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After over twelve months of debate and multiple changes, the Inflation Reduction Act (IRA) has officially passed the Senate and House and was signed into law by President Joe Biden. Although this act has several focuses regarding health care costs and taxation, the most impactful for Medicare beneficiaries is the prescription drug price reform.
The IRA legislation aims to make prescription drugs more affordable to the nearly 49 million Medicare Part D beneficiaries in the country. The legislation includes provisions that will cap costs on Part D plans, allow negotiated prices for expensive medications, provide 100% coverage on Part D vaccines, and more.
So, let’s dive into what you need to know about the Inflation Reduction Act and its impact on Medicare beneficiaries.
Next year, beneficiaries will begin to feel the impact of the approved legislation. First up is the cap on monthly insulin costs for Medicare beneficiaries. In 2021, the Senior Savings Program was rolled out and prohibited participating drug plans from charging more than a $35 copay for specific insulin.
However, not all plans were required to comply. With the new Inflation Reduction Act, all Part D and Medicare Advantage plans with drug coverage must cap covered insulin at $35 per month starting January 2023. It’s also important to note that in July, Part B insulin will be capped at $35 per month as well.
Our free Medicare Q&A group on Facebook gets hundreds of monthly questions about Medicare coverage for vaccines. The IRA is bulldozing the former vaccine coverage and will now cover many of the vaccines that seniors need at 100%.
Though Medicare Part B covers some vaccinations at 100%, such as pneumonia, flu, Covid-19, and Hepatitis B, some necessary vaccines fall under Part D coverage.
One Part D vaccine, in particular, is the Shingles vaccine. Many beneficiaries are shocked that this vaccine falls under Part D and requires payment. To benefit many, the Shingles vaccine and many others will no longer require surprise out-of-pocket costs.
There is concern among many about the pharmaceutical companies raising the cost of certain drugs to make up for losses. However, beginning in 2023, if a drug manufacturer increases its drug costs faster than the inflation rate, it will have to pay rebates to avoid penalties.
What to expect in 2024
In 2024, Part D’s “Catastrophic Coverage” stage is getting a makeover. If you are familiar with the structure of Part D plans, you have likely seen the multiple stages and the sometimes confusing costs associated with each.
The fourth and final stage is the “Catastrophic Coverage” stage, which comes after the Donut Hole. In this stage, the beneficiary pays 5% of the cost of their drugs for the remainder of the calendar year. The 5% cost-sharing can be an excellent relief from the 25% cost-sharing in the Donut Hole. However, it can still result in high annual costs for Medicare beneficiaries.
In 2024, that 5% cost-sharing is getting kicked to the curb. The elimination of this cost-sharing means that once you exit the Donut Hole, you no longer have any out-of-pocket costs to worry about with your Part D plan.
Remember that the Initial Coverage stage and the Donut Hole will remain the same. Nonetheless, this will provide significant relief for Part D enrollees who find it challenging to pay for their necessary medications during the Catastrophic Coverage stage.
In the same cost-cutting vein, Medicare’s Part D premiums will have a cap on increases beginning in 2024. Each year the cost of Medicare, including Part D premiums, changes. However, between 2024 to 2029, Medicare Part D premiums cannot increase more than 6% annually.
This change allows more control over premiums and protects the beneficiaries from overinflated premiums from the carriers.
The final change you can expect in 2024 is an expansion of the Low-Income Subsidy (LIS) program. Many people know of this program as Extra Help. Today, eligibility for this program starts at 135% of the federal poverty level but will change to begin at 150% of the federal poverty level in 2024. This change is a welcomed benefit by the many people who are very close to qualifying for Extra Help already.
One of the most significant developments in the Inflation Reduction Act is the $2,000 Part D cost cap. Capping the out-of-pocket prescription costs has been a topic of conversation for years. This change will now provide a sigh of relief to many seniors.
The new legislation will cap a beneficiary’s out-of-pocket costs on prescription drugs at $2,000 starting in 2025.
The cap will be spread throughout the year and eliminate the Donut Hole stage once and for all. The change also allows seniors to spread the burden of the costs throughout the year. However, we need to note that there will be no change or impact on the Initial Coverage stage.
A major advancement that will begin in 2026 is the ability for Part D price negotiation. In 2026, the negotiation starts with 10 of the most expensive drugs that Medicare Part D covers. The Health and Human Services (HHS) will negotiate the prices of select medications from a list of eligible drugs.
The list of eligible drugs will include 50 Part D and 50 Part B drugs with the highest total expenditures. The drugs on the list must meet criteria such as high-priced, single-sourced drugs and biological products.
The negotiated drug price comes in four phases:
Although beneficiaries won’t see the negotiated prices until 2026, it is a significant step in creating more affordable drug prices for seniors.
Though controversial in many ways, there is no question that the Inflation Reduction Act provides much-needed relief for many seniors regarding the high costs of prescription drugs.
Medicare is a behemoth of a program that offers incredible benefits for American seniors. However, it often comes with confusing intricacies that can be difficult to piece together.
