As I write this, I’m listening to the House debate on the Inflation Reduction Act, which will help boost the US transition to clean energy as well as making some much needed changes to Medicare prescription benefits and support for folks who get their insurance through Obamacare. Democrats are emphasizing the help it will bring to Americans, while Republicans are, as you’d expect, lying through their teeth about what the bill will do. The bill is pretty much a lock to pass today, so let’s talk about what’s in it (generally good stuff) what’s not in it (no army of IRS tyrants who will come and shoot you if your taxes are wrong. More terrifyingly, it’ll be IT and customer support people) and why it matters.
Here, have a livestream of the debate, and coming later today, the vote!
Medicare Reformses
The bill will allow Medicare to negotiate the prices of prescription drugs, which is a longstanding Democratic priority aimed at turning us into a totalitarian socialist state like Canada, only without the actual universal healthcare or Canadians, darn it. Fears (or hopes) that this is a government takeover of the pharma industry aren’t really the case: The negotiations won’t actually start kicking in until 2026, and will be phased in so that only a few of the most expensive meds will be negotiated in the early years: 10 drugs covered by Medicare Part D in 2026, another 15 Part D drugs in 2027, 15 Part B and Part D drugs in 2028, and 20 more for both parts in 2029.
Other parts of the Medicaid reform will kick in sooner. Starting in 2023, Medicare copays for insulin will be limited to $35 dollars per month, which will limit costs for millions of Medicare Part D enrollees. Republicans stripped out a provision that would have similarly capped insulin costs for folks on private insurance, because they could.
In 2024, Medicare Part D will eliminate the existing five percent copay cost for drugs in catastrophic coverage, which can cost thousands of dollars every year.
Then, in 2025, the new annual $2000 cap on Medicare Part D out-of-pocket costs will go into effect, as will other changes to Part D, aimed at reducing costs to the program and to patients.
Obamacare Premium Subsidies
The new law will prevent some serious inflation in premium costs for Obamacare, too. As part of Biden’s American Rescue Plan, lower-income enrollees in private insurance sold on the ACA market received substantial subsidies for their premiums, which allowed those in lower income brackets to get a mid-level “silver” plan with no monthly premium at all, and with a lower deductible. Pretty much all 13 million people getting insurance through Obamacare received some help with premiums, depending on age and income.
Those subsidies were set to expire next year, which would have meant big premium increases for most people — around $700 annually, on average. The IRA will extend the subsidies for three more years, through 2025. Heck, maybe we should keep Democrats in control of the House and Senate and do some reforms to Obamacare that would make lower premiums permanent.
Energy Stuff!
Electric Vehicles: Whole bunch of good stuff here, way beyond the tax credits for electric vehicles, which are pretty good: Up to $7500 for purchase of a new EV that’s assembled in North America, although that may be less depending on whether the battery packs are, as well. The credit runs for 10 years, so the number of models that are eligible should increase as the industry develops. There’s also a $4000 credit for qualifying used EVs, the first time the federal government has offered incentives for used cars. Here’s a good overview of the EV tax credit plan. Given the tight market for cars of all types, which has resulted in ridiculous dealer markups, you may want to wait a year or two for less screwy markets if you’re thinking of buying an EV. Oh yes, the credits also apply to hydrogen fuel cell vehicles, too.
Home Improvement: A bunch of tax credits are available to homeowners who upgrade their homes with solar panels, and battery storage, as well as to help purchase energy efficient appliances, heat pumps, weatherization, and the like. Some credits that were already in place have been increased, even, and instead of a lifetime cap on the amount of home energy efficiency credits someone can use, there’s now an annual limit of $1,200 (that’s for energy-efficient appliances or weatherizing, not your solar panels), so your projects can keep going. More info here.
Clean Energy Manufacturing, Energy Security, and Decarbonizing: A huge part of the tax incentives in the bill are aimed at building up America’s green energy industries, so we probably won’t go into too much detail on your opportunities to get a tax credit for starting a clean technology manufacturing plant. But these are the provisions that will really kickstart the transition to a green energy economy. There’s tax credits for onshoring clean energy manufacturing, for manufacturing heat pumps and mining critical minerals, and incentives to clear up bottlenecks in getting more EVs on the road.
Other tax credits will spur investments in cleaner fuels and development of clean commercial vehicles, in greenhouse emissions reductions, and maybe the only good subsidy for the fossil fuel industry, funding to reduce methane emissions. There’s also funding to help the federal government procure zero-emission vehicles, including $3 billion for the US Postal Service to purchase electric versions of its new goofy-looking postal delivery trucks. That’s roughly half the total budget USPS had allocated for new trucks, so the additional funding should mean far more of the new fleet will run on batteries than the 10 percent USPS had in mind.
Congress Can Make Those Weirdass New Postal Trucks Electric, So Do That, Congress!
US Postal Service illustration
Climate Justice: Roughly $60 billion will go to environmental justice initiatives, including grants to reduce air pollution around seaports, to purchase clean heavy duty trucks, and to monitor air quality in low-income communities. There’ll also be several block grant programs aimed at helping communities hardest hit by pollution and climate change.
And the Rest: There are tax credits and investments to help rural communities with sustainable agriculture, to help make forests more resilient, and even to plant more trees in cities. Other investments will boost R&D in cleaner aviation fuels, and to help communities in the West that have been hit by drought.
For an exhaustive, and I mean agonizingly detailed, compilation of pretty much every last part of the bill, see this piece at The BGR Group. For a far more enjoyable discussion of the energy provisions, give a listen to the Volts podcast hosted by supreme energy geek Dave Roberts, with climate policy wonks Dr. Leah Stokes and Dr. Jesse Jenkins. It’s exceptional, and might even dispel your gloom, particularly about some of the weird concessions Joe Manchin added to the bill to get some pipeline and oil leasing provisions included.
The good news? Whatever additional carbon emissions those projects may result in will be far outweighed by the emissions-reduction parts of the bill. And in fact, if the green energy provisions have the effects that are projected, they may well crush demand for fossil fuels enough to make new oil and gas development moot — there won’t be enough profit in new exploration to justify the costs.
[Health Affairs / Kaiser Family Foundation / Bipartisan Policy Center / Consumer Reports / BGR Group / Volts / Image: Black Rock Solar, Creative Commons License 2.0]
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