[MCD 101] Lesson 2: What is the difference between MediCAID and MediCARE?

You must first complete [MCD 101] Lesson 1: What is Medicaid? before viewing this Lesson

Lesson Goal

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For you to understand the key differences between the Medicare and Medicaid programs at a high level including who is eligible, what services are covered in each program and how the program is operated.

Lesson Summary

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Many people confuse the Medicaid and Medicare programs, but they are very different. Medicare is a program that members pay into over their working years, and is not an entitlement. MediCARE is an insurance program for the elderly, people with end-stage renal disease (ESRD) and some long term disabilities. To receive MediCARE services, you must be at least 65 and have paid into the program during your working years with your taxes.

Medicaid is an entitlement program, which is not funded by payments from members. There are some members who can be enrolled in both programs, and these members have the most complex needs and drive much of the cost in each program. In addition to the differences in eligibility, there are important differences in what services are covered (such as nursing home), what rates providers are paid an in the overall approach to program operations.

In short, Medicare is a national program for the elderly with its own benefit design and operational approach. While Medicare not an entitlement program (you must have paid into it over your working years), Medicaid is an entitlement program for the poor and disabled.

The Big Topics in This Lesson

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1- Comparisons to Medicaid: Eligibility

The information under this topic covers the different populations covered by the 2 programs.

2-Comparisons to Medicaid: Services

The information under this topic covers the overlapping and different services covered by the 2 programs.

3-Comparisons to Medicaid: Operations

The information under this topic covers how the 2 programs deliver services to members, including how each program uses both fee for service and managed care models.

Lesson Video

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Lesson Q & A

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Click on each question to learn more

Q1: Who can be covered under Medicare?


U.S. citizens who paid Medicare taxes for at least 10 years and have reached age 65. Some people younger than 65 can get Medicare coverage if they have End Stage Renal (Kidney) Disease (or ESRD) or if they have been on Social Security disability for 2 years.

Q2: Who can be covered under Medicaid?


As we learned in lesson 1, Medicaid members generally do not pay for their coverage, or they pay very little. Medicaid eligibility is based on income (available to those who meet certain poverty criteria) and disability. Pregnant women can generally have higher incomes and still be eligible. Each state gets to set its own income requirement levels beyond the federal minimum requirements.

Q3: Can anyone be covered under both Medicare and Medicaid?


Yes. More than 9M people are covered under both Medicare and Medicaid. They are referred to as “dual eligibles” or “Medicare-Medicaid” enrollees. Dual eligibles are generally sicker and have more chronic conditions compared to non-dual eligibles in the Medicare or Medicaid program. The dual eligibles account for a significant portion of the costs in each program. Services for dual eligibles cost more than $319B in 2011 alone.

Q4: What services does each program cover?


The services covered by Medicare and Medicaid are similar, with a few important exceptions. Medicare covers most healthcare services using different “parts”: Medicare Part A covers inpatient hospital services, skilled nursing facility services, home health and hospice care. Most members do not pay a premium for this coverage (it was paid for during their working years via taxes taken out of their paycheck).

Medicare Part B covers outpatient services like doctors visits, durable medical equipment, lab tests and x-rays. Members pay a monthly premium for this coverage. Medicare Part C is not a different benefit category, but instead is used to let private insurance companies (like BlueCross or Aetna) provide benefits to Medicare members. When members opt for Part C coverage (as opposed to original Medicare), they enroll in a Medicare Advantage plan. Medicare Part D covers prescription drugs, and members have to pay an additional monthly premium for it.

MEDICAID covers all these same services, but also covers additional services like long term nursing home stays.

While both programs have a similar benefit package, the limits and coverage restrictions can be very different. In general, Medicaid allows for more service utilization than Medicare by placing less restrictions on services like the number of home health visits or therapy sessions allowed. Since each state gets to make decisions about their Medicaid program, there can be many differences in covered services across states.

However, in order to receive the federal matching funds for Medicaid, all states have to cover services in the Mandatory Benefits category. Things in included in mandatory benefits are things like inpatient hospital, outpatient hospital, home health, early periodic screening, diagnostic and treatment services (EPSDT) and many other types of mandatory benefits. Optional Medicaid benefits categories include prescription drugs, physical therapy, dental, podiatry, eye glasses, hospice and many other types of service.

Q5: How are coverage decisions made in each program?


Medicare is required to follow an evidence-based process to determine coverage of services, items and devices for Medicare members. In general, the coverage decision making process must approve what is “reasonable and necessary.” This process is referred to the National Coverage Determination (NCD) process, and is laid out in detail in the Federal Register. There are also Local Coverage Decisions (LCDs) in which a Medicare carrier might cover (or non-cover) a service that has not been considered for coverage nationwide.

MEDICAID coverage is not required to follow a standardized process. Each state can make specific coverage decisions within the broader Mandatory Benefits categories using (or not using) a coverage decision process of their choosing. Most states do not publish the process or standards they use to make coverage decisions for Medicaid benefits. As of the time of this writing (2016), Oregon was that had a clearly defined coverage decision process for its Medicaid program. Other states (such as New York) have a varying degree of definitions for considering whether a particular service should be covered.

Finally, in states with Medicaid managed care, many specific coverage decisions are made by the insurance carrier operating the Medicaid plan. Such decisions follow the standards in use by that plan, which may or may not be published.

Q6: How big is each program? What are the major spending categories for each program?


Medicare spending in 2016 was estimated to be about $591B, with about 55M total members enrolled. Medicare spending is currently predicted to be $1.5T annually by 2022. Medicaid spending in 2015 was estimated to be about $496B, with about 73M total beneficiaries enrolled. Medicaid spending is currently predicted to be $622B in 2022. Current spending combined for the 2 programs is roughly $1T; combined spending is projected to be about $2.1T in 2022. Current combined enrollment is about 128M people.


Medicare and Medicaid spending has some similarities, but several differences. The main similarity is that more than ¼ of all spending in each program goes through health plans. After that, differences emerge. Medicare spending is focused on hospital care and drugs, while Medicaid spending is focused on long term care (in and out of nursing homes). See more information on the spending breakouts for each below:



  • payments to health plans - 26%
  • hospital services - 23%
  • doctors - 12%
  • rx - 11%



  • payments to health plans- 31%
  • hospital services - 14%
  • nursing home services - 12%
  • home health services - 13%
Q7: What are the Medicare carriers?


The Medicare carriers are health plans that CMS pays to deliver Medicare benefits to members using the health plans’ contracts with providers, claims payment technology and other capabilities. Medicare has used carriers since the beginning of the  program (1966), although they used to be called Part A Fiscal Intermediaries (FI) and Part B carriers.  Each carriers is given a region (often multi-state) in which it processes claims for Medicare members. CMS calls the carriers Medicare Administrative Contractors (MACs). There are currently 12 MACs that deliver Medicare Parts A and B, and an additional 4 MACs that focus on durable medical equipment.

Q8: How are Medicare regulations updated compared to Medicaid regulations?


In general, Medicare regulations related to operations and payment schedules are managed using either specific acts of Congress (such as the Deficit Reduction Act, the Affordable Care Act, or the Medicare Modernization Act), the activities of Congressional committees (such as the Medicare Payment Advisory Committee, or MACPAC), or updates to the Code of Federal Regulations (CFR, also discussed in lesson 1). Medicare coverage decisions may be made at the local (carrier / regional) or national level. CMS often summarizes upcoming or proposed changes to Medicare regulations in the Quarterly Provider Updates.

For Medicaid, updates to regulations are most often made at the state level via the provider manuals. The provider manuals are typically updated quarterly and are the policy in force at the times noted in the manuals. There may also be changes to state laws, rules and regulations related to Medicaid, but these are rare. National-level changes to the Medicaid program also occur in CFR. Medicaid regulations are also updated via national legislation (such as the Balanced Budget Act, the CHIP Re-authorization Act and the Affordable Care Act), but this approach is much less often than the changes made regularly at the state level.

Q9: What is the Medicare Part D program?


Medicare Part D covers prescription drugs for both Medicare and dual-eligible Medicaid members. The Part D benefit was created in 2003, and has played a significant role in paying for drugs in both Medicare and Medicaid.

Medicaid Dictionary

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 New Terms from this lesson:

MAC- Medicare Administrative Contractors. A private health care insurer that has been awarded a geographic jurisdiction to process claims for Medicare beneficiaries.

Duals – Dual eligibles, persons eligible for both Medicare and Medicaid coverage.

ESRD- End Stage Renal Disease. This is the last stage of chronic kidney disease.

DME- Durable Medical Equipment. Therapeutic equipment used to assist patients with medical need.

NCD/LCD– National Coverage Determination / Local Coverage Determination. NCD is a nationwide determination as to whether an item or service is paid for by Medicare. Local Coverage Determination is for a service that has not been considered for coverage nationwide.

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