The Inflation Reduction Act - What Is It? How Will It Impact Medicare?

The Inflation Reduction Act was recently signed into law. This new legislation outlines the most significant changes to Medicare in almost two decades. 

The Inflation Reduction Act is in part intended to address the increasing costs of prescription drugs and revise the Medicare Act of 2003. Additionally, it will invest in domestic energy production and manufacturing with a goal of reducing carbon emissions by approximately 40% by 2030.

Below is a summary of the legislation’s most significant changes that relate to Medicare:

  • Negotiation Of Expensive Drug Costs. The Inflation Reduction Act will enable Medicare to negotiate with drug makers on the prices of a shortlist of the most expensive drugs, starting in 2026.
  • Protection From Soaring Costs. Starting in 2025, the maximum Part D out-of-pocket liability will be $2,000.

Several more important provisions of the Inflation Reduction Act will take effect in 2023:

  • Halt The Soaring Costs Of Insulin. The new law caps monthly costs for Medicare enrollees at $35 per month.
  • Inflation Control. Drug makers will be penalized in the form of "rebates" that they would be forced to pay to the government if they impose price increases that exceed general inflation. This provision gives drug makers a powerful disincentive to raise prices sharply.

Our team at Covenant Wealth Strategies will be incorporating these updates into our planning conversations to help educate and inform our clients about Medicare.

If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at to set up time to discuss further.