Due to provisions of the Inflation Reduction Act (IRA), seniors will see a significant jump in premiums for Medicare prescription drug plans (Part D) and Medicare Advantage (MA) this October.
“Democrats know it is coming but instead of being honest and preparing the more than 65 million Medicare beneficiaries for a cost spike, many of whom are on fixed incomes, they are pulling every magic trick possible to have seniors look anywhere but at the truth,” said Joel White, founder and president of Horizon Government Affairs, a health care consultancy.
White says that instead of lowering health care costs, the IRA is a “masterplan in cost shifting.”
“Unfortunately for seniors, those costs are being shifted onto them through higher premiums and out-of-pocket costs—22 percent on average this year, and possibly more than doubling next year,” said White.
Political Fallout
Medicare premiums for the following year are announced in October. This year, the anticipated spike will occur before a general election when voters will be choosing a president, representatives in Congress, and a third of the U.S. Senate.
Premium increases could be embarrassing to the Biden administration and Democrats who pushed the IRA as a bill to make health care more affordable. The IRA capped insulin costs under Part B at $35 a month, eliminated cost-sharing for recommended adult vaccines under Part D, and limited out-of-pocket drug costs under Part D to $2,000 a month. It also forces drug makers to negotiate with Medicare on the price of 10 common drugs in the first year.
“So, while Democrats are shouting from the campaign trail about their win over health care costs, seniors will be scrambling to figure out how to pay for that win,” said White.
Shell Game
A KFF (formerly, the Kaiser Family Foundation) report, titled “Medicare Part D in 2024: A First Look at Prescription Drug Plan (PDP) Availability, Premiums, and Cost Sharing,” predicts a 20 percent increase or more in Medicare Part D premiums.
According to the report, although the Inflation Reduction Act included a premium stabilization provision that capped annual growth in the Part D base beneficiary premium at 6 percent, the law did not apply this 6 percent cap to individual plan premiums that enrollees pay.
The Part D base beneficiary premium of $34.70 for 2024 is based on standardized bids submitted by Medicare and MA prescription drug plans to cover basic Part D benefits in 2024, while actual Part D plan premiums vary across plans and may be higher or lower than the base beneficiary premium, depending on several factors.
The estimated average enrollment-weighted monthly premium for Medicare Part D stand-alone drug plans is projected to be $48 in 2024, based on current enrollment, up 21 percent from $40 in 2023.
Medicare Advantage Hit
Health care consulting and advisory firm Avalere predicts over eight million enrollees in stand-alone PDPs (another term for Medicare Part D) could see an increase of more than 25 percent in their premiums in 2024 due to average plan bid increases of 104 percent for prescription drug plans and 63 percent for MA plans.
MA is a popular alternative to fee-for-service Medicare, allowing enrollees to get comprehensive coverage under one plan offered by approved, private providers. Costs for MA plans are generally lower than traditional Medicare.
President Biden promised to cut prescription drug costs and hold the line against Medicare spending cuts, but the IRA extensively reallocated Medicare funding and shifted the burden of cost cuts to MA providers, who could pass them along to seniors through higher premiums.
False Promises
The result of these funding changes will disproportionally burden older and lower-income Americans says John Goodman, president and CEO of the Goodman Institute for Public Policy Research and co-publisher of Health Care News.
“President Biden has promised older voters that he is lowering prescription drug prices and will stop any attempt to cut Medicare spending,” said Goodman. “Yet Medicare beneficiaries are paying 22 percent more in Part D premiums for prescription drug coverage than last year. This October, when the 2025 rates are announced, industry experts believe premiums will double.”
And there are cuts to Medicare spending, says Goodman.
“The second promise appears to ignore that the Inflation Reduction Act cut more than $300 billion in subsidies for Part D insurance over the next 10 years,” said Goodman. “Furthermore, the federal government has been paying 80 percent of the cost of catastrophic prescription drug insurance. Under the IRA, that drops to 20 percent next year, and the bulk of that reduction is shifted to private insurance plans. Since the market for Part D insurance is very competitive, those costs are being passed on to customers as higher premiums.”
Reverse Robin Hood
Goodman says the cost-savings Biden promoted will be spent to fund Obamacare and other administration priorities.
“A large chunk of it is being used to subsidize insurance under the Affordable Care Act that higher-income individuals buy in the marketplace exchanges, with individuals earning more than $600,000 sometimes receiving a partial subsidy,” said Goodman.
“Another large chunk is spent on green energy companies and subsidies for buyers of electric vehicles,” said Goodman. “All told, the IRA is a ‘reverse Robin Hood’ bill. It takes from the poor and the middle class and gives to the rich. Despite repeated attempts by President Biden to spin the Inflation Reduction Act as a cost-saver, it is a piggy bank for the government to finance non-health-related projects that often benefit the wealthy.”
Kevin Stone (kevin.s.stone@gmail.com) writes from Arlington, Texas.