The Biden administration’s move to use Medicare trust funds to lower senior prescription drug premiums ignites controversy.
At a Glance
- The Biden administration announced lower average monthly premiums for prescription drugs for older Americans next year.
- Billions of dollars in subsidies for insurers were used to achieve this reduction.
- Premiums would have increased due to a $2,000 annual cap on out-of-pocket spending and other Medicare changes under the Inflation Reduction Act.
- Republicans criticized the offset plan as a political maneuver and argued it would only provide temporary relief.
Use of Medicare Trust Fund Sparks Debate
The Biden Administration announced a strategy to use billions from a Medicare trust fund to lower average monthly prescription drug premiums for seniors. This maneuver aims to negate potential rate hikes prompted by the Inflation Reduction Act’s provisions. The administration plans to spend billions to mitigate the potential increase, providing additional funds to private insurers to keep premiums low.
Premiums for Medicare Part D would have likely increased due to a $2,000 annual cap on out-of-pocket spending and other changes prompted by the Inflation Reduction Act. To avoid these increases, private insurers are receiving an extra $15 per member per month. The administration’s actions appear to fulfill election-year promises for older Americans, providing immediate financial relief.
President Biden has built on the Affordable Care Act by:
đź©şLocking in lower health insurance premiums for millions of Americans
đź’‰Capping monthly insulin costs at $35 for seniors on Medicare
đź’ŠGiving Medicare the power to negotiate lower drug prices— The White House (@WhiteHouse) March 23, 2023
Republican Criticism of the Plan
Critics argue this approach is designed more for political advantage than for genuine policy improvement. Republicans insist it offers only temporary relief and accuse the administration of using federal funds for election-related purposes. They also question the legal basis for shuffling billions into these subsidy programs without congressional approval.
“The administration came up with this Part D demo in order to shovel billions of dollars more into the program to mask the huge premium increases that would be coming next year without it,” Joe Grogan, a senior White House official under former President Donald J. Trump, said in an interview.
The legality of the plan remains a concern, with some questioning its constitutionality. However, the Republican-led opposition mainly focuses on how the decision skews the fiscal responsibility of the Medicare program.
Stabilizing the Medicare Part D Market
Supporters argue that the plan is essential for stabilizing the Medicare Part D market. Senate Finance Committee Chair Ron Wyden backs the move, indicating that it helps insurance companies adapt to the changes brought about by the Inflation Reduction Act. Alongside these efforts, the Congressional Budget Office estimates that the drug pricing provisions will save Medicare $98.5 billion over the next decade.
“The Biden-Harris administration is taking additional steps that I fully support to keep premiums stable as insurance companies learn how to be competitive in this market,” Wyden said.
The Inflation Reduction Act also enacts several key measures, including capping out-of-pocket spending for Medicare Part D enrollees starting in 2024 and limiting monthly insulin costs for Medicare beneficiaries beginning in 2023. Starting in 2026, the federal government will negotiate prices for high-spending Medicare Part B and Part D drugs, which could further contribute to lowering overall healthcare costs.
