Will the Inflation Reduction Act Lower Your Drug Costs?
What kind of changes can Medicare beneficiaries expect to see from the Inflation Reduction Act that was recently signed into law? How will this reduce out-of-pocket spending for Medicare beneficiaries?
The climate, tax and health care bill known as the Inflation Reduction Act was signed into law last month. The bill includes significant changes to the Medicare program that will kick-in over the next few years.
These changes will lower prescription drug prices for millions of individuals with Medicare. The government will be allowed to negotiate drug prices and cap out-of-pocket drug costs at $2,000 annually. Other changes include free vaccinations, lower insulin costs and expanded subsidies for low-income beneficiaries.
The Inflation Reduction Act also extends subsidies for health insurance premiums under the Affordable Care Act for three years. The subsidies have helped millions of Americans pay for health insurance before they are eligible for Medicare. Here is a breakdown of the changes and when they will commence.
2023: All vaccines covered under Medicare Part D, including the shingles vaccine, will be free to beneficiaries. The cost of insulin will be capped at $35 per month for participants. This will be a significant savings for more than 3 million Medicare enrollees who currently use insulin to control their diabetes. Also, drug makers will be penalized in the form of "rebates" that would be assessed and paid to the government if a drug's price increase exceeds general inflation.
2024: Cost sharing for catastrophic coverage in Part D will be eliminated. Currently, once your out-of-pocket costs reach $7,050, you enter catastrophic coverage. Participants are still responsible for 5% of your prescription drug costs, with no limit.
In 2024, people with Part D coverage will no longer be responsible for any out-of-pocket drug costs once they enter catastrophic coverage. This is significant for those who use expensive medications for conditions like cancer or multiple sclerosis. Also starting in 2024 through 2029, Part D premiums can not be increase more than 6% per year.
For lower income Medicare beneficiaries, eligibility for the Part D Low Income Subsidy (also known as Extra Help) will be expanded to 150% of the federal poverty level, from today's limit of 135%. This change will allow about 500,000 additional people with Medicare will qualify for financial assistance to help pay some or all their prescription drug premiums and deductibles.
2025: One of the biggest cost reduction measures for Medicare beneficiaries will begin in 2025 when out-of-pocket spending on Part D prescription drugs will be capped at $2,000 per year. This will be a major savings for the more than 1.5 million beneficiaries who spend more than $2,000 out-of-pocket each year.
2026: When Medicare's Part D program was enacted in 2003, negotiating lower drug prices was forbidden. Starting in 2026 Medicare will be allowed to negotiate prices with drug companies for 10 of the most expensive drugs covered under Part D. In 2027 and 2028, 15 drugs will be eligible for negotiations. After 2029, another 20 drugs will be added each year.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.