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Those of us on Medicare may feel like rejoicing at the recent passage of the Inflation Reduction Act, which, among many other provisions, took some unprecedented steps to reduce Medicare’s drug costs as well as costs for the 50 million people who purchase optional Medicare Part D prescription drug insurance.

While I can’t cover all the provisions in this column, here is a summary of some of the more significant ones:

Next year, holders of Part D insurance won’t pay anything towards the cost of recommended vaccines, and those who need insulin won’t pay more than $35 per month for it. Furthermore, drug manufacturers that raise their prices more than the rate of inflation will have to rebate the difference to the government.

Starting in 2024, premiums for Part D plans will not be allowed to rise more than 6% a year.

The following year, total out-of-pocket drug costs for a person with a Part D plan will be capped at $2,000. (Today, there is no cap at all.)

And in 2026, Medicare will be required to negotiate with drug manufacturers the price of 10 of the most costly medications it covers. By 2029, 20 drugs will be subject to negotiation.

Some of these changes will directly result in less money earned by drug manufacturers, which is, of course, the point of the legislation. Drug prices have risen so much faster than inflation for so long, Congress finally decided to crack down on the pharmaceutical industry’s perceived excesses.

But there remain ways in which drug companies and Part D insurance plans will be able to compensate for their lower expected future revenue.

For one thing, manufacturers could significantly raise drug prices and Part D plan insurers might well raise premiums in the years before these limits are phased in. Plans could also refuse to cover certain brand name drugs entirely, requiring wider use of generics.

Also, the prices that drug companies set for newly created and approved drugs (that is, the expensive ones that will probably be chosen for negotiation) might well start out higher than they otherwise would in order to front-load profits before the negotiations start.

Something else I seldom see mentioned in the glowing descriptions of these new benefits is that some of the “cost savings” of the legislation are the result of shifting responsibility for payment from Medicare enrollees to taxpayers generally.

For example, making vaccines “free” for those with Part D insurance doesn’t mean vaccine makers and providers won’t get paid. It just makes Medicare responsible for the full cost. The Congressional Budget Office (CBO) estimates this one change will increase federal spending for vaccines by $7 billion over the next 10 years.

Similarly, capping the cost of insulin at $35 per month doesn’t mean manufacturers can’t charge more; only that the patients who need it won’t be paying the full price. The CBO estimates this provision will raise federal spending more than $5 billion over the next 10 years.

So, thank you, taxpayers. Not only does Medicare already draw on general tax revenues for about half its total annual cost (see my July column), but some of these nice new drug benefits will also be paid for by them (us).

Overall, it is true, the package of changes is expected to save Medicare and the government significant amounts of money over time (compared to what costs might be without them).

But probably the most important change is Medicare’s new power to negotiate at least a few drug prices going forward.

When Medicare’s Part D Prescription Drug program was first authorized by Congress in 2006, the carrot that got the major drug manufacturers on board was a provision forbidding Medicare from using its huge clout to negotiate drug prices.

Instead, individual insurance companies and their much smaller pools of customers would do the negotiating, resulting in higher drug prices than would have been the case had Medicare as a whole been able to negotiate.

We know that to be true because Medicaid and the Veterans Administration are allowed to negotiate drug prices, and they are lower than what Medicare pays.

Interestingly, Medicare controls its costs for doctor and hospital expenses in a different way: by regulating exactly how much they can charge for thousands of different services based on a complex analysis of factors (including local costs of living).

By telling doctors and hospitals that, if they want to treat Medicare patients, they have to accept Medicare’s reimbursement rates, healthcare practitioners are ostensibly given a choice. But it’s an all-or-nothing choice (for the most part).

All of which proves there is strength in numbers: in this case, the strength to set prices without even bothering to negotiate!

One hopes the pharmaceutical industry has gotten the message and now understands that the camel’s nose is under the tent. Well, at least it’s supposed to be — in 2026.