The Inflation Reduction Act (IRA), which President Biden signed into law in 2022, is a sweeping, ambitious piece of legislation designed to accomplish many goals at once. As its name suggests, one of its purposes is to curb rising costs. But it also touches on many other things, like changing tax laws, investing in energy infrastructure, creating jobs, and fighting climate change.
For Medicare beneficiaries, the IRA is designed to help expand benefits, lower drug costs, and provide meaningful financial relief, both now and in the long run. I’d like to break it down for you, so you understand exactly what it does for Medicare beneficiaries.
What Happened in 2023
Insulin
Effective January 1, 2023, the IRA required Medicare Part D prescription drug plans to cap covered Part D insulins at $35 per one-month supply. In July 2023, this cap expanded to include insulins used in durable medical equipment pumps covered under Part B, providing financial relief to people for whom insulin is literally a life-saving medicine.
Part B Drug Costs
The law also requires drug companies to pay a rebate to the Medicare Trust Fund if they raise prices for certain Part B drugs faster than the rate of inflation. This will help keep prices from increasing too quickly. And the coinsurance that Medicare beneficiaries will pay for these Part B drugs will be lowered based on that inflation-adjusted payment amount.
Part D Vaccines
In addition, the IRA allows Medicare beneficiaries to receive all vaccines covered under Medicare Part D with no cost-share, provided those vaccines are recommended by the Advisory Committee on Immunization Practices (ACIP). This includes immunizations against shingles, tetanus/diphtheria (Td), tetanus/diphtheria/pertussis (Tdap), hepatitis A, and hepatitis B.
What’s Happening in 2024
Low-Income Subsidy
Beginning in 2024, the IRA expands the income eligibility to allow more people to qualify for a Low-Income Subsidy (LIS), or the “Extra Help” program. This means that all enrollees who currently only qualify for partial subsidy will become eligible for the full LIS, and out-of-pocket drug costs will be greatly reduced. It ensures that Extra Help recipients will have a $0 monthly Part D premium and a $0 plan deductible, and they won’t need to pay a Part D late enrollment penalty for not enrolling in Medicare when they first became eligible.
Catastrophic Coverage Stage
In addition, the law completely eliminates the cost-sharing for prescriptions in the catastrophic coverage stage, meaning people in this phase won’t pay anything for prescriptions for the remainder of the calendar year. Catastrophic coverage begins when true out-of-pocket (TrOOP) costs have reached $8,000 in any calendar year. But beginning in 2025, the IRA will provide even better cost savings for people with Medicare Part D plans.
What’s to Come in 2025 and Beyond
Out-of-Pocket Part D Costs
Beginning in 2025, the IRA ensures people with Medicare Part D plans will never pay more than a certain amount out of pocket per year on prescriptions. In 2025, that limit will be $2,000. This will drastically lower the cost maximum from $8,000 and completely eliminate the Coverage Gap and Catastrophic Coverage phases.
Prescription Payment Options
Part D plan members will also have the option of paying their prescription drug costs in limited monthly installments over the course of each plan year through the Medicare Prescription Payment Plan (MPPP) provision, rather than paying at the point of sale at the pharmacy. Medicare beneficiaries will need to opt in to this benefit to take advantage of the payment plan, which they’ll be able to do beginning in the summer of 2024.
Drug Price Negotiation
Finally, the law allows the Centers for Medicare and Medicaid Services (CMS) to negotiate directly with drug manufacturers to lower the prices of some of the most expensive brand-name Medicare Part B and Part D drugs. These negotiations are already underway, but they will take full effect in 2026. This should significantly help control the cost of these medicines.
The Bottom Line
The IRA contains many provisions that will help make health care much more affordable for people who have Medicare Part B and Part D coverage. If you are on Medicare and are still having trouble making ends meet, plenty of local resources are available to help you save on prescriptions and other costs of living.
You can learn more on the CMS IRA website.
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Website last updated: 04/17/2024
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