Four Health Policy Takeaways in the Inflation Reduction Act

  • The Inflation Reduction Act (IRA) makes some health changes in cutting prescription drug costs, lowering health care costs for Americans, and defeating special interests. 
  • This law allows the government to negotiate prices for some drugs. Previously this was prohibited. 
  • Experts say regulating the bill will have a significant impact on providers.  

The House passed the Inflation Reduction Act (IRA) in August. IRA is a sweeping climate, health care and tax package that includes major reforms on drug prices and extends boosted Affordable Care Act (ACA) subsidies through 2025.

President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022. According to the White House statement, “the Inflation Reduction Act will lower costs for families, combat the climate crisis, reduce the deficit, and finally ask the largest corporations to pay their fair share.” 

Regarding healthcare, the law focuses on cutting prescription drug costs, lowering health care costs for Americans, and defeating special interests.  

This law allows the federal government to negotiate prices for a small subset of Part D and Part B drugs. Before IRA, the U.S government was explicitly prohibited from engaging in price negotiations with drugmakers on behalf of the Medicare population.  

Starting in 2026, Medicare will begin negotiating the price of 10 drugs, followed by an additional 15 drugs in 2027. Then eventually 15 more drugs in 2027, and an additional 20 drugs in 2029 and beyond.  The list of the first 10 drugs selected for negotiation is expected to be made public in 2023.  

Here are some four health Inflation Reduction Act takeaways you should know: 
  • Limits the premium growth on Medicare Part D to no more than 6% a year from 2024 through 2029: The legislation includes a $2,000 out-of-pocket cost cap on Part D drugs, spread out in installments for the beneficiary over a calendar year. Part D plans will also have to pick up more costs for spending in the catastrophic coverage phase, which a beneficiary reaches when their drug costs reach a certain level. 
  • Expands eligibility for low-income Part D subsidies: The IRA expands who can qualify under the Low-Income Subsidy Program that helps meet Part D cost-sharing burdens like deductibles. The law would expand full benefits to those who earn between 135% and 150%, according to the Kaiser Family Foundation.  
  • States would have to cover all vaccines for Medicaid & Children´s Health Insurance Program Beneficiaries: This benefit only applies to any vaccines that get cleared by the Centers for Disease Control and Prevention´s Advisory Committee on Immunization Practices.  
  • Delays the Part D rebate rule: IRA will delay again this controversial rule from going into effect again into 2032. This rule passed at the end of Trump´s presidential term but has never gone into effect.  

According to a Fierce Healthcare news, experts say regulating the bill will have a significant impact on providers, including those that rely heavily on reimbursements for Medicare Part B drugs. To address this, there will be a need for providers to purchase drug at the negotiated rate as opposed to market prices.  

The White House states that with this law 3 million more Americans will have health insurance and that with the law, 5-7 million Medicare beneficiaries could see their prescription drug costs go down due to the prescription allowing Medicare to negotiate prescription drug costs. 

It adds that 50 million Americans with Medicare Part D will have the peace of mind knowing their costs at the pharmacy are capped at $2,000 per year, benefiting about 1.4 million beneficiaries per year.  

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