How one bad law drives hospital consolidation and high health care costs
Americans are getting squeezed by rising health care costs. The latest numbers from the Centers for Medicare and Medicaid Services show that patient out-of-pocket spending increased by 10.4% in 2021, a rate not seen for more than three decades. The cost of monthly health insurance premiums also leapt, by 6.5%. And that was all before last year’s rapid inflation squeezed household budgets.
One often overlooked cause of soaring health care costs is hospital consolidation. When a single health care system becomes the only game in town, it effectively turns into a monopoly and can set prices at whatever level it likes. Even just a few acquisitions of smaller clinics by a large hospital allows them all to raise fees. Patients are forced to pay more for care, or travel farther afield, which can also be expensive.
Many hospital acquisitions these days are driven by a single well-intended but poorly written policy, the 340B Drug Pricing Program, which became law in 1992 and expanded in 2003. The goal was to help low-income patients get access to medicine and improve their health. Instead, 340B has turned into a cash grab for wily operators gaming the system.
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