Medicare and Medicaid: The Rundown

Jun 27, 2016

Medicare and Medicaid: The Rundown

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What is the difference between Medicare and Medicaid?

Both are government programs that assist people with paying for healthcare, but the words sound very similar, which causes a lot of people to get the terms confused. Below we have included a breakdown of each program and why they’re important.


Administered by the U.S. government in 1966, the social insurance program provides health insurance for citizens over 65 years old or those with disabilities. Just this year it has provided insurance for over 50 million Americans.

How does it help?

On average, Medicare covers about half (48 percent) of the health care charges for those enrolled. The enrollees must then cover the remaining approved charges either with supplemental insurance or with another form of out-of-pocket coverage. Out-of-pocket costs can vary depending on the amount of health care a Medicare enrollee needs.

The program is broken down into four different parts, A, B, C, and D. Part A covers hospital bills and medical expenses. This includes food, room and board, and medical tests. Part B covers other medical expenses like physicians, nursing, and other physical therapy visits. Part C covers other unforeseen expenses as well as offers a payment plan that was not implemented until 1996. Part D is the biggest portion of the program and it covers prescription drugs. The plan offers reduced prices for many prescription drugs that will be offered.

Medicare can be used to pay for a limited amount of long-term care. For example, Medicare will cover up to 100 days in a nursing home after your senior has spent 3 days in a hospital. It may be used to cover home care in some cases, but there are strict eligibility requirements.

Current Issues

There have been proposals to increase the additional premiums paid by the wealthiest people with Medicare, compounding several reforms in the ACA that would increase the number of wealthier individuals paying higher, income-related Part B and Part D premiums. Currently, only about 5 percent of participants have income-related insurance plans. Those who fall into a higher income bracket have been complaining about having a higher premium.

Some Medicare supplemental insurance (or “Medigap”) plans cover all of an enrollee's cost-sharing, insulating them from any out-of-pocket costs and guaranteeing financial security to individuals with significant health care needs. Lawmakers have argued that many are taking advantage of this system, seeking unnecessary procedures simply because they are covered. These expensive procedures will eventually increase the cost for other participants.


Unlike Medicare, this program is dedicated to low-income families. Beginning in the 1980’s, the program was designed to help those who could not afford health insurance. After Obama’s election, The Affordable Care Act was then significantly expanded to cover more insurance plans.

How does it help?

Under managed care, Medicaid recipients are enrolled in a private health plan, which receives a fixed monthly premium from the state. The health plan is then responsible for providing for all or most of the recipient's healthcare needs. The annual costs vary from state to state, as do the insurance plans.

Current Issues

Many politicians have tried to abolish the Medicaid program, and instead want to turn over the program over to private insurers. Experts claim that it will continue to grow and become an ever-larger share of our federal budget. Most Members of Congress are looking for ways to get our fiscal house in order. However, cutting the program would leave many low-income families and those with disabilities, left without a safety net and potentially no health care.

This could cause many people in need (elderly, low-income families, veterans) fighting for a smaller amount of resources. Currently, no action has been taken, but the future of this program is uncertain. 

Medicare and Medicaid: The Rundown
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