President Biden signed the Inflation Reduction Act into law in August 2022. It addresses a number of important issues, including climate change, but more than anything, it will save Medicare beneficiaries a bundle. Outlined below are the perks of the law in the order they kick in.

A $35 Cap on Insulin

What It Does: The Inflation Reduction Act puts a $35 monthly cap on insulin for Medicare beneficiaries. The initial proposal intended to cap prices for anyone on any type of insurance (not just Medicare) but the GOP voted against that provision.

How it Works: Part B covers insulin that is given through an insulin pump and Part D covers all other types of insulin. Prior to the IRA, you would pay 20% for insulin covered by Part B. You paid whatever your Part D plan set for deductibles, coinsurance, and copayments. During the Trump administration, the Part D Senior Savings Model was created, putting a $35 cap on some insulin products but only for Part D plans that chose to participate in the program. Now, the maximum amount you will pay is $35 per month for all Part D plans and for every type of insulin.

When It Starts: 2023

Free Vaccinations

What It Does: The Inflation Reduction Act makes vaccines covered by Part D free to you.

How It Works: Vaccinations covered by Part B never required you to pay anything out of pocket. For Part D vaccines, however, you had to pay whatever rate your plan set. That cost-sharing requirement is now gone. That means you will get the shingles vaccine, tetanus boosters, and other vaccines free of charge.

When It Starts: 2023

Prevent Drug Costs from Rising Too Fast

What It Does: The Inflation Reduction Act prevents pharmaceutical companies from increasing the cost of their medications faster than the rate of inflation.

How It Works: Until now, there was nothing restricting pharmaceutical companies from hiking rates to drive in profits. Now, these drug companies will have to pay inflation rebates if drug prices rise faster than inflation. The catch? Not all medications are included in this provision. Only medications covered by Part B that do not have market competition or Part D drugs that cost more than $100 per year are considered.

When It Starts: 2023

Eliminate Catastrophic Coverage Costs

What It Does: The Inflation Reduction Act gets rid of the 5% charge you pay for drugs when you reach the catastrophic phase of your Part D coverage.

How It Works: Part D coverage can be confusing. After you spend a certain amount out of pocket each year ($4,430 in 2022, $4,660 in 2023, based on the retail cost of the drugs – not necessarily what you pay at the pharmacy), you enter the coverage gap know as the donut hole. During the donut hole, you pay a higher percentage of costs out of pocket, as much as 25% for each drug. After you spend a certain amount in out of pocket costs for the year ($7,050 in 2022, $7,400 in 2023), you exit the donut hole and enter the catastrophic phase of coverage. During the catastrophic phase, you pay $3.95 for generic drugs, $9.85 for brand name drugs, or 5% the cost of those drugs, whichever costs more. Those catastrophic costs will soon be eliminated.

When It Starts: 2024

Expand Eligibility for the Part D Low Income Subsidy

What It Does: The Inflation Reduction Act increases the number of people who are eligible for full benefits under the Extra Help Part D Low Income Subsidy (LIS).

How it Works: The Part D LIS helps pays toward Part D costs like premiums, deductibles, coinsurance, and copays. People with lower incomes (< 135% federal poverty level) or people also eligible for Medicaid can get full benefits. People who had incomes 135-150% FPL, on the other hand, could only get partial benefits, meaning they still got discounts but they paid more out of pocket than those with full benefits. The law will now expand full benefits to people earning 135-150%. Keep in mind that people applying for the Part D LIS must still meet certain income and asset limits set by their state.

When It Starts: 2024

Limit Part D Premium Hikes

What It Does: Under the Inflation Reduction Act, Part D plans cannot increase their premium by more than 6% per year.

How it Works: Part D plans are run by private insurance companies. Let’s face it, they are for-profit machines. Under the IRA, these plans could pay a larger percentage of your drug costs than they had to before. To prevent these plans from hiking up their rates to make up the difference, the law sets a limit on future premium rate hikes.

When It Starts: 2024 – 2030

A $2,000 Cap on Out-of Pocket Drug Costs

What It Does: The Inflation Reduction Act sets an annual cap on out-of-pocket Part D drug costs at $2,000.

How it Works: Prior to the law, there was no cap on how much you could spend out of pocket on prescription drugs. People who needed more expensive medications, not through any fault of their own, literally paid for their misfortune. Now, everyone is put on a level playing field. No one will spend more than $2,000 out of pocket in any given year.

When It Starts: 2025

Negotiation of Drug Costs

What It Does: The Inflation Reduction Act allows Medicare to negotiate with drug companies to cut costs.

How it Works: Until now, Medicare was not allowed to negotiate directly with pharmaceutical companies. This increased what Medicare beneficiaries and Original Medicare/Part D plans had to pay. By allowing negotiations, the law will significantly reduce costs for millions of Medicare beneficiaries. The catch? Not all medications will be eligible for negotiation. Eligibility is based on when a drug got its FDA approval. Small-molecule drugs have to be at least 9 years from their FDA approval date and biological drugs 13 years out. In the first year of negotiations, only 10 drugs will be considered but the number of eligible drugs would increase each year thereafter.

 

H.R.5376 – 117th Congress (2021-2022): Inflation Reduction Act of 2022. (2022). Congress.gov. https://www.congress.gov/bill/117th-congress/house-bill/5376/text

Part D Senior Savings Model | CMS Innovation Center. (2021). CMS.gov. https://innovation.cms.gov/innovation-models/part-d-savings-model

Understanding True Out-of-Pocket (TrOOP) Costs: What payments count toward TrOOP costs? (2015). CMS.gov. https://www.cms.gov/files/document/11223-ppdf

Will the Prescription Drug Provisions in the Inflation Reduction Act Affect Medicare Beneficiaries? (2022, August 18). KFF. https://www.kff.org/medicare/issue-brief/how-will-the-prescription-drug-provisions-in-the-inflation-reduction-act-affect-medicare-beneficiaries/