Medicare or Medicaid: Which one's right for you?

When the time comes (or maybe it’s already here), will you know whether you qualify for Medicare or Medicaid? And if you qualify for both, which should you join? If you’re already using one, would you get a better deal if you were using the other – or using both?

If you’re confused about Medicare and Medicaid, you’ve got company. Many people know that both are government-sponsored health insurance programs – and that’s where their knowledge ends. But there are big differences between Medicare and Medicaid, and understanding those differences could make a difference in your healthcare coverage and, ultimately, your health.
 

Medicare: The first half of the Medicare vs Medicaid question

Medicare is a federal health insurance program for anyone aged 65 or older.¹ But younger people can qualify for eligibility as well if they have specific disabilities or diseases such as end-stage renal disease or amyotrophic lateral sclerosis, better known by its acronym, ALS.²
 

There are four parts to Medicare:

• Part A: Hospital insurance (inpatient care)
• Part B: Medical insurance (outpatient care)
• Part C: Medicare Advantage (private insurance supplement)
• Part D: Prescription drug coverage

Medicare is not means tested. That means you can qualify for it regardless of the amount of money you do or don’t make. But the program isn’t free – it can include premiums, deductibles, copays, and coinsurance.³ While Medicare rates are the same throughout the country, your Medicare costs will vary based on the specific parts of Medicare you select, and the coverage options you choose.
 

Medicaid: The healthcare plan for people with low incomes

The other half of the Medicare versus Medicaid question is Medicaid. It differs in many ways from Medicare, most significantly in being means tested. Unlike Medicare, which is designed for older Americans and some others, Medicaid is designed for low-income individuals and has explicit income eligibility requirements.⁴

Another big difference from Medicare: While Medicare is funded and administered by the federal government, Medicaid is funded jointly by the federal and state governments and administered by the states. This means that you’ll need to look at Medicaid eligibility and benefits for the state in which you live. While the maximum income you can make and qualify for Medicaid varies by state, it’s generally below the federal poverty level.

Medicaid coverage includes both inpatient and outpatient hospital services, physician services, lab and x-ray services, nursing home care, and home health care. And because program features vary somewhat from state to state, some states add benefits such as prescription drugs, physical therapy, and dental services. All or most of this coverage comes at little or no cost to you, in contrast to the various payments that Medicare subscribers have. Some states charge small copayments for some services.⁵
 

Which one is right for you?

Medicare versus Medicaid: To determine which program is right for you, first consider several key factors: age, income, disability status, and coverage needs.

Age – If you’re 65 or older, you probably qualify for Medicare regardless of your income. If you’re younger than that, you can qualify for Medicaid if you meet the program’s requirements.

Income – Medicaid might be the better choice for you if you have limited income and resources, especially if you don’t meet Medicare’s other requirements. The lower costs associated with Medicaid are also a plus for lower-income individuals.

Disability status – If you have a disability or disease that’s specifically covered by Medicare, you might qualify for this program even if you’re younger than 65.

Coverage needs – Costs aren’t the only factor to consider when evaluating Medicare versus Medicaid. Medicare and your state’s Medicaid program likely cover different conditions and provide different benefits. Check them out to see which one covers more of what you need.
 

Dual eligibility: Having both Medicare and Medicaid

Medicare versus Medicaid might not be an “either/or” proposition for you. It might be more like having your cake and eating it, too. That’s because some people, dubbed “dual eligibles,” qualify for both programs. The primary groups in this category are low-income seniors and low-income younger people with Medicare-covered disabilities.⁶

If you’re one of the dual eligibles, you’ll use Medicare as your primary health insurance and pay premiums and other costs associated with your Medicare coverage. You’ll use Medicaid to pay for additional services that aren’t covered under Medicare, as well as to pay for Medicare premiums and out-of-pocket costs if your state’s Medicaid includes that benefit.
 

Should you switch – or add coverage?

If you qualify for dual eligibility, you then face the question of whether to switch from one program to the other, participate in both Medicare and Medicaid, or remain on just one program. Here’s a guide to making that assessment:

If you’re already enrolled in Medicare:

• Review your income and assets. If your financial situation has changed significantly you might qualify for Medicaid in addition to Medicare.
• Assess your healthcare needs. If you require services that Medicare doesn’t cover (such as home health care), Medicaid might be a smart add-on if you qualify for it.
• Check your out-of-pocket costs. Medicare’s premiums, deductibles and copays can easily add up. If meeting those costs is a challenge for you, you might benefit from adding Medicaid to your mix.

If you’re already enrolled in Medicaid:

• Monitor your age. As you approach 65, you’ll likely become eligible for Medicare. If you’re already receiving Social Security benefits, you might find that you’re automatically enrolled in Medicare Part A (hospital services) and Part B (physician services).
• Think about your disability status. If you have a qualifying disability, you might be eligible for Medicare before age 65.
• Consider your income. Medicaid isn’t a “qualify once, get benefits for life” proposition. If your income increases above Medicaid’s eligibility limits, you might find yourself disqualified from the program. In that situation, you should consider transitioning to Medicare (if you qualify) or other health insurance options.
   

How to apply for Medicare and Medicaid

To apply for Medicare, visit the Social Security Administration website (www.ssa.gov) or call 1-800-MEDICARE.

To apply for Medicaid, contact your state Medicaid agency or visit www.healthcare.gov to see if you qualify based on your state's rules.

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