According to a study by Avalere Health and AARP, approximately 3.2 million Medicare prescription drug insurance beneficiaries will benefit from the Biden administration’s Inflation Reduction Act reforms, which will cap out-of-pocket drug costs at $2,000 until 2025. This announcement has generated significant enthusiasm among beneficiaries, who have expressed that the news is “too good to be true.”

The Inflation Reduction Act, considered one of the major achievements of President Biden’s administration, was pushed during the campaigns by both Biden and Vice President Kamala Harris. This transformative legislation completely overhauls the drug benefits under Medicare, known as Part D. Government estimates suggest that next year alone, around 18.7 million people could save $7.4 billion due to the changes in out-of-pocket cost limits and other adjustments.

The annual enrollment period for Medicare beneficiaries to update or switch their drug coverage plans runs from October 15 to December 7. During this time, beneficiaries can also join Medicare Advantage Plans that include prescription drug coverage. Chiquita Brooks-LaSure, the administrator of the Centers for Medicare and Medicaid Services (CMS), encouraged beneficiaries to carefully consider their options, emphasizing that this year’s changes are particularly important.

As these legal reforms take effect, beneficiaries should prepare for potential modifications in plans from their insurance providers. This may include increases in premiums and the possibility that insurers could drop coverage for certain drugs or discontinue access to preferred pharmacies and doctors. Therefore, beneficiaries are advised to compare plans thoroughly.

A KFF survey indicated that the Inflation Reduction Act represents the most comprehensive reform of Medicare drug benefits since Congress expanded the program in 2003. However, many individuals remain unaware of its details, and some beneficiaries have expressed surprise over aspects of the law that could negatively affect them, such as rising premiums in certain plans.

In addition to the $2,000 out-of-pocket cap, the Inflation Reduction Act also limits out-of-pocket costs for most insulin products under Medicare to no more than $35 per month. Furthermore, it allows Medicare to negotiate prices directly with pharmaceutical companies for some high-cost medications.

The legislation aims to eliminate the frustrating “donut hole” feature of drug benefits, which previously left beneficiaries responsible for the full cost of medications when facing escalating drug expenses until they reached a certain spending threshold.

Moreover, the act expands eligibility for “extra help” subsidies to around 17 million low-income Medicare drug plan beneficiaries, increasing subsidy amounts and placing some financial responsibility on drug manufacturers.

Starting January 1, the redesigned drug benefits will resemble those offered by private insurance plans. The law also seeks to limit future drug price increases to the rate of consumer price index inflation (3.4% in 2023) and allows beneficiaries to pay for medications in installments, rather than facing large bills all at once.