This past year has been a year of reckoning for American health care policy. Patients, doctors, and lawmakers were asking an important question: Where is our money going?
Indeed, the talk of Washington has been shifting in that direction: policymakers are finally asking how to return healthcare dollars that go into a subsidy vacuum directly to patients. President Trump has made multiple posts on that single topic. Senators Bill Cassidy and Rick Scott have released plans centered around it, and their counterparts in the House have introduced bills to put these policy ideas into action.
Across the ideological spectrum, the momentum is clear. Returning funding to patients cuts out middlemen and forces the system to respond to the people it’s supposed to serve. Billions of dollars flow through federal and state healthcare programs every year, but almost none of it reaches patients. The core problem is simple: we are funding institutions, not patients.
Nowhere is this more obvious than in a little-known federal drug discount program called 340B.
Congress created 340B in 1992 so that “safety-net” providers could “stretch scarce resources.” But today, the program has exploded far beyond that intent. More than 60% of U.S. hospitals now qualify. And investigative reporting, and a Senate committee report, have shown again and again that many large systems do not use these windfalls to help low-income communities. Instead, they use the revenue to expand into wealthy suburbs, grow their investment portfolios, or acquire physician practices.
340B functions as an institutional subsidy. Patients never see the benefit.
Other U.S. safety net programs go directly to beneficiaries. Food stamps don’t go to restaurants. Housing vouchers don’t go to big developers. Why does 340B go to hospitals instead of patients?
Estimates show that hospitals made around $70 billion from this drug arbitrage program in 2024, and the program saw rapid growth. Yet the current 340B program doesn’t just cost pharmaceutical companies money; it also raises drug costs for everyone and directly increases health insurance premiums. It drives hospital consolidation, further inflating costs. So instead of a complex pharmaceutical drug arbitrage program, why not redirect those dollars to patients themselves?
If the pharmaceutical companies are indirectly subsidizing safety-net hospitals to the tune of $70 billion a year, simply collect those funds as a fee from the pharmaceutical companies and use them to fund health savings accounts (HSAs) for low-income individuals. These savings fund patients instead of padding hospital margins.
HSAs provide freedom for low-income individuals within a severely restricted healthcare landscape. The funds could be used with ACA subsidies to purchase insurance, freeing them from reliance on extremely narrow Medicaid networks (this would require policy changes to allow Medicaid beneficiaries to choose ACA plans over Medicaid). If patients stay healthy, they could use HSAs to grow wealth. But if they need non-urgent medical care, HSAs could be used to purchase services, such as direct primary care, that are typically out of reach for low-income families.
Most of all, HSAs for low-income beneficiaries give them some degree of financial freedom.
Hospitals are already scrambling to stop existing 340B reforms in their tracks. Last month, the American Hospital Association and its affiliates in Maine filed a lawsuit to stop an HHS pilot program that would change 340B’s terms, under which drugmakers would grant hospitals rebates after determining the institution qualifies for the lower price. Such a measure might disqualify countless hospitals from abusing the program.
It’s common-sense reform – but hospital organizations see these reforms as cuts to their bottom line. Of course, when these changes stymie efforts to consolidate and cut costs further, hospital organizations are the first to answer the call. But when patient choice and care is at risk, they hardly flinch.
We don’t need to spend more money. We just need to redirect money to better use. Redirecting 340B dollars to patients is the most direct, equitable, and accountable reform available. It’s a simple and elegant fix that empowers patients over large hospital conglomerates.
It’s time to stop funding institutions and start funding people. The 340B program is an excellent place to start.
Anthony DiGiorgio is an assistant professor of neurological surgery at the University of California, San Francisco. He is also an advisory council member of the Fund The Patient, a nationwide health policy movement.
