Medicaid and Medicare are two distinct programs that can help seniors pay for healthcare expenses. Knowing the differences between the two can help you pay for out-of-pocket medical expenses. Simply put, Medicaid is a public assistance program based largely on financial need and paid for with tax dollars. Medicare is a health insurance policy specifically for seniors, and for qualifying people under the age of 65 with certain disabilities. Learn more about the differences between Medicaid and Medicare and how both programs can help seniors pay for medical expenses.
Medicaid is a federal program funded by both the state and the federal government. Largely based on financial need, Medicaid provides health insurance to low-income Americans of all ages. Specifics of the program vary in each state but there are standard federal guidelines that govern Medicaid.
Medicaid covers similar expenses to Medicare. However, unlike Medicare, Medicaid will also cover custodial care and nursing home care. Custodial care, or care that helps people with daily activities, like dressing, eating, and personal grooming, is often needed for seniors, especially for those living with dementia. Additionally, Medicaid is the primary provider of long-term nursing home care but depending on income and tax deductions, many end up having to cover at least a portion of the cost.
Beyond the mandatory federal guidelines of coverage, some states provide additional coverage of prescription drugs, physical therapy, occupational therapy, optometry, chiropractic care, dental services, and other medical costs.
Applying for Medicaid
Applying for Medicare varies in each state and the process can be lengthy, taking weeks and sometimes months. The application process can also require a medical screening and an extensive review of medical records.
Recipients of Medicaid must demonstrate financial need. Income standards are based on the Federal Poverty Level and each state has specific income requirements. Eligibility is based off an individual’s Modified Adjusted Gross Income (MAGI) along with an evaluation of assets and tax deductions. Some states have a “medically needy program,” which makes income requirement exceptions for cases involving exceptionally high medical expenses.
Unlike Medicaid, Medicare is not based on financial need. Medicare is essentially a health insurance policy offered for people 65 and older, and for certain people who are disabled in qualifying ways. Taxpayers who have paid Medicare taxes (usually taken out automatically, similar to Social Security) while working are eligible for Medicare at age 65.
Medicare has four parts and some parts require a monthly premium payment.
- Part A: Covers hospital care and the cost of being in a medical facility.
- Part B: Covers doctors, medical tests, and procedures. This is a more comprehensive component and does require a monthly premium. Not all visits, tests, and procedures are covered and the patient may be responsible for paying what is not paid for by Medicare.
- Part C Medicare Advantage: An alternative to traditional Medicare coverage, this includes Parts A, B, and D of Medicare. This can be administered by private insurance companies.
- Part D Prescription Drug Coverage: Part D is also administered by private insurance companies. This is required coverage unless covered by another insurance source and requires a monthly premium.
It is important to note that traditional Medicare is not a comprehensive health insurance plan and having only the minimum coverage will result in gaps. Additionally, Medicare does not cover long-term care expenses, like custodial care. Most nursing home care is considered custodial care.
Have you taken advantage of Medicaid and/or Medicare? How have these programs helped you pay for quality senior care? Share your personal experiences with us in the comments below. We’d love to hear from you!