Changes to Medicare in Inflation Reduction Act Rebates

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TL/DR –

The Inflation Reduction Act, passed by the U.S. Congress in 2022, has significant implications for Medicare as it provides inflation rebates for medications covered by Medicare Part B. This legislation, which went into effect on January 1, 2023, reimburses some of the money spent on medications if their price rose faster than the rate of inflation. The Act also monitors drug pricing each quarter and provides rebates for drugs whose prices have increased above the rate of inflation, which are then used to decrease the Part B coinsurance for that drug in the following quarter.


The Inflation Reduction Act was passed in 2022 with implications for various sectors, notably healthcare. It’s brought significant changes to Medicare, including a rebate program for Medicare Part B starting from 2023.

A rebate is a refund given post-purchase, unlike a discount offered at the time of sale. With the Inflation Reduction Act, certain expenses on Medicare Part B medications could be refunded if their price escalation surpasses the inflation rate.

How does this rebate effect drug prices? What drugs qualify? And how might it impact other insurance types? These questions and others will be answered in the following article.

Finding Rebates

Rebates are not exclusive to healthcare. Homeowners, for instance, could receive rebates for heat pumps, insulation, and induction stoves.

Inflation Reduction Act, Rebates, and Medicare: Key Changes

The medical rebate program of the Inflation Reduction Act came into effect on January 1, 2023. The government now monitors drug pricing quarterly. If a drug’s price increase surpasses the inflation rate, it qualifies for an inflation rebate. These rebates are not paid directly to the consumer. Instead, they go to Medicare to reduce the Part B coinsurance for that drug in the next quarter. Coinsurance is the insured person’s share of the costs of a covered expense.

For example, 34 Medicare Part B drugs qualified for inflation rebates in the third quarter of 2023. Beneficiaries of these drugs will pay a lower coinsurance in the next quarter.

The savings could range from $1 to $618 per medication dose, depending on the drug, and the process repeats quarterly.

Medicare Advantage Plans

By law, Medicare Advantage (Part C) plans must cover everything that Part A and Part B cover, including any drugs covered by Part B. Therefore, inflation rebates also apply to Medicare Advantage plans.

Medications Covered by the Inflation Reduction Act

Inflation rebates apply to medications covered by Medicare Part B, such as Injectable Medications, Oral Medications, and Other Medications such as drugs used with an item of durable medical equipment.

Who’s Eligible for Rebates Through the Inflation Reduction Act?

Anyone enrolled in Medicare Part B or a Medicare Advantage plan qualifies for the inflation rebate.

Long-Term Benefits of Inflation Reduction Act Rebates

The Inflation Reduction Act rebates provide immediate benefits by controlling pharmaceutical costs and preventing overpayment. This could encourage fair pricing practices within the drug industry.

Does the Inflation Reduction Act Impact Other Insurance Types?

While the Inflation Reduction Act primarily provides inflation rebates for Medicare Part B drugs, it also helps reduce healthcare costs in other ways. It has significant benefits for Medicare beneficiaries and can also be beneficial for people with other types of insurance.

Changes for Medicare include: cap on insulin products at $35 per month per product starting from 2023, no cost-sharing for vaccines recommended by the Advisory Committee on Immunization Practices from 2023, cost-sharing elimination during the catastrophic phase of Part D drug coverage from 2024, etc.

Medicaid and Marketplace Plans

The Inflation Reduction Act eliminates cost-sharing for adult vaccines for Medicaid, just like for Medicare. Furthermore, it extended low-income subsidies that started with the American Rescue Plan in 2020, which were set to expire in 2022 but will now continue through 2025, making health plans affordable for more people.

Summary

The Inflation Reduction Act has and will continue to significantly impact drug costs for millions of Americans on Medicare. It’s decreased the cost of insulin, provided free vaccines, expanded low-income subsidies, and will cap total out-of-pocket costs from 2025.

Inflation rebates act as a cost control for expensive Part B drugs, potentially saving some people hundreds of dollars every month.


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