The Inflation Reduction Act of 2022 will transform Medicare’s prescription drug coverage through provisions that for the first time will allow the program to negotiate prices of some medications with drugmakers, cap out-of-pocket costs for beneficiaries and make vital vaccines free to enrollees.
As with many new pieces of legislation, these changes will roll out over time. Here’s a year-by-year look at how and when the landmark legislation will affect Medicare beneficiaries. The benefits of the law will apply both to people enrolled in original Medicare and those who belong to Medicare Advantage plans.
Vaccines: Vaccines recommended for adults by the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) will be free to Medicare beneficiaries. Notably, the vaccine for shingles, a two-shot regimen that cost hundreds of dollars, will be available at no cost.
Insulin: Beginning this year and continuing through 2025, copays for a 30-day supply of insulin covered by Medicare Part D will be capped at $35. This copay amount will be in place even if you haven’t yet satisfied your annual Part D deductible. In 2026 and beyond, the monthly insulin copay will be $35 or 25 percent of the medication’s negotiated price, whichever is lower.
Price hike penalties: Pharmaceutical companies will be subject to penalties if they raise their prices more than the rate of general inflation. These companies will have to pay Medicare a rebate for the amount of their price hike that was above inflation. The penalty will apply to all Medicare sales of that particular drug.
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Part D out-of-pocket costs: Part D plan members whose drug costs are so high that they enter the catastrophic phase of coverage will not have any more out-of-pocket costs for the rest of the year. In 2022, the out-of-pocket threshold for that coverage phase is $7,050, a limit that generally increases every year. Until 2024, the 5 percent copay for catastrophic coverage will remain in effect.
Part D premium limitation: From 2024 through 2029, Part D plans cannot increase their premiums more than 6 percent per year. Beyond 2029, it will be up to the secretary of Health and Human Services to determine the premium growth limit.
Financial aid: The government will expand the eligibility for the Extra Help program, which assists people with limited incomes in affording their prescription drug costs, such as premiums and copays. This year the income threshold that will qualify Medicare enrollees for the program will increase from 135 percent of the federal poverty level to 150 percent ($20,385 for an individual in 2022).
Out-of-pocket-cap: The maximum amount people with Medicare will have to pay out of pocket for their prescription drugs will be $2,000 a year. This limit, the first of its kind, will apply both to people with stand-alone Part D plans and to people who get their drug coverage through a Medicare Advantage plan.
Paying Part D premiums: Part D members will have the option of spreading out cost-sharing payments over the course of the year, something Medicare is calling “smoothed” cost sharing. This is designed to protect people from being hit with such a big drug bill at one time that it might discourage them from filling or taking a prescription.
Price negotiations: Consumers will begin to benefit from the first 10 prescription drugs under Part D that will be subject to price negotiations. Medicare will negotiate prices for up to 10 drugs in 2026, up to 15 drugs in 2027 and 2028, and up to 20 drugs in 2029 and beyond. By 2029, that means a total of up to 60 drugs could be subject to negotiation. For Medicare Part B drugs (those typically administered in a hospital or doctor’s office), price negotiations will take effect in 2028.
Dena Bunis covers Medicare, health care, health policy and Congress. She also writes the Medicare Made Easy column for the AARP Bulletin. An award-winning journalist, Bunis spent decades working for metropolitan daily newspapers, including as Washington bureau chief for The Orange County Register and as a health policy and workplace writer for Newsday.