The Inflation Reduction Act, which was signed into law by President Biden last month, contains a number of social and climate policies, including legislation to protect recipients of Medicare from rising drug prices.
This Act has been watched closely by the healthcare industry as it aims to support Medicare recipients by placing a cap on out-of-pocket prescription drug costs. It allows Medicare to negotiate these costs with pharmaceutical companies. While the government will set eligibility parameters, such as the absence of generic equivalents and number of years as an approved US Food and Drug Administration’s (FDA) drug, we see several challenges and opportunities on the horizon.
On a strategic level, here are four ways that the industry will feel the effects of the new legislation, and how your organization can use it to further support your patients and members:
1. Higher Costs for Private Insurance Plans
As Medicare negotiates lower drug prices, the savings may shift to employer-sponsored health plans, leading to higher costs for members of private insurance plans. The direct effect on health insurance plans will vary, but Medicare-negotiated drug prices will surely bring in a wave of change for the stakeholders involved, including pharmaceuticals, payers, employers, or patients.
2. Employer Coverage
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Hospitals have historically benefited greatly from claiming that employers have an obligation to cover costs that they say are unmet by public payers. This raises the question of whether drug manufacturers will try to make a similar argument. If so, will employers be susceptible to the argument, or will they use the negotiated prices to their advantage?
3. Additional Responsibility
Part D plans, a federal program to help Medicare beneficiaries pay for self-administered prescription drugs, provide additional complexity. There will be an adjustment to a new benefit design that provides substantial member benefit. However, the changes include incentives for plans that will now have more responsibility in the catastrophic phase.
4. A Need for Transparency and Accessibility
This act opens a key communication channel between members and their Medicare insurer. Creating a transparent and accessible way for members to learn about how this act will affect them is critical. Ensuring that web properties, contact centers, and messaging is updated and clear is a priority as the Inflation Reduction Act takes effect. Marrying that information with overall brand differentiation and strong value propositions can help to drive current member loyalty and additional enrollment as seniors begin to take a closer look at how this legislation will affect them.
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Our experts can help identify strategic ways to capitalize on opportunities that new trends and legislation bring to healthcare organizations. Contact us to discuss your organizations’ needs.