Medicare and Medicaid are government programs, not commercial insurance

Medicare and Medicaid are both run by the federal government, but they work differently from private insurance sold by companies like Aetna or United Healthcare. Private insurers decide who to cover, what to charge, and what to pay doctors based on profit. Medicare and Medicaid follow federal rules that explore the same way everywhere — they cover people based on age or income, not on whether a company thinks you are a good risk.

The biggest difference between the two: Medicare is for people 65 and older, regardless of income. Medicaid is for people of any age whose income falls below a state-set limit. A person can have both at the same time. Private insurance, by contrast, covers whoever buys a policy and meets the insurer's underwriting rules — which can mean denying coverage for pre-existing conditions, charging more for age or health status, or dropping you if you get sick.

Because Medicare and Medicaid are government programs, they do not make a profit on your premiums. They also do not advertise on television or hire sales agents. You do not buy them the way you buy car insurance — you enroll through a government office or website, and the rules about who pays what are set by law, not by a company's pricing team.

Key Takeaways

  • Medicare covers people 65 and older; Medicaid covers people of any age with income below a state limit; private insurance covers whoever buys a policy and meets the company's rules.
  • Medicare and Medicaid are government programs with the same rules nationwide; private insurers set their own rules, premiums, and coverage limits by state and plan.
  • Medicare Part A (hospital) is free for most people 65 and older; Medicaid is free for those who meet income limits; private insurance requires a monthly premium you pay to the company.
  • Medicare and Medicaid pay doctors and hospitals directly; private insurers do the same, but the amounts they pay vary widely and are negotiated between the insurer and the provider.
  • Private insurers can deny coverage for pre-existing conditions or charge more based on health; Medicare and Medicaid cannot.

How premiums and costs work differently

With private insurance, you pay a monthly premium to the insurance company, and that premium can change based on your age, health, or claims history. The company also sets the deductible (the amount you pay before insurance kicks in), copays, and coinsurance. These can vary widely between plans and between insurers.

Medicare has a different structure. Part A (hospital insurance) is free for most people 65 and older because they or their spouse paid Medicare taxes while working. Part B (doctor visits) costs a monthly premium — the amount depends on your income, and in 2024 ranges from about $175 to $560 per month for most people. You also pay a deductible and coinsurance. Part D (prescription drugs) has a separate monthly premium that varies by plan.

Medicaid is free for those who meet income limits — there is no premium, deductible, or copay in most states, though a few states charge small copays for some services. The income limit varies by state and family size. A single person might may have access to in one state at $1,500 per month and not may have access to in another at the same income.

Private insurance premiums are set by the company and can increase each year. Medicare premiums are set by federal law and increase based on a formula tied to healthcare costs. Medicaid funding comes from both federal and state budgets, so the program's generosity varies by state.

What each program covers

Medicare covers hospital stays, doctor visits, some preventive care, and prescription drugs (if you enroll in Part D). It does not cover dental, vision, hearing aids, or long-term care in a nursing home. Some people buy a separate Medigap policy (private insurance that fills gaps in Medicare) or a Medicare Advantage plan (a private plan that contracts with Medicare to provide coverage).

Medicaid covers doctor visits, hospital stays, emergency care, and prescription drugs. It also covers services Medicare does not: dental care, vision care, and long-term care in a nursing home or assisted living facility. Coverage varies by state — some states cover more mental health services, therapy, or home care than others.

Private insurance plans vary widely. A basic plan might cover only hospital and emergency care; a comprehensive plan might cover preventive care, mental health, and prescription drugs. What is covered depends on the specific policy you buy. Some private plans exclude certain treatments or require you to use doctors in a specific network.

How doctors and hospitals are paid

Medicare pays doctors and hospitals a set amount for each service, determined by federal fee schedules. A doctor visit might be reimbursed at $150 nationwide, though the amount can vary slightly by region. Doctors who accept Medicare agree to accept this payment as full payment (except for your copay or coinsurance). This is called "accepting assignment."

Medicaid also pays a set amount per service, but the amount is set by each state and is often lower than Medicare. Some doctors do not accept Medicaid because the reimbursement is too low. In some states, Medicaid pays so little that finding a doctor who accepts it can be difficult.

Private insurers negotiate payment rates with doctors and hospitals. One insurer might pay a doctor $200 for a visit while another pays $120 for the same visit. Doctors in a private insurer's network agree to accept the negotiated rate. If you see a doctor outside the network, you may pay more out of pocket.

Network restrictions and choice of doctors

Medicare has no network. You can see any doctor in the United States who accepts Medicare, and most do. You do not need a referral to see a specialist (though some Medicare Advantage plans do require referrals). This gives you more freedom to choose your doctor.

Medicaid also has no network in most states — you can see any doctor who accepts Medicaid. However, because Medicaid pays less than Medicare or private insurance, fewer doctors accept it. In rural areas or low-income neighborhoods, finding a Medicaid doctor can be harder than finding a Medicare doctor.

Private insurance plans usually have a network. You pay less if you see a doctor in the network and more (or nothing is covered) if you see a doctor outside the network. Some plans require a referral from your primary care doctor before you can see a specialist. These restrictions help the insurer control costs.

Pre-existing conditions and coverage denials

Medicare and Medicaid cannot deny you coverage or charge you more because of a pre-existing condition. If you are 65, you get Medicare regardless of your health history. If your income is below the Medicaid limit in your state, you get Medicaid regardless of your health history.

Private insurance cannot deny you coverage for a pre-existing condition if you are buying an individual policy (this was banned by the Affordable Care Act in 2014). However, private insurers can still charge you more based on age, and they can exclude specific treatments or conditions from coverage in the policy itself. They can also drop you if you commit fraud on your process, though they cannot drop you straightforward because you got sick.

How enrollment works

You enroll in Medicare through Social Security or Medicare.gov. Enrollment happens automatically at 65 if you are already receiving Social Security. If not, you must enroll during your Initial Enrollment Period (the three months before, the month of, and the three months after your 65th birthday). Missing this window can result in a permanent penalty on your premiums.

You enroll in Medicaid through your state's Medicaid office or through Healthcare.gov if your state uses the federal marketplace. Income limits and enrollment rules vary by state. Some states have continuous enrollment; others have open enrollment periods.

You enroll in private insurance through an employer, through Healthcare.gov during open enrollment (November through January), or directly with the insurer. If you lose employer coverage, you have 60 days to enroll in a private plan without a penalty. If you miss open enrollment and do not have a may have access to life event, you must wait until the next open enrollment period.

Frequently Asked Questions

Can I have both Medicare and Medicaid at the same time?

Yes. If you are 65 or older and your income is below your state's Medicaid limit, you can be enrolled in both. This is called "dual may be able to access." Medicaid covers services Medicare does not, like dental and long-term care, and may help pay your Medicare premiums and copays.

What happens if I do not enroll in Medicare at 65?

If you do not enroll during your Initial Enrollment Period and you are not still working with employer coverage, you will pay a permanent penalty on your Part B and Part D premiums for as long as you have Medicare. The penalty is 10 percent per year you were late.

Can a private insurer refuse to cover a treatment that Medicare covers?

Yes. Private insurers can exclude specific treatments or require prior authorization before covering them. Medicare has fewer exclusions, though it also does not cover everything. If a private plan denies coverage, you can file an appeal with the insurer.

Is Medicaid the same in every state?

No. Each state sets its own income limits, decides what services to cover, and determines how much to pay doctors. A service covered in one state may not be covered in another. Income limits can differ by thousands of dollars between states.

Do I need a referral to see a specialist on Medicare?

No, not on Original Medicare. You can see any specialist who accepts Medicare without a referral. If you are in a Medicare Advantage plan, that plan may require a referral, so check your plan documents.