Following the inevitable end of the government shutdown, Democrat and Republican congressional leaders along with President Trump will begin negotiations on a Fiscal Year 2026 spending bill. One of the major issues facing the negotiators is the extension of the “temporary” Obamacare subsidies passed as part of the 2021 Covid relief bill. While many Republicans will say they oppose extending the subsidies, the fact is that few members are willing to allow their constituents' healthcare premiums to increase because of congressional inaction. This is especially true in an election year.
This does not mean that reformers should not take advantage of the upcoming negotiations. They should do just that to ensure the final bill contains meaningful reforms that will give patients more control over their healthcare via tax credits and expanded Health Savings Accounts. Congress should also reform programs that waste taxpayer money, enable further concentration of the healthcare market, and do little or nothing to help uninsured Americans. An example of this type of program is Section 340B. Created in 1992, Section 340B requires drug companies to provide discounts to “qualified entities,” which are healthcare centers and hospitals that provide care to low-income Americans—many of whom lack insurance. The qualified entities can then bill providers like insurance companies, Medicaid, and Medicare for the full price of the drugs. In theory, the “qualified entities” are supposed to use these savings to subsidize the costs of treating the uninsured. However, there is no legal mandate that they do so.
According to a study by the Alliance for Integrity and Reform, 69% of hospitals who take part in the Section 340B program spend less on charity care than the average hospital! Since any facility connected to a covered entity is eligible to serve as a Section 340B participant, Section 340B encourages hospitals to buy up as many care centers as possible and send patients to the costliest facilities to have their prescriptions filled. This is why, according to the research firm Milliman, the average insured patient spends 200% more on prescription drugs if they use a Section 340B qualified facility. This is also why prescription drug purchases by qualified entities have grown to over $65 billion dollars. Congress should include language in the spending bill requiring any facility benefiting from the program to use the savings to provide care to uninsured Americans. This would fulfill the program’s original goals and remove the incentives to engage in mergers and acquisitions.
Another change that should be included in the final spending bill concerns site neutral billing. The latter is the common sense idea that Medicare should not provide different payments for the same procedure based on whether it was done in a physician’s office or in a hospital. The Medicare bureaucracy, like all government bureaucracies, refuses to use common sense. Therefore, Medicare pays more for procedures done in a physician’s office than in a hospital. Like Section 340B, Medicare’s failure to use site neutral billing gives hospitals an incentive to buy private practices. Site neutral billing was mandated for new facilities in the 2015 Bipartisan Budget Act.
According to the Congressional Budget Office, expanding the use of site neutral billing would save Medicare as much as $153 billion over the next ten years. Other studies show that increased use of site neutral billing could save Medicare patients at least $94 billion, and as much as $466 billion in premiums and cost sharing payments over the next decade.
Medicare is one of the main drivers of our over $37 trillion and rising national debt. According to the 2025 Social Security and Medicare Trustees Report the Medicare Hospital Trust Fund will be out of funds by 2033. It is irresponsible, even by congressional standards, to refuse to make this simple common sense change to Medicare, when a spending bill extending the Covid-era Obamacare subsidies provides the perfect vehicle for this reform. Congress and the White House should not pass the opportunity presented by the upcoming budget negotiations to reform Section 340B to ensure it benefits uninsured Americans—not large healthcare conglomerates—and mandate site neutrality for all health care facilities.
