How the Inflation Reduction Act Helps Bring Down Skyrocketing Drug Costs

The Inflation Reduction Act implements a wide-ranging set of changes aimed at helping America bounce back from the COVID-19 pandemic. Incentivizing green energy adoption for businesses and individuals are central goals, but the IRA also tackles the high cost of healthcare.

Seniors, retirees, and other Medicare recipients will see the most pronounced benefits from the IRA, helping stem the tide of ever-increasing prices in the healthcare sector.

Out-of-Pocket Cap

Seemingly-limitless medication expenses are one of older Americans’ greatest fears. The IRA seeks to solve that with a $2,000 cap for yearly medication expenses through Medicare Part D.

The cap’s targeted demographic is individuals who need one or more high-cost name-brand prescriptions that can far outpace any retiree’s living expenses. Hopefully, this cap will help mitigate the growing concern of doctors with patients who ration doses – or skip doses – due to unacceptable prices.

This cap will take effect in 2025.

Across-the-Board Reductions

Medicare Part D recipients who don’t routinely spend $2,000 or more will still benefit from the IRA.

The IRA allows the government to negotiate the prices of the top 100 most prescribed medications purchased through Medicare. This ability to negotiate will keep the overall expense of these common drugs low and help Medicare recipients save money – whether they need expensive or generic drugs.

Price negotiations will be staggered over the coming years – starting in 2026 – giving drug manufacturers time to shift their business models and acclimate to these altered prices.

Insulin Insulation

Diabetes is one of the most prolific health crises in the U.S., affecting over 11% of the nation’s population.

Price gouging is common among insulin providers, and the IRA seeks to protect medicare users from these predatory practices by instituting a $35 cap on monthly insulin costs – including insulin pumps. Seniors receiving insulin under Medicare Part D can receive medication for $35, and the IRA expands this price cap to all Medicare users from 2023 through 2025.

This changes from 2026 onward: monthly insulin prices will either be A) capped at 25% of the negotiated medicare price or B) remain the stated plan price. The lowest option will be selected.

If recipients are charged over the $35 cap in the first few months of the newly mandated price, reimbursements will cover the difference as companies adjust their billing modules.

Less Spending on Drugs, More Spending on Life

The aim of the IRA is multifaceted, but for seniors and other Medicare recipients, the reduced costs allow for more freedom for fixed-income budgets previously held hostage by exorbitant prices on these life-saving medications.

Steady. Accurate. Consistent.

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