Feb. 13, 2018—Washington, D.C., has many traditions. Cherry blossoms in Spring. Oppressive heat and humidity in Summer. School closings due to snow flurries in Winter. This week marked the latest installment of another: the release of the President’s budget blueprint for the coming year. On Monday, President Trump released what the White House has dubbed “An American Budget” for fiscal year 2019, which starts on Oct. 1, 2018. Within hours, political pundits were already declaring the Trump budget to be “dead on arrival,” predicting Congress would pass few of the President’s initiatives in this mid-term election year.
For supporters of the 340B drug pricing program, the President’s budget also represents the latest challenge to the 25-year-old program. Both in the budget and in a concurrent report issued by the President’s Council of Economic Advisers, the administration made a series of observations about the 340B program that used inflammatory language that signals the administration’s concerns. The guts of the President’s 340B agenda appear in his proposals to change Medicare payment rules. In 2018, the Centers for Medicare & Medicaid Services (CMS) implemented a new policy that cut Medicare Part B reimbursement rates for drugs purchased by 340B hospitals by nearly 30 percent. Those rules are being challenged in court and on Capitol Hill, where legislation (H.R. 4392) to reverse the cuts now has 186 sponsors in the House of Representatives. Under Medicare law, however, the $1.6 billion in payments cut from 340B hospitals were redistributed to all Medicare hospitals in the form of higher payment rates for non-drug services. The Trump budget would double-down on those cuts by extending them into 2019 and add a new twist by asking Congress to allow CMS to keep some of the savings while redistributing some of the money to 340B hospitals that “provide uncompensated care equaling at least one percent of their patient care costs.”
It’s difficult to know exactly how this policy would work if Congress approves it. For example, the budget does not provide an estimate of how much of the Part B savings would go back to the Medicare trust funds and how much would go to hospitals that “provide uncompensated care equaling at least one percent of their patient care costs.” Those funds would be redistributed “based on their share of aggregate uncompensated care.” The budget documents say this policy would “reward [hospitals] based on the charity care they provide” while penalizing those that “provide little to no charity care.”
The administration provides no information about what it means by “charity care” or “uncompensated care.” Traditionally, the government issues a set of budget “assumptions” that shed some light on how they intend the proposed policies to work. So far, those documents have not been released.
New User Fees Proposed
In addition to the Medicare payment proposals, the Trump budget includes a plan to impose “user fees” on providers participating in the 340B program to help pay for oversight of the program. The fees are projected to raise $16 million a year. The plan appears to be similar to one introduced but never acted on by the Obama administration.
Reaction is Mixed
Reaction to the President’s budget has been mixed. 340B Health issued a statement stating, in part, “the President’s proposal to alter Medicare payment policies for hospitals participating in the 340B drug pricing program raises serious concerns about the future of this vital program and the patient care it supports.” The organization called on Congress to reject Trump’s proposal and, instead, enact legislation reversing the Medicare cuts in place in 2019.
Similarly, the American Hospital Association said it is “opposed to the Administration’s continued overreach regarding their authority over the 340B program.” And America’s Essential Hospitals called the budget “unacceptable” and raised “serious concerns” about the proposals for changes to the 340B program that “appear to restrict program participation and impose administratively burdensome new reporting requirements.”
In contrast, the Pharmaceutical Research and Manufacturers of America (PhRMA) said it is “pleased that the budget request includes additional market-based proposals to address misaligned incentives in the system and recognizes further changes are needed to the 340B program.”
What Will the Future Bring?
The release of the President’s budget kicks off a series of activities including hearings on Capitol Hill. HHS Secretary Alex Azar will testify before three committees to lay out the budget and answer questions from lawmakers. It is likely that 340B will come up in at least one of those hearings or more.
Having only recently completed an agreement on a budget for fiscal year 2018, Congress does not seem to have an appetite to dive into a new effort to pass the 2019 budget. However, the House Energy & Commerce Committee has promised to consider legislation to make major changes to the 340B program in early spring. Among the bills to be considered is the 340B Protecting Access for the Underserved and Safety-net Entities (PAUSE) Act introduced in December by Reps. Larry Bucshon (R-Ind.) and Scott Peters (D-Calif.), which would freeze hospital enrollment in the existing program and make a series of changes to impose burdensome reporting requirements. How this will all shake out is impossible to predict. The current Congress is not expected to enact a great deal of legislation unless it has bipartisan support. It is clear, however, that the debate over the future of the 340B program is fully engaged and will continue for much of the next year. Organizations representing hospitals, clinics and other health systems that utilize the program to extend their care for low-income and rural patients will need to remain vigilant and as involved as possible.