When discussing retirement planning with clients nearing retirement age, the subject of Medicare inevitably comes up at some point—often followed by a few questions.
There are some common misunderstandings about the difference between Medicare and Medicaid, and I’ve even heard people use the names interchangeably. Though similar-sounding, they are two different programs, each with their own eligibility requirements.
In a nutshell, Medicare is a federally run insurance program for Americans aged 65 and over, as well as disabled people of all ages, while Medicaid is a state-run assistance program, serving low-income people of all ages. Patients usually pay no part of costs for covered medical expenses. If you are 65 and have a low income, you might be eligible for both programs. It’s important to note that Medicare and Medicaid don’t necessarily cover the same healthcare services.
Medicare: The basics
In addition to the age requirement, a Medicare recipient or their spouse must have worked and paid taxes for at least 10 years. Income is not a consideration. Since Medicare is federally run, benefits are the same across the country. Patients pay a certain amount of medical costs through deductibles and small monthly premiums.
Medicare comprises several different sub-parts that insure the recipient for different types of healthcare services. For instance, Medicare Part B covers outpatient and doctors’ services, and Medicare Part D covers prescription drugs. Some people will choose a few different types of Medicare insurance, while others will choose to have only one type.
Medicare premiums are usually deducted from your Social Security benefit. If you are receiving Medicare but not Social Security, you must pay the premiums out of pocket. Your payment amount will depend on various factors such as your income, whether you are disabled or have a specific medical condition. There are discounts and payment assistance available if you cannot afford Medicare, and some people are covered by a combination of Medicare and Medicaid.
How Medicaid is different
Unlike Medicare, eligibility requirements for Medicaid can vary by state. Income requirements may also vary, and in some states, Medicaid is only available if you’re a child, pregnant, elderly or disabled. Some people pay a small copay for services while many pay nothing. Compared to Medicare, Medicaid recipients are more limited in their choice of healthcare services.
There are obviously more details and requirements specific to your situation that will come into play if you plan to sign up for either of these programs. For more information, visit the U.S. Department of Health’s website http://www.hhs.gov/answers/medicare-and-medicaid/what-is-the-difference-between-medicare-medicaid/index.html.
Source: The U.S. Department of Health and Human Services website, accessed July 2016.