9 ways the Inflation Reduction Act affects Medicare coverage, and what it means for you

Major changes to prescription drug affordability for more than 50 million beneficiaries are likely on the way because of a new law.

President Joe Biden said in July that the legislation would give Medicare the power to negotiate for lower prescription drug prices.

There are other provisions in the bill targeting the cost of Medicare prescription drugs. Limits on increases in premiums and drug prices are also new.

The act was signed by Biden. There are certain changes that will take effect in the year 2023.

The Medicare portions of the inflation reduction act will affect you.

From 2029 on, Medicare will negotiate prices for the drugs it has spent the most on, as well as the drugs it hasn't spent.

The Inflation Reduction Act targets the most expensive, most used drugs that have enjoyed limited competition and maximum profit, according to a senator.

Medicare used to be able to negotiate prices for prescription drugs.

It means that if you are prescribed one of the drugs with negotiated prices, you should see reduced prices. Depending on the outcome of the negotiations and the drugs you take, how much you could save is up to you.

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Negotiated drugs will be covered by all plans

Medicare negotiates prices on their formularies for certain drugs.

The formulary requirements weren't allowed by Medicare before.

It means that if you take a drug with a negotiated price, your Medicare Part D plan has to pay.

Out-of-pocket spending will be capped at $2,000

Out-of-pocket spending for Medicare Part D prescription drugs will be capped.

In the future, the cap increases based on Medicare spending for covered drugs. The cap for 2026 would be 2% higher if Medicare spent 5% more.

There was no out-of-pocket spending cap before.

You won't have to pay copays or coinsurance for covered drugs after you hit the $2,000 out-of-pocket cap. The cap will still be based on the starting point.

Catastrophic coverage will no longer require coinsurance

The catastrophic phase of Medicare Part D coverage will be free for beneficiaries. After your spending reaches $7,050 in 2022, that's how it's going to be.

Prior to this phase, beneficiaries had to pay a 5% coinsurance for generic drugs or $9.85 for brand name drugs.

If you reach the catastrophic out-of-pocket spending threshold after the start of 2024, you won't have to pay for Medicare Part D for the year. The $2,000 out-of-pocket cap will go into effect in 2025.

There is great news for people over 50.

Drug price increases can’t exceed the rate of inflation

If the price of most prescription drugs covered by Medicare goes up faster than the rate of inflation, drug manufacturers will have to give Medicare a discount.

The prices for your prescription drugs may increase more slowly. The Kaiser Family Foundation found that half of the drugs covered by Medicare had price increases greater than the rate of inflation. The law caps those increases at the rate of inflation.

Medicare Part D premium increases will be limited

The national base beneficiary premium for Medicare Part D plans can't increase by more than six percent a year.

It means that your Medicare Part D premiums may not go up as quickly. The national base beneficiary premium is just one part of what you pay. The insurance company and plan will affect your premiums.

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Out-of-pocket costs for insulin will be capped

Monthly out-of-pocket costs for coveredinsulin products will be capped at $35. Deductibles won't apply toinsulin products

If you haven't met your Medicare Part D deductible, your plan won't be able to require more than $35 per month in coinsurance or copays.

Full Extra Help subsidies will be available to more beneficiaries

The full Medicare Part D low-income subsidy, also known as Medicare Extra Help, will be available to people with income up to 150% of the federal poverty level.

Full and partial subsidies were available on a sliding scale in the past.

You may be eligible for the full Extra Help subsidy to help pay for your Medicare Part if you make less than 150% of the Federal Poverty Level.

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Adult vaccines will have no cost-sharing requirements

There will be no deductible, copay or other cost-sharing requirements for adult vaccines covered under Medicare Part D.

It means that you can get any vaccine without having to pay out of pocket.

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Alex is a writer for Nerdwallet. E-mail arosenberg@nerdwallet.com Alex PRosenberg has a verified account on the social networking site.