Top 11 Benefits of the Inflation Reduction Act
The recently passed Inflation Reduction Act will fight inflation; bring down the skyrocketing cost of prescription drugs; cut health care costs; make historic investments to tackle climate change; and significantly cut the deficit.
After more than one year of negotiations in Congress, the recently passed Inflation Reduction Act includes historic, overwhelmingly popular investments and savings for older adults, families, and the planet. By taking on the most powerful special interests in Washington—Big Pharma, Big Oil, and Wall Street—the legislation delivers lower energy and health care costs, fights inflation, reduces the deficit, and jump-starts a new affordable clean energy economy.
This fact sheet outlines 11 important ways that Americans will benefit:
- Allows Medicare to negotiate lower drug prices: The Inflation Reduction Act empowers Medicare to negotiate with drug companies so that they can no longer take advantage of Americans, who currently pay two to three times more for the same drugs than people in other wealthy countries in the Organization for Economic Cooperation and Development (OECD). Allowing the federal government to negotiate drug prices with pharmaceutical companies has been prohibited for nearly 20 years.
- Caps out-of-pocket prescription drug costs for older adults: Medicare beneficiaries receive better financial protection by capping out-of-pocket costs for prescription drugs at $2,000 annually. The cap would save roughly 1 million seniors about $1,000 each year. The Inflation Reduction Act also guarantees that Medicare beneficiaries—more than one-quarter of whom have diabetes—pay no more than $35 per month out of pocket for insulin, a life-sustaining medication.
- Prevents higher health care costs: Health coverage will be more affordable for 13 million people because the Inflation Reduction Act extends enhanced Affordable Care Act (ACA) marketplace subsidies through 2025. The average enrollee will save about $800 per year on premiums. Thanks to the ACA, the uninsured rate is at a record low, and the subsidy extension will prevent 3 million people from becoming uninsured.
- Cracks down on Big Pharma’s greed: The Inflation Reduction Act prevents drug companies from hiking Medicare prices above the rate of inflation. The proposal requires drug companies to rebate back the difference if they raise prices higher than inflation.
- Cuts carbon pollution dramatically: With this bill, emissions in 2030 are projected to be 40 percent below peak levels, putting the country’s climate goal of cutting pollution to half of peak levels by the end of the decade within reach.
- Lowers energy costs: Fossil fuels are driving inflation, but the bill helps families switch to cheaper electricity for home heating, cooking, and vehicles—helping Americans cut their utility bills and skip the gas station. The average household will save $500 per year, and even households that don’t make the switch will see lower electricity and natural gas prices. Total spending on oil could go down by nearly 25 percent over the decade. The bill also would provide middle- and working-class consumers with tax credits for the purchase of clean vehicles that are made in North America.
- Creates American jobs: The Inflation Reduction Act builds a new clean energy manufacturing economy by investing in refurbishing old factories; building new factories; requiring high wages; and mandating apprenticeship training for companies using clean energy tax credits. The bill will spur domestic production of batteries, solar panels, wind turbines, and more, setting the United States up to compete in the global clean energy economy and creating millions of clean energy jobs.
- Invests in communities that suffer the most from environmental and health hazards: Communities who have experienced dangerous long-standing environmental and health threats will have access to $3 billion in Environmental and Climate Justice Block Grants to cut pollution and improve public health. In all, the bill will fund $60 billion worth of environmental justice priorities.
- Cracks down on wealthy tax cheats: The lack of adequate enforcement funding led to a massive drop in the rate of audited U.S. households earning $5 million or more per year, plummeting to just 2 percent in 2019 from a rate of more than 16 percent in 2010. New funding in this bill will help enforce the tax code more fairly.
- Helps build a fairer tax code: The bill addresses the problem of corporate tax avoidance with a 15 percent minimum tax for many corporations that have at least $1 billion in profits annually. It also includes a 1 percent tax on corporations that transfer their revenue to wealthy shareholders in lieu of investing in their business or employees.
- Fights inflation and drives down the deficit: The Inflation Reduction Act decreases demand through fairer taxes; increases supply through investments in manufacturing and clean energy; and cuts costs for energy, health care, and prescription drugs. Unlike the $1.9 trillion 2017 Republican tax bill, the plan is fully paid for and will dramatically decrease the deficit.
The Inflation Reduction Act creates jobs, cuts deficits, builds a fairer tax code, and reduces pollution while directly lowering energy and health care costs. The bill’s passage is a win for everyday Americans and a defeating loss for the corporate special interests, such as the pharmaceutical industry, that spent hundreds of millions of dollars lobbying against its reforms in the past year.
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.