Many people in the United States still wonder what is the difference between Medicare and Medicaid, two of the most essential public health programs. Although their names sound alike, they serve different groups of Americans and are funded and managed differently. Understanding these differences is vital — especially as healthcare costs continue to rise and eligibility rules evolve in 2025.
This guide clearly explains how each program works, who qualifies, what services they cover, and how both programs can overlap to protect millions of Americans.
Table of Contents
Medicare: Federal Health Insurance for Seniors and Disabled Individuals
Medicare is a federal health insurance program primarily designed for:
- Americans aged 65 and older, regardless of income
- Certain younger people with disabilities
- People diagnosed with End-Stage Renal Disease (ESRD) or ALS (Lou Gehrig’s disease)
Created in 1965, Medicare is run entirely by the federal government through the Centers for Medicare & Medicaid Services (CMS). Workers contribute to Medicare through payroll taxes during their employment years. Once eligible, beneficiaries can choose from several coverage options, each designed for specific healthcare needs.
The Four Parts of Medicare
| Part | What It Covers | Key Details |
|---|---|---|
| Part A (Hospital Insurance) | Inpatient hospital stays, skilled nursing care, hospice, and some home health services | Usually premium-free for those who worked at least 10 years |
| Part B (Medical Insurance) | Doctor visits, preventive care, outpatient care, medical supplies | Requires a monthly premium ($185 in 2025, expected to rise to $206.50 in 2026) |
| Part C (Medicare Advantage) | Combines Parts A and B, often includes prescription, dental, and vision coverage | Offered by private insurers approved by Medicare |
| Part D (Prescription Drugs) | Helps cover the cost of medications | Premiums vary by plan and income |
Medicare operates the same across all states — it’s a uniform national program. Most Americans automatically qualify for Medicare when they turn 65, but some may enroll earlier if they receive Social Security Disability Insurance (SSDI).
Medicaid: A Federal and State Program for Low-Income Americans
Medicaid is a joint federal and state program that provides free or low-cost health coverage to people with limited income and resources. Unlike Medicare, Medicaid eligibility depends largely on income and family size, not age.
Medicaid serves several groups, including:
- Low-income adults and children
- Pregnant women
- People with disabilities
- Seniors who need long-term care
Each state runs its own Medicaid program following federal guidelines, meaning benefits, eligibility, and coverage levels vary by state. However, all states must provide core benefits such as hospital services, doctor visits, lab tests, and preventive care.
Key Medicaid Facts (2025 Update)
- Coverage Expansion: As of 2025, 41 states (plus Washington, D.C.) have expanded Medicaid under the Affordable Care Act (ACA), offering coverage to adults earning up to 138% of the federal poverty level (FPL).
- Low or No Cost: Medicaid enrollees generally pay little or nothing for coverage. Some states may require small copayments, but no one can be denied essential care due to inability to pay.
- Long-Term Care: Medicaid is the largest payer of long-term care in the U.S., covering nursing home and home-based assistance for eligible seniors — a service Medicare mostly doesn’t cover.
Major Differences Between Medicare and Medicaid
| Feature | Medicare | Medicaid |
|---|---|---|
| Purpose | Health insurance for seniors and certain disabled individuals | Health coverage for low-income individuals and families |
| Funding | Fully federal (through payroll taxes and federal funds) | Jointly funded by federal and state governments |
| Administration | Federal (same rules nationwide) | Managed by each state (rules and coverage vary) |
| Eligibility | Based on age or disability | Based on income and need |
| Costs | Monthly premiums, deductibles, and copays | Usually free or very low cost |
| Coverage for Long-Term Care | Limited | Comprehensive long-term care coverage |
| Uniformity | Same nationwide | Varies by state |
While both programs cover doctor visits, hospital stays, and preventive services, their eligibility rules, costs, and administration differ significantly.
Dual Eligibility: When a Person Qualifies for Both Programs
Some individuals qualify for both Medicare and Medicaid, known as dual eligibility. This group typically includes seniors or disabled adults with limited income and assets.
For these beneficiaries:
- Medicare acts as the primary insurance, covering hospital and medical services.
- Medicaid serves as secondary coverage, paying for premiums, deductibles, copayments, and additional services like long-term care.
In 2025, about 12 million Americans are dual eligible. Many of them receive their benefits through special Dual Eligible Special Needs Plans (D-SNPs) — a type of Medicare Advantage plan designed to coordinate benefits from both programs.
Recent Developments in Medicare and Medicaid (2025)
Medicare Updates
- Premium Adjustments: The Part B premium increased to $185 per month in 2025, with a projected rise to $206.50 in 2026.
- Drug Price Reforms: Under new legislation, Medicare began negotiating prices for certain high-cost prescription drugs, aiming to lower costs for seniors.
- Telehealth Services: Medicare continues to permanently expand telehealth access, especially for rural and homebound beneficiaries.
- Out-of-Pocket Cap: Starting in 2025, Medicare Part D introduces a $2,000 annual cap on drug costs, reducing financial strain for seniors with expensive prescriptions.
Medicaid Updates
- Post-Pandemic Eligibility Redetermination: States have resumed reviewing enrollees’ eligibility after continuous coverage protections ended, which may result in some losing coverage if their income exceeds state limits.
- Maternal Health Coverage: Many states have extended postpartum Medicaid benefits from 60 days to 12 months, supporting maternal health and reducing complications after childbirth.
- Mental Health Expansion: Medicaid programs in multiple states have increased coverage for behavioral health and addiction treatment, addressing the nation’s mental health crisis.
How to Apply for Medicare and Medicaid
Applying for Medicare
- If you already receive Social Security benefits, enrollment in Medicare Part A and Part B usually happens automatically at age 65.
- If not, you can apply online at ssa.gov or by visiting your local Social Security office.
Applying for Medicaid
- Apply anytime through your state Medicaid agency or online at HealthCare.gov.
- You’ll need to provide proof of income, citizenship or legal status, and household size.
- Eligibility is determined by state standards, which often consider income as a percentage of the Federal Poverty Level (FPL).
For individuals who qualify for both programs, Medicaid enrollment typically begins after Medicare approval.
Medicare and Medicaid: Working Together for America’s Health
Both Medicare and Medicaid serve as the foundation of the U.S. healthcare system, protecting millions of seniors, families, and vulnerable citizens. While Medicare provides essential healthcare for older adults and those with disabilities, Medicaid ensures access to care for those with lower incomes.
In many cases, the two programs complement each other—ensuring that no one goes without the medical services they need.
If you’re nearing retirement or have questions about eligibility, take time to understand your options. Knowing the difference between Medicare and Medicaid can help you choose the right coverage and avoid costly gaps in care.