A subsidy is not a salary

I spent my working life watching what happens when a well-intended instrument loses its discipline. Paper money with no redemption promise, a bill of exchange with no creditworthy drawer, a postal contract with no delivery obligation — each begins as a convenience and ends as a quiet tax on the people least able to resist it. The Washington Examiner now describes a program called 340B in exactly those terms: a federal drug-discount scheme, conceived to help hospitals serve poor and uninsured patients, that has grown into a revenue stream for hospital campuses planted squarely in wealthy suburbs.

The mechanics are simple, and so is the mischief

As the Examiner reports, the 340B program allows qualifying hospitals to purchase drugs at steep federal discounts — then bill insurers and patients at the full market price. The spread between those two numbers is the profit. That profit was meant, in effect, to cross-subsidize care for those who cannot pay. The mischief arises when a large hospital system qualifies through a single low-income clinic downtown, then applies the discount across dozens of outpatient facilities in prosperous neighborhoods where uninsured patients are scarce. The subsidy travels; the poor patients do not.

Who pays? Ask the tradesman.

My habit, always, is to ask what the working person actually pays when the policy is in force. Here the answer is: insurers pay higher drug bills at the suburban campus, and they recover that cost through higher premiums on every policyholder. The program is, in effect, a tax levied invisibly on the insured public, the proceeds of which flow upward to hospital finance departments. Robin Hood, as the Examiner aptly puts it, is riding in reverse.

The virtue of accountability

I do not say that hospitals are wicked. I say that any instrument — paper money, tax incentive, or drug discount — will be exploited in proportion to the looseness of its oversight. A Philadelphia printer who set loose type got blurred text; a Congress that writes loose eligibility rules gets blurred beneficiaries. The remedy is not to abolish the program but to bind it tightly to its stated purpose: require that a measurable share of the 340B benefit reach uninsured and low-income patients, and publish the accounting annually so that the public may judge. Sunlight, I have always believed, is the best of disinfectants — and the cheapest.

A counsel for the citizen

If you or yours must negotiate hospital bills, know that nonprofit hospital systems are required to publish charity-care and financial-assistance policies. Ask for them. A hospital drawing 340B discounts has already received a public subsidy; it is neither unreasonable nor impolite to ask that some portion of that benefit reach you at the counter. The person who knows the rules of the house is always better served than the one who does not.