It’s the best news that few people seem to know about: Prescription drug costs are going down this year for more than a million seniors — in many cases, by thousands of dollars.
The lower costs are a result of the Inflation Reduction Act, or IRA, which was signed into law by President Biden in 2022 and is best known for investing more than $370 billion in climate and energy programs. His changes to Medicare, which will help people enrolled in the prescription drug coverage programs known as Part D, are significant. But a recent survey by the nonprofit KFF found that most Americans didn’t know about them.
The changes began last year with a $35 monthly cap on the cost of insulin for diabetes patients and free vaccines. This year, an annual out-of-pocket maximum of $3,300 will go into effect because people covered by Part D are no longer required to pay 5 percent of the cost of brand-name drugs once they reach that spending level. Another provision penalizes drug companies for price increases that exceed the rate of general inflation. And the IRA expands eligibility for financial assistance with Part D costs for low-income seniors.
The law also authorized Medicare to negotiate prices for expensive drugs with drug companies for the first time. The first deals will be over 10 drugs, including blood thinners Eliquis and Xarelto and diabetes drugs Jardiance and Januvia. The outcome of those talks is uncertain and has already sparked lawsuits from drug makers.
Stronger vaccine coverage eliminates cost-sharing for all the many vaccines covered under Part D. Vaccines for Covid-19, the flu, and some other conditions are covered under Part B (which covers outpatient care) . Some downloads previously had high out-of-pocket costs. For example, patients paid an average of $77 in 2021 for the vaccine that prevents shingles, according to federal data.
In 2025, there will be two more major changes: A beneficiary’s total out-of-pocket expense will be capped at $2,000, and people will be able to spread out-of-pocket costs throughout the year by creating a monthly payment plan with insurance companies of Part D.
New caps on out-of-pocket costs will save thousands of dollars for those taking high-cost drugs for conditions such as cancer and multiple sclerosis. In many cases, Medicare beneficiaries have paid tens of thousands for their drugs. In 2020, 1.4 million people who did not receive a low-income subsidy had annual costs of $2,000 or more, according to KFF, which focuses on health policy.
“The prescription drug reforms in this law mark the most substantial changes to the Medicare D program since the drug benefit began in 2006,” said Tricia Neuman, KFF senior vice president.
But even among people who qualify for Medicare (those 65 or older), awareness of these changes is low. The KFF survey found that just 25 percent were aware of caps on annual out-of-pocket costs. And only 8 percent knew about penalties for price increases that exceed inflation.
“Someone who takes a very expensive drug will probably be very grateful to see their cost come down this year,” Dr. Neumann said. “But, really, no one understands why they pay what they pay for drugs, so it’s not surprising that people don’t know these improvements have come into effect or that they don’t attribute it to the Inflation Reduction Act.”
Paying almost $17,000 in one year
David Mitchell is among those to benefit from the changes. In November 2010, he was diagnosed with multiple myeloma, an incurable cancer — but treatable with very expensive drugs. Mr Mitchell was 60 at the time of his diagnosis and ran a communications firm in Washington, which he co-founded. His company health insurance plan covered the drugs he needed, though his out-of-pocket costs escalated sharply over the years.
After an initial round of treatment, Mr. Mitchell went into remission and then began a maintenance regimen for more than five years that included expensive cancer drugs. Mr. Mitchell knew the health care industry well — his communications firm worked with many industry clients and also campaigned for public health. And, he said, he grew increasingly angry that most of the patient organizations involved in the drug price debate were receiving funding from drug and medical device companies, creating conflicts of interest.
As he learned more about how drugs are priced, Mr. Mitchell became convinced of the need for an advocacy group to represent patients’ interests. “One morning in the summer of 2016, I woke up and had an epiphany: If no one else is going to do this, maybe you’re supposed to try,” he said. He retired from his company that year and started Patients for Affordable Drugs, a national organization funded entirely by individuals and foundations. The organization lobbied for the IRA vote
Once he retired at age 66, Mr. Mitchell signed up for Medicare. Then he began to experience the problem of high-cost drugs in the program. Along with his cancer, he is also being treated for atrial fibrillation. Some of the medicines he uses are covered by Part B as they are given in healthcare settings. Others are covered by Part D, and last year, he paid $16,916 for all his drugs. Most of that amount was for just one of his current cancer drugs, Pomalyst.
This year is different because of the new pocket cap. “I filled my first prescription and it cost $3,308, and I’m done for the year now,” she said.
Some patients may be beginning to understand the cap’s importance, said Frederic Riccardi, president of the Medicare Rights Center, an advocacy and consumer organization. “They may have faced high costs in January, but we have clients with chronic conditions who take very expensive prescription drugs that have significant savings,” he said. “During fall enrollment last year, we helped one person get a life-saving drug that is going to save more than $15,000 this year.”
Stronger out-of-pocket insurance comes as other Medicare costs rise. The standard Part B premium increased this year by 5.9 percent to $174.70 and the deductible increased by $14 to $240.
Part D premiums are also increasing. KFF estimated that Medicare beneficiaries enrolled in stand-alone Part D plans who did not switch providers this year saw premium increases of an average of 21 percent, to $48 a month. (Medicare Advantage enrollees are not affected, as most do not pay a separate premium for drug coverage.)
The increase is due, in part, to higher plan costs that insurers expect under the enhanced protections for patients contained in the IRA. “The whole point of insurance is to protect the people at the highest cost, and that could be any of us tomorrow,” he said.
Help for low-income seniors
Another major change expands access to federal subsidies that help low-income seniors with Part D premiums, deductibles and cost-sharing by raising income limits. The subsidy, called Extra Help, is worth about $5,300 a year to people who sign up for it, according to the Social Security Administration, which administers the program.
This year, annual income must be under $22,590 for an individual or $30,660 for a married couple. Assets must be under $17,220 for an individual or $34,360 for a married couple.
The program is a major feature of Part D. In 2020, 13.1 million Medicare beneficiaries received either full or partial Extra Help benefits, representing 28 percent of all enrollees that year, according to KFF.
This year, the expanded benefit was automatically granted to nearly 300,000 low-income people on Medicare, but as many as three million more could benefit from the expansion, according to Medicare estimates. The program is national and the application is available online.
Another important source of help is the Medicare Savings Programs, which help low-income people pay their Part B premiums and some other costs. The programs are available nationwide and administered by state Medicaid agencies — but are often underutilized because few people know about them and they have complex applications. Some states expand eligibility.
Federal funding helps community organizations, such as the State Health Insurance Assistance Program, screen and enroll eligible beneficiaries. But that funding requires periodic renewal and was excluded from the current federal spending resolution, which expires in early March.
The under-enrollment problem stems mostly from a lack of awareness, said Mr. Riccardi of the Medicare Rights Center. “We need consistent education about these programs, especially for people who are new to Medicare.”