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Aug 18, 2022

Inflation Reduction Act: A BFD for Medicare Beneficiaries

Sponsored Content provided by Michealle Gady - Founder and President , Atromitos

What feels like 100 years ago, when in my early 20s, I had my first “big” job working in the state office of Senator Joe Lieberman. I handled health and human services issues, which means that I helped constituents navigate the byzantine systems that provide health insurance, social services, and financial support. I helped Connecticut residents through some of the most heartbreaking situations and truly felt like a superhero when we were able to come to a positive resolution. This was hands down one of the most rewarding jobs I’ve ever had. 
In addition to helping people navigate these complicated situations, I also had the chance to work on one of the biggest pieces of healthcare legislation in the past 25 years. The Medicare Modernization Act, which created the Medicare Part D program, finally provided coverage of prescription drugs for Medicare enrollees. While the program, as originally created had some gaping holes (one such hole, regrettably referred to as the donut hole), it was still an important step forward. 
After my time with Senator Lieberman, I went on to law school and then headed for Washington, D.C. where I was intent on being a part of changing the laws and policies of our federal health care programs. One such change was enabling price negotiation for prescription drugs by Medicare. For “reasons,” none of them good from my perspective, it took forever to make inroads on this issue, with incremental progress happening well after I had already left D.C. This week, finally, we have a step forward on this critical issue
Earlier this week, President Biden signed into law the Inflation Reduction Act (“IRA”). This law does many things and has a huge impact on major federal health programs. Including, finally (goodness I do mean finally) authorizing prescription drug price negotiation in Medicare Part B and D. 
Prescription medications are central to health care. Indeed, most of the innovations and advances that we have made in healthcare in recent decades are pharmaceutical. As we age, most of us will have at least one medication that we must take. On average, people age 65 to 79, fill about 20 prescriptions per year. This accounts for about 20% of out-of-pocket expenses for people on Medicare being spent on prescription medications. More importantly, that rate continues to grow unchecked. 
While we celebrate the significant (if overdue) progress made this week, it is important to keep this in context. Medicare won’t start out negotiating all drug prices. Instead, the Center for Medicare and Medicaid services (“CMS”) is tasked with identifying the top 100 expensive medications. From that list, CMS will select 10 medications to begin negotiating prices. By 2026, 10 medications will be under negotiated prices and by 2029, CMS will negotiate the price of 20 of the most expensive medications. It will take time to implement this remarkable change (refer to the byzantine nature of our health care programs), but once implemented, this change will save the Medicare program about $100 billion
About 1 in 3 Medicare beneficiaries has diabetes, with out of pocket spending in 2020 over a $1 billion. The average out of pocket cost per prescription was $54, with the range from a low of $16 all the way to a high of $116. Under the IRA, starting next year, Medicare will set a maximum of $35 monthly cap on insulin. Once Medicare begins negotiating prices, the cap will be $35 or 25% of the negotiated price if that is lower. This is a significant savings for Medicare beneficiaries and will positively impact their ability to better manage their diabetes. While the goal was to extend this protection to non-Medicare beneficiaries, the legislation enacted did not go that far. Perhaps next year? In addition to making insulin more affordable, the IRA also makes new vaccines available for no cost. All vaccines recommended by the Advisory Committee on Immunization Practices will be fully covered – meaning no out of pocket cost. 
Other provisions that will save Medicare beneficiaries money and improve their access to vital medications include: 

  • Capping out-of-pocket spending: Currently Medicare Part D does not have a maximum out of pocket limit, something many of us with private insurance are familiar with. When Medicare beneficiaries reach about $7,000 in spending on prescription drugs in a year, their cost sharing is reduced to 5%. Under the IRA, beginning in 2024, that 5% will no longer apply. In 2025, a $2,000 out of pocket limit will kick in. I know how much this will mean to my grandparents! 
  • Capping Part D Premiums: Through 2029, Part D prescription drug plans will have an annual premium increase cap of 6%. This will help mitigate the growing cost of Medicare Part D plans, the mechanism through which Medicare beneficiaries receive prescription drug coverage. 
The IRA takes a huge bite out of the cost of medications for people on Medicare. It is tremendous to see this progress (even if it did take 20 years)! Even so, for many people, Medicare Part D coverage (premiums) and the cost of medications will remain difficult to manage. There has long existed a program often referred to as Extra Help. The program has been a life saver for millions of Medicare beneficiaries for decades. Now, through the IRA, eligibility for this program will be expanded starting in 2024. About 500,000 Medicare beneficiaries will be newly eligible for the financial support that this program provides. 
As is always the case with major pieces of legislation, especially these days, there is a lot being said about the IRA – much of it is nonsense. The Medicare prescription drug program is vital to more than 60 million people. By 2030, Medicare is expected to cover 80 million people. The changes in the IRA will have tremendous positive outcomes for some of our most vulnerable populations – the elderly and those who are disabled. I think that we can all agree with Former President Barack Obama (echoing President Biden’s assessment of an earlier landmark healthcare reform bill), “This is a BFD.”

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