What would the federal Inflation Reduction Act mean for Californian’s health?

This week, the U.S. Congress is poised to vote on a much anticipated package of health and other reforms that will provide both immediate and long-term relief from rising health plan premiums and prescription drug prices. In addition to notable climate change and tax policy provisions, the Inflation Reduction Act represents the most impactful federal legislation on health costs since the passage of the Affordable Care Act.

With the Inflation Reduction Act, California will get real relief from inflated health plan premiums and prescription drug prices. It reforms that patient advocates have sought for years, if not decades, including:

  • It extends significant subsidies to 1.7 million enrollees in Covered California health plans, limiting their premiums to no more than 8.5% of income and shielding them for a premium spike of hundreds or thousands of dollars this year.
  • It allows Medicare to negotiate the price of prescription drugs – a reform sought by consumer advocates for decades – as well as other reforms to cap costs for needed medications, including insulin.

It’s unfortunate we may see a divided, party-line vote on a package that provides so much help to afford health care, especially in a high-cost state like California where such help is so urgent, Californians are crying out for help to afford health and other necessities and we urge all California Congressmembers to vote for consumers and against Big PHARMA.

WATCH : California experts and health advocates weigh in on the statewide, regional, and community health care impacts of the federal Inflation Reduction Act

COVERED CALIFORNIA PREMIUM ASSISTANCE: Without the Inflation Reduction Act, the additional financial help that virtually all Covered California enrollees have enjoyed in 2021 and 2022 will expire at the end of the year. This affordability assistance capped premiums at 8.5% of income for all enrollees and even less for lower income consumers. These subsidies have been very successful, leading to an increase in health coverage of 200,000 more Covered California enrollees, saving thousands of dollars in premium costs for most who were already enrolled, and stabilizing the market with limited rate increases.

Inaction could lead to massive premium spikes for Californians who purchase health care on their own. Without an extension, the average Covered California enrollee will likely see an 83% increase in premiums, costing Californians and their families an average of over $1,000 per year. These impacts would vary by income range.

  • For those under 250% of the federal poverty level (around $34k for an individual), the average increase would be 124%, costing already struggling low-income Californians over $800 more per year.
  • Middle-income Californians above 400% of the poverty level (around $54K for an individual, $111K for a family of four) who are already feeling the squeeze of inflation would see their health care premium costs increase over $3,600 per year.

Other major variations will be seen by California regions:

  • Counties with the biggest potential increases include Imperial (438% increase), Merced (259% increase), Inyo and Mono counties (197% increase).
  • By Covered California region, the biggest percentage increases would be in the Central Valley (116%), Northern California (142%) and the Sierra Nevada mountain counties (321%).
  • Also hit hard will be the regions who have higher numbers of Californians enrolled in Covered California, such as Orange County with the second most enrollees of any county at 138,898. These Orange county residents will see their health care premiums rise an average of $1000 per year. But middle-class Orange County residents will see even bigger hikes – paying an average of $2393 more year more.

While this may be a party line vote, the impacts will be felt in red and blue districts alike. With regard to Congressional districts, some of the districts that will be hit the hardest, with premiums doubling or more for subsidized Covered California members, span the political spectrum:

  • Most impacted Northern California districts and the percent increases: LaMalfa (CD1, 138%), Garamendi (CD3, 114%), McClintock (CD4, 106%), Matsui (CD6, 113%), Bera (CD7, 107%), Eshoo (CD17, 101%), and Lofgren (CD19, 107%)
  • Most impacted Central Valley districts and the percent increases: McNerney (CD9, 104%), Harder (CD10, 103%), Costa (CD16, 151%), Valadao (CD21, 121%), and McCarthy (CD23, 101%)
  • Most impacted Southern California districts and the percent increases: Carbajal (CD24, 128%), and Vargas (CD51, 125%).

If Congress does not act, California consumers would lose over $1.7 billion in affordability assistance. While the state budgeted funding to backfill, it is just a fifth of what we would lose.

PRESCRIPTION DRUG REFORM: The three-year extension of Affordable Care Act affordability assistance in the Inflation Reduction Act would be largely funded by prescription drug price reform. The benefits of the drug reforms in the bill would be historic, and finally enacting decades long health care and consumer advocate goals. A recent KFF analysis estimated that over 700,000 Californians in Medicare would benefit in multiple ways:

  • Savings for the Government and Taxpayers:
    • Allows Medicare to negotiate prescription drug prices, currently explicitly prohibited in the Part D law. Under a new Drug Price Negotiation Program starting in 2023, the HHS Secretary would be required to negotiate for 10 of the most expensive drugs that lack market competition, going into effect in 2026, and then for 20 drugs by 2029.
    • While advocates sought the ability to negotiate for more drugs, getting at the most expensive drugs both sets a precedent to scale up in the future, and is meaningful since government spending is driven by a relatively small number of drugs. For example, the top 50 drugs under Part B account for 80% of the spending.
  • Savings for Seniors and other Medicare recipients:
    • Sets a $2,000 out-of-pocket cap for prescription drug spending for Medicare Part D beneficiaries, where there was no limit previously. According to the Kaiser Family Foundation, around 115,000 Californians in Medicare Part D have annual out-of-pocket drug costs over $2000 and would directly benefit.
    • Increases premium and co-pay assistance, by raising the eligibility from 135% to 150% of the poverty level. Over 24,000 Californians in Medicare Part D are estimated to benefit.
    • Ensures that all vaccines for older adults are available for free. Previously, Medicare covered some but not all vaccines. For example, the shingles vaccine is not included in Medicare Part A or B, and if not in Part D, could cost $190. Over 460,000 Californians are estimated to benefit from this provision.
  • Savings for all:
    • Requires drug companies that hike the prices of existing drugs above the rate of inflation to pay rebates for the difference. Just this year, some drug companies increased prices upward of 16%—more than double the rate of inflation—making already expensive drugs even more unaffordable. This rebate rule would be market wide, helping those with public or private insurance, or paying out of pocket.
    • Prohibits pay-for-delay tactics where drug companies seek to block or push back the introduction of cheaper, generic alternatives, an issue Health Access has worked on for year, helping pass AB824(Wood) in 2019.

So many Californians are reminded of inflated drug prices every month as they visit the pharmacy or pay a premium. After decades of discussion, this package finally takes a firm step to use the government’s purchasing power to negotiate lower prices, and provide real relief to those in Medicare and beyond.

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