Comparing Medicare and Medicaid: How to Explain the Difference to Your Employees

Medicare and Medicaid: Their names are similar. They even start with the same letter! Both are government programs. Both are administered by the Centers for Medicare & Medicaid Services (CMS). And both help people pay for health care. So, it’s not surprising that people have a hard time telling them apart.

But what we’ve listed above is where the similarities end. So, what is the difference between Medicare and Medicaid? Let’s take a closer look.

What is Medicare?

Medicare is a federal health insurance program designed for people who are 65 years of age or older and for younger people who qualify based on a disability, end-stage renal disease, or Lou Gehrig’s disease (ALS). Medicare is an “entitlement” program. That means your employees or their spouses have already paid for Medicare through their taxes.

There are four types of Medicare:

• Part A: Hospital insurance that covers inpatient hospital stays and hospice, post-hospital nursing facility, and home health care
• Part B: Medical insurance that covers basic doctor and lab costs and limited outpatient medical services, including physical therapy and some medical equipment and supplies
• Part C: Private companies offer Medicare Advantage plans, which can supplement Medicare Part A and Part B coverage
• Part D: Prescription drug coverage, which pays some of the costs of prescription medication, shots, and vaccines

What is Medicaid?

Medicaid is a social welfare program that provides comprehensive health coverage for eligible low-income adults. Some children, pregnant women, elderly adults, and people with disabilities may also be eligible for Medicaid coverage.

Each state runs its own Medicaid program, so people have to qualify under their state’s rules. (Confusingly, some states use a different name to refer to Medicare. So, for example, in California it’s Medi-Cal. In Vermont, it’s Green Mountain Care. And in Washington, DC, it’s Healthy Families.) Some states have multiple Medicaid managed care organizations (MCOs). If your state has more than one MCO, employees may be able to choose the MCO they prefer.

The Medicaid programs in every state are required to cover certain services, such as inpatient and outpatient hospital services, X-ray and lab services, nursing facility services, physician services, long-term nursing home care, home health care, transportation to receive medical care, and more. Some states may cover additional services, such as prescription drugs, dental care, podiatry, hospice care, occupational therapy, and physical therapy. You’ll need to check with your state Medicaid agency to determine what is and isn’t covered.

Now let’s review some of the other key differences between Medicare and Medicaid.

Who qualifies for Medicare and Medicaid coverage?

To qualify for Medicare, employees or their spouses must be US citizens or legal permanent residents. They must have worked and paid Medicare taxes for 10 years or longer.

Medicaid doesn’t require recipients to have paid any taxes to be eligible for coverage. In states that participate in the Affordable Care Act, adult legal residents and US citizens with incomes 138% below the poverty line qualify for Medicaid coverage. In 2022, this is $13,590 for a single adult, $18,300 for a couple, $27,750 for a family of four, and $46,630 for a family of eight. If a family’s income exceeds the Medicaid limit, but they can’t afford private health insurance, they can still get coverage for children under age 19 through the Children’s Health Insurance Program (CHIP).

Twelve states have rejected the Affordable Care Act. In these states, Medicaid coverage is limited to those who are low-income plus children, pregnant, elderly, blind, or disabled individuals.

In 32 states plus the District of Columbia, elderly, blind, or disabled people who are eligible for Supplemental Security Income (SSI) automatically qualify for Medicaid benefits.

How do employees apply for Medicare and Medicaid?

Employees who are eligible for Medicare should visit the Social Security Administration’s website during the open enrollment period between November 1 and December 15. They should click on the “Medicare Benefits” section, and then they can apply online. (If your employees are already receiving Social Security or Railroad Retirement Board benefits when they become eligible, they’ll be automatically enrolled in Medicare Parts A and B.)

Keep in mind that if your employees are turning 65, they should sign up within three months before or after their birthday to avoid penalties. Employees only have to apply for Medicare coverage once, though if they also sign up for a Medicare Advantage (Part C) plan, they’ll need to re-enroll annually.

Employees who are eligible for Medicaid in their state can enroll at any time during the year. For more information, employees can visit their state Medicaid agency website or apply through the Health Insurance Marketplace. It’s important to remind employees that they’ll have to recertify for Medicaid every year.

Do Medicare and Medicaid cover dependents?

Medicare covers spouses or ex-spouses. But it doesn’t cover children or other dependents unless they are independently eligible (because of a qualifying disability or disease).

Medicaid, on the other hand, does cover dependents, including children.

How much do Medicare and Medicaid cost?

For Medicare, employees typically won’t have to pay a premium for Part A. However, deductibles and coinsurance apply. For Part B, the standard premium for 2022 is $170.10. Employees who earn more than $91,000 per year, or couples that earn more than $182,000 per year, must pay more. This fee is typically deducted from Social Security or Railroad Retirement payments. Deductibles and coinsurance also apply for Part B. Medicare Part C and Part D coverage require employees to pay out of pocket.

For Medicaid, employees may qualify for no-cost healthcare services. Sometimes, employees may have to pay a small copay. Vision and dental coverage may also require a copay.

Can employees be eligible for Medicare and Medicaid at the same time?

Yes! Employees can qualify and sign up for both programs if they are over 65 or have a qualifying disability plus meet their state’s Medicaid income criteria. Dual enrollees typically use Medicare as their primary coverage, while Medicaid serves as their supplemental insurance.

Some people states have special dual plans. If employees in these states are fully dual eligible, they’ll receive full Medicaid benefits. Other employees may be partially dual eligible, which means they’ll receive Medicaid assistance to pay their Medicare premiums.

How ALEX can help

As your workforce matures, they’ll likely start having questions about what insurance plans they need for now and in the future. While you’re available to answer their questions, they don’t always pop up during the workday, and employees need to be able to find answers when it’s convenient to them.

That’s why we created ALEX: so employees get the help they need to make the right benefits decisions on a timeline that works for them.

ALEX Benefits Counselor helps employees engage better with your benefits plans and gives them valuable, personalized insights that lead to sound decisions and better financial outcomes — for your employees and for your company.