A Two-Year Anniversary

Two years ago, President Biden signed into law a transformative piece of legislation – the Inflation Reduction Act, marking a historic effort to lower healthcare costs for millions of Americans.

Also known as the lower-cost prescription drug law, this Act has brought about significant changes in the healthcare landscape, particularly for people with Medicare. This law not only created the first-ever annual cap on out-of-pocket drug costs for Medicare beneficiaries, but also capped the cost of insulin at $35 per month, empowered Medicare to directly negotiate drug prices, and made Affordable Care Act (ACA) marketplace plans more affordable, leading to the lowest uninsured rate in U.S. history.

As we celebrate the second anniversary of this landmark legislation, it is clear that the Inflation Reduction Act is making a substantial impact on the lives of millions. “Two years in, the Inflation Reduction Act is lowering healthcare costs for millions of Americans,” U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra said. “As a result of this law, we’ve achieved something decades in the making: putting Medicare on a level playing field by negotiating for lower drug prices. The Biden-Harris Administration is delivering lower prescription drug costs, making health insurance more affordable, and making the economy work for working families.”

Officials recently announced new lower prices for the first 10 drugs negotiated under the new Medicare Drug Price Negotiation Program. If these new prices had been in effect last year, Medicare would have saved an estimated $6 billion – approximately 22 percent, across the selected drugs. The negotiated prices, which offer discounts ranging from 38 to 79 percent off the list prices, are expected to save people with Medicare prescription drug coverage about $1.5 billion in out-of-pocket costs in 2026.

These changes are part of a broader effort to ensure that Medicare remains strong for future generations. Beyond the first 10 drugs, the Inflation Reduction Act has already implemented several other provisions to reduce drug prices, including capping insulin costs at $35 per month for Medicare beneficiaries and providing recommended vaccines for free to people with Medicare Part D. In 2023 alone, more than 10 million people received a free vaccine.

Starting in 2024, some Medicare enrollees will see their out-of-pocket drug costs capped at around $3,500. By April 1, 2024, over 260,000 people had benefited from this cap, meaning they will pay no more out of pocket for the remainder of the year. Additionally, the Inflation Reduction Act has expanded eligibility for the Low-Income Subsidy program, known as Extra Help, which provides $0 premiums, $0 deductibles, and fixed, reduced copays to more enrollees.

Another critical provision of the law requires drug companies to pay a rebate to Medicare if they raise their prices faster than the rate of inflation. As the Biden-Harris Administration continues to implement these provisions, Americans will continue to see significant savings on their healthcare costs. In 2025, all Medicare prescription drug enrollees will have their out-of-pocket costs capped at $2,000 – a monumental change that will provide financial relief to millions.

However, the enhanced ACA subsidies are set to expire at the end of 2025 unless Congress takes action. To ensure that millions do not lose access to affordable health coverage, it is crucial that these enhanced subsidies be made permanent.

The Inflation Reduction Act represents a significant step forward in making healthcare more affordable and accessible, but continued efforts are needed to maintain these gains.