The Difference Between Medicaid and Obamacare

Obamacare is a federal law, but the term is also often used to refer to individual and family health insurance obtained through the exchange/Marketplace. 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 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.

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/family 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 to cover low-income adults, which is a cornerstone of the ACA.
• The individual mandate and employer mandate. 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/Marketplace in each state. These 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pushed for the repeal of numerous portions of the ACA throughout 2017, the only significant part of the law that was repealed was the individual mandate penalty.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 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Some of the ACA's taxes, including the Cadillac tax, have also been repealed, and some provisions, including the IPAB and the CLASS Act, never got off the ground.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 most of its major reforms were implemented.

The ACA's individual/family subsidy provisions were enhanced by the American Rescue Plan. And some of those subsidy enhancements have been extended through 2025 by the Inflation Reduction Act.

While the term "Obamacare" technically encompasses all of the ACA, it's often used 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.

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 early 2023, nearly 94 million Americans were receiving Medicaid and CHIP benefits—an increase of more than 37 million people, or 64%, since 2013. But by early 2024, total enrollment had dropped by about 10 million people, due to the "unwinding" of the pandemic-era Medicaid continuous coverage rule.

For three years during the pandemic, states were not allowed to disenroll people from Medicaid unless they died, moved out of state, or requested a disenrollment. That changed as of April 2023, and millions of people have since been disenrolled from Medicaid.

But Medicaid is still the largest health coverage program in the U.S., and there were still about 85 million people enrolled in Medicaid as of late 2023.

Obamacare plans, obtained via the health insurance exchange in each state, covered more than 21 million people as of early 2024 and are private health insurance plans.

They're offered by health insurance companies such as Anthem, Kaiser Permanente, Molina, Cigna, and Centene. Nationwide, hundreds of insurers 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 many 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 and you're not incarcerated, 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 temporarily eliminated by the American Rescue Plan. And the Inflation Reduction Act extended that provision through 2025. (The lower income thresholds for subsidy eligibility are discussed in the next section)

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 income greater than 138% of the poverty level in those states. As of early 2024, Medicaid has been expanded in 40 states and DC, so the lower eligibility level for premium subsidy eligibility is a household income above 138% of the poverty level in the majority of the country.

Who pays full price: Although the American Rescue Plan and Inflation Reduction Act have eliminated the income cap for subsidy eligibility through the end of 2025, it's still possible to earn too much to be eligible for a subsidy.

If your income is above 400% of the poverty level and 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.

(For people with lower incomes, the percentage of income they have to pay for the benchmark plan is lower, but the same rule applies: If the full-price of the benchmark plan isn't more than that percentage of your income, a subsidy is not available. This can sometimes be the case for younger applicants in areas where health insurance is less expensive.)

And if you're in one of the nine states where there's still a coverage gap (due to the state's failure to implement Medicaid expansion), you may find that you're not eligible for any assistance—Medicaid or premium subsidies—if your income is under the poverty level.

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

To be eligible for Medicaid, you must have a low income. The specific level that makes you eligible will depend on the state you live in and the population you belong to (ie, children, pregnant women, childless adults, etc.).

For people whose eligibility is also based on being disabled, blind, or at least 65 years old, there are asset limits as well as income limits for Medicaid eligibility.

For now, we're just looking at the eligibility rules for expanded Medicaid, since that's the portion of the program that was created under Obamacare.

Medicaid expansion: Household income not more than 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 2024, 10 states have not expanded Medicaid coverage to this group. About 1.9 million people in nine 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.

As of July 2023, Georgia partially expanded Medicaid, but with a work requirement. Far fewer people can obtain coverage under this protocol than would be the case if the state were to fully expand Medicaid or even to use Wisconsin's approach and offer no-strings-attached coverage to those 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; note that for people who are 65+, there are both income and asset limits for Medicaid eligibility in every state)

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/winter 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 begins in November 2023, your Obamacare plan coverage will take effect on January 1, 2024, February 1, 2024, 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. But in most cases, coverage selected during a special enrollment period will take effect the month after you enroll.

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

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 is an exception so that retroactive coverage can be obtained for a newborn or newly adopted child. State-run exchanges can also offer retroactive coverage dates during special enrollment periods, although this is not commonly used. An example is the approach New Mexico and Pennsylvania are taking during the transition from Medicaid to private plans after the end of the COVID public health emergency.

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 Medicaid, the coverage may pay for the prenatal care you got during the first four months of your pregnancy, as long as you would have been eligible for Medicaid during those months.

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.

Even without retroactive coverage rules, Medicaid usually takes 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 your income is no more than 250% of FPL (you must select a Silver-level plan through the exchange to take advantage of this benefit).

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. More than 12 million Americans who receive coverage under both Medicare and Medicaid.

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. In some states, the exchange can directly enroll you in Medicaid rather than just forwarding your information to the Medicaid office.

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, 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.

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.

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. The expansion of Medicaid eligibility criteria was a cornerstone of the ACA, and has resulted in significant growth in Medicaid enrollment over the last decade.

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.