Retirement Matters
September 2023
Inflation Reduction Act (IRA) — August 16 marked the one-year anniversary of the IRA signed by President Biden. This new law includes historic prescription drug provisions that are providing benefits to Medicare beneficiaries already, plus adding new benefits in the future. Seniors may not need to choose between essentials like food and medicine. Now, many retirees may actually be able to afford crucial medications rather than needing to cut pills in half or not filling prescriptions due to their high costs.
Your Drug Benefit — In general, Michigan state employee retirees, within the Defined Benefit plan, receive health care insurance through Medicare Advantage (MA), rather than traditional Medicare, unless they choose to opt out. These new IRA changes to Part D prescription drug coverage generally apply to MA plans too and are known as Medicare Advantage Prescription Drug (MA-PD) plans. This discussion is “hot off the press” so it applies to MA plans nation-wide and gives you a general idea of new changes. Specific coverage for your Michigan State Employee Retirees MA plan is not yet available.
Changes effective in 2026, that allow the Medicare program to negotiate the prices for certain drugs, are projected to yield the largest amount of savings to the Medicare program itself. Selected drug provisions include:
- Allows Medicare to negotiate with drug manufacturers for the price of some Part D and Part B drugs effective in 2026.
- Caps beneficiary out-of-pocket Part D drugs costs at $2,000 per year in 2025. It also allows spreading of costs over the course of the year, in 2024, and eliminates the 5 percent coinsurance for Part D catastrophic coverage.
- Penalizes drug-makers for raising prices above the rate of inflation, imposes checks on the annual rise in costs of drugs in 2023 and Part D premiums in 2024.
- Limits monthly out-of-pocket copays for insulin to $35 in 2023.
- Eliminates cost-sharing for adult vaccines covered under Part D in 2023.
- Expands access to the Part D Low-Income Subsidy in 2024.
Price Negotiations — At first, only ten drugs will be eligible for negotiations, and new brand-name drugs are excluded. The number of drugs on the list to be negotiated expands next year to 15, followed by another 15 medications the year after. While a lower price will be negotiated for the first ten drugs, it will not go into effect until 2026. You may have heard the drug names or listened to snappy songs advertising these drugs on TV. See the drug list for the first round of negotiation that includes medications treating heart disease, diabetes, and several other medical conditions:
- Eliquis, for preventing strokes and blood clots
- Jardiance, for diabetes and heart failure
- Xarelto, for preventing strokes and blood clots
- Januvia, for diabetes
- Farxiga, for diabetes, heart failure, and chronic kidney disease
- Entresto, for heart failure
- Enbrel, for arthritis and other autoimmune conditions
- Imbruvica, for blood cancers
- Stelara, for Crohn’s disease
- Fiasp and NovoLog, insulin products for diabetes.
Fairness Over Profits — Drug manufacturers made $493 billion in revenue from these ten drugs. And, these drugs represent more than $170 billion of Medicare’s gross expenditures as reported by the Protect Our Care non-profit organization. So, its no wonder that large drug companies are going to court to challenge Medicare’s authority to negotiate drug prices.
What’s at Stake? — Don’t take this new law for granted. Your support is needed to keep these improvements and enlarge the number and type of medications subject to negotiation. What’s at risk is Medicare’s new found power to negotiate lower prices for these popular but expensive prescription drugs. Also, at risk is $98.6 billion in Medicare savings over the next ten years to lower the cost for patients and taxpayers. Common sense Medicare savings are needed to avoid potential future deficits. It would also lower Part D premiums and out-of-pocket drug costs for those covered by Medicare. Senior’s health depends on lowering the price for these drugs. They are paying up to $6,500 in out-of-pocket costs per year for these prescriptions. About 9 million seniors that take the ten prescription drugs on the negotiation list will pay less for the medications they require.
Drug Affordability Board — In Michigan, Governor Whitmer has also been working on this drug affordability issue at the state level for several years. She recently called for an independent, nonpartisan Prescription Drug Affordability Board. This received praise from health groups but criticism from prescription drug makers.
Loneliness Epidemic — According the U.S. Surgeon General, half of U.S. adults are lonely, increasing their risk of heart disease by 29 percent, stroke by 32 percent, and dementia by 50 percent. Lower your health care cost by improving the quality of your social relationships and reach out to those at higher risk.
AND NOW FOR THE WEATHER
Keep the Lights On — Your State policy makers are hard at work representing consumer interests first. Public utilities have come under heavy criticism over several long-lasting power outages from severe weather. Governor Whitmer recently announced goals for energy that require utilities to generate 100 percent of their power from renewable sources and putting the Public Service Commission (PSC) in charge of large-scale solar and wind facilities. This would consolidate the decision-making process within the PSC to ensure that local voices are listened to and the decision-making process can move faster.
The PSC is also considering a proposal that would penalize utilities for repeated, lengthy power outages. Attorney General Nessel supports legislation that requires utilities to perform or refund consumers their money. The focus is to improve the service for customers rather than passing the utilities rate increase revenue on to shareholders. Michigan customers suffered frustration the week of August 24 as tornadoes hit the state leaving customers without reliable electricity. This change would link utility provider earnings to outage frequency. This proposal aims to improve services given the number and duration of power outages which have occurred over and over again. The proper incentives and disincentives are needed to improve reliability and resilience so we can see fewer and shorter outages.
Editor’s note: Joanne Bump serves as feature columnist for “Retirement Matters.” Column content is time sensitive and is based on information as of 5/7/23. Joanne can be contacted by e-mail at joannebump@gmail.com.
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