What will the Inflation Reduction Act do for your healthcare system?

The passage of the Inflation Reduction Act (IRA) on August 12 impacts healthcare for millions of Americans. The provisions will change how certain drug prices are determined, which could limit out-of-pocket expenses for older Americans and help ensure continued coverage for Medicaid beneficiaries when the COVID-19 public health emergency ends.

Several provisions of the bill affect Medicare, but beneficiaries who take expensive prescription drugs are likely to feel the biggest impact. Adults who rely on the American Rescue Plan’s expanded grants to afford individual coverage will also experience significant benefits. The bill does not expand eligibility for subsidized individual coverage, so adults who don’t already qualify for discounted plans through state or federal marketplaces are unaffected.

Still, for many Americans, the IRA could greatly improve their ability to afford the care they need. “Half of people report having difficulty paying for their health care or making difficult decisions about paying for basic needs versus prescription drugs or co-payments. That’s where this bill makes some incremental advances that are potentially very important,” said Dr. Atul Grover, executive director of the Research and Action Institute of the Association of American Medical Colleges.

Here’s a breakdown of what the bill does for Medicare beneficiaries, adults who purchase private coverage, and Medicaid enrollments.

For Medicare beneficiaries

If you have high out-of-pocket prescription drug costs, you could end up paying less out-of-pocket. The IRA caps prescription drug deductibles at $2,000 for all Medicare beneficiaries, regardless of income, beginning in 2025. This “is likely to be one of the more impactful” provisions of the bill, according to Juliette Cubanski, associate director of the program at Medicare Policy at KFF, a nonpartisan source of health policy analysis. According to a KFF report, 1.4 million Medicare beneficiaries raised more than $2,000 in out-of-pocket prescription drug expenses in 2020. “Not having an out-of-pocket spending limit potentially exposes people to thousands of dollars in prescription drug costs, especially if they need really expensive medications or have many medical conditions that require prescription drugs to maintain their health,” added Cubanski .

However, as more patients can afford prescriptions and cover fewer costs, insurers could increase monthly insurance premiums to make up the difference. “Bringing that down to a maximum of $2,000 is very helpful. But it will mean higher premiums for Medicare Part D plans,” said Dr. Alan Sager, a professor in the Department of Health Law, Policy and Management at the Boston University School of Public Health.

If you take insulin, your monthly cost could be capped at $35. Compared to some other countries, patients in the US pay “10 or 12 times as much” for insulin, according to Grover. The IRA is addressing this with a $35 cap on monthly out-of-pocket insulin costs for all Medicare beneficiaries beginning in 2023. An analysis by KFF found that most Medicare beneficiaries spend more than $35 per prescription on average.

“One important caveat,” however, is that plans don’t need to be covered Everyone Insulin products, so some Medicare beneficiaries could end up paying more than $35 a month, according to Cubanski.

If you need vaccinations, your vaccines are free. Some vaccines, including pneumonia and flu, are already free under Medicare, but many are not. That will change in 2023, when all vaccines covered by Medicare Part B will be available free of charge. “This provision will help millions of beneficiaries each year,” Cubanski said. “Many of these vaccines aren’t very expensive, but when we’re talking about a population living on relatively modest incomes, even modest out-of-pocket expenses could be distressing.” The shingles vaccine, for example, is recommended for anyone over the age of 50, can but cost $50 or more and requires two cans.

If you receive partial financial assistance for Part D coverage, your prescription co-payments will be lower. Currently, low-income Medicare beneficiaries who receive partial financial assistance for Part D coverage typically pay 15 percent co-insurance on prescriptions. But an IRA provision will reduce those co-payments to “very modest” co-payments of about $1 to $3 for generic drugs and no more than $10 for brand-name drugs, according to Cubanski.

For adults purchasing individual insurance through the Affordable Care Act

If you were eligible for expanded grants created by the American Rescue Plan, you could still qualify for those grants. The March 2021 American Rescue Plan expanded the subsidies created by the Affordable Care Act (ACA) for people purchasing health insurance through state and federal marketplaces. The larger subsidies lowered monthly premiums for nearly 90 percent of policyholders, resulting in a record 14.5 million people enrolling for coverage during the 2022 open enrollment period. With the IRA, these extended subsidies were extended for another three years.

According to Sager, the extension “will be vital to prevent a return to ACA subsidy levels that were not high enough to allow many people to afford coverage.” Without the extension, approximately three million people would have their ability could lose the ability to afford insurance and more than 10 million people would have had their tax credits reduced or lost altogether.

For Medicaid beneficiaries

You may qualify for a subsidized plan when the public health emergency ends. As part of the ongoing COVID-19 public health emergency (effective January 31, 2020), states receiving additional Medicaid funding from the federal government are prohibited from de-enrolling individuals from Medicaid coverage. This strategy has been effective “for the last two years” in keeping people insured, according to Grover. But if the emergency ends, about 15 million Medicaid enrollments could lose coverage, including two million adults in states that haven’t expanded Medicaid access to people in the 100 to 138 percent poverty range. Extending the IRA’s extended subsidies for plans available through state and federal marketplaces could help ensure they remain covered by similarly low-cost plans.