Fact sheet: The Inflation Reduction Act Lowers Health Care Costs for … – CMS

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Through the Inflation Reduction Act, President Biden is delivering on his promise to lower prescription drug costs, make health insurance more affordable, and make the economy work for working families. This law means millions of Americans across all 50 states, the United States territories, and the District of Columbia will save money from meaningful benefits like:
View a timeline showing when these changes happen in the Medicare, Medicaid and the Children’s Health Insurance Program, and Health Insurance Marketplace.
See frequently asked questions about reduced drug prices and enhanced Medicare benefits under the Inflation Reduction Act.
People with Medicare will benefit from lower prescription drug costs and a redesigned prescription drug program.
Before the Inflation Reduction Act, more than 5 million people with Medicare struggled to afford their prescription drugs. People with lower incomes and those under age 65 also are more likely to skip the medicine they need because of high costs.[1] The Inflation Reduction Act makes changes to Medicare so that millions of people with Medicare will spend less on their prescriptions.
Medicare’s new ability to negotiate drug prices will mean that people with Medicare will have more access to innovative, life-saving treatments, and the costs will be lower for both them and Medicare.
Americans spend more than $1,500 per person every year on prescription drugs. Prices also tend to be far higher than in other countries. One of the main reasons for these higher drug costs is a lack of market competition.[2] The Inflation Reduction Act increases competition, which will lower the price of prescription drugs for people with Medicare.
The requirement for Medicare to negotiate prescription drug prices encourages drug makers to create new ways to do business so they can stay competitive. This competition helps find new treatments and ways of delivering medicines. This kind of negotiation isn’t new – the Departments of Defense and Veterans Affairs and the Indian Health Service have had the ability to negotiate drug prices for their health programs for decades. With the new law, Medicare will also finally be able to negotiate drug prices directly with manufacturers, ensuring people with Medicare pay lower costs on some of the costliest prescription drugs.
In 2023, Medicare will select and announce the first 10 drugs to be negotiated. The law requires that those 10 are chosen from a list of the highest-spending, brand-name Medicare Part D drugs that don’t have competition. The negotiated Medicare drug prices for these first 10 drugs will be available starting in 2026. Medicare will choose and negotiate 15 more Part D drugs for 2027, 15 more Part B or Part D drugs for 2028, and 20 more Part B or Part D drugs for each year after that. Manufacturers that don’t follow the negotiation rules for the selected drugs will pay a tax, and will pay a penalty if they don’t fulfill other manufacturer requirements.
The Inflation Reduction Act makes Medicare stronger for current and future enrollees. It makes health care more accessible, equitable, and affordable by lowering what Medicare spends for prescription drugs and limiting increases in prices.
The law expands Medicare benefits by making program improvements that save money, so care will be more accessible and affordable without costing taxpayers extra.
The Inflation Reduction Act improves coverage and lowers out-of-pocket costs of recommended vaccines in Medicare, Medicaid, and the Children’s Health Insurance Program.
Many consumers will benefit from lower health care coverage premiums through 2025 on HealthCare.gov and state-based Marketplaces because the new law extends the enhanced financial help that was put in place by the American Rescue Plan.
[1] Prescription Drug Affordability among Medicare Beneficiaries. HHS Office of the Assistant Secretary for Planning and Evaluation.  
[2] HHS Comprehensive Plan for Addressing High Drug Prices. HHS Office of the Assistant Secretary for Planning and Evaluation.
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