The Inflation Reduction Act of 2022 (IRA) was signed into law on August 16, 2022. This historic law includes several provisions that are expected to decrease prescription drug costs and improve access to prescription drugs for the more than 65 million Americans enrolled in the Medicare program. The IRA also extends the enhanced Marketplace premium tax credits (PTCs) provided under the 2021 American Rescue Plan Act (ARPA), eliminates cost sharing for adult vaccines covered under Medicare Part D, as of 2023, and improves access to adult vaccines under Medicaid and CHIP.
This report features key findings from the first year of implementing IRA provisions regarding Medicare drug coverage. The Office of the Assistant Secretary for Planning and Evaluation (ASPE) in the Department of Health and Human Services (HHS) has developed a series of research reports on the impacts of the IRA. ASPE prepared these reports working in collaboration with the Centers for Medicare & Medicaid Services (CMS).
IRA Caps Out-of-Pocket Costs for Insulin in Medicare:
Under the IRA, out-of-pocket costs for covered insulin products in Medicare are now capped at $35 for each monthly prescription under Part D, as of January 1, 2023, and Part B as of July 1, 2023. About 1.5 million Medicare beneficiaries who use insulin would have saved $734 million in Part D and $27 million in Part B out-of-pocket costs in 2020 if these caps had been in effect in 2020.
IRA Expands Access to Vaccines Without Cost-Sharing in Medicare:
Effective January 1, 2023, the IRA eliminated enrollee cost sharing for adult Medicare Part D vaccines recommended by the Advisory Committee on Immunization Practices (ACIP). In 2021, 3.4 million people received vaccines under Part D, and annual out-of-pocket costs were $234 million. This translates to nearly $70 in savings on out-of-pocket spending per Medicare enrollee receiving a Part D vaccine if the IRA had been in effect in 2021.
IRA Provisions Regarding Medicare Part B:
Over the 2008-2021 period, Medicare fee-for-service (FFS) Part B drug spending per enrollee grew on average at 9.2 percent annually. This spending growth was more than triple the rate in Part D (2.6 percent) and nearly 4 times as high as the rate of per capita annual prescription drug spending across all payers, both public and private (2.4 percent). The IRA includes several new provisions designed to improve access to biosimilars, reduce Medicare drug spending, and lower costs for Medicare enrollees. Due to the IRA, Medicare Part B beneficiaries have already enjoyed lower coinsurance for 20 drugs from April 1 to June 30 and for 43 drugs from July 1 to September 30.
IRA Medicare Part D Benefit Redesign and Out-of-Pocket Cap:
The Inflation Reduction Act’s redesign of Medicare Part D, including a $2,000 out-of-pocket cap, is estimated to reduce enrollee out-of-pocket spending by about $7.4 billion annually among more than 18.7 million enrollees (36 percent of Part D enrollees) in 2025 – nearly $400 per person among enrollees who have savings in out-of-pocket costs under the IRA.
- Insulin Affordability and the Inflation Reduction Act: Medicare Beneficiary Savings by State and Demographics
- Medicare Part D Enrollee Savings from Elimination of Vaccine Cost-Sharing
- Medicare Part B Drugs: Trends in Spending and Utilization, 2008-2021
- Medicare Part D Enrollee Out-of-Pocket Spending: Recent Trends and Projected Impacts of the Inflation Reduction Act
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