As discussed in a recent CMA Alert (Aug. 18, 2022), President Biden signed into law the Inflation Reduction Act (IRA) of 2022 on August 16, 2022. This bill includes historic prescription drug provisions that will soon be of significant benefit to Medicare beneficiaries. While some provisions will be phased in over the next few years, other provisions will become effective next month, in January 2023.
Overview of IRA Prescription Drug Provisions
The following is a summary of the Medicare-related drug provisions in the IRA, to be phased in over the next several years. Note that the Part D changes also generally apply to Medicare Advantage plans that provide Part D prescription drug coverage, known as Medicare Advantage Prescription Drug (MA-PD) plans.
- Allows Medicare to negotiate with drug manufacturers for the price of some Part D and Part B drugs (starting in 2026);
- Caps beneficiary out-of-pocket Part D drugs costs at $2,000 per year (starting in 2025 – also allows spreading of costs over course of the year); in 2024, the 5% coinsurance for Part D catastrophic coverage will be eliminated);
- Imposes checks on the annual rise in costs of drugs and Part D premiums (limitations on drug prices start in 2023, and limitations on Part D premiums start in 2024);
- Limits monthly out-of-pocket copays for insulin to $35 (starting in 2023);
- Eliminates cost-sharing for adult vaccines covered under Part D (2023); and
- Expands access to the Part D Low-Income Subsidy (“Extra Help”) (starting in 2024) – full LIS up to 150% of the Federal Poverty Level (FPL) with higher resource limits.
For more information, see this CMS Fact Sheet “The Inflation Reduction Act Lowers Health Care Costs for Millions of Americans” (Oct. 5, 2022), including a timeline and FAQ.
Changes in 2023
Insulin Copays Capped
Starting January 1, 2023, copayments for covered insulin products in Part D will be capped at $35 per month (with no deductible). Starting July 1, 2023, insulin furnished through durable medical equipment under Medicare Part B (such as insulin pumps) will be subject to the $35 per month cap (note that the Part B deductible will apply before then). Note that Part D plans do not have to cover all insulin products at this copay level, only those insulin products that are on the plan’s formulary.
People who are charged more than $35 per month for their insulin in early 2023 may be reimbursed (see, e.g., this CMS memo re: Part B drugs (Nov. 7. 2022)). In addition, in an unpublished FAQ (Oct. 2022), CMS has noted that it will be helping people who use insulin and who experience issues or concerns with their coverage, including choosing the wrong plan because they were unaware of the insulin cap, with a potential Special Enrollment Period (SEP) opportunity to change plans in 2023 (see, e.g., “CMS Might Let Seniors Who Take Insulin Switch Plans Midyear” by Gabrielle Wanneh, Inside Health Policy (Oct. 14, 2022).
Note re: Medicare Plan Finder and Insulin Copay Cap – because of when the IRA was passed relative to when Part D plans submitted their bid packages to the Medicare program for the 2023 plan year, the Medicare Plan Finder does not reflect the insulin copay caps, and will not do so throughout 2023 until 2024 plan information is posted. As a work-around, CMS suggests first doing drug searches without insulin in an individual’s drug list, and add back in annual insulin costs ($35/mo x 12 = $420) to estimate maximum annual drug costs. As a second step, do another search with the individual’s insulin product and dosage to ensure it is covered by a given plan. (See, e.g, this CMS National Training Program flyer “Insulin Cost Sharing in 2023 Medicare Drug Plans”, Oct. 2022.)
No Cost-sharing for Vaccines Covered under Part D
Effective January 1, 2023, cost-sharing for vaccines covered under Part D will be eliminated (even if an individual hasn’t met the Part D deductible). This applies to adult vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), including the shingles and Tetanus-Diphtheria-Whooping Cough vaccines.
Other Drug Cost Changes
Behind the scenes, other provision of the IRA become effective in 2023, including checks on the annual rise in costs of drugs. Under this provision, drug companies will be required to pay rebates to the Medicare program if prices rise faster than inflation. In addition, the first 10 drugs subject to Medicare negotiation (among the highest-spending, brand name drugs without competition), effective 2026, will be announced in 2023. A little over a year from now (starting in 2024), the Part D 5% coinsurance above the catastrophic level will be eliminated, effectively capping out-of-pocket costs, and the following year this cap will be lowered to $2,000.