Medicare beneficiaries – here’s the help you’ll get from the Cut Inflation Act in the new year and beyond
Medicare beneficiaries will see big savings under the Cut Inflation Act, which ushers in a new era of negotiating drug prices and capping out-of-pocket spending.
The Inflation Reduction Act has a few key elements that specifically target the needs of older Americans covered by Medicare — three will take effect in early 2023 and the others in a few years. These provisions affect how much beneficiaries will spend on their drugs, as well as the total they will pay out of pocket each year.
Biden signed the Cut Inflation Act earlier this week — it’s seen as a major victory for Democrats with a focus on health care spending, climate change and corporate taxation. Along with changes to Medicare, the law offers rebates on energy bills and credits for heat pumps or electric vehicles. Large corporations will also see a minimum corporate tax of 15% while the Internal Revenue Service will receive $80 billion in new funding over the next 10 years.
See: Biden signed the Cut Inflation Act. Here’s MarketWatch’s rundown on how this will affect your energy bills, investments, and drug costs.
What to look for after December 31, 2022
From 2023, drug prices will be linked to the Consumer Price Index – the measure of inflation – and pharmaceutical companies that increase their prices faster than the rate of inflation will have to pay rebates. Previously, there were no regulations around rising drug prices, said Ari Parker, chief Medicare adviser and co-founder of Chapter, a company that specializes in maximizing Medicare coverage. “Here the government sets a hard and fast limit,” he said.
Insulin copays are also limited to $35 per month, but only for those covered by Medicare. More than 3.3 million Medicare beneficiaries with diabetes use insulin. The average patient needs two vials per month, but the price per vial can be “catastrophic”. For example, the average price for a unit of insulin in October 2021 was 31 cents, with standard insulin containing 100 units per milliliter, according to GoodRx. So a 10ml bottle – the standard – would cost $310 per bottle.
The latest provision taking effect for the new year will limit cost-sharing expenses for adult vaccinations covered by Medicare Part D, which can be expensive. For example, the shingles vaccine costs nearly $200 per injection, and patients receiving the vaccine need two injections, Parker said.
What the future holds
However, recipients can expect even more savings in the years to come, Parker said.
Out-of-pocket costs for Medicare beneficiaries will be capped at $2,000 a year starting in 2025 — a provision that could save some Americans thousands of dollars a year on health care.
Currently, Part D beneficiaries have a few steps to pay for their medication. First, they may have to pay up to $480 in deductibles. Then they must pay 25% of the cost of the plan for drugs, where the limit is raised to $4,430. The third phase is known as the “donut hole” phase, where recipients must pay up to $7,050. The final phase, in which Medicare will cover the bulk of drug costs, is known as catastrophic coverage phase, which is a coinsurance of 5% for the beneficiary. (The catastrophic hedging phase will be eliminated in 2024 under the Inflation Reduction Act.)
Also see: Drug savings in new law not just for seniors
Typically, Americans with specialty medications, such as chemotherapy pills, or even just an expensive brand name drug, could spend thousands of dollars more than the new $2,000 limit created by the Cutback Act. of inflation.
“It wouldn’t be uncommon for a senior to spend between $6,000 and $8,000 on medication,” said Chris Orestis, president of Retirement Genius, a financial planning site for retirement and long-term care. With the new law, “once you hit $2,000 out of pocket, you’re capped for the rest of the year and you don’t have to keep digging into your pocket.”
Medicare will be able to negotiate drug prices the following year, starting in 2026. Under the law, the agency will start by negotiating the cost of 10 drugs (which the government will later determine). The number of drugs to be traded will increase every few years.
When working together, these two provisions will have a huge impact on recipients, Parker said. With Medicare’s annual enrollment period coming up in October, beneficiaries should review their options now to make the most of these changes and ensure they have the best plan for their health care needs. “There will be significant savings to unlock,” he said.