The Inflation Reduction Act And You
The Inflation Reduction Act of 2022, enacted by President Biden on August 16, 2022, incorporates various measures aimed at decreasing prescription drug expenses for individuals covered by Medicare and curbing pharmaceutical expenditures for the federal government. While I could go into detail about how it affects the federal deficit and changes miscellaneous provisions, I want this page to simplify how this legislation directly affects YOU.
Part B and D Drug Negotiation
Under Medicare Part D, private plan sponsors collaborate with Medicare for prescription drug benefits, and the “noninterference” clause prevents HHS Secretary intervention in drug negotiations. Medicare currently avoids negotiating prices for Part B drugs, relying on a reimbursement formula tied to the Average Sales Price (ASP). The Inflation Reduction Act amends the non-interference clause, introducing a Drug Price Negotiation Program for specific drugs under Medicare Part D and Part B. This legislation establishes a capped negotiated price, mandates coverage of Part D drugs, and sets Medicare payment based on negotiated maximum fair prices. The law includes excise taxes for non-compliant drug companies, escalating from 65% to 95%, and outlines timelines for negotiated drug lists and maximum fair prices.
Establishing a Part D Cost Cap
The current Medicare Part D structure offers catastrophic coverage for high out-of-pocket drug costs without an annual limit. Catastrophic coverage kicks in when out-of-pocket expenses, plus manufacturer discounts on brand-name drugs, surpass a set threshold. In 2022, this threshold is $7,050, and beneficiaries spend around $3,000 on brand-name drugs before reaching catastrophic coverage. The Inflation Reduction Act changes this by eliminating the 5% beneficiary coinsurance for 2024, capping out-of-pocket costs at approximately $3,250. Starting in 2025, a $2,000 hard cap on out-of-pocket spending is introduced, adjusted yearly. The law alters liabilities for Part D plans and manufacturers, reducing Medicare’s share above the cap for brand-name drugs to 20%, for generics to 40%, while increasing Part D plans’ share to 60%. Manufacturers must provide a 20% discount on brand-name drugs and a 10% discount between the deductible and the spending cap. The law also limits premium increases to 6% annually from 2024 to 2029 and reduces the beneficiary share of standard drug coverage in 2030.
Insulin Savings Program
The costs and coverage for insulin vary among Part D plans, resulting in differing out-of-pocket expenses. Part B imposes a 20% coinsurance on the Medicare-approved amount. The ISP model now has certain Part C and D plans cover insulin at a fixed $35 monthly copayment throughout different benefit phases. Although not obligated to cover all insulin products at this copayment, these plans must include one of each dosage form (vial, pen) and insulin type.
Adult Vaccine Coverage
Medicare covers vaccines under both Part B and Part D, stemming from historical requirements. Part B includes vaccines for COVID-19, influenza, pneumococcal disease, and hepatitis B (for high-risk patients), along with those for treating injuries or exposures. Preventive vaccines are covered under Medicare Part D. Part B-covered vaccines like influenza, pneumococcal pneumonia, hepatitis B, and COVID-19 vaccines have no cost sharing, but other Part B vaccines may have a 20% beneficiary share. Vaccines under Part D can have cost sharing, determined by Part D plans. The Inflation Reduction Act ensures that ACIP-recommended adult vaccines covered under Medicare Part D, such as for shingles, are free. This aligns Part D vaccine coverage with Part B, including flu and COVID-19 vaccines. Additionally, the law mandates state Medicaid and CHIP programs to cover all ACIP-recommended adult vaccines and their administration without cost sharing. This emphasizes a consistent approach to vaccine coverage across Medicare and state programs.
Expanding LIS Eligibility
The Part D Low-Income Subsidy (LIS) Program assists Medicare beneficiaries with premiums, deductibles, and cost sharing. In 2020, 28% of Part D enrollees (13.1 million) received LIS benefits, tied to income and assets up to 150% of poverty. Medicare beneficiaries on Medicaid (up to 135% of poverty) automatically get full LIS benefits. Others qualify for full or partial benefits based on income and assets. Full LIS benefits are for incomes up to 135% of poverty and resources up to $9,900 individual, $15,600 couple in 2022. Partial LIS benefits are for incomes between 135-150% of poverty and resources up to $15,510 individual, $30,950 couple in 2022. Full LIS recipients face no Part D premium or deductible, with modest copayments until the catastrophic threshold. Partial LIS recipients may have no or partial premiums, an $89 annual deductible, 15% coinsurance, and copayments above the catastrophic threshold. The Inflation Reduction Act extends full LIS benefits to those with incomes up to 150% of poverty, removing the partial LIS benefit for those with incomes between 135% and 150% of poverty.
At the end of this “summary”, much of it may still seem Greek to many folks, so we made a nice and easy graphic that can also help explain the major factors that apply to you as a timeline.
It’s always important though to see whether this impact will affect your specific situation. After reading this, if you still have questions, please reach out to our agency as it’s our job to help educate and empower anyone we can to help them make better decisions for themselves and their families.