Americans are under pressure from rising medical costs. Out-of-pocket patient co-payments increased by 10.4% in 2021, according to the latest figures from the Centers for Medicare and Medicaid Services. This proportion has not been seen for more than 30 years. His monthly health insurance premium also jumped by 6.5%. And that was before last year’s rapid inflation put pressure on household budgets.
One of the often overlooked causes of rising healthcare costs is hospital consolidation. When a single healthcare system becomes the only game in town, it effectively becomes a monopoly and can set prices at whatever level it wants. Clinics can raise their rates. Patients are being forced to pay higher medical bills and travel farther afield, which can also be costly.
Many recent hospital acquisitions are driven by one well-intentioned but inadequate policy: the 340B Drug Pricing Program, enacted in 1992 and expanded in 2003. health. Instead, 340B turned into a cash grab for clever operators playing games on the system.
The program requires pharmaceutical companies to offer significant discounts to medical facilities that serve many low-income, uninsured patients. Qualifying hospitals and clinics usually offer 25% to 50% discounts on drug purchases. In theory, the savings should be used to help patients in distress. However, this program has some fatal flaws.
As a study in New England Journal of Medicine As observed, the program does not require hospitals to use the 340B savings to improve the care of underserved patients, and it does not require hospitals to make a minimum assessment of whether they are supporting their mission. I am only supervising.
It certainly doesn’t seem to help. The authors of this study said:Economic benefits for hospitals are not associated with clear evidence of expanded care for low-income patients or reduced mortality.”
While clearly not achieving its intended purpose, the 340B program drives up healthcare costs by encouraging hospital consolidation. As the law is written, hospitals are entitled to discounts of up to 50% off all facilities they operate, including satellite clinics. The discount also strengthens incentives for hospitals to resell drugs to middle-class and wealthy patients with generous insurance.
All of this has fueled acquisitions, and now the 10 largest healthcare systems in the United States control nearly a quarter of all hospitals. In short, the large hospital system is abusing the law to wipe out an ever-larger swath of the health system, including facilities in wealthy neighborhoods, to 340B. The number of hospitals and clinics enrolled in the program has increased by a staggering 517% from 2000 to 2020. Hospital revenues have increased accordingly. From 2013 to 2018, total patient income increased by 82% from $505 billion to $918 in the 10 largest healthcare systems.billion, according to Research by Deloitte Insights.
But while hospital conglomerates get rich with 340B, the most needy patients see no benefit, and consolidation continues to drive up healthcare costs.
The only solution is for Congress to amend the law and enact safeguards to return 340B to its original purpose.
A good place to start is cracking down on entitlements. Access to the program should be limited to medical facilities that actually serve low-income patients. Second, 340B hospitals should use discounts to benefit their target population and document how they do so.
We will all continue to pay until politicians overhaul the law.
Sally C. Pipes is Chief Executive Officer of the Pacific Research Institute and a Thomas W. Smith Fellow in Health Care Policy. Her latest book is False Assumptions, False Promises: The Dire Reality of Medicare for All. She wrote this for the Dallas Morning News.
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