The Inflation Reduction Act: What you should know
This summer, President Joe Biden signed into law the Inflation Reduction Act (IRA). In addition to measures to address climate change, generate revenue and boost U.S. manufacturing, the law includes provisions that some have described as a “game changer” for millions of American seniors on Medicare who have been dealing with soaring drug costs.
First, the law caps how much seniors on Medicare can be forced to pay out of pocket each year on medication and vaccines. Starting in 2025, out-of-pocket spending on prescriptions will be limited to $2,000 per year. Seniors should also feel some relief in 2024, a transition year where costs will be capped at Medicare’s catastrophic drug limit (currently $7,050). Given that medication for conditions like rheumatoid arthritis, cancer and multiple sclerosis can generate out-of-pocket costs of more than $10,000 per year, the savings should be significant. Meanwhile, vaccines will be free beginning in 2023.
Additionally, beginning in 2024, an estimated half-million more Medicare beneficiaries will be eligible for low-income subsidies to help pay for prescription drugs because the IRA raises the income limit for eligibility from 135 percent of the federal poverty level to 150 percent.
Meanwhile, diabetes patients are keenly aware that the price of insulin has skyrocketed over the past decade. But starting in 2023, the IRA will cap Medicare recipients’ insulin co-pays at $35 a month, which should result in significant savings.
Finally, the IRA has targeted drug prices themselves by allowing Medicare to negotiate prices for certain medications. This, however, does not take effect until 2026, when Medicare will be able to negotiate the pricing for the 10 drugs it spent the most on the year before. That list will expand to 20 drugs by 2029 and economists estimate that costs of such drugs will be cut between 40 and 70 percent as a result — savings that should be passed along to patients.