Congress was right to approve President Joe Biden’s signature Inflation Reduction Act, although it may have little actual immediate impact on inflation.
SaveCongress was right to approve President Joe Biden’s signature Inflation Reduction Act, although it may have little actual immediate impact on inflation.
Economic analyses suggest that the new law won’t directly address the price of gas, food and rent, some of the main factors in surging prices.
The nonpartisan Congressional Budget Office concluded recently that the changes would have a “negligible” impact on inflation this year and next. The University of Pennsylvania’s Penn Wharton Budget Model concluded that over the next decade, “the impact on inflation is statistically indistinguishable from zero.”
Still the legislation that received final approval August 12 in the House could save money for many Americans over time by lessening the cost of certain prescription drugs for the elderly, extending health insurance subsidies and reducing energy prices.
Pennsylvanians will benefit from the legislation approved by Congress, which would lower prescription costs, address climate change and reduce the federal deficit.
Congressman Dwight Evans (D-Pa.), who voted for the Inflation Reduction Act, said the new law will help with the cost of health insurance.
“The bill extends enhanced Affordable Care Act subsidies for 13 million Americans for three years, to 2025. The average enrollee will save an estimated $800 per year on premiums. “Thanks to Obamacare, the uninsured rate is at a record LOW, and the subsidy extension will prevent an estimated 3 million people from becoming uninsured,” Evans said in a statement.
“This fits well with the recent agreement to keep Chestnut Hill Hospital open. I and state Sen. Art Haywood are urging the state attorney general and the Tower Health bond holders to approve that agreement. I want ‘No More Hahnemanns!’ — and part of keeping our hospitals open is making sure they get paid for the care they provide. So, helping people keep their coverage is also vital for our hospitals, their employees and the communities they serve,” Evans said.
“This is … a bill that lowers prescription drug costs for seniors who receive Medicare,” U.S. Sen. Bob Casey said at a news conference on the steps of the Pennsylvania Capitol after the Senate passed the bill. “So many people told us, for years, we couldn’t do that.”
The vote was along party lines, with a tie-breaking vote by Vice President Kamala Harris.
Pennsylvania’s other senator, Republican Pat Toomey, voted against the bill.
“With inflation skyrocketing, gas prices at near-record highs, and our economy likely in a recession,” Toomey said in a statement, “the last thing Americans need are more corporate welfare, higher taxes, and more government spending.”
Casey said Pennsylvanians will enjoy many of the new law’s policies directly — although some of them won’t appear for a few years.
The legislation would spend $70 billion over a decade to extend tax credits to help 13 million Americans pay for health insurance under the Affordable Care Act.
Those subsidies would free up money for recipients to spend elsewhere, potentially increasing inflation, although the effect would likely be very small, according to economists.
While the bill could have the benefit of increasing the savings of millions of households on pharmaceutical and energy costs, it’s unlikely to have much effect on overall inflation. Prescription drugs account for only 1% of the spending in the U.S. consumer price index; spending on electricity and natural gas make up just 3.6%.
Starting in 2025, the act will cap the amount Medicare recipients would pay for their prescription drugs at $2,000 a year. It will authorize Medicare to negotiate the cost of some high-priced pharmaceuticals. It would also limit Medicare recipients’ out-of-pocket costs for insulin at $35 a month. Insulin prescriptions averaged $54 in 2020, according to the Kaiser Family Foundation.
“This is a historic change,” said Leigh Purvis, director of health care costs at the AARP Public Policy Institute. “This is allowing Medicare to protect beneficiaries from high drug prices in a way that was not there before.”
A study by Kaiser found that in 2019, 1.2 million Medicare recipients spent an average of $3,216 on drug prescriptions. Purvis said recipients who use the most expensive drugs can spend as much as $10,000 or $15,000 a year.
The legislation authorizes Medicare to negotiate prices of 10 expensive pharmaceuticals, starting next year, though the results won’t take effect until 2026. Up to 60 drugs could be subject to negotiation by 2029.
Holtz-Eakin argued that while the provision may lower the cost of some Medicare drugs, it would discourage the development of new drugs or reduce new venture capital investment in start-up pharmaceutical companies.
The Inflation Reduction Act’s energy provisions could also create savings, though the amounts are likely to be much smaller.
The bill will provide a $7,500 tax credit for new purchases of electric vehicles, though most EVs won’t qualify because the legislation requires them to include batteries with U.S. materials.
The legislation also significantly expands a tax credit for homeowners who invest in energy-efficient equipment, from a one-time $500 credit to $1,200 that a homeowner could claim each year. Vincent Barnes, senior vice president for policy at the Alliance to Save Energy, said that would allow homeowners to make new energy-efficient investments over several years.
The Rhodium Group estimates that by 2030 the bill’s provisions will save households an average of up to $112 a year when gas and electricity become cheaper as more Americans drive EVs and houses become more energy-efficient.
Reprinted from the Philadelphia Tribune
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