The Democrats' $800 billion reconciliation bill, known as the Inflation Reduction Act, could bring the first major changes to Medicare in more than a decade.
According to Axios, the bill, which passed in the Senate 51-50 on Sunday, with Vice President Kamala Harris casting the tie-breaking vote, would allow Medicare to negotiate prices with pharmaceutical companies for 10-20 medications from 2026-29 that would lower drug prices and "out-of-pocket" costs for the program's 64 million enrollees.
"Today, Senate Democrats sided with American families over special interests, voting to lower the cost of prescription drugs, health insurance, and everyday energy costs and reduce the deficit, while making the wealthiest corporations finally pay their fair share," President Joe Biden said in a statement Sunday. "I ran for President promising to make government work for working families again, and that is what this bill does — period."
The plan, which is a scaled down version of his $3.5 trillion "Build Back Better" plan that failed last fall, addresses Medicare recipients by allowing the drug prices to be negotiated and reducing the cap for prescription costs to $2,000 per year.
Biden said the plan will lower the premiums of 13 million Americans covered under the Affordable Care Act.
It also has a number of provisions to deal with climate change.
"This bill also makes the largest investment ever in combating the existential crisis of climate change," Biden said. "It addresses the climate crisis and strengthens our energy security, creating jobs manufacturing solar panels, wind turbines, and electric vehicles in America with American workers. It lowers families' energy costs by hundreds of dollars each year."
According to taxfoundation.org, the plan would penalize drug manufacturers with an excise tax of up to 1,900% to force companies to lower their prices on the small number of drugs covered by the new law, but while drug makers will likely take part in the negotiations, and lower some prices, they could also just pull the drugs out of the U.S. market rather than paying a penalty.
If successful, negotiating lower prices under the legislation is expected to reduce federal spending by $101 billion over 10 years.
Less revenue for drug companies, however, could also see a reduction in spending on research and development of new medications.
According to the Kaiser Family Foundation, "the number of Medicare beneficiaries who would see lower out-of-pocket drug costs in any given year under this provision, and the magnitude of savings, would depend on which drugs were subject to negotiation under the legislation and the price reductions achieved through the negotiation process relative to current prices."
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