Medicare Part B and D will be impacted by the recent passing of the latest healthcare bill. The House passed a bill to help reduce the ever-rising cost of prescription drugs, helping those who depend on Medicare for benefits. The bill allows prices for certain drugs to be negotiated.
Currently, over 63 million Americans have prescription drug coverage under Medicare, and some of the most expensive drugs may get a pricing overhaul for those covered under Medicare.
It is important to note that even though the health care bill has been passed, many of the benefits will likely take years to be put into place.
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What Is In The Inflation Reduction Act?
The Inflation Reduction Act of 2022 is legislation enacted to help reduce inflation, as the name suggests. In addition to making prescription drugs and health care more affordable, the legislation aims to combat climate change and tax wealthy corporations to reduce the deficit.
The Affordable Care Act subsidies that help Americans pay for their health insurance premiums will continue with the passing of this bill. This part of the bill kicks in immediately, unlike the benefits that will affect Medicare and prescription drugs.
The Health and Human Services Secretary — who advises the U.S. President on health matters for citizens — negotiated reductions on Medicare prescription drug prices for Parts B and D. Additionally, the negotiations will cap out-of-pocket expenses at $2,000. This particular benefit will not start until 2025.
Outside of health matters, the IRS was awarded additional funding under the Inflation Reduction Act to help ensure thorough compliance with tax laws. The bill also invested in the climate change issue with measures like providing tax credits for homeowners and others who produce clean energy.
What Does This Mean For Medicare in 2023?
The Inflation Reduction Act of 2022 expands drug coverage benefits for those receiving any cost-sharing benefits or subsidies. For example, starting in January of 2023, some insulins will be capped at a copay of $35. It is critical to note that not all insulins will be eligible for this benefit, so be sure to check with your insurer for specific eligible formularies.
Before the bill passed, Medicare prescription drug prices rose continuously, making many unaffordable for its beneficiaries. There was no limit to the prices that drug manufacturers could charge, and Medicare could only pay for a portion. The rest of the drug’s cost fell to the beneficiary, which could result in financial devastation for some people. In fact, the U.S. spent over over $1,000 per capita on prescription drugs in 2019, which is double what other high-income nations spent per capita.
The Kaiser Family Foundation reported that in 2020, prices rose faster than inflation for the top drugs that Medicare Parts B and D covered. To combat this trend, the bill’s passage restricts drug manufacturers to the amount of general inflation currently within the economy, helping to limit their price increases.
Additionally, all adult vaccinations will be covered at no cost instead of only those specifically listed.
Drug Price Negotiations
The federal government was prohibited from directly negotiating drug prices under Medicare Part D since 2003. But starting in 2026, the IRA will permit the government to negotiate prices for 10 drugs without generic or biosimilar competition, increasing to 20 drugs by 2029. Over the next 10 years, Medicare negotiations are projected to reduce government spending by approximately $100 billion.
Inflation caps on Medicare Part D are also included in the law, which limit drug price increases over time. Drugmakers who increase the prices of their products beyond general inflation would face tax penalties.
While the Health and Human Services Secretary will negotiate all the drug prices by the end of 2029, the main stages to accomplish this are:
- 2026 – 10 Medicare Part D drug prices will be negotiated and take effect by this year
- 2027 – 15 Medicare Part D drug prices will be negotiated and take effect by this year
- 2028 – 15 Medicare Part D or B drug prices will be negotiated and take effect by this year
- 2029 – 20 Medicare Part D or B drug prices will be negotiated and take effect by this year
- Subsequent Years – The Health and Human Services Secretary can continue to negotiate 20 more drug prices each year.
Potential Drug Candidates
The Inflation Reduction Act of 2022 has given Medicare a lot of power it has not had before. That will positively impact Medicare beneficiaries, especially the 49 million Americans who are enrolled in Medicare Part D. In fact, the Inflation Reduction Act proposes to save taxpayers $102 billion with drug price reductions. However, drug manufacturers will likely experience adverse financial effects.
While there is no way of knowing what exact drugs will be impacted, there are some potential options based on what Medicare spent in the past. These include:
- Bristol-Myers’ Eliquis
- J&J’s Xarelto
- Merck’s Januvia
- Abbvie’s Imbruvica
- Merck’s Keytruda
- Regeneron’s Eylea
- Amgen’s Prolia
- Bristol Myers’ Opdivo
- Roche’s Rituxan
Even though Medicare beneficiaries won’t see lower drug prices until 2026, the legislation will penalize drug companies if they raise Medicare drug prices faster than inflation by later this year. Those that do increase drug prices beyond inflation must pay the government the difference between the price charged and the inflation rate for all Medicare sales in an effort to reduce overall spending.
How Does It Impact American Health Care as a Whole?
While the most significant part of the health care portion of this bill focuses on prescription drugs and Medicare, there are some other benefits that will impact the overall health care system. Many Medicare beneficiaries and millions of Americans who buy coverage on their own will benefit significantly from this historic legislation once the lower prices go into effect. It allows those who already benefit from the ACA to continue to do so, as well as provide more access to lower premiums so that more people can enroll.