Bluegrass Beacon: Hit drug program’s PAUSE button

BluegrassBeaconLogoEditor’s note: The Bluegrass Beacon is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

The 340B program was created by Congress in 1992 to provide life-saving medicine to poor and uninsured Americans by forcing pharmaceutical manufacturers wanting their drugs covered by Medicaid and Medicare to sell them at discounted rates of up to 50 percent to hospitals willing to serve vulnerable patients.

However, Washington has failed to provide needed oversight to ensure that facilities signing up for 340B are, in fact, serving the poor and investing reimbursed funds – per lawmakers’ intent – into charitable care.

Wealthy Duke University hospital generated 340B profits worth nearly $500 million during a recent three-year stretch though fewer than 5 percent of its patients during that period were charity cases.

Participation in 340B by some Kentucky hospitals also raises questions.

Why, for example, are drug manufacturers forced to offer these huge discounts to Norton Healthcare, which raked in $1.5 billion in revenues in 2014 yet whose charity cases comprised less than 1 percent of its patients?

The Medical Center of Bowling Green reported $285 million in revenues that same year but still participates in 340B even though its charity cases added up to less than 0.5 percent of its patients.

An industry study last year found more than a third of 340B hospitals report charity-care levels of less than 1 percent of all inpatient costs while 22 percent of participating hospitals provide 80 percent of all care received by the program’s vulnerable patients.

The Trump administration is addressing some of the misguided incentives by slashing reimbursement rates for 340B drug purchases.

Hospitals previously acquired drugs from manufacturers at up to half the cost then turned around and received reimbursement from Medicare at a rate of 6 percent above their average national sale price, pocketing the difference with the expectation being that the surplus funds would be used to serve disadvantaged patients.

However, with the evidence mounting that poor patients aren’t reaping most of those benefits, the Trump administration is cutting reimbursements rates by nearly 29 percent, placing them at nearly 23 percent below the average national sale price.

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, assures these cuts will save Medicare beneficiaries, who are required to pay 20 percent of Medicare’s reimbursement rate for their medicines, $320 million in 2018 and “will better, and more appropriately, reflect the resources and acquisition costs that these hospitals incur” in obtaining 340B drugs.

Congress can bolster this effort by passing the Protecting Access for the Underserved and Safety-Net Entities (PAUSE) Act, which places a two-year moratorium on new hospitals and their outpatient locations participating in 340B.

Hospitals to this point have been incentivized to purchase existing physician-owned or community-based clinics, or open new outpatient centers primarily in wealthier areas where they can use their 340B status to purchase drugs at discounted rates, sell them at full price to patients at these off-site centers who usually carry traditional commercial insurance and pocket the difference.

An Inspector General’s review found that during one quarter in 2013, hospitals paid $737 per treatment for a 340B-covered drug to treat bladder cancer yet Medicare beneficiaries were billed $831 per treatment, 13 percent more than the drug cost. Plus, Medicare reimbursed the hospitals at the healthy rate of $3,325 per treatment. It all added up to hospitals collecting a total of $3,419 above their cost of acquiring the drug.

This loophole may be legal but must be closed.

PAUSE requires hospitals who want to continue participating in the safety-net program to report their charity-care rates and the insurance status of patients receiving 340B prescriptions.

Slashing reimbursement rates and pausing growth is the right prescription for repurposing the 340B program so that it fulfills its original mission.

In fact, such an approach wouldn’t be a bad idea to adapt as a process for reviewing all welfare programs.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Reach him at and @bipps on Twitter.

Bluegrass Beacon: Reforming Medicaid, tweaking elections and overcoming evil

BluegrassBeaconLogoEditor’s note: The Bluegrass Beacon is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

Past expanded government programs, present evil and future gubernatorial elections highlight this first edition of “Liberty Boosters and Busters” in 2018.

Liberty Boosters: President Trump for allowing states waivers to create work requirements for able-bodied adults added to Medicaid as part of Obamacare, and Gov. Matt Bevin for ensuring Kentucky was first in line for approval.

Progressives are taking legal action, claiming such requirements weren’t part of the 1965 law creating Medicaid.

The reason they weren’t is that Medicaid was intended to serve a much-smaller group.

It was created as a safety net for those incapable of helping themselves, not able-bodied adults making up to 138 percent of the federal poverty level – nearly $21,000 for individuals and $43,000 for a family of four.

Medicaid wasn’t intended to cover those who can work or at least volunteer in their communities.

It certainly wasn’t made to serve 68 million Americans, 1.4 million of whom are Kentuckians.

Ideological opponents salivate at the opportunity to paint a picture of conservatives as hardened brutes who would rather see the poor die in the streets than receive Medicaid benefits.

But hardworking taxpayer-voters get it.

The same Kaiser Family Foundation poll that shows nearly 75 percent of the public view Medicaid favorably as a safety-net program also reports 70 percent of Americans agree with allowing states to impose work requirements on beneficiaries.

Liberty Buster: Lexington Democratic state Sen. Reggie Thomas apparently thinks 10-percent turnouts in gubernatorial elections is preferable to tweaking election law to increase voter participation.

Thomas in a floor debate of a bill giving voters the opportunity to amend Kentucky’s constitution to include elections for governor, lieutenant governor, attorney general, secretary of state, auditor, treasurer and agriculture commissioner in even-numbered years when presidential elections bring significantly higher turnout, claimed voters would be confused by the change.

“I don’t think we should confuse who is running for president … with who is going to be our governor,” Thomas said in the floor debate on the bill before it received 24-11 approval by the Kentucky Senate.

Does Thomas believe voters are incapable of understanding that while who’s elected president matters, Washington isn’t going to solve problems most affecting their daily lives, like Kentucky’s pension crisis, widening education-achievement gap or budget deficits?

Voters aren’t confused. But they and their county clerks are election-fatigued, considering Kentuckians go to the polls three out of every four years.

Or, at least a few of them do.

Barely 10 and 12 percent of eligible voters turned out in the most recent off-year primaries and fewer than one in three cast ballots in the general elections, compared with nearly 60 percent in Kentucky’s 2016 presidential tally.

Yet Thomas claims the proposed constitutional amendment “goes in the wrong direction.”

So, doubling the number of voters deciding who leads the commonwealth, saving counties millions and curing election fatigue “goes in the wrong direction”?

Now I’m confused.

Life Booster: Tracy Tubbs, whose 15-year-old niece Bailey Holt’s loving life was senselessly snuffed out in the recent shooting attack at Marshall County High School.

One of Holt’s fellow students stands accused in the attack, which killed two, injured at least 18 others and shattered countless lives in the tight-knit Benton community.

It’s tempting to make the story all about a lost young man.

But Tubbs told reporters that’s not how her niece did life.

“She would absolutely tell us all to stop all the fuss, not be angry, forgive him and pray for his mom,” Tubbs said. “She would not have an angry bone in her body. She would rather us turn our pain into something good, and that’s the best way we are going to represent her life.”

Talk about love in biblical proportions: “Do not be overcome by evil, but overcome evil with good.”

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Reach him at and @bipps on Twitter.

Prescription reimbursement policies: Use scalpels, not sledgehammers

Each legislative session brings its own attempts – usually born out of frustration – to address real problems in ways that just wind up growing government’s size, scope and cost.

It’s indicative of sledgehammer-to-ant syndrome. Rather than kill ants and address the specific problem, this approach knocks down the entire house.

Obamacare an example

Perhaps no large-scale policy change in America better describes such an approach than the so-called Patient Protection and Affordable Care Act, which provided neither protection nor more affordable coverage or care for patients.

It’s not that there weren’t some problems that needed attention. Rather, the solutions Obamacare offered went way beyond the pest control needed to address the ants on the floor and instead tore the whole house down.

Obamacare not only didn’t fix the health care and coverage problems but exacerbated them. It’s as if it knocked our whole health-care house down only to discover the ants survived the demolition and grew in number.

[Read more…]

Kentucky publisher praises Medicaid waiver

The Trump administration’s decision to make Kentucky the first step to receive approval for its 1115 Medicaid waiver request, which includes Gov. Bevin’s requirement that able-bodied adults added to the Medicaid rolls as part of the Obamacare-induced expansion work or volunteer in order to receive benefits, receives praise in a recent column by Jobe Publishing’s president and CEO Jeff Jobe.

Jobe calls Bevin’s leadership related to reforming Kentucky’s Medicaid expansion an act of “compassion but yet good honest government stewardship” and says that it will “lead not only Kentucky, but soon the nation, on a path of changing lives, showing we are indeed a compassionate people and getting back to honoring the hard-working tax payers by making sure our programs are indeed going to those in need.”

Jobe also offers a relevant personal story.

Read his commentary here.




Bluegrass Beacon – Drug pricing: Bustling marketplace or stifling monopoly?

BluegrassBeaconLogoYou probably sense that few drug makers can compete in arenas with the likes of a mega-pharmaceutical giant like AbbVie, which employs 30,000, raked in $26 billion last year alone and deserves blame for some of those irksome TV prescription-drug commercials.

You’ll also likely detect that prescription prices may be out of reach and a matter of life and death for some.

But if you’re a common-sense conservative, you’re wary about digging in too hard on solutions regarding this dilemma out of concern that (a) you’ve been misled about prices by those with big-government solutions in search of problems, and (b) even if the situation demands attention, whatever response the U.S. Food and Drug Administration or some other fervid bureaucracy concocts will exacerbate rather than ease or eliminate it.

The whole Affordable Care Act (ACA) is reason enough to let skepticism serve as your default position when hearing about bureaucrats or politicians offering solutions to health-care issues like drug prices that sadly may remain out of reach for the sickest among us.

Pressing problems regarding our nation’s health-care policy demanded attention before the federal reform was signed into law by President Obama, like the need to create paths to coverage for individuals with preexisting conditions, reduce overcrowded emergency rooms and ensure an effective safety net was in place for the indigent and disabled.

Instead, we got a wealth-redistribution program that mandates, subsidizes, taxes and punishes – everything but protecting patients and making care more affordable for most who are forced to participate.

Health-care economist Robert Book reported in Forbes that insurance premiums “across the board, for all ages and family sizes, for HMO, PPO and POS plans” rose by 60 percent between 2013 – the year before Obama’s reforms took effect – and 2017, compared with premium increases of less than 10 percent in the same length of time before ACA’s implementation.

It’s a classic example of government recognizing a problem and then doing all in its power to make things worse.

Similarly, attempts at dealing with rising prescription-drug prices with more heavy-handed cures like price controls – which some states favor and others, including the federal government, are, have or will be tempted to enact – discourage investment in the research and development leading to miracle creations like AbbVie’s Humira, which treats the debilitating disease of rheumatoid arthritis.

In fact, the Food and Drug Administration’s antiquated regulatory process is a contributing factor to rising brand-name drug prices, up 208 percent since 2008.

However, the fact that prices for these drugs’ generic equivalents dropped nearly 74 percent during the same period indicates there’s more to those higher brand-name prices than solely the cost of navigating FDA rules.

The truth is, some brand-name pharmaceuticals are practicing the worst form of crony capitalism by misusing safety regulations and protocols to lock generic drug makers out of the arena, keeping their lower-cost-but-just-as-effective products off the pharmacy shelves far past the patent period.

Patent laws rightly protect drug creators from generic competition for 14 years, allowing them to recover their often-huge investments in creating these wonders of modern medicine and turn a healthy profit.

But generics must not be shut out forever, especially with rising health-care costs and lives at stake.

QuintileIMS reports the use of generics saved Kentuckians $5.3 billion just in 2015.

Those savings could increase dramatically if, as the U.S. Senate is considering in the CREATES Act, loopholes used by brand-name drug makers to limit accessibility to their generic competitors long beyond patent periods are closed and reforms are injected into the process so that the prescription drug-making landscape a bustling marketplace with lots of competitors instead of a stifling monopoly controlled by crony capitalists.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. He can be reached at and @bipps on Twitter.

Go figure

The Rural Blog reported on November 30, 2017 that “The U.S. Drug Enforcement Administration is targeting the opioid epidemic in Appalachia by establishing a new field office in Louisville on Jan. 1.”

You have to wonder about that.

The Appalachian Regional Commission shows this region includes the following area.

Map of Appalachian Region

Louisville isn’t even in the Kentucky-Tennessee-West Virginia part of the region the new office is supposed to cover. Charleston, WV or Knoxville, TN look like they make more sense for a field office to serve Appalachia.

Looks like some government workers will be sucking up an awful lot of travel pay and related perks. After all, it’s a multi-hour drive just getting to Appalachia from Louisville.

As far as service to folks in Appalachia goes, maybe not so much.

A Kentucky senator talks Obamacare repeal

Rand Paul, Kentucky’s junior senator, recently explained his stance on the Senate’s healthcare bill. While acknowledging that he is part of a “team” in the Republican party, Paul stands on principles rather than blindly submitting to the party. Paul’s convictions led him to stand against the Senate’s Obamacare “repeal” bill. Paul explains that rather than repealing Obamacare, it keeps:

  • “the majority of Obamacare taxes,”
  • 10 out of 12 “major Obamacare regulations,”
  • “unsustainable expansion of Medicaid,”
  • insurance subsidies using taxpayer money, and
  • a “$200 billion bailout” of insurance companies.

This particular legislation is failing in the Senate, leaving an opening for real change. Actually repealing the Affordable Care Act would result in benefits not only for the nation in general but for Kentucky in particular.

Bluegrass Beacon: Make health care affordable again


Editor’s note: The Bluegrass Beacon column is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

Whether the American Health Care Act (AHCA), which narrowly passed the U.S. House of Representatives last month, offers an effective repeal and replacement of the Affordable Care Act (ACA) – affectionately known as Obamacare – is the subject of much debate as the Senate takes up another attempt to deal with the failed health care fiasco.

It’s indisputable, however, that any replacement plan failing to deal with cost – the primary malady affecting health-care policy – is an effort in futility.

A growing body of evidence suggests that not only has Obamacare done little to address the cost of health-care products and services, it’s exacerbated the problem.

Recent analysis by the U.S. Department of Health and Human Services indicates average premiums are 105 percent higher for Americans in the 39 states purchasing policies through the federal exchange in 2017 than for individuals’ plans in 2013 – before the exchange was created.

The analysis further unpacked reports that the average individual market premiums rose from $2,784 before Obamacare had kicked up to $5,712 in 2017.

“Affordable” Care Act, anyone?

All of this, it seems, would produce a wonderful opportunity for Republicans, who control Congress, the presidency and most state legislatures to use the leverage given them by voters to tattoo history with:  “Here’s how you do health-care reform,” and do it right.

Don’t get your hopes up.

Insurance-company lobbyists and welfare recipients have joined forces to weaken the resolve of many legislators who campaigned for changing a policy that never should have been implemented in the first place.

We would’ve been much better off seven years ago, instead of passing Obamacare, to adhere to the wise adage of President Calvin Coolidge: it’s “much more important to kill bad bills than to pass good ones.”

Still, killing not only Obamacare but its foundational ideas and approaches remains a priority.

More than reasonable doubt exists concerning whether the AHCA comes anywhere close to doing this – with its Obamacare-like approaches to taxes, subsidies and even mandates.

Northern Kentucky congressman Thomas Massie, one of 20 Republicans to oppose the AHCA, sassily compared the legislation to a kidney stone, charging “the House doesn’t care what happens to it, as long as they can pass it.”

Yet even when it comes to something as politically charged as whether we’re going to replace a health-care policy bearing the name of a Democratic president with a Republican-created substitute, progress can be made regarding critical policies in a bipartisan way.

There is, for example, strong support for making the cost of care transparent.

Costs have largely been hidden in our days of low co-pays, employer-provided plans dominated by third-party administrators and government programs.

“I don’t think I’ve ever had a Medicaid patient ask me how much something costs,” Dr. Cameron Schaeffer, a Lexington-based pediatric urologist and proponent of free-market policies, said on KET’s recent Kentucky Tonight program.

Neither Obamacare nor the AHCA effectively connects patients with cost, which is critical to making America’s great health care affordable again.

One viewer’s email read by Kentucky Tonight host Renee Shaw noted, “a free market only works when there is competition.”

Both Schaeffer and fellow KET panelist Dr. Barbara Casper, an internist, professor of medicine at the University of Louisville and Obamacare supporter, agreed providers should post their prices in a clear and understandable way.

Doing so would “help patients know what they’re getting into” and “would also allow for … more competition,” Casper said.

“I think we need to do everything we can to lower costs,” she added.

Whatever your political belief system, you will bear the burden or at least the consequences of higher health-care costs.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at He can be reached at and @bipps on Twitter.

The Bluegrass Institute on Kentucky Tonight—Healthcare

KyresizedBluegrass Institute president and CEO Jim Waters joined a panel on KET’s Kentucky Tonight this week to discuss the Affordable Care Act — often referred to as Obamacare — and it’s proposed replacement, the American Health Care Act (AHCA), which the U.S. House of Representatives recently passed by a thin 217-213 margin. The U.S. Senate has yet to act on the bill.

Waters, who previously called the AHCA “a RINO bill” — repeal in name only — noted the bill is not a full-scale repeal and replacement of Obamacare, but rather a tweaking of a few of its provisions.

He called it “Santa Claus politics,” keeping “a lot of the goodies in there, in terms of the subsidies and the handouts.”

Overall, he warns the bill “keeps many of the things the Obamacare plan had.”

One positive aspect of the bill, he said, is its allowance for states to apply for federal waivers, which will bring at least some of “the management and administration of healthcare dollars … back to the states,” which are better able to determine the needs of their own citizens than Washington’s huge federal bureaucracy.

Waters also took aim once again with Obamacare’s expanded Medicaid approach, which has greatly increased Kentuckians’ dependency on a government program for their health-care coverage.

“Medicaid was never intended to provide healthcare for one out of three Kentuckians,” Waters said, reiterating that the size of Medicaid needs to be shrunk so that the program can be put back on a sustainable path, while implementing more innovative ideas on providing health care for lower-income Americans and Kentuckians.

Others appearing on the program included Lexington Dr. Cameron Schaeffer, a pediatric urologist in Lexington, Dr. Barbara Casper, who teaches at the University of Louisville and Dustin Pugel from the Kentucky Center for Economic Policy.

“I’ve had a problem with Obamacare not only as a doctor but as an American” because it contravenes the American values of individualism, freedom and property rights, Schaeffer said.

One of the ways to mitigate the effects of increased numbers of sick and elderly beneficiaries is to share risk by incorporating younger, healthier people. However, Obamacare has discouraged the potential involvement of younger enrollees “by pooling young people into policies that are mandated to cover problems that old people get, and they can’t afford it,” he said.

The federal mandate for extensive coverage raises prices, making insurance “untenable” for young people, he said.

Watch the full program here.

Amy Searl is working with The Bluegrass Institute through the Koch Internship Program.