Tag Archives: Health Insurance

Is AHA Right to be Concerned?

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Is AHA Right to be Concerned?

Last week, the American Hospital Association released a study by Kaufman Hall, its preferred data vendor, that took issue with methodologies used by critics of hospital consolidation:

“These findings suggest that a more comprehensive analysis of hospital M&A transactions, one that considers impacts on all patients served, broadens the focus to impacts beyond pricing, and considers the consequences if an M&A transaction is not permitted to proceed, would ensure not only competitive but also healthy hospital markets that can continue to provide the fullest possible range of services.”

The report discusses how hospital merger reviews should look beyond the potential impact on commercial insurance prices and consider what proposed transactions mean for all patients, particularly the nearly 60% of hospital patient days attributable to Medicare, Medicaid and Medicare Advantage beneficiaries whose payment rates are largely set by government programs.” Drawing on analyses of challenged and canceled transactions, the report also finds that hospitals seeking partners often serve more vulnerable communities and face greater financial pressures, and that when proposed deals do not move forward, struggling hospitals can experience significant financial deterioration that threatens services, workforce stability and access to care.”

Kaufman Hall added this disclaimer: “The findings contained in this document may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Past performance is not necessarily indicative of future results. Kaufman Hall accepts no responsibility for actual results or future events.

Also last week, a Health Affairs commentary “In 2026, States Are Leading On Health Care Affordability” noted that “Research has consistently shown that hospital prices are the largest driver of commercial health care spending growth. Hospital markets are dominated by monopolies, which enable hospitals to charge higher prices without improving quality or outcomes. State policymakers are increasingly looking for options to limit excessive hospital prices. Our research shows that capping the highest, most egregious prices charged by hospitals can meaningfully improve health care affordability while still allowing hospitals to generate a healthy margin…

A key driver of rising health care prices is consolidation in health care systems, including through hospital acquisitions of physician practices. These acquisitions, which are a form of vertical integration, increase hospital prices by 3 to 5%. This can be attributed to greater bargaining power, more intensive coding practices, and hospitals charging facility fees at what were previously independent physician practices but are now treated as “hospital outpatient departments.” To address these issues, states are increasingly considering facility fee bans or “site-neutral” policies that would cap prices for certain routine hospital outpatient services that could be provided safely in an office setting.”

Both positions are defensible.

Not for profit and public hospitals are at a disadvantage in managing their finances because they’re obligated to serve entire communities without regard to local economies or population health. Investor-owned hospitals and insurance companies have fewer restrictions and can exit markets at will.

And almost every hospital is dependent on reimbursement from commercially insured patients to offset what is the widely-accepted calculus that Medicare and Medicaid reimbursement doesn’t cover the total cost of care provided enrollees. Thus, across the hospital industry, the playbook has been straightforward: to optimize hospital finances….

  • Maximize the attractiveness of hospital services that attract privately insured patients via contracting with private insurers.
  • Negotiate favorable rates with private insurers to enhance cost-shifting to Medicare and Medicaid by private plans.
  • Optimize leverage (scale) over insurers by consolidating hospitals, acquiring physician practices, expanding ancillary activities and deploying capital to potentially profitable ventures.
  • Advocate for state and federal laws that dissuade hospital price caps, 340B cuts, site-neutral payments, unreasonable price transparency requirements and limits on private-equity partnerships.
  • Assert that hospitals are efficient stewards of the public’s trust but disadvantaged by corporate insurers and drug companies that are allowed to enter and exit markets at will, price at “what the market will bear” and put shareholder profit above all else.

This scheme has worked for 40 years to enable hospitals to control at least 50% of total health spending: 31% for traditional hospital services, 12% of total physician services, and ventures, partnerships, ancillary services and post-acute services in addition. In the aggregate, hospitals are the most important cog in the healthcare wheel. They’re labor intense, capital intense, complicated businesses that enjoy public trust that’s slipping away, especially among the 25 million who work in the industry.  Complicating matters, distinctions between rural and government safety net hospitals and highly profitable investor-owned and not-for-profit systems are attracting unwanted scrutiny from regulators and in media coverage.

While Kaufman Hall raises legitimate questions about current methodologies used by state and federal regulators to assess consolidation, it does not answer the bigger question: what role should hospitals play in the U.S. system as AI-derived clinical innovation proliferates, labor and supply costs accelerate and fewer people can afford services?

It’s not clear.

  • Should “hospital services” be redefined bifurcating facility-dependent inpatient services (Part A) and an expanded set of services inclusive of self-care provided in homes, schools, workplaces and virtually?
  • Should “community-benefits” and “charity care” be redefined so that methodologies are consistent and gaming to receive tax benefits eliminated?
  • Should hospital clinical performance be linked to improved outcomes and lower costs (affordability)?
  • Should local primary care and preventive health services (inclusive of nutrition, physical and mental health, prophylactic dentistry) be integrated with hospital services to improve population health and control demand for hospital services?
  • Should specialized tertiary and quaternary hospital programs be rationalized to optimize outcomes and improve efficiency?
  • Should consolidated hospital systems disclose administrative costs, functions and allocation methodologies publicly?
  • Should hospital boards be required to conduct scenario planning that’s comprehensive?
  • Should hospital administrative services and costs be standardized to facilitate caps on spending and management performance comparisons?
  • Should physician ownership of hospitals be enabled to increase competition?

And many others.

The American Hospital Association is right to be concerned about how regulators are addressing hospital consolidation and its impact on prices. And they’re right to challenge methodologies applied to questions about hospital prices and competition. But they fall short in offering a vision for the future of the health system that’s plausible, affordable and compelling. Rather, they offer a hospital-centric vision based on suspect assumptions and inadequate sensitivity to market trends not directly associated with traditional health services.

Every stakeholder in the health system—including hospitals and physicians—face heightened pressure to eliminate unnecessary utilization and costs due to willful or unknowing fraud. Just as insurer prior authorization practices have been frustrating to providers, unnecessary care is confounding to regulators and employers. The use of agentic AI tools to examine appropriateness of tests, procedures, medications and visits will exponentially change how “quality of care” is defined and regulated, and how its delivered. It’s a big deal everywhere, especially in Medicaid programs.

The Biggest Health Care Companies in America Don’t Treat Anyone

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It started as a simple question. Who are the biggest health care companies in the United States?

If you rank the ten largest health care companies in America by revenue, you will not find a single hospital system or drugmaker. Not Pfizer, not Eli Lilly, not the Mayo Clinic or HCA. Every company in the top ten is a middleman, and together they take in about $2.6 trillion a year.

Above is a list showing how much of every dollar of revenue each company keeps as net income. Then read about what these companies actually do.

Three of these companies are insurers that swallowed pharmacy benefit managers: UnitedHealth owns Optum Rx; CVS owns Caremark and Aetna; and Cigna owns Express Scripts. Three are drug distributors that move pills from the factory to the pharmacy and touch almost none of them. Three more are built on Medicare and Medicaid managed care. Every one of them sits between the people who deliver care and the money that pays for it.

McKesson, Cencora and Cardinal Health each keep somewhere between half a cent and a penny of profit on every dollar of revenue. Cencora reported $294 billion in sales in fiscal 2024 and $1.5 billion in profit. That is a rounding error as a margin. And yet all three rank among the thirty largest companies in the world.

No other rich country works this way

The sheer size of these companies is another distinctly American feature of the system. On the 2026 Fortune Global 500, UnitedHealth ranks fourth in the world, ahead of Apple; McKesson is seventh; CVS is ninth; and Cigna, where I worked for 15 years, ranks 14th in the U.S. and 21st in the world. Every health care company near the top of the global list is an American intermediary in one way or another. There is no foreign health care business of any nature that comes close.

The closest thing another country has to one of our giants is Allianz, in Germany. Allianz is the largest insurance company in Europe. But it is a general insurer built on property, life and asset management, and health is a minor line. Even at home, Allianz is only the third largest health insurer in Germany. There, roughly nine in ten people are covered by nonprofit sickness funds, which are barred by law from operating as for profit and must send any surplus in funds back into the system.

And then there are Britain’s National Health Service (NHS), which is funded by taxes; Canada’s single-payer system financed through the provinces; and Japan’s nonprofit insurance system based on a standardized national fee schedule.

None of these countries built the kind of for-profit middleman layer that exists in the U.S., where some of those companies have grown into the largest corporations in the world. Pharmacy benefit managers are also a uniquely American creation, which helps explain why that entire category of health care giant does not exist elsewhere.

What the middleman layer costs

The United States spent $5.3 trillion on health care in 2024. That was the first year the country ever crossed $5 trillion, and it is the most recent year with actual figures rather than projections. (The Centers for Medicare and Medicaid Services estimates total U.S. health spending will reach $6 trillion this year.)

A large share of that money never reaches care and instead is consumed by the U.S. health care system’s complicated administration and payment systems.

In 2021, the United States spent $925 per person on health administration, meaning the overhead of insurers and government programs. The average wealthy country spent $245. That gap of $680 a person accounts for about 12% of the entire difference between what America spends on health and what its peers spend. As a share of the total, administration eats about 7.6% of U.S. health spending against 3.8% across comparable nations. We devote twice the share of every health dollar to running our absurd machinery.

The $925 figure counts insurer and government overhead and does not include what hospitals and doctors spend on billing, coding and prior authorization just to get paid. When those costs are included, estimates put total administrative spending between 15% and 25% of all U.S. health care spending — or, based on 2024 spending, roughly $800 billion to $1.3 trillion a year.

The countries with the leanest administrative spending tend to be those (you guessed it!) with the fewest middlemen.

Middlemen spend to keep the status quo

I know how a system this profitable defends itself because I used to help do it. Back at my old gig at Cigna, my team and I wrote talking points for lobbyists to use with lawmakers, and we doled out campaign cash to candidates we liked.

The health sector spent $743.9 million lobbying the federal government in 2024, more than any other sector of the economy and the only one to clear $700 million. UnitedHealth alone spent $16.6 million in the 2024 election cycle. The insurance industry’s trade group, AHIP, and the biggest insurance conglomerates pour tens of millions more into the same effort year after year, and the pharmacy benefit managers keep their own operation running through another insurance industry funded trade group called the Pharmaceutical Care Management Association (PCMA), whose spending has roughly doubled since 2022.

That spending helps protect Medicare Advantage payments, fight efforts to rein in pharmacy benefit managers and oppose proposals that would move the country toward universal coverage. Compared with the $70 billion in combined profit of the seven biggest for-profit insurers last year, the lobbying bill is relatively small.

The price of “choice”

The industry says all of this is the price of “choice,” which they want folks to believe is sacred. It is the argument insurers and their allies reach for every time Congress looks at a single-payer bill or public option or any other approach, for that matter, that could move us closer to reining in the worst abuses of the industry.

Americans say they want to choose their own doctor and their own hospital, but that is exactly the kind of choice the middleman system can take away through narrow networks and prior authorization. What the industry defends instead is the choice among insurers. And for most working people, even that choice is made by an employer. We pay hundreds of billions of dollars a year to run a marketplace of middlemen, and in return we get narrower networks and more denials than patients face in the countries that never built the marketplace at all.

Depending on the results of the next two election cycles, Congress will almost certainly debate how to restructure health care again, with the familiar goals of lowering costs, expanding coverage and improving care. But any serious attempt to do that will have to confront the enormous middleman industry the current system has created and allowed to flourish.

Congress Wants to Crack Open Health Care’s Black Box. One Sentence Could Keep It Shut.

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Congress wants employers and unions to finally see where their health care dollars go. A last-minute change could let insurers and PBMs keep some of the most important receipts hidden.

For years, employers and other plan sponsors, such as unions, have been fighting to get the one thing they need to better control their own health care spending: the claims data their insurers/third-party administrators and pharmacy benefit managers generate on their behalf but routinely refuse to hand over. A bill working its way through Congress – the Patients Deserve Price Tags Act (PDPTA) – would finally force that data into the open. The bill is also a real test case for a simple idea: that transparency itself can help drive down unnecessary spending, lower overall health care costs, benefit patients, and strip middlemen of the leverage they use to pocket money they were never entitled to.

The fiscal case backs this up. A recent independent analysis by economists Daniel Arnold and Christopher Whaley estimates the bill would generate roughly $122 billion in additional federal revenue over 2026–2035, with a plausible range of $25 billion to $270 billion, by driving down employer plan spending in ways that eventually show up as higher taxable wages. That’s the standard logic the Congressional Budget Office uses for scoring changes in employer-sponsored insurance. Even at the low end of that wide range, it’s a meaningful number.

The usefulness of the bill, however, would be significantly undermined by a single sentence, added to Section 7 just before it was voted out of the Senate Health, Education, Labor and Pensions (HELP) Committee, that could gut the very accountability mechanism the bill is built around.

First, because this is an area where there is a lot of confusion, here’s some information and context. A plan sponsor, as noted above, is typically an employer or union that offers subsidized health benefits to workers and their families. In that role, the employers and unions are the actual “insurers.” They hire companies we typically call insurers (like Cigna, Aetna, UnitedHealthcare or a Blue Cross plan) to administer those health benefits. In that role, those companies are third-party administrators (TPAs) who use the employers’ and unions’ – and workers’ – money to pay claims, create provider networks, serve as gatekeepers to care and handle other administrative responsibilities, like approving and denying coverage for care (called utilization management or prior authorization). Employers and unions pay those TPAs huge fees to do that work.

So huge, in fact, that at Cigna, where I used to work, approximately 80% or more of revenues from the company’s U.S. commercial health insurance operations came from administrative-services-only arrangements. Even though workers have insurance cards in their wallets with the logo of a company like Cigna or Aetna, which we think of as an insurer, the workers’ employer or union is, in fact, the insurer.

Section 7 of the bill gives employer and union health plans the right to access their own complete claims data — from the insurers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) that plan sponsors hire to handle those administrative duties, and the plan sponsors give the TPAs access to the money in the bank accounts the plan sponsors set up to cover the cost of their workers’ health care benefits. Those TPAs and PBMs (which are typically owned by the TPAs) are the middlemen that are involved in every dollar a plan sponsor spends. They set network prices, retain rebates from pharmaceutical companies (kickbacks, in plainer, more precise language) and generally control the only detailed record of where a plan sponsor’s money actually went. When employers and unions can’t see that record – and in today’s world they usually do not, even though we’re talking about their own money – they can’t audit it, and audits are the only way plan sponsors ever catch things like phantom billing, upcoding, duplicate charges or the disparities in denials and prior-authorization patterns that Congress has spent years scrutinizing.

Section 7’s whole purpose is to let the people paying the bills finally be able to trace where their money goes.

The new language in the Senate bill just before it was voted out of the HELP Committee says that, “A covered service provider would not have to disclose data that could ‘reasonably identify’ a participant or beneficiary, as defined under HIPAA’s individually identifiable health information standard.”

On its face, that sounds like ordinary patient-privacy boilerplate, but it is much more than that. HIPAA already has a detailed, well-established process for exactly this situation — dealing with a health plan’s right to receive identifiable claims data for plan administration. That process encompasses two well-defined de-identification methods – the 18-identifier “Safe Harbor” standard, and “expert determination” – for when identifiability genuinely needs to be limited.

The newly inserted language doesn’t invoke either of those. To the delight of my former employers in the health insurance business, it creates a new, undefined standard — “could reasonably identify” — with no cross-reference to how HIPAA actually determines that, and no appeals process if a plan sponsor disagrees. And it hands the decision to the very parties Section 7 exists to hold accountable. If that language stays in the bill, the insurer, TPA, or PBM would get to decide, on its own, what counts as identifiable enough to withhold from plan sponsors. Keep in mind that the TPAs and PBMs, which are constantly trying to maximize their revenues, by their very nature have access to identifiable data on every insured American.

De-identification of that data before it is shared with plan sponsors doesn’t just strip names and Social Security numbers. Done under a vague, self-certified standard, it can also strip exact service dates, zip codes, and the member-level identifiers that let an employer or union sponsored health plan connect one claim to another. Those are precisely the fields that let a plan sponsor piece together a pattern.

Here’s a hypothetical example of how PDPTA would enable employers to get a better handle on how their TPAs/PBMs are using their money to pay claims – and how the inserted language would stymie their ability to do so:

Suppose an employer plan noticed it had been billed for six services in a single week for one patient from one provider. Because it could see the clustered service dates, the plan could investigate, discover the services had never been performed, report the provider for false billing, and recover the money. But strip out exact dates — which the new language would allow — and that same claim would just look like six services spread out over time. The fraud would likely go uncaught, and the health plan (which means, ultimately, workers’ wages and other compensation) would eat the loss.

The same missing fields also hide denial-rate disparities and turnaround-time patterns — the exact behavior lawmakers keep asking about in prior-authorization hearings. And they would block plan sponsors from recovering overcharges they can no longer prove occurred.

Here’s something else to keep in mind: PBMs and insurers already sell claims-level data to drug manufacturers, data brokers, and analytics firms for their own commercial gain. The inserted language would let them keep doing that while blocking the employer or union that actually paid for the data from ever seeing it themselves.

Some of the lawmakers who care most about getting this right have raised a concern that deserves to be taken seriously, hence the newly added language. They don’t want employers gaining routine access to their own employees’ identifiable medical records. That’s not a paranoid fear. An employer that can see an employee receiving mental health treatment, fertility care or substance-use treatment has information that, mishandled, could influence a promotion, a layoff list or a manager’s private judgment about someone, even where no law technically permits that use.

That concern is exactly why HIPAA built a specific structure for it, back when Congress first grappled with this same problem in the 1990s. Think of it as a locked door inside an employer’s own building. When a company sponsors a health plan for its workers, HIPAA doesn’t let that identifiable medical data just flow into the regular HR filing system where a manager could stumble across it. Instead, the law requires the employer to designate a small, specific group of people – usually benefits staff, auditors or a third party working on the plan’s behalf – who are allowed through that locked door to see identifiable claims data, but only to do plan-administration work like trying to ensure that claims are paid correctly by TPAs and PBMs and checking for fraud. Everyone else at the company – HR generalists, supervisors, anyone who could use the information in a hiring, firing or promotion decision – stays on the other side of the door. The employer has to sign a formal certification promising to keep that separation in place, and using the data for an employment decision is exactly the kind of violation HIPAA’s firewall exists to catch. And violating HIPAA can be very costly: fines of $50-$250,000 per offense and up to 10 years in jail. That is a very real disincentive to mishandle the data.

That’s the tool already built for the harm some lawmakers say they have concerns about. It doesn’t block identifiable data from ever reaching the plan; it controls who inside the plan gets to see it and what they’re allowed to do with it.

The Section 7 carve-out language inserted in the bill doesn’t touch that door at all. It does something completely different: It lets the TPA, PBM or insurer decide, on its own, that a given piece of data simply won’t go through the door in the first place – not to the walled-off auditors – not to anyone – no matter how carefully separated they are from HR. That’s not tightening the firewall that some lawmakers are worried about breaching. It’s blocking the room entirely, including the auditors it was built to let in.

Here’s what should trouble anyone who takes the privacy concern seriously: The same companies that would get to make that call are, separately, in the business of selling similar claims data to outside parties, including data brokers, drug manufacturers and marketing analytics firms, under HIPAA’s “de-identified” label. Privacy researchers have spent years documenting how easily that kind of de-identified data can be re-identified, especially once it’s cross-matched against other data sets a broker already holds. In other words, the industry treats “identifiable enough to protect from a plan’s own fiduciary auditors” as an easy bar to clear, while treating “de-identified enough to sell for profit” as an even easier one. That’s not privacy protection with a consistent standard. That’s a standard that moves depending on who’s asking and who profits.

If the goal is protecting employees from having their sensitive health information misused – and it should be – the fix is to reinforce the locked-door system Congress already built: stronger certification requirements, even more severe penalties if an employer ever uses plan data in an employment decision, and access limited strictly to the walled-off audit function. That protects workers without stripping Section 7 of its ability to catch fraud. A vague, vendor-administered “reasonably identify” standard doesn’t strengthen that door. It just lets the vendor decide who never gets a key.

The good news is that PDPTA is moving through Congress. On the Senate side, the HELP Committee approved it on a bipartisan basis in late July. The lead sponsors – Roger Marshall (R-Kansas) and John Hickenlooper (D-Colorado) – were joined by Senators Chuck Grassley and Joni Ernst of Iowa and Cynthia Lummis of Wyoming, all Republicans, and Democrats Tammy Baldwin of Wisconsin, Cory Booker of New Jersey, Elizabeth Warren of Massachusetts and John Fetterman of Pennsylvania. That’s the kind of bipartisan coalition that rarely comes together on health care and even more rarely survives a full committee markup intact.

House versions of the Senate bill also have strong bipartisan support and are working their way through three committees (Energy and Commerce, Education and Workforce, and Ways and Means) — reflecting how many parts of federal law it touches.

With a bill this far along, this close to bipartisan agreement, and this close to the end of the current Congress, the pressure to move fast is real. That’s exactly why the Section 7 carve-out needs fixing now, while it’s still open for amendment, rather than after passage when it would take an entirely new bill to undo it. That clearly is not the intention of the bill’s many sponsors.

The transparency goal of the bill is sound, the projected fiscal upside is real even under conservative assumptions, and Section 7’s data-access right is exactly the kind of tool plan sponsors need.

Companies like the ones I used to work for undoubtedly were happy to see the new language inserted in the bill, and I’m hearing evidence that they’re working behind the scenes to keep it in the bill by creating the false narrative that employers and unions want this data primarily to learn more about their workers’ health. That simply doesn’t hold up. For one thing, as I’ve explained, HIPAA is clear on how employers can use the data and what happens if they violate existing law. But it is important to keep in mind that federal law also now makes it abundantly clear that plan sponsors are fiduciaries of workers’ money. They can be sued – and some are being sued – for not fulfilling their fiduciary responsibility under the law. And plan sponsors need data they all too often cannot get from their TPAs and PBMs to meet the law’s requirements.

I’ve written before about how often plan sponsors that sue their own TPAs and PBMs to get the data they need in order to have any assurance that they are not being double billed or defrauded in other ways get bogged down for the simple reason that they can’t get at their own claims data in a form they can actually audit. Section 7, done right, is a legislative fix for that problem. But “done right” requires closing this loophole before the bill moves further. At minimum, that means:

  • Cross-referencing HIPAA’s existing Safe Harbor or expert-determination standards instead of inventing a new, undefined one;
  • Requiring the covered entity to justify any withheld field against that established standard, rather than self-certifying; and
  • Giving plans a way to challenge a withholding decision, instead of leaving the provider as sole judge.

One sentence, fixed, would let PDPTA keep its promise. Left as recently changed, it lets the middlemen write themselves an exemption from the very oversight the bill is meant to create.

The Health Care Scare Is Back

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As voters sour on private insurers and health care reform gains political momentum, decades-old warnings about “choice,” “wait times” and “slippery slopes” are resurfacing.

If you want a sense of where the health care debate is headed as we enter the final stretch before the midterm elections, take a look at what has been published over just the past week.

Last Wednesday, the New York Post published an op-ed by Pacific Research Institute President Sally Pipes warning that Medicare for All would be a “real-life nightmare.” That same day, another Pipes column, this one in Newsmax, warned that a public option would be the first step toward a “complete government takeover of health insurance.” And also last Wednesday, Reason published a piece warning that universal health care means “long waits, rationed care, and unmet medical needs.”

These old tropes are familiar to me, as I am sure they are to many readers. And there is a reason they are back getting airtime.

Health care costs have become a major vulnerability for politicians heading into November. A KFF poll this summer found that 51% of voters considered health care costs an “extremely important” issue for candidates to address. Earlier KFF polling found that 61% said health care costs would have a major impact on which party’s candidates they support. And it is Americans’ sentiments about health care costs that have pushed many Medicare for All candidates over the finish line and lit a fire under current members of Congress who are now seeking a way to increase competition in the health insurance space by creating a nonprofit health plan that would be operated by the federal government.

Americans are increasingly fed up with private health insurers. Complaints about denied care, prior authorization, rising premiums and exorbitant out-of-pocket requirements have put insurers under a level of scrutiny I haven’t seen in years. It’s not just Abdul El Sayed. It’s Marjorie Taylor Green, too.

And it’s because of this political storm brewing that the health insurance industry’s longtime defenders are coming out swinging.

I know Sally Pipes’ work especially well. Pipes, who grew up in Canada but has lived in the U.S. for years, has spent decades warning Americans about reforms that might move the United States closer to a system like our neighbors to the north have. When I was an insurance executive, she was always useful to us.

During the industry’s campaign against Michael Moore’s Sicko, for example, we drew on Pipes’ work to portray Canada’s health care system as a cautionary tale. I wrote about that in the Washington Post. And during the debate over what became the Affordable Care Act, she was a forceful critic of the public insurance option insurers desperately wanted to keep out of the final bill.

She was a reliable ally of the health insurance industry then, and she clearly is returning to that role once again.

In her New York Post column last week, Pipes reaches for one of the oldest and most effective arguments against health care reform: “choice.” Pipes says that (currently) employers can switch insurance companies, people buying their own coverage can shop among plans and Medicare beneficiaries can choose between traditional Medicare and privately run Medicare Advantage plans. Medicare for All, she warns, would take that “choice” away.

It’s an argument that has worked before because “choice” sounds pretty good. Who wants fewer “choices” when it comes to their health care? (That’s a rhetorical question. But one answer is the insurance industry, which has been eliminating “choice” and competition for decades now.)

The trick is that much of the “choice” Pipes is talking about is an illusion. Americans with employer-sponsored coverage most certainly do not get to choose their insurance company. Their employer does. And even if you can choose among a handful of health plans at work, all of them at most U.S. businesses that can still afford to offer coverage are operated by the insurance company your employer chose. That’s not the same as being able to choose your doctors or hospitals, which is the “choice” Americans really want. Your health insurer decides which doctors and hospitals are in your network and can require prior authorization before it will pay for care your doctor recommends.

In other words, Americans may have (some) “choice” of plans – with varying levels of deductibles and copayments – but that doesn’t necessarily mean they have a meaningful “choice” when it comes to their health care.

Pipes’ second column last week reveals something else about the “choice” argument. She warns in Newsmax that a public option would have advantages private insurers couldn’t match, eventually drive them from the market and put the country on a “slippery slope” toward single-payer health care. (I can’t tell you how many times I warned about that so-called “slippery slope” when I ran communications at Cigna.) So Pipes essentially is arguing that private insurers must continue to be protected from additional competition in the name of giving Americans “choices.” But give Americans the “choice” of a public plan—and the possibility that millions might prefer it to what private insurers are selling—and suddenly “choice” itself becomes the problem. She ignores the fact that seniors have long been able to choose a public option – traditional Medicare – or one operated by a private insurer – Medicare Advantage. I can assure you that Medicare Advantage is extraordinarily profitable for private insurers. No one should worry that insurance companies won’t continue to make money if people younger than 65 can also at long last be able to choose a public option.

Reason, the libertarian magazine that has been a persistent critic of the Affordable Care Act, Medicare for All and any concept that would allow the government to pass legislation that would interfere with insurance companies’ business practices, published its own warning last week under the headline: “Universal Healthcare Sounds Great. Here’s What’s Happening in Countries That Have It.”

The piece focuses heavily on Canada and Britain, arguing that people in those countries face long waits for care in overcrowded hospitals, and it cites examples of patients who received inadequate care. Those problems are real and shouldn’t be dismissed. Neither Canada nor Britain has a perfect health care system. But the United States sure as hell doesn’t either. Millions of Americans never get the care they need because they can’t afford to buy health insurance. Millions more with insurance can’t use it because of unaffordable out-of-pockets costs and have no “choice” but to go without the care they need.

Reason leans heavily on one of the most familiar scare tactics used against universal health care: the wait times. In Canada, you might wait a few months for an elective procedure like a knee replacement, and in the U.K. see a specialist or get a procedure. In Britain, you might find yourself in an NHS queue. But in either country, unlike in the U.S., you will not have to wait long at all to see your primary care doctor or be admitted to a hospital for medically urgent care.

To be sure, waiting for an elective procedure or imaging annoys many Canadians and Brits. They are real problems. But in this country, we ration care in a way that creates far more harm than waiting in a queue for a few weeks or months for non-urgent care. In the United States, if you can’t afford care, you don’t wait a few months or get thrown on a waiting list – you all too often never get the care. Because in the U.S. of A, if you’re one of the nearly 30 million Americans who are uninsured, or who can’t cover their deductibles, you don’t get it until you get so sick you have to go to the ER. And then you get saddled with hundreds or thousands of dollars in medical debt.

So comparatively, Americans put off the procedures, scans and medications they need. Americans live with pain and hope whatever is wrong doesn’t get worse. In the worst cases, folks in this country die prematurely with conditions that could have been treated because they couldn’t afford to get the care that could have saved their lives.

Reason has been making versions of this argument for years. The magazine has previously published pieces with headlines including “Medicare for All Is Bad Medicine,” “Why Bernie Sanders’ Medicare for All Is a Bad Idea,” and “Medicare for All Would Actually Be a Government Takeover of Health Care.” (“Government takeover” ranked right up there with “slippery slope” when I was an insurance industry propagandist. Get ready to hear both lies again and again and again between now and November.)

Not only did I find propaganda like this effective in my old job, I’ve also seen it effective in real life.

Obviously, the only way we are going to fix our health care system is by debating the difficult things. We can debate Medicare for All. We can debate a public option. Both proposals deserve serious scrutiny if we want to get the next version of our health care system right.

But the attacks against these reforms deserve scrutiny, too — especially when they come from the same people and organizations that have been making them for decades, and when those arguments have historically served the interests of a health insurance system with an enormous financial stake in preventing reform.

Medicare Advantage enrollees more likely to leave after new complex diagnosis

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Medicare Advantage enrollees who developed a new complex condition, such as congestive heart failure or Alzheimer’s disease, were more likely to leave their plan for traditional Medicare the next year, according to a study published Aug. 21 in JAMA Health Forum.

Medicare Advantage (MA), the private alternative to traditional Medicare, covered 54% of Medicare beneficiaries in 2025, the study noted. MA plans offer perks traditional Medicare doesn’t guarantee, such as spending caps and built-in drug coverage, but they also use prior authorization and limited networks that can slow down care. Folks with bigger health needs have left MA at higher rates than healthier enrollees.

However, leaving isn’t simple. In most states, insurers don’t have to sell Medigap, the supplemental coverage that fills traditional Medicare’s gaps, to someone who skipped it when they first signed up. That can leave beneficiaries who get sick later stuck without that backup option.

The study was led by Mark K. Meiselbach, Ph.D., of the Department of Health Policy and Management at Johns Hopkins Bloomberg School of Public Health, and his team, who said past studies treated a new diagnosis as simply yes-or-no and mostly tracked switches to traditional Medicare. The researchers wanted to see whether leaving MA increases with the number of new conditions a person develops and to separate switches to traditional Medicare from switches to a different MA plan, something earlier research hadn’t done.

JAMA Health Forum finds Medicare Advantage members with new complex diagnoses increasingly switch to traditional Medicare, highlighting MediGap barriers, state protections, and plan limits.

The retrospective cohort study used Medicare enrollment and claims data from 2016 through 2021, analyzed in late 2025 and early 2026. Researchers tracked beneficiaries who stayed in an MA plan all of 2016 and had no complex condition through 2018. Using a standard federal algorithm, they flagged eight conditions: heart attack, Alzheimer disease, atrial fibrillation, chronic kidney disease, chronic obstructive pulmonary disease (COPD), depression, congestive heart failure and stroke.

A treatment group of 219,942 beneficiaries developed one of those conditions in 2019; a comparison group of 834,984 did not develop one through 2021. Using a difference-in-differences design, researchers compared how disenrollment changed for each group before and after 2019, then checked whether that change depended on how many new conditions someone developed, their state’s Medigap rules, and whether their MA plan was a health maintenance organization (HMO).

Developing any new complex condition raised MA disenrollment by 3.3 percentage points. Almost all of that increase came from people leaving for traditional Medicare rather than switching to a different MA plan. The more conditions someone developed, the more likely they were to leave: 1.4 percentage points with one new condition, up to 12.8 points among the 1,010 people with four or more. A new Alzheimer’s disease diagnosis had the single biggest effect, an 8.6 percentage point increase, while the rest ranged from 2.9 to 5.0 points.

Beneficiaries in the four states with Medigap guaranteed-issue and community-rating rules, Connecticut, Maine, Massachusetts and New York, were 1.5 percentage points more likely to leave for traditional Medicare than beneficiaries elsewhere. Those enrolled in HMO plans were less likely to leave for traditional Medicare but more likely to switch to a different MA plan.

Dual-eligible beneficiaries, who qualify for both Medicare and Medicaid, left for traditional Medicare at higher rates and switched MA plans less often, which the authors said tracks with Medicaid reducing their need for Medigap. Plan star ratings didn’t matter much: those in 4- or 5-star plans left at about the same rate as those in 3-star plans after a new diagnosis, suggesting star ratings don’t capture how well a plan serves sicker members.

“These findings underscore the difficulty of making an initial enrollment decision in Medicare,” the study’s authors wrote in the discussion. “Beneficiaries cannot foresee all of their future health needs when they first enroll in MA, but the consequences of that decision may depend on health events that occur years later.”

Strengths in this study include the tracked disenrollment trends before 2019, not just a single before-and-after comparison, and the study found no sign the groups were already diverging. The results also held up after adjusting for other chronic conditions people developed.

However, there are limits. Since new conditions were identified from claims, which usually show up after a diagnosis, the authors said their numbers likely undercount the true effect rather than overstate it. Counting conditions is also an imperfect stand-in for true complexity, and the group with four or more new conditions was small, just 1,010 people, so those figures carry more uncertainty. The data ends in 2021 and doesn’t reflect newer MA plan designs.

The authors confirmed that state Medigap protections make it easier for more ill beneficiaries to switch to traditional Medicare, but expanding those protections more broadly could push Medigap premiums up for everyone. And MA star ratings, as they currently work, may not reflect how well a plan actually serves members whose health needs have grown more complex.

Healthcare Spending will Prompt Voter Activism

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Healthcare Spending will Prompt Voter Activism

Last week, during the U.S. Senate and House recess and back-to-school rush, media attention to healthcare was negligible. Healthcare trade media noted impressive earnings for Moderna and Bon Secours and the WSJ Journal announced a Medicare Advantage partnership between Costco and SCAN.  No major Executive Orders from the White House or CMS rule changes. No major clinical breakthroughs, vaccine policy changes or lawsuits. But a couple of new reports frame the existential risk facing the industry: spending.

  • AON forecast for employer health spending: AON forecasts employers will see a 9.5% increase in 2027–the same as this year after increases of 9% in 2025 and 8.5% in 2024.
  • U.S. National Debt: The national debt officially passed the $40 trillion mark Wednesday, which includes $2 trillion this year. Note: Healthcare spending is a major contributor representing 27% of total federal spending.

The common theme in both is the steady growth of healthcare spending—faster than wages, higher than inflation and GDP growth and increasingly the result of higher prices for drugs, specialty services, facility modernization, technology and administrative overhead.

The industry’s aversion to transparency, protection of its business-to-business economics and dependence on private investment perpetuate four myths that justify its proclivity for uncontested spending:

  • Myth One: Healthcare utilization is the result of verifiable (true) demand despite evidence that induced demand from financial incentives is significant and unnecessary care widespread.
  • Myth Two: Healthcare spending above overall economic growth is necessary because demand is increasing though unit price increases for drugs, specialty care and hospital outpatient services exceed demand routinely.
  • Myth Three: Healthcare spending growth is unavoidable as the population ages, medical problems become more complex and clinical breakthroughs (like GLP-1 obesity drugs) are integrated in the system though the industry enjoys legal protections to insiders that limit competition.
  • Myth Four: Healthcare spending in the U.S. system is necessary to our performance as the world’s global leader for quality though at least 15 other systems outperform the U.S. in key measures of mortality, morbidity, life expectancy and satisfaction while spending 30-50% less per capita on healthcare.

As the midterm election November 3 nears, affordability and costs of living will be prominent in campaign rhetoric. Polling indicates healthcare costs, especially insurance premiums, prescription drug costs and hospital care, factor heavily in how voters assess promises on the campaign trail. Both parties espouse the need for systemic change in healthcare citing affordability for their reasoning. Three general solutions have found their way into this election cycle:

  • Price controls imposed selectively by state/federal government applied to hospitals, insurance premiums, physician services and prescription drugs.
  • Increased competition enacted through mandatory price transparency, constraints on consolidation and incentives based on value (price + outcome) instead of volume.
  • Government control of healthcare payments (single payer) to providers to align spending with budgets while lowering administrative costs for participation.

The reality is none of these is without risk, and voters are wildly misinformed about all. But there’s no doubt they’ll be on the table as a majority consensus forms around a better system. They’re sick of the status quo. They see little difference between not-for-profit and for-profit operators and want something better. They see healthcare spending increases as the product of an industry that cares about its profit first and everything else second.

Healthcare spending—contributing factors and mitigation– is a topic every organization in healthcare must address candidly and holistically. There should be no delusion that interest will subside anytime soon. Just as consumers are rewarding organizations in financial services, retail, higher education and organized religion that offer “newer, better” alternatives, the healthcare landscape will be re-defined by those that do more than opine about affordability and conduct business as usual.

JD Power: Medicare Advantage Satisfaction Falls for Second Year in a Row

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https://healthcareuncovered.substack.com/p/jd-power-medicare-advantage-satisfaction?utm_source=post-email-title&publication_id=255152&post_id=212861709&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

New data finds rapidly declining satisfaction and trust among Medicare Advantage enrollees, particularly around costs and coverage.

Americans enrolled in Medicare Advantage plans are becoming increasingly less satisfied with their coverage (and increasingly skeptical that their insurers are looking out for them) according to the new 2026 U.S. Medicare Advantage Study from JD Power.

The study found that overall satisfaction with Medicare Advantage plans fell for the second year in a row (dropping 12 points) and has dropped 41 points since 2024. On JD Power’s 1,000-point scale, the average Medicare Advantage plan now scores 611.

JD Power surveyed 14,559 Medicare Advantage health plan enrollees across 12 major markets between January and June. Researchers evaluated insurers on eight parts of the enrollees’ experience, including trust, access to health services, whether plans save them time and money, whether coverage meets their needs, customer service and how well complaints are resolved.

Satisfaction with plans’ ability to help enrollees save time and money fell 51 points. Their level of trust fell 49 points, while satisfaction with whether a plan’s coverage actually met their needs dropped 47 points.

And fewer than half — just 43% — of people enrolled in Medicare Advantage plans strongly agreed that their insurer was a “trusted partner” in their health and wellness.

One of the clearest differences between higher- and lower-performing plans came down to something relatively basic: helping people understand the insurance they just bought.

So, which plans came out on top?

JD Power did not produce one nationwide ranking of every Medicare Advantage insurer. Instead, it compared plans within 12 individual markets. Below the simple version of which insurer scored highest in each:

  • California: Kaiser Permanente — 665
  • Florida: UnitedHealthcare — 621
  • Georgia: UnitedHealthcare — 656
  • Illinois: Blue Cross Blue Shield of Illinois — 638
  • Kentucky: Humana — 625
  • Michigan: Blue Cross Blue Shield of Michigan — 676
  • New York: Excellus BlueCross BlueShield — 618
  • North Carolina: UnitedHealthcare — 645
  • Ohio: Aetna Medicare — 639
  • Pennsylvania: UPMC For Life — 689
  • Tennessee: Blue Cross Blue Shield of Tennessee — 690
  • Texas: Humana — 641

Tennessee’s Blue Cross Blue Shield plan received the highest score of any market winner, at 690, narrowly ahead of Pennsylvania’s UPMC For Life at 689. The results have also been summarized by Becker’s, which published both the highest-rated plans and lowest-rated plans in each market.

The rankings also show how much people’s experiences with national insurance companies can vary from state to state. UnitedHealthcare, for example, finished first in Florida, Georgia and North Carolina and second in Illinois, Kentucky, Texas and some other markets included in the study. Yet its Michigan plan received a score of just 571, making it the lowest-rated plan JD Power measured in that market.

Humana showed an even wider divide. It finished first in Kentucky and Texas, but its New York plan received a score of 554 — the lowest score reported across all 12 markets.

The federal government has also changed how Medicare Advantage plans are evaluated. Earlier this year, the Centers for Medicare & Medicaid Services (CMS) finalized a significant overhaul of its Star Ratings system, which is supposed to measure the quality and performance of Medicare Advantage and Part D plans. Insurers watch the measures closely because they affect bonus payments they receive. CMS claims the changes will simplify the ratings and focus them more heavily on clinical care, health outcomes and patient experience. The changes include eliminating 11 measures — several related to complaints, appeals and call-center performance — and abandoning a planned Health Equity Index reward intended to incentivize better performance for certain enrollees, including people who are low-income, disabled or dually eligible for Medicare and Medicaid. Instead, CMS will retain its older reward system for plans that perform consistently well across measures.

CMS argues that some of the measures being eliminated are administrative, duplicative or do little to distinguish one plan from another, and that trimming them will make Star Ratings more useful to beneficiaries. But the changes have drawn criticism from Democratic lawmakers and Medicare consumer advocates, who argue that CMS is removing some of the very measures that can help hold insurers accountable for how they treat patients.

In an April letter to CMS Administrator Mehmet Oz, Sen. Elizabeth Warren and seven other Democratic senators specifically objected to the removal of administrative measures that track complaints involving the timeliness or accuracy of prior authorization decisions. The senators argued that weakening those measures is particularly concerning at a time when Medicare Advantage insurers are facing scrutiny over care denials and billions of dollars in estimated overpayments from the federal government.

The letter also pointed out that Oz has publicly acknowledged that prior authorization can significantly delay care and erode trust in the health care system, yet CMS is removing some Star Ratings measures related to prior authorization while the administration is simultaneously testing A.I-powered prior authorization in traditional Medicare via the Wasteful and Inappropriate Service Reduction (WISeR) program.

The Medicare Rights Center, an advocacy organization representing Medicare beneficiaries, has criticized CMS’s decision to scrap the Health Equity Index before it ever took effect and return to the previous reward factor. The group also objected to CMS eliminating a requirement that plans notify members midway through the year about supplemental benefits they are eligible for but have not used.

And the rollback extends beyond the Star Ratings themselves. The final rule eliminates requirements for Medicare Advantage utilization-management committees to include a health-equity expert, analyze how their policies affect certain populations and publicly report those analyses.

The Alliance of Community Health Plans, which represents nonprofit regional health insurers, praised CMS for eliminating the Health Equity Index and said the broader Star Ratings changes would shift the program away from “documentation and paperwork” and toward patient experience and health outcomes.

For insurers, there is a lot of money riding on those Star ratings. CMS estimates that Medicare Advantage plans will receive more than $13 billion in additional federal payments next year — even as the government adjusts how plans are scored (and paid) and results like JD Power’s get released. That is in addition to the $76 billion in overpayments that MedPAC, an independent organization that advises Congress on Medicare issues, says the government is paying Medicare Advantage insurers this year alone.

The JD Power results, however, offer another way of looking at the program: not simply whether insurers are meeting government quality metrics, but whether the people enrolled in their plans actually feel that the coverage is working for them. And by that measure, satisfaction is moving fast in the wrong direction.

Where Do Our Health Insurance Premiums Go?

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https://healthcareuncovered.substack.com/p/where-do-our-health-insurance-premiums?utm_source=substack&utm_medium=email

Big Insurance has hauled in $500B in profits since 2014— enough to cover extending the enhanced ACA subsidies and leave $150B — yet it’s gone to shareholders and executive bonuses instead of patients.

As open enrollment begins and Congress remains deadlocked on whether to extend the ACA’s enhanced premium subsidies, one question looms large: Where does all the money we pay for health coverage actually go?

It’s a fair question. Premiums and out-of-pocket costs have risen relentlessly over the past decade. Since the Affordable Care Act was fully implemented, the average premium for an ACA marketplace plan has doubled, and the average deductible for a Silver plan has increased by 92%. Every year, families pay more, yet the coverage often feels thinner.

What the Insurers Say

Health insurance companies routinely claim these increases simply reflect rising medical costs and higher utilization. For example, when justifying rate hikes in 2024, Cigna of Texas wrote:

“The increasing cost of medical and pharmacy services and supplies accounts for a sizable portion of the premium rate increases.”

But the financial filings of these same companies tell a different story.

What the Numbers Show

As Wendell Potter recently wrote, from 2014 to 2024 the seven largest publicly traded health insurance companies, UnitedHealth Group, CVS/Aetna, Cigna, Elevance (formerly Anthem), Humana, Centene, and Molina, reported that they collectively made more than half a trillion dollars in profits.

That’s money collected from individuals, employers and taxpayers for health coverage — dollars that didn’t go to medical care but instead flowed to corporate shareholders and executive bonuses. To put this in perspective, those profits alone could fund the enhanced ACA premium subsidies for another ten years, at an estimated cost of $350 billion.

Stock Buybacks: Enrollees’ Money, Executives’ Reward

Over the same period, these seven companies spent $146 billion buying back their own stock or, in other words, using premium dollars from patients and employers to boost share prices and executive compensation (the CEOs and many other top executives of big insurers are compensated primarily through stock grants and options).

Stock buybacks don’t lower premiums, expand networks, or improve care. They simply make investors and executives richer. If that same money had been reinvested in enrollees, it could have provided premium-free health coverage to more than 5 million families for an entire year, based on the average employer-sponsored plan cost of $27,000 in 2026.

Lobbying With Our Premium Dollars

Insurers aren’t just rewarding shareholders, they’re also shaping the political system that protects their profits. Since 2014, the seven largest insurers and their trade association, AHIP, have spent $618 million on lobbying.

That’s money that could have been used to lower out-of-pocket costs or improve patient care, but instead it’s spent to influence Congress and federal agencies to maintain the status quo.

The Real Problem — and the Real Solution

As the cost of health insurance continues to climb, politicians debate how to control those costs and expand coverage. But the truth is, there’s already enough money in the system to cover everyone. It’s just being siphoned off by insurance corporations for profits, lobbying, and stock buybacks.

Though some have been calling for less regulation of Big Insurance, that is not the answer and is partly how we ended up in this situation. Right now, Big Insurance is allowed to use premium dollars and tax dollars on things that do nothing to improve anyone’s health – such as stock buybacks and lobbying – instead of on medical care.

Rather than asking families and taxpayers to pay more, it’s time to demand accountability from insurers. At a minimum, they should not be allowed to use premium dollars, or taxpayer dollars, to enrich shareholders through stock buybacks (which wasn’t even legal until the 1980s) or lobby for policies that drive up costs.

If we want to contain health care costs, the first step is simple: Stop the profiteering by Big Insurance.

Insurers Are Rejecting More Prescriptions Than Ever, New Study Finds

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First-time prescription rejections rose 67% between 2018 and 2024, with nearly half of denied patients receiving no comparable medication within 90 days.

A new study published in JAMA puts hard numbers behind something patients and doctors have been telling me for years: getting a prescription filled increasingly means running an obstacle course of denials, prior authorization forms, and step therapy requirements — and a lot of people never make it through.

Researchers from Johns Hopkins Bloomberg School of Public Health and the American Enterprise Institute analyzed more than 2 million first-time attempts to fill prescriptions for brand-name drugs that have no generic alternative, using pharmacy claims data covering nearly every major insurance market in the country: commercial plans, Medicare, Medicare Advantage, Medicaid, and ACA marketplace plans. The data ran from January 2018 through September 2024.

Here’s what they found:

  • Rejections are way up. In 2018, insurers turned down 24.3% of first-time fill attempts for these drugs. By 2024, that had jumped to 40.7% — a 67% increase.
  • Coverage rules are the driver. Overall, 32% of initial attempts were rejected: 14.8% because the drug was excluded from the formulary outright, and 17.2% because it required prior authorization or step therapy — insurer-speak for “try something cheaper first.”
  • Nearly half of rejected patients got nothing. Of everyone who was turned down, only 38.6% eventually got the original drug within 90 days, and 13% got a different drug in the same class. But 48.4% — essentially half — received no medication in that class at all within three months.
  • Delays add up. Even patients who eventually got their medicine waited an average of 12.2 days after the initial rejection.
  • Where you get your coverage matters enormously. Rejection rates were highest in ACA marketplace plans (48.7%) and Medicaid managed care (49.8%) — nearly one in two prescriptions. Traditional Medicare drug plans (24.0%) and Medicare Advantage (19.8%) had noticeably lower rejection rates.

Why this matters

The insurance industry has a ready answer for all of this: prior authorization and step therapy exist to control costs and steer patients toward drugs with the best evidence behind them, not just the most expensive ones. There’s some truth in that — utilization management can reduce unnecessary spending and has, in some cases, nudged prescribing toward cheaper, equally effective alternatives.

But this study makes clear that the tradeoff is not small or hypothetical. When nearly half the people who get turned down simply never receive treatment in that drug class — not “later,” not “with a substitute,” but never, at least within 90 days — that’s not utilization management working as intended but as a barrier that outright blocks care for a huge share of patients, many of whom presumably still need what their doctor originally prescribed.

The study lands in the middle of a real fight over these practices. Federal regulators have been pushing to speed up and standardize prior authorization. Several states have passed laws limiting insurer review times, exempting doctors with track records of low rejection rates from prior authorization requirements altogether, or requiring plans to honor authorizations a patient already has when they switch coverage.

Insurers will point out that some of the increase in rejections reflects more brand-name drugs entering the market during the study period. But that doesn’t explain away the core finding: patients across every type of coverage are hitting more roadblocks, and for close to half of them, the medicine their doctor decided they needed simply never arrives.

Is 340B good for the healthcare system? 

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https://www.managedhealthcareexecutive.com/view/is-340b-good-for-the-healthcare-system-takeaways-from-an-mhe-drug-topics-webinar

Key Takeaways

  • Absence of mandatory federal reporting on 340B revenues and expenditures is viewed as the program’s core governance gap, despite existing audit authority focused on duplicate discounts and diversion.
  • Eligibility criteria tied to disproportionate Medicaid/uninsured volume remain contested, with examples showing large academic systems generating far more 340B margin than charity-care outlays compared with public safety-net hospitals.
  • Use of savings ranges from keeping small hospitals solvent to subsidizing high-cost service lines, yet lack of spending requirements can incentivize expansion in affluent markets and shift costs to payers.
  • Manufacturers are criticized for contract-pharmacy restrictions and demands for claims data, while also allegedly pricing 340B discounts into list prices; limited HRSA rulemaking authority perpetuates litigation.

Does the 340B program help hospitals provide care and other services to low-income patients? Or has the program grown beyond what was initially intended, with undeserving institutions taking advantage of it?

Two industry leaders addressed these questions and more during a webinar sponsored by Managed Healthcare Executive, Drug Topics and the Pharmacy Benefit Management Institute.

Tom Kraus, J.D., chief advocacy officer and vice president of government relations at the American Society of Health-System Pharmacists, argued in favor of the program’s value to patients. “Hospitals are still operating on incredibly thin margins across the board. The average is around 1%; almost half are operating at negative margins. It’s just not true that they’re somehow getting rich off this. They’re using it to provide patient care in communities that need it and to patients that need it.”

But Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said the program has “grown out of control, and it doesn’t have the guardrails it needs. What 340B has tried to accomplish is absolutely valid; I fully support it. But it’s plainly obvious to anybody that the time is now for Congress and policymakers to get together and say we can make this program actually work.”

The 340B program allows qualifying hospitals and other providers, such as federally qualified health centers, to purchase medications at discounted rates from drug manufacturers and use the difference between the discounted price and the reimbursement from commercial insurers and other payers to fund patient care services.

The 340B program generated roughly $100 billion in discounted drug purchases last year, growing 23%, compared with less than 10% growth in overall U.S. prescription drug spending.

Since its implementation in 1992, more than half of U.S. hospitals participate in the program.

The Health Resources & Services Administration (HRSA), which oversees the 340B program, is currently reviewing comments and determining next steps for a pilot 340B rebate program for drugs that were part of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program.

Here are four key takeaways from the webinar:

1: Transparency and oversight

There is no federal requirement that hospitals report how much 340B revenue they collect or how they spend it. Gremminger argued that this absence of reporting is the program’s central flaw. “The underlying problem with 340B is it creates economic distortions,” he said. “The program is so problematic because it has virtually no oversight. The Health Resources and Services Administration, which oversees nominally 340B, has been found by courts to have basically no ability to actually create rules.”

Gremminger said payers want to know how much hospitals make and what they do with the money. He pointed to states, such as Minnesota, that are beginning to require covered entities to report this information.

Kraus countered that HRSA and manufacturers already have audit authority when there is a specific concern, such as a suspected duplicate discount, and that 340B dollars are not separately traceable once they reach a hospital’s books.

2: What counts as a safety net hospital?

Much of the debate centered on which hospitals should qualify for participation in the program. Gremminger cited Minnesota data showing that M Health Fairview, the University of Minnesota’s academic medical center, netted more than $300 million in 340B revenue last year while providing about $17 million in charity care, compared with Hennepin Healthcare, a public safety-net hospital that made roughly $100 million in 340B revenue against $107 million in charity care. He argued dollars are flowing disproportionately to large, financially healthy systems rather than the rural and community providers the program was designed to protect.

Kraus said that hospitals in the program already treat a disproportionate share of Medicaid and uninsured patients to qualify. “The states have said payers should pay the normal rate, and they want the clinic or hospital to be able to use those dollars to subsidize care in their communities. I think that’s like a reasonable decision that states can make, and I think from my perspective, it helps us provide care to patients.”

3: What services should 340B dollars fund?

Kraus maintained that the law implies, though does not strictly require, that 340B savings support safety net care and noted three-quarters of small participating hospitals use the savings simply to stay open. Additionally, he said large academic centers often house the trauma centers, cancer centers, and emergency departments that require substantial, ongoing subsidy.

“At the end of the day, the program exists in order to subsidize the care of patients by allowing providers to purchase at a lower cost and sell to payers at a higher cost, which is the contracted rate. The program’s not designed to subsidize payers; it’s designed to subsidize providers so that they can survive.”

Gremminger said the lack of any spending requirement means some systems reinvest the 340B margin into facilities in higher-income, better-insured markets rather than expanding services for low-income patients, calling that an economic distortion that raises costs for employers, taxpayers, and working families through reduced Medicaid rebates and higher commercial pricing.

4: Pharma’s role in drug pricing

Both panelists were critical of drug manufacturers, although for different reasons. Kraus said pharmaceutical companies, which he noted operate on roughly 40% margins compared with hospitals’ roughly 1%, have pursued restrictions on contract pharmacy arrangements that have ended up in litigation. Manufacturers such as Eli Lilly are now requiring covered entities to turn over claims data as a condition of receiving discounts, which he characterized as a “fishing expedition” rather than a targeted integrity effort.

Gremminger agreed pharma bears responsibility for high drug prices because companies simply prices 340B’s cost into list prices, which he argued undermines any savings the program is meant to generate. Both agreed HRSA lacks the statutory authority for meaningful rulemaking, a gap they said invites continued litigation between manufacturers and hospitals.