The Inflation Reduction Act’s Hidden Health Costs for Patients

Vice President Kamala Harris will undoubtedly tout the Inflation Reduction Act (IRA) as her party's greatest legislative achievement in the past four years in nearly every campaign speech.

But that plan could prove to be a mistake for them. The changes to Medicare made by the law clash with the complex reality of the U.S. health care system – and leave many seniors worse off than before.

Both monthly premiums and deductibles are rising rapidly or will continue to rise – so much so that the Biden-Harris administration is currently preparing one of the largest taxpayer-funded bailout packages ever to prevent retirees from receiving notices of huge premium increases in their mailboxes just before the election.

The IRA redesigned Medicare in a way that nearly tripled the cost of insuring the average senior citizen. The national average amount — essentially insurers' estimated monthly cost of coverage per insured — will rise from $64.28 in 2024 to $179.45 in 2025, according to a memo the Biden-Harris administration sheepishly released in late July.

Of course, a 179% increase in insurance costs – including the increases announced in October for every single plan – would infuriate retirees. So, to avert an electoral disaster, the government is putting together an unprecedented bailout package, effectively agreeing to hand over tens of billions of taxpayers' money to insurers to protect retirees from huge premium increases.

A massive increase in deficit-financed government spending will not fulfill the promise of reducing inflation enshrined in the Inflation Reduction Act.

Higher premiums would be easier to bear if co-payments were also reduced. But risk consulting firm Milliman recently predicted that millions of Medicare beneficiaries would have to pay higher co-payments for drugs as a result of the law.

The higher costs are the result of the interplay between one of the IRA's most popular provisions – the $2,000 annual out-of-pocket limit – and one of its most controversial provisions: price controls on brand-name drugs.

The problem is how patients reach the $2,000 limit. Most Medicare Part D plans require patients to pay 25 percent of the drug price out of pocket. But some plans only require enrollees to pay a fixed dollar amount – called a copayment – for their prescriptions.

The math doesn't quite work out, but it does suggest that seniors enrolled in plans with flat-rate copayments rather than a 25 percent deductible are likely to pay more out-of-pocket for price-controlled drugs than if those drugs were not price-controlled.

Milliman's analysis suggests that 3.5 million Medicare beneficiaries could face higher out-of-pocket costs in 2026, with the average senior in that group spending 12% more than they otherwise would have.

For socially disadvantaged groups, the price increases are even more severe. For those with low incomes, costs could rise by 27 percent, while those insured in employer plans could see an increase of a whopping 29 percent.

Congress should address both rising premiums and rising out-of-pocket costs. What the Vice President should not do, however, is extend the IRA's drug price controls and benefit caps to private health insurance.

All workers would face dramatically higher premiums and potentially higher costs. Many would lose their insurance coverage. Until these problems are resolved, any expansion is premature and unwise.

The Anti-Inflation Act, like so many other Democrats' health care policies, is poorly designed. In the rush to pass such sweeping legislation along purely partisan lines, lawmakers overlooked important nuances. And now the bill is coming.

Joel White is president of the Council for Affordable Health Coverage, a nonprofit advocacy group dedicated to lowering health care costs for all Americans.