TL/DR –
The Inflation Reduction Act, signed into law in 2022, introduced provisions to help Medicare beneficiaries save on health insurance and prescription drug costs, such as a $35 insulin cost cap and prescription drug price negotiations. The negotiation process, set to run from 2023 to 2026, will select drugs for price negotiations each September based on several criteria provided to the Centers for Medicare and Medicaid Services, with the new price announced the following September and implemented the subsequent January. However, the savings that beneficiaries will see at the pharmacy counter are uncertain, with factors such as the deductible, coinsurance, and spending thresholds potentially limiting direct savings from these negotiations.
The Inflation Reduction Act’s Impact on Medicare and Prescription Drug Costs
Medicare beneficiaries experienced increased potential for savings on health insurance and prescription drug expenses upon the inception of the Inflation Reduction Act in 2022. Notable features include a $35 insulin cost cap and emerging prescription drug price negotiations, whose effects will be more noticeable by 2026, with the first negotiated prices being announced in September 2023.
As the changes evolve and impact differs, it’s important to understand what the Inflation Reduction Act implies for U.S. drug costs. Particularly for agents managing these changes.
Understanding the Process
Briefly, the negotiation process unfolds each September from 2023 to 2026, with the Centers for Medicare and Medicaid Services selecting drugs based on data points including lack of competition, cost, intended treatment, and market longevity.
Once chosen, these drugs undergo a price negotiation process for Medicare formularies inclusion. Following price settlement, new prices are announced every following September and implemented every subsequent January.
The initial round of negotiations theoretically represents 20% of total Medicare Part D spending, suggesting wide-ranging benefits. However, actual savings at the pharmacy counter remain uncertain. Beneficiaries could be paying full price for the first $545 of their drugs this year. If those prices decrease, beneficiaries save money.
Upon meeting that deductible, beneficiaries shift from paying sticker prices. Depending on plan design, they might pay a copay or coinsurance. More savings are likely due to coinsurance, which calculates beneficiary payment as a percentage of the sticker price.
While beneficiaries are likely to hear about significant price cuts from negotiations, the savings at the counter might be less dramatic. Beneficiaries remain in this initial coverage phase until they’ve spent $5,030 in 2024. After that, they enter a coverage gap and pay 25% of each drug’s cost. However, most beneficiaries end up short of reaching this coverage gap.
For more information on the effects of these negotiations on Medicare beneficiaries, see Part 2 and Part 3 of this series on changes in the group and individual markets.
—
Read More US Economic News