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Medicare and Medicaid: What is the Difference?
Gail Carlson, MPH Ph.D, State Health Education Specialist, University of Missouri Extension
Most Americans are confused about the difference between
Medicare, Medicaid and Medigap. Medicare and Medicaid
programs are government programs created as part of the
Social Security Act of 1965. Medigap is an insurance
policy offered by private insurance companies to fill
the “gaps” in coverage for Original Medicare. Here is a
brief summary of the three programs.
Medicaid
Medicaid is a health insurance program
financed and run jointly by the federal and state
governments for low-income people of all ages who do not
have the money or insurance to pay for health care. The
goal of the program is to provide medical and other
health care services to eligible individuals so that
they are able to remain as self-sufficient as possible.
Medicaid is a state administered program. Each
state sets its own guidelines, subject to federal rules
and guidelines. Certain services must be covered by the
states in order to receive federal funds. Other services
are optional and are elected by states.
Services that are often provided are:
- health screening and services for children,
- hospital and physician services,
- laboratory services and X-rays,
- care in nursing homes or
- home health care services.
Medicaid eligibility in nearly every state is limited
to:
- low-income children,
- pregnant women,
- families with dependent children,
- persons who are blind or disabled, and
- persons 65 or older.
Other eligibility requirements must also be
met.
Medicare
Medicare is a federally funded and
administered program that provides health
insurance for older Americans and those who are disabled.
Individuals contribute to Medicare during their working
years, just as they do to Social Security. Since
Medicare is a federal program, eligibility guidelines
and services are much the same all over the country.
People eligible for the program include:
- most persons over the age of 65,
- persons with disability status, or
- persons with irreversible kidney failure.
There are a number of Medicare plan choices. Two of the
most widely available plans are Original Medicare and
Medicare Advantage.
Original Medicare Plan
The Original Medicare Plan is available nationwide and
is a pay-per-visit health plan. You can go to any health
care provider who accepts Medicare and is accepting new
Medicare patients. There are usually coverage “gaps” or
costs that you must pay, such as deductibles, copayments
and coinsurance. Some people buy a Medigap policy to
cover these gaps in coverage (see Medigap below).
The Original Medicare Plan has two parts. Part A provides hospital insurance and Part B, which is optional, provides medical insurance. If someone chooses Part B, a monthly premium is deducted from his or her Social Security benefits. Insurance coverage for prescription drugs is a new benefit added on January 1, 2006. Insurance companies and other private companies work with Medicare to offer the drug benefit. Costs vary depending on which plan is selected by the individual.
Medicare Advantage Plan
Medicare Advantage Plans are available in some parts of
the country. These are managed care Medicare plans.
Medicare pays a set amount of money for your care every
month to these private health plans whether or not you
use services. In most of these plans, generally there
are extra benefits and lower co-payments than in the
Original Medicare Plan. However, you may have to see
doctors that belong to the plan or go to certain
hospitals to get services. If you enroll in a Medicare
Advantage Plan, you probably won’t need a Medigap policy
because Medicare Advantage Plans usually provide a wider
range of services.
Medicare does not cover all health care services, nor
does it pay the entire cost of all the services that it
does cover.
Medigap
Medigap insurance is also known as Medicare
supplement insurance. A Medigap policy provides
reimbursement for the out-of-pocket costs that are not
covered by Original Medicare. Gaps in the Original
Medicare Plan consist of deductibles, coinsurance and
co-payments that the individual is responsible for
paying. Medigap policies are sold by private health
insurance companies. There are 12 standardized policies,
called Plans “A” through “L.” Each plan has a different
set of benefits. Not all companies sell all 12 policies.
When purchasing Medigap insurance, shop around. Policies
offering the same benefits can vary greatly in price.
Since the plans are standardized they are easy to
compare across companies. In addition, you want a policy
that truly supplements Medicare — one that will cover
that portion of the bill not covered by Medicare, as
well as covering some additional health services not
provided by Medicare. Also consider your own situation;
not everyone needs a Medigap policy. For example, you
might not need a Medigap policy if you have a Medicare
Advantage Plan or a supplemental health insurance plan
through your former employer.
While much has remained constant in Medicare and
Medicaid since these programs were created 40 years ago,
both programs have also changed a great deal. Faced with
an aging population, rising health care costs and
decreasing availability of employer-sponsored health
insurance, governments are debating how to maintain
these programs and control costs. In spite of these
concerns, Medicaid and Medicare play a major role in
providing health care coverage for people of all ages.
Medigap policies can further reduce health care costs
for individuals who have Original Medicare. For more
information about Medicare, Medicaid and Medigap contact
the Centers for Medicare and Medicaid Services at
877-267-2323 or visit the Centers’ Web site
http://www.cms.hhs.gov/ Another good reference is
the official Medicare Web site:
http://www.medicare.gov/default.asp.
Source: Centers for Medicare and Medicaid Services http://www.cms.hhs.gov/
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Last Updated 05/05/2009
