Inflation Reduction Act Cuts Prescription Drug Costs for Older Adults

With the Inflation Reduction Act of 2022 signed into law on Aug. 16, millions of Medicare enrollees will be able to better afford their life-sustaining medications, and millions more Americans will be able to pay their Affordable Care Act premiums, according to AARP.

The Inflation Reduction Act for the first time authorizes Medicare to negotiate the prices of some high-cost prescription drugs with pharmaceutical companies, puts an annual $2,000 limit on how much Part D prescription drug plan members will have to pay out of pocket for their medications, and levies tax penalties on drugmakers that increase product prices by more than the rate of inflation. The new law also caps the cost of Medicare-covered insulin at $35 a month and eliminates out-of-pocket costs for most vaccines under Medicare.

The new law also extends by three years the expanded subsidies and other financial enhancements first included in the 2021 American Rescue Plan that help bring down the costs of health insurance plans in the ACA marketplace. These subsidies are particularly important to those ages 50 to 64, who pay up to three times more for their insurance.

A recent poll found that the caps on prescription drug prices were the most popular part of the bill with 76 percent of respondents strongly or somewhat support placing a limit on the amount that prescription drugs can increase, while only 13 percent strongly or somewhat oppose it.

A deeper analysis of the impact of the recently enacted law on prescription drug prices and access is available here.