Essential Hospitals Can Redirect 2025 Medicare Part D Cap Funds to Serve Disadvantaged Patients, Communities

Essential hospitals across the country rely heavily on 340B program savings to provide patient assistance for those unable to afford their medications. These hospitals share a responsibility to care for patients who face social and financial hardships, including low-income patients and the underinsured.

The 340B program allows many hospitals to keep their doors open and maintain essential programs such as transitional care, specialty pharmacy, infusion services and other important patient care programs. Many of these hospitals continue to struggle, even with the 340B program, to cover unreimbursed care expenses or additional important initiatives that improve patients’ health.

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Although the Inflation Reduction Act that took effect January 1, 2024 will improve medical coverage for many senior citizens who utilize Medicare Part D coverage, the new law also has the potential to indirectly benefit essential hospitals using the 340B program to provide patient assistance.¹ For senior citizens, the legislation will add a cap on out-of-pocket drug spending by eliminating the 5% coinsurance requirement for catastrophic coverage and capping out-of-pocket spending at $2,000 in 2025, relieving many patients of catastrophic coverage costs.² Prior to the new law, many 340B-eligible hospitals used funds to help patients afford medications, but with the new caps, many of these hospitals will have an opportunity to redirect funds towards meeting other patient and community needs.

Funds could potentially be used for opening a trauma center or food pantry, improving substance use disorder services, offering hepatitis C testing and treatment, establishing clinical pharmacy programs, adding new infusion services or transitional care, or creating housing and educational opportunities depending on the needs of the patients and community. To make the best use of these funds to improve a hospital’s services, leaders should start planning now for these changes using the 4 following strategies:

Determine the Impact: Hospitals and health systems will first need to determine the impact the Inflation Reduction Act will have in providing additional funds for their patients. They can look at the funding used to cover out-of-pocket drug costs for Medicare patients in 2023, continue to track these numbers through 2024, and then determine how these funds will be shifted in 2025. A hospital’s pharmacy system software is a great place to start to determine the amount of additional funds the hospital can devote to new patient initiatives in 2025 and beyond. The hospital system will then consider how best to use the funding to best fit the needs of its patient population and community.

Demonstrate Good Stewardship: If the health system determines there will be significant additional funding, they should be proactive in setting good 340B stewardship principles by demonstrating publicly how these additional funds are used. The Health Resources and Services Administration (HRSA) has begun to shift their stance on the reporting of 340B funds and is requiring more hospitals to show how they are using the money to benefit patients and the local community.³

Two states have passed legislation requiring reporting of 340B savings. Minnesota was the first to sign a bill into law in May 2023.⁴ Maine also passed legislation in June 2023 requiring hospitals to submit information based on the American Hospital Association’s 340B Good Stewardship Principles beginning January 1, 2024.^3,5 Reporting requirements for the 340B Program are expected to grow and many hospitals that have complex arrangements with an array of clinics, services, and departments will need to invest significant time and resources into complying with the new rules.⁶ Essential hospitals, even those outside of Minnesota and Maine, should begin preparing for these new requirements now.

Involve the Hospital’s Oversight Committees: The hospital’s steering committee or governance committee overseeing patient assistance programs should meet to consider policy changes related to the additional funding to help cast a wider net to cover more patients.

Establish a Robust Patient Assistance Program: If a hospital does not have a solid patient assistance program in place, they should consider taking the necessary steps to implement or improve their program. Working with a specialty pharmacy partner can help the hospital structure the governance necessary to support the program, consider the requirements needed for HRSA, and set up a reporting structure. Having a patient assistance program in place is one example of the way 340B hospitals can provide comprehensive services to the vulnerable patients they serve.

Planning now for the redirecting of essential hospitals’ 2025 Medicare Part D Out-of-Pocket Cap funds to serve disadvantaged patients and communities allows essential hospitals to improve their 340B programs, take the necessary steps to begin planning for new programs and services that will improve patient care, and realize the most financial benefit in stretching scarce federal resources as far as possible within their health system and community.

References

1. On the First Anniversary of the Inflation Reduction Act, Millions of Medicare Enrollees See Savings on Health Care Costs. News release. US Department of Health and Human Services. August 16, 2023. Accessed February 28, 2024. https://www.hhs.gov/about/news/2023/08/16/first-anniversary-inflation-reduction-act-millions-medicare-enrollees-savings-health-care-costs

2. Cubanski J, Neuman T. Changes to Medicare Part D in 2024 and 2025 Under the Inflation Reduction Act and How Enrollees Will Benefit. Kaiser Family Foundation. April 20, 2023. Accessed February 28, 2024. https://www.kff.org/medicare/issue-brief/changes-to-medicare-part-d-in-2024-and-2025-under-the-inflation-reduction-act-and-how-enrollees-will-benefit/

3. 340B Hospital Commitment to Good Stewardship Principles. American Hospital Association. Accessed February 28, 2024. https://www.aha.org/initiativescampaigns/2018-09-13-340b-hospital-commitment-good-stewardship-principles

4. Newton W. Minnesota Imposes Nation’s First 340B Covered Entity Reporting Requirements. 340B Report. June 23, 2023. Accessed February 28, 2024. https://340breport.com/minnesota-imposes-nations-first-340b-covered-entity-reporting-requirements/

5. Newton W. Maine Enacts Nation’s Second 340B Provider Transparency Law. 340B Report. June 29, 2023. Accessed February 28, 2024. https://340breport.com/maine-enacts-nations-second-340b-provider-transparency-law/

6. The Growing Inevitability of New 340B Reporting Requirements. Verity Solutions. July 27, 2023. Accessed February 28, 2024. https://www.verity340b.com/the-growing-inevitability-of-new-340b-reporting-requirements