Home
Finance & Legal
Insurance

A 5 Minute Guide to Medicaid and Medicare for Older Adults

Understand the differences between Medicaid and Medicare.
June 25, 2024
•
min read
Share this GUIDE
Key Points
Table of Contents

Paying for Care

It’s likely that either Medicare or Medicaid will come into play in paying for your care. Learning how these programs reimburse different kinds of care will influence many decisions, like how much you should save and whether or not to buy long-term care insurance.

A thorough understanding of both programs takes ample research, and our favorite resources are Medicare.gov’s website and Medicare Interactive from the non-profit Medicare Rights.

To get started, we’ve created a five minute guide to understand the difference between Medicare and Medicaid.

The 5 Min Guide to Medicare and Medicaid

Medicare Medicaid
What was it created to do?
  • Fund medical care for the years of remaining life expectancy after people retire at 65.
  • Prior to this, when you retired, you lost your insurance because health insurance is tied to employment.
  • Pay for medical care for low income people of all ages.
How do you qualify for it?
  • Generally, Medicare is for people 65 or older.
  • You may be able to get Medicare earlier if you have a disability, End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant), or ALS (also called Lou Gehrig’s disease).
  • You qualify for Medicaid when you meet certain low income requirements.
  • In the case of long-term care, this usually happens after you’ve been in a nursing home for some period of time and paying for it has depleted your life savings.
What services does it cover?
  • There are two types of Medicare: Original Medicare, the traditional fee-for-service program offered through the government, and Medicare Advantage Plans, private insurance offered by companies that contract with Medicare.
  • Both have various parts that cover most basic physician and hospital services as well as medications. We dive deeper into this in the next section.
  • Because Medicaid is partially state funded, coverage varies by state.
  • Basic physician and hospital services as well as some medications are almost always covered.
What long-term care services does it cover?
  • Medicare is not a long-term payer for long-term care services, but will pay briefly for them on the heels of a hospitalization or after an acute illness.
  • Examples include short stay “subacute rehabilitation” in a nursing home after a hip fracture, or a visiting nurse to come see you at home after you’ve been hospitalized.
  • Medicaid is the major payer for long-stay nursing home care in the US, as any extended time in a nursing home will typically deplete a patient’s finances.
  • Medicaid may also pay for some long-term care services at home, but this varies considerably by state.
How is the plan funded?
  • Medicare is a federally funded program. As such, benefits are more uniform across states. A specific payroll tax funds the program.
  • Medicaid is funded through a combination of federal and state dollars. As a result, what’s covered varies by state.

Original Medicare and Medicare Advantage Plans

Once you become Medicare-eligible and enroll, you can choose to get your Medicare benefits from Original Medicare, the traditional fee-for-service program offered directly through the government, or from a Medicare Advantage Plan, a type of private insurance offered by companies that contract with Medicare.

Original Medicare includes Part A (inpatient/hospital coverage), Part B (outpatient/medical coverage), and Part D (prescription drug coverage). In most cases you will need to actively choose and join a stand-alone part D plan.

Medicare Advantage Plans, which are provided by private insurers, must provide all Part A and Part B services covered by Original Medicare, but can do so with different rules, costs, and restrictions that can affect how and when you receive care. Medicare Advantage Plans can also provide Part D coverage – drug coverage – within the plan. Medicare.gov’s website can help you get started picking a plan.

You are initially eligible when you return 65; this is called your Initial Enrollment Period. It lasts for seven months, starting three months before you turn 65, and ending three months after the month you turn 65.

What To Do Next
The Bottom Line
  • If you’re confused about navigating Medicare, the first step is to go to the “getting started” section of Medicare.gov’s website.
  • You can also call Medicare at 1-800-MEDICARE (1-800-633-4227).
  • For additional support, visit Medicare Interactive from the non-profit Medicare Rights.
About The Author