The core difference: who runs it and who it covers

Medicare is a federal insurance program run by the Centers for Medicare & Medicaid Services (CMS). You pay into it through payroll taxes during your working years, and you become may be able to access at age 65 regardless of income. It covers hospital care, doctor visits, and prescription drugs.

Medicaid is a joint federal and state program. Each state designs and runs its own Medicaid program within federal guidelines, which is why coverage and income limits differ from state to state. Medicaid is means-tested, meaning your income and assets determine whether you may have access to. It covers low-income individuals, families with children, pregnant people, seniors, and people with disabilities.

The simplest way to remember the difference: Medicare is based on age and work history; Medicaid is based on income and need. You can have both at the same time — this combination is sometimes called "dual may be able to access."

Key Takeaways

  • Medicare is a federal program for people 65 and older, funded through payroll taxes you paid during your working years.
  • Medicaid is a state-run program for low-income individuals and families, with income limits that vary by state and may be able to access category.
  • Medicare has the same rules nationwide; Medicaid rules and coverage differ significantly depending on which state you live in.
  • You can be enrolled in both programs at the same time if you meet the age and income requirements for each.
  • Neither program covers long-term care or nursing home stays in full, though Medicaid covers more of these costs than Medicare does.

Who pays for each program

Medicare is funded through a combination of payroll taxes (you and your employer each pay 1.45% of wages), premiums you pay monthly once enrolled, and general federal tax revenue. When you turn 65, you are automatically enrolled in Medicare Part A (hospital insurance) if you have worked and paid taxes for at least 10 years. You choose whether to enroll in Part B (doctor and outpatient care) and Part D (prescription drugs), though waiting to enroll can result in permanent penalties.

Medicaid is funded jointly by federal and state governments. The federal government sets minimum standards, but each state decides how much to contribute, which income levels may have access to, and which services to cover beyond the federal minimum. This is why a person with the same income might may have access to for Medicaid in one state but not in another.

Income limits and how they work

Medicare has no income limit. A millionaire and a person living in poverty can both have Medicare at age 65. However, higher-income Medicare enrollees pay higher premiums for Part B and Part D coverage.

Medicaid has strict income limits that vary by state and by category. For example, a parent caring for children may have a higher income limit than a single adult without dependents. Some states expanded Medicaid under the Affordable Care Act to cover adults earning up to 138% of the federal poverty level; others did not expand and maintain lower limits. You need to check your specific state's rules to know whether you may have access to.

Income is calculated differently for each program too. Medicare counts your modified adjusted gross income (MAGI) from your tax return. Medicaid typically counts gross monthly income but may exclude certain types of income depending on your state and category.

What each program covers

Medicare Part A covers inpatient hospital stays, skilled nursing facility care (up to 100 days per benefit period), hospice, and some home health care. Part B covers doctor visits, outpatient surgery, diagnostic tests, and preventive care. Part D covers prescription drugs. Medicare does not cover dental, vision, hearing aids, or long-term custodial care in a nursing home.

Medicaid covers doctor visits, hospital care, emergency services, prescription drugs, and preventive care — similar to Medicare in many ways. But Medicaid also covers services Medicare does not: dental care, vision care, hearing aids, and crucially, long-term care in a nursing home or assisted living facility. This is one reason Medicaid is often the primary payer for nursing home residents. Medicaid coverage varies by state; some states offer more generous mental health, substance abuse, or therapy services than others.

If you have both Medicare and Medicaid (dual may be able to access), Medicare is your primary payer for most services, and Medicaid covers what Medicare does not, including the gaps in coverage and services Medicare excludes.

Out-of-pocket costs you will face

Medicare requires you to pay premiums, deductibles, and copayments. Part A has a deductible of $1,676 per benefit period (as of 2024, though this amount changes yearly). Part B has a monthly premium (around $175 for most people in 2024) and a $240 annual deductible. Part D premiums vary by plan. You also pay 20% coinsurance for most Part B services after you meet the deductible. These costs add up, which is why many Medicare enrollees buy supplemental insurance (Medigap) to cover the gaps.

Medicaid typically has lower or no out-of-pocket costs. Most states charge little to no premium for Medicaid, and copayments are usually small or waived for low-income enrollees. However, Medicaid can place a lien on your estate after you die to recover costs for long-term care services, which is an important consideration for people with assets.

How to enroll in each program

You enroll in Medicare automatically at 65 if you are receiving Social Security benefits. If you are not yet receiving Social Security, you must enroll yourself through Medicare.gov or by calling 1-800-MEDICARE. There is a seven-month window around your 65th birthday to enroll without penalty. If you miss this window, you pay a permanent 10% increase to your Part B premium for each year you delayed.

Medicaid enrollment happens through your state. You contact your state's Medicaid agency or apply online through your state's health insurance marketplace. Some states use a simple online form; others require more documentation. Processing times vary, but most states aim to make a decision within 30 days. You can apply any time of year; there is no enrollment period like there is for Medicare.

State differences in Medicaid that matter

Because Medicaid is state-run, the program you have access to depends entirely on where you live. Some states expanded Medicaid to cover more low-income adults; others did not. Some states cover dental and vision services; others do not. Some states have higher income limits for parents; others have lower ones. A person earning $20,000 per year might may have access to for Medicaid in one state and not in another.

If you move to a different state, your Medicaid coverage may change. You will need to reapply in your new state, and you may lose coverage temporarily during the transition. This is an important consideration if you are planning to relocate and rely on Medicaid for health insurance.

Frequently Asked Questions

Can I have Medicare and Medicaid at the same time?

Yes. If you are 65 or older and have low income, you may may have access to for both. Medicare is your primary insurance, and Medicaid covers costs Medicare does not, including premiums, deductibles, and services like dental and nursing home care. People with both are called "dual may be able to access."

Do I have to pay for Medicare?

Most people do not pay a premium for Part A if they worked and paid Medicare taxes for at least 10 years. Part B and Part D require monthly premiums. Higher-income enrollees pay higher premiums. You also pay deductibles and copayments when you use services.

What happens to my Medicaid if I turn 65?

You become may be able to access for Medicare at 65. If your income is low enough, you keep Medicaid too and become dual may be able to access. If your income is above your state's Medicaid limit, you lose Medicaid coverage and rely on Medicare alone. Contact your state Medicaid agency before you turn 65 to understand how the transition will work for you.

Does Medicaid cover nursing home care?

Yes, Medicaid covers long-term care in a nursing home if you meet income and asset limits. Medicare covers only the first 100 days of skilled nursing care after a hospital stay. This is one of the biggest differences between the two programs and a major reason people on Medicaid can afford nursing home care.

Why do income limits for Medicaid differ by state?

Each state receives federal funding but decides how much of its own money to spend on Medicaid. States with more funding can cover more people and set higher income limits. States that did not expand Medicaid under the Affordable Care Act have lower limits. This creates significant variation in who qualifies depending on geography.