What You Need to Know about the Inflation Reduction Act

New law makes health care more affordable, combats climate change, falls short in battle for equity 

Posted on Aug 17, 2022

Congress building and inflation reduction act
President Joseph Biden signed into law on Tuesday the Inflation Reduction Act, which will make health care more affordable in the United States--a point PIH applauds and advocated for over the past year.

The Inflation Reduction Act might not sound like legislation that has anything to do with health equity or addressing disparities in the United States. The name suggests that it will handle the costs of groceries and gasoline. But it goes much further by helping make health care more affordable for millions of people. This legislation, however, did not come to pass easily, and Partners In Health has been tracking it and supporting parts of the bill for nearly a year.  

In late 2021, the U.S. Senate failed to pass the Build Back Better Act (BBBA), the $1.75 trillion package that would have transformed health equity, green energy infrastructure, and U.S. health care, after the sweeping bill had passed the U.S. House of Representatives. This was a disappointing turn, as PIH supported the BBBA due to its inclusion of funding for maternal health, community health workers, and coverage for low-income families.  

Senators continued to negotiate a smaller version of the BBBA with the hopes of reaching an agreement on the pieces that could garner enough support to pass. In July, they announced an agreement on the newly dubbed Inflation Reduction Act.  The bill quickly passed the Senate on August 7 by a vote of 51-50 (with Vice President Kamala Harris breaking the tie) and the House on August 12 by a vote of 220-207, before being signed into law by President Jospeh Biden on Tuesday.  

Below, PIH-US Advocacy Manager Lucas Allen and PIH-US Advocacy Lead Justin Mendoza explain what there is to be excited about with the passage of the Inflation Reduction Act, who will benefit, and why it falls short in the battle for health care equity.  

What does the Inflation Reduction Act include? 

  • Health insurance premium support: Through the American Rescue Plan Act of 2021, Congress enhanced the Affordable Care Act’s premium tax credits so that more people could obtain affordable coverage. Those tax credits lowered monthly costs for people who purchase their insurance from a private market place. Set to expire at the end of this year, it was critical to include the premium tax credits in the Inflation Reduction Act or millions would face increased health insurance costs and potentially lose coverage. The legislation extends these enhanced credits through 2025. 
  • Lower-cost prescriptions: The Inflation Reduction Act will require Medicare to negotiate the prices of certain prescription drugs starting in 2026. It also caps out-of-pocket drug costs for people enrolled in Medicare and penalizes drug companies if they increase Medicare drug prices faster than the rate of inflation. For millions of people in the U.S., this policy will mean being able to afford their prescriptions, and for the U.S. itself it means working to rein in high and rising prescription drug costs. This is historic, since Medicare negotiation has been out of reach for the past 18 years.  
  • Investments to address climate change: The Inflation Reduction Act includes $369 billion to reduce greenhouse gas emissions that contribute to climate change and related health impacts. This is the biggest investment in combatting climate change in U.S. history. 
  • No anti-migrant amendments: PIH leaders have been advocating forcefully against Title 42, an unjustified and racist policy that uses public health and the COVID-19 pandemic as a pretext to block asylum-seekers from entering the U.S. Two amendments were proposed to the Inflation Reduction Act that would have further extended Title 42. Before the votes, PIH reached out to urge senators not to support such amendments, both were narrowly defeated, and the final bill did not include any anti-migrant policies. 

Who benefits most from passage of the bill? 

Right now, 14.5 million people in the U.S. get their health care from their state or federal health insurance marketplace. For millions of lower-to-middle income families or individuals, this policy will keep their current health insurance affordable. The health care credits also make insurance more accessible for Black and Latinx communities. Since these credits have been in effect, Black and Hispanic enrollment saw an increase in number of people willing to enroll in health insurance as compared to previous years. Maintaining these credits will be a big boost toward continuing to close the gap in health coverage and access to care. 

A senior citizen enrolled in Medicare will see relief in drug costs once Medicare has the ability to negotiate down the costs of high-priced drugs. A Medicare beneficiary who spent a significant portion of their income on prescription drugs will have their out-of-pocket costs capped at $2,000 per year. Today, more than half of seniors aged 65 or older take at least four prescription drugs, and nearly 1 in 4 of those seniors say it is difficult to afford their prescriptions. Particularly hard hit are low-income seniors and those who are in poorer health. This policy will save most of these seniors hundreds or thousands of dollars per year.  

The bill’s historic investments in addressing climate change will benefit the health and well-being of all who face risks from the climate crisis. By putting the U.S. on a path to reducing greenhouse gas emissions by 40% by 2030, this legislation is a step toward reducing the health impacts of climate change, which fall disproportionately on communities that have been historically marginalized.  

Where does the Inflation Reduction Act fall short?  

The Inflation Reduction Act is a compromise, and it does fall short in areas that PIH fully supports. We strongly encourage congressional leaders to take up these priorities as soon as possible to focus on health equity in the United States. 

  • Closing the Medicaid coverage gap: The Inflation Reduction Act left out a provision that would have provided health coverage to low-income adults in states that have not expanded Medicaid,  a state and federal shared insurance program that provides health care coverage to low-income families. This would have provided health insurance to an estimated 2.2 million adults whose income is too low to be eligible for Affordable Care Act subsidies. 
  • Maternal health: The Build Back Better Act also included policies to address the maternal health crisis, which disproportionately affects Black women. It would have required all states to extend Medicaid coverage to 12 months postpartum, which is currently optional, and it would have provided funding for Black maternal health across multiple agencies in the federal government. The bill did not include these provisions, leaving a gap in maternal health. 
  • Child and family supports: Previous legislation, the American Rescue Plan Act, included a child tax credit that temporarily reduced child poverty by about half in the United States. In addition the BBBA included support and investments for child care. This bill did not include either of these provisions, leaving low-income children and families without essential evidence-based support. 
  • Public health infrastructure: The Inflation Reduction Act also missed an opportunity to invest in the U.S.’s public health infrastructure and workforce to better address COVID-19, monkeypox, future outbreaks, and other health needs. Despite previous efforts in the American Rescue Plan Act and other COVID-19 relief legislation, public health resources for pandemic response are a far cry from what is needed to deliver an equitable public health system. 

While it is disappointing that these critical priorities were left out, the Inflation Reduction Act makes important investments in health and climate that will make a significant difference in people’s lives. Congress still has work to do to meet these critical needs for health equity, and PIH will continue to push for our health equity priorities. 

Next Steps

Want to learn more about the Inflation Reduction Act and what comes next? Join the PIH Health Justice Call listserv and our next call on August 30. On these bi-monthly calls, fellow experts, activists, and organizers discuss key issues and actions to promote health equity and social justice. On August 30, we will be discussing the Inflation Reduction Act and other updates in the health justice movement.

Join the Listserv

Dr. Paul Farmer sharing a friendly moment with one of his staff.

Paul's Promise

As we mourn the passing of our beloved Dr. Paul Farmer, we also honor his life and legacy.

PIH Founders - Jim Kim, Ophelia Dahl, Paul Farmer

Bending the Arc

More than 30 years ago, a movement began that would change global health forever. Bending the Arc is the story of Partners In Health's origins.

Please send donations to: Partners In Health, PO Box 996, Frederick, MD 21705-9942