Big Changes are coming for Health Care Costs

Updated: Aug 23



On Aug. 16, 2022, President Joe Biden signed the Inflation Reduction Act into law. While this law is primarily aimed at fighting inflation and reducing carbon emissions, it also contains a number of reforms that will impact health coverage. The health reforms included in the law have staggered effective dates and will be implemented over the next several years.


Overview of the New Health Reforms

The law’s health reforms primarily impact those with Medicare coverage. Specifically, the law implements the following measures:

· It allows the Secretary of Health and Human Services to negotiate the prices of certain Medicare drugs each year. The negotiations will take effect in 2026 for 10 drugs covered by Medicare, increasing to 20 drugs in 2029. · Beginning in 2023, the cost of insulin will be capped at $35 per month for people with diabetes enrolled in Medicare. · Beginning in 2025, out-of-pocket prescription drug costs will be capped at $2,000 per year for Medicare beneficiaries. · The law also implements a three-year extension on increased health insurance subsidies for coverage purchased through an Exchange. These enhanced subsidies were originally provided as part of the American Rescue Plan Act, a COVID-19 relief bill, and were set to expire at the end of 2022



The Inflation Reduction Act is the most significant reform initiative since Obama passed the Affordable Care Act. The fact that this legislation passed against the opposition of the drug industry means Big Pharma is not as invincible as it believed itself to be. The political power of the pharmaceutical industry has historically prevented the United States from controlling drug prices. The plan is not the sweeping measure the Democrats hoped it would be, but it is the biggest political loss the drug industry has sustained.


Government-negotiated drug prices will not take effect until 2026, so the tangible benefits will require patience. But it is definitely a start in the right direction.


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