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340B Hospital Lawsuit: The Pot Calling The Kettle Black

Three health systems – Mount Sinai in New York, Michigan Medicine, and University of Kansas City Health — have filed federal lawsuits against CVS Health. The hospitals allege that CVS and sister companies diverted about $250 million from 2020 and 2025 in savings generated through the 340B drug pricing program.

The 340B program requires brand drug makers to offer discounted prices to hospitals and safety net providers. Oftentimes, various healthcare entities are part of the adjudication and documentation process. The complaint alleges that CVS health companies used a series of intercompany service transactions to divert the funds and retain them when they should have been given to the hospitals.

I have argued that vertically integrated companies use all sorts of inter-company transfers to retain dollars within the family. So, I don’t doubt that what is alleged is possible. At the same time, the lawsuit is ironic. Substantial evidence exists concluding that hospitals benefit from the discounts but do not pass enough of the savings through as lower costs to needy consumers. In fact, 340B hospitals are found to have higher overall prices than those who are 340B qualified. So, the suit is a bit of the pot calling the kettle black.

Additional articles: https://www.fiercehealthcare.com/payers/hospitals-allege-contracted-cvs-health-subsidiaries-pocketed-their-340b-savings and https://www.modernhealthcare.com/providers/mh-cvs-340b-lawsuit-mount-sinai-michigan/

#drugpricing #340b #hospitals #cvshealth

https://www.beckerspayer.com/legal/health-systems-sue-cvs-over-alleged-250m-340b-scheme/

— Marc S. Ryan

Second Provider Tax Rule Issued Under OBBBA

Under a proposed rule implementing aspects of the One Big Beautiful Bill Act (OBBBA) Medicaid reductions, state-directed payments would be capped at 100% of Medicare rates in states that expanded Medicaid and 110% in non-expansion states. The rule saves more than $775 billion over 10 years, including $510 billion in federal savings.

Another rule that was finalized in April ends states’ ability to use certain provider taxes to generate additional federal Medicaid matching funds. That rule bans states from imposing higher tax rates on Medicaid business than on non-Medicaid business and blocks indirect tax structures designed to bypass those limits.

The proposed rule would apply to hospital inpatient and outpatient services, skilled nursing facility services, and qualified practitioner services at academic medical centers. The policy would be expanded to all services in 2029. Certain payments are temporarily grandfathered, although they will be reduced by 10% a year starting in 2028 until they reached Medicare rates.

CMS also proposes to eliminate uniform payment increases. States could establish minimum or maximum fee schedules beginning in 2028 as long as they do not exceed the Medicaid rate limit without CMS approval. Such payments rose considerably after the Biden administration set the upper limit to average commercial health insurance reimbursements for hospitals and nursing facilities.

CMS said provider taxes generate more than $24 billion annually for state budgets, with one state bringing in more than $13 billion. 

In other news, Democratic lawmakers in the Senate and House introduced resolutions that seek to roll back new Medicare prior authorization requirements under the Wasteful and Inappropriate Service Reduction (WISeR) model.

Further, Senate Democrats unveiled a policy roadmap calling for increased access to affordable long-term care services, including a proposal to establish a home care guarantee for people with Medicare. Medicare currently only has short-term nursing facility stays. Medicaid covers long-term chronic care but is usually only for the lower income.

Additional articles: https://www.fiercehealthcare.com/regulatory/legislators-introduce-resolution-seek-congressional-disapproval-cms-wiser-ai-prior-auth and https://www.fiercehealthcare.com/payers/democratic-senators-share-plans-medicare-home-care-benefit-long-term-care-reform and https://www.modernhealthcare.com/politics-regulation/mh-cms-medicaid-state-directed-payments/ and https://www.healthcaredive.com/news/senate-democrats-roll-back-medicare-ai-prior-authorization-pilot-wiser/820728/ and https://www.beckershospitalreview.com/finance/cms-to-cap-state-medicaid-payments-to-save-775b-7-things-to-know/ and https://www.beckerspayer.com/payer/democrats-ramp-up-efforts-to-repeal-medicare-prior-authorization-pilot/

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#medicaid #providertaxes #obbba #medicare #priorauthorization #homecare

https://www.fiercehealthcare.com/regulatory/cms-proposes-rule-aimed-limiting-medicaid-state-directed-payments

— Marc S. Ryan

Exchange Enrollment Likely To Decline By Millions This Year

Healthcare policy group KFF finds that enrollment in Exchanges could decline to 17.5 million people this year. About 23.1 million enrolled as of January 1, which was already down from 2025 by 1.2 million. KFF used data from a Wakely Consulting study.

Just 86% of people enrolled in an individual market plan as of January 2026 paid their first month’s premium. If such trends continue, enrollment in the Exchanges could decrease between 17% to 26% over the course of 2026. The fall would include future unpaid premiums, mid-year attrition, and other impacts.

KFF also looked at all the cost impacts of expiring premium studies. Earlier it estimated that premiums would increase 114% if all enrollees stuck with their same plan. The new analysis finds that premiums in the aggregate actually increased by 58% for enrollees, which accounts for people switching to lower cost plans. That includes subsidized and unsubsidized individuals. The average actual filed premium hike from 2025 to 2026 as 26%.

Additional articles: https://www.fiercehealthcare.com/payers/aca-exchange-enrollment-likely-decline-least-17-year-kff and https://thehill.com/homenews/5885476-aca-marketplace-tax-credit-loss-enrollments/ and https://www.modernhealthcare.com/insurance/mh-aca-marketplace-enrollment-premiums-2026-kff/ and https://kffhealthnews.org/insurance/eroding-aca-enrollment-higher-insurance-rates/

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#exchanges #healthcare #coverage

https://www.kff.org/affordable-care-act/what-we-know-so-far-about-2026-aca-marketplace-enrollment-premiums-and-deductibles/

More Drugs On TrumpRx

President Trump announced that more than 600 generic drugs will be available through the TrumpRx website and billionaire entrepreneur Mark Cuban of Cost Plus Drug was there to celebrate with him.

Some are critical of the initiative, arguing that lower prices may be available through insurance or elsewhere. But there is no denying that Trump’s many drug price reform initiatives are redefining drug price in the nation.

#drugprices #trump

https://thehill.com/policy/healthcare/5884064-trump-adds-600-generic-drugs

CMS Finalizes Sweeping Exchange Rule

The Centers for Medicare and Medicaid Services (CMS) finalized its sweeping 2027 Affordable Care Act and Exchange rule today. While a few items were not finalized, most of the major items that will dramatically change offerings were.

The agency says the rule is an effort to bring down premiums, increase choice, and address fraud. Critics say it will erode enrollment and benefits.

The changes include:

• Policies for tighter eligibility verification requirements, reformed marketing and enrollment practices, and fraud measures
• Extending a ban on a special enrollment period for those below 150% of poverty
• Expansion of access to catastrophic coverage due to hardship. This would apply to individuals who are ineligible for premium and cost-sharing reduction subsidies (those below 100% or above 250% of poverty) when they experience changes in their household income.
• Multi-year catastrophic coverage policies
• Value-based preventive benefits in multi-year coverage that will be covered pre-deductible.
• Non-network plans can qualify as essential benefit plans
• Changes to cost-sharing parameters to increase flexibility for issuers designing individual bronze and catastrophic plans.
• Repeal of standardized benefit options and no limits on non-standardized plans
• States get greater authority over plan oversight
• Lower user fees on plans to lower premiums
• Beginning in plan year 2028, states will be required to defray the cost of benefits they mandate that are in addition to essential benefits.

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#exchanges #aca #obamacare #trump #regulations #coverage #healthcare

https://www.modernhealthcare.com/politics-regulation/mh-cms-aca-exchange-rule-2027-final

Internal CMS Memo Shows Growing Exchange Falloffs

NOTUS obtained an internal Centers for Medicare and Medicaid Services (CMS) memo that says more Americans are dropping out of Exchange coverage than usual. The memo says more than one in five people who enrolled in health insurance through the federal Exchanges during open enrollment and in the weeks following were dropped from coverage for failing to pay their first month’s premium. This rate is significantly higher than the rate from last year, which was 12%.

The administration attributes most of the drop to efforts to root out fraud. That could be some of it, but companies also report dropping enrollment since January due to non-payment. Premiums surged when enhanced subsidies lapsed. This occurred for those subsidized as well as more generally as companies increased rates across the board to mitigate an anticpated increase in risk and surging utilization costs.

(Article may require a subscription.)

#exchanges #coverage #healthcare

https://www.notus.org/healthcare/aca-healthcare-dropped-insurance-numbers-subsidies

Plans Launch New Ad Campaign On NSA Disputes

A new health plan ad campaign takes aim at the No Surprises Act (NSA) law and its arbitration component. It says that the dispute processes “create a ‘fox guarding the hen house’ dynamic.”

Data show that providers are far more likely to win (87% of the time) and earn significantly higher payouts than payments before the law. It is driving overall healthcare costs up.

Further, it is subject to abuse, with five organizations accounting for 63% of disputes in the first half of 2024: Team Health, SCP Health, Radiology Partners, AGS Health and HaloMD.

Plans have sued but it will take the courage of Congress to fix his problem.

#nosurprisesact #transparency

https://www.fiercehealthcare.com/payers/new-payer-backed-ad-campaign-pushes-no-surprises-act-idr-reform

Makary Resigns At FDA

Food and Drug Administration (FDA) Marty Makary, M.D, is out at the agency, having resigned under pressure from Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr. The move was approved by the White House.

The last straw appeared to be Makary’s reluctance to approve fruit-flavored e-cigarettes given the potential for abuse by minors.

Critics argued that Makary lacked government experience and did not lead the agency well. Others say he rightfully pushed back on certain administration initiatives he deemed wrong-headed.

I won’t get into the saga, only to say that Makary was dealt a poor hand, with layoffs and huge cutbacks at a time of great political volatility for the agency. Such appointments don’t always work out for the principled person.

I am a supporter of Makary, who I have been connected with for over five years now. (He endorsed my book when it was published.) I was inspired to write based on several of his works and those of Uwe Reinhardt. Makary is a deep thinker and consummate professional. His works on surgery, healthcare, and reform are top-notch. He brings the unique perspective of a practicing physician and academic to healthcare reform. Makary would be better as a healthcare policy change agent more broadly.

That Makary drew scorn from all corners is likely a signal that he was actually a good pick. His speeding of drug development will be a lasting legacy as will his reforms on rare diseases. I know he will continue to influence the healthcare world for good.

Additional articles: https://www.fiercepharma.com/pharma/fda-commissioner-marty-makary-resigns-capping-turbulent-tenure and https://www.healthcaredive.com/news/makary-fda-commissioner-resign-trump/820008/ and https://www.medpagetoday.com/washington-watch/fdageneral/121232 and https://thehill.com/policy/healthcare/5875030-marty-makarys-tenure-as-head-of-fda-ends-with-difficulty/

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#fda #makary #trump #hhs #rfkjr

https://www.modernhealthcare.com/politics-regulation/mh-trump-fda-marty-makary-resign

United Moving To Transparency For Its PBM

UnitedHealth Group Inc. said it will change its profit structure at pharmacy benefits manager (PBM) Optum Rx. The company handled about 1.7 billion prescriptions last year. Optum Rx plans to shift to a more transparent fee structure that gives clients clarity into payments the PBM gets from drug makers.

CVS Health Corp’s Caremark earlier said it would change how it pays pharmacies to make it simpler and more transparent. Cigna’s Express Scripts late last year said it will phase out rebate payments in many private health plans.

(Article may require a subscription.)

#pbms #drugpricing

https://www.modernhealthcare.com/insurance/mh-unitedhealth-optum-rx-pbm-model

Exchange Insurers Report On Program Challenges

First quarter results for insurers with Exchange lines of business had two trends. First, there generally was lower enrollment because people exited the market due to surging premiums and expiring subsidy enhancements. Second, people moving to less costly and trimmer Bronze and Catastrophic plans.

The health insurance companies expect aggregate Exchange enrollment will shrink by at least 20% over the course of the year as more drop out due to affordability.

Oscar Health bucked the trend in terms of enrollment growth.

Additional articles: https://www.fiercehealthcare.com/finance/aca-exchanges-dominated-q1-earnings-calls-heres-what-payer-health-system-execs-had-say

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#exchanges #healthplans

https://www.modernhealthcare.com/insurance/mh-aca-enrollment-centene-molina-cigna-oscar