Despite their similar names, Medicare and Medicaid serve completely different groups of people and operate under vastly different rules. If you’re approaching 65 or trying to help an aging parent navigate healthcare coverage, understanding these two programs can save you thousands of dollars and ensure you get the coverage you need. Here’s what every American should know about these essential healthcare programs.

Understanding Medicare: Age-Based Healthcare Coverage

Who Qualifies for Medicare

Medicare is federal health insurance available to anyone age 65 and older, regardless of income level. You can also qualify before age 65 if you have certain disabilities or end-stage renal disease. Medicare covers medical expenses for more than 68.5 million Americans age 65 and older as well as younger people who qualify because of a disability.

If you’ve been receiving Social Security or Railroad Retirement Board benefits for at least four months before your 65th birthday, you’ll be enrolled automatically in Medicare. Otherwise, you’ll need to apply during your initial enrollment period, which begins three months before the month you turn 65 and ends three months after your birthday month.

What Medicare Covers and Costs

Medicare consists of four main parts, each covering different healthcare needs. Part A (hospital insurance) covers inpatient hospital stays, skilled nursing facilities, hospice care, and some home health services. Most people pay nothing for Medicare Part A. Your Part A coverage is free as long as you’re eligible for Social Security or Railroad Retirement Board benefits.

Part B (medical insurance) covers doctor visits, outpatient care, preventive services, and durable medical equipment. The standard monthly premium for Medicare Part B enrollees will be $185.00 for 2025, an increase of $10.30 from $174.70 in 2024. You’ll also be subject to an annual deductible of $257 in 2025.

Part C (Medicare Advantage) and Part D (prescription drug coverage) are optional plans offered through private insurers that can supplement your original Medicare coverage.

Higher Income Means Higher Premiums

Here’s something that catches many retirees off guard: if your income exceeds certain thresholds, you’ll pay significantly more for Medicare. For 2025, beneficiaries whose 2023 income exceeded $106,000 (individual return) or $212,000 (joint return) pay a higher total Medicare Part B premium amount depending on income.

This surcharge, called an Income-Related Monthly Adjustment Amount (IRMAA), can increase your Part B premium from the standard $185 to as much as $628.90 per month. IRMAA is based on your 2023 tax return, impacting premium amounts for higher earners.

Understanding Medicaid: Income-Based Healthcare Coverage

Who Qualifies for Medicaid

Medicaid is a joint federal and state program that helps cover medical costs for some people with limited income and resources. Unlike Medicare, Medicaid is specifically designed for individuals and families who meet strict income requirements that vary significantly by state.

For most states, the Medicaid income limit is $2,901 per month for a single applicant and $5,802 per month for married applicants, typically set at 300% of the Federal Benefit Rate (FBR). However, these limits can vary dramatically depending on your state and the type of Medicaid coverage you’re seeking.

In states that expanded Medicaid under the Affordable Care Act, adults can qualify if their income is 138% of the Federal Poverty Level or lower. For a single person in 2025, that means an annual income of approximately $21,600 or less.

What Medicaid Covers

Medicaid often covers services that Medicare doesn’t, making it particularly valuable for people needing long-term care. Medicaid offers benefits that Medicare doesn’t normally cover, like nursing home care and personal care services. This includes home health services, assisted living care, and comprehensive nursing facility coverage.

People with Medicaid usually don’t pay anything for covered medical expenses but may owe a small co-payment for some services. This makes it incredibly valuable for people with limited financial resources who need extensive medical care.

Can You Have Both Medicare and Medicaid?

Many people qualify for both programs simultaneously, creating what’s called “dual eligibility.” In total, 12 million people are “dually eligible” and enrolled in both Medicaid and Medicare, composing more than 15% of all Medicaid enrollees.

Medicare pays first when you’re dual eligible and receive Medicare-covered services. Medicaid pays last, after Medicare and any other health insurance you have. This coordination can dramatically reduce your out-of-pocket healthcare costs.

If you’re dual-eligible, you might qualify for Medicare Savings Programs that help pay Medicare premiums, deductibles, and coinsurance. The 2025 income limits for Medicare Savings Programs (MSPs) are $20,580 per year for an individual and $27,840 per year for a married couple, in many cases.

State-by-State Variations in Medicaid

One of the most confusing aspects of Medicaid is that each state runs its own program. This means eligibility requirements and benefits can vary from state to state. Some states have expanded Medicaid under the Affordable Care Act, while others haven’t, creating significant differences in who qualifies. Additionally, many states use different names for their Medicaid programs – for example, California calls it Medi-Cal, while Tennessee calls it TennCare.

Federal regulations mandate that states participating in the Medicaid program must provide coverage to certain “mandatory” populations. Examples include qualifying low-income families, eligible pregnant women and children, and people who receive Supplemental Security Income (SSI) payments due to disability or age.

When Income Exceeds Medicaid Limits

If your income is slightly above Medicaid limits, you might still qualify through special programs. Medically Needy Medicaid, also called “Share of Cost” Medicaid, is currently available in 32 states and Washington D.C. This program considers both your income and medical expenses, potentially making you eligible if healthcare costs consume most of your income.

Another option is a Qualified Income Trust (Miller Trust), which can be used to become income-eligible for Nursing Home Medicaid and HCBS Waivers in 25 states. Essentially, an applicant’s monthly income that exceeds Medicaid’s income limit gets placed into an irrevocable trust. Once the excess income is in the trust, it no longer counts toward Medicaid’s income limit, potentially making the applicant eligible.

Planning Strategies for Both Programs

The key to maximizing both Medicare and Medicaid benefits is understanding how your income affects eligibility and costs. For Medicare, managing your income in retirement years can help you avoid IRMAA surcharges. For Medicaid, proper planning might help you qualify for benefits while protecting some assets.

Both programs require careful attention to enrollment deadlines and renewal requirements. Medicare has specific enrollment periods with penalties for late enrollment, while Medicaid requires annual renewals to maintain coverage.

Key Takeaways

• Medicare is available to all Americans 65+ regardless of income, but higher earners pay significantly more in premiums

• Medicaid is income-based healthcare coverage with strict financial requirements that vary by state

• You can qualify for both programs simultaneously, which provides comprehensive coverage with minimal out-of-pocket costs

• Medicare focuses on hospital and medical coverage, while Medicaid includes long-term care services Medicare doesn’t cover

• State Medicaid expansion status significantly affects adult eligibility requirements

• Strategic income planning can help manage Medicare costs and potentially qualify for Medicaid benefits