How could the HHS analysis on drug payments affect Congress?
Congress may need to address the proposed Medicare drug payment cut The internal HHS policy brief, authored by Casey B. Mulligan, argues that the 340B program incentivizes the overuse of high-cost drugs. This analysis supports a Centers for Medicare and Medicaid Services (CMS) proposal to drastically reduce Medicare payments for 340B-acquired drugs, changing the rate from the average sales price plus 6% to the average sales price minus 33.4%. This proposed change, which CMS estimates would reduce Original Medicare drug payments by about $4.55 billion in the first year, requires legislative oversight and budgetary decisions from Congress, which holds the formal authority to regulate and fund the Medicare program.
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How it reaches Congress
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Economists at the Department of Health and Human Services produced an internal agency analysis arguing that the federal drug discount program, the 340B Program, may incentivize hospitals to overuse expensive drugs and expand through consolidation. The analysis, which was authored by Casey B. Mulligan, supports a Medicare payment cut that the administration has proposed. Hospital groups have strongly opposed this proposed cut.
The full event1independent outlet -
The CMS proposal, which is part of the 2027 hospital outpatient payment rule, is estimated to reduce Original Medicare drug payments by about $4.55 billion in the first year. As Congress holds the formal legislative and budgetary authority over Medicare, this major financial and policy shift requires their consideration and potential action.
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The facts so far
As reported. Each one links to where it comes from.
- The HHS brief argues the 340B program encourages hospitals to overuse high-cost drugs and drives consolidation.medicaldaily.com
- The CMS proposal would change Medicare payments for 340B drugs from average sales price plus 6% to average sales price minus 33.4%.medicaldaily.com
- CMS estimated the change would reduce Original Medicare drug payments by about $4.55 billion in the first year.medicaldaily.com
- A final Medicare rule is expected later this fall, with proposed changes set to take effect Jan. 1, 2027.medicaldaily.com
Why it matters
The debate centers on the financial viability of safety-net hospitals, which provide about 77% of Medicaid hospital care. If the payment cut is finalized, patients relying on these hospitals could face reduced services, while Medicare enrollees receiving costly infusions could potentially pay less coinsurance on those drugs.
Hospital groups strongly oppose the cut, arguing that the 340B savings fund care for low-income and uninsured patients. However, the Federation of American Hospitals, representing investor-owned hospitals, supports finalizing the cut, suggesting the policy has complex implications across different types of healthcare providers.
What we don't know yet
- Will Congress intervene to modify or block the CMS payment rule?
- What specific legislative actions, if any, will be required to finalize the 2027 outpatient payment rule?
What would change this answer
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Beyond this explainer
Questions worth asking
Ideas the web ties closely to this story that the explainer doesn't mention. These are prompts for your own research: Brind hasn't answered them.
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About Fee-for-Service (FFS)
If the payment cut is implemented, how might the shift in reimbursement rates affect the incentive structure of the current fee-for-service model for safety-net hospitals?
Explore Fee-for-Service (FFS) -
About End-Stage Renal Disease (ESRD)
Considering that Medicare enrollees receiving costly infusions could potentially pay less coinsurance, how might the payment cut specifically impact the treatment of patients with End-Stage Renal Disease?
Explore End-Stage Renal Disease (ESRD) -
About National Provider Identifier (NPPES)
Since the payment cut affects how providers are reimbursed, how does the National Provider Identifier system track the usage of 340B-acquired drugs across different hospital types?
Explore National Provider Identifier (NPPES)
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Reporting
- medicaldaily.comSaturday
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