Capped drug costs, billons for clean energy: Inflation Reduction Act a ‘big deal for Michigan’

WASHINGTON - A huge bill that aims to cut healthcare costs and fund clean energy efforts was passed by the U.S. Senate this weekend after a long night of negotiations and a tie-breaking vote from Vice President Kamala Harris.

The roughly $740 billion Inflation Reduction Act goes beyond addressing the immediate economic concerns by salvaging pieces of the Democrat-led Build Back Better Act. It includes a plan to cap prescription drug costs for seniors, lower costs for people purchasing private health insurance and invest billions into fighting climate change.

“It’s a big deal for Michigan,” said U.S. Sen. Debbie Stabenow, D-Michigan, during a Monday, Aug. 8 press briefing.

Under the legislation, out-of-pocket prescription drug costs would be limited to $2,000 for the roughly two million Michigan seniors who rely on Medicare. It would also provide free Medicare coverage for all vaccines.

As a cost-saving measure, the bill allows the federal government to negotiate the cost of medications with drug makers. And drug companies that hike prices faster than the rate of inflation would face penalties.

Medicare recipients would only pay $35 a month for insulin with the bill. A proposed cap on insulin for those with private health insurance was cut from the final bill by Republicans for violating Senate budget rules, the Associated Press reported.

“One of the central focuses of this bill is to reduce costs to Americans,” said U.S. Sen. Gary Peters, D-Michigan. “We know that one of the significant drivers of inflation and costs for Americans across our country are rising prescription drug prices.”

The bill also continues pandemic-era tax credits for 14.5 million Americans who purchased private health insurance this year. Premiums may have doubled or tripled without the extension, according to the Center on Budget and Policy Priorities.

A 15% corporate minimum tax rate and closing tax loopholes will fund a large chunk of the bill.

About half the revenue will go toward cutting the federal deficit by an estimated $300 billion over the next decade.

“When that tax fairness kicks in and they’re paying their fair share, not only do we lower the costs for consumers and make sure that we can deal with the climate crisis, we also can lower the deficit,” Peters said.

The bill earmarks more than $300 billion to cut emissions 40% by 2030.

It includes $30 billion for states and utilities to transition to clean electricity. An additional $60 billion is allocated for clean energy manufacturing like battery, solar and electric vehicle production, which Stabenow expects to have a direct impact on Michigan manufacturers.

“In places like Hemlock, where they make one-third of all the polysilicon for the raw materials for solar panels, we’re going to be able to build a supply chain around those efforts in mid-Michigan,” she said.

The bill also includes clean energy consumer incentives.

A $9 billion rebate program would help low-income homeowners buy electric appliances, tax credits would lower the cost of buying electric vehicles and a $1 billion grant program would help make affordable housing more energy efficient.

These climate-based programs are expected to create 9 million jobs over the next decade, according to University of Massachusetts research. Michigan lawmakers expect thousands of those clean energy manufacturing jobs to land in the state.

“We’re doing the right thing by the environment. And we’re also doing the right thing when it comes to creating good paying jobs in Michigan as well as across the country,” Peters said.

Although called the Inflation Reduction Act, the bill will likely do little to cool the hot economy this year. It passed the Senate with a 51-50 vote along party lines with Republicans saying it will likely worsen the economy.

Analysis from the nonpartisan Congressional Budget Office found the bill, which tackles macroeconomic issues, will have a “negligible effect” on inflation in 2022. With the legislation, inflation is estimated to drop 0.1% and it would increase 0.1% under current law.

Stabenow contends the bill attacks the “biggest drivers” of inflation like gas prices and prescription drug costs.

“Our seniors on fixed incomes will tell you number one for them is trying to figure out whether they’re paying the rent, buying their food or getting medicine,” she said.

Peters argued the clean energy investments will address high energy costs—a key pain point for many Americans who paid more than $5 a gallon at the pump this summer.

“Those energy prices translate through the entire economy. When you think about bringing food to grocery stores, there’s additional costs because of the fuel cost to bring that food to the grocery store,” he said. “If you reduce that cost, it brings down inflation.”

But most Americans likely won’t feel any immediate impact from the legislation.

Medicare recipients would likely see the insulin cap by January, according to Stabenow, and it’ll be two years before the limit on prescription drug costs goes into effect. Lawmakers are still analyzing the broad economic impact of the clean energy investments.

The bill will go to the U.S. House for consideration