Understanding Medicare and Medicaid

Medicare. Medicaid. Medical bills. If it feels like the healthcare system is just throwing M-words at you, you’re not alone. When you’re planning for aging care, trying to figure out what’s covered (and what’s not) by government programs can be confusing, but that’s where we can help you out. 

While both are government programs and cover medical expenses, they differ significantly in what expenses they cover and who is eligible for them. We’ll help you make sense of Medicare and Medicaid so you can plan for your aging care like a pro. 

First, let’s start with the program that covers everyone over the age of 65. Medicare is the federal health insurance program that covers all people over the age of 65. Adults with certain disabilities or medical conditions may also qualify at a younger age. Medicare is essentially acute care, which means it will cover major medical expenses from hospitals and physicians. 

When you become eligible for Medicare, you’ll need to choose between the two primary types: Original Medicare and Medicare Advantage. Both types of Medicare include different parts.

Original Medicare is comprised of Parts A and B. Part A (Hospital Insurance) helps cover in-patient expenses such as hospital stays, skilled nursing facilities, hospice care, and some short-term home health care. Part B (Medical Insurance) can help cover preventative care like screenings, vaccines, and yearly wellness visits; out-patient care such as physician visits, lab work, and x-rays; and durable medical equipment like wheelchairs, walkers, and hospital beds. Original Medicare lets you use any doctor or hospital in the U.S. that takes Medicare, but there is no yearly limit on what you’ll pay out-of-pocket. 

On the other hand, Medicare Advantage is a Medicare-approved plan from a private company. It operates like a group health insurance plan, which means you need to receive primary care services from a provider in your network plan and service area. Unlike Original Medicare, Medicare Advantage does have a yearly limit, so you’ll pay nothing for the services in Part A and B once you reach your deductible. 

Medicare will pay for services once the following conditions are met:

• You had a recent prior hospital stay of at least three days. 

• You are admitted to a Medicare-certified nursing center within 30 days of your prior hospital stay (not all facilities are Medicare-certified). 

• You need skilled care such as physical therapy or skilled nursing services. To qualify for skilled nursing facility care, your doctor must certify that you need daily skilled care (like intravenous fluids/medications or physical therapy), which you can only get as a skilled nursing facility inpatient.¹ 

If you meet all these conditions, Medicare will cover costs for a certain number of days: 

• Days 1-20: Medicare covers 100% of the costs. If you’re in a Medicare Advantage Plan, you may be charged copayments during the first 20 days.² 

• Days 21-100: You pay up to $209.50 per day. 

• After 100 days: You are responsible for the full cost of your care for each day you remain in a nursing center.³ 

It’s important to note here that while Medicare can cover some select home health care services, such as skilled nursing and physical therapy, for a short period of time, it does not cover most long-term care expenses, such as home care, assisted living communities, and nursing homes.

For more information on Medicare, you can read the Medicare and You U.S. government handbook. 

While Medicare is a federal program for everyone of a certain age, Medicaid is a joint federal and state public assistance program administered by states, that helps you pay for most health and aging care services if you have a low income or a disability. 

Since it’s a joint program there are some federal regulations that all Medicaid programs follow, but eligibility requirements can vary between states so it’s important to check what your state’s income thresholds which you can research here. 

Medicaid benefits can be split into two categories: mandatory benefits and optional benefits. States are required to provide all the Mandatory benefits and can choose to provide optional benefits.⁴ 

Partial list of mandatory Medicaid benefits: 

• Transportation to medical care 

• Inpatient hospital services 

• Outpatient hospital services 

• Rural health clinic services 

• Early and periodic screening, diagnostic and treatment services (EPSDT) 

• Nursing home services 

• Home health services 

• Physician services 

• Federally qualified health center services 

• Laboratory and X-ray services 

• Nurse midwife services 

• Certified pediatric and family nurse practitioner services 

Partial list of optional Medicaid Benefits: 

• Prescription drugs 

• Clinic services 

• Physical therapy 

• Occupational therapy (thinking and movement) 

• Speech, hearing and language disorder services 

• Respiratory care for ventilator-dependent individuals 

• Other diagnostic, screening, preventive and rehabilitative services 

• Dental services 

• Dentures 

• Prosthetics (to replace missing or damaged body parts) 

• Eyeglasses 

• Other practitioner services 

• Private duty nursing services 

• Personal care 

• Hospice 

• Case management 

• Services for individuals who are over the age of 65 in an institution for mental disease (IMD) 

• Services in an intermediate care facility for individuals with intellectual disability 

• Self-directed personal assistance services 

• Community first choice option 

• TB-related services 

• Inpatient psychiatric services for individuals under age 21 

• Other services approved by the Secretary of Health and Human Services 

• Health homes for enrollees with chronic conditions

You can access the full list of mandatory and optional Medicaid benefits here. 

That was a lot of information! Now that you know the fine details of Medicare and Medicaid, let’s look at the broad strokes. Here’s a breakdown: 

Medicare

• Eligibility: Age 65+ or disability

• Services Provided: Acute medical care and short-term rehabilitation

• Long-term care coverage: Limited (short-term skilled nursing care

• Cost: Cost-sharing for many services

Medicaid

• Eligibility: Income- and asset-based 

• Services Provided: Long-term care for people with low incomes

• Long-term care coverage: Extensive (nursing homes, in-home care) 

• Cost: Minimal costs for those who are eligible 

Planning for long-term care is an important part of your aging journey, especially since 70 percent of people over the age of 65 are expected to need some type of long-term care during their lifetime.⁵ 

But what if you need long-term care, but don’t qualify for Medicaid? That’s where long-term care insurance comes in.

Long-term care insurance is a policy that helps reimburse long-term care expenses for your ongoing care for the services that can be commonplace as you age in settings such as home care, assisted living communities, nursing homes, and adult day care. 

1. "Medicare will cover all my long-term care needs."

We mentioned this above, but it’s important to repeat, Medicare is not designed for long-term care. It will cover your major medical expenses such as hospital stays, surgeries, and some short-term home health care services.

2. "I’ll lose everything to qualify for Medicaid."

To qualify for Medicaid, you must meet certain income and asset limits. If you’re considering Medicaid, talk with your family or financial advisors to see if you should consider spending down your assets and lowering your income. 

3. "Medicaid is only for nursing home care"

Each state is different, but Medicaid can cover all kinds of long-term care like nursing homes, assisted living communities, and in-home care. 

Navigating Medicare and Medicaid can be complex (the names alone can confuse people). As you plan for care, consider how Medicare and Medicaid can benefit you.

It can also help to talk with your loved ones or financial advisor to see how Medicaid planning, long-term care insurance, or a combination of resources can ensure you get care that's right for you.