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Inflation Reduction Act significant for drug costs, Medicare, those with ACA insurance


KFF convenes analysts to explain effects as House vote could happen Aug. 12.

Inflation Reduction Act significant for drug costs, Medicare, those with ACA insurance

The federal Inflation Reduction Act will have significant effects in health care costs for people using Medicare or insurance through the Affordable Care Act.

On Aug. 12, the U.S. House of Representatives could begin its deliberations on the Inflation Reduction Act that the Senate approved on Aug. 7. House Speaker Nancy Pelosi, D-California, this week said she expects House Democrats to approve the act and send it to President Joe Biden for his signature.

On Aug. 11, nonprofit analyst KFF convened a panel for an online discussion of the health care and economic effects of the new law. Medical groups generally have praised the legislation for improving access and lowering costs of care, along with other provisions such as changing some taxes and boosting clean and renewable energy

Health care significance

The Inflation Reduction Act is significant for at least three reasons, said Tricia Newman, KFF senior vice president and executive director for KFF’s Program on Medicare Policy.

  • It is the first major improvement in Medicare benefits since the Affordable Care Act passed in 2010.
  • The act improved drug coverage and tackled drug prices, which had seemed untouchable given opposition from the pharmaceutical industry.
  • Proposals that were in the policy pipeline for years now appear to be on the fast track to the president’s desk.

Juliette Cubanski, deputy director for KFF’s Program on Medicare Policy, shared a list of provisions, based on the Senate version, in the Inflation Reduction Act:

  • The federal government will be required to negotiate prices for some of the highest-spending drugs covered by Medicare. Drugs will be selected and published by Sept. 1, 2023, with negotiations lasting a year, new prices published in September 2024 and taking effect in 2026.
  • Drug companies would pay rebates if prices rise faster than inflation for drugs used by Medicare beneficiaries.
  • For Medicare Part D, the 5% coinsurance for catastrophic coverage would be eliminated in 2024; a $2,000 cap on out-of-pocket spending will start in 2025; and annual premium increases will be limited from 2024 to 2030.
  • Cost-sharing for insulin products will be limited to $35 a month for people with Medicare.
  • There will be expanded eligibility for Medicare Part D Low-Income Subsidy full benefits.
  • Cost-sharing will be eliminated for adult vaccines covered by Medicare Part D.
  • The drug rebate rule, enacted by former President Donald J. Trump, will be delayed.

Love-hate relationship

Earlier this year, a KFF survey found 83% of adults think prescription drug costs are unreasonable, 20% said in the last year they did not take prescription medicines as directed because of costs, and 26% of adults said it is very difficult for them to pay for their prescription drugs, Neuman said.

Whatever the House of Representatives does, the KFF analysts predicted health care costs will continue to be part of the public discourse this fall as the November election nears.

Americans have a love-hate relationship with pharmaceuticals, said Mollyann Brodie, KFF executive vice president and executive director of polling.

They love new drug innovations that change people’s lives, but they feel costs are too high, pharmaceutical makers are too focused on profits, and what they suggest is not in the best interests of the country or its people, she said.

Those perceptions hold true for a majority of Republicans and Democrats, Brodie added, citing polls with questions based on strongest arguments of proponents and opponents.

People are not convinced by pharmaceutical companies’ arguments that government negotiations will stifle drug innovations. Negotiation is a basic part of American business and life, with people negotiating prices of houses and cars, and of work contracts, she said

ACA insurance

Meanwhile, subsidies will continue for eligible people purchasing health insurance through the ACA Marketplace, said Cynthia Cox, vice president and director for the KFF Program on the ACA.

If the Inflation Reduction Act does not pass, premiums will increase for virtually all of 13 million subsidized enrollees using ACA insurance, she said.

That comes at a cost -- $25 billion a year, according to an estimate from the Congressional Budget Office, said Krutika Amin, associate director for the KFF Program on the ACA. The actual cost will depend on the actual number of people who sign up and premium cost increases.

Amin cited a Peterson-KFF Health System Tracker that estimated premium increases of about 10% in 13 states and Washington D.C.

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