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August 8, 2022

What you need to know about the $740B bill just passed by the Senate

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    The Senate on Sunday voted 51-50—with Vice President Kamala Harris casting the tiebreaking vote—to pass the Inflation Reduction Act, a $740 billion package that includes several major health care reforms.

    Health care provisions in the bill

    If passed by the House of Representatives and signed by President Joe Biden, the Inflation Reduction Act will allow Medicare to negotiate certain prescription drug prices with pharmaceutical companies, saving the federal government roughly $288 billion over 10 years, the Associated Press reports. That provision will apply to 10 drugs starting in 2026 and expand to 20 drugs in 2029.

    For Medicare beneficiaries, the bill will also introduce a $2,000 cap on out-of-pocket prescription drug costs starting in 2025, ensure seniors are able to receive free vaccinations next year, and cap the cost of insulin at $35 a month starting next year.

    The bill initially included a $35 monthly cap on insulin costs for all Americans. However, Senate Republicans successfully challenged the inclusion of a monthly insulin price cap on private insurance under the rules of reconciliation—a congressional budget process that protects certain tax and spending bills from a filibuster.

    The Inflation Reduction Act will also penalize drug manufacturers if they raise the prices of their drugs faster than the rate of inflation. If the increase in a drug's price outpaces inflation, the manufacturer will be required to pay a rebate to Medicare. The Senate parliamentarian ruled that this provision could apply only to Medicare under the rules of reconciliation, not to private insurance.

    According to an analysis by the Kaiser Family Foundation (KFF), these inflation-based rebates could apply to many drugs. The foundation's analysis found that half of all prescriptions covered by Medicare in 2019 and 2020 saw their prices outpace inflation.

    The bill also includes a provision that will allow the federal government to extend subsidies through the Affordable Care Act (ACA), initially passed in the American Rescue Plan, for three more years. These subsidies lowered premiums for Americans relying on the ACA marketplace, with four out of five enrollees qualifying for a plan with a premium of $10 or less per month, according to a government estimate.

    The bill will now head to the House where Speaker Nancy Pelosi (D-Calif.) said the chamber will "move swiftly to send this bill to the president's desk." Votes are expected to occur on Friday, the Associated Press reports.


    President Joe Biden praised the passing of the bill, saying Senate Democrats "sided with American families over special interests," adding that the bill's passage makes good on his campaign promise "to make government work for working families again."

    "The bill, when passed, will meet all of our goals: fighting climate change, lowering health care costs, closing tax loopholes abused by the wealthy, and reducing the deficit," Senate Majority Leader Chuck Schumer (D-N.Y.) said. "This is a major win for the American people and a sad commentary on the Republican Party as they actively fight provisions that lower costs for the American family."

    Senate Minority Leader Mitch McConnell (R-Ky.) decried the bill, condemning a "tidal wave of Washington meddling" that he believes would result from the prescription drug provisions, which would take "a buzz saw to the research and development behind new, lifesaving medical treatments and cures."

    An analysis by the Congressional Budget Office estimated that, under the bill, roughly 15 out of 1,300 drugs would not come to the market over the next 30 years, representing roughly 1% of all new drugs.

    In addition, some generic drugmakers are warning that having Medicare negotiate the prices of brand-name drugs may undercut competition from lower-cost generics and ultimately lead to higher drug prices over time, Axios reports.

    Still, Tricia Neman, director of the Program on Medicare Policy at KFF, called the bill a "huge breakthrough."

    "Congress has been talking about doing something about drug prices for decades," she said. "[This] may not be everything everyone wants, but it really is a big deal and it will provide significant help to literally millions of people who need it." (Mascaro, Associated Press, 8/5; Fram/Mascaro, Associated Press, 8/7; Cochrane, New York Times, 8/6; Cochrane/Friedman, New York Times, 8/7; Shivaram, NPR, 8/7; Duehren/Hughes, Wall Street Journal, 8/7; Simmons-Duffin/Aubrey, "Shots," NPR, 8/6; Owens, Axios, 8/8)

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