Last week, Paragon successfully launched our Capitol Hill health policy education program—more about that below. Today’s newsletter includes a warning about increased Medicaid and Medicare spending sought by the White House for the end-of-the-year continuing resolution, discusses a recent piece in City Journal by Carl Schramm on the CDC’s dreadful COVID response, and highlights a new study demonstrating problems with the 340B program.
The White House’s Medicaid and Medicare Spending Proposals Are Flawed
Regarding Medicaid, the White House has indicated that increasing U.S. territories’ federal medical assistance percentage (FMAP) must be attached to the end-of-the-year continuing resolution. The FMAP is the percentage of Medicaid expenditures that are paid by federal taxpayers. The statutory FMAP for territories is 55%, but it has often been raised in the past. Congress should not raise the territories’ FMAP for two main reasons.
First, raising the FMAP will make the territories less focused on ensuring that Medicaid spending actually generates value since a larger portion of the tab will be paid by federal taxpayers. Raising the FMAP increases waste, fraud, abuse, improper spending, and low value spending.
Second, residents in U.S. territories do not pay federal income tax, and the federal Medicaid funds come from federal income tax revenue. Thus, unlike states, territories already get an unfair benefit through Medicaid because territory residents don’t share in the nation’s federal Medicaid costs.
Regarding Medicare, the White House supports suspending sequester cuts. The cuts, which are required under the Budget Control Act of 2011, were suspended under the CARES Act. That moratorium was extended multiple times during the pandemic under pressure from provider groups, but cuts were reinstated in July.
While Congress will be under pressure to reinstate the moratorium, hospitals no longer face the circumstances that led Congress to avert the cuts in the first place. Instead, the Medicare program’s continued spending growth presents a different crisis. Fundamental reform of the program is needed more than ever. Policymakers need to remember that while sequestration will not solve Medicare’s spending problem, suspending sequester cuts would only make Medicare’s fiscal problems even more severe.
The Public Has Lost Trust in the CDC
Writing in City Journal, Carl Schramm—a Paragon public advisor, Syracuse Professor, and member of the COVID Commission Planning Group—expressed pessimism about what will come from Rochelle Walensky’s mea culpa about the Centers for Disease Control and Prevention’s (CDC) problematic COVID response. The CDC’s main problems include ignoring science, promoting fear, issuing guidance that was used to justify school closures, and abusing or illegally claiming authorities—such as the unlawful eviction moratorium—to shut down commerce and other activities.
Schramm writes that the CDC is several weeks tardy in releasing its internal assessment of its COVID-related performance and recommendations. He takes Walensky to task for claiming that the CDC’s biggest failure was one of communications. He speculates that the report will call upon Congress to significantly boost the agency’s budget—a clearly unwise policy move, given the CDC’s abysmal track record and obvious need for structural reform.
Schramm’s conclusion is sobering as he writes that the CDC’s numerous COVID-related failures will result in public distrust of public health guidance from the government for a long time: “The Centers for Disease Control has thoroughly destroyed its own credibility with most Americans. Even if Walensky’s reforms result in flawless science and near-perfect guidance during the next pandemic, we shouldn’t be surprised if many Americans ignore the CDC from now on.”
Hospitals Abuse 340B to Boost Profits
A new report from the Community Oncology Alliance demonstrates severe problems with the 340B Drug Pricing Program. The program, which was originally intended to provide resources to safety net hospitals to help indigent patients, allows qualifying hospitals to buy drugs for a low price and resell them at a much higher price.
According to the report, the program—which has grown to include 44% of the nation’s hospitals—has unfortunately not been used for this purpose. Cash paying patients, many of whom are uninsured and in financial straits, do not seem to receive discounts on their drugs. Instead, the program has become a significant source of profits for hospitals. For example, many hospitals sell oncology drugs for up to five times the acquisition cost through the 340B program. Further, the program has incentivized hospitals to acquire more expensive drugs rather than adopt less expensive biosimilars.
Paragon Launched its Congressional Education Program—The Administrative Process
Last week, Paragon held its inaugural Capitol Hill education session entitled, “How Government Really Works—The Administrative Process.” As Congress has weakened over the past several decades, the executive branch and bureaucracy have grown in power. Several former senior government officials briefed about 70 congressional staff on the rulemaking process, including the opportunities for members and staff to engage with that process. You can find here a primer about the process, including a case study of the Trump administration’s health reimbursement arrangement rule which resulted from a policy process that I ran while at the National Economic Council.
All the best,
Paragon Health Institute