Democrats didn’t achieve all of their goals, but did create inflation-reducing legislation

The giant health care, climate and tax bill that will pass the House on Friday and be sent to the president for his signature won’t be what Democrats who wrote it hoped for, but it will help millions of Americans better afford it. Their prescription drugs and health insurance.

The Inflation Reduction Act is estimated to spend about $485 billion over 10 years on health and alternative energy programs while raising about $790 billion through tax revenues and savings. The difference will be used to help reduce the deficit.

On the health front, the legislation achieves two key goals of congressional Democrats. First, it would give the federal government the power to negotiate the price of certain drugs purchased by Medicare beneficiaries, a tool the drug industry has long opposed. Second, it would extend increased premium subsidies to those who buy insurance in the Affordable Care Act marketplaces that Congress put in place last year to help combat the Covid-19 pandemic.

“This is historic. Never before have we been able to discuss prescription drug prices. This is something we continue to struggle with [for] decades,” House Speaker Nancy Pelosi said this week. “I definitely want more – we always want more. But it’s a big deal.”

The bill also extended the subsidy, which would expire this year if not continued through 2025. The 2021 Covid Relief Bill increased subsidies for people who had already qualified for assistance and provided subsidies to some middle-income people who found them. Coverage must be very expensive. According to an analysis by KFF, about 13 million people would see their premiums increase by more than half on average if the increased subsidies did not continue. And those earning more than four times the poverty level will no longer be eligible for subsidies, seeing their premiums rise.

The subsidy expansion is expected to cost about $64 billion.

The bill would also have major impacts on Medicare, including allowing the program to negotiate prices for some of the most expensive drugs, paying beneficiaries out-of-pocket for drugs, capping their insulin cost-sharing at $35 a month, and allowing drug companies to raise prices faster than inflation. to interrupt

The drug pricing provision, projected to save the government about $100 billion over 10 years, requires the U.S. Department of Health and Human Services to identify the 100 most expensive drugs on Medicare and then select 10 for price negotiations starting in 2023. These prices will be in effect In 2026. Another 10 drugs will be added over the next two years, with savings fully realized by 2028.

The talks will first apply to drugs people get at pharmacies, but over the next two years, drugs people get at doctors’ offices could also be covered.

Some changes to Medicare will begin next year. One is the cap on price increases. Under the bill, companies that raise the price of drugs sold to Medicare faster than inflation must pay rebates to Medicare, saving the government an estimated $101 billion. Inflation protection would also apply to some drugs, such as biologics, that patients get at a doctor’s office.

New vaccine and insulin cost caps will also take effect in 2023 Under the bill, all vaccines recommended by the Federal Advisory Committee on Immunization Practices would be fully covered by Medicare, as well as Medicaid and the Children’s Health Insurance Program. For Medicare beneficiaries who need insulin, out-of-pocket costs will be capped at $35, and starting in 2026, the cap will be $35 or 25% of the negotiated price, whichever is lower.

Another big savings for Americans enrolled in Medicare will be a $2,000 cap on out-of-pocket drug costs, which will begin in 2025. According to KFF, 1.5 million Medicare beneficiaries paid more than $2,000 for their drugs in 2019. About 3.5 million beneficiaries would save more than $1,500 a year, according to an analysis by the Council for Informed Drug Spending Analysis based on 2012 data.

Starting soon, in 2024, those whose out-of-pocket drug costs reach the “disaster” threshold of $7,050 will not have to pay any extra for drugs that year. Currently, there is no cap, and people must pay 5% of the price of very expensive drugs once they reach the threshold.

Also starting in 2024, Medicare will expand low-income subsidies to about 500,000 beneficiaries who earn between 135% and 150% of the poverty level ($18,347 to $20,385 for an individual). Premium hike will also be capped at 6% for all beneficiaries in 2024 through 2029.

The bill would have reached more people, but Democrats’ efforts to slow drug price increases outside of Medicare and cap insulin copays were blocked.

Because the bill is being passed through an expedited process known as budget reconciliation, all provisions must have a direct impact on federal spending or revenue. Senate lawmakers, who scrutinize such measures, ruled that insulin and inflation measures aimed at the private insurance market were out of bounds. Democrats tried to roll back the cost caps on mass-market insulin but fell three votes shy of the 60 needed to do so, with only seven Republicans joining them.

Senate Majority Leader Chuck Schumer has promised another vote on extending the insulin spending cap in the fall.

Still, some analysts see reason to believe that most Americans not directly affected by the bill will see some benefits, particularly from the cap on drug price increases and the negotiation of Medicare drug prices.

In a conference call with reporters Thursday, Sean Dixon of the nonprofit West Health Policy Center pointed to the government’s 340B program, which requires drug companies to offer discounts to certain care providers and which includes inflation penalties. He estimated that Medicare alone saved $7 billion over five years indirectly due to inflation control.

“There was a spillover effect from the subsection of a government program that had an inflationary penalty,” Dixon said. “Everyone who used those drugs had lower costs and lower price increases.”

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