New laws are here!

The new Inflation Reduction Act is a big enchilada of green energy spending, corporate taxes, and some pretty major changes to Medicare.

Is this deal a big deal? Could be. We'll wrap it up for you at the end.

First, here are some Medicare changes you might want to know about:¹

Medicare will be able to negotiate drug prices (starting in 2026)

For the first time, the Medicare program will have the power to negotiate the cost of (some) drugs.

Before price negotiations kick off, new rules will also force manufacturers to pay "rebates" to the government if they increase covered drug prices higher than general inflation (starting in 2023) and limit Medicare Part D premium increases each year (starting in 2024).¹

Why does this matter?

Drug price inflation is crazy high, outpacing general inflation for thousands of medications.²

The power to negotiate drug prices with manufacturers could end up lowering costs. For example, a budget study found that Medicare was paying 32% more for the same drugs as Medicaid (which already has the power to negotiate prices).¹

Lower prices could lead to overall program savings (and possibly lower Medicare premiums), plus save money for retirees who depend on those specific drugs.

Out-of-pocket drug costs on Part D will be capped at $2,000/year (starting in 2025)

Under current laws, there's no cap on how much people have to spend out-of-pocket for their medications, which can really add up under cost-sharing requirements.

Starting in 2024, folks who spend enough out-of-pocket on medications to surpass the "catastrophic threshold" will no longer have to pay coinsurance for their expensive drugs.¹

And, starting in 2025, the maximum out-of-pocket medicine cost for folks on Part D will be a flat $2,000.

Why does this matter?

Many drugs (especially new ones) can be devastatingly expensive.

Capping annual drug costs will hopefully not only save folks money, but also lead to more predictability in their yearly health care costs.

Out-of-pocket insulin costs will be capped at $35/month for Medicare participants (starting in 2023)

Starting in 2023, enrollees won't have to spend more than $35 per month on their insulin copays.¹

Folks on private health insurance won't see a change.

Why does this matter?

As anyone who needs insulin will tell you, it can get pricey, costing over $500 per year on average.³ Much more if you need one of the more expensive versions.

Capping costs could help the millions who need this life-saving medication.

All vaccines will be free under Part D (starting in 2023)

While flu and COVID-19 shots might be covered for many, most vaccines are not.

Starting in 2023, cost-sharing under Part D will end, making ALL covered adult vaccines free.¹

Why does this matter?

Many adult vaccines can cost quite a few bucks. For example, the shingles vaccine can cost upwards of $150 a pop and other recommended jabs can also be very pricey.⁴

Making vaccines free could not only lower the financial impact of immunizations, but also increase their availability to lower-income folks.

Will these new laws help retirees?

This is where the future gets hazy. Legal challenges or post-election changes could end up altering much of what's in the Inflation Reduction Act. And much depends on the actual execution of the new rules.

The new rules could also mean premium changes as insurance companies figure out their models.

Since health care is one of the biggest unknown costs in retirement, lowering drug costs and making spending more predictable for Medicare recipients could absolutely have a positive impact on millions of people.

Will the Inflation Reduction Act help the economy?

Whether the overall bill will live up to its name, lower inflation, and have a net positive impact on the economy also remains to be seen.

Some economists project that the bill will end up modestly reducing inflation and trimming the federal budget over the next decade.⁵

Others are concerned about the impact of the new corporate tax rules written into the legislation.

As is usually the case, time will tell.

To your health,

Your Eagle Wealth Team

P.S. Have questions about your Medicare plan? Want to talk about how the new laws could impact you? Just hit "reply" and we'll set up a time to discuss.

Are Medical and Dental Expenses
Tax-Deductible?

If you file your taxes using itemized deductions, you may be able to deduct medical and dental expenses for yourself, your spouse, and your dependents. According to the IRS, you may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income.

Some types of medical care expenses that may be deductible include:

• Payments for the diagnosis, cure, treatment, and prevention of a disease.
• Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners.
• Paying for inpatient hospital care or nursing home care.
• Fees associated with inpatient treatment for alcohol or drug addiction.
• Payments to participate in a weight-loss program for a specific disease diagnosed by a doctor (such as obesity).

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

*Tip adapted from IRS.gov

The Week on Wall Street

A comprehensive sell-off on Friday following comments by Fed Chair Jerome Powell drove stocks to losses for the week.

The Dow Jones Industrial Average tumbled 4.22%, while the Standard & Poor's 500 dropped 4.04%. The Nasdaq Composite index fell 4.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.10%.^1,2,3

Under Pressure

Stocks dropped on Friday following Powell's remarks reiterating the Fed's inflation-fighting resolve. While his comments did not break new ground, markets reacted severely, perhaps on worries that interest rate hikes may continue into next year.

After starting the week sharply lower on renewed rising interest rates and economic slowdown fears, markets staged a modest turnaround beginning mid-week. Stocks rallied on Thursday, sparked by a revised Gross Domestic Product estimate showing the economy's shrinking less than initially estimated. Thursday's rally also got a boost from regional Federal Reserve Bank presidents, who suggested future rate hikes may be in line with market expectations.

Powell at Jackson Hole

In his much-anticipated speech at the Jackson Hole Economic Symposium, Powell unflinchingly reaffirmed the Fed's commitment to raising rates to lower inflation, even if it results in causing pain to individuals and businesses.

Wall Street focused on Powell's presentation in the hope it might provide greater clarity on future Fed direction, though his remarks ultimately went no further than restating past communications. Powell commented, "We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to two percent." This statement may have put to rest any thoughts that the Fed would soon pivot on rate hikes.⁴ 

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