President Donald Trump has made a lot of progress reducing what we pay for healthcare by asking one simple question of providers: What does this cost?
At the grocery store, we know exactly what each item costs before we buy it. At the car dealership, the figures are not so precise, but we know the Bentley costs considerably more than the Kia, and we know why.
But when it comes to paying for healthcare, we rarely have even as much specificity as can be expected from the window sticker at Slippery Sam’s Used Car Lot. We frequently have no idea what any of it costs until the bill comes. We have no opportunity to assess whether all the products we just bought were even necessary. Were there less-expensive options?
As Trump makes his case on affordability ahead of the midterm elections, he should consider making a big deal out of reining in some of the profiteering by so-called nonprofit hospitals.
If they want to put the “profit” back in “nonprofit,” that is up to them. But if they are getting the tax-favored treatment of a nonprofit organization, then they are obliged to serve the public interest as a nonprofit organization.
As of now, nonprofit hospitals receive far more in tax advantages than they spend on direct charity. The most profitable 5% earn more than half but provide only a fifth of what is spent on charity care.
This allows them to play games such as taking advantage of a technicality in the law to declare themselves “administratively rural hospitals.” This enables them to take advantage of programs designed to help rural hospitals, which are historically understaffed and underfunded, serve patients who themselves often cannot pay.
Many of these non-rural rural hospitals are in fact major medical centers, many attached to major universities, and when they saw a chance to be classified as both a rural hospital for sweet deals on drugs and an urban hospital for higher rates of pay, which means higher Medicare reimbursements, they jumped on it.
The United States went from three hospitals that were designated both rural and urban to 427 in six years — more than three-fourths of which were nonprofit hospitals.
The so-called 340B program is typical of the programs this dual classification allows nonprofit hospitals to access. The program mandates that pharmaceutical producers provide some commonly prescribed drugs to rural and other qualifying hospitals at reduced rates.
Hospitals purchase nearly $44 billion worth of drugs through this plan and make nearly $124 billion on those sales. Hospitals in the 340B program have the highest prices for administered drugs and keep more of the money for drugs than non-340B hospitals.
Read that again. The people who get the special deal charge the most and retain the highest percentage of the income. Now, some hospitals do pass along the lower costs, but others charge the regular price or even more and say they use the profits to keep the hospitals themselves afloat.
Only they’re also buying up practices of oncologists and other physicians to increase the volume of drugs sold by the hospital in this rigged environment. Medicare costs are going up. The profitability of nonprofits is going up. But the volume and quality of care are not.
It’s time to follow Trump’s lead and make the hospitals — the real beneficiaries of this program — tell us what this is costing.
Put in your Form 990 how much you received in tax advantages and public support programs. Provide how much hospitals made not just from 340B savings but state and local tax abatements, bond savings, and charitable contributions.
Also, tell us in your Form 990 what you provided and how much in terms of charity care. And straighten out the definition of “community benefit standard,” so it looks more like what people would see as a community benefit. And have the IRS take a much closer look at whether these laws are being followed.
BIG INSURANCE WINS WHILE PATIENTS LOSE
Then we could have firmer ground to establish minimums for charity care that must be provided to receive this tax-favored status and to get hospitals to look at executive compensation from the perspective of a nonprofit, not a government-grant-receiving machine.
Knowing what we’re paying for government programs and what we’re getting in return is an important step in making policy for the most expensive line item in America’s budget. The first step is to find out what this is really costing us.
Brian McNicoll is a freelance writer based in Alexandria, Virginia, a former senior writer for the Heritage Foundation, and former director of communications for the House Committee on Oversight and Government Reform.
