Medicare vs Medicaid — What They’re All About

Though they sound similar, there is a huge difference between Medicare and Medicaid.

Fortunately, the difference is easy to explain, and just as easy to learn – so let’s get started without delay.

Medicare

stethescopeMost people who are eligible for Medicare are at least 65 years old. Although some people become Medicare-eligible when they are younger due to disability or end-stage renal disease, most Americans become eligible for Medicare coverage the month they turn 65.

What most Americans sign up for during their initial enrollment in Medicare is often referred to as Original Medicare. Original Medicare is composed of the two parts of Medicare that were established under the Social Security Act in 1965, Medicare Part A and Medicare Part B. To this day, Medicare Part A and Medicare Part B remain the foundation of Medicare coverage.

Medicare Part A pays for inpatient hospital services. Covered services include skilled nursing facility care after a hospital stay, hospice care, and certain home health care. Medicare Part B, meanwhile, covers medical expenses, clinical laboratory services, and outpatient hospital treatment. For Part B-covered services, Medicare normally pays 80% of costs.  Some Part B-covered services also involve copayments.

What other costs do Medicare recipients pay for Medicare-covered services?

Over 98 percent of people enrolled in Medicare are not required to pay a Part A premium. The vast majority of Medicare beneficiaries covered this cost during their years in the workforce.

There is a Part A deductible, currently set at $1,184 per benefit period. In certain situations a Medicare recipient may be required to pay this amount two or more times in a single year.

Most people enrolled in Part B currently pay a monthly premium of $104.90. There is an annual Part B deductible of $147.

Is Original Medicare designed to meet all of a Medicare recipient’s healthcare needs?

Unfortunately, Medicare can make no such claim. There are sizable gaps in Original Medicare coverage. As a result, millions of Medicare recipients choose one or more of the following options in order to enjoy more comprehensive coverage than they can hope to get through Medicare Part A and Medicare Part B alone.

Medicare Supplement Plans (also called Medigap plans) are designed specifically to help fill the gaps in Original Medicare coverage. Medicare supplements are sold by private insurance companies to people already enrolled in Medicare Part A and Medicare Part B. Medigap plan options span the alphabet from Medigap Plan A all the way to Plan N. The most comprehensive plan, Medigap Plan F, fills the high-risk gaps in Original Medicare and covers all Medicare-approved costs not covered by Medicare Part A and Medicare Part B.

pillsMedicare Advantage Plans (also called Medicare Part C plans) are offered by Medicare-approved private companies to people already enrolled in both Medicare Part A and Medicare Part B. All Medicare Advantage plans provide the equivalent of all Medicare Part A and Part B coverage, and must provide all the benefits covered by Original Medicare except hospice care. Medicare Advantage plans can provide additional coverage in various areas of health including dental, vision, and hearing, and most plans also include prescription drug coverage. Popular Medicare Advantage plans include Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans, and Private Fee-for-Service (PFFS) plans.

Medicare Prescription Drug Plans (also called Medicare Part D plans) are available to people already enrolled in Medicare Part A or Medicare Part B. Prescription drug plans can be added to Original Medicare or provided through Medicare Advantage plans. Many Medicare recipients save substantially on drug costs by enrolling in Part D plans.

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