Why is the American health care system so confusing?
Understanding the U.S. health care system can be confusing. This article is the first in our new column, American Health Policy: Evidence and Evaluation. The goal of this column is to make information about health coverage – especially related to mental health care and substance use – more accessible. Each article will offer key takeaways to help you better understand the U.S. health care system and the research behind state and federal health programs.
An introduction to America’s health care programs:
On July 30, 1965, President Lyndon B. Johnson signed into law the Social Security Amendments of 1965, establishing both Medicare and Medicaid. These two programs were created with the purpose of expanding health care services and providing financial support for diverse American communities.
Medicare was established to provide health insurance for the elderly starting from 65 years of age, as well as individuals with certain disabilities.
Medicaid was designed to offer health coverage to low-income individuals and families.
The Affordable Care Act (ACA) aims to make health insurance coverage more accessible, improve quality of care, and reduce health related costs for millions of Americans.
Why Were These Programs Created?
Medicare and Medicaid were created to make health care more affordable and accessible to low-income individuals. These health coverage programs were established for underrepresented and vulnerable Americans, such as, elderly, individuals with a diagnosed disability, or individuals with extremely low income. Medicare and Medicaid were constructed to address the lack of accessibility of healthcare coverage in the United States; therefore, further expand healthcare coverage for Americans.
What Is the Affordable Care Act (ACA)?
President Barack Obama signed the Affordable Care Act (ACA) —often called Obamacare— into law. The ACA made health care coverage more affordable and accessible for Americans nationwide by providing premium subsidies, which provides financial assistance to assist individuals and families to afford healthcare coverage. The ACA aimed to improve the efficiency and quality of healthcare in the United States.
What Did the ACA Change?
Before the ACA:
Insurers could deny coverage based on pre-existing conditions.
People faced sky-high out-of-pocket costs.
Millions were uninsured due to unaffordability and/or employer limitations.
The ACA changed that by:
Creating healthcare marketplaces with premium subsidies.
Expanding Medicaid in many states nationwide.
Mandating coverage for essential health benefits.
Why Do People Confuse Medicare and Medicaid?
It’s easy to see why. Both programs:
Are government-run
Help pay for healthcare
Have overlapping beneficiaries (e.g., low-income communities)
But the key difference is who they serve:
Medicare = age and disability-based
Medicaid = income-based
Poverty threshold: depends whether Medicare is expanded in certain states (this expansion was because of the ACA back in 2014 and it allowed more funding from the federal government).
In states with Medicaid expansion, adults (from ages 18-65) qualify if their income is up to 133% of Federal Poverty Level (FPL), while in states where Medicaid has not expanded, adults must fall below 100% FPL to qualify, unless they meet other criteria like age, being disabled, or others.
Who Is Eligible?
Although both programs serve vulnerable groups, they have different eligibility criteria:
Medicare is primarily for people aged 65 and older. However, younger individuals with disabilities, End-Stage Renal Disease (ESRD), or ALS may also qualify. It’s structured into four parts (A, B, C, and D), covering hospital stays, outpatient care, and prescription drugs.
Medicaid serves low-income individuals and families, including children, pregnant women, people with disabilities, and some seniors. Eligibility varies by state but is generally based on income and need.
Where Do We Go From Here?
Fast forward to July 1, 2025, the Senate voted to pass bill H.R.1. This bill steeply affects Medicaid, due to the restrictions imposed and federal funding cuts. Furthermore, since Medicaid is going to receive exponentially lower federal funding, mental health resources are going to be restricted as well because mental health initiatives are largely funded by the government.
This article was researched and produced by José Caballero, Diana Cardenas, Pablo Hernandez. This article is part of Khipú’s American Health Policy: Evidence and Evaluation Column.