As the political heat increases with the presidential election approaching, health insurance companies are once again under fire. But as Adam Okun pointed out in his recent blog, it’s not just the insurance carriers. A recent Berkeley Research Group study highlights how every constituency in the system shares responsibility for rising healthcare costs.
The federal government has established the 340B Drug Pricing Program to subsidize the cost of drugs to qualifying disproportionate share hospitals (DSHs) serving more Medicaid and uninsured populations. The study found that per-patient prescription drug spending increased by 32.4% at hospitals that recently enrolled in the 340B Program, as compared to an increase of only 13.4% at non-340B hospitals. Since 2014, the 340B program represented over $19 billion in spending with a 114% growth rate over the period. A billion here and a billion there, and soon you are talking real money.
What this suggests is that these hospitals may be prescribing more to take advantage of the difference between the Medicare reimbursement rate and the cost to the hospital under 340B. This overspending spills over not just to the Medicaid populations but to Medicare and also commercially-insured patients. And this is another way the system shifts costs unexpectedly and even the noblest programs may create waste.
The financial dynamics and incentives built into our healthcare system are incredibly complex. And this highlights why change would be difficult to manage. As the government seeks to eliminate this 340B waste, it is important to keep in mind that these DSH hospitals will need these revenues to operate – so revenue will need to come from somewhere.
It’s not an easy problem and easy solutions aren’t so easy.