The United States health insurance system provides three distinct avenues for Americans to find coverage: Medicare, Medicaid, and traditional health insurance. While all three programs provide coverage, they serve distinct populations and offer different levels of benefits. Eligibility criteria vary but are most often based on income level, disability status, citizenship status, and other personal information. Understanding the differences between these programs can help you choose the payers, providers, and coverage that best meets your needs.
Medicare Explained
Medicare is a government-funded health insurance program created for Americans aged 65 and older. Sometimes, individuals younger than 65 with long-term disabilities also qualify. In 2022, over 64 million Americans were enrolled in Medicare.
Medicare is broken into four separate programs to cover specific services. According to the Medicare website:
Part A coverage includes hospital visits, stays in nursing facilities, hospice, and home care.
Part B coverage includes medical services like physician office visits, outpatient care, and medical devices. (When combined, Medicare Parts A and B are also called “Original Medicare” or “Traditional Medicare.”)
Part C, also called “Medicare Advantage,” is a combination of Parts A and B and offers additional benefits (like vision and dental coverage) in conjunction with private health insurers.
Part D is also a combination of Parts A and B and offers prescription drug coverage in conjunction with private health insurers.
According to the Centers for Medicare and Medicaid Services, in 2022, more than 45% of all Medicare participants were enrolled in Part C.
Medicaid Explained
Medicaid is a federal and state government-funded health insurance program. As one of the largest healthcare programs in the country, Medicaid provides coverage for low-income citizens. This program covers physician office visits, preventative care, prescription drugs, and hospital stays.
Over 80 million people are currently enrolled in Medicaid. Eligibility is primarily based on income, though disability, household size, pregnancy, and age may also be taken into account. Each state oversees its own program, so in general, eligibility criteria and benefits can vary.
Medicaid includes two subsidiary programs, the Children’s Health Insurance Program (CHIP) and the Basic Health Program (BHP).
The Children’s Health Insurance Program, or CHIP, was created in 1997 to provide low-cost or free health insurance coverage for children whose families cannot afford private insurance but are not eligible for Medicaid. This means children (up to age 19) whose parents don’t qualify for Medicaid may still be eligible for assistance through CHIP. Services include physician office visits, immunization, hospitalizations, dental care, vision care, and prescription drugs. As of 2018, 9.6 million children were enrolled in the program.
The Basic Health Program, also known as BHP, was created as part of the Affordable Care Act (ACA) to offer an alternative coverage option for people who earn between 133%-200% of the federal poverty level. This program provides affordable health coverage by offering plans with lower premiums, deductibles, and cost-sharing compared to traditional health insurance plans. This makes health care more accessible for individuals with lower incomes. Preventive care, maternity care, prescription drugs, mental health services, and hospitalization are covered.
Traditional Health Insurance Explained
Traditional health insurance is the coverage individuals or families buy through employers, private insurance companies, or government programs like the Affordable Care Act (ACA) Marketplace (also sometimes just referred to as the “Marketplace.”)
The scope and cost of traditional health insurance plans vary wildly. They usually cover services such as physician office visits, hospital visits, prescriptions, and preventive care, although prices may differ based on factors like pre-existing conditions and employer contributions.
Prices also vary based on cost sharing. Cost sharing refers to the portion of expenses an insured person is responsible for paying, even with health insurance coverage. Cost sharing comes in several forms, including deductibles (the amount an insured person has to pay for services before their insurance contributes), copays (the fixed amount an insured person has to pay for doctor visits or medications), coinsurance (the percentage of the cost of services an insured person must pay after meeting the deductible), and out-of-pocket maximums (the most amount of money an insured person must pay for services during a calendar year).
Key Differences in Coverage
Here’s a side-by-side comparison of the coverage provided by Medicare, Medicaid, and traditional health insurance, along with the specific populations each program is designed to serve, types of coverage provided, eligibility criteria, and cost-sharing information:
Medicare | Medicaid | Traditional Health Insurance | |
Type | Federal program | Federal and state program | Private health insurance plans |
Population | - People aged 65 and older | - Low-income earners and families | Individuals and families |
Coverage | - Part A: Hospital insurance | Comprehensive for eligible services, including physician office visits, preventative care, immunizations, prescription drugs, and hospital stays | Varies based on plan type, including physician office visits, preventative care, immunizations, prescription drugs, and hospital stays |
Eligibility | - People aged 65 and older | Varies by state | Varies based on employer offerings, income, and other factors |
Cost Sharing | - Premiums for Part B, Part C, and Part D | Limited premiums, copayments, and coinsurance | Premiums, deductibles, coinsurance, copayments, and out-of-pocket maximums vary by plan type and coverage level |
Administered By | - Federal government | State governments | -Private insurance companies |
Eligibility Criteria
Age, income, and other factors influence eligibility for each program.
Medicare
People aged 65 and older are usually eligible for Medicare. Some people under 65 with certain disabilities or medical conditions like end-stage renal disease (ESRD) are also eligible. Most people qualify for Medicare Part A based on their prior work history (and previous payment of Medicare taxes). Enrollees must also be citizens or legal residents who have lived in the United States for at least five years.
Medicaid
Eligibility is primarily based on income minimums but varies state-by-state. Generally, individuals and families with incomes below a specific percentage of the federal poverty level qualify. Some states have expanded Medicaid under the Affordable Care Act to loosen income restrictions.
Regardless of income, some populations like children, pregnant people, parents, seniors, and people with disabilities may qualify for Medicaid. Some states also offer Medicaid to enrollees in need of long-term care. Eligibility may also be influenced by immigration status.
Traditional health insurance
Many employees choose to enroll in traditional health insurance programs through their employers. While some employers make health insurance available to all employees, only full-time employees are often eligible to participate in work-sponsored health insurance programs.
Part-time employees, self-employed people, and others can choose to purchase insurance through the ACA Marketplace or directly from insurers. Individuals or families with more modest incomes sometimes qualify for financial assistance to help cover costs.
The ACA allows people under the age of 26 to access coverage through their parents’ plans, and prevents insurance companies from denying enrollees access based on health status or medical history (pre-existing conditions).
Different Enrollment Processes
Medicare
Most people become eligible for Medicare when they turn 65. The Initial Enrollment Period begins three months before the month of your 65th birthday, includes your birthday month, and extends three months afterward. During this period, you can enroll in Medicare Parts A and/or B.
If you miss the Initial Enrollment Period, you can enroll in Medicare Part A and/or Part B during the General Enrollment Period, which runs from January 1-March 31 each year. Coverage begins on July 1 of that year.
Special Enrollment Periods are available for certain circ*mstances, such as losing employer-based coverage, moving out of a program’s service area, or qualifying for other types of coverage. During this time, people can enroll in or make changes to their Medicare coverage outside of the standard enrollment periods.
Medicaid
There is no specific open enrollment period, and eligible people can apply for Medicaid coverage at any time.
Traditional health insurance
There is an annual Open Enrollment Period for anyone purchasing health insurance through the ACA Marketplace or directly from insurers (November 1-December 15). During this time, individuals or families can enroll in or make changes to their health insurance plans.
Like Medicare, Medicaid has Special Enrollment Periods (SEPs), which allow people to enroll or make changes to their insurance outside of the standard open enrollment period. SEPs are available for “qualifying” life events like marriage, birth, adoption, death, loss of other health insurance, or a change in income.
Enrollment in employer-sponsored health insurance plans typically occurs during a designated enrollment period each year. Employers provide information about enrollment periods to eligible employees but vary depending on the employer.
Costs and Financial Considerations
Every health insurance option requires some level of cost-sharing, which may include premiums, deductibles, copayments, and out-of-pocket expenses.
Medicare
Most Medicare enrollees don’t have to pay a premium for Part A (as long as they paid taxes into the healthcare system while they were previously working.) Premiums for Part B, Part C (Medicare Advantage), and Part D (prescription drug coverage) vary based on income and plan. Medicare Part A and Part B have annual deductibles that enrollees must meet before coverage begins. However, after meeting deductibles, enrollees are typically only responsible for paying coinsurance or copayments for covered services.
Medicaid
While Medicaid coverage is generally free or low-cost, some states require enrollees to pay small premiums or copayments for services (particularly higher-income enrollees or those in expansion programs like BHP). Most Medicaid programs typically do not have deductibles, though some programs or managed care plans do. Also, Medicaid enrollees may be required to make copayments or coinsurance for certain services. However, copayments for essential services like preventive care and treatment for some populations (e.g., children and pregnant women) are usually low, or care is free.
Traditional health insurance
Premiums vary based on plan type, coverage level, age, location, and whether coverage is obtained through an employer, the ACA marketplace, or directly from insurers. Many health insurance plans have annual deductibles that must be met before the insurance company will begin paying for covered services. Deductibles can vary widely depending on the plan. Once the deductible is met, enrollees are responsible for copayments or coinsurance. Thankfully, health insurance plans often have out-of-pocket maximums, which limit the total amount of money a person has to contribute to deductibles, co-payments, and coinsurance. Once that maximum is reached, the insurance company covers 100% of the costs.
Coordination of Benefits
If you are eligible for benefits from multiple healthcare programs, it is important to understand how each program works together to help minimize your out-of-pocket costs.
If you have dual coverage, one program typically acts as the primary insurer, while the other acts as a secondary insurer. Medicare is usually the primary insurer for people eligible for both Medicare and Medicaid, as well as for those with employer-sponsored coverage.
Medicaid can fill gaps left in Medicare coverage, including cost-sharing and services not covered (like dental and vision care).
If you are covered through an employer or a private health insurance provider, it is essential to find out how your specific plan coordinates benefits with your other providers and whether there are any specific rules or limitations regarding dual coverage.
If in doubt, contact your insurance organizations for help navigating the complexities of dual coverage.
How To Find a Good Health Insurance Agency
It is crucial to choose the right health insurance coverage for your needs. Expertise.com is passionate about finding and reviewing professional services and the people behind them. Researching over 60,000 businesses across 200 different industries, we are dedicated to helping our readers find the best providers in the country.
Whether you are just starting your search or have specific questions about Medicare, Medicaid, and the traditional health insurance system, visit Expertise.com to browse our curated list of trusted professionals. Or, if you need more direct assistance, let the Expertise.com Concierge team help. Call 848-BookPro (848-266-5776), and we will connect you with one of our available experts.
