Where Do Our Health Insurance Premiums Go?

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Big Insurance has hauled in $500B in profits since 2014— enough to cover extending the enhanced ACA subsidies and leave $150B — yet it’s gone to shareholders and executive bonuses instead of patients.

As open enrollment begins and Congress remains deadlocked on whether to extend the ACA’s enhanced premium subsidies, one question looms large: Where does all the money we pay for health coverage actually go?

It’s a fair question. Premiums and out-of-pocket costs have risen relentlessly over the past decade. Since the Affordable Care Act was fully implemented, the average premium for an ACA marketplace plan has doubled, and the average deductible for a Silver plan has increased by 92%. Every year, families pay more, yet the coverage often feels thinner.

What the Insurers Say

Health insurance companies routinely claim these increases simply reflect rising medical costs and higher utilization. For example, when justifying rate hikes in 2024, Cigna of Texas wrote:

“The increasing cost of medical and pharmacy services and supplies accounts for a sizable portion of the premium rate increases.”

But the financial filings of these same companies tell a different story.

What the Numbers Show

As Wendell Potter recently wrote, from 2014 to 2024 the seven largest publicly traded health insurance companies, UnitedHealth Group, CVS/Aetna, Cigna, Elevance (formerly Anthem), Humana, Centene, and Molina, reported that they collectively made more than half a trillion dollars in profits.

That’s money collected from individuals, employers and taxpayers for health coverage — dollars that didn’t go to medical care but instead flowed to corporate shareholders and executive bonuses. To put this in perspective, those profits alone could fund the enhanced ACA premium subsidies for another ten years, at an estimated cost of $350 billion.

Stock Buybacks: Enrollees’ Money, Executives’ Reward

Over the same period, these seven companies spent $146 billion buying back their own stock or, in other words, using premium dollars from patients and employers to boost share prices and executive compensation (the CEOs and many other top executives of big insurers are compensated primarily through stock grants and options).

Stock buybacks don’t lower premiums, expand networks, or improve care. They simply make investors and executives richer. If that same money had been reinvested in enrollees, it could have provided premium-free health coverage to more than 5 million families for an entire year, based on the average employer-sponsored plan cost of $27,000 in 2026.

Lobbying With Our Premium Dollars

Insurers aren’t just rewarding shareholders, they’re also shaping the political system that protects their profits. Since 2014, the seven largest insurers and their trade association, AHIP, have spent $618 million on lobbying.

That’s money that could have been used to lower out-of-pocket costs or improve patient care, but instead it’s spent to influence Congress and federal agencies to maintain the status quo.

The Real Problem — and the Real Solution

As the cost of health insurance continues to climb, politicians debate how to control those costs and expand coverage. But the truth is, there’s already enough money in the system to cover everyone. It’s just being siphoned off by insurance corporations for profits, lobbying, and stock buybacks.

Though some have been calling for less regulation of Big Insurance, that is not the answer and is partly how we ended up in this situation. Right now, Big Insurance is allowed to use premium dollars and tax dollars on things that do nothing to improve anyone’s health – such as stock buybacks and lobbying – instead of on medical care.

Rather than asking families and taxpayers to pay more, it’s time to demand accountability from insurers. At a minimum, they should not be allowed to use premium dollars, or taxpayer dollars, to enrich shareholders through stock buybacks (which wasn’t even legal until the 1980s) or lobby for policies that drive up costs.

If we want to contain health care costs, the first step is simple: Stop the profiteering by Big Insurance.

The Hospitals That Close, and the Hospitals That Open, Are Not in the Same America

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New analysis shows hospitals are increasingly closing in poorer communities while new facilities are built in wealthier ones, reshaping access to care along economic lines.

As I wrote a few days ago, 700 rural hospitals are in danger of closing because they’re not getting enough money from either private insurers or Medicare and Medicaid to stay open. That would be on top of the 743 general acute-care hospitals that have closed across the United States since 2000. In that same stretch of years, however, hundreds more hospitals have opened. Taken together, that sounds almost reassuring — a sector in churn, but not in freefall. Yale’s Health Care Affordability Lab, which just published the most comprehensive accounting of this churn to date, even framed it that way: for every ten hospitals that closed, eight opened.

But churn isn’t neutral. It matters enormously where the closing happens and where the opening happens, because, as it turns out, they are not the same places.

I pulled the underlying hospital-level data behind Yale’s new numbers and matched every closure and opening since 2000 to its county, then layered in U.S. Census data on income, poverty, and population density. The pattern that emerged is clear: The hospitals closing serve poorer communities than the hospitals opening. Almost all of the new hospitals were built in zip codes with wealthier residents.

The median household income in counties where hospitals closed was $45,992. In counties where hospitals opened, it was $52,873 — nearly $7,000 higher.

Breathe data into income quintiles and the divide sharpens further. Hospitals closing in the poorest fifth of U.S. counties outnumber hospitals closing in that same tier by three-to-one compared with openings. Meanwhile nearly three-quarters of all new hospitals — 73% — have opened in the richest 40% of counties. The country isn’t just losing hospitals and gaining hospitals. It’s losing them in one America and gaining them in another.

The easy explanation is that this is just population following growth — hospitals close in the declining Rust Belt and open in the booming Sunbelt, and income differences are just a side effect of which regions are growing. I checked for that, because it would matter: if that’s all this is, it’s a story about demographic drift, not about who a health system chooses to serve.

It isn’t just that. I broke the same comparison out by state, and in 23 of the 24 states with enough closures to compare, the hospitals that closed were in lower-income counties than the hospitals that opened — within that same state. Illinois lost hospitals in counties averaging $52,693 in household income while gaining them in counties averaging $65,217. Minnesota: $51,525 versus $72,971. North Carolina: $38,090 versus $49,874. Even in Texas — which added a net 40 hospitals, the best record of any state — the closed hospitals were in counties averaging nearly $10,000 less than the counties where new ones opened. The only state in the sample where this didn’t hold was Arizona, and there it was essentially a wash.

That consistency shows this isn’t primarily a story about regional growth patterns. It’s a story about who health systems — hospital operators, investors, health systems chasing better payer mix — decide is worth building for, and it’s happening inside the same state borders, sometimes inside the same metro areas, at the same time.

What “closure” actually means depends on the zip code

It’s important to be somewhat specific about which facilities are closing, because “hospital closure” isn’t one phenomenon. Some of what shows up in this data is the slow bleed familiar to anyone who’s covered rural health care: all too often, the last hospital in a county goes away and with it obstetrics, the ER, and in many cases the last stable employer in town. But some of the closures in dense urban counties are something else — consolidation, where systems fold a facility into a nearby campus.

What both kinds of closures share, though, is the income pattern. Whether it’s the last rural hospital in a county or an urban system trimming a facility in a lower-income neighborhood, the destination for new capital is disproportionately a wealthier community or across the state.

If you live in the county that lost its hospital, the fact that a gleaming new facility opened forty minutes away in a wealthier suburb does not shorten your ambulance ride, doesn’t help you deliver a baby, and doesn’t change the calculation an uninsured or underinsured patient makes about whether a symptom is worth the trip.

Health systems, quite rationally from a balance-sheet perspective, build where the payer mix is better — commercial insurance, higher reimbursement, wealthier patients who can absorb high-deductible cost-sharing. They close or shrink where the payer mix is worse — more Medicaid, more Medicare Advantage, more uninsured, more bad debt. Every individual decision can make business sense. The aggregate effect, repeated in state after state for a quarter century, is a health care system quietly re-sorting itself by income, county by county.

Insurers Are Rejecting More Prescriptions Than Ever, New Study Finds

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First-time prescription rejections rose 67% between 2018 and 2024, with nearly half of denied patients receiving no comparable medication within 90 days.

A new study published in JAMA puts hard numbers behind something patients and doctors have been telling me for years: getting a prescription filled increasingly means running an obstacle course of denials, prior authorization forms, and step therapy requirements — and a lot of people never make it through.

Researchers from Johns Hopkins Bloomberg School of Public Health and the American Enterprise Institute analyzed more than 2 million first-time attempts to fill prescriptions for brand-name drugs that have no generic alternative, using pharmacy claims data covering nearly every major insurance market in the country: commercial plans, Medicare, Medicare Advantage, Medicaid, and ACA marketplace plans. The data ran from January 2018 through September 2024.

Here’s what they found:

  • Rejections are way up. In 2018, insurers turned down 24.3% of first-time fill attempts for these drugs. By 2024, that had jumped to 40.7% — a 67% increase.
  • Coverage rules are the driver. Overall, 32% of initial attempts were rejected: 14.8% because the drug was excluded from the formulary outright, and 17.2% because it required prior authorization or step therapy — insurer-speak for “try something cheaper first.”
  • Nearly half of rejected patients got nothing. Of everyone who was turned down, only 38.6% eventually got the original drug within 90 days, and 13% got a different drug in the same class. But 48.4% — essentially half — received no medication in that class at all within three months.
  • Delays add up. Even patients who eventually got their medicine waited an average of 12.2 days after the initial rejection.
  • Where you get your coverage matters enormously. Rejection rates were highest in ACA marketplace plans (48.7%) and Medicaid managed care (49.8%) — nearly one in two prescriptions. Traditional Medicare drug plans (24.0%) and Medicare Advantage (19.8%) had noticeably lower rejection rates.

Why this matters

The insurance industry has a ready answer for all of this: prior authorization and step therapy exist to control costs and steer patients toward drugs with the best evidence behind them, not just the most expensive ones. There’s some truth in that — utilization management can reduce unnecessary spending and has, in some cases, nudged prescribing toward cheaper, equally effective alternatives.

But this study makes clear that the tradeoff is not small or hypothetical. When nearly half the people who get turned down simply never receive treatment in that drug class — not “later,” not “with a substitute,” but never, at least within 90 days — that’s not utilization management working as intended but as a barrier that outright blocks care for a huge share of patients, many of whom presumably still need what their doctor originally prescribed.

The study lands in the middle of a real fight over these practices. Federal regulators have been pushing to speed up and standardize prior authorization. Several states have passed laws limiting insurer review times, exempting doctors with track records of low rejection rates from prior authorization requirements altogether, or requiring plans to honor authorizations a patient already has when they switch coverage.

Insurers will point out that some of the increase in rejections reflects more brand-name drugs entering the market during the study period. But that doesn’t explain away the core finding: patients across every type of coverage are hitting more roadblocks, and for close to half of them, the medicine their doctor decided they needed simply never arrives.

Beyond Coverage Loss: The Real Financial Fallout of ACA Disruptions

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https://www.healthleadersmedia.com/cfo/beyond-coverage-loss-real-financial-fallout-aca-disruptions?utm_source=HealthLeaders&utm_campaign=52ada68df2-EMAIL_CAMPAIGN_2026_07_30_01_43&utm_medium=email&utm_term=0_adc94e5966-52ada68df2-532959885&mc_cid=52ada68df2&mc_eid=71a6a1464f

Why CFOs must prepare for more than just coverage loss.

KEY TAKEAWAYS

Higher deductibles and cost sharing are driving collection challenges even among patients with coverage.

ACA and Medicaid policy changes can quickly alter payer mix, making financial flexibility a competitive advantage.

Strengthening payer partnerships, optimizing revenue cycle performance, and investing in sustainable growth are becoming unarguably critical.

The expiration of enhanced ACA premium subsidies is not just a policy issue, but a steep revenue cycle and margin challenge. The loss of the subsidies represents far more than a temporary decline in insurance coverage, it’s a structural shift in payer mix, revenue predictability, and financial strategy that is reshaping how health systems plan for an uncertain future.

Recent earnings reports from major for-profit systems underscore the reality of the challenge. HCA Healthcare, Community Health Systems, and Tenet Healthcare have all reported that the impact of ACA marketplace disruptions has been more severe than expected. Rather than transitioning to employer-sponsored coverage or delaying care, many patients who lost subsidized exchange plans are continuing to seek treatment without the ability to cover their growing financial responsibility—meaning rising uncompensated care, higher bad debt expense, and increased pressure on operating margins.

CFO outlook is overall optimistic, and although healthcare demand has remained remarkably resilient, patients’ ability to pay has not. That reality is playing out in real time at hospitals across the country.

Bill Pack, CFO of Methodist Le Bonheur in Tennessee, describes the expiration of ACA subsidies as one of the system’s most significant financial headwinds. According to Pack, enrollment in Gold, Silver, and Platinum marketplace plans has fallen by approximately 70%, while enrollment in Bronze and catastrophic plans has increased by nearly 30%. For Pack’s organization, the disruption is driving a sharp increase in self-pay patients.

“To a certain extent, the mindset of a lot of people in government is ‘COVID’s over, so we don’t need these things anymore,'” Pack says. “But I don’t think there’s a good appreciation for the impact that has had.”

Technically patients are still insured, but many now carry substantially higher deductibles, copayments, and coinsurance obligations than they cannot realistically afford.

“This just adds to the self-pay as well because a lot of people are not going to be able to pay that patient portion,” Pack says.

Pack and his organization’s experience reflects a broader national trend. According to an HFMA analysis, the expiration of enhanced ACA premium tax credits is expected to leave approximately five million Americans without marketplace coverage, increasing uncompensated care while reducing hospital revenue. As a result, traditional payer mix metrics will likely no longer tell the full financial story, making revenue cycle performance and patient collections even more vital to margin preservation.

Further, this is also a subtle but meaningful evolution of the revenue cycle challenge: collections become more difficult, bad debt increases, and cash flow becomes less predictable despite stable patient volumes. At the same time, policy uncertainty is making long-term planning increasingly difficult.

Beyond labor shortages, inflation, reimbursement pressure, and supply chain costs, CFOs are now preparing for additional changes to Medicaid eligibility and future federal policy. Pack says the experience of the past several years has fundamentally changed how organizations approach financial planning.

“One thing we learned from COVID is no matter how hard we try, we cannot predict the future,” he says. “We’ve got to be very flexible. We’ve got to be nimble.“

That philosophy is growing amongst CFOs, ultimately because it has to.

Rather than relying on typical assumptions about reimbursement and payer mix, systems are building flexibility into their financial planning. For this Pack’s system, this means strengthening managed care contracting, deepening relationships with commercial payers, pursuing strategic service-line growth, maintaining disciplined cost management, and making thoughtful capital investments while preparing for potential Medicaid policy changes.

As the challenges persist, optimization is becoming the star of the CFO’s playbook. Today health systems depend on how they can optimize payer strategy, improve revenue cycle performance, make disciplined capital allocation decisions, and invest in services for long-term demand.

Corporate CEO Turnover Is Cooling. Hospitals Are the Exception.

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Hospital CEO turnover remained above last year’s pace through the first half of 2026 even as departures across industries decreased, continuing a trend that emerged earlier this year.

KEY TAKEAWAYS

While CEO departures across U.S. companies fell 26% during the first half of 2026, hospitals recorded an 8% increase, making healthcare one of the few sectors still experiencing elevated leadership turnover.

Increased hospital CEO exits during the first quarter carried into the first half of 2026, suggesting the rise in turnover has become more sustained.

As leadership changes continue at a higher rate than in most industries, hospital boards face greater pressure to strengthen executive pipelines and preserve continuity.

The wave of CEO departures that hit corporate America over the past two years has largely stabilized. Hospitals, however, continue to move in the other direction.

A report from Challenger, Gray & Christmas found U.S. companies announced 920 CEO exits during the first half of 2026, down 26% from 1,235 departures during the same period last year, while hospitals recorded 74 CEO exits through June, compared to 68 during the first half of 2025, for an increase of more than 8%.

The contrast suggests the spike in hospital leadership turnover that emerged during the first quarter has extended into a larger trend.

For June, hospitals announced 10 CEO departures, down from 17 during the same month last year. Earlier months produced increased activity, with 16 exits in March, 16 in April, and 14 in May.

Most other sectors, conversely, have experienced significant year-over-year declines in CEO turnover. Government/not-profit, which has announced the most exits over the past two years, saw departures drop from 256 through the first half of 2025 to 247 through June 2026.

The industries that also dealt with an uptick in year-to-date turnover were aerospace/defense (13 in 2026, eight in 2025), insurance (20, 17), media (15, 12), and pharmaceutical (22, 17), with none of those sectors coming close to the volume seen with hospitals.

The data reveals how much of an outlier hospital CEO turnover has been and the effect that financial pressures, workforce challenges, and policy changes have had on executive leadership.

For hospital boards, persistent and elevated turnover increases the importance of succession planning as a priority rather than a contingency.

Now and going forward, boards may place greater emphasis on developing internal leadership pipelines and maintaining continuity during executive changes.

“Boards continue to hold onto the leaders they have rather than reaching for change, and the first-half pace now sits a full quarter below last year,” Andy Challenger, labor expert and chief revenue officer for Challenger, Gray & Christmas, said in a statement. “After two years of elevated turnover, companies are prioritizing stability.”

Are Hospitals Sacrificing Tomorrow’s Leaders to Solve Today’s Problems?

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As hospitals and health systems flatten their organizational structures to control costs, they risk weakening the pipeline that develops future leaders.

KEY TAKEAWAYS

Leadership development has become a recurring priority in conversations with hospital CEOs as workforce challenges evolve beyond staffing shortages.

Administrative restructurings are reducing middle management roles, creating fewer opportunities for emerging leaders to gain operational experience.

Hospitals need to treat leadership development as a workforce strategy and invest more intentionally in preparing the next generation of decision-makers.

One topic that has been part of nearly every conversation I’ve had with hospital and health system CEOs over the years has been the clinician workforce shortage. But as we’ve moved further into the post-COVID-19 era and workforces have somewhat stabilized, I’ve noticed another workforce challenge emerging that is eliciting real long-term concern among organizations: the lack of a leadership pipeline.

Hospitals are being forced to reckon with the next workforce question. After recruiting and retaining clinicians through a period of unprecedented disruption, who will prepare the next generation of leaders?

I’m not talking about leadership capacity at the highest levels, although elevated hospital CEO turnover and overall C-suite churn are major threats to organizational stability in their own regard. That’s a conversation for another day. The potential leadership gap that I’m referring to resides more in the middle of organizations, where positions are increasingly being hollowed out and deemphasized, lessening opportunities for future leaders while removing layers of on-the-ground contact with frontline workers.

During my interviews with hospital CEOs, leadership development has continuously surfaced as a priority. Organizations are thinking about how to develop managers, strengthen clinician leadership, and create pathways for emerging leaders to take on greater responsibility.

At the same time, hospitals are making tough calls around their administrative structures to mitigate financial pressures, with labor costs often the biggest driver of rising expenses. Over the past year or so, I’ve covered restructuring after restructuring. The details change, but the pattern that remains fairly consistent is that the positions being eliminated often sit between frontline caregivers and the executive suite.

It’s understood why those positions are the ones on the chopping block. Having leaner organizations where the talent is concentrated on the front lines and at topmost levels makes sense when resources are limited. But while the balance sheet may benefit in the short term, the consequences of “The Great Flattening” are likely to be felt when today’s emerging leaders have fewer opportunities to become tomorrow’s executives.

Reducing waste remains a focus, but as Fairview Health Services president and CEO James Hereford recently told me, layoffs must be weighed with careful consideration.

“On the people side, we’re such a labor-intensive business, the temptation is always if you have economic issues, you look at what levers you can pull,” Hereford said. “You start to say, ‘Okay, well people, that’s a huge expense.’ It is, but if you put people in a bad system and then you blame the people, that’s not an equation for success. So we concentrate a lot more on the system.”

“That’s the that’s the danger, right, is you make too many cuts on the people side and then you actually damage your ability to do the things you’re there to do. And we’re trying to be very careful about making sure that we don’t make those kinds of changes.”

The Need for Intentional Leadership Development

That tension—between hospitals pursuing restructurings and the downstream costs on leadership—is not exclusive to healthcare, of course. This is happening across corporate America.

I’ve also wondered if the flattening of workplace hierarchies accelerates leadership development by placing more power and responsibility on all employees, not just managers.

However, the stakes in healthcare differ wildly from other industries. There’s a fine line between honing the leadership skills of a working clinician and overburdening someone who is already prone to burnout. Without specific opportunities for clinicians to willingly take on leadership duties, development can become more fragmented and random.

If flatter organizations are here to stay, there has to be more intentionality with leadership development. Without those management layers, it’s incumbent on CEOs and C-suites to more directly invest in emerging leaders. Succession planning shouldn’t be limited to the top of the organizational chart.

It also means recognizing that leadership capacity is a workforce issue. A hospital can address staffing challenges and still be on the back foot if it doesn’t have enough leaders prepared to guide employees through change.

Healthcare has spent years focused on having enough people to provide care. Going forward, I’m convinced it requires equal attention on preparing the people who will lead those teams.

Is 340B good for the healthcare system? 

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https://www.managedhealthcareexecutive.com/view/is-340b-good-for-the-healthcare-system-takeaways-from-an-mhe-drug-topics-webinar

Key Takeaways

  • Absence of mandatory federal reporting on 340B revenues and expenditures is viewed as the program’s core governance gap, despite existing audit authority focused on duplicate discounts and diversion.
  • Eligibility criteria tied to disproportionate Medicaid/uninsured volume remain contested, with examples showing large academic systems generating far more 340B margin than charity-care outlays compared with public safety-net hospitals.
  • Use of savings ranges from keeping small hospitals solvent to subsidizing high-cost service lines, yet lack of spending requirements can incentivize expansion in affluent markets and shift costs to payers.
  • Manufacturers are criticized for contract-pharmacy restrictions and demands for claims data, while also allegedly pricing 340B discounts into list prices; limited HRSA rulemaking authority perpetuates litigation.

Does the 340B program help hospitals provide care and other services to low-income patients? Or has the program grown beyond what was initially intended, with undeserving institutions taking advantage of it?

Two industry leaders addressed these questions and more during a webinar sponsored by Managed Healthcare Executive, Drug Topics and the Pharmacy Benefit Management Institute.

Tom Kraus, J.D., chief advocacy officer and vice president of government relations at the American Society of Health-System Pharmacists, argued in favor of the program’s value to patients. “Hospitals are still operating on incredibly thin margins across the board. The average is around 1%; almost half are operating at negative margins. It’s just not true that they’re somehow getting rich off this. They’re using it to provide patient care in communities that need it and to patients that need it.”

But Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said the program has “grown out of control, and it doesn’t have the guardrails it needs. What 340B has tried to accomplish is absolutely valid; I fully support it. But it’s plainly obvious to anybody that the time is now for Congress and policymakers to get together and say we can make this program actually work.”

The 340B program allows qualifying hospitals and other providers, such as federally qualified health centers, to purchase medications at discounted rates from drug manufacturers and use the difference between the discounted price and the reimbursement from commercial insurers and other payers to fund patient care services.

The 340B program generated roughly $100 billion in discounted drug purchases last year, growing 23%, compared with less than 10% growth in overall U.S. prescription drug spending.

Since its implementation in 1992, more than half of U.S. hospitals participate in the program.

The Health Resources & Services Administration (HRSA), which oversees the 340B program, is currently reviewing comments and determining next steps for a pilot 340B rebate program for drugs that were part of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program.

Here are four key takeaways from the webinar:

1: Transparency and oversight

There is no federal requirement that hospitals report how much 340B revenue they collect or how they spend it. Gremminger argued that this absence of reporting is the program’s central flaw. “The underlying problem with 340B is it creates economic distortions,” he said. “The program is so problematic because it has virtually no oversight. The Health Resources and Services Administration, which oversees nominally 340B, has been found by courts to have basically no ability to actually create rules.”

Gremminger said payers want to know how much hospitals make and what they do with the money. He pointed to states, such as Minnesota, that are beginning to require covered entities to report this information.

Kraus countered that HRSA and manufacturers already have audit authority when there is a specific concern, such as a suspected duplicate discount, and that 340B dollars are not separately traceable once they reach a hospital’s books.

2: What counts as a safety net hospital?

Much of the debate centered on which hospitals should qualify for participation in the program. Gremminger cited Minnesota data showing that M Health Fairview, the University of Minnesota’s academic medical center, netted more than $300 million in 340B revenue last year while providing about $17 million in charity care, compared with Hennepin Healthcare, a public safety-net hospital that made roughly $100 million in 340B revenue against $107 million in charity care. He argued dollars are flowing disproportionately to large, financially healthy systems rather than the rural and community providers the program was designed to protect.

Kraus said that hospitals in the program already treat a disproportionate share of Medicaid and uninsured patients to qualify. “The states have said payers should pay the normal rate, and they want the clinic or hospital to be able to use those dollars to subsidize care in their communities. I think that’s like a reasonable decision that states can make, and I think from my perspective, it helps us provide care to patients.”

3: What services should 340B dollars fund?

Kraus maintained that the law implies, though does not strictly require, that 340B savings support safety net care and noted three-quarters of small participating hospitals use the savings simply to stay open. Additionally, he said large academic centers often house the trauma centers, cancer centers, and emergency departments that require substantial, ongoing subsidy.

“At the end of the day, the program exists in order to subsidize the care of patients by allowing providers to purchase at a lower cost and sell to payers at a higher cost, which is the contracted rate. The program’s not designed to subsidize payers; it’s designed to subsidize providers so that they can survive.”

Gremminger said the lack of any spending requirement means some systems reinvest the 340B margin into facilities in higher-income, better-insured markets rather than expanding services for low-income patients, calling that an economic distortion that raises costs for employers, taxpayers, and working families through reduced Medicaid rebates and higher commercial pricing.

4: Pharma’s role in drug pricing

Both panelists were critical of drug manufacturers, although for different reasons. Kraus said pharmaceutical companies, which he noted operate on roughly 40% margins compared with hospitals’ roughly 1%, have pursued restrictions on contract pharmacy arrangements that have ended up in litigation. Manufacturers such as Eli Lilly are now requiring covered entities to turn over claims data as a condition of receiving discounts, which he characterized as a “fishing expedition” rather than a targeted integrity effort.

Gremminger agreed pharma bears responsibility for high drug prices because companies simply prices 340B’s cost into list prices, which he argued undermines any savings the program is meant to generate. Both agreed HRSA lacks the statutory authority for meaningful rulemaking, a gap they said invites continued litigation between manufacturers and hospitals.