Though CMS touts that the IRA’s inflation-based coinsurance adjustments will "lower out-of-pocket costs," the results have been more complicated. Below, we update and expand on our previous analysis.
We find that a growing number of Part B drugs now have inflation-adjusted coinsurance rates that are rising, not falling. In many cases, the rate dips temporarily before snapping back to the standard 20%.
Even more troubling, these fluctuations have led to unexpected increases in patients’ out-of-pocket expenses—even when a drug’s price was declining.
These unpredictable coinsurance shifts are another example of the IRA’s unintended consequences. Rather than enjoying stable or reduced costs, some seniors are finding themselves on a financial rollercoaster.
Retail Pharmacy Update 2025: Data, Debate, and Disruption.
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PART B TWISTS AND TURNS
Fee-for-service Medicare Part B covers 80% of the expenditures for Part B drugs. The beneficiary is responsible for the remaining 20 percent. In addition to coinsurance, Medicare Part B enrollees pay monthly premiums and an annual deductible. For 2025, the standard monthly premium for Medicare Part B enrollees is $185.00, an increase of $10.30 (+5.9%) from the 2024 figure. (source) The annual deductible is $257, a $17 (+7.1%) increase from the 2024 figure. Beneficiaries with higher incomes pay income-adjusted premiums that exceed the standard rate.
Beginning in 2023, the Inflation Reduction Act of 2022 (IRA) altered the standard coinsurance rate in the following ways:
- Manufacturers must now pay mandatory rebates on single-source Part B drugs whose payment amount in a calendar quarter, such as average sales price (ASP) plus 6%, rises faster than the general inflation rate. The inflation rate is measured using the Consumer Price Index for All Urban Consumers (CPI-U).
- The first quarterly IRA rebate measurement period began on January 1, 2023. To date, CMS has released eight quarterly reports on the revised coinsurance amounts. You can find the reports here: Coinsurance Adjustment for Part B Rebatable Drugs.
- For drugs with inflation-based rebates, beneficiaries’ coinsurance rates are computed based on the inflation-adjusted payment amounts. The adjusted coinsurance rate depends on the relationship between two different factors: (1) the rate of change in a drug’s payment limit, and (2) the consumer price index. Consequently, the coinsurance rate can fluctuate up or down—and even return back to its original 20% rate.
- These rebate payments are excluded from the computation of average sales price (ASP).
- Decrease from previous quarter
- Increase or remain the same from previous quarter (but remain below 20%)
- Return to 20%
For a deep dive on Part B and buy-and-bill drugs, see Chapter 3 of DCI's 2024-25 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.
A WILD RIDE OF ADJUSTMENTS
There have been 109 unique J-codes for which the coinsurance rate has adjusted at least once during the eight quarters of measurement (2023:Q2 through 2025:Q1). The chart below illustrates how frequently the coinsurance rates changed for these 109 J-codes.
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Observations on these data:
- The overall number of adjustments has increased over time. The total number of J-codes that had a change in coinsurance rate almost quadrupled in the most recent quarter (69) compared to when coinsurance adjustments were first implemented (18).
- Many drugs saw coinsurance rates rise compared to the prior quarter. For the first quarter of 2025 (the most recently reported period), the coinsurance rate increased for 31 J-codes and decreased for 38 J-codes. For the preceding quarter, the coinsurance rate increased for 52 J-codes and decreased for only 19 J-codes.
- Many coinsurance rates have reverted back to 20%. Over the eight-quarter period, 63% of the 96 J-codes had a coinsurance rate that returned to the standard 20% figure at least once.
These adjustments directly affect patient out-of-pocket costs—and the impact is often counterintuitive.
A fee-for-service Part B patient’s out-of-pocket obligation in a quarter equals: (1) the Part B payment limit reported by CMS multiplied by (2) the reported coinsurance rate applicable for that quarter.
We analyzed increases and decreases in the dollar value of a patient’s out-of-pocket costs over the eight-quarter period of IRA adjustment. Products launched during the analysis period did not appear in every quarter. In addition, we excluded seven J-codes associated with CAR-T products and one chemotherapy drug. For these eight products, the out-of-pocket amount was set at the Medicare Part A inpatient deductible and therefore did not fluctuate.
We found that a Part B patient’s out-of-pocket obligation increased 436 times and decreased 167 times. The figure below summarizes how changes in the coinsurance rate and Part B payment limit affected these out-of-pocket changes.
[Click to Enlarge]
Observations:
- Increases in the Part B coinsurance rate led to higher out-of-pocket obligations for patients. Surprisingly, the IRA’s Part B coinsurance adjustment frequently offset a reduction in a drug’s price. In 17% (76/436) of the situations when out-of-pocket obligation increased, a drug’s price declined or remained the same—but the IRA’s coinsurance rate adjustment still raised patients’ costs. In 13% (57/436), the coinsurance increase amplified the higher payment limit.
- Changes in a drug’s price were the primary driver of changes in out-of-pocket obligations. In 74% (123/167) of the situations where out-of-pocket obligations decreased, the coinsurance rate was unchanged—meaning the IRA adjustment had no effect. In 36% (157/436) of the increases, there was no offsetting coinsurance rate change.
- Decreases in the Part B coinsurance rate often did not lower out-of-pocket obligations. For 33% (146/436) of the out-of-pocket increases, a lower coinsurance rate partially offset the increase in the payment limit.
But for only 10% (16/167) of the declines, the coinsurance rates were the primary cause of the out-of-pocket drop. In just 5% (8/167), the IRA’s adjustment amplified the out-of-pocket decline.
What’s more, in 12% (20/167) of these situations, coinsurance rate increases offset part of the benefit from lower drug prices—demonstrating how the IRA can sometimes increase costs despite falling prices.
The Inflation Reduction Act's coinsurance adjustment mechanism was designed to shield Medicare Part B beneficiaries from inflation-driven drug price hikes. However, our analysis reveals that the impact on out-of-pocket costs has been far more nuanced—and at times counterintuitive.
While the adjustment has occasionally reduced patient expenses, it more frequently failed to deliver savings. In some cases, the inflation-based coinsurance calculation increased patient costs even when drug prices declined. This disconnect arises because the IRA’s mechanism adjusts coinsurance independently from actual payment trends and excludes key variables such as drug launches, market shifts, or clinical value.
As more J-codes become subject to this adjustment—and as the frequency of coinsurance changes accelerate—stakeholders should closely monitor both pricing dynamics and changes in patient burdens. Will the newly streamlined CMS take the time to assess the structure of these adjustments to ensure they consistently lower out-of-pocket costs for seniors? Or, will the introduction of financial unpredictability continue to offer seniors a white-knuckle ride?
This article was coauthored by Adam J. Fein, Ph.D., and Greis Kapexhiu.
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