It is rare for Medicare subscribers to get good news about the government’s health insurance plan for seniors. The latest Medicare news of CMS certainly is not good. Subscribers are starting to learn of rate increases for 2024, increases that are being blamed partly on the $9 billion Medicare payment remedy settlement.

In short, there are cost of living increases built into next year’s rates. Such increases are expected from year to year. But additional increases will be tacked on in 2024 to cover a lump sum payment CMS has to make to some 1,600 hospitals that participate in the 340B Drug Pricing Program. The lump sum payment is a direct result of a Supreme Court decision from last year.

The unfortunate thing in all of this is that Medicare subscribers had nothing to do with the original issue leading to the $9 billion payment. Yet they will ultimately bear its costs through higher premiums and deductibles in 2024. For all we know, they could still be paying for it in 2025.

Reimbursing 340B Hospitals

Anyone interested in understanding the issue better needs to go back to a 2017 HHS decision to reduce reimbursement rates on discounted medications sold to hospitals and other healthcare providers under the 340B Drug Pricing Program. These healthcare providers are known under the program as ‘covered entities’.

HHS is allowed to adjust reimbursement rates on everything from prescription medications to medical devices as long as certain procedures are followed. Where prescription medications are concerned, adjustments can be made based on average drug price. When HHS modified reimbursement rates for covered entities under 340B, they did so based on average drug prices across the board – not the actual amount covered entities were paying for discounted drugs.

The end result was lower reimbursement rates that many covered entities balked at. Some of them sued HHS and CMS, claiming the government had no right to adjust rates in a way that would ultimately affect only a small group of hospitals. The Supreme Court agreed. They ruled that the government should have conducted a survey to learn the actual cost of covered drugs before adjusting reimbursement rates for 340B participants.

A Lump Sum Remedy

More than a year after the court’s ruling, HHS has offered a lump sum remedy to the affected hospitals. That remedy is the previously mentioned $9 billion. But neither HHS nor CMS has that kind of money lying around. It is certainly not in the federal budget. So to pay for it, the government is raising rates and deductibles on Medicare subscribers.

That is the way it goes with a program that has become so complicated as to require covered entities to utilize the services of expert 340B consultants, likethose behind Consulting firms assist with program establishment, program optimization, legal compliance, and more.

Meanwhile, covered entities must do what they do and hope to not run afoul of program rules. Sometimes the program even works against them, which was the case when HHS reduced reimbursement rates five years ago.

Someone Has to Pay for It

There are plenty of entities that share the blame for the mess that is the 340B Drug Pricing Program. Regardless, the reimbursement problem created in 2017 is water under the bridge. Now HHS needs to implement a remedy, and someone must pay for it. That someone is the average Medicare subscriber.

If you are on Medicare, expect rate increases on Parts and B next year. Also note that some of the increase is going to pay the $9 billion 340B program settlement.

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