How does the Inflation Reduction Act affect my Health Insurance?

Regine Roquia
Regine Roquia7 Oct 2022

For the first time, Medicare is able to negotiate the price of high-cost drugs under the passage of the Inflation Reduction Act. Signed into law by President Biden on August 16, 2022, this marks a historic piece of legislation passed to lower prescription drug prices and a milestone in reducing the cost of health care for millions of Americans enrolled in Medicare.

For Medicare populations in need of high-cost drugs, these changes are significant. However, these reforms will not be reflected immediately. While we wait for the roadmap to drug reform to take motion, you can start saving on supplemental prescription drug coverage on over 1,000 medications by signing up for Mira services today. 

Impact on Medicare Recipients 

Nearly 1 in 4 Americans struggle to afford prescription drugs. This bill protects Medicare recipients from catastrophic drug costs by establishing a $35 cap for a month’s supply of insulin beginning in 2023. In previous years, Medicare recipients would have to spend about $7,050 annually on out-of-pocket prescription costs to qualify for catastrophic coverage. Under the new law, out-of-pocket catastrophic coverage costs will drop to zero by 2024. In 2025, catastrophic coverage will be removed entirely because of the $2,000 annual Part D drug cost cap established in the IRA.

Additionally, co-pay for adult vaccines under Medicare Part D, Medicaid, and CHIP programs are eliminated under this law. New requirements for vaccinations recommended by the Advisory Committee on Immunization Practices (ACIP) are to be distributed at no cost. In previous years, this was optional coverage and dependent on states, with half denying coverage on vaccines recommended by the ACIP in 2018-2019

Negotiating Drug Prices

The fight for increasing access and affordability to prescription drugs has been long-standing. Under this new law, the Centers for Medicare and Medicaid Services (CMS) Federal Health Secretary are now allowed to negotiate the price of high-cost drugs with manufacturers. This means a significant reduction in price for costly prescriptions over the coming years, as shown in Figure 1. 

Medicare will provide a framework to determine a baseline for negotiating fair pricing of drugs. Negotiations are expected to begin in 2026 and will start with a selection of 10 medications to deliberate. These drugs are not yet listed but include a number of parameters, such as having to be a certain number of years old and without competitors. 

It is worth noting that this is not a novel idea as National Health Services in other countries routinely negotiate drug prices. For the United States, however, this means an estimated savings of over $98.5 billion for Medicare based on the Congressional Budget Office (CBO) score. 

Implementation timeline of the prescription drug provisions in the Inflation Reduction Act

Source: Kaiser Family Foundation

Impact on Medicaid Recipients 

In terms of drug costs, the new law is not expected to impact Medicaid as it does for Medicare. Medicaid recipients will continue to be protected against high out-of-pocket drug costs through the established rebate system. The rebate system requires manufacturers to issue refunds if a drug's price increases faster than inflation. 

The IRA extends subsidies through 2025 for people who have purchased health plans from the Affordable Care Act (ACA) marketplaces, previously set to expire this year. The law builds on the original expansion of tax credits introduced by the American Rescue Plan in 2021. 

Benefits for Medicaid populations under these new provisions include:

  • $2.5 billion increase in Medicaid spending over ten years
  • Increased access to adult vaccines with no cost-sharing
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Marketplace Plans

The IRA extends premium subsidies in the Affordable Care Act’s marketplaces, making health care more accessible and affordable. Without this extension, approximately 3 million people would expect to lose coverage and become uninsured in 2023.  Increase in healthcare coverage according to Health and Human Services (HHS) projections under the IRA now expects to extend coverage across all states in 2023:

StateNumber of Members
Alabama~44,000 members
Alaska~5,000 members
Arizona~41,000 members
Arkansas~18,000 members
California~361,000 members
Colorado~42,000 members 
Connecticut~24,000 members 
D.C. ~1,000 members 
Delaware~7,000 members 
Florida~543,000 members
Georgia~142,000 members 
Hawaii ~5,000 members 
Idaho~16,000 members 
Illinois ~66,000 members
Indiana~33,000 members
Iowa~15,000 members
Kansas ~22,000 members
Kentucky~15,000 members
Louisiana~20,000 members
Maine~14,000 members
Maryland~38,000 members
Massachusetts~57,000 members
Michigan~63,000 members 
Minnesota~27,000 members
Mississippi~29,000 members
Missouri~29,000 members
StateNumber of Members
Montana~10,000 members
Nebraska~20,000 members
Nevada~21,000 members
New Hampshire~11,000 members 
New Jersey ~67,000 members
New Mexico ~10,000 members
New York~49,000 members
North Carolina ~135,000 members
North Dakota~6,000 members
Ohio~55,000 members
Oklahoma~38,000 members
Oregon~31,000 members
Pennsylvania~76,000 members
Rhode Island~7,000 members
South Carolina~60,000 members
South Dakota~8,000 members
Tennessee~56,000 members
Texas~370,000 members
Utah~52,000 members
Vermont~6,000 members
Virginia ~63,000 members
Washington~52,000 members
West Virginia~5,000 members
Wisconsin~43,000 members
Wyoming~7,000 members

Source: Assistant Secretary for Planning and Evaluation Office of Health Policy

Inflation Reduction Act Frequently Asked Questions (FAQs)

Here's a list of frequently asked questions about the Inflation Reduction Act on health care.

Who does the IRA benefit most?

The IRA mainly benefits Medicare populations by lowering prescription drug prices in Medicare plans. 

Will the IRA benefit everyone? 

The IRA includes benefits to save families thousands of dollars, with provisions working to lower household costs through prescription drug coverage, home energy, and electric vehicles.

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Why won’t I see changes until 2026? 

The federal government will begin negotiating prices for prescription drugs that Medicare populations spend the most money on in 2026. Once agreed upon, the law will reflect changes on the first 10 drugs selected to market. The process will begin by establishing the negotiation of 10 drugs under Part D in 2026, 15 under Part D in 2027, 15 under Part B and D in 2028, and 20 under Part B and D in 2029. 

The federal government will begin negotiating prices for prescription drugs that Medicare populations spend the most money on in 2026. Once agreed upon, changes will be reflected on the first 10 drugs selected to market. The process will begin by establishing the negotiation of 10 drugs under Part D in 2026, 15 under Part D in 2027, 15 under Part B and D in 2028, and 20 under Part B and D in 2029. 

Do I need to do anything or “sign up” to ensure the IRA benefits me?

You do not need to sign up for anything to ensure the IRA benefits you if you are already enrolled in Medicare or have a plan under the healthcare marketplace. If you are not enrolled in any coverage, set a reminder for upcoming health insurance enrollment dates starting November 1st, 2022 - January 15, 2023. Click here to navigate your health coverage options. 

What is the Public’s Opinion on Medicare Drug Negotiations?

The latest Kaiser Family Foundation (KFF) tracking poll shows a large sum of public opinion supporting the Federal Government in negotiating drug prices. For decades, lowering prescription drug prices in the U.S. has been at the top of healthcare issues the public has wanted Congress to address across all parties. 

Bottom Line

The Inflation Reduction Act paves the way for making healthcare affordable again. It acts as a catalyst for future healthcare reform to build on. Drug pricing reforms represent a milestone in accessible care, predominately for our aging populations. 

If you're looking to save on your healthcare needs, join Mira today for an average of $45 a month. We'll help you support your healthcare needs with discounted rates for doctor visits, urgent care visits, and up to 80 percent off on over 1,000 medications. 

Regine Roquia

Regine Roquia is a Masters of Public Health Candidate at New York University studying Public Health Policy & Management. She is passionate about creating the culture she wishes to see by working to increase health literacy.