This past weekend marked three years since former President Joe Biden signed the Inflation Reduction Act (IRA) into law. Promoted as a way to lower prescription drug costs for seniors, the law is now being blamed for higher premiums, shrinking coverage, and increased taxpayer subsidies.
Insurers warn that Medicare Advantage and traditional Medicare beneficiaries face “much, much higher prices” for prescription coverage, according to CVS Health CFO Thomas Cowhey. Analysts argue the IRA shifted costs onto insurers without providing enough subsidies, forcing them to raise premiums and reduce benefits.
A 2024 study in JAMA Network Open found that of the $86 billion spent annually on supplemental Medicare Advantage benefits, only $3.9 billion was actually used for dental, vision, and hearing coverage. Much of the rest went to so-called “ghost benefits”—perks that look good on paper but remain largely unused.
Dr. Tomas Phillipson told Fox Business that premiums are “skyrocketing” under the law. MarketWatch’s Brett Arends also noted that costs are being passed to insurers, who in turn raise premiums to recover losses. From 2024 to 2025, the Better Medicare Alliance reported that out-of-pocket maximums in Medicare Advantage rose 8%, while plan options declined in 31 states.
The law capped annual out-of-pocket prescription costs at $2,000 but shifted catastrophic drug costs to insurers. To soften the blow in an election year, the federal government injected $7 billion in subsidies to prevent steep premium hikes in 2024, followed by a $25 billion rate increase this year. Critics argue this amounts to taxpayer bailouts of insurers.
The Paragon Health Institute concluded that the IRA has led to “fewer coverage options” for seniors and “a significant increase in the subsidies that taxpayers pay to insurance companies.” Despite its name, the law has failed to reduce costs—simply shifting them instead.
