How the Inflation Reduction Act Might Affect Your Health Care

Congressional Democrats are on the verge of passing their most significant health-care legislation in more than a decade, delivering a major victory to President Biden, who has made tackling the high price of care a key plank of his domestic agenda.

If signed into law, the party’s long-stalled economic package would prevent huge spikes in the cost of health insurance for roughly 13 million Americans. It would limit seniors’ drugs costs at $2,000 a year. And it would place a cap of $35 a month on how much diabetics enrolled in Medicare would pay for insulin, a lifesaving medication.

After more than a year of fraught negotiations, the economic package won the support of all Senate Democrats on Sunday, and heads to the House, where it’s expected to advance this week. The bill doesn’t make changes to the health-care system as sweeping as the party originally envisioned, and some policies will take years to be implemented. But, three months before the midterm elections, Democrats are already gearing up to tout the measures on the campaign trail.

“There’s a whole range of things that are really game-changing for ordinary folks. Now, some of it is not going to kick in for a little bit, but it’s all good,” Biden told reporters Monday. “When you sit down at that kitchen table at the end of the month, you’re going to be able to pay a whole hell of a lot more bills because you’re paying less in medical bills.”

Will Americans pay less for drugs?

There are several key parts to that question. The first involves Medicare being able to negotiate the price of drugs.

It isn’t clear yet how robust the savings for seniors will be because of Medicare’s ability to negotiate prices. But health experts believe there will be lower costs.

Allowing drug negotiation in Medicare — the federal health insurance program for older Americans and those with disabilities — has long been backed by Democrats, who believe it will help make medicines more affordable. But the pharmaceutical industry’s multimillion dollar lobbying machine has blasted that notion and fought tooth-and-nail against the proposal.

The provisions included in Democrats’ health and climate bill are smaller in scale than many in the party wanted, meaning the impact won’t be as far-reaching. The government would begin negotiating the price of 10 drugs by 2026, with that number growing to up to 20 drugs by 2029.

But the number of Americans with Medicare coverage who will see lower out-of-pocket costs on drugs — and how much will they save — will depend on which drugs are subject to negotiations and the price reductions the government secures, according to the Kaiser Family Foundation.

“It’s difficult to say with certainty which drugs will be negotiated or what the level of savings will be for patients who take those drugs,” said Tricia Neuman, a senior vice president at the Kaiser Family Foundation. “But for patients who do take those drugs, there will be savings that come into being starting in 2026.”

As for annual out-of-pocket costs for medicines, the legislation passed Sunday caps costs at $2,000 per year for Medicare beneficiaries. Roughly 1.4 million enrollees in the program’s voluntary prescription drug benefit spent $2,000 or more in 2020 on medications. But it’s likely that even more seniors will save money as a result of the new limit on drug costs, because the estimate from the Kaiser Family Foundation didn’t account for expected hikes in average annual out-of-pocket costs in more recent and in future years.

Older adults who take pricey medications for conditions such as cancer or multiple sclerosis are especially likely to benefit. For instance, some on Medicare with the diseases spent between $4,100 and $6,200 a year to manage the disease.

Democrats had sought to impose a $35 monthly price cap on the cost of insulin for patients on Medicare and those with private health plans.

But Republican lawmakers blocked the part of the policy that would have extended the cap to millions of Americans with private insurance who use the drug, which diabetics use to manage blood sugar levels. The measure will still benefit Americans who have Medicare coverage.

The number of Americans with Medicare using insulin doubled from 1.6 million in 2007 to 3.3 million people in 2020. Many seniors spend an average of $54 per prescription across all insulin products, which means Democrats’ cap will lower costs.

Does the legislation lower health insurance costs? And if so, for whom?

The spending package includes a three-year extension of enhanced financial aid for roughly 13 million Americans who buy health coverage through the Affordable Care Act’s exchanges.

Last year, Democrats passed the beefed up tax credits in their coronavirus aid bill, but such subsidies are slated to expire at the end of this year. The economic package poised for final passage this week extends the aid through 2025.

Without that assistance, health-care costs would spike substantially. Roughly 3 million people who receive health coverage through the ACA’s insurance exchanges could be priced out of the market and potentially become uninsured. Nearly 9 million people could lose hundreds of dollars in financial help per year if the assistance wasn’t extended, and an estimated 1.5 million may have lost their tax credits entirely, though remain insured, according to a March report from the Department of Health and Human Services.

Who won’t benefit from the legislation?

Under the ACA, states were required to expand Medicaid to people earning up to 133 percent of the federal poverty level. But the Supreme Court made doing so optional for states, and Republican officials in a dozen states have refused to expand the program.

Previous versions of the bill had crafted a federal solution, circumventing recalcitrant GOP officials and expanding safety net coverage to roughly 2.2 million low-income adults. But the legislation the Senate passed Sunday excluded that provision.

The legislation also excluded provisions aimed at new mothers and vulnerable children. The policies left out of the Senate’s bill would have permanently funded coverage for low-income children and expanded Medicaid benefits in all states to new mothers for a year after giving birth.

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