Tomorrow night, the Presidential candidates square off in Philadelphia. Per polling from last week by the New York Times-Siena, NBC News-Wall Street Journal, Ipsos-ABC News and CBS News, the two head into the debate neck and neck in what is being called the “chaos election.”
Polls also show the economy, abortion and immigration are the issues of most concern to voters. And large majorities express dissatisfaction with the direction the country is heading and concern about their household finances.
The healthcare system per se is not a major concern to voters this year, but its affordability is. Out-of-pocket costs for prescription drugs, insurance premiums and co-pays and deductibles for hospitals and physician services are considered unreasonable and inexplicably high. They contribute to public anxiety about their financial security alongside housing and food costs. And majorities think the government should do more by imposing price controls and limiting corporate consolidation.
That’s where we are heading into this debate. And here’s what we know for sure about the 90-minute production as it relates to health issues and policies:
Each candidate will rail against healthcare prices, costs, and consolidation taking special aim at price gouging by drug companies and corporate monopolies that limit competition for consumers.
Each will promise protections for abortion services: Trump will defer to states to arbitrate those rights while Harris will assert federal protection is necessary.
Each will opine to the Affordable Care Act’s future: Trump will promise its repeal replacing it “with something better” and Harris will promise its protection and expansion.
Each will promise increased access to behavioral health services as memories of last week’s 26-minute shooting tirade at Apalachee High School fade and the circumstances of Colt Gray’s mental collapse are studied.
And each will promise adequate funding for their health priorities based on the effectiveness of their proposed economic plans for which specifics are unavailable.
That’s it in all likelihood. They’re unlikely to wade into root causes of declining life expectancy in the U.S. or the complicated supply-chain and workforce dynamics of the industry. And the moderators are unlikely to ask probative questions like these to discover the candidate’s forethought on matters of significant long-term gravity…
What are the most important features of health systems in the world that deliver better results at lower costs to their citizens that could be effectively implemented in the U.S. system?
How should the U.S. allocate its spending to improve the overall health and well-being of the entire population?
How should the system be funded?
My take:
I will be watching along with an audience likely to exceed 60 million. Invariably, I will be frustrated by well-rehearsed “gotcha” lines used by each candidate to spark reaction from the other. And I will hope for more attention to healthcare and likely be disappointed.
Misinformation, disinformation and AI derived social media messaging are standard fare in winner-take-all politics.
When used in addressing health issues and policies, they’re effective because the public’s basic level of understanding of the health system is embarrassingly low: studies show 4 in 5 American’s confess to confusion citing the system’s complexity and, regrettably, the inadequacy of efforts to mitigate their ignorance is widely acknowledged.
Thus, terms like affordability, value, quality, not-for-profit healthcare and many others can be used liberally by politicians, trade groups and journalists without fear of challenge since they’re defined differently by every user.
Given the significance of healthcare to the economy (17.6% of the GDP),
the total workforce (18.6 million of the 164 million) and individual consumers and households (41% have outstanding medical debt and all fear financial ruin from surprise medical bills or an expensive health issue), it’s incumbent that health policy for the long-term sustainability of the health system be developed before the system collapses. The impetus for that effort must come from trade groups and policymakers willing to invest in meaningful deliberation.
The dust from this election cycle will settle for healthcare later this year and in early 2025. States are certain to play a bigger role in policymaking: the likely partisan impasse in Congress coupled with uncertainty about federal agency authority due to SCOTUS; Chevron ruling will disable major policy changes and leave much in limbo for the near-term.
Long-term, the system will proceed incrementally. Bigger players will fare OK and others will fail. I remain hopeful thoughtful leaders will address the near and long-term future with equal energy and attention.
Regrettably, the tyranny of the urgent owns the U.S. health system’s attention these days: its long-term destination is out-of-sight, out-of-mind to most. And the complexity of its short-term issues lend to magnification of misinformation, disinformation and public ignorance.
That’s why this debate will frustrate healthcare voters.
PS: Congress returns this week to tackle the October 1 deadline for passing 12 FY2025 appropriations bills thus avoiding a shutdown. It’s election season, so a continuing resolution to fund the government into 2025 will pass at the last minute so politicians can play partisan brinksmanship and enjoy media coverage through September. In the same period, the Fed will announce its much anticipated interest rate cut decision on the heals of growing fear of an economic slowdown. It’s a serious time for healthcare!
This year, 316 million Americans (92.3% of the population) have health insurance: 61 million are covered by Medicare, 79 million by Medicaid/CHIP and 164 million through employment-based coverage. By 2032, the Congressional Budget Office predicts Medicare coverage will increase 18%, Medicaid and CHIP by 0% and employer-based coverage will increase 3.0% to 169 million. For some in the industry, that justifies seating Medicare on the front row for attention. And, for many, it justifies leaving employers on the back bench since the working age population use hospitals, physicians and prescription meds less than seniors.
Last week, the Business Group on Health released its 2025 forecast for employer health costs based on responses from 125 primarily large employers surveyed in June: Highlights:
“Since 2022, the projected increase in health care trend, before plan design changes, rose from 6% in 2022, 7.2% in 2024 to almost 8% for 2025. Even after plan design changes, actual health care costs continued to grow at a rate exceeding pre-pandemic increases. These increases point toward a more than 50% increase in health care cost since 2017. Moreover, this health care inflation is expected to persist and, in light of the already high burden of medical costs on the plan and employees, employers are preparing to absorb much of the increase as they have done in recent years.”.
Per BGH, the estimated total cost of care per employee in 2024 is $18,639, up $1,438 from 2023. The estimated out-of-pocket cost for employees in 2024 is $1,825 (9.8%), compared to $1,831 (10.6%) in 2023.
The prior week, global benefits firm Aon released its 2025 assessment based on data from 950 employers:
“The average cost of employer-sponsored health care coverage in the U.S. is expected to increase 9.0% surpassing $16,000 per employee in 2025–higher than the 6.4% increase to health care budgets that employers experienced from 2023 to 2024 after cost savings strategies. “
On average, the total health-plan cost for employers increased 5.8% to $14,823 per employee from 2023 to 2024: employer costs increased 6.4% to 80.7% of total while employee premiums increased 3.4% increase–both higher than averages from the prior five years, when employer budgets grew an average of 4.4% per year and employees averaged 1.2% per year.
Employee contributions in 2024 were $4,858 for health care coverage, of which $2,867 is paid in the form of premiums from pay checks and $1,991 is paid through plan design features such as deductibles, co-pays and co-insurance.
The rate of health care cost increases varies by industry: technology and communications industry have the highest average employer cost increase at 7.4%, while the public sector has the highest average employee cost increase at 6.7%. The health care industry has the lowest average change in employee contributions, with no material change from 2023: +5.8%
And in July, PWC’s Health Research Institute released its forecast based on interviews with 20 health plan actuaries. Highlights:
“PwC’s Health Research Institute (HRI) is projecting an 8% year-on-year medical cost trend in 2025 for the Group market and 7.5% for the Individual market. This near-record trend is driven by inflationary pressure, prescription drug spending and behavioral health utilization. The same inflationary pressure the healthcare industry has felt since 2022 is expected to persist into 2025, as providers look for margin growth and work to recoup rising operating expenses through health plan contracts. The costs of GLP-1 drugs are on a rising trajectory that impacts overall medical costs. Innovation in prescription drugs for chronic conditions and increasing use of behavioral health services are reaching a tipping point that will likely drive further cost inflation.”
Despite different methodologies, all three analyses conclude that employer health costs next year will increase 8-9%– well-above the Congressional Budget Office’ 2025 projected inflation rate (2.2%), GDP growth (2.4% and wage growth (2.0%). And it’s the largest one-year increase since 2017 coming at a delicate time for employers worried already about interest rates, workforce availability and the political landscape.
For employers, the playbook has been relatively straightforward: control health costs through benefits designs that drive smarter purchases and eliminate unnecessary services. Narrow networks, price transparency, on-site/near-site primary care, restrictive formularies, value-based design, risk-sharing contracts with insurers and more have become staples for employers.
But this playbook is not working for employers: the intrinsic economics of supply-driven demand and its regulated protections mitigate otherwise effective ways to lower their costs while improving care for their employees and families.
My take:
Last week, I reviewed the healthcare advocacy platforms for the leading trade groups that represent employers in DC and statehouses to see what they’re saying about their take on the healthcare industry and how they’re leaning on employee health benefits. My review included the U.S. Chamber of Commerce, National Federal of Independent Businesses, Business Roundtable, National Alliance of Purchaser Coalitions, Purchaser Business Group on Health, American Benefits Council, Self-Insurance Institute of America and the National Association of Manufacturers.
What I found was amazing unanimity around 6 themes:
Providing health benefits to employees is important to employers. Protecting their tax exemptions, opposing government mandates, and advocating against disruptive regulations that constrain employer-employee relationships are key.
Healthcare affordability is an issue to employers and to their employees, All see increasing insurance premiums, benefits design changes, surprise bills, opaque pricing, and employee out-of-pocket cost obligations as problems.
All believe their members unwillingly subsidize the system paying 1.6-2.5 times more than what Medicare pays for the same services. They think the majority of profits made by drug companies, hospitals, physicians, device makers and insurers are the direct result of their overpayments and price gauging.
All think the system is wasteful, inefficient and self-serving. Profits in healthcare are protected by regulatory protections that disable competition and consumer choices.
All think fee-for-service incentives should be replaced by value-based purchasing.
And all are worried about the obesity epidemic (123 million Americans) and its costs-especially the high-priced drugs used in its treatment. It’s the near and present danger on every employer’s list of concerns.
This consensus among employers and their advocates is a force to be reckoned. It is not the same voice as health insurers: their complicity in the system’s issues of affordability and accountability is recognized by employers. Nor is it a voice of revolution: transformational changes employers seek are fixes to a private system involving incentives, price transparency, competition, consumerism and more.
Employers have been seated on healthcare’s back bench since the birth of the Medicare and Medicaid programs in 1965. Congress argues about Medicare and Medicaid funding and its use. Hospitals complain about Medicare underpayments while marking up what’s charged employers to make up the difference. Drug companies use a complicated scheme of patents, approvals and distribution schemes to price their products at will presuming employers will go along. Employers watched but from the back row.
As a new administration is seated in the White House next year regardless of the winner, what’s certain is healthcare will get more attention, and alongside the role played by employers. Inequities based on income, age and location in the current employer-sponsored system will be exposed. The epidemic of obesity and un-attended demand for mental health will be addressed early on. Concepts of competition, consumer choice, value and price transparency will be re-defined and refreshed. And employers will be on the front row to make sure they are.
For employers, it’s crunch time: managing through the pandemic presented unusual challenges but the biggest is ahead. Of the 18 benefits accounted as part of total compensation, employee health insurance coverage is one of the 3 most expensive (along with paid leave and Social Security) and is the fastest growing cost for employers. Little wonder, employers are moving from the back bench to the front row.
Health systems have a big challenge: rising costs and reimbursement that doesn’t keep up with inflation. The amount spent on healthcare annually continues to rise while outcomes aren’t meaningfully better.
Some people outside of the industry wonder: Why doesn’t healthcare just act more like other businesses?
“There seems to be a widely held belief that healthcare providers respond the same as all other businesses that face rising costs,” said Cliff Megerian, MD, CEO of University Hospitals in Cleveland. “That is absolutely not true. Unlike other businesses, hospitals and health systems cannot simply adjust prices in response to inflation due to pre-negotiated rates and government mandated pay structures. Instead, we are continually innovating approaches to population health, efficiency and cost management, ensuring that we maintain delivery of high quality care to our patients.”
Nonprofit hospitals are also responsible for serving all patients regardless of ability to pay, and University Hospitals is among the health systems distinguished as a best regional hospital for equitable access to care by U.S. News & World Report.
“This commitment necessitates additional efforts to ensure equitable access to healthcare services, which inherently also changes our payer mix by design,” said Dr. Megerian. “Serving an under-resourced patient base, including a significant number of Medicaid, underinsured and uninsured individuals, requires us to balance financial constraints with our ethical obligations to provide the highest quality care to everyone.”
Hospitals need adequate reimbursement to continue providing services while also staffing the hospital appropriately. Many hospitals and health systems have been in tense negotiations with insurers in the last 24 months for increased pay rates to cover rising costs.
“Without appropriate adjustments, nonprofit healthcare providers may struggle to maintain the high standards of care that patients deserve, especially when serving vulnerable populations,” said Dr. Megerian. “Ensuring fair reimbursement rates supports our nonprofit industry’s aim to deliver equitable, high quality healthcare to all while preserving the integrity of our health systems.”
Industry outsiders often seek free market dynamics in healthcare as the “fix” for an expensive and complicated system. But leaving healthcare up to the normal ebbs and flows of businesses would exclude a large portion of the population from services. Competition may lead to service cuts and hospital closures as well, which devastates communities.
“A misconception is that the marketplace and utilization of competitive business model will fix all that ails the American healthcare system,”
said Scot Nygaard, MD, COO of Lee Health in Ft. Myers and Cape Coral, Fla.
“Is healthcare really a marketplace, in which the forces of competition will solve for many of the complex problems we face, such as healthcare disparities, cost effective care, more uniform and predictive quality and safety outcomes, mental health access, professional caregiver workforce supply?”
Without comprehensive reform at the state or federal level, many health systems have been left to make small changes hoping to yield different results. But, Dr. Nygaard said, the “evidence year after year suggests that this approach is not successful and yet we fear major reform despite the outcomes.”
The dearth of outside companies trying to enter the healthcare space hasn’t helped. People now expect healthcare providers to function like Amazon or Walmart without understanding the unique complexities of the industry.
“Unlike retail, healthcare involves navigating intricate regulations, providing deeply personal patient interactions and building sustained trust,” said Andreia de Lima, MD, chief medical officer of Cayuga Health System in Ithaca, N.Y. “Even giants like Walmart found it challenging to make primary care profitable due to high operating costs and complex reimbursement systems. Success in healthcare requires more than efficiency; it demands a deep understanding of patient care, ethical standards and the unpredictable nature of human health.”
So what can be done?
Tracea Saraliev, a board member for Dominican Hospital Santa Cruz (Calif.) and PIH Health said leaders need to increase efforts to simplify and improve healthcare economics.
“Despite increased ownership of healthcare by consumers, the economics of healthcare remain largely misunderstood,” said Ms. Saraliev. “For example, consumers erroneously believe that they always pay less for care with health insurance. However, a patient can pay more for healthcare with insurance than without as a result of the negotiated arrangements hospitals have with insurance companies and the deductibles of their policy.”
There is also a variation in cost based on the provider, and even with financial transparency it’s a challenge to provide an accurate assessment for the cost of care before services. Global pricing and other value-based care methods streamline the price, but healthcare providers need great data to benefit from the arrangements.
Based on payer mix, geographic location and contracted reimbursement rates, some health systems are able to thrive while others struggle to stay afloat. The variation mystifies some people outside of the industry.
“Healthcare economics very much remains paradoxical to even the most savvy of consumers,” said Ms. Saraliev.
Arguably, three trade groups have emerged at the center of healthcare system transformation efforts in the U.S.: the American Hospital Association (AHA), America’s Health Insurance Plans (AHIP) and the Pharmaceutical Research and Manufacturers of America (PhRMA). Others weigh in—the American Medical Association, AdvaMed, the American Public Health Association and others—but this trio is widely regarded as the Big Tents under which policy changes are pursued.
Each plays a unique advocacy role in the system, protecting their members’ turf from unwelcome regulation while fighting against restrictions that might limit their growth opportunities. Their focus is their members:
AHA
AHIP
PhRMA
Members
5000 hospitals & 43,000 individual members
125 Health Insurers
31 Manufacturers
Board Composition
26 (10 female)
33 (5 female)
25 (3 female)
Revenues (’22)
$138.8 Mil
$78.6 Mil
$568.3 Mil
Revenue chg. ’22 v. ‘21
+7.7%
-7.1%
-6.7
Margin (’22)
$6.6 Mil
$4.7 Mil
$-0.1%
Exec Comp % of ’22 Rev
8.4%
9.6%
3.9%
CEO (Tenure)
Richard J. Pollack (since 2015, with AHA 37 yrs.).
Mike Tuffin (since Jan 2024)Prior: SVP UHG, APCO
Stephen J. Ubl (since 2015)Prior: CEO AdvaMed, FAH
Direct Lobbying ‘23
$30.2 Mil
NA
$27.6 Mil
Total Industry Lobbying 2023 (includes all sources)
All three serve diverse memberships and are highly protective of their Big Tents. But each faces growing intramural pressure from member cohorts that seek special attention–especially their large and highly profitable members vs. the rest.
All three struggle with the notions of affordability, price transparency, profit, executive compensation and value. These terms appear frequently in their white papers and comment letters but each tent defines them differently.
All three depend on physicians to fund member revenues: they’re gatekeepers to member patients, referrals and prescriptions. Each Big Tent is focused on advocacy that enables physician interactions upon which member revenues can be sustainable and service disruption minimal. Thus, physician well-being is a concern to the Big Tents.
All blame factors outside their control for health costs escalation. The health habits of population, over-regulation and U.S. monetary policy are frequent targets. Projections by the CBO of annual health spending of 5.6% through 2032 are justified by the Big Tents as the net result of increased demand and flaws in the system’s incentives, legals protections and funding mechanisms. Each Big Tent is on the defensive about how they address costs and waste, and how their prices enable increased affordability.
All three spend heavily to influence lawmakers to avoid unwelcome regulation. Their spending for direct lobbying is multiplied by formal coalitions with friendly trade groups, political action committees, high net worth contributors and corporations. Coalition building is a major function in each Big Tent used against swings in public opinion of concern or against pending legislation that threaten member interests.
All three serve memberships that operate primarily with business-to-business (B2B) business models primarily. Each subordinates ‘consumerism’ to ‘patients, enrollees, and communities’ served by their members. Maximizing consumer (voter) good will and counter-messaging against hostile media coverage are core functions in each Big Tent.
All three favor incremental changes to the status quo over transformational reform of the system top to bottom. Wholesale change is unwelcome though the majority of U.S. adults say it’s fundamentally flawed and needs a fresh start.
In each campaign cycle, the Big Tents create playbooks based on possible election outcomes and potential issues they’ll confront. Each identifies possible political appointees to key government posts, committee appointments and legislative staff that with whom they’ll deal. Each reaches out to friendly think-tanks, ex-pats from previous government roles and research organizations to create favorable thought leadership for the talking heads they trust. And each lines up outside lobbyists to augment their staff.
The Boards of the Big Tent trio weigh in, but senior staff in each of the Big Tents drive the organization’s strategy. They’re experienced in advocacy, well-paid and often heavy-handed in dealing with critics.
Operationally, the 3 Big Tents have much in common. Strategically, they’re far apart and the gap appears to be widening. Each blames the other for medical inflation and unnecessary cost. Each alleges the others use unfair business practices to gain market advantages. And each thinks their vision for the future of the U.S. health system is accurate, complete and in the best interest of the public good.
And none of the three has put-forth a vision for the long-term future of the U.S. health system. Protecting the immediate interests of their members against unwelcome regulatory changes is their focus.
P.S. It can be argued that the American Medical Association is the Fourth Big Tent. However, fewer than a fourth of the million active practitioners are AMA members contrasted to the other Big Tents. Like the trio, AMA’s primary advocacy focus is its members: protecting against encroachment by non-physicians, maintenance of clinical autonomy, restrictions on the use of artificial intelligence in patient care and Medicare reimbursement rate changes are major concerns. And, akin to the others, the wider set of issues facing the system i.e. structure, funding, ownership, price transparency, workforce modernization et al. has gotten less attention.
As state hospital association leaders assemble in Big Sky, Montana this week, the environment for hospital-friendly legislation is threatening at best:
The public’s trust in hospitals has eroded. Hospital financial performance is a mixed bag: some are profitable and many aren’t. Congress thinks hospitals need more regulation to increase price transparency, require ownership disclosure, verify community benefits that justify tax exemptions and impose restrictions on hospital private equity investments. And programs through which state and federal health policies are authorized—HHS, CMS, FTC, FDA, CMMI et al—are in limbo as a result of the June 28, 2024 Chevron ruling by the Supreme Court.
At a federal level, the American Hospital Association has successfully fended-off a significant portion of proposed cuts to key programs (DSH, rural), delayed Congressional action against facility fees and site neutral payments, influenced improvement from April’s proposed 2025 Medicare rate from 2.6% to 2.9%, advanced legislation to protect healthcare workers and streamline prior authorization business practices by insurers. In most cases, it has pursued a unified agenda alongside its Coalition (America’s Essential Hospitals, the Federation of American Hospitals, the Catholic Health Association and the Association of American Medical Colleges , Children’s Hospital Association et al) and it has invested heavily in its lobbying: $6.46 million in the second quarter 2024 (plus $4.1 million by HCA, AAMC, Tenet and others).
At the state level, the attention hospitals get is equally intense but more complicated: It starts with money and demand: Examples:
State resources: 9 states don’t tax any income, regardless of the source (AL, FL, NV, NH, TN, SD, TX, WA, WY); 4 states don’t tax any retirement income: (IL, IA, MS, PA); 8 states tax social security benefits (CO, MN, MT, NM, RI, UT, VT, WV)
Population health status: WalletHub used 44 measures to assess each state and the District of Columbia on healthcare cost, access, and outcomes. WalletHub weighted the three categories equally. The Top 5: MN, RI, SD, IA, NH; the bottom 5: MS, AL, WV, GA, OK
There are Blue and Red states. Some are growing and some declining. All are integrating more diverse populations and divergence between low- and high-income household financial security and spending. The health system, and its hospitals, impact all.
Healthcare spending for state employees, Medicaid and dual eligible enrollees and public health programs consume a third or more of total state spending. And actions taken in states vis a vis ballot referenda, executive orders, administrative agency rulings and legislative actions result in wide variance in the regulatory environments for hospitals. Consider:
32 states have passed legislation to lower health system costs
31 states have CON requirements (24 of these have been revised since 2021).
15 states have passed laws to reduce or eliminate facility fees including hospitals
17 have passed legislative to increase competition in healthcare
23 passed legislation to reduce surprise medical bills
9 have passed legislation to address community benefit declarations by NFP hospital and health systems.
9 have passed legislation to reduce insurer prior authorization obstacles.
13 passed legislation involving reference pricing requirements for hospitals
8 states passed legislation requiring minimal levels of primary care services
24 modified their Certificate of Need programs
3 states have all-payer payment policies.
8 states have drug price control commissions/mechanisms to limit price increases.
And all are grappling with determinations about abortion services, drug formulary design for Medicaid, state health employee health costs, Medicaid eligibility and funding, staffing requirements in hospitals and nursing homes, rural health solvency, telehealth efficacy, insurer plan design restrictions, and scope of practice expansion for nurse practitioners, pharmacists and much more.
The advocacy environment for hospitals at the state and federal levels will be dicier going forward: the near-term macro-environment is unwelcoming for hospitals presumed to have returned to profitability after the pandemic.
It’s root in four convergent issues:
Economic Uncertainty: Last week’s BLS jobs report signaled softening of the economy and alarmed some thinking it a harbinger of a possible recession.
Middle East Tension: the Israeli-Palestinian conflict appears headed toward a broader regional conflict involving Lebanon, Iran and others.
Campaign 2024: hyper-partisanship coupled with disinformation on both sides lends to voter unrest: healthcare affordability, price transparency, consolidation, executive compensation and inequity are ripe targets.
Healthcare Workforce Disenchantment (including Physicians): Hospitals directly employ half of the physician workforce and 30% of total health industry employment. Labor-management tension in hospitals is mounting.
For hospitals, effective advocacy is imperative: the reservoir of good will enjoyed for decades is evaporating. Advertising “we’re there for you” is timely as rural providers need a lifeline, and public castigation of “corporate insurers and billionaire critics” necessary to rally supporters.
But beyond these, two things are clear:
The marketplace for “hospitals” is fundamentally different than the past requiring a clearer value proposition and fresh messaging.
And in states, hospitals will encounter unique opportunities and challenges in plotting strategies for their future. No two are alike.
Big Sky is a symbolic locale for this week’s meeting of state health executives: the Big Sky over hospitals is cloudy.
Over the weekend, President Biden called it quits and Democrats seemingly coalesced around Vice President Harris as the Party’s candidate for the White House. While speculation about her running mate swirls, the stakes for healthcare just got higher. Here’s why:
A GOP View of U.S. Healthcare
Republicans were mute on their plans for healthcare during last week’s nominating convention in Milwaukee. The RNC healthcare platform boils down to two aims: ‘protecting Medicare’ and ‘granting states oversight of abortion services. Promises to repeal and replace the Affordable Care Act, once the staple of GOP health policy, are long-gone as polls show the majority (even in Red states (like Texas and Florida) favor keeping it. The addition of Ohio Senator JD Vance to the ticket reinforces the party’s pro-capitalism, pro-competition, pro-states’ rights pitch.
To core Trump voters and right leaning Republicans, the healthcare industry is a juggernaut that’s over-regulated, wasteful and in need of discipline. Excesses in spending for illegal immigrant medical services ($8 billion in 2023), high priced drugs, lack of price transparency, increased out-of-pocket costs and insurer red tape stoke voter resentment. Healthcare, after all, is an industry that benefits from capitalism and market forces: its abuses and weaknesses should be corrected through private-sector innovation and pro-competition, pro-consumer policies.
A Dem View of Healthcare
By contrast, healthcare is more prominent in the Democrat’s platform as the party convenes for its convention in Chicago August 19. Women’s health and access to abortion, excess profitability by “corporate” drug manufacturers, hospitals and insurers, inadequate price transparency, uneven access and household affordability will be core themes in speeches and ads, with a promise to reverse the Dobb’s ruling by the Supreme Court punctuating every voter outreach.
Healthcare, to the Democratic-leaning voters is a right, not a privilege.
Its majority think it should be universally accessible, affordable, and comprehensive akin to Medicare. They believe the status quo isn’t working: the federal government should steward something better.
Here’s what we know for sure:
Foreign policy will be a secondary focus. The campaigns will credential their teams as world-savvy diplomats who seek peace and avoid conflicts. Nationalism vs. globalism will be key differentiator for the White House aspirants but domestic policies will be more important to most voters.
Healthcare reform will be a more significant theme in Campaign 2024 in races for the White House, U.S. Senate, U.S. House of Representatives and Governors. Dissatisfaction with the status quo and disappointment with its performance will be accentuated.
The White House campaigns will be hyper-negative and disinformation used widely (especially on healthcare issues). A prosecutorial tone is certain.
Given the consequence of the SCOTUS’ Chevron ruling limiting the role and scope of agency authority (HHS, CMS, FDA, CDC, et al), campaigns will feature proposed federal & state policy changes and potential Cabinet appointments in positioning their teams. Media speculation will swirl around ideologues mentioned as appointees while outside influencers will push for fresh faces and new ideas.
Consumer prices and inflation will be hot-button issues for pocketbook voters: the health industry, especially insurers, hospitals and drug companies, will be attacked for inattention to affordability.
Substantive changes in health policies and funding will be suspended until 2025 or later. Court decisions, Executive Orders from the White House/Governors, and appointments to Cabinet and health agency roles will be the stimuli for changes. Major legislative and regulatory policy shifts will become reality in 2026 and beyond. Temporary adjustments to physician pay, ‘blame and shame’ litigation and Congressional inquiries targeting high profile bad actors, excess executive compensation et al and state level referenda or executive actions (i.e. abortion coverage, price-containment councils, CON revisions et al) will increase.
Total healthcare spending, its role in the economy and a long-term vision for the entire system will not be discussed beneath platitudes and promises. Per the Congressional Budget Office, healthcare as a share of the U.S. GDP will increase from 17.6% today to 19.7% in 2032. Spending is forecast to increase 5.6% annually—higher than wages and overall inflation. But it’s too risky for most politicians to opine beyond acknowledgment that “they feel their pain.”
My take:
Regardless of the election outcome November 5, the U.S. healthcare industry will be under intense scrutiny in 2025 and beyond. It’s unavoidable.
Discontent is palpable. No sector in U.S. healthcare can afford complacency. And every stakeholder in the system faces threats that require new solutions and fresh voices.
In 126 days, U.S. voters will settle Campaign 2024 choosing the winners for 435 House seats, 34 Senate seats, 13 Governors and the White House. When final votes are counted, the last week of June, 2024 will be seen as the tipping point when much about politics and policy was re-set as the result of two events:
1-The ‘Great Debate’:
Thursday’s standoff between President Biden and former President Trump drew 51.3 million viewers across 17 networks that carried it. That’s well below previous head-to-head debate match-ups i.e. 84 million for Clinton-Trump in 2016, 73 million for Trump and Biden in 2020. Perhaps more telling, only 3.9 million of these were adults 18-34– 7.6% of debate viewers but 22.9% of U.S. population.
While pundits debated the fitness of the President to continue and speculated about alternative candidates over the weekend, the majority of Americans paid no attention—especially young adults. They think both candidates are old.
In 2020, 57% of 18–34-year-olds voted for a Presidential candidate vs. 69% of 35–64-year-olds and 74% of voters 65+.
Polls show young adults think the political system is fundamentally flawed and partisanship harmful to policies that advance the well-being of the population. They also show their declining trust and confidence in America’s institutions—the press, big business, Congress, organized religion and the medical system.
Young adults get their information from social media and friends and they’re tuning out spin in politics.
2-Supreme Court decisions impacting healthcare:
As is customary for the high court, many of its rulings are handed down in the last week of June before it adjourns for the summer. Only one case remains in limbo: Presidential immunity with a decision expected today. Of the 61 cases SCOTUS has heard in its 2023-2024 term, these four decisions are the most significant to the health industry:
Power of federal agencies (Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dept. of Commerce): By a vote of 6-3, SCOTUS ruled that judges no longer have to defer to agency officials when interpreting ambiguous federal statutes about the environment, the workplace, public health and other aspects of American life overturning a 40-year-old legal precedent known as “Chevron deference.” The court’s decision will significantly curtail the power federal agencies have to regulatethousands of private companies, products, industries and the environment.
Emergency room abortions (Idaho v. U.S): SCOTUS ruled 6-3 that hospitals in Idaho that receive federal fundsmust allow emergency abortion care to stabilize patients — even though the state strictly bans the procedure.
Opioid lawsuit settlement (Harrington v. Purdue Pharma): By a vote of 5-4, the justices blocked a controversialPurdue Pharma bankruptcy plan that would have provided billions of dollars to address the nation’s opioid crisis in exchange for protecting the family that owns the company from future lawsuits. The majority found that the plan was invalid because all the affected parties had not been consulted on the deal
Abortion medication restrictions (FDA v. Alliance for Hippocratic Medicine): By a vote of 9-0, the justices maintained broad access to mifepristone, unanimously reversing a lower court decision that would have made the widely used abortion medication more difficult to obtain. The decision was not on the substance of the case, but a procedural ruling that the challengers did not have legal grounds to bring their lawsuit.
Based on these events last week, healthcare organizations and their trade groups making plans for 2025 and beyond should consider:
Young adults. Out of Sight, Out of Mind: Polling data shows young adults think the health system is broken and alternatives worth considering. Affordability, equitable access and price transparency matter to them. Their finances are stretched as inflation (housing, energy, food et al), their medical debt prevalent and mounting and their employers are cutting their health benefits and forcing them to assume more out-of-pocket responsibility. Hospitals, insurers, physicians and drug companies pay close attention to older working age consumers and seniors. They pay little attention to younger adults, and the reverse is true. But history teaches that social movements originate from disenchanted youth and young adults who feel taken for granted, abused by corporate greed and unheard. Might the healthcare status quo be a target?
The federal administrative state in flux: The ripple effect of the court’s Chevron decision is equivalent to its decision ending Roe v. Wade (June 2022). The latitude afforded key federal agencies i.e. CDC, CMS, OSHA, CMMI, FDA, HRSA et al will be revisited. States will be forced to step in where federal guidance is in jeopardy. Governors and the White House will face more frequent court challenges on their Executive Orders and agencies for their Administrative Actions as government oversight of healthcare evolves. For investors, safe bets will be targets. For hospitals, insurers and physicians, federal advocacy will require recalibration.
The administrative state flux means state legislatures and ballot referenda will play a bigger role in healthcare. States already have enormous responsibilities for healthcare:
Medicaid coverage determination
Retail Health i.e. services (efficacy), truth in advertising, consumer safety et al
Public health services i.e. STDs, disease surveillance, immunization policies et al.
Prescription Drug Affordability (in 11 states)
Health Insurance Marketplaces
Healthcare workforce scope of practice
Medical Malpractice and consumer protections
Abortion Rights: as a result of the 2022 Supreme Court ruling that Roe v. Wade
Behavioral health, substance abuse workforce adequacy, licensure, scope of practice et al.
Certificate of Need Programs
Use Medical Marijuana (Cannabis) for Therapeutics and/or Recreational Use.
Health Insurer Licensing, Network adequacy and Liquidity
Quality and patient safety inspection in post-acute & home-based settings.
Workers’ compensation eligibility, administration use and funding.
Formulary design and expense control.
School clinics
Prison health
And others
The court decisions last week open the door to additional actions by state agencies and elected officials in areas where federal policies are in limbo:
Tax exemptions for not-for-profit health systems
Hospital consolidation and price transparency,
Accessibility of hospital emergency services for abortion,
Insurer prior authorization and network adequacy
Minimum staffing requirements,
Telehealth use and payment
Restrictive drug formulary
And more.
For every healthcare organization and trade group, vigilance about pending legislation/action at the state level will take on added importance.
The U.S. health system’s future is not a repeat of its past: The week’s events lend to the health industry’s uncertain future. Today, strategic planning in most U.S. healthcare organizations i.e. insurers, hospitals, physician organization, device and drug manufacturers, et al is based on incremental changes forecast 3-5 years out. While consideration is given “transformational” changes 10-15 years out, it is under-studied by planners and rarely included on board agenda dockets. Yet, signal detection of disruptive shifts in financial services, higher education and other industries predict winners and losers. The U.S. system is change-averse because it benefits its self-interests. Outsiders do not share this view. No trade group or organization in healthcare can afford to bet its future on incrementalism in healthcare. These court decisions and the pending election results suggest that healthcare’s future is not a repeat of its past: new rules, new players and new critical success factors are inevitable.
It was a big week for U.S. politics and perhaps a bigger week for healthcare. Stay tuned.
The Affordable Care Act turned 14 on March 23. It has done a lot of good for a lot of people, but big changes in the law are urgently needed to address some very big misses and consequences I don’t believe most proponents of the law intended or expected.
At the top of the list of needed reforms: restraining the power and influence of the rapidly growing corporations that are siphoning more and more money from federal and state governments – and our personal bank accounts – to enrich their executives and shareholders.
I was among many advocates who supported the ACA’s passage, despite the law’s ultimate shortcomings. It broadened access to health insurance, both through government subsidies to help people pay their premiums and by banning prevalent industry practices that had made it impossible for millions of American families to buy coverage at any price. It’s important to remember that before the ACA, insurers routinely refused to sell policies to a third or more applicants because of a long list of “preexisting conditions” – from acne and heart disease to simply being overweight – and frequently rescinded coverage when policyholders were diagnosed with cancer and other diseases.
While insurance company executives were publicly critical of the law, they quickly took advantage of loopholes (many of which their lobbyists created) that would allow them to reap windfall profits in the years ahead – and they have, as you’ll see below.
I wrote and spoke frequently as an industry whistleblower about what I thought Congress should know and do, perhaps most memorably in an interview with Bill Moyers. During my Congressional testimony in the months leading up to the final passage of the bill in 2010, I told lawmakers that if they passed it without a public option and acquiesced to industry demands, they might as well call it “The Health Insurance Industry Profit Protection and Enhancement Act.”
A health plan similar to Medicare that could have been a more affordable option for many of us almost happened, but at the last minute, the Senate was forced to strip the public option out of the bill at the insistence of Sen. Joe Lieberman (I-Connecticut), who died on March 27, 2024. The Senate did not have a single vote to spare as the final debate on the bill was approaching, and insurance industry lobbyists knew they could kill the public option if they could get just one of the bill’s supporters to oppose it. So they turned to Lieberman, a former Democrat who was Vice President Al Gore’s running mate in 2000 and who continued to caucus with Democrats. It worked. Lieberman wouldn’t even allow a vote on the bill if it created a public option. Among Lieberman’s constituents and campaign funders were insurance company executives who lived in or around Hartford, the insurance capital of the world. Lieberman would go on to be the founding chair of a political group called No Labels, which is trying to find someone to run as a third-party presidential candidate this year.
The work of Big Insurance and its army of lobbyists paid off as insurers had hoped. The demise of the public option was a driving force behind the record profits – and CEO pay – that we see in the industry today.
The good effects of the ACA:
Nearly 49 million U.S. residents (or 16%) were uninsured in 2010. The law has helped bring that down to 25.4 million, or 8.3% (although a large and growing number of Americans are now “functionally uninsured” because of unaffordable out-of-pocket requirements, which President Biden pledged to address in his recent State of the Union speech).
The ACA also made it illegal for insurers to refuse to sell coverage to people with preexisting conditions, which even included birth defects, or charge anyone more for their coverage based on their health status; it expanded Medicaid(in all but 10 states that still refuse to cover more low-income individuals and families); it allowed young people to stay on their families’ policies until they turn 26; and it required insurers to spend at least 80% of our premiums on the health care goods and services our doctors say we need (a well-intended provision of the law that insurers have figured out how to game).
The not-so-good effects of the ACA:
As taxpayers and health care consumers, we have paid a high price in many ways as health insurance companies have transformed themselves into massive money-making machines with tentacles reaching deep into health care delivery and taxpayers’ pockets.
To make policies affordable in the individual market, for example, the government agreed to subsidize premiums for the vast majority of people seeking coverage there, meaning billions of new dollars started flowing to private insurance companies. (It also allowed insurers to charge older Americans three times as much as they charge younger people for the same coverage.) Even more tax dollars have been sent to insurers as part of the Medicaid expansion. That’s because private insurers over the years have persuaded most states to turn their Medicaid programs over to them to administer.
We invite you to take a look at how the ascendency of health insurers over the past several years has made a few shareholders and executives much richer while the rest of us struggle despite – and in some cases because of – the Affordable Care Act.
BY THE NUMBERS
In 2010, we as a nation spent $2.6 trillion on health care. This year we will spend almost twice as much – an estimated $4.9 trillion, much of it out of our own pockets even with insurance.
In 2010, the average cost of a family health insurance policy through an employer was $13,710. Last year, the average was nearly $24,000, a 75% increase.
The ACA, to its credit, set an annual maximum on how much those of us with insurance have to pay before our coverage kicks in, but, at the insurance industry’s insistence, it goes up every year. When that limit went into effect in 2014, it was $12,700 for a family. This year, it has increased by 48%, to $18,900. That means insurers can get away with paying fewer claims than they once did, and many families have to empty their bank accounts when a family member gets sick or injured. Most people don’t reach that limit, but even a few hundred dollars is more than many families have on hand to cover deductibles and other out-of-pocket requirements. Now 100 million Americans – nearly one of every three of us – are mired in medical debt, even though almost 92% of us are presumably “covered.” The coverage just isn’t as adequate as it used to be or needs to be.
Meanwhile, insurance companies had a gangbuster 2023. The seven big for-profit U.S. health insurers’ revenues reached $1.39 trillion, and profits totaled a whopping $70.7 billion last year.
SWEEPING CHANGE, CONSOLIDATION–AND HUGE PROFITS FOR INVESTORS
Insurance company shareholders and executives have become much wealthier as the stock prices of the seven big for-profit corporations that control the health insurance market have skyrocketed.
NOTE: The Dow Jones Industrial Average is listed on this chart as a reference because it is a leading stock market index that tracks 30 of the largest publicly traded companies in the United States.
REVENUES collected by those seven companies have more than tripled (up 346%), increasing by more than $1 trillion in just the past ten years.
PROFITS (earnings from operations) have more than doubled (up 211%), increasing by more than $48 billion.
The CEOs of these companies are among the highest paid in the country. In 2022, the most recent year the companies have reported executive compensation, they collectively made $136.5 million.
U.S. HEALTH PLAN ENROLLMENT
Enrollment in the companies’ health plans is a mix of “commercial” policies they sell to individuals and families and that they manage for “plan sponsors” – primarily employers and unions – and government/enrollee-financed plans (Medicare, Medicaid, Tricare for military personnel and their dependents and the Federal Employee Health Benefits program).
Enrollment in their commercial plans grew by just 7.65% over the 10 years and declined significantly at UnitedHealth, CVS/Aetna and Humana. Centene and Molina picked up commercial enrollees through their participation in several ACA (Obamacare) markets in which most enrollees qualify for federal premium subsidies paid directly to insurers.
While not growing substantially, commercial plans remain very profitable because insurers charge considerably more in premiums now than a decade ago.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2) Humana announced last year it is exiting the commercial health insurance business. (3) Enrollment in the ACA’s marketplace plans account for all of Molina’s commercial business.
By contrast, enrollment in the government-financed Medicaid and Medicare Advantage programs has increased 197% and 167%, respectively, over the past 10 years.
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS.
Of the 65.9 million people eligible for Medicare at the beginning of 2024, 33 million, slightly more than half, enrolled in a private Medicare Advantage plan operated by either a nonprofit or for-profit health insurer, but, increasingly, three of the big for-profits grabbed most new enrollees.
Of the 1.7 million new Medicare Advantage enrollees this year, 86% were captured by UnitedHealth, Humana and Aetna.
Those three companies are the leaders in the Medicare Advantage business among the for-profit companies, and, according to the health care consulting firm Chartis, are taking over the program “at breakneck speed.”
(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2,3) Centene’s and Molina’s totals include Medicare Supplement; they do not break out enrollment in the two Medicare categories separately.
It is worth noting that although four companies saw growth in their Medicare Supplement enrollment over the decade, enrollment in Medicare Supplement policies has been declining in more recent years as insurers have attracted more seniors and disabled people into their Medicare Advantage plans.
OTHER FEDERAL PROGRAMS
In addition to the above categories, Humana and Centene have significant enrollment in Tricare, the government-financed program for the military. Humana reported 6 million military enrollees in 2023, up from 3.1 million in 2013. Centene reported 2.8 million in 2023. It did not report any military enrollment in 2013.
Elevance reported having 1.6 million enrollees in the Federal Employees Health Benefits Program in 2023, up from 1.5 million in 2013. That total is included in the commercial enrollment category above.
At Cigna, Express Scripts’ pharmacy operations now contribute more than 70% to the company’s total revenues. Caremark’s pharmacy operations contribute 33% to CVS/Aetna’s total revenues, and Optum Rx contributes 31% to UnitedHealth’s total revenues.
WHAT TO DO AND WHERE TO START
The official name of the ACA is the Patient Protection and Affordable Care Act. The law did indeed implement many important patient protections, and it made coverage more affordable for many Americans.
But there is much more Congress and regulators must do to close the loopholes and dismantle the barriers erected by big insurers that enable them to pad their bottom lines and reward shareholders while making health care increasingly unaffordable and inaccessible for many of us.
Several bipartisan bills have been introduced in Congress to change how big insurers do business. They include curbing insurers’ use of prior authorization, which often leads to denials and delays of care; requiring PBMs to be more “transparent” in how they do business and banning practices many PBMs use to boost profits, including spread pricing, which contributes to windfall profits; and overhauling the Medicare Advantage program by instituting a broad array of consumer and patient protections and eliminating the massive overpayments to insurers.
And as noted above, President Biden has asked Congress to broaden the recently enacted $2,000-a-year cap on prescription drugs to apply to people with private insurance, not just Medicare beneficiaries. That one policy change could save an untold number of lives and help keep millions of families out of medical debt. (A coalition of more than 70 organizations and businesses, which I lead, supports that, although we’re also calling on Congress to reduce the current overall annual out-of-pocket maximum to no more than $5,000.)
I encourage you to tell your members of Congress and the Biden administration that you support these reforms as well as improving, strengthening and expanding traditional Medicare. You can be certain the insurance industry and its allies are trying to keep any reforms that might shrink profit margins from becoming law.
Last week, 2 important economic reports were released that provide a retrospective and prospective assessment of the U.S. health economy:
The CBO National Health Expenditure Forecast to 2032:
“Health care spending growth is expected to outpace that of the gross domestic product (GDP) during the coming decade, resulting in a health share of GDP that reaches 19.7% by 2032 (up from 17.3% in 2022). National health expenditures are projected to have grown 7.5% in 2023, when the COVID-19 public health emergency ended. This reflects broad increases in the use of health care, which is associated with an estimated 93.1% of the population being insured that year… During 2027–32, personal health care price inflation and growth in the use of health care services and goods contribute to projected health spending that grows at a faster rate than the rest of the economy.”
The Congressional Budget Office forecast that from 2024 to 2032:
National Health Expenditures will increase 52.6%: $5.048 trillion (17.6% of GDP) to $7,705 trillion (19.7% of GDP) based on average annual growth of: +5.2% in 2024 increasing to +5.6% in 2032
NHE/Capita will increase 45.6%: from $15,054 in 2024 to $21,927 in 2032
Physician services spending will increase 51.2%: from $1006.5 trillion (19.9% of NHE) to $1522.1 trillion (19.7% of total NHE)
Hospital spending will increase 51.6%: from $1559.6 trillion (30.9% of total NHE) in 2024 to $2366.3 trillion (30.7% of total NHE) in 2032.
Prescription drug spending will increase 57.1%: from 463.6 billion (9.2% of total NHE) to 728.5 billion (9.4% of total NHE)
The net cost of insurance will increase 62.9%: from 328.2 billion (6.5% of total NHE) to 534.7 billion (6.9% of total NHE).
The U.S. Population will increase 4.9%: from 334.9 million in 2024 to 351.4 million in 2032.
The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024):
“The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April… Over the last 12 months, the all-items index increased 3.3% before seasonal adjustment. More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month. The index for food increased 0.1% in May. … The index for all items less food and energy rose 0.2% in May, after rising 0.3 % the preceding month… The all-items index rose 3.3% for the 12 months ending May, a smaller increase than the 3.4% increase for the 12 months ending April. The all items less food and energy index rose 3.4 % over the last 12 months. The energy index increased 3.7%for the 12 months ending May. The food index increased 2.1%over the last year.
Medical care services, which represents 6.5% of the overall CPI, increased 3.1%–lower than the overall CPI. Key elements included in this category reflect wide variance: hospital and OTC prices exceeded the overall CPI while insurance, prescription drugs and physician services were lower.
Physicians’ services CPI (1.8% of total impact): LTM: +1.4%
Hospital services CPI (1.0% of total impact): LTM: +7.3%
Prescription drugs (.9% of total impact) LTM +2.4%
Over the Counter Products (.4% of total impact) LTM 5.9%
Health insurance (.6% of total) LTM -7.7%
Other categories of greater impact on the overall CPI than medical services are Shelter (36.1%), Commodities (18.6%), Food (13.4%), Energy (7.0%) and Transportation (6.5%).
Three key takeaways from these reports:
The health economy is big and getting bigger. But it’s less obvious to consumers in the prices they experience than to employers, state and federal government who fund the majority of its spending. Notably, OTC products are an exception: they’re a direct OOP expense for most consumers. To consumers, especially renters and young adults hoping to purchase homes, the escalating costs of housing have considerably more impact than health prices today but directly impact on their ability to afford coverage and services. Per Redfin, mortgage rates will hover at 6-7% through next year and rents will increase 10% or more.
Proportionate to National Health Expenditure growth, spending for hospitals and physician services will remain at current levels while spending for prescription drugs and health insurance will increase. That’s certain to increase attention to price controls and heighten tension between insurers and providers.
There’s scant evidence the value agenda aka value-based purchases, alternative payment models et al has lowered spending nor considered significant in forecasts.
The health economy is expanding above the overall rates of population growth, overall inflation and the U.S. economy. GDP. Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic.
As Campaign 2024 heats up with the economy as its key issue, promises to contain health spending, impose price controls, limit consolidation and increase competition will be prominent.
Public sector actions
will likely feature state initiatives to lower cost and spend taxpayer money more effectively.
Private sector actions
will center on employer and insurer initiatives to increase out of pocket payments for enrollees and reduce their choices of providers.
Thus, these reports paint a cautionary picture for the health economy going forward. Each sector will feel cost-containment pressure and each will claim it is responding appropriately. Some actually will.
PS: The issue of tax exemptions for not-for-profit hospitals reared itself again last week.
The Committee for a Responsible Federal Budget—a conservative leaning think tank—issued a report arguing the exemption needs to be ended or cut. In response,
the American Hospital Association issued a testy reply claiming the report’s math misleading and motivation ill-conceived.
This issue is not going away: it requires objective analysis, fresh thinking and new voices. For a recap, see the Hospital Section below.
On Tuesday, health system leaders testified before the House Energy and Commerce Subcommittee onOversight and Investigations about potential changes to the 340B Drug Pricing Program.
The committee was receptive to witnesses’ claims that the program is essential to the financial survival of many systems, but representatives stated that “the status quo is not acceptable” and that they had a responsibility to “step in and provide oversight.”
There was little interest expressed in broad overhauls to the program, but both witnesses and representatives focused on how it could benefit from greater transparency, for example requiring hospitals to disclose 340B revenue, how savings are used, and which patient populations are served through the program.
Meanwhile, Republicans and Democrats in both houses have introduced multiple bills this session that focus on various aspects of the 340B program, including transparency.
The Gist: It’s encouraging to see members of congress recognize how essential the 340B program is to health system finances, and of the potential reforms on the table, increased transparency is a relatively palatable option.
Congress is exploring statutory tweaks to the program in response to the myriad legal challenges concerning it, many of which involve the Department of Health and Human Services. Several of these lawsuits stem from more than 20 major drugmakers restricting 340B discounts at contract pharmacies, which has led multiple states to enact legislation protecting these discounts, in turn prompting further lawsuits.
The mess of conflicting rulings these cases have produced so far is a clear sign that the 340B statute will be amended, and health system advocates should continue working with Congress to find solutions that preserve the integrity of the program.
HENRY KOTULA 