Future of Health Care: Higher Costs for Some, Lower for Others
By 2026, the landscape of health care is expected to look quite different. Certain Americans can look forward to reduced expenses, as the first Medicare drug prices that have been negotiated come into play. However, others might see an increase in their expenditure as tax credits from the Affordable Care Act cease and Medicaid coverage becomes more uncertain, due to significant cuts in state funding.
This divide in health care costs is the outcome of decisions made by the recent administrations. On one hand, the Inflation Reduction Act was signed into law, enabling Medicare to negotiate prices on some of its most expensive medications. On the other hand, a massive bill was passed that drastically cut funding for Medicaid, without extending ACA subsidies.
Medicare Drug Costs: A Silver Lining
Starting the new year, the first negotiated drug prices will be implemented for Medicare beneficiaries. These prices will apply to the 10 most costly drugs in the program, including certain blood thinners and diabetes medications. These drugs are used by nearly 9 million older adults.
Next year, it's expected that out-of-pocket costs for these negotiated medications will decrease by more than half on average. Seven of these drugs will cost under $100 per month. It's projected that enrollees will save $1.5 billion in out-of-pocket costs next year alone.
Limiting Out-of-Pocket Expenses
The Inflation Reduction Act has also placed a limit on annual out-of-pocket prescription drug spending for Medicare enrollees. This year, the limit was $2,000, and it's expected to rise to $2,100 by 2026. In 2023, a cap of $35 a month was imposed on out-of-pocket costs for insulin.
Despite these benefits, the Inflation Reduction Act has had some unintended negative effects. It has led to higher initial prices for new medications, as it penalizes companies for excessive price increases from year to year. Therefore, drugmakers are setting their prices higher to begin with.
Uncertainty for ACA and Medicaid
Moves by previous administration and lawmakers have created uncertainty regarding health care costs. Enhanced ACA subsidies that were instrumental in maintaining affordable premiums are expiring, as lawmakers declined to extend them. As a result, premiums could rise by up to 114% on average, when coupled with rate increases by insurers.
Alterations to Medicaid funding, including the termination of a financial incentive for states to expand Medicaid, are set to take effect soon. This means that in states that haven't expanded Medicaid, low-income adults will remain in a so-called "coverage gap", where they earn too little to afford ACA coverage but don't qualify for Medicaid.
Potential Lower Drug Costs for Non-Medicare Individuals
However, there's a chance that people not on Medicare might see a decrease in their drug costs, thanks to efforts from the previous administration. It has been pushing to align the cost of prescription drugs in the U.S. with the lowest prices in other wealthy countries. Consequently, deals have been struck with 14 pharmaceutical companies, who have offered a mix of lower prices in exchange for tariff relief.
Regardless, the reduced costs offered may still not make certain drugs more affordable for everyone. They're lower for those who pay cash, but still not low. If health insurance is unaffordable due to lost subsidies, it seems unlikely that these individuals would have the resources to pay out of pocket for drugs.
For Americans on ACA plans, there may still be hope if Congress reaches a deal to extend subsidies next year. Despite resistance against efforts to extend the subsidies, there's a chance that these could be retroactive to Jan. 1, allowing people to sign up for coverage.