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President Joe Biden’s federal budget proposal will include increasing Medicare taxes for people earning more than $400,000 a year and expanding and accelerating prescription drug price negotiations. The result of these changes would make the health insurance program for older Americans solvent for at least 25 years, according to the White House.
The budget, which was released on March 9, also proposes limiting Medicare Part D prescription drug plan monthly co-pays to $2 for certain generic drugs used to treat chronic conditions. A White House fact sheet lists hypertension and high cholesterol as two maladies that could be covered by this out-of-pocket cap.
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The president’s annual budget is an outline of the administration’s fiscal priorities and is sent to Congress, which is in charge of the nation’s purse strings. Biden promised during his State of the Union address in February that he would unveil a plan to extend the solvency of Medicare. The White House says the budget proposal would strengthen Medicare “with no benefit cuts” while lowering costs for Medicare beneficiaries.
“Nothing is more important to our members than ensuring that Medicare stays strong and will be there for them when they need it,” says Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer. “AARP is pleased to see proposals to expand efforts to lower drug prices, improve the health of the Medicare trust fund and help protect the benefits that millions of Americans have paid into and earned.”
Extending prescription drug negotiations
Under the prescription drug provisions of the Inflation Reduction Act of 2022, 10 of the most widely used and expensive brand-name drugs paid for by Medicare Part D will be selected for negotiations with drugmakers in the first year of the program. The process for price negotiations is being developed, and the first 10 medications selected are due to be made public by September. The expected price decreases of those drugs will take effect in 2026. Under the new law, more drugs would be subject to negotiations every year.
Biden asks Congress in his budget to allow Medicare to negotiate prices for more drugs and begin negotiations sooner after new drugs are launched than under the current law, which doesn’t allow a drug to be subject to negotiation until it has been on the market for many years — at least seven for typical pill-form medications and 11 years for biologics. The budget does not specify how many years a drug would have to be on the Food and Drug Administration’s approved list before it could be part of the negotiations process or how many more drugs would be negotiated.
“The budget’s expansion of Medicare drug negotiations will not only save money for the federal government, it will cut beneficiaries’ out-of-pocket costs by billions of dollars,” the White House plan says.
The law requires pharmaceutical companies to pay rebates to Medicare for prescription drug price increases higher than the rate of inflation. The budget proposal would extend that regulation to commercial insurance plans.
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