Key takeaways
- The Inflation Reduction Act was enacted in 2022. It gives Medicare the ability to negotiate drug prices for the first time, aiming to reduce overall healthcare spending.
- The first drug savings came into effect on January 1, 2026, with more announced for 2027.
- The price of insulin has also been capped for people on Medicare Part D, as has out-of-pocket spending.
Overview
Prices in the United States seem to be consistently rising due to a wide variety of economic factors. To address this, the U.S. government enacted the Inflation Reduction Act (IRA) in 2022, which aimed to reduce costs across several sectors — including healthcare.
In 2026, the first drug savings negotiated through the IRA will take effect. Let’s take a look at how the IRA will affect healthcare costs in 2026 and beyond.
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How does the IRA affect healthcare costs?
The IRA has several aims, including addressing climate change, reforming how large corporations are taxed, and, notably, reducing the prices of several prescription medications.
The IRA may affect healthcare costs in different ways.
Price negotiation
The key effect of the IRA on healthcare is the introduction of Medicare price negotiation and reform. For the first time, the federal government can negotiate prices directly with manufacturers for the highest-spending drugs in Medicare Part D.
Medicare selected the first 10 drugs for negotiation from a longer list of eligible medications. To be eligible for negotiation, the drugs had to be brand-name only, with no generic or biosimilar alternative. What’s more, at least 7 years must have passed since FDA approval, or at least 11 years for biologic drugs.
The ten drugs selected for 2026 are:
Medicare Part D enrollees who use the drugs are expected to save an estimated $1.5 billion this year in out-of-pocket costs.
The next 15 drugs for negotiation have already been chosen, with their lower prices coming into effect on January 1, 2027. These include weight management medications such as Ozempic and Wegovy.
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Get free cardPrice caps
The IRA is also introducing price and spending caps. The out-of-pocket spending cap for people on Medicare Part D in 2026 is $2100. Once your combined deductibles, copays, and coinsurance hit that $2,100 mark, you pay $0 for the rest of the calendar year.
There is also a cap on insulin spending, where a month’s supply of each insulin product is capped at $35. This cap is specific to diabetes care and applies to both Medicare Part D and Part B (for those using insulin pumps).
Finally, recommended adult vaccines — including Shingles, RSV, and Tdap — are now covered at 100% with $0 copay for those on Medicare Part D.
Inflation rebates
The IRA requires manufacturers to pay rebates on drugs if prices rise faster than inflation for drugs reimbursed under Medicare Part B and outpatient drugs under Medicare Part D. This means that drugmakers are incentivized to keep any price increases low.
Half of all Medicare Part D covered drugs experienced annual price increases higher than inflation from 2018 to 2020, so this change may be a good way to keep overall costs down.
In practice, these rebates don’t just go to the government — they often translate to lower out-of-pocket costs for patients at the point of sale. If a drug’s price increase exceeds inflation, Medicare may adjust your coinsurance rate downward to reflect those savings.
How else to save on your medication costs
Branded medication prices in the U.S. are currently the highest in the world. However, there are several ways you can lower your drug costs, including:
- try generics over brand-name drugs
- look into manufacturer savings programs
- get to know your insurance formulary
- look into discount cards and coupons
The Optum Perks Discount Card is a free card you can download or print and take to a pharmacy to get your prescription at the website-listed price. It may be able to save you up to 80% on prescription drug costs. The Optum Perks site also offers individual coupons for many medications.
Note that Optum Perks discounts can’t be used with insurance, so consider which option offers the highest savings.
Summary
The Inflation Reduction Act is significantly lowering healthcare costs in 2026 by allowing Medicare to negotiate lower prices for high cost drugs and capping annual out-of-pocket prescription spending at $2,100.
These reforms also include a $35 monthly limit on insulin and $0 copays for essential adult vaccines while penalizing manufacturers who raise prices faster than inflation.
To maximize these savings, patients can combine these federal protections with tools like the Optum Perks Discount Card to ensure they are paying the lowest possible price for their medications.
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Disclaimer: While Optum Perks strives for factual, comprehensive, and current information, this article is not a substitute for a licensed healthcare professional’s expertise. Always consult a doctor before taking or discontinuing any medication. Drug information is subject to change and may not cover all uses, directions, precautions, warnings, interactions, reactions, or adverse effects. The lack of a warning does not guarantee a drug’s safety, effectiveness, or appropriateness for all patients or specific uses.