Long Overdue Healthcare Relief for Seniors
Transcript of Podcast Episode 198
Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, Long Overdue Healthcare Relief for Seniors.
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IR Act”). While much of the bill’s focus is on corporate taxes, renewable and clean energy, and climate preservation and resilience, it also has a significant impact on healthcare, particularly for seniors and retirees. For example, under previous law, Medicare was unable to negotiate with pharmaceutical companies on drug prices. That’s hard to believe because of the approximately 64 million people covered by Medicare, some 49 million are enrolled in a Part D prescription drug plan. The IR Act finally allows this enormous bargaining power to be used. Medicare can now begin to negotiate what it pays for the most expensive drugs on a phased-in process. Negotiated prices for 10 of the most expensive drugs will be effective in 2026; 15 in 2027; and 20 in 2029.
As an example of the need for prescription drug price management, the RAND Corporation studied the price of insulin for the treatment of diabetes at the request of the U.S. Department of Health and Human Services. RAND stated: “Diabetes is one of the most pervasive, deadly, and expensive diseases in the United States. More than 30 million people have it, and nearly a quarter of them use insulin to manage their symptoms and prevent life-threatening complications.” Yet, the study found that a vial of insulin costs $98.70 in the U.S. Across the border in Canada, however, it only costs $12. The closest of any other country’s price for insulin was $21.48 in Chile. Prices in some European countries were only around $10 per vial. The IR Act will cap the price of insulin to Medicare recipients to $35 per month starting in 2023.
In addition, starting in 2023, drug companies must pay rebates to Medicare if the prices of drugs used by Medicare beneficiaries increase more than the rate of inflation. Prices in effect in 2021 will be used as the base for determining increases relative to inflation.
Another important provision of the IR Act is that starting in 2025, total annual out-of-pocket spending on prescription drugs through Medicare Part D or Medicare Advantage will be capped at $2,000. Also, premiums for Medicare Part D will not be allowed to be increased by more than 6 percent a year through 2029.
For lower income seniors, more will qualify for the Part D Low-Income Subsidy (aka “Extra Help”) program starting in 2024. This subsidy helps to pay Part D out-of-pocket expenses. The threshold will be increased from up to 135 percent of the federal poverty level to up to 150 percent. The Social Security Administration, which administers the Extra Help program, has estimated that the Extra Help subsidy helps seniors to save $5,100 annually.
With regard to vaccinations, the IR Act mandates that any vaccine recommended by the CDC’s Advisory Committee on Immunization Practices shall be made free of charge to Medicare recipients. Annual flu vaccines, shingles vaccines and more, will now be made available at no cost to seniors.
Finally, the American Rescue Plan Act of 2021 increased subsidies for those who needed to buy health insurance on the healthcare exchange established by the Patient Protection and Affordable Care Act of 2010 (commonly known as the “Affordable Care Act” or “ACA”). Those subsidies were set to expire at the end of 2022. The IR Act expands the ACA subsidies for an additional 3 years. These subsidies provide significant annual savings and all purchasers will continue to pay no more than 8.5 percent of their income on ACA health insurance premiums.
The Inflation Reduction Act brings much needed relief to seniors and retirees to alleviate the rising costs of healthcare. Please consult with your own tax, legal and healthcare advisors to determine how the new law impacts your unique situation.
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