Inflation affects all consumers, but older Americans are facing an especially dramatic loss of buying power.
The Inflation Reduction Act was signed by President Biden on August 22, 2022. It reforms various sectors of the economy, including Medicare prescription drug costs. Many seniors take multiple prescription drugs and use Medicare to help pay for them. Their savings could be substantial.
A Brief Explanation of Medicare Parts A, B, D
Medicare is federal health insurance for people 65 and older. Different Medicare parts cover various medical expenses. Part A is also called hospital insurance. It does not have a monthly premium for most people because they pay into Part A insurance while working. Part A covers hospital visits, hospice care, skilled nursing care, and home health care.
Part B is also called medical Insurance. It covers many doctor visits, outpatient care, medical equipment, and preventative services such as vaccines. Most people will pay monthly premiums of $170.10 for Part B. The exception is if your annual income exceeds $91,000 for an individual or $182,000 for a couple.
Part D is for drug costs. It helps cover the costs of prescription medicine. There are several part D options available with different premiums and benefits. Prescription medications are classified into tiers, with lower tiers generally being generic and less expensive.
Changes from the Inflation Reduction Act
The Act focuses on lowering the cost of expensive prescription medications and vaccines, found mostly in Parts B and D. There is currently no annual out-of-pocket maximum for prescription medicines. Some drugs are prohibitively expensive, forcing many seniors into non-compliance with medications. By 2025, beneficiaries will pay no more than $2000 per year for their prescriptions. With the confidence that their medication costs will not skyrocket, seniors can plan their budgets accordingly. Hopefully, this will allow them not to skip doses to reduce costs.
One of the most exciting changes for people with diabetes is that insulin will be capped at a $35 per month copay starting in 2023. According to the Kaiser Family Foundation, the average cost of insulin in 2020 was $54. The American Diabetes Association says that most seniors with diabetes have type two and use one insulin shot daily to regulate their blood sugar. That will be a savings of about $144 annually. Medicare beneficiaries with Type 1 diabetes typically need more insulin, and their savings could be more dramatic.
The Shingles vaccine is only covered through part D. If you do not have part D, you have to pay for it out of pocket, which often costs several hundred dollars. People watching their every penny often choose to take their chances rather than pay for the vaccine. The Adult Access Vaccine Coalition estimates that 75% of adults are not up to date on their vaccines and that costs are a large part of the problem. Starting in 2023, all vaccines recommended by the Advisory Committee on Immunization Practices will be free to Medicare beneficiaries. This change will hopefully encourage more senior citizens to get the appropriate immunizations and reduce preventable illnesses.
How Medicare is Controlling Costs
Medicare pays for these changes primarily by changing how they do business with pharmaceutical companies. Medicare will be able to negotiate the prices of many prescriptions, which is currently not the case. According to AARP, Medicare spends almost 10 billion dollars annually on a blood-thinning medication called Eliquis. Changes of this magnitude take time to put into effect. KFF published a timeline of changes to Medicare drug costs.
As elder care lawyers, we advocate for senior citizens’ health and financial well-being. We are here to guide you in preparing legal documents related to health, asset protection, and more. Please call if you have questions about your Medicare coverage. Don’t forget that Medicare has limitations regarding long-term care needs. We can discuss increasing needs for healthcare with age, along with wills, trusts, or advanced medical directives. Please contact us at 914-498-8709 and schedule a free consultation.