Q. My wife and I have been following the news about the recently signed Inflation Reduction Act, and there seems to be significant benefits for seniors on Medicare. Can you provide more information?
A. Sure. The recently signed Inflation Reduction Act has been considered by many as a blockbuster piece of legislation, perhaps one of the most important during the Biden Administration, and perhaps the most sweeping in terms of Medicare prescription drug reforms since inception of the Medicare Part D Program. Here is a kind of “bullet point” summary:
The ACT Caps Medicare Part D Out-Of-Pocket Costs at $2,000 per Year
Seniors and others with Medicare Part D coverage will see their out-of-pocket prescription drug costs capped at $2,000 per year, beginning in the year 2025. The good news is that this cost-cap will apply to both persons enrolled in stand-alone prescription drug plans (“PDPs”), as well as those in Medicare Advantage Drug Plans (“MA-PDs”). Further, in 2025, a new monthly cost sharing policy will allow people to spread their out-of-pocket costs throughout the year, if they wish. This option will also be available to those on the Extra Help Program.
Further, Commencing in 2023, Insulin costs for those on Medicare will be capped at $35 per month, without a deductible. And, for plan years 2024 through 2029, the annual premium growth for Part D Coverage will be limited to 6%.
The ACT Lowers Prescription Drug Prices
For the very first time since the Part D Program was created, the program will be required to negotiate prices with drug manufacturers of certain high-cost prescription drugs covered under either Part D or Part B. Though these negotiated prices will be phased in, the requirement that prices be negotiated is expected to deliver significant savings for people on Medicare, and to the Medicare program itself.
Commencing in the year 2023, the ACT also requires prescription drug manufacturers to rebate excess charges to the government if they increase the price of a drug covered under the Part D or Part B Programs above the inflation rate. The obvious purpose of this provision is to discourage pharmaceutical manufacturers from making large price hikes. The Act Expands the Medicare Part D Extra Help Program
Commencing in the year 2024, the ACT expands the full Part D low income subsidy (a.k.a., the “Extra Help” program) to people with incomes below 150% of the federal poverty level (“FPL”) ($20,385 per year for a single person in the year 2022). Folks with incomes between 135% and 150% of the FPL, who previously had only a partial subsidy, will now have a full subsidy with lower co-pays and no deductibles. These changes, alone, are expected to provide significant additional financial support to the more than 400,000 low income people who currently only have partial subsidies and for thousands more who are eligible but not currently enrolled.
The ACT Expands No Cost Coverage of Vaccines
Commencing in 2023, individuals on Medicare will receive all recommended vaccines without cost-sharing, and the same will be true for persons on Medicaid (known as ‘Medi-Cal’ in California).
The ACT Enhances Premium Assistance For Those with Marketplace Coverage
The ACT extends the enhanced premium tax credit for Affordable Care Act Marketplace coverage for 3 years (through 2025), providing additional cost savings for older adults who are not yet eligible for Medicare. With the subsidies, it is estimated that over 80% of enrollees in marketplace plans in the 55 to 64 age-range will now be eligible for a plan with monthly premiums of only $50, or less.
These out-of-pocket cost caps and other innovations should greatly help folks with chronic conditions who otherwise face high drug costs, as well as seniors and the disabled on fixed incomes, who will then be protected from catastrophic costs for their medication.