Swamp Annals: The Hospital Industry’s Disgusting Obamacare Complicity

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Andrew F. Quinlan President, Center for Freedom and Prosperity
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The list of people who cowardly accommodated Obama at the height of his power is long. But among crony capitalist “liberal profiteers” of the Obama era, the hospital industry truly stands alone.

Eight years ago, the top executives in the health care industry faced a choice. They knew an incoming Democratic president would be trying to nationalize their industry. They also knew they might be able to stop it, like they had in 1993 when industry-funded ads helped torpedo Hillarycare.

But some thought going up against Obama was a risk and preferred appease—that by trying to accommodate him they might achieve “peace.”

And so the American people endured the wrenching, destructive process of the last eight years, their health care plans abruptly canceled, costs skyrocketing, and the entire system teetering on the edge of a “death spiral.”

Despite the chaos, the hospital industry has fared much better.
To begin with, it’s a highly profitable industry, though many of its members (especially the most profitable ones) oddly exist as tax-exempt “not for profit” organizations (the multi-million dollar salaries of their CEOs notwithstanding).

Secondly, much of the industry’s revenues come from the government in the form of Medicare, Medicaid, Social Security and other programs which, in recent years, have seen their spending absolutely explode. Not that the increase are buying more or better services for the patients.

But that in itself is relatively pedestrian. It just means that hospitals are a subsidized industry (with all the pitfalls), albeit one that is especially good at securing more funding for itself.

The real nub is the downright dastardly ways the hospital industry rigs the rules in its favor, often in ways that siphon tens of billions of taxpayer dollars their way.
One example is something called the “340B” program, named after a section in the federal code that establishes it.

The intention behind 340B was to give discounts to poor people when they buy medicine. It existed for quite a while as an obscure government program until a clever lawyer somewhere figured out a massive loophole.

Technically, the language in 340B applies to the companies manufacturing the drugs, not whoever is providing them to the patient. Hospitals realized they could make a killing by quietly keeping the discount for themselves rather than passing it on to the patient.

In other words, the hospital gets the discounted price, but the patient pays the normal price.

Amazing fact: following an astonishing increase directly attributable to 340B, there are now more pharmacies in the U.S.A. than McDonald’s restaurants. Most of the brand new stores exist primarily as fronts to exploit the loophole.

In another disgusting, crony capitalist move, the extremely well-financed hospital lobby has been working to slowly strangle a small but highly successful auditing program that has helped the government recover over $10 billion in fraud in only a few years.

The “Recovery Audit Contractors,” or RACs program, allows several private companies to audit tens of billions of dollars in Medicare payments. In return, they get a small portion of any illegal payments they help uncover, if the money is ultimately recouped by the government.

Obviously, this arrangement is far too logical and effective for the government. It’s something of a miracle that the first-of-its-kind program exists in the first place.
But the experience of the last few years has provided very ample evidence that Medicare fraud is a substantial portion of how the hospital industry makes money.
Thus, the RACs program, which even with its hands tied behind its back has had something of a field day, had to be killed.

Hundreds of hospital industry lobbyists have been billing overtime in a ruthless effort to destroy the RACs at any cost. The disturbing thing is: it’s working. Perhaps as payback for their timely support for Obamacare, the administration has been doling out all kinds of perks to the hospitals, including sweetheart deals on how they get audited.

With an outsider president like Donald Trump coming into power, a lot of people are talking about how to “drain the swamp.” There’s a lot of swamp to drain, but some of these people are truly egregious bad actors.

So, welcome to a new era, hospital industry! And thanks but no thanks for giving us Obamacare.