If you're on Medicare, you can save money on medications this year

It's the best news that few people seem to know: Prescription drug costs have fallen for more than a million seniors this year — in many cases by thousands of dollars.

The lower costs are the result of the Inflation Reduction Act, or IRA, which was signed into law by President Biden in 2022 and is best known for investing more than $370 billion in climate and energy programs. The changes to Medicare, which will help people enrolled in the prescription drug coverage plans known as Part D, are significant. Still one recent research by the non-profit organization KFF found that most Americans were unaware of it.

The changes started last year with a $35 monthly cap on the cost of insulin for diabetes patients and free vaccines. This year, a $3,300 annual copayment goes into effect because people covered by Part D will no longer have to pay 5 percent of the cost of brand-name drugs once they reach that spending level. Another provision punishes pharmaceutical companies for price increases that exceed the rate of general inflation. And the IRA expands eligibility for financial assistance to include Part D costs for low-income seniors.

The law also authorized Medicare to negotiate prices for expensive drugs with pharmaceutical companies for the first time. The first negotiations will concern ten medicines, including the blood thinners Eliquis and Xarelto and the diabetes medicines Jardiance and Januvia. The effect of these talks is uncertain, and they have already led to lawsuits by drug makers.

The stronger vaccine coverage eliminates cost sharing for all the many vaccines covered by Part D. Vaccines for Covid-19, the flu and some other conditions are covered under Part B (which covers outpatient care). Some withdrawals previously had high out-of-pocket costs. For example, patients paid an average of $77 in 2021 for the vaccine that prevents shingles. federal data.

In 2025, there will be two more important changes: a beneficiary's total out-of-pocket expenses will be capped at $2,000, and people will be able to spread their own costs year-round by setting up a monthly payment plan with their Part D insurance companies.

The new out-of-pocket cost caps will save thousands of dollars for those taking expensive medications for conditions such as cancer and multiple sclerosis. In many cases, Medicare beneficiaries have paid tens of thousands of dollars for their medications. In 2020, 1.4 million People who did not receive low-income subsidies had annual out-of-pocket costs of $2,000 or more, according to KFF, which focuses on health policy.

“The prescription drug reforms in this law mark the most substantive changes to the Medicare D program since the introduction of the prescription drug benefit in 2006,” said Tricia Neuman, senior vice president of KFF.

But even among people eligible for Medicare (65 years or older), awareness of these changes is low. The KFF survey found that only 25 percent were aware of annual out-of-pocket cost caps. And only 8 percent were aware of the penalties for price increases that exceed inflation.

“Someone who is taking a very expensive drug will probably be very grateful that their costs go down this year,” said Dr. Neuman. “But really, no one understands why they pay what they pay for drugs, so it's no surprise that people don't know these improvements have gone into effect or don't attribute it to the Inflation Reduction Act.”

I pay almost $17,000 in a year

David Mitchell is among those who will benefit from the changes. In November 2010 he was diagnosed with multiple myeloma, an incurable cancer, but one that can be treated with very expensive drugs. Mr. Mitchell was 60 when he was diagnosed and ran a communications company he co-founded in Washington, D.C. His company's health insurance covered the medications he needed, although his out-of-pocket costs escalated sharply over the years.

After an initial round of treatment, Mr. Mitchell went into remission and then began a maintenance regimen of more than five years, including expensive cancer drugs. Mr. Mitchell knew the healthcare industry well; his communications company worked with numerous industry clients and also ran public health campaigns. And, he said, he was growing increasingly angry because most patient organizations involved in the drug price debate were accepting funding from drug and medical device companies, creating conflicts of interest.

As he learned more about the way drugs are priced, Mr. Mitchell became convinced of the need for a patient advocacy group. “One morning in the summer of 2016, I woke up and had an epiphany: If no one else is going to do this, maybe you should try it,” he said. He quit his business that year and started Patients for affordable medicines, a national organization funded solely by individuals and foundations. The organization urged the passage of the IRA

When he retired at age 66, Mr. Mitchell enrolled in Medicare. Then he started to experience the problem of the expensive drugs in the program. In addition to his cancer, he is also being treated for atrial fibrillation. Some of the medications he takes fall under Part B because they are administered in a health care setting. Others are covered by Part D, and last year he paid $16,916 for all his medications. Most of that amount was for just one of his current cancer drugs, Pomalyst.

This year is different because of the new out-of-pocket cap. “I filled my first prescription and it cost $3,308, and I'm done for the year now,” he said.

Some patients may be just beginning to understand the cap's importance, said Frederic Riccardi, president of the Medicare Rights Center, an advocacy and consumer group. “They may have faced high costs in January, but we have clients with chronic conditions who are taking very expensive prescription drugs and realizing significant savings,” he said. “During fall registration last year, we helped one person take a life-saving medication that will save more than $15,000 this year.”

The stronger out-of-pocket protections come at a time when other Medicare costs are rising. The standard Part B premium rose 5.9 percent this year to $174.70, and the deductible rose $14 to $240.

Part D premiums are also increasing. KFF estimated that Medicare recipients who enrolled in a standalone Part D plan and did not switch providers this year experienced an average 21 percent premium increase, to $48 per month. (Medicare Advantage enrollees are not affected, as most do not pay a separate premium for drug coverage.)

The increase is partly due to the higher plan costs expected by insurers under the enhanced protections for patients in the IRA. But the stronger insurance protections benefit everyone who participates in Part D, Dr. argued. Neuman. “The whole point of insurance is to protect people with the highest costs, and that could be any of us tomorrow,” she said.

Help for low-income seniors

Another important change expands access to federal subsidies that help low-income seniors with their Part D premiums, deductibles and cost sharing by raising income limits. The subsidy, called Extra Help, amounts to: worth approximately $5,300 per year for people who sign up for it, according to the Social Security Administration, which administers the program.

This year, annual income must be less than $22,590 for an individual, or $30,660 for a married couple; assets must be less than $17,220 for an individual, or $34,360 for a married couple.

The program is a key feature of Part D. In 2020, 13.1 million Medicare beneficiaries received full or partial Extra Help benefits, representing 28 percent of all enrollees that year. according to KFF.

This year, the expanded benefit was automatically extended to nearly 300,000 low-income people on Medicare, but Medicare estimates another three million people could benefit from the expansion. The program is national and the application is available online.

Another important source of assistance is the Medicare Savings Programs, which help low-income people pay Part B premiums and some other costs. The programs are available nationwide and administered by state Medicaid agencies, but they are often underutilized because few know about them and because they have complex applications. Some states have expanded eligibility.

Federal funding helps community organizations like the State Health Insurance Assistance Program to conduct outreach and enroll eligible beneficiaries. But that funding requires periodic renewal and was excluded from the current federal spending resolution, which expires in early March.

The under-enrollment problem largely stems from a lack of awareness, said Mr. Riccardi of the Medicare Rights Center. “We need consistent education about these programs, especially for people new to Medicare.”