When President Biden signed the Inflation Reduction Act in 2022, he promised it would lower Medicare costs for America’s seniors. Loaded with the all-too-familiar political rhetoric of “taking it to drug companies”– what is missing from this talking point is how the President “took it to seniors.”
Thus far, however, seniors’ costs have skyrocketed. A new report reveals that for those with a Medicare Part D drug plan, this year’s premiums have increased by a crushing 21%, on average. Next year’s prices are expected to be even higher.
The IRA is unraveling the “Part D” drug benefit — and hitting seniors with bills that few can afford. It’s high time to review what went wrong.
The IRA’s most heralded reform gave Medicare officials the authority to set prices on a growing list of medicines covered by the program. Most thought the law would translate into savings at the pharmacy counter, but the IRA’s price-setting provision was designed to save the government — not patients — money.
The IRA’s framers knew that the law wouldn’t reduce drug prices immediately, so they included other sweeteners. One, a cap on monthly insulin costs at $35, has taken effect and is rightly popular. Another, lowering the cap on out-of-pocket drug expenditures, could have been popular — except that it doesn’t take effect until next year, and was so poorly designed it’s already producing surprise premium increases.
The scheduled decrease in the out-of-pocket maximum for prescriptions was a classic bait-and-switch. Seniors who take only brand name drugs thought they would save when the out-of-pocket maximum went down from about $3,300 under the old rules to $2,000. The IRA’s framers knew perfectly well they had no magic wand to make the $1,300 differential disappear, and the government had no intention of picking up that tab. So, lawmakers shifted financial responsibility for most of the $1,300 to insurers.