What the Latest Medicare News Means for University Hospitals

UH Clinical Update | August 2022

By Cliff A. Megerian, MD, FACS, Chief Executive Officer; Jane and Henry Meyer Chief Executive Officer Distinguished Chair

You may have read the recent positive news about the changes in Medicare prescription coverage: beginning in 2025, Medicare recipients with prescription drug coverage will see significant savings, as their cost for medication will not exceed $2,000 annually.

This change was made to help people on Medicare who have been overwhelmed by the high cost of prescriptions, and are often unable to pay when just one prescription can cost thousands of dollars each month. Not infrequently, people then forgo the drugs, with dire results for their health.

As detailed in the New York Times, nearly 49 million people, most of them older Americans, get prescription drug coverage through Medicare, yet many find that it does not go far when it comes to paying for the medication they need. While low-income people qualify for subsidies, people in the middle class are hit hard. 

Now, with the healthcare bill passed, many on Medicare can save hundreds, or likely thousands, on those prescriptions each year. That’s because the bill allows Medicare to negotiate prices with drug makers to drive down the costs, to the benefit of those who rely on those medications.

There are other positives, too. Starting next year, insulin co-payments for Medicare recipients will not exceed $35 a month. And in 2024, beneficiaries who have costs high enough to qualify for “catastrophic coverage” would no longer have to pay up to 5 percent of the cost of every prescription. 

All of this is tremendous news for many of our patients, and we are happy and relieved for all Medicare recipients who will benefit from this.

As physicians, it’s also something to keep in mind as we counsel our patients. We want to make sure that they take their medications as prescribed, and also to remind them how important it is that they avail themselves of the annual or age-related screenings that Medicare requires, including those for cancer, heart disease and diabetes. We have seen the metrics on how effective these screenings are and what a big difference they make in population health.

This is also a good time to note that UH provides prescription cost assistance in another way, which is through our 340B savings program. This program was created 30 years ago as a safety net for low-income patients with or without insurance, but also for other patients who would never be able to afford the medicines they need when they are ill (such as extremely expensive cancer drugs) or when they are suffering from a chronic condition. The program’s name comes from Section 340B of the U.S. Public Health Service Act of 1992.

It works by requiring pharmaceutical manufacturers that participate in Medicaid to sell outpatient drugs at discounted prices to healthcare organizations that care for many uninsured and low-income patients. The savings in those prices allows UH to benefit the community, to reach more eligible patients and provide more comprehensive care, including pharmacist staff for services used by patients with such chronic illnesses as diabetic hypertension, dyslipidemia, asthma and COPD.

In 2021, the UH Specialty Pharmacy team, which is funded by the savings from the 340B program, helped secure $42 million in funding to support patients getting access to medications that they could not afford.  

And yes, while the new health bill means that many patients who are on Medicare will benefit from the upcoming prescription savings, for healthcare systems like ours, there is a different story.

Here’s what is happening. While you may have seen news headlines about hospital reimbursement rate increases from the Centers for Medicaid and Medicare Services (CMS), the fact is there also were cuts mandated earlier in the year that offset those increases. So the net increase is very modest and not nearly what is needed to keep pace with rising inflation and our supply costs.

Medicare is the No. 1 provider of reimbursement to hospitals, and nearly 60 percent of our revenue comes from Medicare and Medicaid reimbursement. So these cuts are being made when we already are in challenging economic times.

Workforce shortages are also at critical levels across many positions at American hospitals, including those of nurses, hospitalists, intensivists, lab technicians, nursing assistants, and environmental service workers. In some cases, this leads to a delay in patients getting needed care.

Hospitals are hurting already, and then facing a cut in reimbursement by the biggest payer – all this during a time of once-in-a-generation inflation.

Why is Medicare cutting funding? They see the overall cost of healthcare continuing to increase and Medicare has only so much money in its trust fund, so Congress and the Administration have pushed to reduce spending.  That’s understandable. Our UH Government Relations team is doing what it does best and because of its strong relationships with government officials, we are working with our political leaders, encouraging them to put forward legislation  that can reverse these cuts.

The Government Relations team has ensured that I meet regularly with members of Ohio’s congressional delegation. Also, this past spring, we hosted CMS Administrator Chiquita Brooks LaSure for a healthcare roundtable at UH Cleveland Medical Center, which gave us the opportunity to build strong relationships with the Biden administration’s leading health policy makers.

We are working hard to ensure that our elected leaders know the significance of the financial and staffing struggles that health systems are facing and that we need them as a partner. 

It is one of the most crucial issues to address now, and we will remain persistent.