The 2022 Inflation Reduction Act helps minimize the rising U.S. healthcare costs, including Medicare premiums, deductibles, and drug prices.

With inflation in the United States at a 40-year high, the strain on budgets across U.S. households continues to increase.

And it’s not just due to the rising housing, food, and gas prices.

Medical costs, such as doctor’s fees, hospital services and visits, and health insurance fees, are also affected by inflation and can play a significant role in your budget.

If you have Medicare coverage, you may wonder how inflation might influence your medical costs. Read on to find out.

Since July 2022, people living in the United States have seen a 2.4% increase in health insurance costs.

This includes the nearly 64 million Americans currently enrolled in Medicare.

A large portion of the Medicare population is retired, and many are living on a fixed income. This means that any unexpected medical bills, such as those for an expensive prescription drug or a specialist visit, may have to come out of their savings.

Here are some of the primary ways inflation can drive up your Medicare costs.

Deductibles

According to the Centers for Medicare & Medicaid Services, in 2022, people with Medicare coverage saw a 15% increase in deductibles for necessary outpatient services covered under Medicare Part B.

In 2023, Medicare decreased the annual Part B deductibles by 3%. But Part A deductibles increased from $1,556 in 2022 to $1,600 in 2023.

Premium increases

Part B coverage requires monthly premium payments. A high rate of inflation throughout 2021 led to an increase in monthly Medicare Part B premiums.

As inflation skyrocketed in 2022, so did Part B premiums, by about 14%.

However, In 2023, Medicare dropped its Part B plan premiums by about 3%. In 2024, Part B premiums are now $174.70 per month.

Prescription drug coverage

One of the largest contributors to rising healthcare costs in the United States is the cost of prescription drugs.

High drug prices often lead to less favorable health outcomes. When you’re unable to afford your medication, you’re less likely to take it regularly, and it’s less likely to work as effectively.

According to the U.S. Department of Health & Human Services (HHS), the average list price increase in prescription drugs in January 2022 was nearly $150 per drug (a 10% increase). In July 2022, the increase in the average cost per drug was $250 (a 7.8% increase).

Because drug manufacturers are unregulated, it’s not uncommon for drug prices to exceed the inflation rate.

A 2022 report by the HHS’s Office of the Assistant Secretary for Planning and Evaluation found that prices of certain medications doctors prescribe to treat lymphoma and leukemia increased by more than $20,000 in 2022.

In addition, prices for several chronic heart failure and hypertension drugs jumped by more than 500%.

The Inflation Reduction Act, signed in August 2022 by President Joe Biden, introduced specific measures to help minimize the effects of rising U.S. healthcare costs.

The 2022 Inflation Reduction Act includes provisions that put a cap on out-of-pocket costs for millions of Medicare beneficiaries and make vaccines free to all Medicare enrollees. The Inflation Reduction Act also gives Medicare the ability to negotiate the prices of some medications directly with drug manufacturers for the first time in Medicare history.

The new law affects people with Medicare in the following ways:

  • Beginning in October 2022, drugmakers will start to pay rebates to Medicare for drugs included in Part D coverage if the price increases exceed the rate of inflation. As a result, the prices of prescription drugs will increase at a much slower rate.
  • In 2023, out-of-pocket costs for insulin will be capped at $35, even if you haven’t met your Part D deductible.
  • In 2024, Medicare’s Extra Help program ended partial subsidies, covered more people, and expanded savings to prescription medications. Medicare beneficiaries who qualify for Extra Help pay:
    • $0 premiums
    • $0 deductibles
    • no more than $4.50 for generic drugs
    • no more than $11.20 for brand-name drugs
    • $0 for each covered drug once total drug costs reach $8,000 in a year
  • From 2026 to 2029, you may start to see a reduction in your prescription drug costs as Medicare-negotiated drug prices start to take effect.

Increases in healthcare costs due to inflation can affect your budget and health.

In a June 2022 Healthy Minds Monthly Poll conducted by the American Psychiatric Association, almost 90% of U.S. adults reported feeling anxious or very anxious about the effects of inflation.

In addition, nearly 50% of U.S adults said they worried about losing their source of income.

There are multiple ways you may be able to cope with an increase in healthcare costs:

  • Apply in time: The annual enrollment period for Medicare kicks off on October 15 and runs through December 7. This time frame gives you the flexibility to decide whether to enroll in a Medicare plan for the first time or to choose to change their coverage.
  • Consider your healthcare needs: When choosing a Medicare plan, be sure to account for all your healthcare needs, including your primary care doctor (and whether you would like to keep seeing them), any specialists you’re currently seeing, and any prescription medications you take.
  • Consider your lifestyle and personal health goals: You might want to think about your lifestyle habits and health goals so that you’re well prepared before you begin to search for savings and find the right Medicare coverage for you.

The current rate of inflation in the United States is affecting not just the price of energy, food, and housing but also Medicare costs.

U.S. adults, particularly those on fixed incomes, are experiencing more stress due to the effects of inflation as the costs of prescription drugs and medical services skyrocket.

While specific deductibles, such as the Medicare Part A deductible, increased in 2023, you can expect healthcare expenses to drop in 2024 and 2025, for the most part, thanks to the Inflation Reduction Act.