The Good News for (Future) Retirees

There is some very good news out of Washington for Medicare enrollees. The Inflation Reduction Act that President Biden signed into law last month has a series of new rules that will reduce the cost of prescription drugs for many retirees.

But that good news comes with a caveat: None of the changes are immediate. Here’s the timeline for how new federal legislation will focus on reducing out-of-pocket drug costs for Medicare enrollees:

2023: The monthly copay for insulin will be capped at $35 a month. This provision only applies to Medicare enrollees; there is no insulin price cap for people with private insurance through an employer or the ACA.

2023: Free vaccines for Medicare enrollees. There will be no copay for vaccines such as flu, pneumonia and shingles.

2025: Annual out-of-pocket prescription drug costs will be capped at $2,000 for Medicare enrollees. That’s an important improvement over the current Medicare Part D system that continues to charge a 5% copay even after an enrollee has reached the “catastrophic” drug spending copay threshold ($7,050 in 2022.)

2026: Medicare will begin to negotiate prescription drug costs. Medicare, the biggest health care provider in the country, has never been allowed to negotiate prices for prescription drug costs. That’s not just costly for Medicare enrollees, it is a cost to the federal government and thus all taxpayers who are responsible for Medicare’s funding. Beginning in 2026 10 drugs will be priced based on negotiated rates, with more drugs to follow in the following three years. It has not yet been determined which 10 high-cost drugs will be in the first batch.

If you are enrolled in Medicare or love someone who is, the wait for these new regulations makes it as important as ever to make sure your 2022 prescription drug coverage remains the best policy for 2023. Copays can change at any time, so you should never presume that what worked in 2022 will work in 2023. For those of you enrolled in Original Medicare, you can and should review your 2023 options for a Medicare Part D policy. It is easy to swap plans if you find your current plan’s coverage for your meds is going to rise next year. The Medicare website has a tool for comparison shopping Part D plans; it will be updated with 2023 prices beginning in October.

If you are enrolled in a Medicare Advantage plan, you should do the same review of your 2023 copays for prescription drugs. If you find any current medications may be much more expensive next year, you too can switch to a better plan. But it may involve needing to switch to an entirely different MA plan, because most MA plans embed drug coverage inside the overall plan.