Medicare and Medicaid are two separate government health insurance programs that serve different populations. Medicare is federal health insurance based primarily on age, covering people 65 and older regardless of income. Medicaid is a joint federal-state program based on income, covering people with limited financial resources. Some people qualify for both at the same time.
How Medicare Works
Medicare is available to anyone 65 or older, people under 65 with certain disabilities, and people of any age with permanent kidney failure or ALS. Your income doesn’t determine whether you qualify. You earn Medicare eligibility through age or medical condition, and enrollment happens through the federal government.
The program is divided into four parts, each covering a different category of care:
- Part A (Hospital Insurance) covers inpatient hospital stays, skilled nursing facility care, hospice care, and home health care. Most people don’t pay a premium for Part A if they or a spouse paid Medicare taxes while working.
- Part B (Medical Insurance) covers doctor visits, outpatient care, preventive services like screenings and vaccines, durable medical equipment such as wheelchairs and walkers, and home health care. The standard Part B premium is $185 per month in 2025, with an annual deductible of $257. Higher earners pay more.
- Part C (Medicare Advantage) is an alternative way to receive your Medicare benefits. These are bundled plans offered by private insurance companies that include Part A, Part B, and usually Part D coverage in a single plan. Most Medicare Advantage plans also offer extras that Original Medicare doesn’t cover, like vision, hearing, and dental.
- Part D (Drug Coverage) helps cover prescription drug costs, including many vaccines. You can add a standalone Part D plan to Original Medicare, or get drug coverage through a Medicare Advantage plan that includes it.
Parts A and B together make up “Original Medicare.” From there, you choose one of two paths: stay with Original Medicare (and optionally add a Part D drug plan), or switch to a Medicare Advantage plan that bundles everything together through a private insurer.
Medicare Enrollment Timing
Your Initial Enrollment Period lasts seven months: it starts three months before the month you turn 65 and ends three months after. If you miss this window, you may have to wait to sign up and pay a late enrollment penalty on your Part B premium for as long as you have coverage. The penalty increases the longer you delay, so enrolling on time matters.
How Medicaid Works
Medicaid provides health coverage to people with limited income, including children, pregnant women, parents, seniors, and individuals with disabilities. The program covers over 77.9 million Americans. Unlike Medicare, Medicaid is run jointly by the federal government and individual states, which means the rules, covered services, and income limits vary depending on where you live.
Federal law requires every state to cover certain groups: low-income families, qualified pregnant women and children, and people receiving Supplemental Security Income (SSI). Beyond these mandatory groups, states can choose to extend coverage further. One of the biggest decisions each state makes is whether to expand Medicaid eligibility to all adults earning up to 133% of the Federal Poverty Level.
Medicaid Income Limits
Eligibility is measured against the Federal Poverty Level, which in 2024 is $15,060 per year for a single person and $31,200 for a family of four in the contiguous United States. In states that have expanded Medicaid, adults generally qualify if their household income falls at or below 133% of those figures, roughly $20,030 for an individual. Children are covered at that threshold or higher in every state, and many states set their children’s income limits well above the standard.
As of late 2023, the majority of states have adopted Medicaid expansion. A handful have not, including Texas, Florida, Georgia, Mississippi, Tennessee, Wyoming, Kansas, Alabama, and South Carolina. In non-expansion states, adults without children or a disability often fall into a coverage gap where they earn too much for traditional Medicaid but too little for marketplace insurance subsidies.
A few states go beyond the standard expansion threshold. The District of Columbia covers adults up to 210% of the poverty level, while Minnesota and New York extend coverage to 200% through a combination of Medicaid and other state programs.
The Spend-Down Option
Some states offer a “medically needy” pathway for people whose income is slightly too high for Medicaid but who face large medical bills. This process, called a spend-down, works similarly to a deductible. Your medical expenses, including insurance premiums, copays, and costs for services not covered by other programs, are subtracted from your income. If the remaining amount drops to or below your state’s income threshold, you become eligible for Medicaid coverage. States set their own budget periods for this calculation, ranging from one to six months.
What Medicaid Covers That Medicare Doesn’t
Medicaid typically covers services that Medicare either doesn’t include or covers only in limited ways. Long-term nursing home care is the most significant example. Medicare pays for short-term skilled nursing stays after a hospitalization, but it doesn’t cover the kind of extended custodial care many older adults eventually need. Medicaid does. Personal care services, which help people with daily activities like bathing and dressing so they can remain at home, are another area where Medicaid fills a gap that Medicare largely leaves open.
Medicaid programs also tend to have little or no cost-sharing for enrollees. Premiums, copays, and deductibles are minimal or nonexistent for most Medicaid beneficiaries, while Medicare enrollees face monthly premiums, annual deductibles, and coinsurance on many services.
Qualifying for Both Programs
About 12 million Americans are “dual eligible,” meaning they qualify for both Medicare and Medicaid simultaneously. This typically applies to people who are 65 or older (or have a qualifying disability) and also have low income. For these individuals, Medicare serves as the primary insurer, covering hospital stays, doctor visits, and prescription drugs. Medicaid then acts as a supplement, picking up costs that Medicare doesn’t cover, like long-term care and personal care services, and often paying Medicare premiums, deductibles, and copays on the person’s behalf.
Navigating two separate programs with different rules can be complicated. To address this, several coordination models exist. Dual Eligible Special Needs Plans (D-SNPs) are Medicare Advantage plans designed specifically for people on both programs, bundling Medicare and Medicaid benefits into a single plan with one set of rules. The Program of All-Inclusive Care for the Elderly (PACE) provides comprehensive medical and social services to people 55 and older who need a nursing-home level of care but can live safely in the community. Both models aim to simplify what has historically been a fragmented system, giving dual-eligible individuals a single point of contact for their healthcare rather than forcing them to juggle two bureaucracies.
Key Differences at a Glance
- Who qualifies: Medicare is based on age (65+) or disability. Medicaid is based on income.
- Who runs it: Medicare is a single federal program with uniform rules nationwide. Medicaid varies by state.
- Cost to you: Medicare charges premiums, deductibles, and coinsurance. Medicaid has minimal or zero out-of-pocket costs.
- Long-term care: Medicaid covers extended nursing home stays and personal care. Medicare covers only short-term skilled nursing.
- Prescription drugs: Medicare covers drugs through Part D or Medicare Advantage. Medicaid covers prescriptions directly, with rules varying by state.