TL/DR –
The 2022 Inflation Reduction Act (IRA) by Democrats has caused the cost of the Part D segment of Medicare to increase and limited seniors’ choices. The IRA introduced caps on out-of-pocket pharmacy spending and insulin costs, which led to insurers raising premiums to cover these liabilities. Despite stopgap measures by the Biden administration and a subsequent increase in federal subsidies, premiums for Part D are still projected to increase significantly, and there will be fewer plans for seniors to choose from due to insurers exiting the market.
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Medicare Part D: The Consequences of Democratic Interference
The current Medicare open enrollment season presents a shock to seniors. Not only are there fewer options for prescription drug plans compared to previous years, but the assistance in purchasing a plan has become even more of a challenge. As these issues rise, the cost to taxpayers continues to escalate. The cause of these issues? The Democrats’ 2022 Inflation Reduction Act (IRA).
What the Act Changed
Passed three years ago, the IRA has resulted in a distorted drug coverage market, leading to increased costs, decreased competition, and unfavorable conditions for seniors. Medicare Part D, the segment that enables enrollees to purchase subsidized prescription drug coverage from private insurers, has been significantly affected by these changes.
The Original Plan for Part D
Established two decades ago, Part D was designed with market principles. By driving competition among insurers, the creators intended to provide quality coverage at affordable prices for beneficiaries and taxpayers. In fact, this plan was successful, with roughly 90% of seniors expressing satisfaction with their drug coverage last year. The average prescription drug plan even cost seniors only $43 a month in 2024.
Implementation of IRA and Its Effects on Seniors
However, the Democrats decided to meddle with Part D, leading to consequences that seniors now bear. The IRA imposed a cap on seniors’ out-of-pocket pharmacy spending at $2,000 a year and on insulin costs at $35 a month. While these changes might seem favorable for the seniors, the immediate reaction from insurers was to hike premiums across the program to cover the new liabilities.
The Biden Administration and Premium Hikes
The Biden administration launched a “demonstration” program to hide these premium increases from patients. This program offered any participating senior a substantial, federally-funded premium reduction while also capping the year-over-year premium increases. Thus, seniors wouldn’t feel the effects of the Part D price hikes until after the 2024 presidential election. However, this resulted in a cost of approximately $5 billion to taxpayers and failed to address the IRA’s underlying problems with Part D.
The Trump Administration’s Attempt to Revert the Changes
The Trump administration took steps to mitigate the effects of Biden’s costly policy by slightly reducing the demonstration program’s premium reductions. Yet, this effort didn’t save taxpayers much, and instead, unleashed a flood of new federal subsidies to offset the decrease in “demonstration” payments. Consequently, Part D subsidies are projected to increase by more than 31% in 2026, reaching $243.78. Without this wave of federal aid, premiums would have increased by nearly 600% compared to 2023.
The IRA’s Reforms and Their Impact on Seniors
Despite the generous federal support, seniors are still affected by the IRA’s reforms, mainly through reduced choice as insurers exit the market. In 2021, the average Part D beneficiary had 30 different drug plans to choose from. However, in 2026, seniors will only have 8 to 12 plans available, depending on their location.
Further Impact of the IRA
The IRA’s harm doesn’t end with the reduction of choice. As the Paragon Health Institute’s recent study highlights, Part D insurers have started to eliminate broker fees in response to the new law, leaving many seniors choosing plans without the guidance of an insurance professional.
Summary
The Democrats’ interference with Medicare Part D has resulted in increased premiums, limited choice, and a worsened patient experience. While seniors might be shielded from these financial consequences temporarily, taxpayers will bear the brunt of the cost, paying for billions in new subsidies that weren’t previously necessary.
Sally C. Pipes, President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute, is the author of “The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It.” She can be followed on X @sallypipes. More of Sally Pipes’ reports can be found — here.
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