The plan calls for higher taxes on high-income earners and increased prescription drug negotiations. The federal budget proposal of President Joe Biden will include an increase in Medicare taxes for individuals earning more than $400,000 per year and an expansion and acceleration of prescription drug price negotiations. According to the White House, these changes will ensure that the health insurance program for older Americans remains solvent for at least 25 years.
The budget, published on March 9, also proposes capping Medicare Part D monthly co-payments for generic drugs used to treat chronic conditions at $2. The White House fact sheet indicates that this maximum may include hypertension and high cholesterol.
The president’s annual budget outlines the administration’s fiscal priorities and is sent to Congress, which controls the nation’s finances. In his February State of the Union address, Vice President Biden vowed to unveil a plan to extend Medicare’s solvency. In the proposed budget, Medicare would be strengthened without benefit cuts, and costs would be reduced for recipients.
Nancy LeaMond, executive vice president of AARP and chief advocacy and engagement officer, said their members want Medicare to remain strong and accessible. AARP welcomes proposals to lower medication prices, strengthen the Medicare trust fund, and protect the benefits of millions of Americans, according to LeaMond.
Negotiations for prescription drugs to be extended
Under the Inflation Reduction Act of 2024, ten of the most frequently used and expensive brand-name drugs covered by Medicare Part D will be selected for negotiations with drug manufacturers. The mechanism for negotiating prices is currently being developed, and the first ten selected medications will be made public by September. The anticipated price reductions for these medications will take effect in 2026. More pharmaceuticals would be subject to negotiations each year under the new law.
As part of his budget, Biden asks Congress to allow Medicare to negotiate prices for more drugs and to begin negotiations sooner than under current law. Typically, a drug can only be negotiated after it has been on the market for seven years and biologics for eleven years. The budget does not specify how long a drug must be on the Food and Drug Administration’s approved list before it can be negotiated or how many additional drugs will be negotiated.
According to the White House plan, the budget’s expansion of Medicare prescription negotiations will reduce beneficiaries’ out-of-pocket expenses by billions of dollars.
The law requires pharmaceutical companies to reimburse Medicare for price increases for prescription drugs that exceed the inflation rate. The proposed budget would expand this regulation to include commercial insurance policies.