The Inflation Reduction Act Will Cut Health Care Costs for Tennesseans
President Biden believes that health care should be a right, not a privilege. Every American
deserves the peace of mind that quality, affordable health insurance brings, and Americans
facing illness should never have to worry about how they are going to pay for their treatment or
face a choice between buying life-saving medications and putting food on the table.
The Inflation Reduction Act of 2022 will lower health care costs for millions of Americans and
put money back in the pockets of American families and seniors. The Act will cap prescription
drug costs for hundreds of thousands of Tennessee Medicare beneficiaries, reduce health
insurance premiums for hundreds of thousands of Tennesseans by about $720 per year on
average while expanding coverage to about 56,000 Tennesseans, and cap insulin co-payments for
the tens of thousands of Tennessee Medicare beneficiaries that use insulin.
Cutting Prescription Drug Costs
Americans pay two to three times what citizens of other countries pay for prescription drugs. For
some drugs, U.S. prices are even higher than that. For example, a GAO study found that Spiriva,
used to control asthma and used by about 700,000 Medicare beneficiaries in 2020, had an
estimated U.S. net price of $250 in 2020 and cost between $30 and $52 in France, Australia and
Canada. Myrbetriq, used to control overactive bladder and used by over 600,000 Medicare
beneficiaries in 2020, had an estimated U.S. net price of $164 and cost $43 in Canada.
The Inflation Reduction Act finally takes on this problem by allowing Medicare to negotiate
prices for high-cost drugs. It also provides seniors and people with disabilities who have
Medicare coverage with new protections against unaffordable prescription drug bills.
• Protecting Hundreds of Thousands of Tennesseans from Catastrophic Drug Costs by
Capping Medicare Beneficiary Out-of-Pocket Costs in Part D at $2,000. Currently,
Medicare beneficiaries with conditions such as cancer, multiple sclerosis, and lung disease
can face thousands of dollars in out-of-pocket prescription drug costs, and millions of people
in Medicare struggle to afford their medications. The Act will require Part D plans to offer
improved financial protections that would phase in starting in 2024, with the $2,000 out-of-
pocket cap taking effect in 2025. Each year, that will benefit about 37,000 Tennessee
Medicare beneficiaries who would otherwise have out-of-pocket costs above the cap,
according to estimates from the Kaiser Family Foundation (KFF). And, for the first time, all
1.1 million Tennesseans with Medicare Part D will have the peace of mind of knowing their
pharmacy costs are capped.
• Saving Billions of Dollars for Seniors and People with Disabilities and the Federal
Government by Allowing Medicare to Negotiate Prices for High-Cost Drugs. By
bringing down the cost of these drugs, the legislation will save billions of dollars for both
Medicare beneficiaries, who will see reduced out-of-pocket costs, and the federal
government. Nationwide, KFF estimates suggest that some 5 to 7 million beneficiaries each
year use the types of high-cost drugs that would be subject to negotiation and could see
reduced cost sharing as a result.
• Addressing Rapid Prescription Drug Price Growth in Medicare. The Act requires
companies to pay Medicare a rebate if they increase drug prices faster than inflation. That
will achieve billions more in savings for the federal government and will further reduce out-
of-pocket costs for Medicare beneficiaries, starting in 2023.
• Saving Tennessee Medicare Beneficiaries Money by Capping Insulin Copays at $35 per
Month. Drug manufacturers have raised insulin prices so rapidly over the last few decades
that some Medicare beneficiaries struggle to afford this life-saving drug that costs less than
$10 a vial to manufacture. Starting in 2023, the legislation will cap the out-of-pocket cost of
insulin for Medicare beneficiaries at no more than $35 for a month’s supply. Some 83,000
Tennessee Medicare beneficiaries used insulin in 2020.
• Providing Extra Help Paying for Drugs for Tennessee Medicare Beneficiaries with Low
Incomes. The Act expands eligibility for full Part D Low-Income Subsidies – known as
Extra Help – in 2024 to low-income beneficiaries with incomes up to 150% of poverty and
modest assets. Currently, individuals with incomes between 135% and 150% of poverty only
receive partial help, meaning that they still pay premiums and face more significant co-pays.
About 15,000 Tennessee Medicare beneficiaries received partial Extra Help in 2020 and
could be helped by the expansion of income eligibility for full Extra Help, KFF estimates.
• Saving Tens of Thousands of Tennessee Medicare Beneficiaries Money by Ending Cost-
Sharing for Vaccines in Part D. While Medicare Part B covers vaccines such as the flu
vaccine at no cost-sharing, patients receiving vaccines covered under Medicare Part D, such
as the vaccine for shingles, must pay for a portion of the cost out of pocket. Starting in 2023,
the legislation will require $0 cost-sharing for vaccines for Medicare Part D beneficiaries.
Some 69,000 Tennessee Medicare beneficiaries received a Part D vaccine in 2020, and that
number is likely to rise as those vaccines become more affordable.
Lowering Health Insurance Premiums and Expanding Coverage
Since their creation in 2014, the Affordable Care Act (ACA) marketplaces and premium tax
credits have played a critical role in providing affordable, quality health insurance coverage for
people who don’t get health insurance through their jobs. As the ACA’s major coverage
expansions took effect, the share of Tennesseans without health insurance fell by 35 percent. But
because premium tax credits weren’t adequate for people with lower incomes, and weren’t
available to middle-income people with high premium burdens, some people still couldn’t afford
health insurance coverage or paid for health insurance at the expense of meeting their families’
other basic needs.
President Biden promised to build on the Affordable Care Act by making premium tax credits
more generous and lowering health care premiums for working families. The American Rescue
Plan (ARP) kept that commitment by improving premium tax credits, and helped the U.S. reach
its lowest uninsured rate in history. But those improvements were set to expire at the end of
2022. The Act continues those critical improvements through 2025, preventing premium spikes
this January. Continuing these ACA improvements means:
• Saving Hundreds of Thousands of Tennesseans about $720 per Year. About 274,000
Tennesseans with Marketplace coverage are saving an average of about $720 annually from
the ARP subsidies that the Inflation Reduction Act would continue. Those savings increase to
thousands of dollars per year for some middle-income older people who would otherwise
face very high premium burdens. Among those benefiting the most from these affordability
improvements are:
o Tennessee small business owners and self-employed people. ACA coverage plays
a critical role in providing affordable health coverage to 50,000 small business
owners and self-employed adults in Tennessee, Treasury data show. In fact, this
population makes up 26 percent of ACA marketplace enrollment among working-age
Tennesseans.
o Middle-income older people who have retired or don’t have health coverage
through their jobs. For example, a 60-year old Tennessean with income of $60,000
would pay about 19 percent of income for benchmark health coverage without
expanded premium tax credits, which cap premiums at 8.5 percent of income.
• Allowing Tens of Thousands of Tennesseans to Gain Coverage. About 56,000 more
Tennesseans will have health insurance next year compared to without the Inflation
Reduction Act, according to HHS projections. The Act’s coverage expansions will:
o Improve health outcomes and likely save lives. Health insurance improves access
to care and health, a large body of research finds. That includes a randomized trial
finding that expanding Marketplace coverage saves lives: mortality fell among people
who gained Marketplace coverage due to randomized outreach.
o Improve financial security. Health insurance reduces medical debt and improves
credit scores and access to credit, research finds – making it possible for people to
buy a home or take out an auto loan that in turn allows them to get or keep a job.
Health insurance also reduces the frequency of bankruptcies and evictions, with one
study finding that access to premium tax credits significantly reduces the share of
people delinquent on rent or mortgage payments.
o Narrow disparities in health coverage and access to care. Continuing the ACA
improvements will reduce uninsured rates for all demographic groups, but the
uninsured rate will fall disproportionately for Black people – narrowing existing gaps
in coverage, Urban Institute researchers estimate. Narrowing gaps in coverage also
narrows gaps in access to care, research finds.
