The Inflation Reduction Act: What It Means for Affordability
Clara Lambert, Director of Financial Navigation
Today, President Biden is set to sign the Inflation Reduction Act, a major spending bill with significant implications for healthcare, climate change, and tax reform.
As a company focused on removing financial barriers to care, we at TailorMed have paid particular attention to the provisions of the bill that attempt to tackle healthcare costs. Here's what this legislation means for patient affordability:
Lower Prescription Drug Costs for Medicare Beneficiaries
According to recent polling by the Kaiser Family Foundation (KFF), 83% of U.S. adults think the costs of prescription drugs are unreasonable. 29% say that over the past year, they have not taken medications as prescribed due to costs. And 26% say it is very difficult for them to afford their prescriptions.
For seniors, many of whom are on a fixed income, financial concerns are particularly acute. In a new survey of Medicare beneficiaries, more than 95% of respondents said they worry about the impact of inflation on healthcare costs. About half said that an increase of 10% or more in out-of-pocket costs would make their medications unaffordable, while 26% said that their prescriptions were already unaffordable.
The new legislation, which will take effect over the next few years, aims to reduce drug costs by:
Requiring the federal government to negotiate prices for some high-cost drugs under Medicare—for the first time. Currently, the government is prohibited from negotiating directly with drug manufacturers. Negotiated prices will be implemented beginning in 2026.
Adding a $2,000 cap on Medicare Part D out-of-pocket spending and other Part D benefit changes. Part D is a voluntary outpatient prescription drug benefit for people with Medicare. About a quarter of current Part D beneficiaries—more than 16 million people in 2022—are at risk of spending more than $2,000 per year on their medications. Those with chronic conditions, such as cancer, multiple sclerosis, or arthritis, are at heightened risk. The provision, which takes effect in 2025, has the potential to save Part D beneficiaries with high-cost diagnoses thousands of dollars each year.
Requiring pharmaceutical companies to pay rebates if drug prices rise faster than inflation within the Medicare program. This applies to covered drugs under Part D with an average annual cost of $100 or more. It also applies to certain drugs covered under Part B, which is typically for medications delivered in a doctor's office or an outpatient setting.
Expanding eligibility for full benefits under the Medicare Part D Low-Income Subsidy (LIS) Program. The LIS program helps qualifying enrollees with Part D premiums, deductibles, and cost-sharing. Currently, beneficiaries qualify for full or partial benefits based on their income and resources. Beginning in 2024, the provision will eliminate partial benefits and allow individuals with incomes between 135% and 150% of the federal poverty level—and resources at or below the designated limits—to qualify for full benefits.
Imposing a $35 cap on monthly out-of-pocket costs for insulin. This applies to those with Medicare, but not for those with private insurance. 3.3 million Medicare beneficiaries use insulin. Yale researchers found that 14% of insulin users experience "catastrophic" levels of spending on treatment.
Extended Affordable Care Act (ACA) Subsidies
The Affordable Care Act provides subsidies to help qualifying individuals pay for health insurance purchased through the Marketplace. These subsidies can help offset the costs of monthly health insurance premiums. As part of the government's COVID-19 relief efforts, the American Rescue Plan Act (ARPA) of 2021 expanded subsidy eligibility to more middle-income people and increased the amount of financial assistance for those with lower incomes.
However, these changes were set to expire at the end of this year. This would mean that all those who now receive ACA subsidies—about 13 million Americans—would see their monthly premiums increase. Of that number, about one million would no longer qualify for subsidies and would see an even greater hike in costs. According to the Kaiser Family Foundation, "For many people, such an increase in premium payments would be unaffordable, leading them to drop their health coverage."
Under the Inflation Reduction Act, the enhanced subsidies will be extended for another three years.
What are the implications for financial navigation?
For those of us who work in the field of financial navigation, our goal is to help patients access the resources they need to afford care. The Inflation Reduction Act will provide more opportunities to help patients with Medicare save costs on vital prescription drugs. When it comes to benefits optimization, it will also enable us to match more patients of all ages with affordable health insurance plans.
Far too many healthcare consumers are unaware of the assistance available to them. It's a navigator's job to educate those we serve and connect them with crucial funding—before they experience financial hardship. By staying up to date on key healthcare legislation, navigators improve their ability to reduce patient expenses, enabling them to adhere to treatment and live healthier lives.
Clara Lambert is the Director of Financial Navigation at TailorMed. Prior to joining TailorMed, Clara served as a financial navigator at the Bhorade Cancer Center at Advocate Good Samaritan Hospital in Illinois and the Cowell Family Cancer in Michigan, where she helped pioneer a nationally recognized financial navigation program.
A frequent speaker at healthcare conferences nationwide, Clara is a recipient of the Academy of Oncology Nurse and Patient Navigators (AONN+) Leadership Council Award: Putting Evidence into Practice. She is a past chair of the Association of Community Cancer Centers (ACCC) Financial Advocacy Network (FAN) Advisory Committee. Clara holds a BA in Integrated Professional Studies (Business, Healthcare Administration, and Information Technology) from Davenport University and a graduate certificate of public health from Loyola University. Having personally experienced the financial burden of a family member's cancer diagnosis, Clara is passionate about helping patients and caregivers secure the resources they need.