Good news! (In a few years, anyway.)
The reconciliation bill, which passed Aug. 12 in the House and now goes to President Joe Biden, would lower at least some Medicare beneficiaries’ prescription costs on Part D, Medicare’s prescription drug program, and on Part B, which covers drugs administered in a doctor’s office, by:
- Requiring the federal government to negotiate prices for some Medicare drugs, 10 medications to start in 2026, rising to 20 in 2029.
- Capping seniors’ out-of-pocket costs at $2,000 a year for Medicare’s prescription drugs.
- Requiring rebates from drug companies if their prices increase faster than inflation.
- Expanding eligibility for prescription drug benefits in the Part D low-income subsidy program.
- Capping monthly insulin copays at $35.
- Making vaccines free, with no out-of-pocket costs.
- Limiting Part D premium increases.
Impact on Beneficiaries
Seniors who spend more than $2,000 a year on prescriptions would clearly benefit. That provision would launch in 2025, and could affect more than 1.4 million beneficiaries, according to Kaiser Family Foundation estimates based on 2020 enrollee data.
Right now, out-of-pocket costs of more than $7,050 for Part D drugs bumps seniors into what’s called the “catastrophic” phase — they pay 5% of their drug costs after that threshold. The reconciliation bill — called the Inflation Reduction Act — would eliminate the 5% copay in 2024, benefiting more than 1.3 million seniors, KFF estimates, as a precursor to implementing the $2,000 out-of-pocket cap the following year.
That out-of-pocket cap may be the easiest provision to understand as a cost benefit to Part D enrollees, but Rachel Sachs, a professor at the Washington University in St. Louis’ School of Law, told us “there’s a whole range of ways in which we are protecting seniors” in the bill. That includes limiting Part D premium increases to 6% per year from 2024 to 2029. The measure means Part D plans can’t take increased costs of reducing out-of-pocket spending and “turn around and put that back on beneficiaries in the form of premiums.”
Sachs — whose expertise includes food and drug regulation, and health law — also cited another provision that allows seniors to spread out the cost of their drugs over the year as beneficial to seniors on fixed incomes.
The cap on insulin copays also could affect millions. In 2020, 3.3 million Medicare Part D enrollees used insulin, KFF found, with average per-prescription, out-of-pocket spending of $54. Some of those enrollees may benefit from a program launched in 2021 in which certain Part D plans capped copays at $35 for some insulin products. But the reconciliation bill would require all plans to cap all insulin products at that price.
About 400,000 Medicare beneficiaries who receive partial benefits under the low-income subsidy program could benefit from an expansion in eligibility for full benefits. The program pays Part D premiums and cost-sharing for seniors with low incomes and assets. Partial benefits now go to those with income between 135% and 150% of poverty; the Democrats’ bill extends full benefits to that income group. “Annual out-of-pocket costs for these beneficiaries could fall by close to $300, on average, based on the difference between average out-of-pocket drug costs for LIS [low-income subsidy] enrollees receiving full benefits versus partial benefits in 2020,” KFF said in its July 27 report.
Seniors who now can’t afford to buy needed medicines also would benefit from the bill. Sachs said in a phone interview that “a lot of seniors don’t even fill these prescriptions,” but the cap on out-of-pocket spending and other cost-lowering provisions will “increase utilization and increase spending because people can now afford their medications.”