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Inflation Reduction Act re-routes Medicare savings into tax credits for electric vehicles

The bulk of $280 billion in savings from the IRA's prescription drug provisions has been redirected to fund $7,500 tax credits on new electric vehicles and $4,000 tax credits on used electric vehicles, as well as other energy efficiency programs.

Published: January 3, 2024 11:02pm

The Biden administration took an unprecedented step of rolling its climate agenda into a health care concern with the passage of the Inflation Reduction Act (IRA). According to critics, it makes climate change a priority. In both cases, they say, it’s not accomplishing anything with either goal.

Diverted funds

Medicare provisions within the IRA are siphoning funds into green energy policies, Isabelle Morales, federal affairs manager for Americans For Tax Reform, told Just The News. The IRA, Morales explained, grants the Secretary of Health and Human Services the ability to negotiate the price of prescription drugs on behalf of Medicare.

“The negotiation is basically, if a company doesn’t comply, they’re subject to 90% tax on all of their earnings. So, it’s really not a negotiation,” Morales said.

Writing in the Wall Street Journal, Mark Merritt, president of Proactive Strategies Group, said that only about 15% of the $280 billion in savings from the program goes into Medicare. The bulk of the savings, Merritt explained, are going to support the $7,500 electric-vehicle tax credit.

Morales said the siphoned funds are also supporting the $4,000 used electric-vehicle tax credit, and tax credits for energy efficiency items, such as doors. The tax credits on these vehicles, Merritt said, are items that wealthier Americans purchase. In 2019, half of those enrolled in Medicare earn less than $30,000 per year, whereas the typical Tesla buyer earns around $150,000 per year.

According to Merritt, the savings that go into Medicare pay for some “relatively inexpensive new benefits,” such as a $2,000 annual cap on pharmacy spending. The overall Medicare program's budget is projected to rise from $1 trillion in 2023 to $1.8 trillion in 2031.

Melting glaciers to asthma

Over the past decade, climate activists have pushed to make climate change a health-care issue. In 2013, journalist Courtney Subramanian argued in Time that climate change should be rebranded a health issue, because people could connect with fears of infectious diseases and childhood asthma more than they could melting glaciers.

The rhetoric on climate change since then has spilled over into health issues, even into medical journals. In 2021, as people were dying of COVID-19, 200 medical journals published an opinion piece by a group of medical journal editors that called climate change the “greatest threat to public health.” That same year, Harvard and U.K. universities produced a study claiming that fossil fuels were responsible for 1 in 5 deaths – 8 million people annually.

Energy expert and author Alex Epstein criticized the study for ignoring the strong correlations between fossil fuels use and markers of human improvement, such as increased standard of living, access to clean water, life expectancy, and infant mortality. Since 1980, Epstein wrote on “Energy Talking Points,” India’s fossil fuel use grew 700% and China’s fossil fuel use increased 600%, citing BP Statistical Review of World Energy. Between 1980 and 2020, according to World Bank data, life expectancy in India increased by 16 years, and life expectancy in China increased by 10 years, Epstein wrote.

With the popular merging of concerns about climate change and health issues, the IRA was promoted as a sweeping climate and health care bill. Jeff Reynolds, senior investigative researcher with Restoration of America, told Just The News that the IRA does nothing for health care. “It reminds me a lot of Obamacare. It wasn’t anything they claimed it was going to be,” he said.

Instead of truly lowering drug prices, which are skyrocketing, Reynolds said, the IRA diverts funding into electric vehicles and that the combination of climate change and health issues follows a similar pattern to what was seen during the COVID pandemic, where fears of deadly infections were used by politicians to justify restrictions that were unnecessary and ultimately harmful.

“That’s exactly what they’re doing with climate change,” he said.

Minimal impact

The IRA will grant the Secretary of Health and Human Services in 2026 authority for price controls on 10 separate drugs, and over time, that increases to 20. Morales said that these price controls will ultimately disincentivize drug innovations, as it can take 15 years and billions of dollars to develop a drug and bring it to market.

Citing a 2021 University of Chicago study, Morales said the IRA’s price controls will lower research and development on new drugs and result in 135 fewer drugs entering the market. This will, according to the study, result in a loss of 331.5 million life years in the U.S., which is more than the first two years of the pandemic. For cancer treatments alone, the IRA will reduce research and development spending by $18.1 billion annually.

Critics of the IRA also point out it will have minimal impact on global warming.

Preston Brashers, senior policy analyst for the Heritage Foundation, testified at a House subcommittee hearing in September on the impacts of the IRA a year after its passage. Even if the U.S. eliminated 100% of its greenhouse gas emissions today, by the end of the century, Brashers said, global temperatures would be reduced by no more than 0.2 degrees Celsius. “Of course, the IRA’s green tax credit provisions will come nowhere near eliminating U.S. emissions,” Brashers said.

Writing in the Federalist, Reynolds points out the massive losses automakers are taking on the EVs they sell, as well as all the difficulties drivers face — from depreciation to charging issues — which have slowed the pace of sales of the vehicles in the past few months, will result in a lot of wasted taxpayer dollars.

“The Biden administration is more interested in pet projects, unsustainable green schemes, and ideological revenue redistribution than in the core functions of government — and seniors hoping for relief on drug prices get screwed once again,” he said.