Understanding the Differences Between Medicare and Medicaid

Medicare and Medicaid are two separate and commonly misunderstood programs, even among healthcare professionals. Centauri Health Solutions wants to help clarify the differences.

Medicare vs. Medicaid: An Overview

Medicare was designed to protect people in retirement. Originally, it included Part A, which is hospital insurance, and Part B, which covers medical care outside of a hospital admission. Medicare pays the medical providers directly. This is often referred to as fee-for-service payment.

Over the years, Medicare has added coverage. People with disabilities and End Stage Renal Disease were added in 1972. Hospice care came along in 1982. The Medicare Prescription Drug Improvement and Modernization Act of 2003 made the biggest changes to the Medicare program in 38 years, according to the Centers for Medicare and Medicaid Services (CMS) website. Under that law, private health plans approved by Medicare became known as Medicare Advantage Plans, sometimes called “Part C.” In contrast to fee-for-service payment, Medicare pays these Medicare Advantage plans to cover a person’s Medicare benefits and pay the medical providers. The law also expanded Medicare to include an optional outpatient prescription drug benefit, “Part D,” which went into effect in 2006. Most recently, in 2011, the Affordable Care Act made many preventive care services such as cancer screenings available for no out-of-pocket cost.

Medicare wasn’t the only program that saw expansion over the years, Medicaid did, too. Originally, Medicaid was almost exclusively available to people receiving cash assistance through state programs for families with dependent children, seniors, and people with disabilities. In the 1980s and 1990s, policymakers expanded eligibility, enabling many more low-income children, parents, and pregnant women in working families to qualify for coverage.

Medicaid is the largest government healthcare program overall, while Medicare is the largest government healthcare program for those 65 and older. Only 2% of Americans over 65 lack coverage today.

Some beneficiaries receive both Medicare and Medicaid. These beneficiaries may be termed dual eligible, dual, or Medi-Medi. Medicare would be the primary payer and Medicaid the secondary payer.

Change is inevitable and Medicare and Medicaid are not exempt. They have changed a lot since 1965 and will continue to do so. Centauri Health Solutions will continue to work to keep you updated.

CLICK HERE for a comparison chart that you can keep as a handy guide to help you distinguish between Medicare and Medicaid.


Shanna Hanson, FHFMA, ACB
Manager, Business Knowledge
Centauri Health Solutions, Inc.