Policy Playbook: Healthcare provisions in the Inflation Reduction Act

Author: Kirstin Woody Scott, MD, MPhil, PhD (Chair of the EMRA Health Policy Committee and PGY-2 in Emergency Medicine, University of Michigan); Summer Chavez, DO, MPH, MPM (Attending Physician, UT Houston) // Reviewed by: Alex Koyfman, MD (@EMHighAK); Brit Long, MD (@long_brit)

Case:

In July 2022, a 70-year-old female with history of insulin-dependent T2DM presents to the ED due to altered mental status. Exam shows a lethargic woman who is alert to name only but maintaining her airway. Workup is notable for a glucose of 800 and concerning for hyperglycemic hyperosmolar syndrome (HHS) and she is started on IV fluids, insulin, and other supportive interventions before transfer to the ICU. The patient is discharged home. Notation from her PCP follow-up visit states that though the patient had Medicare (the federal health insurance program for those aged 65 or older or those with disabilities), she was unable to afford her required insulin after financial challenges in the setting of losing her spouse earlier this year to COVID-19 and was skipping some required doses in the weeks leading up to her ED presentation. Now that it is October 2022, you remember hearing a lot of debate about insulin recently in the news. What ever happened?

What’s the issue?

On August 16, 2022, President Biden signed into law the Inflation Reduction Act (IRA) (Public Law No. 117-169). This Policy Playbook summary aims to highlight some of the major healthcare provisions contained with the newly-enacted law, which also contains sweeping changes for climate change policy, the tax code, manufacturing, and the economy.¹

The following are some of the major healthcare changes contained in the IRA:

• An insulin co-pay cap for some (but not all)
  • The IRA will limit co-payments for insulin among Medicare beneficiaries to no more than $35 per month starting in 2023. This has been a hotly-debated policy proposal and many hoped it would also include a co-pay cap for diabetics enrolled in private health plans, but the final legislation was limited to Medicare beneficiaries only.^2,3 There are many advocacy organizations, including the American Diabetes Association, continuing to lobby for an insulin co-pay cap that expands to more of the insulin-dependent population. Furthermore, many state-initiated insulin co-pay cap laws or even state-led proposals to manufacture insulin have emerged in recent years.
• Many significant changes for Medicare prescription drug pricing
  • The big news: Medicare will now have the authority to negotiate drug prices.
    • Big news indeed but with the following big caveat: this negotiation will be allowed for only somehigh-expenditure medications. Specifically, Medicare will be able to negotiate prices for 10 of its top expenditure medications with no generic or biosimilar competition starting in 2026. This will increase to a total of 20 medications by 2029. For those of you familiar with pharmaceutical policy, this is a very significant change and has rightfully been called a “landmark step” even in spite of this caveat.⁴ Historically, Medicare has not been permitted to negotiate on behalf of its 65 million+ enrollees for better drug prices both for those administered by physicians (Part B) and those beneficiaries with coverage through the retail prescription drug plans (Part D). Thus while the IRA only allows for price negotiation for a limited number of medications, it has created a precedent at both the national and state levels for additional changes to be possible in the future.^3,4 This provision is estimated to save the Medicare program over $100 billion over the next 10 years.^3,5
  • Inflation rebates
    • Drug manufacturers will now be required to pay “inflation rebates” for some Medicare Part D covered medications whose prices rise faster than inflation (“the allowable inflation rate from a 2021 base period based on the Consumer Price Index”).⁶ These rebates are expected to help put pressure on companies that will translate into a reduction in the growth of drug prices over time.⁵
  • Medicare Part D benefit redesign
    • A few of the IRA provisions included protections to limit out-of-pocket costs for the 48 million older adults enrolled in the Medicare Part D benefit.⁷ Prior to the IRA, there was no actual cap to what seniors enrolled in Part D plans would pay if they had drug costs that exceeded what is known as the catastrophic threshold level (in 2022, this was at $7050).^3,6 Seniors with medication costs exceeding this level have been at risk of paying a 5% coinsurance for additional prescriptions. As of 2024, the IRA will eliminate this 5% coinsurance and effectively cap seniors’ out-of-pocket costs to $3,250. However, starting in 2025, this will all be replaced by a new cap of $2000 for out-of-pocket spending for medications for Part D enrollees. In the past, a federally mandated out-of-pocket cap did not exist for these plans. It is expected that those beneficiaries who are paying for high-priced medications (e.g., cancer meds) will particularly benefit from this cap.³ Furthermore, the IRA also includes a cost-growth cap of 6 percent for Part D plan premiums from 2024 to 2029.
  • Affordable Care Act (ACA) subsidies extended
    • The IRA extends the enhanced premium tax credits (subsidies) from the American Rescue Plan Act (ARPA) that help individuals afford healthcare coverage through the Patient Protection and Affordable Care Act (ACA) exchanges/marketplaces for an additional 3 years.^5,6 These enhanced subsidies were expected to expire in 2022, thus the IRA extends this coverage. This extension has been estimated to help millions of Americans avoid premium increases as well as prevent 2 million people from losing their insurance coverage.⁵
  • Major improvements to making vaccines more accessible
    • The IRA now removes patient cost-sharing among Medicare, Medicaid, and Children’s Health Insurance Coverage Plan (CHIP) beneficiaries for vaccinations recommended by the Advisory Committee on Immunization Practices (ACIP).⁶ It is estimated that 75% of adults are missing one or more of recommended vaccines (i.e., influenza, pneumococcal disease, herpes zoster (shingles), tetanus, diphtheria and pertussis).² Before the IRA, many enrollees in these programs had faced cost-sharing for some or all of these vaccines, which is a known deterrent for accessing this recommended care.⁸ For Medicaid enrollees alone, the Kaiser family Foundation estimates that approximately 4 million adults will gain coverage for 1 or more vaccines due to this provision of the IRA.⁹

Why does it matter?

As detailed above, the Inflation Reduction Act (IRA) includes a wealth of provisions that directly impact the ED; we are on the frontlines of care and witness firsthand in our patients the health consequences of uninsurance and, even among the insured, being priced out of care or medications that help to prevent illness. From increasing access to free vaccinations for many preventable illnesses to ensuring that millions of people remain insured through the health insurance exchanges to implementing dramatic changes for Medicare patients and their ability to afford their medications (including insulin), it is not difficult to envision how the IRA may impact the ED.

As you think about the provisions of the IRA that related to Medicare patients (remember, the enhanced ACA subsidies extension and the vaccination provisions help a broader population), it may be helpful to think about the scope of Medicare as a payer among ED encounters nationally. Data collected by the Nationwide Emergency Department Sample (NEDS) (the largest existing all-payer database of hospital-based ED encounters) showed that approximately 35% of the 144.8 million ED encounters (in 2017) had Medicare as the primary payer of those services.¹⁰ Nearly 1 in 3 ED encounters are age 65 or older. As such, many of our patients – especially those having difficulty paying for their home medications – have the potential to be impacted by these provisions

Additionally, public opinion data consistently show that the cost of healthcare is a major financial worry for many Americans.¹¹ The Kaiser Family Foundation regularly tracks these opinions and have specifically documented the public’s concern about high and rising drug prices.¹² Though the IRA prescription drug related provisions are limited to Medicare Part D beneficiaries for now, it is anticipated that these dramatic changes for a program of such a massive size of Medicare (which accounts for 12% of the federal budget) can have many trickle down effects. For instance, the National Academy for State Health Policy has outlined a number of ways that states may respond to the IRA and apply similar provisions to a broader population, including those covered by private (commercial) health insurance plans or other state-regulated marketplaces.⁴ Seeing how states navigate the IRA legislation and its impacts will be of much policy interest moving forward.

Lastly, going back to our initial case, the patient presented there could have been among the estimated 3 million Medicare Part D enrollees who used an insulin product in 2020.³ For the portion of those diabetic enrollees who paid higher out-of-pocket costs for their insulin and did not have access to subsidies, they will certainly benefit from the new insulin co-pay cap included in the IRA. And maybe, just maybe, it will prevent some of those patients from showing up in the ED with a diabetic emergency.

What can I do about it?

• The next time you leave a shift, take a moment to think about your patients who are >65 or with a disability (and thus likely to have Medicare coverage). Now think about their home medication list. Imagine the cost relief that these patients may soon be facing due to the provisions of the IRA.
• Look up the topic of an insulin co-pay cap in your state – you may be surprised to see just how many states have passed (or are trying to pass) legislation that applies a co-pay cap to more than just the Medicare population.
• Keep note of patients who endorse concerns about healthcare costs or may have missed needed care (or medications) due to costs. How did you see how those missed appointments or medications led to their ED presentation? These are the stories that can help motivate policy change. Consider sharing these stories with the EMRA Health Policy Committee (EMRAHealthPolicyCtte@emra.org) as we are curious to learn more from you as to how ED residents intersect with health policy challenges on the frontlines – and there are no better teachers of how to make things better than our patients.

Useful Links and Resources:

• Opportunities for states after the IRA has been passed: https://www.nashp.org/the-inflation-reduction-acts-health-care-provisions-opportunities-for-states/
• Kaiser Family Foundation video to explain the major healthcare provisions contained in the IRA: https://www.kff.org/medicare/understanding-the-health-provisions-in-the-senate-reconciliation-legislation/
• How patients with diabetes may be affected by the Inflation Reduction Act: https://diabetes.org/sites/default/files/2022-08/What-People-with-Diabetes-Need-to-Know-about-the-Inflation-Reduction-Act.pdf

This post was a collaboration between emDocs and the EMRA Health Policy Committee.

References/Further Reading:

1. The White House. FACT SHEET: The Inflation Reduction Act Supports Workers and Families [Internet]. The White House. 2022 [cited 2022 Sep 22];Available from: https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/19/fact-sheet-the-inflation-reduction-act-supports-workers-and-families/
2. American Academy of Family Physicians. Inflation Reduction Act Delivers Academy Advocacy Wins [Internet]. [cited 2022 Sep 22];Available from: http://www.aafp.org/news/government-medicine/inflation-reduction-act-passage.html
3. Cubanski J, Neuman T, Freed M, Damico A. How Will the Prescription Drug Provisions in the Inflation Reduction Act Affect Medicare Beneficiaries? [Internet]. Kaiser Family Foundation. 2022 [cited 2022 Sep 22];Available from: https://www.kff.org/medicare/issue-brief/how-will-the-prescription-drug-provisions-in-the-inflation-reduction-act-affect-medicare-beneficiaries/
4. Brostek E. The Inflation Reduction Act’s Health Care Provisions: Opportunities for States [Internet]. The National Academy for State Health Policy. 2022 [cited 2022 Sep 22];Available from: https://www.nashp.org/the-inflation-reduction-acts-health-care-provisions-opportunities-for-states/
5. Gustafsson L, Collins SR. The Inflation Reduction Act is a Milestone Achievement in Lowering Americans’ Health Care Costs [Internet]. The Commonwealth Fund. 2022 [cited 2022 Sep 22];Available from: https://www.commonwealthfund.org/blog/2022/inflation-reduction-act-milestone-achievement-lowering-americans-health-care-costs
6. Congressional Research Service. Selected Health Provisions of the Inflation Reduction Act [Internet]. 2022. Available from: https://crsreports.congress.gov/product/pdf/IF/IF12203
7. Kaiser Family Foundation. An Overview of the Medicare Part D Prescription Drug Benefit [Internet]. 2021 [cited 2022 Sep 22];Available from: https://www.kff.org/medicare/fact-sheet/an-overview-of-the-medicare-part-d-prescription-drug-benefit/
8. Granade CJ, McCord RF, Bhatti AA, Lindley MC. State Policies on Access to Vaccination Services for Low-Income Adults. JAMA Network Open 2020;3(4):e203316.
9. Williams E. Medicaid and the Inflation Reduction Act of 2022 [Internet]. Kaiser Family Foundation. 2022 [cited 2022 Sep 22];Available from: https://www.kff.org/policy-watch/medicaid-and-the-inflation-reduction-act-of-2022/
10. Moore BJ, Liang L. Costs of Emergency Department Visits in the United States, 2017 #268 [Internet]. Agency for Healtcare Research and Quality: Healthcare Cost and Utilization Project. 2020 [cited 2022 Sep 22];Available from: https://www.hcup-us.ahrq.gov/reports/statbriefs/sb268-ED-Costs-2017.jsp
11. Montero A, Kearney A, Hamel L, Brodie M. Americans’ Challenges with Health Care Costs [Internet]. Kaiser Family Foundation. 2022 [cited 2022 Sep 22];Available from: https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-costs/
12. Hamel L, Lopes L, Kirzinger A, et al. Public Opinion on Prescription Drugs and Their Prices [Internet]. Kaiser Family Foundation. 2022 [cited 2022 Sep 22];Available from: https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/