Changes to Medicare Part D in 2023 Under New Law

Changes to Medicare and Drug Prices: The Basics

The Inflation Reduction Act, a new piece of legislation, has the potential to significantly lower the out-of-pocket costs of pharmaceuticals for the elderly.

Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Joe Manchin (D-WV) pushed through a budget reconciliation package that includes several changes to Medicare and its recipients. 

Here is a little primer to help set the stage.

Modifications are made to lower the price of medications and decrease federal spending on drugs. The same pharmaceuticals would be available to Medicare recipients, but the overall cost to both parties would decrease. Medicare itself would suffer no cuts; rather, the savings would result from price negotiations and other measures.

For some drugs, the government can bargain for lower prices. Some very pricey pharmaceuticals are covered by Medicare Part D and would be subject to price negotiations under this plan (Medicare Part B).

In 2026, the Department of Health and Human Services (HHS) will start choosing the ten pharmaceuticals subject to negotiation. Twenty medications would be selected in 2029, down from 15 in each of the previous two years (2027 and 2028).

The United States currently has a more expensive pharmaceutical market than most other affluent countries. By illustration, Rand Corp. research found that U.S. prices for brand-name medications were more than three times as high as brand-name drug costs in other OECD countries.

The Congressional Budget Office found that Medicare’s net prices for brand-name drugs are higher than those paid by the Veterans Health Administration, the Department of Defense, or Medicaid, even though all of these agencies have the authority to negotiate prices or participate in the federal supply schedule.

Medicare is not allowed to negotiate prescription pricing due to a provision in the Medicare Modernization Act of 2003 that created the Medicare Part D program. If the new rule is adopted, it will no longer be the case.

The pharmaceutical industry has maintained that if Medicare were to negotiate drug pricing, it would affect innovation and result in fewer therapeutic breakthroughs. The CBO predicted that only 15 out of 1,300 medications (1% of the total) would fail to reach the market due to the new provisions over the next 30 years. This change is likewise limited to brand-name pharmaceuticals and biologics that have been available for at least five years without any generic or biosimilar alternatives.

The proposal would save $288 billion over ten years, the Congressional Budget Office estimated.

The idea would also require rebates for pharmaceutical companies with price increases over inflation.

Beneficiaries of Medicare would have an annual cap of $2,000 on their out-of-pocket prescription payments. It would be the first time people’s responsibility for the cost of their Part D prescription drugs would be limited. By 2025, Medicare Part D recipients will no longer be responsible for annual prescription costs over $2,000. Until 2029, the annual growth of Part D premiums could be at most 6%.

Beneficiaries would need an income of 150% of the federal poverty level ($20,385 for an individual in 2022) to be eligible for a subsidy to help with the out-of-pocket costs associated with Medicare Part D, up from 135% of the poverty line ($18,347 for an individual in 2022).

Medicare begins covering the full cost of vaccines in January 2023.

Medicare recipients, also members of the CDC’s Advisory Committee on Immunization Practices, will no longer have to pay anything out of pocket to get the immunizations recommended for adults beginning January 2023.

Certain vaccinations, such as those against influenza, pneumonia, hepatitis B, and coronavirus, are already completely covered by Medicare Part B, which covers doctor visits, diagnostic testing, and other outpatient services (initial shots and boosters).

Nevertheless, the Part D prescription drug plans cover some vaccines, including the pricey shingles vaccine. Many of these plans now necessitate their participants to contribute to the overall cost of these injections. As of the passage of the new law, there will be no more such sharing of expenses.

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