Provider Organizations (PPOs) to deliver preventive healthcare or specialist services.

Other plans focus on people with specific needs, such as individuals living with diabetes.

Medigap

If Medicare does not cover a medical expense or service, a person may wish to take out a Medigap plan for supplemental coverage.

Private companies also offer Medigap plans. Depending on the individual plan, Medigap may cover:

  • copayments
  • coinsurances
  • deductibles
  • care outside of the United States

If a person has a Medigap policy, Medicare will first pay their eligible portion. Afterward, Medigap will pay the rest.

To have a Medigap policy, a person must have Medicare parts A and B and pay a monthly premium.

Medigap policies do not cover prescription drugs.

An individual must be at least one of the following to be eligible for Medicare:

  • over age 65 years
  • under age 65 years and living with a specific condition, such ALS
  • any age with ESRD or permanent kidney failure needing dialysis or a transplant

They must also be a U.S. citizen or permanent legal resident for 5 years continuously and eligible for Social Security benefits with at least 10 years of contributing payment.

Dual eligibility

Some people may be eligible for both Medicaid and Medicare.

Currently, 12 million people have both types of coverage, including 7.2 million older adults with a low income and 4.8 million people living with a disability. This accounts for over 15% of people with Medicaid enrolment.

Provisions vary depending on the U.S. state in which a person lives.

Most of the funding for Medicare comes from payroll taxes under the Federal Insurance Contributions Act and the Self-Employment Contributions Act.

Typically, the employee pays half of this tax, and the employer pays the other half. This money goes into a trust fund that the government uses to reimburse doctors, hospitals, and private insurance companies.

Additional funding for Medicare services comes from premiums, deductibles, coinsurance, and copayments.

Medicare resources

For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.

Medicare and Medicaid are both government funded health insurance covers. They differ by eligibility and coverage.

Medicaid is generally for people in low income households. Medicare is health coverage for those over age 65 years or those under age 65 years and living with a disability.

Services and costs may vary from state to state. A person should check what their coverage and personal costs will be based on the state in which they live.