Medicaid and Medicare: What’s the difference?

Medicare and the Medicaid both fall under the umbrella of the Social Security Act.  They were established in 1965 and sought to expand the budding safety-net for the elderly and the indigent.

Medicare’s first and foremost goal was the creation of a system that would guarantee that the elderly population’s medical care needs would be met.  While Medicare originally limited its benefits to individuals aged 65 and older, in 1972 Medicare coverage was expanded to also include those individuals who are severely disabled and because of their disability entitled to at least 24 months of disability benefits, and also to include patients who suffer from the advanced stages of kidney disease that require dialysis or a kidney transplant.  In 1973, the Medicare program was further extended to also include individuals who did not fall into any of the three categories previously mentioned, yet who wished to buy into it.

Medicare is a two-tier program that consists of a Part A and a Part B. Part A is the portion that deals with hospital insurance, while Part B is referred to as supplementary medical insurance. Part A goes into effect automatically when a person reaches age 65 or enters the 25th month of disability benefits, while Part B requires an application process.  Hospital insurance allows for an unlimited lifetime benefit of inpatient hospital stays and up to 100 days of subsequent skilled nursing care per benefit period.  Part A is not entirely free, and a co-payment is required. Hospital care benefits are extensive, and they include semi-private rooms, drugs, laboratory tests, and any medically necessary services, procedures, and supplies.  Skilled nursing care consists of the services covered by hospital care, but it also allows for rehabilitation therapy and appliances, such as oxygen tanks, C-Pap machines, apnea monitors, etc.  In conjunction with skilled nursing care, home health care may be used without limitation. In 1983, Medicare Part A was amended to also include hospice care for terminally ill patients whose life expectancy was six months or less, and who have chosen to no longer receive conventional treatments for their illness.

Medicare Part B is an optional coverage that must be purchased and paid for with monthly payments on a regular basis. While it appears that Part B and Part A overlap, the supplementary medical insurance actually goes further than Part A in that it covers services such as flu vaccinations, ambulance services, blood for transfusions, and other services and products not covered under Part A.

It is important to note that Medicare does not cover custodial care for individuals in need of round the clock treatment or long-term nursing home stays.  Additionally, dentures, dental care, glasses, hearing aids and prescription drugs are not covered.

Medicaid, on the other hand, sought to improve upon the medical care provisions that were available to those individuals who were eligible for public assistance. It is not an all-inclusive program, and a low income alone does not guarantee eligibility for the program benefits. In general, families who receive Aid to Families with Dependent Children (AFDC), pregnant women whose income falls below the poverty level, recipients of Supplemental Security Income (SSI) and adoption assistance are eligible to receive Medicaid benefits.

Medicaid has two loosely defined components that may or may not be available in each state.  If a state has a “medically needy” component to its Medicaid program, it will allow individuals who may have more income than the poverty level, yet who are burdened by extreme health care expenses, to receive benefits.  All states offer a “categorically needy” definition, and usually the benefits are more extensive than for individuals who take advantage of the “medically needy” program (if available).  Medicaid benefits will stop if individual eligibility criteria no longer apply. For example, if recipients of AFDC or SSI lose their eligibility to those programs, and if Medicaid coverage was received solely because of participation in those programs, then in addition to losing AFDC or SSI the individual will also lose Medicaid coverage.

While this could have catastrophic implications for a family, it is noteworthy that most states provide state-only programs that mimic Medicaid yet apply to those individuals who lose Medicaid eligibility, thus easing the transition.