How the Inflation Reduction Act Changes Healthcare Planning

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It’s been about a month since the Inflation Reduction Act (IRA) passed. There have been plenty of articles and videos talking about the legislation – what it does, who it impacts, and when we’ll see the impacts. My team and I started receiving a lot of questions from the financial advisors we work with leading up to the passing of the IRA and have continued since. The IRA impacts everyone, but the healthcare portions of it mean substantial changes to the way advisors incorporate healthcare costs into their financial plans for clients who are retired, on Medicare, or are still working.

Here’s what financial advisors need to know about the IRA.

1. The IRA will impact your clients on Medicare

In more ways than one!

Effective in 2025, there will be a $2,000 cap on out-of-pocket costs for prescription drugs for Medicare recipients. This cost reduction not only saves clients money – and will make it easier to plan for Medicare drug costs than it is today – but it broadens their health plan options under Medicare now that there is a cap on out-of-pocket costs for prescriptions. Although not likely to be common among clients of financial advisors, in 2024, full extra help eligibility will extend to enrollees with income up to 150% of the poverty level, and assets up to $15,510 for an individual and $30,950 for a couple. Full extra help means beneficiaries won’t pay premiums for the part D benchmark plan and won’t have a part D deductible. Starting in 2024, the IRA will also prevent beneficiary premiums for part D coverage from increasing by more than 6% annually. However, this doesn’t mean that every plan’s premium increases will be capped at 6% per year. Because of this, it will be crucial that Medicare enrollee clients still compare their part D plans each year to ensure they choose the optimal plan for their health needs and financial goals.