Inflation Reduction Act Expected to Save Millions on Drugs

On Feb 15, 2024

TL/DR –

The Kaiser Family Foundation (KFF) has released an issue brief on how the provisions of the Inflation Reduction Act of 2022 are expected to generate savings for millions of Medicare Part D beneficiaries from 2025. Starting January 1, 2024, Part D enrollees will not have to pay 5% coinsurance once they hit the “catastrophic coverage” limit of $8,000 in out-of-pocket (OOP) costs; from 2025, OOP drug costs will be capped at $2,000, with this limit to be indexed annually. The KFF notes that these changes will benefit people with consistently high drug costs the most, but will also assist those with shorter periods of high drug costs, concluding that the Part D redesign will continue to assist people with long-term high drug costs and more intermittent expenses for years to come.

KFF’s Medicare Part D Savings Preview in New Issue Brief

The Kaiser Family Foundation (KFF) has published a new issue brief detailing savings for Medicare Part D enrollees under the Inflation Reduction Act of 2022 (IRA). These changes will come into effect in 2025.

Changes in Medicare Part D Costs

Beginning January 1, 2024, Part D enrollees no longer pay 5% coinsurance upon reaching “catastrophic coverage,” applicable once they incur $8,000 in out-of-pocket (OOP) costs for covered drugs.

Introduction of OOP Drug Costs Cap

From 2025, OOP drug costs will be capped at $2,000, with annual adjustments based on Part D costs. In 2021, 1.5 million people had OOP costs exceeding $2000. This cap will significantly benefit those facing high drug costs consistently.

Benefits for Shorter Periods of High Drug Costs

The brief reveals that over 6.8 million people have crossed the $2,000 threshold at least once since Part D’s introduction in 2007. Thus, this cap will benefit those with shorter periods of high drug costs as well.

Long-term Savings and Benefits

The Part D redesign will continue to aid people with long-term high drug costs and sporadic expenses. This adds to other savings, such as less noticeable cost reductions like vaccines without cost sharing, lowered insulin costs, better access to “Extra Help,” and the new drug negotiation program commencing in 2026 for expensive drugs for Medicare beneficiaries.

Medicare Rights commends the IRA changes that will lower drug costs for millions of Medicare beneficiaries and advocates for further congressional action to make high-quality care affordable for people with Medicare, other coverage, or no coverage.