The Inflation Reduction Act’s Medicare Budget Implications: Results for States and Regions

Executive Summary 

  • The Inflation Reduction Act contains two Medicare provisions – an “inflation tax” and drug price “negotiation” – that are estimated to save $266 billion from 2023 to 2031.
  • Previous American Action Forum research established that some Medicare beneficiaries may see lower drug prices based on certain provisions included in the law, but the Medicare program does not benefit from an additional $266 billion in potential savings spent to subsidize clean energy. 
  • This research breaks out these impacts by states and regions in the United States.


The Inflation Reduction Act (IRA) has two primary policy initiatives: reforms to Medicare prescription drug policies and large-scale subsidies to clean (non-fossil) energy. In discussing the IRA, advocates typically keep the two separate, giving the impression that Medicare drug policy will yield savings for the Medicare program while clean energy subsidies will speed the transition to a new energy portfolio. But in fact, the two are linked by the unified federal budget. Previous American Action Forum research makes clear that some Medicare budget savings will be spent to subsidize clean energy.

Thus, some beneficiaries may benefit from lower drug prices and lower corresponding out-of-pocket costs. But the possibility of additional Medicare benefits such as lower premiums or broader options from the $266 billion in budget savings used to subsidize clean energy will not be realized. The map and table below summarizes the geographic distribution of that lost opportunity across U.S. regions and states.


Region/State of Residence  Share of Total

($ millions) 

  Region/State of Residence  Share of Total ($ millions) 
United States  266,000    Southeast  73,977 
      Alabama  4,594 
New England  13,294    Arkansas  2,795 
Connecticut  2,989    Florida  20,224 
Maine  1,501    Georgia  7,661 
Massachusetts  5,844    Kentucky  4,079 
New Hampshire  1,328    Louisiana  3,824 
Rhode Island  973    Mississippi  2,639 
Vermont  653    North Carolina  8,799 
      South Carolina  4,780 
Mideast  40,850    Tennessee  5,987 
Delaware  934    Virginia  6,679 
District of Columbia  407    West Virginia  1,912 
Maryland  4,572       
New Jersey  7,073    Southwest  29,568 
New York  15,867    Arizona  5,918 
Pennsylvania  12,000    New Mexico  1,869 
      Oklahoma  3,257 
Great Lakes  39,902    Texas  18,524 
Illinois  9,794       
Indiana  5,550    Rocky Mountains  8,881 
Michigan  9,080    Colorado  4,058 
Ohio  10,291    Idaho  1,510 
Wisconsin  5,191    Montana  1,030 
      Utah  1,791 
Plains  17,922    Wyoming  493 
Iowa  2,756       
Kansas  2,362    Far West  41,607 
Minnesota  4,521    Alaska  450 
Missouri  5,399    California  27,694 
Nebraska  1,527    Hawaii  1,216 
North Dakota  580    Nevada  2,375 
South Dakota  779    Oregon  3,828 
      Washington  6,043