Affordable Care Act (ACA)

What is the Affordable Care Act?

The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act (ACA) – is the landmark health reform legislation signed into law by President Barack Obama in 2010. The bulk of the ACA’s insurance provisions apply to the individual and small-group markets, but the law also imposed some new regulations on the large-group market and on large employers. And some ACA provisions directly affected Medicare. For example:

• The ACA began reducing the amount Medicare Part D enrollees had to pay while in the donut hole. Under the ACA, donut hole costs were, by 2020, equalized with the costs that enrollees paid prior to entering the donut hole phase (in other words, “closing” the donut hole). The donut hole was eliminated entirely as of 2025, due to the Inflation Reduction Act.
• The ACA added a high-income surcharge (IRMAA) to Medicare Part D premiums (there was already an IRMAA surcharge for Medicare Part B).¹
• The ACA eliminated cost-sharing for various preventive benefits, meaning that Medicare Part B enrollees can receive these services without having to pay the Part B deductible or coinsurance.²
• The ACA requires Medicare Advantage and Medicare Part D plans to spend at least 85% of their revenue on claims and quality improvements, rather than administrative costs (this is the same as the medical loss ratio that applies to commercial large group plans under the ACA).³
• The ACA imposed funding cuts on Medicare Advantage plans, in an effort to bring federal spending on those plans into line with what the government would spend if those enrollees were in Original Medicare instead (the overpayments have dropped since the ACA, but the government does still spend more, on a per-enrollee basis, for Medicare Advantage).⁴ There was speculation that Medicare Advantage enrollment would drop as a result, but enrollment had been steadily increasing every year since 2004, and that trend continued after the ACA was enacted.⁵