The House passed the big climate change and health policy reconciliation bill in a rare August Friday session, coming off of recess to get the job done. Well, some of them came off recess. The rest voted by proxy, a COVID-19 pandemic measure that allows members to avoid being in Washington, D.C., and still be able to vote.
It’s a significant achievement, despite the best efforts of Senate Democrats Joe Manchin (WV) and Kyrsten Sinema (AZ). Without them, the package would have been absolutely transformative. With them, it’s still very real progress.
The $369 billion the bill authorizes will fund projects that tackle drought mitigation and resilience, offering consumers tax credits for new and used electric vehicles, providing funding to rural and marginalized communities to drive additional renewable power development, and providing tax credits for more energy efficient homes and commercial buildings. According to the REPEAT Project, the Inflation Reduction Act would reduce nationwide emissions to around 41% below the peak levels seen in 2005 by 2030—a far more substantial reduction than if the legislation fails to pass.
The climate provisions would lower greenhouse gas emissions by 40 percent from 2005 levels by 2030. “It doesn’t get us all the way there on its own, but it keeps us in the climate fight,” Jesse Jenkins of Princeton University’s REPEAT project told NPR last month.
And there’s stuff in it for you, should you be interested in saving money while reducing your carbon footprint and not spending as much on health care.
If you’re a homeowner and in the market to upgrade your heating/cooling system, there’s the $4.28 billion High-Efficiency Electric Home Rebate Program. That would provide a rebate of up to $8,000 to install heat pumps, indexed by income. “The rebate actually means a discount,” Jamal Lewis, director of Policy Partnerships and Equitable Electrification at Rewiring America, told NPR. Lower- and middle-income people who make 80% or less of the area median income can access the full rebate, with the amount of rebate decreasing for people making up to 150% of area median income see a smaller benefit. If your income is high enough to disqualify you from the rebate program, you can still get a tax credit up to $2,000 for installing a heat pump, and tax credits up to $1,200 for other efficiency measures, like new electric appliances, windows, and doors.
The law provides a rebate of up to $1,750 for a heat-pump water heater. There’s also up to $840 in rebates—money in your pocket at the time of purchase—to offset the cost of energy-efficient appliances, like a heat-pump clothes dryer or an electric stove, range, or oven. It will also provide up to $4,000 for a new breaker box to accommodate all those new electric appliances and up to $2,500 for the new wiring to support it. It also provides up to $1,600 for home upgrades like insulation, air sealing, and ventilation.
It also renews an expired 30% tax credit for installing residential solar panels and extends the program until Dec. 31, 2034. Starting in 2032, the credit declines to 26% for solar panels put into service after Dec. 31, 2032, and before Jan. 1, 2034. There’s also a 30% tax credit for homeowners who install solar battery systems with at least 3 kilowatt-hours of capacity.
“The impact of this program is huge, as it will help over a million low- and moderate-income households make the switch to electric,” Sam Calisch, head of special projects for Rewiring America, told Bloomberg Green. “This looks like a slam dunk win for electrification. We estimate at current prices, households that get heat pumps for space and water heating, an EV, and put solar on their roof stand to save $1,800 per year on energy bills. Not only that, but these households will be getting off the roller-coaster ride of fossil-fueled inflation, with stable bills into the future.”
There’s also electric vehicle tax credits, as much as $7,500 for a new vehicle and $4,000 for a used one. That’s as long as your household makes less than $300,000/year and can only be applied for cars that cost less than $55,000 and pickups/vans/SUVs that cost less than $80,000. Rather than getting the credits back at tax filing time, the money can go directly to the dealership at the time of purchase, lowering the out-of-pocket costs for buyers.
The cost-savings in health care for individuals are also limited, but still significant. Importantly, it allows the federal government to negotiate some drug prices for Medicare. It’s not the complete Medicare negotiating scheme Democrats have been trying to achieve for years, but it’s a foot in the door.
It’s also a boon for Medicare enrollees who rely on insulin. Their out-of-pocket cost for the drug will be limited to $35/month, and drug companies are barred from increasing the price on the drug faster than the rate of inflation. That cap should have been provided to every person with private insurance who uses insulin. Republicans, by the way, didn’t want that to happen and blocked it from being included in the bill. Beginning in 2025, Medicare enrollees are also going to enjoy an annual cap of $2,000 on all out-of-pocket drug costs.
The new law will also extend the enhanced premium subsidies for people buying health insurance though the Affordable Care Act marketplaces. Nearly 14 million people—13.6 million—have taken advantage of the expanded subsidies created in the American Rescue Plan (ARP), President Joe Biden’s massive COVID-19 relief package. A substantial chunk of that 14 million people, were facing an unpleasant surprise come October just weeks before the election, when they’ll get their premium notices for 2023. When Congress passed the ARP, they made the federal subsidy expansion for plans end at the end of 2022, assuming that they would make that program permanent—or last at least another several years—in Biden’s Build Back Better (BBB) plan. Now, at the last possible moment, really, it’s happening.
The Kaiser Family Foundation (KFF) analyzed the potential impact of the subsidies not being renewed last fall. If the ARPA subsidies are not continued, “premium payments will rise sharply for nearly all marketplace enrollees,” KFF said.
How sharply? “According to HHS, the 8 million marketplace enrollees who signed up before the ARPA subsidies were enacted are now paying $68 per month, after accounting for an average monthly premium savings due to the ARPA of $67,” KFF found. “Without the ARPA subsidies, premiums would double on average for these enrollees, and they would pay an average of $800 per year more if enrolled for the full year.”
So, whew, that’s a relief! At least through 2025, when it expires. But it also becomes a campaign issue for 2024, and there sure is a good track record lately for Democrats running on the Affordable Care Act.