Key Takeaways

  • The House and Senate have passed the Inflation Reduction Act, which now goes to President Biden for his signature before becoming law.

  • The bill includes important measures to reduce prescription drug costs for Medicare beneficiaries and extends Affordable Care Act (ACA) insurance premium subsidies.

  • Disappointingly, the bill did not include provisions to improve staffing and access to home and community-based services.

The Inflation Reduction Act, which would help millions of older adults by reducing prescription drug costs and extending Affordable Care Act insurance subsidies, is now on its way to President Biden to be signed into law. 

As the Leadership Council of Aging Organizations (LCAO) said in a statement from NCOA President and CEO Ramsey Alwin in support of the health-related provisions of the bill, 

The Medicare prescription drug provisions are of particular interest, as they will go a long way in making prescription drugs much more affordable for millions of older adults, including those with the lowest incomes for whom expensive medications are out of reach.”

The bill—a scaled-back version of the Build Back Better reconciliation legislation passed by the House in November—is largely the result of negotiations between Senate Majority Leader Chuck Schumer, D-N.Y., and Sens. Joe Manchin, D-W.Va., and Kristen Sinema, D-Ariz., and passed the Senate on July 31 and the House on Aug. 12. The legislation addresses four areas:

  • Reducing Medicare prescription drug costs
  • Extending expiring Affordable Care Act (ACA) premium subsidies
  • Creating new incentives to reduce the impact of climate change and promote energy efficiency
  • Raising taxes on wealthy individuals and large corporations to pay for reforms and reduce the deficit

Alwin also wrote an op-ed published in The Hill in support of the bill's health-related improvements and released a statement after Senate passage. NCOA is, however, particularly disappointed that the bill did not include provisions to improve access and staffing for home and community-based services.

NCOA led the advocacy efforts to include improvements in low-income assistance for Medicare beneficiaries. The Part D Low-Income Subsidy (LIS, or Extra Help) would, starting in 2024, further reduce out-of-pocket costs for beneficiaries with incomes between 135-150% of poverty by eliminating “partial” subsidies and replacing them with “full” subsidies. This provision would particularly help low-income Black and Hispanic Medicare beneficiaries, who are more likely than white beneficiaries to have incomes in this range.1

The LIS partial subsidy program has sliding scale monthly premiums based on income, a $99 deductible, and a potentially expensive 15% coinsurance rate. Under the Inflation Reduction Act, in 2024 these beneficiaries will receive full subsidies, pay no premium as long as they are enrolled in a benchmark plan, have no deductible, and will have fixed, lower copayments (up to $3.95 for generic and $9.85 for brand-name drugs in 2022). Income eligibility for these full subsidies increase from $18,347 to $20,385 for singles ($24,719 to $27,465 for couples) not including the $20 monthly income disregard. Asset eligibility thresholds increase from $8,400 to $14,010 for singles ($12,600 to $27,950 for couples, not including the $1,500 burial plot allowance/individual).

What other Medicare prescription drug provisions are in the bill?

In 2023:

  • New limits on drug price increases: Manufacturers of certain Part D drugs would be required to reimburse, or “rebate,” Medicare if the price of their drug increases faster than the rate of urban consumer price index inflation (CPI-U). Financial penalties would be levied for non-compliance.
  • Caps on insulin costs: Monthly out-of-pocket cost sharing for insulin would be capped at $35.
  • Zero vaccine cost-sharing: All vaccines would be free for Medicare beneficiaries, the only population for which vaccines are not already free.

In 2024:

  • Zero coinsurance for catastrophic costs: The current 5% coinsurance for catastrophic costs would be eliminated. This year, the out-of-pocket threshold, after which 5% coinsurance begins, is $7,050. In 2023, the threshold will be $7,400.
  • From 2024-2029, limits on Part D premium increases: Annual premium growth would be capped at no more than 6%, to ensure insurers and manufacturers will not pass their new financial responsibilities on to beneficiaries.

In 2025:

  • Reduced catastrophic cap: Annual prescription drug out-of-pocket cost sharing could be no higher than $2,000. Beneficiaries would also have the option to break that amount into more affordable monthly payments. NCOA strongly supported this provision.
  • Shifting financial responsibility for prescription drug costs: The bill creates stronger incentives to limit drug prices by shifting more responsibility for higher prices onto insurance companies and drug manufacturers.

In 2026:

  • Allow Medicare to negotiate drug prices: Starting with 10 Part D drugs, the Secretary of Health and Human Services would have new authority to negotiate prices. The drugs eligible for negotiation would be taken from list of 50 most expensive brand-name drugs that lack competition, and would remain on the list until competition enters the market. Only older drugs would be subject to negotiation, after a period of nine years for most “small molecule” drugs and 13 years for more complex “biologic” drugs after FDA approval. There would also be an exception for drugs with less than $200 million in annual sales.

In 2027:

  • Price negotiation for 15 Part D drugs

In 2028:

  • Price negotiation for 15 Part B and Part D drugs

In 2029:

  • Price negotiation for 20 Part B and D drugs

Also, the bill would extend ACA Marketplace premium subsidies, which were due to expire at the end of 2022, for an additional three years. This means an estimated 10 million people will save an average of about $700 per year.  According to the Kaiser Family Foundation, “[A] 64-year-old Marketplace enrollee making just over four times the poverty level in West Virginia or Wyoming would have to pay more than 40% of their income for a silver plan if they lost access to the ARPA [American Rescue Plan Act] subsidies. That would amount to an increase of over 380% in their premium payment.”2

The Inflation Reduction Act also includes provisions to address climate change challenges and promote energy efficiency. Read a Senate Democrat summary of the energy security and climate change investments and a NEADA summary of provisions designed to help lower income families transition to a clean energy economy. Also, the Institute on Taxation and Economic Policy put together this rundown of the bill's tax provisions.

Going forward, NCOA will continue to urge Congress to pass legislation this year to invest in Medicaid home and community-based services and home care workers, for example, by extending American Rescue Plan funding and making permanent the Medicaid Money Follows the Person and spousal impoverishment protection programs.

Sources

1. Kaiser Family Foundation. Racial and Ethnic Health Inequities and Medicare. Feb. 16, 2021. Found on the internet at https://www.kff.org/report-section/racial-and-ethnic-health-inequities-and-medicare-education-poverty-and-wealth/

2. Kaiser Family Foundation. Falling off the Subsidy Cliff: How ACA Premiums Would Change for People Losing Rescue Plan Subsidies. June 30, 2022. Found on the internet at https://www.kff.org/policy-watch/falling-off-the-subsidy-cliff-how-aca-premiums-would-change-for-people-losing-rescue-plan-subsidies/