What's the Difference Between Medicaid & Obamacare?

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Comparing Medicaid and Obamacare is like comparing apples to oranges. Image © JGI/Getty Images

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.

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 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 Blue Cross, Kaiser Permanente, UnitedHealthCare, Aetna, Humana, Wellpoint, and others. Obamacare health plans are not run by the government.

Who Gets Medicaid Vs. Who Gets 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 ACA health insurance exchange as long as you’re not eligible for Medicare. If your income is from 100% to 400% of federal poverty level, you may qualify for a subsidy that helps pay part of your monthly health insurance premiums. If your income is above 400% 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.

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 below 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. This resulted in a confusing system in which some states have very strict Medicaid eligibility criteria because their leaders chose not to expand Medicaid coverage, but other states have more lenient Medicaid eligibility criteria because their leaders opted into the ACA’s Medicaid expansion.

If you live in a state that expanded Medicaid coverage, you’ll be eligible for Medicaid if your modified adjusted gross income is less than 138% of FPL. This Medicaid coverage is usually free to you, although some states are exploring ways to charge a small, token monthly premium for coverage.

If you live in a state that didn’t expand 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 may require that you be a member of a medically vulnerable group such as the elderly, the disabled, the blind, children, pregnant women, and parents or adult caregivers of young children.

So, for example, if you’re a childless, healthy 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 less than 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.

Limited Enrollment Period for Obamacare Vs. Enroll Anytime for Medicaid

You may apply for Medicaid throughout the year. You may only apply for Obamacare during open enrollment or if you meet the eligibility criteria for a limited special enrollment period. If it’s not open enrollment, you’ll have to wait until the next open enrollment period to apply for an Obamacare plan.

When you apply for an Obamacare plan during open enrollment, the coverage generally 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 2016, your Obamacare plan coverage will take effect on January 1 of 2017.

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 for Medicaid Vs. No Retroactive Coverage for Obamacare

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 on Obamacare exchanges.

Lower Cost-Sharing for Medicaid Vs. Obamacare

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.

Medicaid & Medicare Can Be Combined; Obamacare & Medicare Can't

It’s perfectly legal to have both Medicare and Medicaid coverage at the same time. In fact, there’s even a name for people who have both: dual eligibles. However, it’s not OK to have both an Obamacare health insurance plan and Medicare. 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 Part C, Medicare Advantage plan. You can’t have both Medicare and Obamacare at the same time.

Why Telling the Difference Between Medicaid & Obamacare Can Be Tough

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 Medicaid, 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 some states, Medicaid services are provided through a private health insurance company. In fact, according to America’s Health Insurance Plans, a health insurance industry trade group, almost half of Medicaid recipients are in managed care health plans. 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 may be confusing as to how government-subsidized private health insurance (Obamacare) is really all that different than government-funded Medicaid.

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