Jeremy Ohara

Jeremy Ohara

Medicare vs. Medicaid: What’s the Difference?

  Jan 17, 2024
Reviewed by Ravinder Kaur

Key Takeaways

  • Medicare and Medicaid are the two prominent healthcare programs offered by the Govt. of the United States of America.
  • Both plans are divided into various parts, highlighting a different set of rules and regulations.
  • Medicare and Medicaid are both distinguished based on different target groups, eligibility criteria, funding, etc. 

In healthcare in the United States, two prominent government programs, Medicare and Medicaid, play vital roles in providing medical coverage and assistance to specific groups of individuals. Whereas both programs aim to improve healthcare access and affordability, they differ in eligibility, funding, coverage, and administration.

Medicare: Federal Health Insurance for Seniors and Disabled Individuals


Medicare is a federal health insurance program primarily designed for individuals aged 65 and older. Additionally, it provides coverage for certain individuals under 65 with qualifying disabilities. The authority responsible for running the programs is the Centers for Medicare & Medicaid Services (CMS), which ensures consistent standards for costs and coverage across the nation.


This graph shows the number of dollars (in Billions) spent from 1970 to 2021.

1.1. Eligibility and Coverage

To be eligible, individuals must either be 65 or older and have paid the required taxes during the period they were working or have certain disabilities as specified by the Social Security Administration. The coverage is divided into several parts:

1.1.1. Part A (Hospital Insurance)

Part A covers inpatient hospital care, skilled nursing facility care, hospice care, and home health care services. Most beneficiaries do not pay a premium for Part A if they or their spouse have paid taxes during the time they are working.

1.1.2. Part B (Medical Insurance)

Part B covers outpatient services, such as doctor visits, preventive care, and medical supplies. Beneficiaries pay a monthly premium for Part B coverage.

1.1.3. Part C (Medicare Advantage)

Medicare Advantage plans, or Part C, are offered by private insurance companies approved by the authority. These plans combine Part A and Part B benefits and may include prescription drug coverage (Part D). Beneficiaries may pay additional premiums for Advantage plans.

1.1.4. Part D (Prescription Drug Coverage)

Part D offers prescription drug coverage through approved private insurance plans. Beneficiaries pay a monthly premium, a yearly deductible, and copayments or coinsurance for their medications.

1.2. Funding and Administration

The Funding comes from two trust funds held by the U.S. Treasury: the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund. Beneficiaries contribute to the program through premiums, deductibles, and coinsurance, and the federal government also provides funding.

Medicaid: Joint Federal and State Program for Low-Income Individuals


Medicaid is a joint federal and state program that aims to assist individuals with limited income and resources to cover their medical costs. The program was established alongside Medicare in 1965, and whereas the federal government sets general guidelines for Medicaid, each state operates its program. Consequently, eligibility criteria and benefits can vary significantly from state to state.

2.1. Eligibility and Coverage

Medicaid primarily targets low-income individuals and their families who meet specific income and asset criteria. The program provides comprehensive coverage for various healthcare services, including doctor visits, hospital care, long-term care, and preventive services. Unlike the previous version, Medicaid covers services not typically covered by Medicare, making it a safety net for those with limited financial resources.

2.2. Cost-sharing

Sometimes, Medicaid recipients do not pay for medical expenses except small co-payments. The cost-sharing amount can differ among states and depends on income level and the services received.

2.3. Recent Developments

As states adapt to the evolving healthcare landscape, Medicaid continues to undergo significant changes. Some states have expanded their Medicaid programs under the Affordable Care Act (ACA), providing coverage to a broader range of low-income individuals. Medicaid expansion has been vital in increasing healthcare access and reducing the number of uninsured Americans.

Differences between Medicare and Medicaid


3.1. Target Groups

The primary difference between both plans lies in their target groups. Medicare primarily serves individuals aged 65 and older and those with qualifying disabilities, regardless of their income level. In contrast, Medicaid is specifically designed for individuals with very low incomes, regardless of age.

This map shows the rate of change in the spending of their funds in Medicaid. With 4.9 being an average of 50-state change.

3.2. Eligibility Criteria

Eligibility for Medicare is generally determined by age or disability status, on the other hand, Medicaid eligibility is based on income and asset thresholds set by each state. 

As a result, individuals may be eligible for both programs simultaneously, commonly known as “dual-eligibility,” in which case the two programs can work together to provide comprehensive coverage and reduce out-of-pocket costs.

3.3. Funding and Administration

This plan is funded through payroll taxes, premiums, and other contributions from beneficiaries, with additional funding provided by the federal government. 

In contrast, Medicaid is jointly funded by the federal government and individual state budgets, with the federal government matching a percentage of the state’s spending.

3.4. Coverage and Benefits

Medicare provides comprehensive coverage for various medical services, including hospital care, medical visits, and prescription drugs. It also offers different plans, such as Medicare Advantage (Part C) and prescription drug plans (Part D), allowing beneficiaries to customize their coverage to some extent.

On the other hand, Medicaid covers a broader range of services and plays a vital role in supporting vulnerable populations, including pregnant women, children, and low-income adults. It covers long-term care expenses, such as nursing home care, not included in Medicare or private insurance coverage.

Medicare and Medicaid are decisive pillars of the U.S. healthcare system, providing medical coverage and assistance to distinct groups of individuals. Medicare primarily serves seniors and individuals with disabilities, whereas Medicaid focuses on supporting low-income individuals and their families. 

Understanding the differences between these programs is necessary for individuals seeking appropriate healthcare coverage based on their unique circumstances.