Today, August 16, 2022, President Biden signed into law the Inflation Reduction Act . While it is confusingly abbreviated IRA, it has no impact on your tax advantaged savings vehicle with the same acronym. So what does the Inflation Reduction Act mean for you?

Only a couple of factors will have a direct personal finance related impact on a large percentage of the population.

One is for those on Medicare. The Act aims to make prescriptions more affordable for those on Medicare. It does this by pressuring drug companies to only raise the cost of drugs by the rate of inflation, capping the price of insulin, eliminating a coinsurance component, adding an out of pocket cap on Part D, limiting pricing on some of the most costly single-source medications, expanding subsidy access, and improving costs for vaccines. Slide 4 of this presentation by the Kaiser Family Foundation do a great job of helping you visualize this. These aren’t all dropped into place immediately, however, they are being phased in over time.

The other is by extended the Affordable Care Act subsidies originally enacted due to COVID, which eliminated the ACA premium tax credit cliff for 2021 and 2022. That cliff-abolishing extension now runs through 2025, and is a big deal for millions of Americans who did not receive their health insurance through an employer.

The Act also impacts many other areas, including climate change.