Publisher Health

Steve Lubin spent a lot last year on insulin to control his Type 2 diabetes.

A retired nurse in Philadelphia, Mr. Lubin relies on Medicare for health coverage, including a Part D plan to cover drug expenses. Yet his out-of-pocket costs kept mounting, including a deductible of $480, monthly supplies of two forms of insulin, and higher prices once he entered the “coverage gap.” His total insulin tab in 2022: $1,582.

So Mr. Lubin, 68, was cheering for the sprawling federal Inflation Reduction Act, which among other provisions called for capping insulin prices for Part D beneficiaries at $35 a month, with no deductible. He signed petitions circulated by the American Diabetes Association and the Pennsylvania Health Access Network asking Congress to vote yes.

“My income is definitely down from when I was working, and the expenses go up,” he said. “It’s difficult.”

But Mr. Lubin also supported the bill because, after working in an intensive care unit for years, he had seen patients suffer the serious consequences of diabetes when they could not afford their prescriptions.

“You’d take their history and find out that they were rationing their insulin or couldn’t take it at all,” he recalled.

In August, Congress passed the bill, and President Biden signed it. Mr. Lubin’s out-of-pocket insulin costs for 2023 will fall to $630. The legislation establishes other requirements to lower drug prices for Medicare beneficiaries, about three-quarters of whom have Part D plans.

“It’s one of the biggest changes to the way Medicare deals with prescription drugs,” said David Lipschutz, associate director of the Center for Medicare Advocacy. “It signals lawmakers’ willingness to take on a very powerful lobby.”

Some provisions took effect on Jan. 1; others will phase in over several years. “Collectively, these represent substantial out-of-pocket cost savings, especially for those who use expensive drugs,” said Juliette Cubanski, deputy director of the Kaiser Family Foundation’s Medicare policy program. They could also bolster Medicare by reducing its spending.

Beneficiaries will see three significant changes in 2023.

The first is the $35 monthly cap on insulin, which will affect more than a million insulin users who have Part D through Medicare Advantage plans or free-standing plans purchased along with traditional Medicare.

From 2007 to 2020, beneficiaries’ aggregate out-of-pocket insulin costs quadrupled, even though the number of users only doubled. They spent an average $54 a month on insulin in 2020, according to a Kaiser Family Foundation analysis.

The cap will save average users at least 35 percent and applies immediately, without requiring them to first pay the Part D deductible, which amounts to $505 in 2023. About 10 percent of Part D insulin users, like Mr. Lubin, paid more than $1,300 out of pocket in 2020 and will save much more.

Although all Part D plans must cap the cost, they aren’t required to offer every form or brand of insulin.

“People should make extra sure their plan isn’t dropping their insulin from the formulary,” Dr. Cubanski said.

But Medicare’s open enrollment period ended on Dec. 7, and its online cost comparison tool doesn’t reflect changes mandated by the new law, which was passed after Part D plans had already set prices.

“People might have made different choices if they’d had more information,” Dr. Cubanski said.

So Medicare has begun a one-time special enrollment period through the end of 2023, allowing insulin users to drop, add or change Part D plans. Beneficiaries have to call the 1-800-MEDICARE number to make a switch. Counselors at State Health Insurance Assistance Programs can also help with the decision.

In the second major change, adult vaccines covered by Part D, typically offered at pharmacies, are now free, without deductibles or co-pays, just as the flu and pneumonia vaccines (covered by Part B) have been.

That will in particular improve access to the shingles vaccine, the most expensive adult vaccine. In 2018, the Kaiser Family Foundation reported, Part D enrollees paid $57 per dose out of pocket — and each recipient needs two doses.

Although shingles risk rises with age, only 46 percent of adults over age 65 had been vaccinated by 2020, the Centers for Disease Control and Prevention reported. Rates were much lower among Black and Hispanic older adults.

“It’s disappointing because this is a spectacularly effective vaccine,” said Dr. William Schaffner, an infectious disease specialist at Vanderbilt University Medical Center. Shingrix, the current vaccine, is about 90 percent effective, and a new study has found that its protection persists a decade after vaccination.

A serious disease in itself, shingles can also cause the lingering nerve pain called post-herpetic neuralgia. “It varies from being annoying to being absolutely life-changing,” Dr. Schaffner said.

With Shingrix available at pharmacies without charge, “the receptivity to vaccination for older adults will increase substantially, especially among underserved populations,” he predicted.

Also free: hepatitis A and hepatitis B vaccinations, and Tdap, which protects against tetanus, diphtheria and pertussis (whooping cough).

The third major change: When prices for drugs covered under Part D, and some under Part B, increase faster than the inflation rate, the law now requires drug manufacturers to pay rebates or face stiff penalties.

Although those rebates will go to Medicare, not to individuals, “if you’re responsible for a portion of a drug’s cost and there are limits on how much that can increase, in theory your costs should decrease,” Mr. Lipschutz said.

It will take months for Medicare to determine which price increases will prompt rebates and how much the rebates will amount to. But the Congressional Budget Office has estimated that this provision will save Medicare more than $56 billion over 10 years.

Medicaid has employed a similar strategy since 1990. “It definitely has an effect on keeping spending in check,” Dr. Cubanski said. “The hope is that it will have the same effect for Medicare.”

The changes in subsequent years will be more dramatic.

In 2025, Medicare will set a $2,000 annual limit on out-of-pocket spending for Part D beneficiaries. “Nowadays, a lot of drugs can cost $500 or $1,000 a month,” Dr. Cubanski said. “Or maybe you take 10 medications, and that adds up to high out-of-pocket costs.”

A kind of cap will take effect even sooner, in 2024. That’s when Medicare will eliminate the 5 percent co-pay that beneficiaries are responsible for once they pass the catastrophic expenditure threshold, effectively limiting out-of-pocket costs to about $3,250. The $2,000 cap takes hold the following year. Access to low-income subsidies will broaden, as well.

Probably the most significant policy change is that the new law requires Medicare to begin bargaining with drug manufacturers, “the first time the federal government is not just allowed but required to negotiate prices on behalf of Medicare beneficiaries,” Dr. Cubanski said.

Starting in 2026, the prices of 10 brand-name drugs covered by Part D, selected from those with the highest Medicare spending, will reflect those negotiations. The drugs must have been on the market for several years with no generic or biosimilar competitors.

Medicare will provide negotiated prices for 15 additional drugs the following year, another 15 in 2028 and 20 each year thereafter. Negotiated prices for selected Part B drugs will be available in 2028.

Given the thousands of covered drugs, “it’s a pretty modest proposal when it comes to restraining the cost,” Mr. Lipschutz said. Nevertheless, he added, “the pharmaceutical industry is likely to try to undermine this law — it will be looking for loopholes and escape hatches.”

Republicans in Congress, nearly all of whom voted against the Inflation Reduction Act, have already introduced legislation to repeal the measures intended to lower drug prices, and supporters are braced for court challenges, too.

But for now, the law is in effect. “It can give people peace of mind,” Dr. Cubanski said. “They won’t go bankrupt or go into medical debt to afford the prescriptions they need.”