The Healthcare Provisions in the Inflation Reduction Act

Pharma, health insurers square off about the healthcare provisions in the Inflation Reduction Act that passed the Senate yesterday. The PhRMA was sharply critical of the provisions that would empower CMS to negotiate the prices of a selected number of drugs. AHIP praised the extension of more generous ACA premium subsidies.

The $35-a-month cap on out-of-pocket costs for insulin is more limited than Democrats had hoped because it applies only to people covered by Medicare and not those with commercial insurance. Still, the healthcare provisions of the Inflation Reduction Act that passed the Senate yesterday would mean about mean major changes in federal healthcare programs and policies, especially when it comes to prescription drugs.

Passed on a strict party line vote with Vice President Kamala Harris breaking the 50-50, the legislation would empower the Centers for Medicare and Medicaid Services to negotiate drug prices directly for the first time, starting in 2026. It would also create a “hard” cap of $2,000on out-of-pocket costs for people with Medicare Part D coverage .

“I would say ‘huge’” Stacie Dusetzina, Ph.D., a health policy professor at Vanderbilt University Medical Center and an expert on prescription drug coverage, said Sunday during an PBS NewsHour interview, when asked to characterize the significance of the prescription drug price negotiations part of the bill.

Dusetzina said the $2,000 cap on Part D out-of-pocket costs and th eextension of some cost breaks for low-income seniors is a “major, major improvement of today’s (Part D) benefit.”

The New York Times said the healthcare provisions of the Inflation Reduction Actadd up to the “largest change to national health policy since the passage of the Affordable Care Act.”

Trica Neuman, a senior vice president at the Kaiser Family Foundation and director of the foundation’s program on Medicare policy, tweeted this morning that “it’s hard to overstate the significance of the drug provisions” of the bill that passed the Senate. She said the bill is the first major improvement to the Medicare program in over a decade, tackles drug prices “despite fierce industry opposition,” and lowers costs for people who take expensive drugs and insulin.

The House must pass the bill and President Joe Biden must sign it before it comes law. Biden has praised the bill and, by most accounts, the Democrats in the House are likely to unify and vote for it.

The pharmaceutical industry and its lobbying arm, the Pharmaceutical Research and Manufacturers of America (PhRMA), fought against the Medicare price negotiation provisions of the bill. Last week, it sent a letter to every member of Congress, urging them to vote against them, according to Kaiser Health News. PhRMA’s central argument against Medicare price negotiations is that they stifle the development of new drugs because they will mean a lower rate of return.

On Sunday, Stephen J. Ubl, the organization’s president and CEO, issued a stinging statement that accused the Senate Democrats of seizing every opportunity to make the bill worse for patients and siding with the insurance industry: “When given the choice to stand with patients or insurers and middlemen, Senate Democrats stood by insurers and middlemen.”

Matt Eyles, president and CEO of AHIP, the health insurance’s trade group, also issued a statement on Sunday, but in contrast to Ubl’s, his heaped praise on the legislation and, more specifically, the provisions that extend premium subsidies for people buying health insurance on the Affordable Care Act (ACA) exchanges for another three years. “Every American deserves access to affordable coverage and high-quality care, and the Senate’s action will continue vital support that millions of hardworking American families need to purchase their own health coverage in the years to come,” said Eyles’ statement.

The subsidies, which were implemented as part of the 2021 American Rescue Plan Act, increased premium subsidies for low-income people buying coverage and created new subsidies for people with higher incomes who had been previously ineligible because their incomes were too high. Many commentators have noted that the subsidy extension was politically important toDemocrats.

The legislative and political maneuvering around the $35 insulin cap garnered a lot of coverage this weekend. The Inflation Reduction Act passed the Senate as a reconciliation bill, which means it needs a simple majority to pass rather than the 60 votes needed to avoid a filibuster. (Fifty senators caucus with the Democrats but to reach the 60-vote threshold, some Republicans would have needed to break ranks and support the Inflation Reduction Act and none did.)But reconciliation bills must be related to the federal budget and the Senate parliamentarian ruled that the extending the cap to the commercial market (insurance thatpeople get their through employer) did not relate to the federal budget so it could not be part of the reconciliation-eligible bill. However, the $35 cap for those with Medicare coverage was deemed as being related to the federal budget, so it survived and is in the bill.

At attempt to get the insulin cap passed outside of the reconciliation process drew some Republican support — the vote was 57-43 — but not enough to get to the 60-vote threshold.

Here is a short rundown of the healthcare provision in the bill:

  • CMS empowered to negotiate drug prices. According to the Times, the negotiations would apply to only 10 drugs initially, starting with 10 drugs. Dusetzina said in her interview with PBS that it was a “modest start” but would allow time to see whether price negotiation does affect drug development and new drugs coming on the market.
  • $35 cap on out-pocket costs for insulin. As discussed, the cap ended up applying only to people with Medicare coverage.

  • $2,000 “hard” cap on Medicare Part D cost sharing starting in 2025.Outside the political and legislative dynamics of the Inflation Reduction Act, redesigning the Part D benefits to cap out-of-pocket costs has wide support. The cap should benefit millions of beneficiaries with Part D coverage who are being treated with increasingly expensive cancer drugs.

  • Extension of more generous ACA premium subsidies. At one point in the tortuous history of this legislation, the extension was going to be for two years, not three. The Kaiser Family Foundation If Congress extends the temporary subsidies, premium payments in 2023 will hold mostly flat for Marketplace enrollees, since the premium tax credits shelter enrollees from increases in the underlying premium. However, if these extra subsidies expire, out-of-pocket premium payments will rise across the board next year for virtually all 13 million subsidized enrollees.