Illustration: Aïda Amer/Axios
CBO says in a new letter that the Inflation Reduction Act's redesign of Medicare Part D will cost $10 billion to $20 billion more next year than it had originally thought.
Why it matters: The added cost to the government could give fuel to Republicans' criticisms of the law and illustrates the unpredictability around estimating the effects of the IRA's changes.
Between the lines: The IRA's Part D redesign, including a new $2,000-per-year out-of-pocket cap for seniors, shifted new costs onto insurers, which in turn increased premiums and the federal subsidies to Part D plans.
- CBO says in the letter to three House Republican chairs and two ranking members in the Senate who requested the analysis that it "underestimated the federal cost in 2025 that would be attributable to the Part D redesign."
- The CBO also projected another $5 billion in cost for a Biden administration stabilization program that gives subsidies to insurers to stave off premium increases, which is in line with previous estimates.
What they're saying: Republicans have criticized that stabilization program as a transparent attempt to avert premium increases in an election year.
- Sen. Chuck Grassley called the program a "dishonest election year gimmick" in a statement Thursday reacting to the CBO letter.
The big picture: There are notable savings for seniors, though, from the $2,000 out-of-pocket cap, and the stabilization program means that Part D premiums on average are actually declining next year.
- Savings from the new Medicare drug price negotiations in the IRA will be realized starting in 2026.
- "The uncertainty surrounding the cost of changes to the Medicare drug benefit illustrate why CMS felt the need to create a stabilization demonstration program to cushion the effects of premium increases on beneficiaries," Larry Levitt, executive vice president for health policy at KFF, wrote in an email reacting to the new CBO letter.
- "The demonstration is costing the federal government money, but softening the blow for beneficiaries," he added.
