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Understanding Medicare and Medicaid

Medicare and Medicaid were both created in 1965 by President Lyndon B. Johnson. Since then, both programs have significantly expanded in coverage and services provided. Today, nearly 60 million people are covered by Medicare, and nearly 70 million are covered by Medicaid. Both programs have become a vital part of the American healthcare system, offering seniors, the disabled and those living in poverty more affordable options to pay for doctor’s visits, drug prescriptions and hospital expenses.

For many older Americans who are beginning to consider their healthcare options, understanding the difference between the two programs can feel overwhelming. Over the years, many changes have been made to the programs, and some elderly Americans may find that Medicare and Medicaid are unrecognizable when they begin exploring their options. This guide can help readers differentiate between the benefits offered by the two programs, and figure out which program applies to them. Some elderly or disabled low-income Americans have dual eligibility, which means they qualify for both programs.

What benefits does Medicare provide?

The Medicare program has four parts, and each part offers different coverage options for qualified patients. Parts A, B, C and D each exist for a different purpose. It’s important for a patient to understand what he or she is enrolled in to know what medical treatments are covered.

Part A includes coverage for hospital visits, nursing facilities, home health services or hospice care. Americans age 65 or older are automatically enrolled for Part A Medicare. Americans who receive Social Security benefits do not need to make additional payments to remain enrolled in the program, while patients who are not eligible for Social Security benefits must pay a monthly fee. Patients enrolled through Part A Medicare must meet their deductible and then make co-payments for the rest of the year.

Part B includes outpatient visits, including check-ups, tests and preventative care. This part also covers medical supplies such as lancets and blood sugar testing meters. Part B costs include a monthly fee, a deductible and a 20 percent co-pay of a Medicare-negotiated price for specific equipment and doctor’s visits. Not all doctors agree to pay Medicare-negotiated prices. Patients must pay full price for some doctors.

Parts A and B are collectively referred to as Traditional Medicare. Patients with Part A and B will receive the same treatment for the same cost at any doctor or hospital in the country that accepted Medicare. However, it does not cover any treatment outside of the country. Parts A and B do not cover all treatments. Some patients also purchase Medigap coverage, which covers the cost of deductions, co-pays and other out-of-pocket medical expenses.

Part C, also known as Medicare Advantage, is a partnership program between private insurers and Medicare. Medicare Advantage includes coverage for services included in Part A and Part B. Insurers offer a variety of different Medicare Advantage plans, including Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans and Private Fee-for-Service (PFFS) plans among others. Some Medicare Advantage plans include dental, vision and general wellness coverage, and most cover Part D Medicare.

Part D is a private health plan that covers prescription drugs. Most Part C plans include Part D coverage, but patients can also obtain a Part D plan alone by paying an additional monthly premium. This plan was added to Medicare in 2006. Enrolling in it is not mandatory, but patients who do not enroll during the open enrollment period face significantly higher costs. There are a variety of options available depending on the level of prescription drug coverage a patient desires or requires.

What benefits does Medicaid provide?

Medicaid coverage is negotiated between the federal government and individual states, which means specific benefits vary by location. Each state will operate its program in a slightly different way. However, there are some services that every state must provide in order to receive federal funding for the program, including:

  • Inpatient and outpatient hospital services.
  • Early and periodic screening, diagnostic and treatment services.
  • Nursing facility and home health services.
  • Physician, pediatric and family nurse practitioner services.
  • Lab and x-ray services.
  • Family planning, freestanding birth center and nurse midwife services.
  • Transportation to medical care services.
  • Tobacco cessation counseling for pregnant women.
  • Federally qualified health center services.
  • Rural health clinic services.

Some states choose to expand their Medicaid coverage. These states may include services such as prescription drug coverage, vision or dental coverage, physical therapy, speech therapy and more. Patients should explore the policies of their individual states to determine the full extent of coverage available under Medicaid.

Which plans do I qualify for?

Medicare is automatically available to seniors when they turn 65 years of age. Those who have paid into Medicare taxes for at least 10 years, or whose spouses did so, are eligible for premium-free Medicare. Those who did not pay Medicare taxes for 10 years or more must pay a monthly fee. Patients who receive or are eligible to receive Social Security retirement or Railroad Retirement Board benefits can also get premium-free Medicare. People younger than 65 years of age can qualify for premium-free Medicare if they are a kidney dialysis or transplant patient, have Lou Gehrig’s disease, or have received disability benefits for at least 24 months.

Everyone must pay for Part B coverage, even if they are eligible for Part A coverage without premiums. Everyone with Medicare has access to Part D coverage if they wish to pay the extra monthly premiums. However, patients should enroll during the open enrollment period for Part D coverage.

Medicaid is available in all states to pregnant women and children up to age 19 living at or below 133 percent of the federal poverty level. It also includes caretakers of adult dependent children, the blind or disabled, Supplemental Security Income recipients and children in foster care up to age 26. Some states have expanded coverage to include all low-income adults below a particular percentage, while others restrict it to adults meeting the specified qualifications above.

Dual-eligibility refers to people who qualify for both Medicaid and Medicare services. There are nearly 12 million people who use both services. Such individuals are most likely to have chronic health issues, including mental health issues or comorbid chronic conditions, and require additional federal assistance. However, dual-eligibility qualification varies by state. The Federal Coordinated Health Care Office, also known as the Medicare-Medicaid Coordination Office, works to coordinate treatment for patients who utilize both programs.