The Inflation Reduction Act of 2022 is packed with provisions about tax calculation and collection and climate change. It’s also got provisions worthy of the attention of anyone handling injury cases. Some of these provisions have been widely, but not fully, publicized.
Medical Insurance Premiums
Remember those three ways to evaluate future medical expenses? People who get their health insurance through health exchanges like Covered California were scheduled to see a major rise in premium expense at the end of this year. The Department of Health and Human Services projected that three million people would lose their health insurance coverage. The Inflation Reduction Act continues the subsidies that make premiums under the Affordable Care Act actually affordable through 2025.
2025?, you may say. That’s not very long when computing a person’s lifetime medical expense. True, but it is also true that once a public benefit is entrenched, Congress would find it very difficult to take it away. Skilled negotiators know how to fashion settlements which anticipate these events.
Downward Pressure on Medication Expense
Drug companies’ profits are soaring. One reason is that when Part D coverage became law, the compromise was a ban on Medicare being able to negotiate drug prices with drug companies. This contrasts with the way the Veterans Administration manages their drug costs. Medicare accounts for one-third of all prescription spending in the United States.
While there has been a lot of publicity about the new law granting Medicare negotiation power for the first time, the benefit is more meager than at first glance. First, it doesn’t start until 2026, and even then it’s not a blanket change. It applies to 10 drugs in 2026, 15 in 2027, 30 in 2028 and 40 in 2029 and after. The affected medications are to be chosen from the 100 most expensive pharmaceuticals (50 from Part D, 50 from Part B). What’s more, the drugs subject to price negotiation cannot include conventional drugs that have been approved for marketing for nine years, biotech products with marketing approval for13 years, or “orphan” drugs — those with exclusive FDA approval to treat certain rare conditions. This brings most drugs close to the end of the life of their patent, after which lower-cost generics will become available.
Those of us who have been evaluating future medical expenses for a while have learned not to rely on prescription costs decreasing because the injured person’s current medications are going off-patent. Drug companies are always innovating. Just when it seems like the availability of a generic will reduce ongoing prescription expense, the injured person gains access to a new, better drug with a high price tag.
The Inflation Reduction Act limits out-of-pocket spending by Part D enrollees to $2,000 per year. Premium increases are limited to 6% a year from 2023 through 2030. These limits provide better insurance coverage, but due to the collateral source (civil) and primary payer (WC) rules, won’t change case evaluation without meaningful price reduction. On the other hand, the limitation on how much the injured person will actually have to pay can encourage greater negotiation flexibility.Stay Vigilant
Depending on how the political winds blow, these changes might be just the first step toward changing how Americans pay for healthcare. Or it may take decades before more important changes occur. News reports typically ignore the effect of such laws on dispute negotiations, so you will have to read between the lines and stay alert. Working with a skilled, experienced mediator can help you navigate these shoals.