Families across Michigan from Sterling Heights to the Upper Peninsula are getting hit with higher healthcare costs because hospitals have learned to game a federal charity program.
Yet rather than support President Donald Trump’s push to hold hospitals accountable for their abuses, dozens of lawmakers are stepping in to preserve the status quo.
Michigan families deserve better than a Congress that protects hospital profits over patients.
The program at issue, 340B, was originally created in 1992 to support low-income patients. It requires manufacturers to provide steep drug discounts to safety-net hospitals, with the expectation that hospitals use the savings to expand care or reduce out-of-pocket costs.
But no guardrails were ever put in place to ensure 340B savings actually reach patients, a gaping loophole that too many hospitals learned to abuse.
Today, participating hospitals acquire drugs at deeply discounted prices and then charge patients far more, often several times the discounted rate, and pocket the difference. A recent report found Michigan state employees experience an average markup of nearly 150% on prescription medicine filled through 340B, increasing their healthcare costs by more than $20 million a year.
Hospitals have every incentive to boost their margins by steering patients toward therapies, exploiting a safety-net program as a profit engine.
These perverse incentives coupled with decades of lax oversight have fueled the program’s explosion. Nearly 90 hospitals in Michigan alone currently participate in 340B, and many extend their footprint through arrangements with contract pharmacies. Roughly 60% of these pharmacies are located in higher-income Michigan communities, not underserved areas.
Across the state, 340B-participating hospitals now generate almost triple the revenue of hospitals that don’t participate, while providing 34% less charity care on average. Hundreds of millions of dollars in revenue are flowing through these 340B hospitals, but it’s not translating into better support for low-income or vulnerable patients.
Instead, much of it is being funneled toward further expansion and Wall Street. Analysis shows that Michigan 340B hospitals invest heavily in financial assets like stocks and bonds. These market investments approach $55 million — nearly four times the amount invested by non-participating hospitals.
And as hospitals capture an ever-larger share of this now-$80 billion program, the ripple effects continue to drive up costs across the system — for every Michiganian. Prescriptions filled through 340B don’t qualify for the rebates that normally help lower drug spending, costing employers and workers in Michigan more than $270 million each year.
This abuse of 340B is not an abstract policy problem; it hits patients at the bedside as hospital markups can leave families with unaffordable copays, skipped doses and worsening chronic diseases. Patients are steered toward higher priced therapies that maximize hospital profit, not toward the most appropriate or affordable treatment.
In too many Michigan communities, especially poorer and rural areas, pharmacies that capture 340B profits sit in wealthier ZIP codes, so low income patients see none of the supposed benefits while still facing rising premiums and deductibles. As hospitals plow 340B windfalls into Wall Street investments instead of charity care, people who should be getting help with insulin, cancer drugs, or heart medications are forced into impossible choices between paying for prescriptions, rent, or groceries.
The Trump administration has seen enough and is moving to hold 340B hospitals accountable through a new pilot initiative.
The pilot would require hospitals to receive 340B discounts as rebates only after a drug is dispensed, tying savings to data confirming that a prescription actually qualified for the program. It’s a straightforward initiative that would help ensure discounts reach the low-income patients they were meant to serve and close the loopholes that have allowed 340B hospital abuse to go unchecked for decades.
But hospitals and their lobbying groups, as expected, are fighting this effort, filing lawsuits and pressing Congress to do their bidding by defunding the pilot before it can begin.
Michigan families deserve a champion in that fight, and they should expect one in Republican Congresswoman Lisa McClain of Romeo. Rep. McClain has long been an advocate for accountability in government and for ensuring federal programs serve the public, not special interests. She should use her standing as Chairwoman of the House Republican Conference to make clear Congress won’t shield the hospital industry from transparency.
While Rep. McClain has the chance to stand up for patients by defending Trump’s 340B accountability pilot, Democratic Rep. Debbie Dingell of Dearborn is instead leading a push to block that very effort and preserve the hospital driven status quo.
The Trump administration is taking a targeted approach to reform a federal program that has long failed the patients and communities it was created to serve. Congress should allow that work to move forward, not shut it down.
Michiganians are counting on it.
Michael J. Daugherty, a Michigan native and UM alum, is founder and CEO of LabMD and author of The Devil Inside the Beltway, a firsthand account of his fight with the administrative state.
This article originally appeared on The Detroit News: Michigan lawmakers shouldn’t shield hospital abuse | Daugherty
Reporting by Michael J. Daugherty, The Detroit News / The Detroit News
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