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On August 16, President Biden signed the Inflation Reduction Act of 2022. This landmark legislation includes several provisions designed to reduce the cost of health care, particularly for older Americans on Medicare. These include:

Cap on Medicare Part D Out-of-Pocket Costs

In 2003, President George W. Bush signed the Medicare Prescription Drug Improvement and Modernization Act, which for the first time offered seniors the option to purchase prescription drug coverage through Medicare, commonly referred to as Part D. Today more than 45 million seniors participate in this Medicare benefit. However, unlike most insurance, Part D does not limit the amount patients are required to pay out-of-pocket. So, despite having coverage, many patients on expensive prescription drugs can’t afford the out-of-pocket portion they must pay. This will change under the new law. Beginning in 2025, out-of-pocket costs under Part D will be capped at $2,000 annually. The Alliance has strongly advocated for this important protection to ensure seniors can afford the prescription drugs they need.

Limiting Increases in Prescription Drug Prices 

The initial draft of the Act sought to penalize drug manufacturers if prices increased greater than the rate of inflation. However, since the Act was completed under Budget Reconciliation to avoid a Republican filibuster, it was ruled that this could only apply to drugs within the Medicare system. As a result, the manufacturer of prescription drugs for seniors in Medicare must limit cost increases to no more than the rate of inflation or face a penalty. This does not apply to prices in the private sector. This is significant because, in that last year, half of the Medicare drugs increased more than the rate of inflation. An amendment to limit the cost of insulin to thirty-five dollars in the private sector did not receive enough Republican votes to overcome filibuster. 

Extension of ACA Subsidies 

For those who do not have health insurance through their employer or who are in Medicaid/Medicare must purchase coverage through the Health Insurance Exchange Marketplace. Today, 11 million Americans purchase coverage in the marketplace. The cost of even the modest bronze plans is unaffordable for many and currently 86% receive some type of subsidy under the Affordable Care Act. These subsidies were set to expire, but the new law extends them through 2025. 

The Act also empowers the Centers for Medicare & Medicaid Services (CMS) to negotiate the price of certain prescription drugs, as is done in other countries. This has a phase-in and limits the number of drugs involved. CMS may negotiate prices of 10 drugs in 2026, increasing to 20 drugs in 2029.



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