What is the Inflation Reduction Act and how will it impact Medicare?

Published by Medicare Made Clear®

Introduced in 2022, the Inflation Reduction Act (IRA) is a federal law that has made a number of improvements to the Medicare program. Among other things, the IRA has expanded Medicare benefits, helped reduce Medicare members’ out-of-pocket costs for prescription drugs, and expanded coverage for many recommended vaccinations.

Learn more about the developments that have already been enacted and get the details on what can be expected in the coming year.

How has the IRA affected Part D coverage?

  • Member cost-sharing has been capped for Part-D-covered insulin products at $35/month
    • Medicare Part D covers these forms of insulin:
      • Injectable insulin that is not used with a traditional/reusable insulin pump
      • Insulin used with a disposable pump 
  • Vaccines that are recommended by the Advisory Committee on Immunization Practices (ACIP) are now available to members at no cost.
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How will the Inflation Reduction Act affect my Medicare Part D coverage over time?

What changed in 2024?
  • Members no longer need to pay any cost-sharing for Medicare covered Part D medications once they reach the catastrophic phase of their plan.
  • Full eligibility for the low-income subsidy program (or “Extra Help”) was expanded for those with Medicare Part D.
What changed in 2025?
In 2025, the Inflation Reduction Act introduced additional changes related primarily to prescription drug costs and payment flexibility. These changes included:
  • Lower maximum out-of-pocket prescription drug costs: In 2024, Medicare members were required to hit an $8,000 out-of-pocket maximum on prescription drug expenses before entering the Catastrophic stage. In 2025, this out-of-pocket maximum changed to $2,000.
  • No more coverage gap: Starting in 2025, there are only 3 Part D prescription drug coverage stages: deductible (depending on your plan), initial coverage and catastrophic coverage. No more "donut hole", no coverage gap.
  • New Medicare Prescription Payment Plan: Medicare members with Part D coverage can spread their prescription drug out-of-pocket costs into monthly payments over the course of the plan year. These costs will be billed to members by their plan. Certain Medicare members with high drug costs early in the plan year may benefit from this new payment plan, but it's important to know this program does not lower prescription drug costs.
What will change in 2026?
  • For the first time, Medicare had the ability to negotiate drug prices of certain high-cost medications directly with the manufacturers. Ten medications were selected for 2026, and the updated pricing will take effect Jan. 1, 2026.

For additional information related to the IRA and how it may impact your current or future Medicare Part D coverage, you can visit cms.gov.

View answers to frequently asked questions related to the Inflation Reduction Act.

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