How is the Inflation Reduction Act affecting Medicare?


Editorial team Published on

The Inflation Reduction Act (IRA) of 2022 significantly reformed Medicare Part D prescription drug coverage to lower out-of-pocket expenses for seniors and people with disabilities.

Out-of-Pocket Cost Caps and Reductions

  • $2,000 Annual Cap: Established a hard yearly cap of $2,000 on out-of-pocket prescription drug costs for Part D enrollees.
  • Catastrophic Coverage Elimination: Eliminated the 5% coinsurance requirement for beneficiaries in the catastrophic phase, meaning zero out-of-pocket costs once the spending threshold is met.
  • Payment Spreading: Introduced an option for beneficiaries to spread their out-of-pocket prescription costs into predictable, monthly payments across the calendar year.
  • Donut Hole Redesign: Fully restructured the Part D benefit design, phasing out the old coverage gap.

Drug Price Negotiation and Inflation Penalties

  • Federal Price Negotiation: Empowered Medicare to directly negotiate prices for select high-cost, single-source brand-name drugs, starting with 10 medications in 2026 and expanding in future years.
  • Inflation Rebates: Requires drug manufacturers to pay rebates to Medicare if they raise prescription drug prices faster than the rate of inflation.

Specific Treatments and Vaccines

  • Insulin Capped at $35: Limited monthly cost-sharing for all covered insulin products to $35, with no deductible applied.
  • Free Vaccines: Eliminated all cost-sharing and deductibles for adult vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), including the shingles vaccine under Part D.

Low-Income Assistance

  • Expanded Extra Help: Broadened full eligibility for the Part D Low-Income Subsidy program (Extra Help) to beneficiaries with incomes up to 150% of the federal poverty level.