The Difference Between Medicaid and Obamacare

Doctor consulting with a patient
Obamacare is another word for the Affordable Care Act—a far-reaching law that includes the expansion of Medicaid.

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Technically, Obamacare is just a nickname for the Affordable Care Act (ACA). It was initially used in a pejorative sense by opponents of the law, but President Obama embraced the terminology in 2012, and it's been used ever since by both opponents and supporters of the ACA.

Since Obamacare is synonymous with the ACA, it includes all of the regulatory changes that apply to the individual health insurance market (both on-exchange and off-exchange, all new major medical plans are ACA-compliant), as well as changes that apply to the small group and large group markets for employer-sponsored plans. It also encompasses Medicaid expansion, which is a cornerstone of the ACA. And it includes the individual mandate and employer mandates—the ACA's "sticks" to encourage people to obtain coverage—along with the premium subsidies and cost-sharing reductions—the "carrots"—that make coverage and care more affordable for people who buy policies in the health insurance exchanges.

Although Republican lawmakers and the Trump Administration pushed for repeal of numerous portions of the ACA throughout 2017, the only part of the law that was ultimately repealed was the individual mandate penalty. The Tax Cuts and Jobs Act, enacted in December 2017, eliminated the individual mandate penalty as of January 2019. The individual mandate itself does technically remain in effect, but there is no longer a federal penalty for non-compliance (states can impose their own individual mandates and penalties, and some have done so).

Typical Usage of Term Obamacare

Although the term Obamacare technically encompasses all of the ACA, people typically use it to refer to individual market health insurance plans sold in the health insurance exchanges. So for the purpose of this article, we'll go with that utilization of the word, and take a look at the difference between those plans and Medicaid.

The most important difference between Medicaid and Obamacare is that Obamacare health plans are offered by private health insurance companies while Medicaid is a government program (albeit often administered by private insurance companies that offer Medicaid managed care services).

Obamacare Private Plans vs. Government-Run Medicaid

Medicaid, the government health insurance program for low-income United States residents, is a social welfare program like SNAP food stamps or Temporary Assistance to Needy Families.

The term Obamacare is typically used to describe private health insurance purchased through the Affordable Care Act’s health insurance exchanges. Obamacare health insurance plans are offered by health insurance companies such as Anthem, Kaiser Permanente, Molina, Cigna, Centene, and others. Obamacare health plans are not run by the government but must comply with various government regulations. 

It's worth noting, however, that two-thirds of Medicaid enrollees nationwide are on Medicaid managed care plans, which means that their insurance is administered by private insurers that also sell commercial insurance to individuals and businesses. Those plans operate via a contract with the state government to provide Medicaid benefits.

This can be confusing to people, and it's compounded by the fact that in most states, the Medicaid program doesn't have "Medicaid" in its name (Apple Health in Washington, for example, and BadgerCare Plus in Wisconsin).

Who Gets Medicaid vs. Obamacare

It’s more difficult to get Medicaid than it is to get an Obamacare health plan.

If you’re a legal resident of the United States, you can buy an Obamacare private health insurance plan through your state's ACA health insurance exchange as long as you’re not enrolled in Medicare. If your income is between 100% and 400% of federal poverty level (FPL), and you're not eligible for Medicaid, Medicare, or an employer-sponsored plan that provides affordable, comprehensive coverage, you may qualify for a subsidy that helps pay part of your monthly health insurance premiums (note that the lower threshold for subsidy eligibility is 139% of the poverty level in states that have expanded Medicaid; in those states, Medicaid is available to people with income up to 138% of the poverty level).

If your income is above 400% of FPL or below 100% of FPL, you won’t get help paying for the health insurance sold on Obamacare exchanges, but you may buy an Obamacare plan anyway. In this case, you’ll be responsible for paying 100% of the monthly premium yourself.

Note that in every state, legally-present immigrants with income below the poverty level are eligible for premium subsidies if they're not eligible for Medicaid due to the five-year Medicaid waiting period for recent immigrants. And in California, state-funded premium subsidies are available to people with household income up to 600% of the poverty level.

The criteria to get Medicaid are strict and vary from state to state. The original intent of the ACA was that all legal residents with incomes up to 138% of FPL would get Medicaid coverage for free. However, a Supreme Court decision made complying with this part of the Affordable Care Act optional.

As of 2020, there are 15 states that have not expanded Medicaid. Roughly 2.3 million people in 14 of those states are in what's known as the coverage gap: their income is too low for subsidies in the exchange (under the poverty level), but they're also ineligible for Medicaid. Although Nebraska has agreed to expand Medicaid after their voters approved Medicaid expansion ballot initiatives in 2018, expanded Medicaid coverage won't become available until October 2020 in Nebraska.

If you live in a state that has expanded Medicaid coverage, you’ll be eligible for Medicaid if your modified adjusted gross income is no more than 138% of FPL. This Medicaid coverage is usually free to you, although some states charge a small monthly premium for coverage for people with income above the poverty level.

If you live in a state that hasn't expanded Medicaid coverage, you’ll have to meet the older, stricter eligibility criteria. These stricter criteria vary from state to state. They include low-income criteria and will also require that you be a member of at least one vulnerable group (elderly, disabled, blind, children, pregnant women, and parents or adult caregivers of young children).

For example, if you’re a childless, non-disabled 30-year-old male with an income of $10,000 per year, whether or not you qualify for Medicaid depends on which state you reside in. If you live in a state that expanded Medicaid coverage to everyone making up to 138% of FPL, you’ll get Medicaid because you meet the income criteria. If you live in a state that didn’t expand Medicaid coverage, you won’t qualify for Medicaid, even though your income is low, since you’re not also disabled, elderly, blind, or the parent of a young child.

Wisconsin is an exception; the state has not accepted federal funding to expand Medicaid, but they provide Medicaid to residents with income up to the poverty level, so there's no coverage gap in Wisconsin.

Enrollment Period Differences

Eligible individuals can enroll in Medicaid throughout the year. But enrollment in Obamacare plans is only available during the annual open enrollment or if you meet the eligibility criteria for a limited special enrollment period. Otherwise, you’ll have to wait until the next open enrollment period to apply for an Obamacare plan. Note that this is true regardless of whether you're enrolling through the exchange or off-exchange; plans sold outside the exchange are ACA-compliant too, and have the same limited enrollment windows.

When you apply for an Obamacare plan during open enrollment (each fall from November 1 to December 15 in most states), the coverage doesn’t take effect until January 1 of the following year. For example, if you enroll in an Obamacare plan during open enrollment in the autumn of 2020, your Obamacare plan coverage will take effect on January 1, 2021 (there are different effective date rules that apply in some cases when people apply as a result of a ​qualifying event, such as the birth of a child).

However, when you apply for Medicaid and are accepted into the Medicaid program, there is no waiting period before your coverage takes effect.

Retroactive Coverage Differences

In some instances, Medicaid coverage can be retroactive. For example, if you’re 5 months pregnant when you apply for and receive Medicaid coverage, Medicaid may actually pay for the prenatal care you got during months 1-4 of your pregnancy, even before you applied for Medicaid. This is not true of the private health insurance plans sold through Obamacare exchanges (or outside the exchanges).

It's noteworthy that the Trump administration has begun approving waiver requests from states that want to end retroactive coverage under Medicaid. Without retroactive coverage, Medicaid becomes more similar to private health insurance in terms of when the coverage can take effect, although enrollees do generally get coverage effective the first of the month during which they applied, as opposed to the first of the following month (so the coverage can still be retroactive by a few weeks, depending on the enrollment date).

Cost-Sharing Differences

In most instances, Medicaid does not require much in the way of copayments, coinsurance, or deductibles. Since Medicaid is intended for those with very low incomes, anything other than token small amounts of cost-sharing would be unaffordable to Medicaid recipients and present a potential barrier to care.

On the other hand, Obamacare health plans do come with deductibles, copayments, and coinsurance. Since a deductible of several thousand dollars can be difficult for people with modest incomes to pay, there is a cost-sharing subsidy available to those making less than 250% of FPL that helps to decrease these cost-sharing expenses. Those making more than 250% of FPL are responsible for the full amount of any cost-sharing required by their Obamacare health plan.

Combining Coverage With Medicare

It’s perfectly legal and beneficial to have both Medicare and Medicaid coverage at the same time if you're eligible for both. In fact, there’s even a name for people who have both: dual eligibles.

However, there is generally no benefit to having both an Obamacare health insurance plan and Medicare. It's illegal for a private insurer to sell you an individual market plan after you're enrolled in Medicare, but it's legal to sell an individual market plan (on-exchange or off-exchange) to a person who is eligible for Medicare but not yet enrolled. And an insurer can't force you to give up an Obamacare plan you already have when you become eligible for Medicare. But in that case, you'll lose any premium subsidy that you're receiving once you become eligible for Medicare (assuming you're eligible for premium-free Medicare Part A, which is usually the case), and there's also no coordination of benefits between Medicare and the individual market.

It's generally advised that Obamacare enrollees drop their individual coverage once they become eligible for Medicare.

Note that this process is not automatic; you have to initiate the cancellation of your Obamacare plan yourself. When you become eligible for Medicare, you’ll need to coordinate the cancellation of your Obamacare health insurance policy with the start of your Medicare coverage. This is true whether you sign up for original Medicare Parts A and B, or a Medicare Advantage (Part C) plan. 

Why Telling the Difference Is Difficult

Understanding the difference between Medicaid and Obamacare can be confusing because:

  • Often, you learn you’re eligible for Medicaid when you fill out an application for health insurance on your ACA health insurance exchange. If the exchange determines that you qualify for Medicaid in your state, it will forward that information to the state Medicaid office, starting the Medicaid application process. Since you submitted your initial health insurance application to an Obamacare health insurance exchange, it can be confusing when you end up receiving Medicaid instead of a private Obamacare plan.
  • Although Medicaid is a government program, in most states, Medicaid services for the majority of enrollees are provided through a private health insurance company. A Medicaid beneficiary receiving his or her Medicaid ID card from UnitedHealthcare, Humana, Kaiser, or Blue Cross, might mistakenly assume he’s received private Obamacare health insurance. In fact, his state Medicaid program has contracted with a private insurer to manage the care of Medicaid recipients. Even though a private company is managing the Medicaid benefits, the benefits themselves are still Medicaid and the money to pay for those benefits ultimately comes from combining federal and state taxpayer funds.

Since the majority of people buying health insurance on an ACA health insurance exchange get help paying for that health insurance in the form of subsidies from the federal government, it can sometimes be confusing as to how government-subsidized private health insurance (Obamacare) is really all that different than government-funded Medicaid.

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Article Sources
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