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How the Inflation Reduction Act Affects Medicare Patients: A Medicare Customer Question

By Bethany Cissell

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What You Need to Know

  • The Inflation Reduction Act eliminates Medicare copayments for many vaccines.
  • By 2025, the act is supposed to cap out-of-pocket prescription drug costs at $2,000.
  • The act will hold Medicare Part D prescription drug premiums to 6% or less per year from 2024 through 2029.

Passed in August 2022, the Inflation Reduction Act will lower health care costs for millions of American citizens and provide additional benefits to Medicare recipients.

With this legislation, the White House recognized the impact that the rising cost of living has had on individuals and provided solutions for millions of Americans at a time when they need relief.

In addition to addressing soaring consumer costs of health care, this act also restructures how Medicare negotiates subsets of Part D and Part B prescription drugs — so it’s important that your client understands how the Inflation Reduction Act will specifically affect their Medicare benefits.

Medicare recipients will feel the impact of the changes implemented in this act immediately.

This act directly addresses the needs of Medicare beneficiaries by negotiating soaring pharmaceutical costs, capping out-of-pocket expenses, and providing affordable access to life-saving insulin and free vaccines.

The Question:

How does the Inflation Reduction Act affect Medicare coverage?

The Answer:

For the last 19 years, Medicare has been blocked from negotiating prescription drug costs.

Now, with the Inflation Reduction Act, Medicare is back at the center of the negotiation and better empowered to advocate for patients.

With this provision, an estimated 5 million to 7 million Medicare beneficiaries could see their drug costs go down, according to a White House statement.

The Inflation Reduction Act also expands Medicare benefits, including offering free vaccines and a $35-per-month cap on insulin — a necessary and life-saving drug for millions of Americans — beginning in 2023.

Medicare beneficiaries will no longer have to pay a co-payment for any vaccine recommended by the Advisory Committee on Immunization Practices, and co-pays for 30-day insulin supplies will be capped even before deductible payments are made.

In addition, the Inflation Reduction Act sets limits on out-of-pocket drug costs for Medicare beneficiaries.

In 2024, out-of-pocket costs are estimated to be capped at $4,000 or less annually, and by 2025, the annual cost will be capped at $2,000.

Furthermore, Medicare Part D premiums cannot increase faster than 6% per year from 2024 through 2029, with opportunities to slow premium increases in 2030 and beyond.

These measures reduce patient expenses by more than 50%.

Prior to this legislation, the out-of-pocket expenses for Medicare recipients had a limit of $7,550 for in-network services and $11,300 for in-network and out-of-network services combined — prices that would have increased in 2023 if not for the introduction of Medicare provisions within the Inflation Reduction Act.

Due to these changes, more seniors may choose to move to Medicare coverage earlier, even while still employed, because these benefits make Medicare a more attractive option for seniors looking toward retirement in a few years.

The Inflation Reduction Act puts more money in the hands of Medicare beneficiaries and provides them with the financial peace of mind they need while seeking necessary health care with affordable prescription drugs and vaccine access.

Bethany CissellBethany Cissell is a health care insurance services specialist at Allsup.

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