Medicare is not part of the Affordable Care Act. Medicare is a separate federal health program created in 1965, while the Affordable Care Act (ACA), signed into law in 2010, primarily created insurance marketplaces for people who don’t have coverage through an employer or government program. However, the ACA made several significant changes to Medicare that directly affect what beneficiaries pay and what services they receive. Understanding where these two programs overlap, and where they don’t, matters if you’re approaching 65 or already enrolled.
Two Separate Programs With Different Purposes
Medicare is a federal health program for people 65 and older, certain younger people with disabilities, and those with end-stage renal disease. It existed for nearly five decades before the ACA was signed. The ACA, by contrast, created health insurance marketplaces (sometimes called “exchanges”) where individuals and families can shop for private insurance plans, often with income-based subsidies to lower premiums.
These programs serve different populations and work differently. You cannot use ACA marketplace subsidies once you’re eligible for Medicare Part A or once your Medicare or Medicare Advantage coverage starts. At that point, you’d pay full price for any marketplace plan. In fact, it’s against the law for someone who knows you have Medicare to sell you a marketplace plan. If you’re approaching 65 and currently covered through the marketplace, you’ll need to transition to Medicare during your initial enrollment period to avoid late-enrollment penalties.
How the ACA Changed Medicare
While the ACA didn’t create Medicare, it reshaped the program in ways that still affect beneficiaries today. The most impactful changes fall into three categories: free preventive care, lower prescription drug costs, and new payment models designed to improve quality.
Free Preventive Services
Before the ACA, Medicare beneficiaries often owed copays or coinsurance for routine screenings and checkups. The ACA eliminated cost-sharing for most preventive services when you see a provider who accepts Medicare assignment. That means you pay nothing for a long list of screenings and shots, including mammograms, colonoscopies, cardiovascular disease screenings, diabetes screenings, lung cancer screenings, depression screenings, glaucoma tests, flu shots, pneumococcal shots, COVID-19 vaccines, and hepatitis B vaccinations.
Medicare also covers a one-time “Welcome to Medicare” preventive visit when you first enroll and an annual wellness visit every year after that, both at no cost. Counseling services for tobacco use, alcohol misuse, obesity, and nutrition therapy are also covered without copays. Before the ACA, many of these services either weren’t covered or required out-of-pocket payments that discouraged people from getting them.
Closing the Prescription Drug “Donut Hole”
One of the ACA’s most tangible changes for Medicare beneficiaries was closing the Part D prescription drug coverage gap, commonly called the “donut hole.” Before the ACA, once your total drug costs hit a certain threshold, you entered a gap where you were responsible for the full cost of medications until you reached catastrophic coverage. This left many seniors choosing between paying for prescriptions and paying for other necessities.
The ACA phased in discounts from drug manufacturers and increased Medicare’s share of drug costs in the gap over several years. By 2020, the gap was fully closed: beneficiaries in the coverage gap now pay 25% of the cost for both brand-name and generic drugs, the same rate they pay before entering the gap. Drug manufacturers are required to sign discount agreements with the government for their brand-name drugs to be covered under Part D at all, which creates a strong incentive for participation.
Shifting From Volume to Value
The ACA also created new ways of paying doctors and hospitals that reward better outcomes rather than simply more services. The Medicare Shared Savings Program, established by the ACA, allows groups of doctors, hospitals, and other providers to form Accountable Care Organizations (ACOs). These groups coordinate care for Medicare patients and can share in the savings when they deliver high-quality care while spending less. The goal is to reduce unnecessary tests, procedures, and medical errors by encouraging providers to work together rather than in silos.
Impact on Medicare Advantage Plans
Medicare Advantage (Part C) plans, the private-insurer alternative to traditional Medicare, were also reshaped by the ACA. Before 2010, the government paid these private plans significantly more per beneficiary than it cost to cover the same person under traditional Medicare. The ACA reduced those payments, tying them more closely to what traditional Medicare actually spends in each county.
Many analysts predicted this would shrink the Medicare Advantage market. The opposite happened. Plans adapted by cutting internal costs and lowering their bids, which allowed them to offer more benefits, not fewer. Between 2016 and 2021, the average number of Medicare Advantage plan choices per beneficiary grew from 18 to 32. The share of beneficiaries with access to a zero-premium plan option rose from 81% to 96%. And the annual value of extra benefits (things like dental, vision, and hearing coverage) grew roughly 75%, from about $972 to $1,700 per enrollee.
Effect on Medicare’s Financial Health
The ACA included cost-containment measures designed to extend Medicare’s solvency. The most significant is a set of annual productivity adjustments that slow the growth of payments to hospitals and other providers covered under Medicare Part A. These adjustments are projected to reduce what Medicare pays providers by about 20% after 25 years, 38% after 50 years, and 51% after 75 years compared to what prices would be without the reductions.
These savings have helped extend the life of Medicare’s Hospital Insurance trust fund, though the program still faces long-term financial pressure. The 2025 Medicare Trustees Report projects that the trust fund will be depleted by 2033, with tax income falling short of expenditures starting in 2027. Without the ACA’s cost reductions already built into current law, that projected depletion date would be significantly earlier.
Transitioning From the Marketplace to Medicare
If you currently have a marketplace plan and are approaching 65, the transition to Medicare requires some planning. Your initial enrollment period for Medicare begins three months before the month you turn 65 and ends three months after. Missing this window can result in permanent late-enrollment penalties that increase your premiums for as long as you have Medicare.
Once you become eligible for Medicare Part A, you lose access to marketplace premium subsidies and cost-sharing reductions. There is one narrow exception: if you have to pay a premium for Part A (which applies to people who didn’t work long enough to qualify for premium-free Part A), you can choose between Medicare and marketplace coverage. For everyone else, Medicare becomes your primary coverage, and keeping a marketplace plan means paying the full, unsubsidized price with no financial benefit.