Medicare vs Medicaid: What's the Difference?

Medicare and Medicaid sound almost identical, were created in the same year (1965), and both provide health coverage to millions of Americans. But they are fundamentally different programs serving different populations with different rules. Confusing them can cost you money or cause you to miss coverage you're entitled to.

This guide explains exactly how Medicare and Medicaid work, who qualifies for each, what they cover, how they affect your hospital bills, and what happens if you qualify for both.

The One-Sentence Difference

Medicare is health insurance for people 65 and older (and some younger people with disabilities). Medicaid is health insurance for people with low incomes. Medicare is based on age; Medicaid is based on income.

Side-by-Side Comparison

Medicare Explained

Who Qualifies

• Age 65 or older — If you or your spouse paid Medicare taxes for at least 10 years (40 quarters), you qualify automatically
• Under 65 with a disability — If you've received Social Security Disability Insurance (SSDI) for 24 months
• Any age with End-Stage Renal Disease (ESRD) — Kidney failure requiring dialysis or transplant
• Any age with ALS — Amyotrophic lateral sclerosis (Lou Gehrig's disease)

Medicare Part A: Hospital Insurance

Part A covers:

• Inpatient hospital stays — Room, meals, nursing care, medications, lab tests, and surgeries during a hospital admission
• Skilled nursing facility care — Up to 100 days following a qualifying hospital stay (not long-term/custodial care)
• Home health care — Skilled nursing and therapy if you're homebound
• Hospice care — End-of-life care for terminal illness

Cost for 2026:

• Premium: $0 for most people (if you or your spouse paid Medicare taxes for 10+ years)
• Deductible: $1,676 per benefit period (not per year — a new benefit period starts after 60 days out of the hospital)
• Days 1–60: $0 after deductible
• Days 61–90: $419/day coinsurance
• Days 91+: $838/day (lifetime reserve days — you only get 60 total)

Medicare Part B: Medical Insurance

Part B covers:

• Doctor visits — Office visits, specialist consultations
• Outpatient care — Surgery, ER visits (even if not admitted), physical therapy
• Preventive services — Annual wellness visit, screenings, vaccinations
• Durable medical equipment — Wheelchairs, walkers, oxygen equipment
• Lab tests and imaging — Blood work, X-rays, CT scans, MRIs
• Mental health services — Therapy, psychiatric care
• Ambulance services — When medically necessary

Cost for 2026:

• Premium: ~$185/month (higher for incomes above $106,000)
• Deductible: ~$257/year
• Coinsurance: 20% of the Medicare-approved amount for most services

Important: Part B has no out-of-pocket maximum. That 20% coinsurance applies to every service with no cap. This is why many Medicare beneficiaries buy supplemental insurance (Medigap) or choose Medicare Advantage.

Medicare Part C: Medicare Advantage

Part C isn't a separate benefit — it's a way of receiving Parts A and B through a private insurance company instead of the government. Medicare Advantage plans:

• Must cover everything Original Medicare covers
• Often include prescription drugs (Part D), dental, vision, and hearing
• Usually have networks (HMO or PPO) and require referrals for specialists
• Have annual out-of-pocket maximums (Original Medicare doesn't)
• May charge different copays and coinsurance than Original Medicare

About half of Medicare beneficiaries now choose Medicare Advantage plans. Use our plan comparison tool to see how plans stack up in your area.

Medicare Part D: Prescription Drug Coverage

Part D covers prescription medications through private insurance plans. Key features:

• Monthly premiums vary by plan (typically $15–$90/month)
• Each plan has a formulary (list of covered drugs) — check that your medications are covered
• The "donut hole" coverage gap has been largely closed, but some cost-sharing differences remain at different spending levels
• Low-income beneficiaries may qualify for Extra Help (Low-Income Subsidy) to reduce Part D costs

Medicaid Explained

Who Qualifies

Medicaid eligibility is based primarily on income and varies significantly by state. General categories include:

• Low-income adults (expansion states) — In the 40 states that expanded Medicaid, adults under 65 with household income up to 138% FPL (about $20,783 for an individual) qualify
• Children — In most states, children in families up to 200–300% FPL qualify through Medicaid or CHIP
• Pregnant women — Generally up to 138–200% FPL (higher in some states)
• People with disabilities — Various pathways based on disability and income
• Seniors (65+) — Low-income seniors may qualify for Medicaid in addition to Medicare

What Medicaid Covers

Federal law requires all state Medicaid programs to cover certain "mandatory benefits":

• Inpatient and outpatient hospital services
• Physician services
• Laboratory and X-ray services
• Nursing facility services
• Home health services
• Family planning
• Pediatric and family nurse practitioner services
• Federally qualified health center services
• Transportation to medical appointments

Most states also cover "optional benefits" like:

• Prescription drugs
• Dental care
• Vision care
• Physical therapy and rehabilitation
• Mental health and substance abuse treatment
• Prosthetic devices

What Medicaid Costs You

Medicaid is designed to have minimal cost-sharing:

• Premiums: $0 in most states (some charge nominal premiums for higher-income enrollees)
• Copays: $0 to $4 for most services
• Deductibles: Generally $0
• No balance billing: Providers who accept Medicaid cannot bill you for any amount beyond the Medicaid copay

How Each Program Affects Your Hospital Bills

Hospital Bills with Medicare

If you have Medicare and are admitted to the hospital:

• Part A covers the hospital stay after you pay the deductible ($1,676 in 2026)
• Doctor services during your stay are covered by Part B (you pay 20%)
• The hospital must accept Medicare's payment as payment in full — they can't balance bill you beyond your cost-sharing
• If you have a Medigap (supplemental) policy, it may cover some or all of your deductible and coinsurance

For outpatient visits and ER trips that don't result in admission, Part B covers at 80% after your deductible. You pay 20% — which on a $10,000 ER bill could still be $2,000.

If you think your Medicare claim was processed incorrectly, you can file a Medicare appeal.

Hospital Bills with Medicaid

If you have Medicaid:

• Hospital services are covered with minimal or no cost-sharing
• The hospital accepts Medicaid's payment in full — no balance billing allowed
• You may owe a small copay ($1–$4) depending on your state
• If you weren't enrolled in Medicaid when you received care but later qualify, Medicaid can cover bills retroactively for up to 3 months before your application date

Retroactive coverage is a big deal. If you had a hospital visit in January and apply for Medicaid in March (and qualify), those January bills may be covered. Apply as soon as possible if you think you might be eligible.

Dual Eligibility: Having Both Programs

About 12 million Americans qualify for both Medicare and Medicaid — known as "dual eligibles" or "dually eligible beneficiaries." This happens when someone who qualifies for Medicare (usually seniors 65+) also has low enough income to qualify for Medicaid.

How Dual Coverage Works

• Medicare pays first (primary payer) for services both programs cover
• Medicaid pays second (secondary payer) for Medicare cost-sharing and services Medicare doesn't cover
• Medicaid may pay your Medicare Part B premium, deductibles, and copays
• Medicaid covers services Medicare doesn't, like long-term care, dental, vision, and transportation

Medicare Savings Programs

Even if you don't qualify for full Medicaid, you may qualify for a Medicare Savings Program (MSP) that helps pay Medicare costs:

• Qualified Medicare Beneficiary (QMB): Pays Part A/B premiums, deductibles, and coinsurance. Income limit: 100% FPL.
• Specified Low-Income Medicare Beneficiary (SLMB): Pays Part B premium only. Income limit: 120% FPL.
• Qualifying Individual (QI): Pays Part B premium only. Income limit: 135% FPL.

How to Apply

Applying for Medicare

• You're automatically enrolled if you're receiving Social Security benefits when you turn 65
• Otherwise, apply at ssa.gov, by phone (1-800-772-1213), or at your local Social Security office
• Initial Enrollment Period: 7 months around your 65th birthday (3 months before, birthday month, 3 months after)
• Missing the enrollment window can result in permanent premium penalties

Applying for Medicaid

• Apply through your state's Medicaid agency, Healthcare.gov, or your local Department of Social Services
• There is no limited enrollment period — you can apply any time
• Applications are typically processed within 45 days (90 days for disability-based applications)
• If approved, coverage is retroactive to the date of application (and up to 3 months prior for covered services)

Common Misconceptions

"Medicare covers everything"

It doesn't. Medicare has significant gaps: no long-term care, limited dental/vision/hearing, no out-of-pocket maximum on Part B, and 20% coinsurance on most services. This is why supplemental coverage (Medigap or Medicare Advantage) is important.

"Medicaid is only for people in poverty"

In expansion states, a single adult earning up to about $20,783/year can qualify. That's roughly $10/hour full-time. Children and pregnant women qualify at higher income levels. The income limits are higher than many people assume.

"I make too much for Medicaid"

Maybe, maybe not. Income is calculated using Modified Adjusted Gross Income (MAGI), which may differ from your take-home pay. Deductions, family size, and state-specific rules can make you eligible when you think you're not. It costs nothing to apply.

"If I have Medicare, I don't need to worry about hospital bills"

A 5-day hospital stay under Medicare Part A could cost you the $1,676 deductible. An outpatient procedure could leave you with 20% of a large bill. Without supplemental coverage, Medicare beneficiaries can face substantial out-of-pocket costs.

The Bottom Line

Medicare and Medicaid are both essential programs, but they serve different populations and work very differently:

• If you're 65+ or disabled: You likely qualify for Medicare. Consider supplemental coverage to fill the gaps.
• If you have low income: Check Medicaid eligibility in your state — there's no cost to apply and coverage is often retroactive.
• If you qualify for both: Dual coverage is extremely valuable. Medicaid covers what Medicare doesn't, and may pay your Medicare premiums and cost-sharing.

Don't leave coverage on the table. Use our plan comparison tool to evaluate your options, and check your state's Medicaid eligibility guidelines if you think you might qualify. Understanding your coverage is the first step to managing your healthcare costs.