Federal Indecisiveness Belies Significant Changes in Medicaid Policy State by State

Oncology Business News, October 2017,

Today’s healthcare landscape is rapidly evolving, with many trends emerging and policy changes under consideration that have far-reaching implications for cancer care.

Debra Patt, MD, MPH, MBA

Policy Changes and Trends

Today’s healthcare landscape is rapidly evolving, with many trends emerging and policy changes under consideration that have far-reaching implications for cancer care. As a medical oncologist at Texas Oncology, I have been very active in collaborating with ASCO, the Community Oncology Alliance, and The US Oncology Network to heighten awareness of issues that may affect access to quality care for patients with cancer. What follows are a few of the major issues we are closely watching.Healthcare reform

As we have seen recently, there is much executive interest in modifying the Affordable Care Act (ACA) or replacing it with new legislation, such as the American Health Care Act (AHCA). Although the AHCA failed to pass, the future of repeal and replace is undecided, creating uncertainty about healthcare policy.

While we wait for developments on the federal level, tremendous changes are occurring in various state Medicaid programs, affecting how cancer care is managed in each state. Many states expanded Medicaid under the ACA, while some chose instead to rely on other funding systems. Some states have a very low percentage of uninsured individuals on Medicaid, while others have a large percentage. Consequently, healthcare coverage is highly variable because of the choices state governments made concerning Medicaid expansion and other funding sources. Frequently, states that have not expanded Medicaid have expanded funding for programs that deliver care to a high percentage of uninsured individuals, but these programs have limited deliverables and oversight, which is a threat to their effectiveness in helping underserved populations.

The transition in reimbursement strategy from the sustainable growth rate (SGR) calculation to new quality payment programs also affects care. The Medicare Access and CHIP Reauthorization Act of 2015 replaced the SGR mechanism with a focus on new quality payment program models. The legislation defined 2 reimbursement paths: the Medicare Merit-Based Incentive Payment System (MIPS) and alternative payment models (APMs).

With MIPS, practices are learning how to document quality benchmarking differently to meet specific requirements. Only 1 cancer-specific APM has been launched so far, the Center for Medicare & Medicaid Innovation’s Oncology Care Model, which has 192 oncology practices participating. Both reimbursement paths stress quality and value over quantity, a trend that represents the future of healthcare reimbursement. APMs try to influence the entire continuum of patient care in meaningful and innovative ways.

Attempts to control drug prices

There is strong bipartisan support for better control of escalating drug prices, such as:

  • Attempts to change Medicare reimbursement for both Part B and Part D drugs
  • A growing interest in value-based programs
  • An interest in reference pricing benchmarked to international standards

340B Incentives

Additionally, there are targeted efforts to control cancer drugs. Last year, the oncology community successfully fought a proposal from CMS to change Part B drug reimbursement from the legislatively mandated average-salesprice-plus-6% formula to a fixed fee with a smaller percentage of reimbursement. Because some small and rural practices purchase drugs at an above-average price, the reduced reimbursement would have made it financially challenging for them to administer expensive drugs, reducing access to novel treatments for Medicare beneficiaries. There is still much interest in modifying structures of reimbursement, as illustrated by the Medicare Payment Advisory Commission’s interest in a voluntary drug value program or alternative structure of reimbursement for Part B drugs.The 340B Drug Pricing Program was initially designed to help hospitals and select community and disease-specific health clinics that care for a disproportionately high share of indigent and low-income patients. The federal program allows 340B-eligible hospitals to purchase drugs at upward of a 50% cost reduction compared with what private-practice oncology centers and others pay.

Although well intended, the 340B program is exploited for financial gain, and this is hurting patients with cancer and our cancer care system. Challenges with eligibility, implementation, and oversight of 340B have led to unprecedented growth of hospitals in the program and the profit it generates for them. The 340B program provides a tremendous financial incentive for hospitals to abuse it by purchasing drugs at a huge discount and selling them to patients at full price. The savings that hospitals generate from 340B do not have to be used to lower the cost of patient care. Instead, hospitals can use those profits for executive bonuses, new buildings, and other things that benefit their institutions, not patients.

Because of the tremendous profits that can be made from 340B, the program has grown substantially. Since 2010, it has expanded from roughly 3000 participating entities to approximately 19,000 in 2016. Today almost 50% of hospitals in the United States participate in the program, even though most provide very little charity care. One study found that just 24% of 340B hospitals provide 80% of all the charity care in the program.

To increase the volume of costly cancer drugs they can acquire at a discount and dispense at full price, 340B hospitals are aggressively acquiring oncology clinics and generating tremendous profits. This competitive advantage adds to the difficulties faced by practices that are not in the 340B program. Within the past decade, many private oncology clinics have been forced to close or affiliate with hospital systems. Unfortunately, cancer care delivered by hospitals is much more expensive than care provided in private oncology clinics, costing from 1.7 to 2 times more for the same services. Even though 340B hospitals purchase cancer drugs at a lower price than do private clinics, they administer them at a much higher cost, so on the whole, the program is driving up the cost of care.

Oncologists across the country report that some 340B hospitals have begun turning away or putting patients with cancer on wait lists for care so that fully insured (and more profitable) patients can be prioritized. There are several more problems with this well-intended 340B program that have resulted in negative consequences:

  • Criteria for a qualifying entity are lax.
  • Patient qualifications for participation have not been clearly defined.
  • Qualifying entities are not required to spend savings from the program directly on care for poor and underserved patients.
  • The administrator of the 340B program, the Health Resources & Services

Administration (HRSA), has no ability to oversee the program because of its small staff and limited authority. Less than 1% of its programs are audited, and when they are, over 80% have problems, including inappropriate documentation, diversion of benefits to private payer plans, or double-dipping where the 340B entity gets more than 1 discount.2

Although the 340B program has merit because care must be provided to the underserved, its shortcomings need to be addressed to ensure that 340B fulfills its stated goal: to actually provide more care for the underserved patient populations. CMS has proposed addressing rising drug prices and curbing abuse of the 340B program by making hospital payments more reflective of the actual costs to acquire drugs. This is an important first step in curbing the obscene profits that some hospitals generate by abusing the 340B program.

The Opioid Epidemic

Additionally, HRSA not only needs to audit the 340B program but also should be granted the regulatory authority to manage it that they have not previously had. While many view the program as a victimless crime, in reality, it causes drug prices to increase over time. Drug companies are forced to sell an increasing proportion of their products to 340B entities at upward of a 50% discount, causing drug companies to increase prices for everyone else to maintain a stable profit margin.Nationally there has been much discussion about the opioid epidemic, as many states are grappling with this critical issue. There is increasing interest at the state level in developing policies to better regulate opioids, and over 400 state bills addressing opioid use have been introduced this year.

While we cancer physicians support better monitoring of opioids and are eager to do our part to curtail the national opioid addiction epidemic, we are working to make sure the proposed policies do not prevent our vulnerable patient populations from getting the palliation they need. It is unusual for patients with cancer to abuse drugs, and overprescribing of opioids is much more common in other clinical settings than in cancer and hospice clinics. ASCO and other organizations have proposed guidelines for particularly vulnerable populations, such as cancer and hospice patients, so appropriate drug utilization is not diminished.

Healthcare policy is rapidly evolving, and we are likely to see many more changes. There are many issues that pertain to cancer care that hopefully will be resolved in a meaningful way because there is heightened awareness of how these issues affect cancer care. We are striving to make sure policy changes support optimal outcomes for patients with cancer by working to ensure timely access to cancer treatment, as well as drug policy changes that support value and appropriate use of therapies for the patients who need them.


  1. Vandervelde A, Blalock E; Berkeley Research Group. Measuring the relative size of the 340b program: 2012-2017. http://340breform.org/wp-content/ uploads/2017/02/July-2017-BRG-White-Paper_Percent-of-Sales.pdf. Published July 2017. Accessed August 29, 2017.
  2. Subcommittee on Oversight and Investigations, 115th Congress. Hearing on “Examining HRSA’s Oversight of the 340B Drug Pricing Program” [video]. Committee on Energy & Commerce Democrats website. https://democrats-energycommerce. house.gov/committee-activity/hearings/hearing-on-examining-hrsa-s-oversight-of-the- 340b-drug-pricing-program. Accessed July 18, 2017.