August 16, 2022 – After a long and arduous process, last week Congress passed the final version of the FY2022 Budget Reconciliation bill—the Inflation Reduction Act (IRA), which President Biden signed into law today. This legislation marks a significant achievement for the administration’s health policy agenda and includes history-making investments to fight climate change. In order to garner the votes needed to pass, health care priorities like closing the Medicaid coverage gap and 12-month continuous health coverage for children were unfortunately cut from the final legislation. However, the package still makes significant progress on health care reform by negotiating lower prescription drugs prices, capping the price of insulin for seniors and extending health care subsidies to help families pay for their monthly premiums.
Lowering prescription drug prices
The ability for the federal government to negotiate with drug manufacturers for lower prices has been a longtime priority for democratic policymakers—one that has faced strong opposition from the pharmaceutical industry. For the first time, the IRA will allow the government to negotiate prescription drug prices under Medicare. The U.S. Department of Health and Human Services will identify the top 100 most expensive drugs and pick 10 drugs for negotiations to go into effect 2026. Additional drugs will be added for negotiations over subsequent years. This provision is estimated to save the federal government $100 billion over 10 years, savings that Medicare beneficiaries will see in the form of lower drug prices.
In another effort to curb ever-increasing prescription drug prices, the IRA will also mandate that drug manufacturers pay a rebate to Medicare if their drug prices rise faster than inflation. This is expected to have a significant impact on lowering costs given that half of all drugs covered on Medicare had price increases above the rate of inflation in 2020.
Other health care cost-saving measures include expanding eligibility for Medicare’s low income subsidy program, making recommended vaccines free under Medicare and capping out-of-pocket spending on prescription drugs at $2,000/year for Medicare beneficiaries.
Capping insulin prices
The cost of insulin in the U.S. is more than ten times higher than the average of all other countries combined. Surveys have shown that a quarter of individuals with diabetes have skipped rent or mortgage payments in order to afford their insulin, so it’s no surprise capping insulin costs has bipartisan public support. Despite Senate Republicans voting against capping insulin prices for both public and private insurance enrollees, the IRA passed with an insulin cap for Medicare recipients at $35/month. This means over 3 million Americans, mostly seniors, will have more affordable access to this life-saving drug.
Extending Enhanced Premium Tax Credits
The IRA also extended the enhanced advanced premium tax credits (APTCs), which began last year to provide additional premium support to people who already qualified for assistance under the Affordable Care Act (ACA) as well as to help lower the cost of coverage for middle-income enrollees purchasing ACA marketplace plans during the covid-19 pandemic. Had Congress failed to extend these enhanced subsidies, over 13 million people would have seen their premiums increase by 50% next year.
For years, Massachusetts has provided individuals and families with more generous premium support than the federal law requires. Because the state will have to spend less money to provide this level of premium support thanks to the enhanced APTCs, the state will continue to accrue savings. These savings collect in the Massachusetts’s Commonwealth Care Trust Fund, which is designated to be used to increase health coverage for Massachusetts residents.
During Massachusetts’s most recent legislative session, which concluded at the end of July, the state legislature passed a bill proposing the savings from the federal enhanced APTCs be used to expand eligibility for the state’s subsidized health care program, ConnectorCare. Although this proposal had broad support in the legislature, it was ultimately vetoed by Governor Baker as a part of the budget bill. With the extension of the enhanced APTCs now secured, HCFA will continue to work with the legislature to pass this important initiative in a future session.
The IRA’s historic progress on lowering prescription drug costs for Medicare enrollees and the continuation of premium support is more important than ever as people across the country are struggling with rising costs from inflation. It is a critical step forward for people in the Commonwealth, especially for seniors, but work remains to be done to ensure that the state of Massachusetts is investing in critical coverage expansions and taking additional steps at the state level to bring down the cost of prescription drugs outside of Medicare.
Grace Jurkovich is a policy & project coordinator at Health Care For All.
