Understanding the Inflation Reduction Act’s Impact on Medicare
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The Inflation Reduction Act (IRA) was signed by President Joe Biden in 2022 to manage rising healthcare costs, including prescription medications under Medicare. The IRA makes vaccinations free for everyone with Medicare, caps out-of-pocket costs for millions, and authorizes Medicare to negotiate some drug prices directly with manufacturers. This also includes capping the cost of insulin under the Medicare prescription drug benefit, increasing eligibility for Medicare’s Extra Help program, and having drug manufacturers pay Medicare rebates for medications if price increases exceed the rate of inflation.
Inflation Reduction Act: Aiming to Curb Rising US Healthcare Costs
The Inflation Reduction Act (IRA), signed in 2022 by President Joe Biden, is a major initiative to control the escalating costs of prescription medications, particularly for Medicare beneficiaries. This groundbreaking legislation allows Medicare to negotiate medication prices directly with drug manufacturers and offers manufacturer rebates, substantially slowing the rate of overall price increase.
Included in the provisions of the 2022 IRA are free vaccinations for all Medicare beneficiaries. Out-of-pocket costs for millions of users have been capped, reflecting the first time such a measure has been implemented in the US.
Since the signing of the act, numerous changes have been implemented with further modifications planned in the future. From 2023, drug manufacturers have begun paying Medicare rebates for medications included in Part D plans if those drugs’ price increases exceeded the inflation rate.
Manufacturer Rebates and Insulin Price Caps under IRA
From 2028, the IRA will start integrating Part B drugs into the negotiation program. The act also imposes a $35 cap on insulin costs under the Medicare prescription drug benefit.
Increased Availability of Extra Help
By 2024, the Extra Help program under Medicare expanded to accommodate more eligible beneficiaries and offer greater savings on prescription medications. Qualifying beneficiaries will pay a $0 premium and deductible for their Part D prescription drug plan, among other benefits.
The Future of Medicare-Negotiated Drug Prices
Starting from 2026, Medicare-negotiated drug prices will begin to take effect. This milestone marks the first time in history that Medicare has obtained the legal power to negotiate the prices of certain high-cost medications directly.
The IRA aims to provide cost savings on prescription medications for all Medicare beneficiaries. With the ongoing drug negotiations until 2029, a greater number of older adults on fixed incomes and with limited resources could benefit from Extra Help and other medication savings.
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