Older adults will benefit from changes coming to Medicare and an ACA subsidies extension outlined in recently passed legislation.
Inflation has hit the pocketbooks of America’s older adults particularly hard this year. That is why news about reduced costs coming to Medicare and the extension of premium subsidies in the Affordable Care Act (ACA) marketplace via the Inflation Reduction Act (IRA) are so welcome right now. But implementation of the IRA’s different provisions will be staggered, and some provisions are complicated for those of us not in the field of health care — so this month’s Coffee Break is devoted to laying out the new policies as simply and concisely as possible.
Affordable Care Act Subsidies
Many older adults who are self-employed and don’t yet qualify for Medicare receive health insurance through the ACA. The new law extends expanded subsidies and other financial breaks from the 2021 American Rescue Plan for another three years, through 2025. Adults aged 50 to 64 covered through the ACA already pay up to three times more than their younger counterparts, so they’ll save more too — an average of $950 per year, versus $800 across all participants. The law also caps premiums at 8.5% of income for all age groups.
Which Drugs Will Get Price Negotiation?Everyone wants to know which particular drugs will undergo price negotiation. While there is currently no list, the new law creates a formula for the drugs that will get tapped. They will be the drugs with the highest Medicare spending that meet specific criteria. According to three knowledgeable physicians, these are the most likely candidates, listed by their generic and brand names:
The Inflation Reduction Act price negotiation regulations take a stab at equating the cost of a drug to its relative value. The government is supposed to take into account the cost of research and development, production and distribution, as well as how effective the drug is when compared to alternative treatments when arriving at a price. This process will doubtless evolve over time, but the hope is that more ground-breaking treatments will be rewarded, while those that improve treatment only incrementally won’t receive the same financial advantage. |
Medicare
The biggest changes come in the form of ground-breaking modifications to Medicare, particularly the Part D voluntary outpatient prescription drug benefit. The law reduces the price of many drugs and puts a limit on out-of-pocket costs for Medicare patients. Currently, research shows that many older Americans skip doses or never fill prescriptions at all due to cost concerns. Prescription drug prices account for 20% of costs paid by the 48 million Medicare patients who get coverage through Part D. However, some changes from the new law won’t begin immediately.
- Starting in 2026, negotiated drug prices on expensive drugs with no generic or biosimilar equivalents will go into effect. Ten drugs will be on the list in 2026, increasing to 20 drugs by 2029. (See sidebar for likely drug candidates).
- Medicare Part D inflation caps will limit drug price increases to the rate of inflation starting in October 2022.
- Beginning in January 2023, beneficiaries will qualify for a rebate on drugs (most often office-based infusions for cancer drugs) covered under Medicare Part B.
- Beginning in 2025, there will be an annual $2,000 cap on part D spending for beneficiaries.
- Starting in January 2023, Part D premiums cannot increase more than 6% annually through at least 2029.
- The income threshold for Part D out-of-pocket subsidies is raised from 135% of the federal poverty level ($18,347 for an individual in 2022) to 150% ($20,385 for an individual in 2022).
- Beginning in January 2023, most vaccines will be free in Medicare, including those for shingles and Tdap. Medicaid and CHIP enrollees will get all ACIP-recommended adult vaccines free beginning October 1, 2023.
- Starting in January 2023, the cost of insulin products will be limited to $35 per month.
It’s not just Medicare beneficiaries who are expected to benefit from the new regulations. The non-partisan Congressional Budget Office analysis estimates savings of hundreds of billions of dollars by Medicare over the next decade as a result of the new law, primarily from drug price negotiations and inflation caps. There are no cuts to the Medicare program. Senior advocacy organizations have championed the changes as well.
"AARP has fought hard to lower prescription drug prices for decades," AARP CEO Jo Ann Jenkins said in a statement after the bill was signed. "This is one of the most important pocketbook issues for older Americans — across political aisles and across the country. We have made our voice loud and clear: Drug prices have been out of control, and enough is enough.”
Sources:
Blog posting provided by Society of Certified Senior Advisors
