New Inflation Reduction Act Includes Several Healthcare Issues

August 18, 2022

A new law signed by President Biden earlier this week will profoundly affect how medicine is practiced in the U.S.  

On August 16, Biden signed a scaled back version of the “Build Back Better Act,” now known as the “Inflation Reduction Act” (IRA) after last-minute negotiations resulted in a bill that passed by the narrowest of margins in the U.S. Senate.

The law includes several healthcare items designed to address Medicare costs. It allows Medicare to begin negotiating the price it will pay for certain prescription drugs directly with drug manufacturers. This has been a long battle with drug manufacturers designed to limit the price growth of drugs covered by Medicare.  

The IRA also caps the annual out-of-pocket prescription drug costs for Medicare recipients at $2,000, beginning in 2025. This will protect Medicare beneficiaries from the large out-of-pocket costs so often seen with prescription drugs. 

The law also extends Affordable Care Act (ACA) subsidies beyond 2023 for those purchasing coverage in the individual market, thus lowering individual healthcare premiums. These subsidies were scheduled to expire at the end of this year but will be now extended through 2025. 

The new law expands eligibility for the Low-Income Subsidy Program. Before the IRA, a beneficiary could fully qualify for the program if their income was below 135% of the federal poverty level (FPL) and get partial benefits if their income was between 135% to 150% of the FPL. The law now expands full benefits to those who earn up to 150% of the FPL. 

Finally, beginning in 2023, the IRA caps out-of-pocket spending on insulin products in Medicare Part D at $35 per month, it eliminates cost-sharing for adult vaccines under both Medicare Part D and Medicaid, and it requires states to cover all vaccines for Medicaid and Children’s Health Insurance Program beneficiaries.