Inflation Reduction Act Saved American Seniors Nearly $1 Billion in the First Six Months of 2024

But an overall out-of-pocket cap for traditional Medicare is urgently needed.

The Department of Health and Human Services' latest report on Medicare Part D provides encouraging news for millions of Americans who rely on prescription drugs. Thanks to the Inflation Reduction Act (IRA), proposed by the Biden-Harris administration and passed by Congress in 2022, nearly 1.5 million Medicare beneficiaries saved close to $1 billion in out-of-pocket drug costs during the first half of 2024. This is a significant milestone in reducing the financial burden of uncovered medical expenses for America’s seniors and people with disabilities. 

For too long, Medicare enrollees had no limit on their out-of-pocket costs, leaving many vulnerable to devastating financial consequences, especially those who rely on life-saving medications. Before the IRA, some enrollees faced drug costs as high as $60,000 a year. 

This year marked the first-ever cap on those out-of-pocket costs, and the results have been transformative for many Americans even in just the first six months. The law’s current cap of $3,500 on out-of-pocket drug costs will drop even lower, to $2,000 next year, further alleviating the financial pressures on Medicare beneficiaries. 

What’s especially promising is that this cap isn’t just benefiting a few; it’s bringing widespread relief. If the $2,000 cap had been in place for 2024, about 4.6 million people would have hit that limit by mid-year and would have faced no additional costs for the rest of the year. This is real, tangible change for millions of seniors. 

For those grappling with chronic conditions like cancer, the savings are even more profound. A study published in September by JAMA found that the out-of-pocket cap saved cancer patients $7,000. Some of the most vulnerable populations — American Indian, Alaska Native and African American enrollees — have especially benefited from the cap.

The administration’s ongoing efforts to reduce drug costs include negotiating directly with pharmaceutical companies, allowing Medicare to leverage its bargaining power to secure lower prices for the most commonly used and most expensive drugs. The first round of negotiations is already producing savings, with prices expected to drop by as much as 79% for some medications starting in 2026. And for those with diabetes, the law’s $35 monthly cap on insulin costs offers a lifeline for millions of Americans who have struggled to afford this essential medication.

Despite victories, the fight is far from over

As we look ahead to 2025 and beyond, one thing is certain: The days of unlimited out-of-pocket costs for Medicare enrollees are behind us, but only for prescription medications. Congress and the next administration must push for an overall cap for people enrolled in traditional Medicare. Because of the lack of an overall cap, a stay in the hospital or extensive outpatient care can bury Medicare beneficiaries under a mountain of debt if they do not have a Medicare supplement policy to cover out-of-pocket obligations.

The lack of such a cap is a reason why many seniors are enticed to enroll in so-called Medicare Advantage plans despite their many unadvertised shortcomings, which we have detailed many times in this newsletter. And that $2,000-a-year cap on prescription drugs should apply to everybody, not just Medicare beneficiaries, as President Biden proposed in his State of the Union address earlier this year. Note: I run a coalition of organizations called Lower Out-of-Pockets NOW (LOOP NOW) that supports extending the $2,000-a-year cap for all Americans.

No one in the richest country on the planet should have to choose between their health and their financial well-being.