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Prescription drugs, Medicare: What the Inflation Reduction Act means for New Yorkers

Updated: Nov 6, 2022

Prescription drugs, Medicare: What the Inflation Reduction Act means for New Yorkers

New York State Team, Messenger Post

Amid politically charged debate over the Inflation Reduction Act’s pros and cons, about 3.7 million New Yorkers on Medicare will receive some of the clearest benefits under the Democratic plan to lower costs for prescription drugs and health care, experts said.

As federal lawmakers battled to shape public perceptions of the $739 billion package that impacts taxes, climate change and health care, the provisions involving Medicare will remove some long-standing barriers to reducing health-care costs for Americans ages 65 and above, according to experts at Kaiser Family Foundation, a nonpartisan health research organization. President Biden signed the package into law Tuesday.

The package will also extend extra subsidies included in the 2021 coronavirus relief package for people who purchase insurance on their own, rather than getting it through an employer or a government program like Medicare and Medicaid, for three years.

“Keeping healthcare affordable will make care more accessible at a time when people need relief,” Avenel Joseph, vice president for policy at the Robert Wood Johnson Foundation, said in a statement on the package.

“However, this is only a first step in the right direction,” Joseph added. “As a country, we must do more to create an equitable nation where everyone − no matter who they are, where they live, or how much they make − has an opportunity to live their healthiest life.”

While advocates and lawmakers clashed over the plan, here’s a breakdown of what the health-related measures mean for New Yorkers.

How does the Inflation Reduction Act impact prescription-drug costs?

The bill is the most significant prescription-drug legislation to pass in 20 years − and a rare loss for the deep-pocketed pharmaceutical industry.

Decades after then-President Bill Clinton proposed the government negotiate with drug companies for lower prices, Medicare will have to do that for some high-cost drugs.

Drug companies also have to pay rebates to Medicare if their prices rise faster than inflation. And diabetic seniors won't have to pay more than $35 a month for insulin.

Starting in 2026, out-of-pocket costs for all prescription drugs will also be capped at $2,000 a year for Medicare recipients.

U.S. Sen. Charles Schumer, D-NY, Senate Majority Leader, estimated the $2,000 cap alone would protect “nearly 75,000 New Yorkers every single year from exorbitant drug costs if they get a major diagnosis, like cancer, for the drugs they need to live.”

“To New York’s seniors who’ve faced the indignity of rationing medications or skipping them altogether, this bill was for you,” he said in a statement.

The pharmaceutical industry has argued that allowing the government to negotiate drug prices would stifle innovation. The independent Congressional Budget Office estimates that 15 out of 1,300 drugs, or 1%, would not come to market over the next 30 years as a result of the drug provisions in the bill, Kaiser Family Foundation experts noted.

What does the Inflation Reduction Act mean for insurance premiums?

The bill’s measure that extended the American Rescue Plan Act subsidies for three years will, in part, impact millions of New Yorkers buying health insurance connected to the Affordable Care Act.

The extra subsidies previously contributed to rising enrollment in NY State of Health, the state-run Affordable Care Act marketplace in New York, state Health Commissioner Dr. Mary Bassett said in a statement.

As a result, the marketplace has been serving as a “a critical safety net for individuals and families who lost their jobs and/or income, and providing health insurance to nearly 6.6 million individuals, or one in three New Yorkers, by the end of May 2022,” Bassett added.

Of that 6.6 million people, about 1.3 million people would benefit directly from the subsidies extension included in the Inflation Reduction Act, state data show, and the remaining 5.3 million people are covered through the government programs Medicaid and Child Health Plus.

The bill also impacts premiums and co-pays connected to Medicare, according to Schumer’s statement.

Currently, the low-income subsidy program under Medicare Part D is fully available to all seniors earning less than 135% of the federal poverty level, and partially available to seniors earning less than 150% of the federal policy level.

The bill eliminates the partial subsidy status, giving those seniors the full low-income subsidy under Medicare Part D, he said.

Other measures in the bill reform incentives and other pricing-related issues connected to drug manufacturers, pharmacy benefit managers and insurers as part of the effort to reduce costs for New Yorkers, Schumer noted.

Still, Joseph, the Robert Wood Johnson Foundation policy expert, asserted the bill fell short of addressing many issues impacting Americans' health and wellbeing.

"Congress must renew efforts to extend the expanded Child Tax Credit, create a national paid family and medical leave standard, create affordable and stable housing, and, finally, provide health insurance for those left behind in states that haven’t expanded Medicaid," Joseph said in a statement.

Maureen Groppe and Michael Collins of USA TODAY contributed to this report.

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