The Difference Between Medicaid and Obamacare

Obamacare is a federal law, but it's also often used to refer to individual market health insurance obtained through the exchanges. Medicaid is government-run health coverage provided to people with limited incomes, and the expansion of Medicaid is a major cornerstone of Obamacare.

Since both terms involve health coverage, health care reform, and the United States federal government, they sometimes get conflated. This article will explain how Obamacare and Medicaid differ, including who provides the coverage, who's eligible, the enrollment periods, how costs are shared, and more.

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Obamacare/ACA Basics

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.

Obamacare includes:

  • All 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).
  • Changes that apply to the small group and large group markets for employer-sponsored plans.
  • Medicaid expansion, which is a cornerstone of the ACA
  • The individual mandate and employer mandates (the ACA's "sticks" to encourage people to obtain coverage; both are still in effect, but there is no longer a penalty for non-compliance with the individual mandate unless you're in a state that has its own penalty; there is still a federal penalty for non-compliance with the employer mandate)
  • The premium subsidies and cost-sharing reductions available in the health insurance exchange in each state (the "carrots" that make coverage and care more affordable for people who buy their own health coverage).
  • A variety of other reforms that apply to health insurance, access to health care, and more.

Although Republican lawmakers and the Trump administration pushed for the repeal of numerous portions of the ACA throughout 2017, the only significant part of the law that was repealed was the individual mandate penalty. The Tax Cuts and Jobs Act, enacted in December 2017, eliminated the individual mandate penalty (but not the individual mandate itself) as of January 2019.

Some of the ACA's taxes, including the Cadillac tax, have also been repealed, and some provisions, including the IPAB and the CLASS Act, never got off the ground. But by and large, the ACA remains intact and fully functional, more than a decade after it was enacted. And its individual/family subsidy provisions have been enhanced by the American Rescue Plan.

While the term "Obamacare" technically encompasses all the ACA, people typically use it to refer to individual market health insurance plans sold in the health insurance exchanges. That's how it'll be used for the rest of this article, as we compare Obamacare 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).

Private Plans vs. 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. As of 2021, more than 82 million Americans were receiving Medicaid benefits, which was an increase of more than 26 million people, or 44%, since 2013.

This increase has been driven largely by the expansion of Medicaid under the Affordable Care Act, but also by the widespread job losses caused by the COVID-19 pandemic. States have not been allowed to disenroll people from Medicaid during the pandemic emergency period, although widespread eligibility redeterminations are expected once the pandemic emergency period ends.

"Obamacare" plans, obtained via the health insurance exchange in each state, cover more than 12 million people and are private health insurance plans. They're offered by health insurance companies such as Anthem, Kaiser Permanente, Molina, Cigna, and Centene. Nationwide, there are hundreds of insurers that offer plans in the exchanges, because it's mostly regional insurers that only offer coverage in one or a few states.

Obamacare health plans are not run by the government but must comply with various state and federal government regulations. 

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

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.

Who Can Get Obamacare Coverage

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.

Subsidy eligibility: If your household income is in the subsidy-eligible range 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.

For several years, subsidy eligibility had an income cap equal to 400% of the federal poverty level. But that income cap was eliminated for 2021 and 2022, under the American Rescue Plan. The Build Back Better Act, under consideration in Congress in late 2021, would extend that provision through 2025.

Some states also offer their own state-funded subsidies, in addition to the federal subsidies provided by the ACA.

Expanded Medicaid exception: Under the ACA, your household income has to be at least 100% of the poverty level in order to qualify for a premium subsidy. But subsidies are not available if you're eligible for Medicaid, and in states that have expanded Medicaid under the ACA, Medicaid is available to people with income up to 138% of the poverty level. So the lower threshold for ACA subsidy eligibility is 139% of the poverty level in those states. As of 2021, Medicaid has been expanded in 38 states and DC, so the lower eligibility level for premium subsidy eligibility is 139% of the poverty level in the majority of the country.

Who pays full price: Although the American Rescue Plan has eliminated the income cap for subsidy eligibility through the end of 2022 (and the Build Back Better Act might extend that through 2025), it's still possible to earn too much to be eligible for a subsidy. If the full-price cost of the benchmark plan would be less than 8.5% of your household income, you're not eligible for a subsidy. In that case, you can still buy an Obamacare plan, but you’ll have to pay 100% of the monthly premium yourself.

Legal immigrants: 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. In most states, there is a five-year Medicaid waiting period for recent immigrants, which means that recent immigrants with low incomes will qualify for subsidies instead of Medicaid.

Who Can Get Medicaid Coverage

The criteria to get Medicaid are fairly strict and vary from state to state.

Income below 138% of poverty level: The original intent of the ACA was that all adults under the age of 65 with household incomes up to 138% of FPL would get Medicaid coverage for free. However, a Supreme Court decision made it optional for states to comply with this part of the ACA.

Coverage gap: As of 2021, there are 12 states that have not expanded Medicaid coverage to this group. About 2.2 million people in 11 of those states are in what's known as the coverage gap:

  • Their income is below the federal poverty level and thus too low for Obamacare subsidies
  • But they're also ineligible for Medicaid because their states have refused to expand Medicaid eligibility.

Wisconsin has managed to avoid a coverage gap despite not expanding Medicaid. The state hasn't expanded Medicaid but provides Medicaid to residents with income up to the poverty level.

Who's eligible: If you live in a state with expanded Medicaid coverage, you’re 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 without expanded Medicaid coverage, you’ll have to meet the older, stricter eligibility criteria. They vary from state to state but include:

  • Low-income criteria
  • That you belong to at least one vulnerable group (age 65+, disabled, blind, children, pregnant women, and parents or adult caregivers of young children)

Example

Say you're a:

  • Childless, non-disabled, 30-year-old male earning $10,000 a year

Whether you qualify for Medicaid depends on where you live.

State with expanded Medicaid: Eligible because of income criteria (under 138% FPL)

State without expanded Medicaid: Ineligible (in coverage gap) because you don't belong to a vulnerable group. Unfortunately, you'll be in the coverage gap (and thus not eligible for Medicaid or a premium subsidy in the exchange) because your income is under the poverty level.

Fortunately, the Build Back Better Act would temporarily close the coverage gap if the version that passed the House of Representatives in November 2021 is approved by the Senate. The legislation calls for full premium subsidies to be available to people who aren't eligible for Medicaid, even if their income is below the poverty level. This would apply from 2022 through 2025.

Enrollment Period Differences

If you're eligible for Medicaid, you can enroll throughout the year.

However, enrollment in Obamacare plans is only available:

  • During the annual open enrollment period OR
  • If you're eligible for a limited special enrollment period (due to loss of insurance, change of marital status, the birth or adoption of a child, etc.)

If you don't have a qualifying life event that triggers a special enrollment period, you’ll have to wait until the next open enrollment period to apply for an Obamacare plan. This is true whether you're enrolling through the exchange or off-exchange; individual/family major medical plans sold outside the exchange are ACA-compliant too and have the same limited enrollment windows.

When Coverage Begins

When you apply for an Obamacare plan during open enrollment (each fall from November 1 to January 15 in most states), the coverage doesn’t take effect until at least January 1 of the following year (if you apply after December 15, your coverage will likely take effect in February, or even in March, depending on the state).

For example, if you enroll in an Obamacare plan during the open enrollment period that began in November 2021, your Obamacare plan coverage will take effect on January 1, 2022, February 1, 2022, or possibly March 1 (in a few states that have extended enrollment windows). Your effective date may be different if you apply because of a ​qualifying event, such as the birth of a child.

However, when you're accepted into the Medicaid program, there is no waiting period. Coverage takes effect immediately.

Retroactive Coverage Differences

Insurance plans sold through Obamacare are generally never retroactive, meaning you can't get coverage for anything before the start date of your insurance (there are some exceptions, including coverage for a newborn or newly adopted child, and state-run exchanges can also offer retroactive coverage dates during special enrollment periods, as Maryland did during its COVID-related special enrollment period).

But depending on the circumstances and where you live, Medicaid coverage can be retroactive.

For example, if you’re five months pregnant when you apply for and receive Medicaid coverage, Medicaid may pay for the prenatal care you got during the first four months of your pregnancy, even before you applied for Medicaid.

The Trump administration approved waiver requests from some states that wanted to end retroactive coverage under Medicaid, but most states do still offer retroactive Medicaid coverage.

Without retroactive coverage, Medicaid becomes a bit more similar to private health insurance in terms of when the coverage can take effect. However, coverage usually goes into effect on the first day of the month during which you applied, as opposed to the first of the following month—so the coverage can still be retroactive by a few weeks, depending on your 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 often come with substantial deductibles, copayments, and coinsurance.

Since a deductible of several thousand dollars can be difficult for people with modest incomes to pay, a cost-sharing subsidy to decrease those expenses is available if you make less than 250% of FPL.

If you make more than 250% of FPL, you're responsible for the full amount of any cost-sharing required by your Obamacare health plan. Even if you earn less than that, you must select a silver-level plan in order to receive the cost-sharing reduction benefits.

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's usually 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 someone who's eligible for Medicare but not enrolled.

Also, an insurer can't force you to give up an Obamacare plan you already have when you become eligible for Medicare.

In that case, though, you'll lose any premium subsidy 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 no coordination of benefits between Medicare and the individual market.

It's generally advised that you drop individual coverage under Obamacare once you're eligible for Medicare. This process is not automatic; you have to initiate the cancellation of your Obamacare plan yourself and coordinate it 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. 

Telling the Difference

When it comes to Medicaid and Obamacare, understanding who is providing your health coverage can be confusing, especially in certain circumstances.

Apply for ACA, Get Medicaid

You may not know you're eligible for Medicaid until you fill out an application for health insurance through the ACA-created health insurance exchange in your state.

If the exchange determines that you qualify for Medicaid, it will forward that information to the state Medicaid office, which starts the Medicaid application process.

Since you submitted your initial health insurance application to an Obamacare health insurance exchange, it might surprise you to end up receiving Medicaid instead of a private Obamacare plan. However, this is a normal part of the process.

Medicaid Through Private Companies

Although Medicaid is a government program, in most states, Medicaid services for the majority of enrollees are provided through a private health insurance company.

If you receive a Medicaid ID card from UnitedHealthcare, Humana, Kaiser, or Blue Cross, you might mistakenly assume you're receiving private Obamacare health insurance, when it's actually just the company your state has contracted with to provide Medicaid benefits.

Even though a private company is managing the Medicaid coverage, the benefits themselves are still Medicaid and the money to pay for those benefits ultimately comes from federal and state taxpayer funds.

Subtle Differences

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

Summary

Obamacare is just another word for the ACA, but it's often used to describe the private health insurance plans that people purchase through each state's health insurance exchange.

Medicaid is a government-run program for low-income Americans, and the expansion of Medicaid eligibility criteria was a cornerstone of the ACA.

Medicaid enrollment has grown sharply as a result of the ACA, and people who enroll in coverage through the exchange will either be directed to Medicaid or a private plan, depending on their income. Although Medicaid is a government-run program, it's typically administered by private insurance companies.

A Word From Verywell

If you have questions about who is providing your medical coverage and why, or about particular aspects of your coverage, look for contact information on your insurance card or paperwork. The agency or company should be able to provide you with the information you need.

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