With the passage of the Medicare Modernization Act of 2003, the Medicare Part D Subscription Drug Program became law, and Medicare beneficiaries finally received help paying for outpatient prescription drugs they obtain at their local pharmacy. However, this law prohibited Medicare from negotiating drug prices for its beneficiaries. Thus, pharmaceutical companies were able to set and raise prices on popular drugs necessary for older adults. It’s no surprise, then, that prescription drug costs in the United States are now substantially higher than in other developed countries, sometimes triple the price that patients in other countries pay. In fact, Medicare has been paying more for drugs for Medicare beneficiaries than such other government entities as the Department of Defense or the Department of Veterans Affairs. At a time when many Medicare beneficiaries are forced to choose between expensive medications and such other life necessities as food or rent, it seems outrageous that Medicare cannot do more to bring down the price of drugs. On Tuesday, however, things changed, with the enactment of the Inflation Reduction Act, a landmark piece of legislation that not only promises massive investment in cleaner, climate technology but also finally puts Medicare on a path toward negotiating the pricing of some of its most expensive medications. There are additional cost-saving measures for seniors that we’ll describe below.

So what exactly will this legislation do for older adults? While the concrete effects of the bill will not be felt by consumers for a few years (while the programs are being negotiated and set up), many experts are lauding this new legislation as a “huge breakthrough.” Beginning in 2026, Medicare will be able to negotiate prices for 10 of its most expensive drugs, and going forward that list of drugs will expand, so that by 2029, a total of 60 of Medicare’s most expensive drugs will be subject to negotiated pricing, leading to substantial savings for both the Medicare program and Medicare beneficiaries. None of the cost savings to Medicare will come as a result of cuts to Medicare programs. An analysis by Bank of America of drugs likely to be negotiated to a lower cost includes blood thinners such as Eliquis and Xarelto, Prolia for osteoporosis, and Keytruda, an immune therapy drug for certain types of cancer. One other important provision of this new legislation? Medicare beneficiaries who use insulin will see the cost of the drug capped at $35/month (unfortunately this does not apply to non-Medicare insulin users).

There are additional, significant cost-saving health measures that need to be mentioned. So for example, those participating in the Medicare Part D program will see their out-of-pocket medication expenses capped at $2000/year beginning in 2025. For patients using expensive cancer medications or drugs for other serious illnesses, this may yield substantial, life-altering savings. There will also be limits on the rates of premium increases for Medicare Part D beneficiaries, as well as an increase in the subsidies available to help lower-income Medicare recipients pay their out-of-pocket expenses. Finally, pharmaceutical companies who raise their drug prices faster than the rate of inflation will be required to provide a rebate to Medicare for those additional costs (apparently half of all prescriptions covered by Medicare increased their prices faster than the rate of inflation). And beginning next January, almost all vaccines will be free for Medicare beneficiaries.

This bill does not solve all problems related to drug pricing experienced by older adults. Most noticeably, it does not address the high cost of drugs, including insulin, for adults between the ages of 50-64 who are not yet on Medicare. It does, however, extend generous subsidies to help those not yet eligible for Medicare to pay for policies under the Affordable Care Act marketplaces. There are also criticisms that the impact of these changes, while significant, will not be felt for a few years, and could even be revised or repealed if control of the government shifts to the Republicans in 2025. However, public sentiment is clearly on the side of lower prescription drug costs, and the current Medicare chief has expressed confidence that all target deadlines for these new programs will be met. So, while not solving all problems related to health care pricing (or climate problems for that matter) the Inflation Reduction Act represents a significant first step in addressing real-life financial worries experienced by so many Medicare recipients