It may take a few years, but Medicare recipients will start paying less for some prescription drugs and out-of-pocket costs for medications will be capped annually at $2,000, according to a summary of the Inflation Reduction Act published by Financial Planning.
The legislation signed into law this week by President Joe Biden allows Medicare to negotiate prices with pharmaceutical companies, beginning with 10 prescription drugs in 2026 and 20 by 2029.
More immediately, pharmaceutical companies will have to pay rebates starting next year if they raise medication prices faster than inflation. There are also other perks in store for Medicare recipients: Out-of-pocket costs will be capped at $2,000 a year starting in 2025; and insulin costs for people with diabetes will max out at $35 a month.
“To make it so that they don’t face potentially catastrophic amounts of money coming out of a very limited budget — that’s going to be world-changing for them,” said Matthew Rutledge, a research fellow at the Center for Retirement Research at Boston College who co-authored a study that found a typical retiree spends about 25% of their Social Security on medical expenses, including Medicare premiums and out-of-pocket costs for prescription drugs. Read the full article.