Some critics of the 340B drug discount program say it should be phased out because millions of people will get health coverage under health care reform. This argument ignores that other parts of the Affordable Care Act (ACA) are squeezing public and private nonprofit hospitals’ finances—making hospitals’ continued access to 340B drug discounts more important than ever.
- Medicaid DSH cuts. ACA is cutting Medicaid disproportionate share hospital (DSH) payments by $18.1 billion beginning now through 2020. Under a final regulation that came out in September, $500 million is being cut this fiscal year, followed by a $600 million cut in fiscal 2015. Safety-net hospitals in the 26 states that aren’t expanding Medicaid will feel these cuts the most. As the group America’s Essential Hospitals notes, the Medicaid DSH cuts aren’t directly linked to a reduction in the number of the uninsured or the ongoing burden of uncompensated care.
- Charitable care rules. Bloomberg news service, meanwhile, reports that some nonprofit hospitals already struggling to pay for charitable care are considering giving up their tax-exempt status due to ACA’s new charitable-care rules. “Many nonprofits serve poorer or rural populations with more uninsured patients,” the article notes. “These hospitals have been struggling already, and the benefits of the federal tax exemption don’t necessarily offset the costs of providing more charitable care.”
- High deductible plans and bad debt. Finally, Nashville Business Journal reports that “even as hospitals are set to see an influx of newly insured patients” under health care reform, “industry watchers warn that bad debt, long a sore spot on hospitals’ books, could increase under the new health care law, putting more pressure on already thin margins.” The newspaper observes that “hospitals’ bad debt—the out-of-pocket expenses that patients can’t or won’t pay—has increased in recent years, as more Americans have made the switch to high-deductible health plans that bring more out-of-pocket costs. Now, health care executives and industry analysts are concerned even more revenue may be at risk, as consumers, many new to health insurance, buy ‘bronze’ and ‘silver’ plans that only cover 60 and 70 percent of costs.”