Know the nuances of Medicare and Medicaid to save money

Sorting through healthcare options feels like learning a new language. People toss around “Medicaid” and “Medicare,” often interchangeably — an easy mistake to make. The terms sound similar, and they’re both government programs that help with healthcare costs. But in reality, they’re designed for very different purposes and serve various groups of people.

Knowing the difference between the two is important for making informed decisions about your own healthcare coverage. One program is based on your age and work history; the other is based on financial need. Understanding which program you may qualify for — and what each covers — can save you time and money. So, let’s break down the key differences between Medicare and Medicaid to clear up the confusion once and for all.

The fundamental difference between Medicare and Medicaid

A common misconception is that Medicare and Medicaid are the same program, which is not the case, said Dominic Morrone, principal and president of the ABC Unit at World Insurance Associates.

Medicare is a federal health insurance program intended mainly for people with specific disabilities or those 65 and older. The federal government funds and sets the standards for Medicare.

Medicaid is a federal and state program providing health coverage to low-income people and families, pregnant women, children, and people with disabilities. The states jointly fund and administer their own Medicaid programs, determining eligibility and benefits within federal guidelines, he said.

How do you qualify for Medicare and Medicaid?

Medicare eligibility at age 65 generally requires having paid Medicare taxes for a certain period, said Morrone. If you’re under 65, it’s available if you’ve been receiving Social Security Disability Insurance (SSDI) benefits for at least 24 months. You may also be eligible if you’ve been diagnosed with a specific disease, like end-stage renal disease.

You qualify for Medicaid as an older adult if you meet your state’s income and asset limits. States typically require a low amount of countable assets (about $2,000 for an individual) and an income below a certain threshold. “There are a number of nuances that vary widely by state,” said Brett Koenig, managing partner at Senior Living Search Partners. “For example, some states have laws that allow most individuals who have been residents of an assisted living or memory care community for two or more years to benefit from government funds, even if they have personal assets. Other states have no such laws.”

What does Medicare cover?

Medicare typically covers medically necessary services like hospital stays and doctor visits, but excludes services such as long-term care, routine dental and vision care, and hearing aids.

Does Medicare cover long-term care?

“Medicare does not provide coverage for long-term care, should that care become necessary,” said Whitney Stidom, VP of consumer enablement at eHealth, Inc. “Medicaid will. Among retirees, one of the biggest misconceptions about Medicaid is that it’s only for the poorest of the poor. But about 20% of Medicare beneficiaries — one in five people — are also enrolled in Medicaid.”

What does Medicaid cover?

Medicaid can offer benefits Medicare doesn’t cover, such as nursing home care, personal care, transportation to medical services, home- and community-based services, dental, vision, and hearing services. Specific state rules dictate your eligibility and the plan coverage.

Can you have both Medicare and Medicaid?

Yes, you can have both if you are “dually eligible,” meaning you qualify for both. In that case, Medicare typically pays for services provided first, and Medicaid covers the remaining costs.

What are the main costs associated with Medicare?

The main costs for Medicare include its monthly premiums for Part B coverage, which are based on your income. “Part A and Part B also have deductibles you must pay before benefits kick in, and 20% coinsurance of the costs you pay after the deductible is met, with no out-of-pocket maximum,” said Morrone.

Why should you get supplemental health insurance?

The biggest misconception about Medicare is that it will cover all healthcare expenses. Original Medicare has significant coverage gaps and out-of-pocket costs. Without enrolling in Medicare Advantage or in a Medicare Supplement and Medicare Part D plan, you won’t have access to prescription drug coverage and may find your costs unsustainable on a limited budget, said Stidom.

Tips to figure out your healthcare options if you’re retiring soon

A little preparation can go a long way if retirement is looming on the horizon. First, if your employer offers retirement planning, take advantage of the option. But if you’re taking a DIY approach, follow Stidom’s suggestions:

1.   Know your financial picture and Medicaid eligibility

Get a clear picture of your retirement income — the first step in determining your eligibility for Medicaid. While primarily for people with limited income and resources, specific rules about who qualifies vary by state. Depending on where you live when you retire, this program could be part of your healthcare plan.

2.   Understand your Medicare choices

Medicare isn’t a one-size-fits-all solution. While Original Medicare (Parts A and B) provides essential hospital and medical coverage, it leaves you with pretty sizeable out-of-pocket costs and coverage gaps. Most people opt for additional coverage to help fill those gaps.

• Medicare Advantage (Part C): Private insurance companies offer these plans — a popular alternative to Original Medicare. They cover everything that Original Medicare does and often include prescription drug coverage and extra benefits like dental, vision, and hearing. Today, more than half of all Medicare beneficiaries are enrolled in a Medicare Advantage plan.
• Medicare Supplement (Medigap) Plans: If you choose to stick with Original Medicare, you can enroll in a Medigap plan to help cover your out-of-pocket costs. You would also need a separate Medicare Part D plan for prescription drug coverage.

3.   Work with an agent

When it’s time to enroll, consider working with a licensed health insurance agent. Best of all, this service doesn’t cost you anything extra. A good agent, preferably one who offers a variety of plans from competing insurers, can offer personalized advice tailored to your specific health needs and budget. They can help you compare plans based on your doctors and network, prescriptions, and financial situation, to make sure you find the best fit.

4.   Shop around during the enrollment period

Choosing the right plan can be pretty complex, as many areas offer dozens of Medicare Advantage plans. To make sure you select the optimal plan, take advantage of the Annual Enrollment Period (AEP), which runs from October 15 to December 7. This window is your chance to compare options, switch plans, and align your coverage with your needs for the next year. Taking time to compare plans can save you significant money. According to Stidom, people who shopped with the help of a licensed agent for a Medicare Advantage plan last year saved over $1,800 because the agent was able to help them compare plans based on their individual drug regimens and personal coverage needs.

Where can I go if I want help choosing the best plan?

The good news is that there’s a wealth of resources available for anyone who wants to understand their Medicare options, from civic and advocacy organizations to government offices and licensed insurance agents, said Stidom.

Every state has State Health Insurance Program (SHIP) counselors to provide Medicare beneficiaries and their families with free information about Medicare and to help them understand their options. Although most SHIP counselors receive some training in Medicare and volunteer their time, they typically don’t have a health insurance license, cautioned Stidom, which is required to make recommendations based on individual needs.

More from Nifty50+

• Late-diagnosed autism is growing rapidly, especially among women
• Medical gaslighting: How to advocate for yourself with a doctor
• A ‘confidence expert’ provides a guide to changing your career
• One kidney, two friends … and a life saved