CBO Warns of $20 Billion Cost Increase in Biden-Harris Medicare Drug Policy Due to Inflation Reduction Act

"Tax letters with spilled jar of coins."

The Biden-Harris administration’s Medicare drug policy could cost taxpayers over $21 billion in just three years, according to a startling new projection from the Congressional Budget Office (CBO).

At a Glance

CBO estimates the Medicare Part D Premium Stabilization Demonstration Program could cost over $21 billion in three years
The program aims to mitigate premium increases caused by previous policies, including the Inflation Reduction Act
Federal Medicare Part D spending is projected to increase by $10-$20 billion in 2025 due to the Inflation Reduction Act
Critics view the program as a temporary fix for consequences of the Inflation Reduction Act
Republican lawmakers express concerns about the financial burden on taxpayers

CBO Reveals Costly Medicare Drug Policy

The Congressional Budget Office has unveiled a projection that has sent shockwaves through Washington. The Biden-Harris administration’s Medicare prescription drug policy, specifically the Premium Stabilization Demonstration Program, could cost American taxpayers over $21 billion in just three years. This program, while aimed at lowering insurance premiums for seniors, has raised significant concerns about its long-term fiscal impact.

The CBO’s analysis, requested by several Republican members of Congress, including Senators Chuck Grassley and Jodey Arrington, reveals that the demonstration program will add $5 billion to federal spending and increase net spending on interest by $2 billion. Furthermore, the CBO projects an increase in federal Medicare Part D spending by $10-$20 billion in 2025 due to the Inflation Reduction Act.

Under the Biden-Harris Administration, average Medicare Part D premiums have increased by over 11 percent, costing seniors an average of $52 more per year for their prescription drug coverage.

— House Budget GOP (@housebudgetGOP) October 3, 2024

Criticism and Concerns

Critics view the program as a temporary fix for the consequences of the Inflation Reduction Act, which led to higher Medicare prescription drug plan premiums. The policy provides taxpayer-funded payments to Medicare prescription drug plans to cover costs typically paid by enrollees.

“Rather than coming to the table and legitimately addressing its partisan mistakes, the Biden-Harris administration threw taxpayer dollars at the problems it created, putting Americans on the hook for tens of billions more dollars.” – Grassley

Republican lawmakers have expressed deep concerns about the financial burden this policy places on taxpayers. The Wall Street Journal Editorial Board went as far as to criticize the demonstration as a “Medicare election bribe for seniors.”

Administration’s Defense

Despite the criticism, the Biden-Harris Administration stands by its efforts to lower drug costs for Medicare beneficiaries. They recently announced lower prices for 10 drugs selected for Medicare negotiations, effective January 1, 2026. These negotiated prices offer discounts ranging from 38% to 79% off list prices, with estimated savings of $1.5 billion for Medicare users in 2026.

“Americans pay too much for their prescription drugs. That makes today’s announcement historic. For the first time ever, Medicare negotiated directly with drug companies and the American people are better off for it,” said U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra

The administration also points to the Inflation Reduction Act’s introduction of a $2,000 out-of-pocket cap for Medicare Part D enrollees starting next year. However, concerns remain about the policy’s impact on pharmaceutical research and development, as well as its long-term fiscal sustainability.

Looking Ahead

As the debate over healthcare costs continues, the CBO’s projection adds a new dimension to the discussion. While the Biden-Harris administration aims to provide immediate relief to seniors, critics argue that the long-term costs may outweigh the short-term benefits. With CMS planning to negotiate prices for up to 15 more drugs for 2027 and up to 20 more each year thereafter, the full impact of these policies on both Medicare beneficiaries and taxpayers remains to be seen.