Inflation Reduction Act Passes Congress, Includes Several Significant Healthcare Policies

After more than a year of negotiations and several iterations, Congress has passed the Inflation Reduction Act of 2022 (H.R. 5376). This major budget bill includes, among many other things, significant new health care policies. The Senate passed the bill on Aug. 7, and the House approved it 220-207 last week. President Biden signed the bill into law on August 16, 2022.

​Here is a brief look at the main health care provisions of the Inflation Reduction Act. 

​Prescription Drug Pricing Reform
 
The Inflation Reduction Act of 2022 requires CMS to negotiate the prices of certain prescription drugs under Medicare beginning in 2026.
 
Specifically, CMS must negotiate maximum prices for brand-name drugs that do not have other generic equivalents and that account for the greatest Medicare spending. CMS must negotiate the prices of 10 drugs in 2026, 15 drugs in 2027 and 2028, and 20 drugs in 2029 and each year thereafter. Drug manufacturers that fail to comply with negotiation requirements are subject to significant civil penalties and taxes.
 
The bill also requires drug manufacturers to issue rebates to CMS for brand-name drugs without generic equivalents under Medicare that cost $100 or more per year per individual and for which prices increase faster than inflation. Manufacturers that fail to comply are subject to civil penalties.
 
Medicare Part D Improvements and Maximum Out-of-Pocket Cap for Medicare Beneficiaries
 
The bill eliminates beneficiary cost-sharing above the annual out-of-pocket spending threshold under the Medicare prescription drug benefit beginning in 2024 and caps annual out-of-pocket spending at $2,000 in 2025 (with annual adjustments thereafter). It also establishes a program under which drug manufacturers provide discounts to beneficiaries who have incurred costs above the annual deductible beginning in 2025.
 
The bill also establishes a process through which certain beneficiaries may have their monthly out-of-pocket costs capped and paid in monthly installments beginning in 2025.
 
Affordable Care Act Subsidies
 
For three years, the bill extends the enhanced Affordable Care Act subsidies that Congress passed last year as part of the American Rescue Plan Act. That temporary boost increased the amount of financial help available to people already eligible to buy subsidized health plans in the ACA Marketplaces and expanded subsidies to more middle-income people, many of whom were previously priced out of coverage.