What are the differences between Medicaid and Medicare?

Not all of us are fortunate enough to be able to independently cover our health care costs as we age. Whether due to the rising cost of care, an unexpected illness, or the need for long-term assistance, many individuals and families turn to government programs for support—most often Medicare and Medicaid. Though their names are similar, Medicare and Medicaid serve very different roles, with distinct eligibility requirements and benefits.

Medicare: Federal Health Insurance

Medicare is an entitlement program for health insurance that is funded and administered entirely by the federal government. Eligibility is established once two conditions are met: (1) you or your spouse have accumulated at least ten years of Medicare-taxed work, and (2) you have reached age 65––or earlier if you have a qualifying disability such as amyotrophic lateral sclerosis (ALS) or End-Stage Renal Disease. Your current income and the size of your savings never affect eligibility; once you meet the work-credit requirement and the age or disability threshold, you qualify for Medicare.

How Medicare is Organized

Medicare divides coverage into four parts:

• Part A covers inpatient hospital care, short rehabilitation in a skilled-nursing facility, hospice, and limited home-health services (first 20 days fully covered, co-insurance for days 21-100).

• Part B pays for outpatient care—doctor visits, lab work, preventive screenings, and durable medical equipment.

• Part C (Medicare Advantage) is an alternative to Parts A and B that offers bundled coverage from private health insurance companies, often including prescription drug coverage.

• Part D is a separate prescription drug insurance plan that can be added to Parts A and B or included in a Medicare Advantage plan.

The system is broken into "parts" so each enrollee can mix and match the coverage that best fits their health needs and budget instead of being forced into a one-size-fits all policy.

Medicaid: New York's Comprehensive Long-Term Care

Medicaid is a joint federal-state program that pays for care only when an applicant meets financial and medical criteria. In New York, the medical requirement is verified through an independent assessment arranged by the local Department of Social Services (for nursing-home care) or the New York Independent Assessor (for at-home services); the evaluator confirms that the person needs help with routine activities such as bathing, dressing, or eating.

Financially, for 2025, a single New York applicant seeking nursing-home coverage must show countable assets of no more than about $32,396 and monthly income of no more than about $1,800 per month. If the applicant is married, there are special rules for the non-applying spouse who remains at home (the "Community Spouse"). The Community Spouse may retain the home real estate (valued up to $1,097,000 for 2025) as well as cash, securities and other assets up to about $157,920 and may be entitled to keep up to $3,948 of the applicant spouse's income.

Chronic Care Medicaid & Community Medicaid

Medicaid offers two parallel paths. First, Chronic Care Medicaid pays for care in a nursing facility but enforces a five (5) year look-back period: any gifts or transfers made within the five years before application can trigger a penalty period during which Medicaid will not pay.

Second, Community Medicaid, by contrast, finances care in the home, adult-day health programs, and the state's Assisted Living Program, and it currently carries no look-back at all (although a thirty (30) month review has been authorized and may take effect in the future).

Managing Excess Income With a Pooled Trust

If a single applicant's monthly tops the $1,800 Medicaid limit, New York allows the applicant's surplus income, to be deposited into a pooled-income trust. The trust sets up a sub-account for the applicant, and under strict record-keeping, can use those dollars to pay expenses Medicaid will not cover, such as rent, utilities, or private therapies. By routing surplus income through the trust each month, the individual remains financially eligible for Medicaid while still meeting everyday living costs.

Once approved, Medicaid pays for the long-term services Medicare omits: permanent nursing-home residency, extended home-health aides, adult-day programs, medical transportation, and more. With timely planning—such as funding an irrevocable Medicaid Asset Protection Trust more than five years before any likely nursing-home need—families can safeguard the home or other assets and still qualify.