How Will the Prescription Drug Provisions in the Inflation Reduction Act Affect Medicare Beneficiaries?

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which includes a broad package of health, tax, and climate change provisions. The law includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. These provisions will take effect beginning in 2023.

The Inflation Reduction Act includes two policies that are designed to have a direct impact on drug prices. First, it requires the federal government to negotiate prices for some high-cost drugs covered under Medicare. Second, it requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries.

The Inflation Reduction Act also includes several provisions that will reduce out-of-pocket spending for Medicare beneficiaries. It caps Medicare beneficiaries’ out-of-pocket spending under the Medicare Part D benefit, first by eliminating coinsurance above the catastrophic threshold in 2024 and then by adding a $2,000 cap on spending in 2025. The Act limits cost sharing for insulin to $35 per month for people with Medicare, beginning in 2023, and eliminates cost sharing for adult vaccines covered under Medicare Part D, as of 2023, and improves access to adult vaccines under Medicaid and CHIP

What does this mean for you if you’re a Medicare beneficiary? We posed this question to Joshua Hunter, one of the Public Benefits Specialists at Takacs McGinnis Elder Care Law, a Life Care Planning Law Firm in Hendersonville, Tennessee. “This is an exciting time to be a Medicare specialist,” Joshua laughed. “This legislation will cause waves for years to come.”

Joshua says that the legislation will make some things better. “Since Part D’s inception, the federal government gave drug companies a lot of discretion,” he explained, “which fits the American narrative of ‘market competition’ regulating fair prices. The problem is the market did not regulate in a way that benefitted the people. In my time working with Medicare, we have listened to the cries of beneficiaries who had to choose food over their meds, or their meds over their rent payment. I have seen the cost of insulin completely control a family’s life; they based every decision on whether they could afford their insulin. This cap is frankly incredible. The Affordable Care Act (ACA) was the first attempt to solve this problem, but it was far from a cure-all. This Inflation Reduction Act seeks to reduce the impact of drug expenses on seniors. By setting these caps on both drug expenses and premiums, our seniors should be able to sigh with some relief. This will directly help the people in the years to come.”

The changes create by this legislation will go into effect over time, so their respective impacts will be felt in waves. Many of the changes are scheduled to go into effect a few years from now. “For example, the out-of-pocket Part D max is set for 2025,” Joshua explained. “We need to make sure that people understand the wait required. I am afraid that people won’t see their bills changing and they’ll throw up their hands in frustration. Many of the provisions will phase in with time, much like the changes with the donut hole. If I had to pick a most important part overall, I would have to say the out-of-pocket cap excites me the most. This will affect all beneficiaries on all plans, unlike the targeted drugs (not to say those aren’t exciting, too).”

What cautions does Joshua have for Medicare beneficiaries or their families? “I always recommend cautious optimism with any legislation,” he added. “We cannot be sure this legislation will survive long-term. Who knows whether it will truly reach fruition. Just like we did with the good pieces of ACA, we need to remain active advocates, acknowledge the good and bad, and continue to make our voices heard on what works and what misses the mark. Simply put, anything that takes time can be changed.”