The Impact of the Affordable Care Act on Medicare Spending

The healthcare system in the U.S. was always the pool for debate. The introduction of the Affordable Care Act (ACA) was supposed to provide a healthcare reform by changing taxation for individuals and government entities. It did indeed expand Medicare eligibility to adult children and elderly populations. However, the following reform also caused a significant impact on the financial status of Medicare. Overall, the reduction of the number of uninsured combined with policy changes for medical staff had a positive impact on healthcare costs in America but still possesses several flaws.

ACA was a comprehensive reform in healthcare in 2010. The primary goal of it was to make healthcare more affordable for a more considerable amount of people (Nowicki, 2015). The following is provided by giving consumers subsidies that drop healthcare costs in households with low income. It is also intended to cover all adults with modest income under the Medicaid program. The innovative modern care delivery is also supported to lower the prices for health care.

Financial Impacts of ACA on Medicare

The ACA affected the Medicare implementation through new plans, extended dependent coverage for young adults, prevention benefits, and coverage limits. The following provisions allowed millions of people to rely on Medicare for their health coverage. Such policy changes included reducing the growth of Medicare payments for medical care providers such as hospitals, giving benefits for payment and delivery system reforms, new revenues, and higher premiums for beneficiaries.

The Affordable Care Act was focused on several spendings restructuring. The ACA gradually cut costs for reorganizing payments to Medicare to spend less money per enrollee. The following strategy was expected to drop the enrollment for Medicare Advantage because of the payment cuts and benefit reductions (Nowicki, 2015). However, the following effect was not noted as the program has a steadily increasing number of enrollees. ACA forced Medicare Advantage plans to utilize small networks and switch to more efficient plans with higher out-of-pocket costs. Since more individuals get insured under the ACA expansion of Medicare, hospitals got sources to bill for services. Before the reform, the emergency services provision led to uncompensated care or bad debts (Nowicki, 2015). Thus, the expenditures on expanding Medicare functions will be covered in the long-term perspective due to the decrease in the number of bad debts under Medicare extended coverage.

The ACA, most importantly, changed the tax code for the Medicare program as a way of increasing revenue. The ACA imposed new requirements for tax-exempt hospitals that used to define the standards for themselves and avoid services for low-income patients (Nowicki, 2015). The ACA reduced Medicare Disproportionate Share Hospital (DSH) payments to help hospitals compensate for providing care to low-income or uninsured patients (Nowicki, 2015). ACA also addressed one of the biggest financial drains on Medicare’s prescription drugs known as “donut hole.” ACA made the coverage adjustment, decreasing the pressure on enrollees. This resulted in the break in the cost of drugs in the donut hole.

In the end, the introduction of ACA played an essential role in securing Medicare’s financial stance in a long-term perspective and provided additional benefits to people with Medicare. The ACA allowed for additional savings in the budget by reducing hospitals and nursing facilities as providers. The following provider payment changes were adopted with the ACA’s insurance coverage expansions to create additional Medicare payments revenue. More Medicare savings were also achieved by lowering payments to Medicare Advantage plans.


Nowicki, M. (2015). Introduction to the financial management of healthcare organizations (6th ed.). Chicago, IL: Health Administration Press.

Find out your order's cost