Benjamin Franklin once wrote that the only things certain in life are "death and taxes." If he was alive today, he might want to add soaring prescription drug costs to the list.
Medicare Part D prescription drug plans help cushion the impact of ever-increased medication costs for seniors. However, older Americans still feel the pain of having to shell out more money out of pocket over time for their prescription drugs.
But there's actually some good news on the way. Congratulations, Medicare Part D beneficiaries. You could soon save a lot of money.
Image source: Getty Images.
Help from a different IRA
Most seniors are probably familiar with one kind of IRA -- individual retirement accounts. However, help is on the way from a completely different IRA. This one is the Inflation Reduction Act, legislation signed into law by President Biden last year.
The Inflation Reduction Act included lots of provisions. But there were several especially important ones for Medicare Part D beneficiaries. The most publicized of these was the $35 out-of-pocket cap for a month's supply of insulin.
Even if you don't take insulin, you could still save money as a result of the bill. For example, the Inflation Reduction Act eliminates out-of-pocket costs altogether for vaccines that are recommended by the Advisory Committee on Immunization Practices. These currently include COVID-19, flu, pneumococcal, respiratory syncytial virus (RSV), and shingles vaccines.
The legislation also will cap Medicare Part D out-of-pocket expenses at $2,000 per year beginning in 2025. In subsequent years, the cap will be indexed annually for inflation.
Currently, beneficiaries must pay a 5% coinsurance in the catastrophic coverage phase (reached after paying $7.400 in out-of-pocket costs for covered drugs during a year). That coinsurance goes away with the Inflation Reduction Act.
Big savings for many
The Office of the Assistant Secretary for Planning and Evaluation (ASPE) of the U.S. Department of Health and Human Services recently released projections of how much these and other changes could save seniors. It estimated that the Inflation Reduction Act will reduce annual out-of-pocket spending by $7.4 billion in 2025.
Those savings will be spread across roughly 18.7 million Medicare Part D beneficiaries. That amounts to roughly $400 per person per year for individuals who are impacted by the reforms.
Some in this group will feel an even greater positive impact. ASPE projects that the out-of-pocket costs for the 8.4 million Medicare Part D enrollees who aren't eligible for low-income subsidies will be $759 lower on average in 2025. Some people will save at least $1,000.
Granted, not every person signed up for Medicare Part D will enjoy cost savings. But around 36% of enrollees will.
Conservative estimates -- but with a catch
If you're among the enrollees who are helped by these changes, your actual savings could be even higher than these projections. ASPE said in its report, "Our savings estimates are conservative because they do not fully capture policy changes that are designed to reduce the cost of prescription drugs to the Medicare program and taxpayers."
This statement refers in part to the Inflation Reduction Act's provision that allows Medicare to negotiate prices on certain high-cost drugs with pharmaceutical companies. However, this part of the legislation is being challenged in court by Bristol Myers Squibb, Merck, and the industry organization Pharmaceutical Research and Manufacturers of America (PhRMA). Perhaps Ben Franklin could have added lawsuits to his list of certainties in life, too.
