The Difference Between Medicaid and Obamacare

Since both involve the United States federal government, it's hard to know the exact differences between Obamacare and Medicaid. Some important features distinguish them, 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)
  • 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Trump Administration pushed for the repeal of numerous portions of the ACA throughout 2017, the only part of the law repealed was the individual mandate penalty.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).

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 in a comparison of 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.

Obamacare's health insurance exchanges are private health insurance plans. They're offered by health insurance companies such as:

  • Anthem
  • Kaiser Permanente
  • Molina
  • Cigna
  • Centene

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, 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 income is between 100% and 400% of the 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.

Expanded Medicaid exception: In states with expanded Medicaid, 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 there.

Who pays full price: 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. You can still buy a 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 due to the five-year Medicaid waiting period for recent immigrants.

California exception: In California, state-funded premium subsidies are available to people with household income up to 600% of the poverty level.

Who Can Get Medicaid Coverage

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

Income below 138% of poverty level: 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 it optional for states to comply with this part of the ACA.

Coverage gap: As of late 2020, 12 states have not expanded Medicaid coverage to this group. About two million people in 11 of those states are in what's known as the coverage gap:

  • Their income is below FPL and thus too low for Obamacare subsidies
  • But they're also ineligible for Medicaid

Wisconsin has managed to close the coverage gap. The state hasn't expanded Medicaid but provides Medicaid to residents with income up to the poverty level.

Nebraska's voter-approved Medicaid expansion went into effect in October 2020. Missouri and Oklahoma both have approved Medicaid expansion, which will go into effect in 2021.

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 (elderly, 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
  • Making $10,000 a year

Whether you qualify for Medicaid depends on what state you live in.

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

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, pregnancy, etc.)

Otherwise, 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; 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 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. 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 never retroactive, meaning you can't get coverage for anything before the start date of your insurance.

In some instances, though, 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 has approved 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.

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 do come with 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.

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 coordinated 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.

If the ACA exchange determines you qualify for Medicaid in your state, 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.

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 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.

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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Article Sources
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