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The COVID-19 crisis has been a brutal lesson on the limitations of government action and imagination. The response, thus far, has been a ‘business as usual’ expansion of entitlements and interventions in an attempt for the government (programs, loans, direct payments, welfare, food assistance, etc.) to take the place of private sector activity. It has not worked.  

Many Americans have yet to receive their ‘stimulus’ checks (even as dead Americans have received their checks); too many small business have shuttered never to reopen while elite institutions with huge endowments, like Sidwell Friends, have received millions of dollars from the Paycheck Protection Program (PPP). The PPP was intended to save jobs and support small businesses from going under because of the crisis. Unfortunately, the PPP has not worked out exactly as it was intended. What’s more, many thousands of Americans are still waiting for their Unemployment Insurance claims to be processed (after weeks of frustration). We have furloughed doctors and nurses in hospitals nationwide while the Federal Reserve reports that 40% of those earning less than $40K per year have lost their jobs.

Too many governors, mayors, and county executives shut down their economies with no real plans on how to reopen—the reasonable 15 day ‘stay-at-home’ orders to flatten the COVID-19 curve have turned into months of ‘stay home until we’re safe’ demands. Well, we will never be safe; yet life must continue. The COVID cure is worse than the disease.   

Such problems with government inefficiencies and failures are not new. As government grows, so does abuse and cronyism. However, now with the COVID crisis and the economic and public health devastation, policymakers must begin to reexamine government programs—especially in the health sector. Hospitals are reporting historic revenue losses and furloughs due to the lockdown orders. Ironically, to save our health systems from being over-run with COVID patients we have shut down other aspects of our health care systems – checkups, tests, prenatal visits, transplants, vaccines, emergency care after heart attacks and strokes. Our health delivery systems are damaged, and Coronavirus has exposed and amplified the cracks in American health care.

This COVID-19 hospital crisis comes on top of America’s preexisting hospital capacity catastrophe. As the Washington Post reported, the hospital capacity crisis is “a result of consolidation over the past 30 years that concentrated our health-care system in wealthy cities and suburbs, where the prevalence of expensive insurance plans allowed big health systems to rake in profits. There have been more than 680 hospital mergers over the past decade, a trend that is likely to accelerate in the coming years. It involves mergers between hospital systems, as well as large hospital conglomerates’ takeovers of rural hospitals, physician offices, ambulatory surgical centers and other outpatient clinics.”

Post COVID-19 is not the time for lobbyists and insiders to game the system for the politically well-connected and powerful. It is past time to examine America’s hospital capacity and revisit the policies that allow for the hospital industry to leverage programs intended to help underserved communities.

The 340B drug-pricing program is a textbook example of how insiders, lobbyists, and influence-peddlers high-jacked an obscure provision of law and turned it into a profit-making racket. For three years, the Trump administration has made attempts to reform the program.

In 1992, Congress enacted the 340B Drug Discount Program, compelling drug manufacturers to provide certain outpatient drugs to specific health-care organizations at a discounted rate. The program was designed to benefit veterans and their families. However, the Affordable Care Act (ACA) — known as Obamacare — expanded 340B by growing the number (and kind) of facilities eligible to participate in the program. Obamacare distorted 340B into a money-making enterprise that hospitals and Wall Street investors now use to increase profits at the expense of patients. 

Since its expansion, the program has grown at a rapid rate, thanks in part to recognition by hospitals and chain drugs stores that they can now profit from the program by arbitraging prescription drugs. The Berkeley Research Group notes that outpatient branded drug sales in the 340B Drug Pricing Program now amount to almost 8 percent of the total market, well up from 5.4 percent in 2012 — with much of the growth fueled by abuse of the program. Rather than help veterans, the program is being exploited to benefit corporate executives and Wall Street, including investment funds. The scam is simple: Hospitals and drug stores get drugs at the mandated discounted rate and then seek reimbursement from the government at the full cost of the drug.”

In 2013, Sen. Chuck Grassley (R-IA) noticed that Walgreens was making a significant amount of money when an analyst predicted the company would walk away with a quarter of a billion dollars in profits from the 340B program. “The intent and design of the program is to help lower outpatient drug prices for the uninsured,” the senator wrote. “It is not intended to subsidize pharmacies that team up with [hospitals] to turn a profit.” 

The 340B program continues to grow outside of its original purpose of helping the poor and uninsured — this is true, despite the promise that the ACA would vastly reduce the numbers of uninsured (and underinsured).

Hospitals have been gaming the system. As we move into America’s recovery from the Coronavirus shutdowns, policymakers must keep hospital conglomerates in check. 

Jerry Rogers is the founder of Capitol Allies and the host of “The Jerry Rogers Show” on WBAL NewsRadio. Twitter: @CapitolAllies.

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