What the Inflation Reduction Act of 2022 Means for the Medicare Program
Posted on May 29, 2025 By Jeff Snyder
On August 16, 2022, the Inflation Reduction Act (IRA) of 2022 was signed into law. This government reconciliation bill promised to fund environmental efforts, close tax loopholes, work to lower inflation, and reduce health care costs under the Medicare program. The changes this bill brought has the potential to save Medicare insurance beneficiaries thousands of dollars annually.
Unless directly cited elsewhere, all facts and figures from the bill can be found directly in the legislative text of the Inflation Reduction Act of 2022 or the topline messages for the drug pricing reforms.
The Medicare Program to Negotiate Certain Drug Prices
Starting in 2026, the Medicare program will be allowed to negotiate pricing on 10 drugs covered by Medicare Part D. Additionally, the Medicare program will be able to start negotiating prices for drugs covered under Medicare Part B in 2028. This will increase each subsequent year until 2029, when the Medicare program will have 60 total drugs with negotiated prices — 10 Medicare Part D drugs in 2026, 15 more Part D drugs in 2027, 15 Medicare Part B and Part D drugs in 2028, and 20 Medicare Part B and D drugs in 2029.
Insulin Price Capped in Medicare Insurance
One essential drug with a new price implemented outside of the negotiations is insulin. The bill will capped the monthly price of insulin at $35. Prior to this, the cost of insulin averaged around $63 to $70 each month with coverage.
Drug Price Inflation Rebate
A similar fate was shared by another provision of the IRA, which sought to tie drug price increases to inflation by instituting an inflation rebate. This means that drug companies would pay the Medicare program the difference of any price increase above the inflation rate for that year. Like the insulin price cap, this was going to cover non-Medicare private insurance plans too, but that portion didn’t pass muster with the parliamentarian and didn’t receive enough votes after that.
All Vaccines Covered Under Medicare Insurance
The Inflation Reduction Act of 2022 will also open the possibility of preventive vaccinations to be covered under the Medicare program. Currently, Medicare insurance covers vaccines for COVID-19, the annual flu, and pneumonia, while vaccines for Hepatitis A and B or shingles are only covered in certain circumstances or by Medicare Part D. But now all vaccines are zero cost.
New Medicare Insurance Out-of-Pocket Drug Insurance Costs Cap
Perhaps the most significant change of all is the new cap on out-of-pocket drug costs for Medicare insurance beneficiaries.
As a result of the IRA, the “donut hole” coverage gap was eliminated and the out-of-pocket limit for Part D costs will be set annually. The first limit was set at $2,000 in 2025. Beneficiaries will also have the option to break their out-of-pocket costs into affordable monthly payments.
Other Part D Adjustments
There were two other major changes and effects on Medicare Part D from the Inflation Reduction Act. First, the IRA is capping the annual growth of Medicare Part D premiums to six percent between 2024 and 2030. Furthermore, the IRA will be expanding access to the Part D Low-Income Subsidy by eliminating the partial subsidy level. This will allow anyone making 150 percent of the Federal Poverty Level to utilize this subsidy and lower their out-of-pocket costs even more.
You can read more about the timeline when each facet of the IRA will come into effect below (graphic courtesy of the Kaiser Family Foundation).
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