Seniors are facing major increases in premiums for Medicare prescription drug plans (Part D) as well as higher prices at the pharmacy, under provisions of the Inflation Reduction Act (IRA).
Instead of lowering health care costs, the IRA is a “masterplan in cost shifting,” says Joel White, founder and president of Horizon Government Affairs, a health care consultancy.
“Unfortunately for seniors, those costs are being shifted onto them through higher premiums—22 percent on average this year, and possibly more than doubling next year,” said White.
“Democrats know it is coming, but instead of being honest and preparing the more than 65 million Medicare beneficiaries for a cost spike, many of whom are on fixed incomes, they are pulling every magic trick possible to have seniors look anywhere but at the truth,” said White.
Political Fallout
Medicare premiums for the following year are announced in October. This year, the expected price spike will occur before a general election in which voters will be choosing a president, representatives in Congress, and one-third of the U.S. Senate.
Premium increases could be embarrassing to the Biden administration and Democrats who promised the IRA as a bill to make health care more affordable. The IRA capped insulin costs under Part B at $35 a month, eliminated cost-sharing for recommended adult vaccines under Part D, and limited out-of-pocket drug costs under Part D to $2,000 a year. The law also forces drug makers to negotiate with Medicare on the price of 10 common drugs in the first year.
“So, while Democrats are shouting from the campaign trail about their win over health care costs, seniors will be scrambling to figure out how to pay for that win,” said White.
Shell Game
Though the IRA included a premium stabilization provision capping annual growth in the Part D base beneficiary premium at 6 percent, the law did not apply this 6 percent cap to the individual plan premiums of the non-standard plans that cover most beneficiaries.
The estimated average enrollment-weighted monthly premium for Medicare Part D standalone drug plans is projected to be $48 in 2024, based on current enrollment, up 21 percent from $40 in 2023.
President Joe Biden promised to cut prescription drug costs and hold the line against Medicare spending cuts, but the IRA extensively reallocated Medicare funding and shifted the burden of cost cuts to Part D insurers, who can pass them along to seniors through higher premiums.
Overcharged at the Drug Counter
The IRA also penalizes seniors at the drug counter. Their coinsurance payment is based on the nominal price, while the drug plan gets undisclosed rebates from the drug manufacturer. A Trump administration executive order would have required pharmacists to pass these discounts to along to the patients.
“According to the consulting firm Milliman, the net savings for Part D members were expected to be almost $15 billion over the next 10 years. The IRA, however, delayed Trump’s regulation until 2032. As a result, Medicare beneficiaries continue to be overcharged at the pharmacy for just about every drug they purchase,” said John Goodman, president and CEO of the Goodman Institute for Public Policy Research and co-publisher of Health Care News.
Medicare Advantage Shortchanged
Medicare Advantage (MA) provides a model where seniors could see drug cost savings. “Enrollees buy one plan, not several plans, which they must do in traditional Medicare, and the plan has an economic incentive to keep enrollees healthy,” said Goodman.
Goodman says some MA plans already give enrollees free insulin because they consider insulin “maintenance.” However, scheduled government payments to MA plans have not kept up with inflation, and plans have had to cut back or drop out of the market altogether.
“If President Biden were truly concerned about the cost of drugs, you would think he would be a big fan of companies like these,” said Goodman.
False Promises
These higher drug plan premiums and cuts in physicians’ fees will disproportionally burden older and lower-income Americans, says Goodman.
“President Biden has promised older voters that he is lowering prescription drug prices and will stop any attempt to cut Medicare spending,” said Goodman. “Yet Medicare beneficiaries are paying 22 percent more in Part D premiums for prescription drug coverage than last year. This October, when the 2025 rates are announced, industry experts believe premiums will double.”
Meanwhile, Medicare spending is being cut, says Goodman.
“The second promise appears to ignore that the Inflation Reduction Act cut more than $300 billion in subsidies for Part D insurance over the next 10 years,” said Goodman. “Furthermore, the federal government has been paying 80 percent of the cost of catastrophic prescription drug insurance. Under the IRA, that drops to 20 percent next year, and the bulk of that reduction is shifted to private insurance plans. Since the market for Part D insurance is very competitive, those costs are being passed on to customers as higher premiums.”
‘Reverse Robin Hood’
Goodman says the cost savings Biden promoted will be spent to fund Obamacare and other administration priorities.
“A large chunk of it is being used to subsidize insurance under the Affordable Care Act that higher-income individuals buy in the marketplace exchanges, with individuals earning more than $600,000 sometimes receiving a partial subsidy,” said Goodman.
“Another large chunk is spent on green-energy companies and subsidies for buyers of electric vehicles,” said Goodman. “All told, the IRA is a ‘reverse Robin Hood’ bill. It takes from the poor and the middle class and gives to the rich. Despite repeated attempts by President Biden to spin the Inflation Reduction Act as a cost-saver, it is a piggy bank for the government to finance non-health-related projects that often benefit the wealthy.”
Kevin Stone (kevin.s.stone@gmail.com) writes from Arlington, Texas.