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Hospitals Cut Jobs and Services as Rising Costs Strain Budgets

Bozeman Health had a problem, one that officials at the health system with hospitals and clinics in southwestern Montana said had been building for months.

It had made it through the covid-19 pandemic’s most difficult trials but lost employees and paid a premium for traveling workers to fill the void. Inflation had also driven up operating costs.

The system, which serves one of the state’s richest and fastest-growing areas, was losing money. It spent nearly $15 million more than it brought in from January to June of this year, President and CEO John Hill said. On Aug. 2, Hill announced that Bozeman Health had laid off 28 people in leadership positions and wouldn’t fill 25 open leadership jobs. The system has a workforce of about 2,400 and an approximately $450 million budget for the year.

The pandemic has intensified a long-running health care worker shortage that has hit especially hard in large, rural states like Montana, which have few candidates to replace workers who depart. Expensive stopgaps — including traveling nurses — caused hospitals’ costs to rise. Staffing shortages have also left patients with longer waits for treatment or fewer providers to care for them.

In addition to Montana, hospitals in California, Mississippi, New York, Oregon, and elsewhere laid off workers and scaled back services this summer. Health systems have pointed toward low surgery volumes, high equipment prices, sicker patients, and struggling investments. Parallel to those problems, hospitals’ largest expense — payroll — skyrocketed.

“If you talk with just about any hospital leader across the country, they would put workforce as their top one, two, and three priorities,” said Akin Demehin, senior director of quality and patient safety policy for the American Hospital Association.

Workers left the health care industry in droves during the pandemic, citing low pay and burnout. Nationwide, hospitals competed for contract workers to fill the void, which drove up prices. That left hospitals with an awkward balancing act: keep existing employees and fill essential roles while cutting costs.

Bozeman Health Chief Financial Officer Brad Ludford said the system went from spending less than $100,000 a month on short-term workers before the pandemic to $1.2 million a week last fall. That number is now closer to $1.4 million a month. Overall, the system’s labor costs are roughly $20 million a month, an increase of about 12% compared with this time last year.

Hill said the health system took other measures before cutting jobs: It stopped all out-of-state business travel, cut executive compensation, and readjusted workloads. Simultaneously, it tried to convert contract workers into full-time employees and to retain existing staffers though a minimum wage increase. Hill said the hospital system has had some success but it’s slow. As of mid-August, it had 487 vacancies for essential workers.

“It still has not been enough,” Hill said.

Vicky Byrd, a registered nurse and the CEO of the Montana Nurses Association, said nationwide shortages mean nurses are asked to do more with less help. She wants to see more hospitals offer longtime employees the kind of incentives they’ve used for recruitment, such as giving nurses premium pay for picking up additional shifts or bonuses for longevity.

“It’s not just about recruiting — you can get anybody in the door for $20,000 bonuses,” Byrd said. “But how are you going to keep them there for 10 or 20 years?”

Hospitals’ financial challenges have evolved since early in the pandemic, when concerns focused on covid response costs and revenue that didn’t come in because people delayed other care. In 2020, because of federal aid and a return to more normal service levels, many of the nation’s wealthy hospitals made money.

But hospital officials have said the financial picture shifted early in 2022. Some hospitals were hit hard by the omicron surge, as well as rising inflation and staffing challenges.

Hospitals received millions of dollars in pandemic relief from the government, but industry officials said that has dwindled. Bozeman Health, for example, received roughly $20 million in federal aid in 2020. It received $2.5 million last year and about $100,000 in 2022.

John Romley, a health economist and a senior fellow at the University of Southern California’s Schaeffer Center for Health Policy and Economics, said that with federal aid drying up and inflation taking off, some hospitals may now be losing money. But he cautioned that more data is needed to determine how hospitals overall have fared compared with previous years.

Providence, a health system with 52 hospitals across the West, reported a net operating loss of $510 million for the first three months of the year. In July, Providence announced it was putting in place a “leaner executive team.” The system operates one of Montana’s largest providers, Providence St. Patrick Hospital in Missoula.

Kirk Bodlovic, chief operating officer of Providence Montana, said the new structure hasn’t affected local positions yet, although he said hospital leaders are scrutinizing open jobs that aren’t essential to patient care. He said the hospital is trying to reduce its reliance on contract workers.

“Recruitment efforts are not keeping up with the demand,” Bodlovic said.

Hospital job cuts across the nation have pushed out some health care professionals who had stuck with their jobs during the stress of the pandemic. And the cuts have meant some patients have needed to travel further for treatment.

In Coos Bay, Oregon, the Bay Area Hospital faced community backlash after it announced it would cut the contracts of 56 travel workers and end its inpatient behavioral health services. Hospital officials cited the high cost of filling open positions quickly.

St. Charles Health System, headquartered in Bend, Oregon, laid off 105 workers and eliminated 76 vacant positions in May. The system’s CEO at the time, Joe Sluka, said in a news release that labor costs had “skyrocketed” largely because of the need to bring in contract clinical workers. He said the hospital ended April with a $21.8 million loss.

“It has taken us two pandemic years to get us into this situation, and it will take at least two years for us to recover,” Sluka said in the release.

In Montana, Bozeman Health hasn’t been able to offer inpatient dialysis at its largest hospital for months, so patients who need that service have been sent elsewhere. Hill said he expects some delays for services outside of critical care, such as lab testing. Ludford said the hope is that the system will begin breaking even in the second half of this year.

About 100 miles away, Shodair Children’s Hospital in Helena halved the number of patients it accepted because of staffing shortages. It’s the only inpatient psychiatric hospital for kids in Montana and is constructing a $66 million facility to expand bed capacity.

CEO Craig Aasved said the 74-bed hospital downsized roughly two years ago instead of adding contract workers so it could leave space for patients to quarantine in case of covid outbreaks. Aasved said he’s scrambling to get another unit open. Shodair, which historically hasn’t relied on travel workers, hired four traveling workers in recent months, he said.

“It’s a double whammy: We lost revenue because we’ve closed beds, and then you’ve got the additional expense for travelers on top of that,” Aasved said. “The goal is no layoffs, no furloughs, but we can’t stay in what we’ve been doing forever.”

He said the hospital increased pay for some employees and opened a nurse residency program roughly six months ago to bring in new people. But those steps haven’t delivered immediate help.

Nearby, the CEO of St. Peter’s Health, Wade Johnson, said the hospital closed part of its inpatient unit and scaled back hours for some services because of staffing shortages. Some beds remain out of use.

Administrators are exploring automation of more services — such as having patients order food by iPad instead of through a hospital employee. They also are allowing more flexible schedules to retain existing staffers.

“Now that we’ve adapted to life with covid in many regards in the clinical setting, we are dealing with the repercussions of how the pandemic impacted our staff and our communities as a whole,” Johnson said.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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Wastewater Surveillance Has Become a Critical Covid Tracking Tool, but Funding Is Inconsistent

To look at recent data posted on Clemson University’s covid-19 dashboard, one might assume that viral activity is low on the Upstate South Carolina college campus.

The dashboard, which relies on positive covid tests reported by local laboratories and on-campus medical offices, identified 34 positive cases among students during the third week of August and 20 cases the week before.

These numbers pale in comparison to those from eight months ago, when the omicron variant first surged in the U.S. and Clemson averaged hundreds of positive covid tests every day.

For those who rely on these kinds of dashboards to assess the risk of contracting covid, the recent data doesn’t paint the most accurate picture, said David Freedman, who chairs the university’s Department of Environmental Engineering and Earth Sciences. With the proliferation of at-home covid tests, only a small fraction of positive results are reported to public agencies. Many people with mild infections don’t test at all.

He said that better data can be found in samples collected from sewage water and that those have shown this summer’s viral activity is much higher than the number of reported cases suggests.

“In our area, the numbers are actually higher than at any time except for the [first] omicron surge,” said Freedman, who runs the department’s covid wastewater surveillance program. “And yet the case reports are often zero.”

Even though wastewater surveillance is proving to be the most accurate and economical way to gauge covid activity in communities across the country, Freedman and others say funding for this type of tracking hasn’t been consistent. And data collection is sometimes paused while wastewater researchers look for new ways to pay for the surveillance.

“For the wastewater data to be actionable, you have to observe it,” said Mariana Matus, CEO and co-founder of Biobot Analytics, which has a $10 million contract with the federal Centers for Disease Control and Prevention to run wastewater surveillance at more than 300 sites across the U.S. “The more that you observe, the easier it is to catch early changes and take action.”

Wastewater research isn’t new. The method was used in the 1940s to track polio outbreaks. Besides covid, the technique is being used to track the spread of monkeypox.

It involves collecting a wastewater sample, often at a treatment plant, concentrating it, and processing it so scientists can run an analysis — similar to a PCR nasal swab — able to detect genetic evidence of the covid virus, other infectious diseases, and even the presence of opioids.

Historically, wastewater samples have been collected to gauge community trends, such as the rise and fall of covid cases. More recently, though, research published by Freedman and others in the journal Lancet Planetary Health found that wastewater surveillance can be used to estimate the number of infected people in an area.

For much of the pandemic, covid numbers reported on a daily or weekly basis by state and local health departments moved in tandem with data collected by wastewater surveillance programs. Typically, when cases reported by the health departments increased so did the amount of covid detected in wastewater samples.

Covid-related hospitalization data is also useful in measuring community spread and gauging the severity of variants, but it is considered a lagging indicator, meaning the data tends to peak weeks after covid is already running rampant through a community, said Michael Sweat, director of the Center for Global Health at the Medical University of South Carolina, whose work focuses on covid forecasting.

By contrast, because people excrete the covid virus in feces before they show symptoms of illness, community-level infections can show up in wastewater sludge before case counts or hospitalizations start to rise.

Many scientists now consider wastewater surveillance a more precise way to track covid activity in real time. Without wastewater surveillance, “we just don’t have a very accurate read of things,” Sweat said.

And researchers say data collection is not expensive. According to Freedman, the program at Clemson costs $700 a week. Erin Lipp, who runs the wastewater surveillance lab at the University of Georgia in Athens, said covid testing costs about $900 a week.

According to a U.S. Government Accountability Office report published in April, countries could save millions or billions of dollars by using wastewater surveillance, but the potential cost savings remain unclear. A general lack of cost-benefit analyses makes determining how and when to use it difficult, the report said.

Yet some labs say the lack of a consistent and centralized source of funding raises questions about how — or if — communities can continue to carry out this work.

“When we started this, it was basically extra bits of money I could find,” said Lipp. Her lab has used CDC grant money over the past year to pay for surveillance, but the portion of funding dedicated to that testing is set to expire at the end of August. Donations will sustain the lab through September.

“I’m very hopeful we can find some way to keep it going,” said Lipp. She is concerned that her lab, for the first time during the pandemic, is seeing a disconnect between the covid spikes in wastewater and the spikes in clinical cases. “What we’re seeing is a huge undercount,” she said.

Wastewater surveillance sites often go “offline” for periods and then resume work later, said Colleen Naughton, an assistant professor of civil and environmental engineering at the University of California-Merced. She developed an online dashboard called CovidPoops19 that tracks wastewater surveillance efforts across the world.

Surveillance work can be intermittent, she explained, because funding comes from such a variety of sources, including governments, universities, and the private sector.

At the Plum Island Wastewater Treatment Plant in Charleston, South Carolina, wastewater surveillance was suspended for more than two months this year. The project was reinstated this summer when the state Department of Health and Environmental Control assumed control from the University of South Carolina.

“The academics that I know who have been doing this up to this point, we’re all facing similar levels of funding problems,” said Freedman, of Clemson University.

For much of the pandemic, Clemson paid for its wastewater surveillance. The program faced a funding shortfall earlier this year, but Freedman said his lab was never forced to suspend its surveillance. Before the money for his lab work ran out in May, Freedman turned to Biobot Analytics, which, in addition to the work it does for the CDC, analyzes wastewater samples for about 50 independent projects.

Biobot’s wastewater surveillance network is funded through venture capital investment, Matus said.

Regardless of the funding hurdles, wastewater surveillance is moving forward. Nationally, more wastewater research is being conducted now than ever before.

Although some researchers have had to look for alternative sources of funding this year, CDC spokesperson Jasmine Reed said that more than 1,000 CDC-funded surveillance sites are now operational across the U.S. The agency expects 200 more to start collecting data within the next few months.

That’s good news for researchers who want more data. But many will face a whole other hurdle in fighting the American public’s covid burnout, said Freedman.

“People don’t want to hear about it anymore,” he said. “But if you look at the national statistics, we’re averaging around 400 deaths per day. We can pretend it’s not happening, but the wastewater and the deaths are telling us a different story.”

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Timely Mental Health Care Is a Key Factor in Strike by Kaiser Permanente Workers

[Editor’s note: KHN is not affiliated with Kaiser Permanente.]

A California law that took effect in July requires health plans to offer timely follow-up appointments for mental health and addiction patients. Whether that’s happening is a point of contention in an open-ended strike by Kaiser Permanente clinicians in Northern California who say staffing shortages saddle them with stifling workloads that make providing adequate care impossible.

KP says it is making every effort to staff up but has been hampered by a labor shortage. The therapists — and the National Union of Healthcare Workers, which represents them — counter that the managed-care giant has difficulty attracting clinicians because its mental health services have a poor reputation.

The dispute has erupted at a time when demand for mental health care is increasing. The share of adults in the United States with symptoms of depression and anxiety has nearly quadrupled during the covid-19 pandemic.

The new law requires health plans regulated by the state to provide return appointments no more than 10 days after a previous mental health or substance use session — unless a patient’s therapist approves less frequent visits.

The bill, which was sponsored by the union, was signed by Gov. Gavin Newsom in October and included a grace period for health plans to comply.

Kaiser Permanente has not complied, said Sal Rosselli, president of the health care workers union, which represents more than 2,000 KP mental health clinicians in Northern California and 4,000 statewide. “In fact, it’s getting worse,” he said. “Thousands of people are not getting access to the care that clinicians say they need.”

The union and its members said patients often must wait as much as two months for follow-up appointments.

Kaiser Permanente said in an online statement that the HMO’s compliance with the new law “is well underway.”

KP has bolstered its mental health care capacity by adding nearly 200 clinicians since January 2021, expanding virtual appointments, and offering more mental health services through its primary care providers, said Deb Catsavas, senior vice president of human resources in KP’s Northern California division. In addition, she said, KP has launched a $500,000 recruitment campaign and is investing $30 million to “build a pipeline for new, culturally diverse mental health professionals across California.”

But picketing clinicians, who started their strike Aug. 15, said they regularly encounter obstacles in their jobs because of what they described as persistent staffing shortages.

Alicia Moore, a KP psychologist in Vallejo who leads group therapy sessions in an intensive outpatient program, said her patients can have difficulty maintaining the progress they’ve made after the program finishes because they must wait for follow-up appointments. “Our program does a pretty good job of immediately helping folks in crisis, but then there’s no therapy appointments to discharge them to,” said Moore, who picketed Aug. 16 in front of KP’s Oakland Medical Center. “You search for an appointment, and it’s a couple of months out.”

Not only are therapists worn out, she said, but many potential new providers don’t want to work for KP. “We actually have a number of open positions in our clinic, but I think it’s very hard for Kaiser to fill positions when it is known by mental health care workers as a place where it’s really hard to do a good job because you just don’t have the appointments to offer patients,” Moore said.

The union said KP also has an attrition problem.

Mickey Fitzpatrick, a psychologist who worked at Kaiser Permanente for 11 years, said he resigned this year because he was unable to care for patients “in the way that we are trained in graduate school, in a way congruent with my passion for psychotherapy, in a way that is conducive to healing.”

The union argues that KP has the money to fix the problem if it wants to, noting that it posted $8.1 billion in net profit last year and sits on nearly $55 billion in cash and investments.

The two sides also disagree about how much time clinicians should get to handle patients’ cases outside therapy sessions.

Catsavas said the union is demanding that clinicians’ face time with patients be reduced to allow more time than KP is willing to provide for administrative tasks. This demand, she said, contradicts the union’s “own commitments to help improve access to mental health care.”

The union says clinicians need the time for tasks that are not administrative but are an integral part of care — such as communicating with parents, school officials, and social service agencies about patients who are minors and returning emails and phone calls from anxious adults whose next appointment might be six to eight weeks away.

The strike “will only reduce access to our care at a time of unprecedented demand,” Catsavas said. “Across the country, there are not enough mental health care professionals to meet the increased demand for care,” she said. “This has created challenges for Kaiser Permanente and mental health care providers everywhere.”

In an Aug. 15 statement, the California Department of Managed Health Care reminded KP that it must respect timely access and clinical standards even while clinicians are on the picket line. “The DMHC is closely monitoring Kaiser Permanente’s compliance with the law during the strike,” the statement said.

Agency spokesperson Rachel Arrezola said the state has received 10 complaints related to the new law so far — all against Kaiser Permanente.

Catsavas said that more than 30% of KP’s clinicians have continued to care for patients during the strike and that KP psychiatrists, clinical managers, and outside mental health providers have stepped in to help.

KP’s mental health woes date back many years. The organization was fined $4 million by the state in 2013 for failing to provide timely mental health treatment. It was cited twice after that for failure to resolve the problems and is currently being investigated by regulators, who saw a 20% increase in mental health complaints against KP last year.

Barbara McDonald, of Emeryville, said she tried to get help at KP for her 19-year-old daughter, who was engaging in self-destructive behavior. Numerous attempts with Kaiser Permanente in the past couple of years failed to get her daughter the help she needed, and McDonald said she ended up spending tens of thousands of dollars to get her diagnosed and treated elsewhere. She has bipolar and borderline personality disorders, as well as attention-deficit/hyperactivity disorder, McDonald said.

McDonald said that at one point, her daughter cut her own throat and ended up in a KP hospital for three days.

“The irony is that when you let mental health issues go untreated, it ends up being physical issues as well,” she said. “You can’t tell me that having my daughter in the hospital for three days costs less than regular therapy.”

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

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Haunted for 13 Years by Debt From Childbirth, Then Rescued by a Nonprofit

“Every day was tough. Every day, I’m thinking about what I owe, how am I going to get out of this? Tough.”
Terri Logan

Terri Logan, 42, Spartanburg, South Carolina

Approximate Medical Debt: $1,400, now $0

Medical Issue: Premature childbirth

What Happened: Two months ahead of her due date with her second daughter, Terri Logan felt weighed down by stress. She was a high school math teacher in Union City, Georgia, and was ending her relationship with the baby’s father.

One day the baby stopped moving. Logan went to the hospital, where her blood pressure spiked, her head throbbed, and she blacked out. Hours later, her daughter was born by cesarean section, weighing only 3 pounds. Logan had health insurance through work, but she was responsible for out-of-pocket charges. She and her baby were in a health crisis, so the issue of money didn’t come up: “That conversation just wasn’t had in that moment.”

About two weeks after her daughter was discharged, Logan was hit with a bill. She couldn’t bring herself to take a close look at the total. “It was one of those moments when you see … commas,” she said. She never opened the bills that arrived after that, knowing she couldn’t pay them or handle the stress. “I just avoided it like the plague.”

Other bills followed. Eventually, they were sent to collections.

The debt piled on to other stressors for the single mom. She developed debilitating anxiety, which brought on more headaches. She had to give up her full-time teaching job. “The weight of all of that medical debt — oh, man, it was tough,” she said. “Every day was tough. Every day, I’m thinking about what I owe, how am I going to get out of this.”

What’s Broken: Logan is among a growing number of working people who are considered under-insured; that is, they have an employer-sponsored plan but it pushes a lot of costs — in the form of copays, coinsurance, and deductibles — onto the patient.

This cost sharing, as it’s called, has increased steadily over the past two decades. Last year, the average annual deductible for a single worker with job-based coverage topped $1,669, which is 68% higher than a decade ago, according to an annual employer survey by KFF. Family deductibles can top $10,000.

At the same time, millions of Americans have next to no savings. A nationwide poll conducted by KFF for this project found that half of U.S. adults don’t have the cash to cover an unexpected $500 health care bill.

That makes debt almost inevitable for anyone with a large expense like the birth of a child, even if they have health insurance. Indeed, most Americans who have medical debt had coverage, according to the KFF poll.

With her older daughter, Logan said, she never saw a bill. It was an uncomplicated birth with no out-of-pocket charges. So she assumed her insurance would provide similar coverage for the second birth.

What’s Left: Nearly 13 years after her second daughter’s birth, Logan received yellow envelopes by mail and braced herself to open them. She was finally able to work again, whenever her health permitted. It was time to start tackling the problem that had dogged her.

As she put it: “It was like, ‘OK, even if you can’t pay it, you need to know who you owe. At some point, you gotta start, because you gotta take care of this to get into a better situation.’”

To her surprise, the envelopes did not contain bills, but rather a notice from RIP Medical Debt, a nonprofit, saying it had bought her unpaid medical debts and forgiven them on her behalf. She was shocked: “Wait: What? Who does that?”

Logan reread the letter and cried, absorbing the unexpected gift. “It definitely gives you a sense of, ‘You know what? There’s still good in this world,’” she said.

RIP Medical Debt uses donated funds to buy unpaid medical debt, directly from hospitals or on the secondary market, for about 1% of the original value. It selects unpaid bills held by lower-income patients — those making up to four times the federal poverty level — and instead of trying to collect on those loans, simply forgives them.

Through the pandemic, donations have skyrocketed, enabling the group to accelerate its purchase of hospital debts. To date, it has forgiven $6.7 billion in medical debt, helping 3.6 million people.

The lifting of her own debt burden, Logan said, has freed her to pursue long-dormant interests. A lover of the stage, she planned her first singing performance this month.

About This Project

“Diagnosis: Debt” is a reporting partnership between KHN and NPR exploring the scale, impact, and causes of medical debt in America.

The series draws on the “KFF Health Care Debt Survey,” a poll designed and analyzed by public opinion researchers at KFF in collaboration with KHN journalists and editors. The survey was conducted Feb. 25 through March 20, 2022, online and via telephone, in English and Spanish, among a nationally representative sample of 2,375 U.S. adults, including 1,292 adults with current health care debt and 382 adults who had health care debt in the past five years. The margin of sampling error is plus or minus 3 percentage points for the full sample and 3 percentage points for those with current debt. For results based on subgroups, the margin of sampling error may be higher.

Additional research was conducted by the Urban Institute, which analyzed credit bureau and other demographic data on poverty, race, and health status to explore where medical debt is concentrated in the U.S. and what factors are associated with high debt levels.

The JPMorgan Chase Institute analyzed records from a sampling of Chase credit card holders to look at how customers’ balances may be affected by major medical expenses.

Reporters from KHN and NPR also conducted hundreds of interviews with patients across the country; spoke with physicians, health industry leaders, consumer advocates, debt lawyers, and researchers; and reviewed scores of studies and surveys about medical debt.

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Sleepless Nights Over Her Children’s Future as Debts Pile Up

“My doctor saved my life, but my medical bills are stealing from my children’s lives.”
Jeni Rae Peters

Jeni Rae Peters, 44, Rapid City, South Dakota

Approximate Medical Debt: More than $30,000

Medical Issue: Breast cancer

What Happened: Jeni Rae Peters’ budget has always been tight. But Peters, a single mom and mental health counselor, has worked to provide opportunities for her children, including two girls she adopted and a succession of foster children. One of her daughters had been homeless.

Then two years ago, Peters was diagnosed with stage 2 breast cancer.

Multiple surgeries, radiation, and chemotherapy controlled the disease. But, despite having insurance, Peters was left with more than $30,000 of debt and mounting threats from bill collectors.

One collection call came as Peters was lying in the recovery room after her double mastectomy. “I was kind of delirious, and I thought it was my kids,” she said. “It was someone asking me to pay a medical bill.”

Through the surgeries and treatments, Peters kept working so she would not lose her insurance. She took on extra work to pay some of the bills. Five days a week, she works back-to-back shifts at both a mental health crisis center and a clinic where she counsels teenagers, some of whom are suicidal. Last year, three friends on the East Coast paid off some of the debt.

But Peters’ credit score has tumbled below 600. And she worries constantly about how she will provide for her children.

Peters said she could drop car insurance for her teenage daughter, who just got her license. Canceling ice skating for another daughter would yield an extra $60 a month. But Peters is reluctant. “Do you know what it feels like to be a foster kid and get a gold medal in ice skating? Do you know what kind of citizen they could become if they know they’re special?” she said.

Peters added: “My doctor saved my life, but my medical bills are stealing from my children’s lives.”

What’s Broken: Despite many advances in cancer treatments, millions of Americans end up in debt after being diagnosed with the disease.

That’s in part because medications and treatments are now so expensive. It’s also because health plans typically require patients to pay thousands of dollars out-of-pocket in deductibles and other cost sharing.

One study found that cancer patients were 71% more likely than Americans without the disease to have bills in collections or to have a credit account closed for nonpayment.

The debt forces many to make difficult sacrifices. Two-thirds of U.S. adults who’ve incurred health care debt who’ve had cancer themselves or in their family have cut spending on food, clothing, or other household basics, according to a poll conducted by KFF for this project. One in 4 have declared bankruptcy or lost their home.

The financial stress from debt can hinder cancer patients’ recovery and even hasten death, researchers have found.

What’s Left: Peters’ cancer is in remission, and her health has improved. She said she’s excited about adopting two more of her foster children.

But the threats from debt collectors keep coming. She recently received a new collection notice for $13,000, warning her that she would soon face legal action.

Peters said she has no way of paying off all her debts. She recently told one bill collector that she was prepared to go to court and ask the judge to decide which of her children should miss out on after-school activities to pay off debt.

She asked another debt collector whether he had kids. “He told me that it had been my choice to get the surgery,” Peters recalled. “And I said, ‘Yeah, I guess I chose not to be dead.’”

About This Project

“Diagnosis: Debt” is a reporting partnership between KHN and NPR exploring the scale, impact, and causes of medical debt in America.

The JPMorgan Chase Institute analyzed records from a sampling of Chase credit card holders to look at how customers’ balances may be affected by major medical expenses.

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Her Brother Landed in a Nursing Home. She Was Sued Over His Bill.

“I thought this was crazy.”
Lucille Brooks

Lucille Brooks, 74, Pittsford, New York

Approximate Medical Debt: $8,000

Medical Issue: None. She was billed for her brother’s care.

What Happened: Lucille Brooks was stunned to discover a nursing home in Monroe County, New York, was suing her. She had never been a patient there. Nor had her husband. “I thought this was crazy,” she said, figuring it had to be a mistake.

The bill was for care her brother, James Lawson, received in summer 2019. He’d been hospitalized for complications from a diabetes medication. The hospital released him to the county-run nursing home, where Brooks had visited him a few times. No one ever talked to her about billing, she said. And she was never asked to sign anything.

Brooks and Lawson were part of a big family that moved north from Mississippi to escape segregation in the 1960s. Lawson had a career at the Rochester Parks and Recreation Department. Brooks worked in insurance. They lived on opposite sides of the city. “My brother always took care of his own business,” she said.

Lawson spent two months in the nursing home. A year later, Brooks was sued.

The county alleged that Brooks should have used her brother’s assets to pay his bills and that she was therefore personally responsible for his debt. Attached to the suit was an admissions agreement with what looked like Brooks’ signature.

What’s Broken: Admissions agreements often designate whoever signs as a “responsible party” who will help the nursing home collect payments or enroll the resident in Medicaid, the government safety-net program.

Consumer advocates say nursing homes slip the agreements into papers that family members sign when an older parent or sick friend is admitted. Sometimes people are told they must sign, a violation of federal law. “They are given a stack of forms and told, ‘Sign here, sign there. Click here, click there,” said Miriam Sheline, managing attorney at Pro Seniors, a nonprofit law firm in Cincinnati.

Litigation is a frequent byproduct of America’s medical debt crisis, which a KHN-NPR investigation found has touched more than half of all U.S. adults in the past five years.

About 1 in 7 adults who have had health care debt say they’ve been threatened with a lawsuit or arrest, according to a nationwide KFF poll. Five percent say they’ve been sued.

The nursing home industry has quietly developed what consumer attorneys and patient advocates say is a pernicious strategy of pursuing family and friends of patients despite federal law that was enacted to protect them from debt collection.

In Monroe County, 24 federal licensed nursing homes filed 238 debt collections cases from 2018 to 2021 seeking almost $7.6 million, KHN found. Nearly two-thirds of the cases targeted a friend or relative.

Many were accused — often without documentation — of hiding residents’ assets. The practice can intimidate people with means into paying debts they do not owe, said Anna Anderson, an attorney at the nonprofit Legal Assistance of Western New York. “People see that on a lawsuit and they think they’re being accused of stealing,” she said. “It’s chilling.”

What’s Left: When the bill came, Brooks was so worried that she didn’t tell her husband. “People like us live on a fixed income,” she said. “We don’t have money to throw around, especially when you don’t see it coming.”

Brooks turned to Legal Assistance of Western New York, a nonprofit, which has represented defendants in such cases. In time, Monroe County dropped its case against her. Brooks said she thinks the signature on the admissions agreement was forged from the nursing home’s visitor log, the only thing she signed.

Now she tells anyone with a friend or relative in a nursing home not to sign anything. “It’s ridiculous,” she said. “But why would you ever think they would be coming after you?”

About This Project

“Diagnosis: Debt” is a reporting partnership between KHN and NPR exploring the scale, impact, and causes of medical debt in America.

The JPMorgan Chase Institute analyzed records from a sampling of Chase credit card holders to look at how customers’ balances may be affected by major medical expenses.

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from Health Industry – Kaiser Health News

After Wiping Out $6.7 Billion in Medical Debt, This Nonprofit Is Just Getting Started

Soon after giving birth to a daughter two months premature, Terri Logan received a bill from the hospital. She recoiled from the string of numbers separated by commas.

Logan, who was a high school math teacher in Georgia, shoved it aside and ignored subsequent bills. She was a single mom who knew she had no way to pay. “I avoided it like the plague,” she said, but avoidance didn’t keep the bills out of mind.

“The weight of all of that medical debt — oh man, it was tough,” Logan said. “Every day, I’m thinking about what I owe, how I’m going to get out of this … especially with the money coming in just not being enough.”

Then a few months ago — nearly 13 years after her daughter’s birth and many anxiety attacks later — Logan received some bright yellow envelopes in the mail. They were from a nonprofit group telling her it had bought and then forgiven all those past medical bills.

This time, it was a very different kind of surprise: “Wait, what? Who does that?”

RIP Medical Debt does. The nonprofit has boomed during the covid-19 pandemic, freeing patients of medical debt, thousands of people at a time. Its novel approach involves buying bundles of delinquent hospital bills — debts incurred by low-income patients like Logan — and then simply erasing the obligation to repay them.

It’s a model developed by two former debt collectors, Craig Antico and Jerry Ashton, who built their careers chasing down patients who couldn’t afford their bills.

“They would have conversations with people on the phone, and they would understand and have better insights into the struggles people were challenged with,” said Allison Sesso, RIP’s CEO. Eventually, they realized they were in a unique position to help people and switched gears from debt collection to philanthropy.

What triggered the change of heart for Ashton was meeting activists from the Occupy Wall Street movement in 2011 who talked to him about how to help relieve Americans’ debt burden. “As a bill collector collecting millions of dollars in medical-associated bills in my career, now all of a sudden I’m reformed: I’m a predatory giver,” Ashton said in a video by Freethink, a new media journalism site.

After helping Occupy Wall Street activists buy debt for a few years, Antico and Ashton launched RIP Medical Debt in 2014. They started raising money from donors to buy up debt on secondary markets — where hospitals sell debt for pennies on the dollar to companies that profit when they collect on that debt.

RIP buys the debts just like any other collection company would — except instead of trying to profit, it sends out notices to consumers saying their debt has been cleared. To date, RIP has purchased $6.7 billion in unpaid debt and relieved 3.6 million people of debt. The group says retiring $100 in debt costs an average of $1.

RIP bestows its blessings randomly. Sesso said it just depends on which hospitals’ debts are available for purchase. “So nobody can come to us, raise their hand, and say, ‘I’d like you to relieve my debt,’” she said.

Yet RIP is expanding the pool of those eligible for relief. Sesso said that with inflation and job losses stressing more families, the group now buys delinquent debt for those who make as much as four times the federal poverty level, up from twice the poverty level.

A surge in recent donations — from college students to philanthropist MacKenzie Scott, who gave $50 million in late 2020 — is fueling RIP’s expansion. That money enabled RIP to hire staff and develop software to comb through databases and identify targeted debt faster.

New regulations allow RIP to buy loans directly from hospitals, instead of just on the secondary market, expanding its access to the debt.

Sesso said the group is constantly looking for new debt to buy from hospitals: “Call us! We want to talk to every hospital that’s interested in retiring debt.”

Sesso emphasized that RIP’s growing business is nothing to celebrate. It means that millions of people have fallen victim to a U.S. insurance and health care system that’s simply too expensive and too complex for most people to navigate. As KHN and NPR have reported, more than half of U.S. adults say they’ve gone into debt in the past five years because of medical or dental bills, according to a KFF poll. A quarter of adults with health care debt owe more than $5,000. And about 1 in 5 with any amount of debt say they don’t expect to ever pay it off.

RIP is one of the only ways patients can get immediate relief from such debt, said Jim Branscome, a major donor. Policy change is slow. Numerous factors contribute to medical debt, he said, and many are difficult to address: rising hospital and drug prices, high out-of-pocket costs, less generous insurance coverage, and widening racial inequalities in medical debt. The pandemic, Branscome added, exacerbated all of that.

The “pandemic has made it simply much more difficult for people running up incredible medical bills that aren’t covered,” Branscome said. He is a longtime advocate for the poor in Appalachia, where he grew up and where he says chronic disease makes medical debt much worse. It undermines the point of care in the first place, he said: “There’s pressure and despair.”

For Terri Logan, the former math teacher, her outstanding medical bills added to a host of other pressures in her life, which then turned into debilitating anxiety and depression. Now a single mother of two, she described the strain of living with debt hanging over her head. She had panic attacks, including “pain that shoots up the left side of your body and makes you feel like you’re about to have an aneurysm and you’re going to pass out,” she recalled.

Some hospitals say they want to alleviate that destructive cycle for their patients. Heywood Healthcare system in Massachusetts donated $800,000 of medical debt to RIP in January, essentially turning over control of that debt, in part because patients with outstanding bills were avoiding treatment.

“We wanted to eliminate at least one stressor of avoidance to get people in the doors to get the care that they need,” said Dawn Casavant, chief of philanthropy at Heywood. Plus, she said, “it’s likely that that debt would not have been collected anyway.”

One criticism of RIP’s approach has been that it isn’t preventive: The group swoops in after what can be years of financial stress and wrecked credit scores that have damaged patients’ chances of renting apartments or securing car loans. (The three major credit rating agencies recently announced changes to the way they will report medical debt, reducing its harm to credit scores to some extent. However, consumers often take out second mortgages or credit cards to pay for medical services.)

“A lot of damage will have been done by the time they come in to relieve that debt,” said Mark Rukavina, a program director for Community Catalyst, a consumer advocacy group.

Rukavina said state laws should force hospitals to make better use of their financial assistance programs to help patients. “Hospitals shouldn’t have to be paid,” he said. “Basically: Don’t reward bad behavior.”

Most hospitals in the country are nonprofit and in exchange for that tax status are required to offer community benefit programs, including what’s often called “charity care.” Depending on the hospital, these programs cut costs for patients who earn as much as two to three times the federal poverty level. But many eligible patients never find out about charity care — or aren’t told. They are billed full freight and then hounded by collection agencies when they don’t pay.

Recently, RIP started trying to change that, too.

RIP CEO Sesso said the group is advising hospitals on how to improve their internal financial systems so they better screen patients eligible for charity care — in essence, preventing people from incurring debt in the first place. Ultimately, that’s a far better outcome, she said.

“We prefer the hospitals reduce the need for our work at the back end,” she said. “I would say hospitals are open to feedback, but they also are a little bit blind to just how poorly some of their financial assistance approaches are working out.”

Terri Logan said no one mentioned charity care or financial assistance programs to her when she gave birth. Nor did Logan realize help existed for people like her, people with jobs and health insurance but who earn just enough money not to qualify for support like food stamps.

The debt shadowed her, darkening her spirits. “I don’t know; I just lost my mojo,” she said. “But I’m kinda finding it,” she added. Logan’s newfound freedom from medical debt is reviving a long-dormant dream to sing on stage.

Her first performance is scheduled for this summer.

About This Project

“Diagnosis: Debt” is a reporting partnership between KHN and NPR exploring the scale, impact, and causes of medical debt in America.

The JPMorgan Chase Institute analyzed records from a sampling of Chase credit card holders to look at how customers’ balances may be affected by major medical expenses.

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from Health Industry – Kaiser Health News

Buy and Bust: Collapse of Private Equity-Backed Rural Hospitals Mired Employees in Medical Bills

The first unexpected bill arrived in December, just weeks before Tara Lovell’s husband of 40 years died from bladder cancer.

Lovell worked as an ultrasound technologist at the local Audrain Community Hospital, in Mexico, Missouri, and was paying more than $400 a month for health insurance through her job. The town’s struggling hospital, the sole health care provider and major employer, had changed ownership in recent years, selling in March 2021 to Noble Health, a private equity-backed startup whose managers had never run a hospital.

One year later, facing staggering debt and a pile of lawsuits, Noble closed the hospital and another one it owned in neighboring Callaway County. It is now the focus of at least two federal investigations.

As the hospitals collapsed, Lovell and the facilities’ doctors, nurses, and patients saw evidence that the new owners were skimping on services — failing to pay for and stock surgical supplies and drugs. For example, in Callaway, state inspectors deemed conditions in the hospital to be endangering patients. What was less apparent, former workers said, was that Noble had also stopped paying for employee health, dental, vision, and life insurance benefits. They were unknowingly uninsured.

Lovell and others said they realized — after comparing notes about canceled dental appointments, out-of-pocket costs for glasses, and surprise bills — that Noble had taken money from their paychecks for benefits but failed to pay for coverage.

Lovell took time off to care for her husband in June 2021 and requested full-time leave in August. She retired Dec. 31, 2021, but paid Noble for insurance until March 2022.

“None of us knew until it was too late,” Lovell said. She said she faces $250,000 to $300,000 in medical bills from the last months of her husband’s life. “All they had to do was tell us that we didn’t have insurance.”

The U.S. Department of Labor’s Employee Benefits Security Administration, after receiving complaints from Lovell and other employees about surprise medical bills and the loss of life insurance benefits, launched an investigation in early March, according to a DOL letter sent to the company and obtained by KHN. Scott Allen, an agency spokesperson, declined to comment or confirm the investigation.

The agency confirmed a second investigation by a different division, Wage and Hour, into Noble’s management of its Audrain hospital and clinic. DOL spokesperson Edwin Nieves did not offer details because “it could jeopardize an investigation.” The inquiries could take more than a year and could result in penalties and payment of back benefits and wages, as required by federal law. The cases could also be referred to the U.S. Justice Department for criminal inquiries.

Noble closed the hospitals in late March, citing on social media “a technology issue” and a need to “restructure their operations.” Interviews with former employees and a KHN review of Noble documents and internal communications offer a portrait of a business in a free fall. Employees were shorted their pay and benefits. Vendors sued over more than $4 million in unpaid bills, lawsuits show. And as its crisis deepened, Noble borrowed nearly $10 million in risky loans with interest rates from 25% to 50%, according to former employees with knowledge of the company’s finances.

No Noble executive responded to requests for interviews or to specific questions.

Why Noble was in such dire straits is unclear: The company, which acquired both hospitals during the pandemic, accepted nearly $20 million in federal covid-19 relief funds, including $4.8 million from paycheck protection programs, according to public records.

On April 20, Noble sold both hospitals — for $2 — to Texas-based Platinum Neighbors, which assumed all liabilities, according to the sales agreement. The day before, Platinum Health Systems President Cory Countryman, in a sharp blue suit, promised to do right by employees as they gathered in the Audrain hospital cafeteria, most wearing jeans and sneakers, according to a video shared with KHN.

“Several things are going to be on the priority list for us. Get everybody paid up to where they should be. That’s you guys,” Countryman said. He also said the company would reopen the hospitals. Months later, neither has happened.

Countryman did not respond to a reporter’s questions for this article.

Amy O’Brien, chief executive of the Audrain hospital, said “the doctors and staff are hanging in here with us and really fighting for the community and the patients they serve.” Platinum hopes to open Audrain in September, O’Brien said. She declined to comment on Callaway.

Rural hospital closures are not unusual — 140 have failed nationwide since 2010. Most often, they slowly fade away because payments for the typical patient base — people who are uninsured or covered by low-paying government programs — can no longer sustain modern care.

But Lovell said Noble’s methods felt particularly “evil.” At 64 years old, she lost her husband and left her job. Now Lovell fears the unpaid medical bills will jeopardize her financial security: “I can’t believe they would do this to human beings.”

‘Where Did All the Money Go?’

Noble’s finances were buckling by the time Lovell and others said they realized they were uninsured.

Noble was launched in late 2019 by venture capital and private-equity firm Nueterra Capital. Nueterra bought the Callaway County hospital in 2014 before handing over management to Noble in December 2019. Noble later bought Callaway Community Hospital and then Audrain. Nueterra and Noble shared office space in Leawood, a suburb south of Kansas City, Kansas, according to former employees and public records.

A Missouri state filing lists Noble’s directors as Nueterra Chairman Daniel Tasset and Donald R. Peterson. Its executives included Tom Carter and, eventually, William A. “Drew” Solomon. In a March email to KHN, Peterson said they created the company to “save a rural hospital that was about to close.”

Tasset didn’t respond to requests for comment, and Peterson said he was unavailable for an interview.

Although the Centers for Medicare & Medicaid Services vets such purchases, these seemed less-than-ideal buyers: None had experience running a hospital, and Peterson had been accused of Medicare fraud. Peterson settled that case without admitting wrongdoing and agreed to be excluded for five years from Medicare, Medicaid, and all other federal health care programs, according to the U.S. Health and Human Services Department’s Office of Inspector General.

More than a dozen lawsuits were filed in Missouri courts alleging that Noble owed money to vendors and contractors that provided services including nursing, landscaping, food, and covid testing. In nearly half, judgments have been entered against Noble, many of them for “failing to appear.”

Shortly after Noble took over the Audrain hospital, Kristy Melton, the facility’s blood bank supervisor, received an email from its blood supplier saying it hadn’t been paid for several months. Patient care deteriorated: The Callaway hospital was considered so “at risk” that state health department inspectors removed its patients.

Melton, 63, had worked at the Audrain hospital for nearly 25 years. As of July, neither Noble nor Platinum had fully paid her wages, she said. Melton and others are relying on unemployment benefits, she said, adding that hers are set to end in September.

In late June, Platinum requested that Missouri officials extend a deadline to reopen the hospitals to September.

Whether Platinum, a private company, realized the extent of the liabilities, or debt, it accepted when purchasing Noble is unclear.

One former high-level Noble employee, who spoke on the condition of anonymity because of fear of litigation, estimated that Noble’s debt totaled $45 million to $50 million, including what was owed to vendors and on more than a dozen high-interest loans from multiple lenders.

Noble acquired its first high-interest loan in August 2021, the employee said, and received the final one — at 48% interest — the month before the hospitals closed.

“Where did all the money go for the taxes and benefits?” the employee said in an interview. “I’d get a forensic auditor in there.”

One lender, Itria Ventures, which offers financing to businesses, is a subsidiary of Biz2Credit, a New York-based online lender. In a lawsuit filed in April, Itria alleges that Noble failed to pay on three loans it took out in January 2022.

Itria’s agreements work much the same way as payday loans do: Noble borrowed nearly $2 million, with interest rates of 25%, promising to pay it off within seven months. Itria expected weekly installments of $67,000. Noble stopped paying in early March, according to the lawsuit. Noble has not responded to Itria’s claims, but court records show it has asked for more time to do so.

‘I Didn’t Have Real Insurance’

In early April, Noble Health emailed employees, saying “we can’t tell you how sorry we are that you’re in this situation” and assuring them that their medical, dental, and vision coverage would remain in place “at least through April 30, 2022.”

By then, hospital workers knew better. Radiology technician Jana Wolthuis had taken screenshots showing that her dental and vision coverage was “terminated as of 1/31/2022.” Later, the insurer would ask Wolthuis to help claw back $240.40 it “overpaid” the dentist.

The blood bank’s Melton was calling the insurer before every appointment. She had already paid more than $1,400 for dental bills that weren’t covered. “I was extremely gun-shy,” she said, noting that she had an insurance card but “I didn’t have real insurance.”

In March 2022, the Health Cooperative of Missouri, which had been hired in January as Noble’s insurance broker, detailed the missing payments to Noble’s leadership team in a presentation. As of March 16, Noble owed more than $307,000 in outstanding premiums to Principal, Humana, HealthEZ, and the Hartford.

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Contributed to DocumentCloud by Sarah Jane Tribble (Kaiser Health News) • View document or read text

“Over the past 11 weeks all of the employee benefits plans have been terminated or have had potential termination for lack of payment,” the presentation deck stated, adding that Noble was the broker’s only client that did not have an automatic electronic withdrawal.

This had come up earlier, too. In 2021, Meritain administered Noble’s self-insured benefits plan, which meant it was paid a fee to process claims for hospital employees’ medical, dental, and vision insurance. Noble was supposed to pay the fee and fund the plan.

Peterson, Noble’s executive chairman, had not approved the automatic bank withdrawals for Meritain’s administration fees, according to a Noble email shared with KHN. When sent forms to set up electronic withdrawals, the email shows, Peterson passed the message on to others, writing: “I hope you guys are handling this. — Don.”

The email showed Meritain could not access funds to pay its fees for Audrain hospital since Noble bought it in March 2021. Callaway fees had not been paid in July and August 2021.

Noble’s Meritain account appears to be a focus of the Labor Department’s employee benefit investigation, according to the March 2 letter sent to Solomon. Federal investigator Casey Branning requested documents and interviews with Noble leaders and indicated the agency would examine the Noble People Employee Benefit Plan, the company’s human resource subsidiary. Solomon could not be reached for comment.

The investigator’s eight-page letter asked for agreements, payroll records, and more. One bulleted item: copies of payments to Meritain. Another was for “any and all correspondence with employees regarding the Plan and any failure to fund claims.”

Tara Lovell’s husband, Donald, the cancer patient, was not the only former employee or family member to suffer:

The family of Michael Batty, 63, a hospital janitor who had an aortic aneurysm at work in January 2022, said they had no idea his life insurance had been terminated for nonpayment. His daughter, Stephanie Hinnah, was the beneficiary of the policy — with an expected payout of $60,000. She was initially told she wouldn’t get a cent because the policy had lapsed before her father’s death.

Hinnah, who endured months of stress, said her father would not have wanted to leave his daughter in debt. Unfortunately, she said, “my dad doesn’t really have a voice to speak about it.”

To pay for her father’s cremation, Hinnah raised $700 by selling Batty’s belongings in a garage sale. She said she owed the funeral home about $8,000. She filed an appeal to the Hartford, and months passed. In late July, after KHN contacted the Hartford, a spokesperson, Suzanne Barlyn, told KHN that “after further review” the insurer would pay the benefits.

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Journalists Scrutinize Retail Giants’ Push Into Health Care and Government’s HIV Surveillance

On Aug. 5, KHN chief Washington correspondent Julie Rovner discussed CVS Pharmacy’s plan to offer more primary care services and Amazon’s offering to buy One Medical on Peacock/NBC’s “NOW Tonight With Joshua Johnson.” She also discussed the Kansas ballot measure, rejected by voters, that would have stripped abortion rights from the state constitution on WAMU/NPR’s “1A” on Aug. 5.

Click here to watch Rovner on “NOW Tonight with Joshua Johnson” (starts at 35:20)
Click here to hear to Rovner on “1A”

KHN correspondent Sam Whitehead discussed the potential harm of genetic HIV surveillance by the government on NPR’s “All Things Considered” on Aug. 4.

Click here to hear Whitehead on “All Things Considered”
Read Whitehead’s “Critics Worry Government Surveillance of HIV May Hurt More Than It Helps”

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Big Pharma Went All In to Kill Drug Pricing Negotiations

For decades, the drug industry has yelled bloody murder each time Congress considered a regulatory measure that threatened its profits. But the hyperbole reached a new pitch in recent weeks as the Senate moved to adopt modest drug pricing negotiation measures in the Inflation Reduction Act.

The bill “could propel us light-years back into the dark ages of biomedical research,” Dr. Michelle McMurry-Heath, president of the Biotechnology Innovation Organization, said last month. Venture capitalists and other opponents of the bill said that it “immediately will halt private funding of drug discovery and development.”

Steve Ubl, leader of the ubiquitous Pharmaceutical Research and Manufacturers of America, or PhRMA, called the bill’s Senate passage on Aug. 7 a “tragic loss for patients.” He threatened in an interview with Politico to make politicians suffer if they voted for the measure, adding that “few associations have all the tools of modern political advocacy at their disposal in the way that PhRMA does.”

In the past 12 months, PhRMA and closely allied groups spent at least $57 million — $19 million of it since July — on TV, cable, radio, and social media ads opposing price negotiations, according to monitoring by the advocacy group Patients for Affordable Drugs. PhRMA spent over $100 million this year to unleash a massive team of 1,500 lobbyists on Capitol Hill.

The final bill is weaker than earlier versions, which would have extended negotiations to more drugs and included private insurance plans. The bill would enable only Medicare to negotiate prices beginning in 2026, initially for just 10 drugs.

It would save the Centers for Medicare & Medicaid Services about $102 billion over a decade, the Congressional Budget Office estimates. In 2021 alone, the top U.S. pharmaceutical companies booked tens of billions of dollars in revenue: Johnson & Johnson ($94 billion), Pfizer ($81 billion), AbbVie ($56 billion), Merck & Co. ($49 billion), and Bristol Myers Squibb ($46 billion).

The bill authorizes hundreds of millions of dollars for CMS to create a drug negotiation program, setting in motion a system of cost-benefit evaluations like those used in Europe to guide price negotiations with the industry. Americans pay, on average, four times what many Europeans do — and sometimes far, far more — for the same drugs.

The bill does not affect the list prices companies charge for new drugs, which increased from a median price of $2,115 in 2008 to a staggering $180,007 in 2021, according to recent research.

The bill’s champions say that PhRMA’s gloomy prophecies are overblown, and that history is on their side.

“It’s complete bullshit and a scare tactic,” Andy Slavitt told KHN. As a leading federal health official in 2016, he tried to change part of a Medicare program that pays doctors a fixed 6% of the cost of a drug each time they administer it, creating an incentive to use the most expensive infusion drugs. PhRMA funded most of the loud campaign that defeated his efforts, Slavitt said.

Another scare tactic: The drug industry warns that any price negotiation will kill innovation. Such warnings “constitute the pharma response in literally every instance since 1906,” the year the first drug regulation agency was created, said Dr. Aaron Kesselheim, who leads the Program on Regulation, Therapeutics, and Law at Brigham and Women’s Hospital in Boston. And yet, he said, regulatory changes rarely choked out investment in new drugs.

For example, the drug industry bemoaned a bill to boost generic drugs sponsored by Rep. Henry Waxman (D-Calif.) in 1984. Yet while 50% of prescribed drugs were generics in 2000 — up from 15% in 1980 — approvals of important new drugs also soared during the period, Kesselheim noted. The threat of losing market share to generics, he said, may have induced manufacturers to invest in innovation.

In 1993, Thomas Copmann, then a PhRMA vice president, charged that President Bill Clinton’s Vaccines for Children program, which funded vaccinations for any kid whose parents couldn’t afford them, “would just kill innovation because the government would control the market.” Over the next 16 years, childhood vaccination rates climbed — from 72% to around 93% for polio vaccine, for example. Over the same period, new vaccines against hepatitis A and B, pneumonia, chickenpox, human papillomavirus, and rotavirus were added to the schedule.

The drug industry’s attacks on regulation have a rich and florid history. In the early 1900s, the Proprietary Association of America warned newspapers that their advertising revenue would dry up if the industry had to list its ingredients (mostly alcohol). The law passed in 1906, but newspapers — and the drug industry — survived it.

Sometimes the industry’s breast-beating is a negotiating tactic, one that has led to concessions from Congress and the federal government.

In the 1990s, when discussions began about requiring drug companies to pay user fees to have their drugs reviewed, the industry described the fees as a “tax on innovation.” Eventually, it agreed to pay the fees if the FDA set deadlines for the reviews. The resulting boost in FDA staffing levels ushered in an increase in drug approvals over the ensuing five years.

Yet “killing innovation” remains a go-to trope. Drug imports, efforts to rein in “pay-for-delay” agreements between brand and generic companies, investigations of price gouging by drugmakers — all, according to conservatives and pharmaceutical executives, “kill innovation.” Former House Speaker Newt Gingrich in 2009 said the same about the Affordable Care Act. A golden decade for new drugs followed, with FDA approvals increasing from 21 in 2010 to 50 in 2021.

Critics of the current bill argue that history and economic research show that drug investment will lag when markets shrink, which they say will be the case if price controls lead corporations to earn less money on their blockbuster drugs.

If Medicare negotiations cut into the profits of the biggest earners, investors in risky biotech companies, whose drugs rarely strike it rich, will shift some of their portfolios from pharmaceuticals into other sectors, said Craig Garthwaite, director of health care at Northwestern University’s Kellogg School of Management. “There’s a fair argument as to how much,” he said.

He noted that after Medicare’s drug program was created in 2003 — the drug industry initially opposed it — an increase in federal spending on medicines inspired pharmaceutical companies to spend more on drugs aimed at older people. “Once you invest in clinical trials, that money never comes back unless it’s in revenue for products sold,” he said.

The moribund antibiotics industry demonstrates how shrinking markets — hospitals and doctors intentionally limit the use of new drugs to reduce microbial resistance — lead to lower investment, Garthwaite said.

Yet some experts argue that Medicare drug pricing negotiations could hasten innovation if they steer companies away from drugs that modestly improve outcomes but can earn massive amounts of cash in the current system of unchecked prices.

In the cancer field, most investment is in drugs that provide incremental benefits at a high price, said Dr. Vincent Rajkumar, a Mayo Clinic oncologist. He was a principal investigator on two large trials testing Ninlaro (ixazomib), a pill for multiple myeloma that is very similar to the injected drug Velcade (bortezomib). While more convenient, Ninlaro is no more effective, he said, and it costs about eight times as much as generic bortezomib. A newer multiple myeloma drug, Xpovio (selinexor), keeps patients progression-free for about four additional months; it costs $22,000 a month.

Most new cancer drugs extend life for only a short time, said Rajkumar, who helped organize a 2015 letter signed by 118 oncologists that called for giving Medicare the power to bargain. If forced to negotiate, “maybe the companies would spend their research and development funds on something more meaningful,” he said.

In other high-income countries, drug price negotiations are the norm. “Right now, we are the odd man out,” Rajkumar said. “Are we really that brainy that we are right and everyone else is wrong? Are we really looking out for our public better than everyone else?”

Large patient groups such as the American Cancer Society, American Heart Association, and American Diabetes Association, all of which have significant drug industry support, stayed on the sidelines of the debate over the language in the drug price negotiation bill.

Some other patient groups, fearful that the industry will lose interest in drugs for smaller populations should prices decline, opposed the bill — and successfully won exceptions that would prevent Medicare from negotiating prices on drugs for rare diseases.

David Mitchell, a multiple myeloma patient who founded Patients for Affordable Drugs in 2017, said he’s sure the bill won’t discourage innovation — and his life may depend on it. The 68-year-old said he’s on a four-drug regimen but “cancer is very clever and finds a way to get around drugs.”

“The idea that taking a small bite out of pharma revenue is going to stop them from creating new drugs is bullshit,” he said.

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No, the Senate-Passed Reconciliation Bill Won’t Strip $300 Billion From Medicare

Senate Democrats’ reconciliation bill “will strip $300 billion from Medicare.”

Ad from the American Prosperity Alliance, posted July 19

As Senate Democrats raced to pass what could be their final piece of major legislation before the midterm elections, critics went to the airwaves to blast the proposal as hurting older Americans who rely on Medicare.

Here’s the narration of one ad, sponsored by a group called the American Prosperity Alliance:

“Higher gas prices, higher grocery bills, everything today is costing too much. Now, Congress is considering a bill that will strip $300 billion from Medicare, money older Americans rely on for their medicine, their treatments, their cures. We are all paying more today, but stripping $300 billion from Medicare? It’s simply too much. So call Congress and tell them to oppose [President Joe] Biden’s reckless spending package.”

The ad misleadingly paints what is more accurately characterized as nearly $300 billion in savings for consumers and taxpayers.

The American Prosperity Alliance maintains almost no online profile. Its website provides only a link to the ad, without any identifying information or pages beyond the homepage. When we asked a better-known group with a similar name, Americans for Prosperity, whether the American Prosperity Alliance was an affiliate, a spokesperson, Bill Riggs, said, “This is NOT our ad and we are not affiliated with this group.”

The ad echoes a theme seen in other attacks on the Democratic-backed proposal, including one “The Fact Checker” at The Washington Post gave three Pinocchios out of four in June, meaning it contains “significant factual error and/or obvious contradictions.” PolitiFact rated a similar ad False in July.

The Senate passed the bill, which includes major provisions on climate change and corporate taxation, on Aug. 7. The House is expected to approve the measure this week.

The problem with the ad’s $300 billion claim is it frames the spending decline as hurting older Americans insured under Medicare. That’s not so.

Rather, the $300 billion — technically, almost $288 billion, according to the latest Congressional Budget Office analysis — stems from a provision in the Democratic bill that would end the long-standing bar on Medicare from negotiating with drugmakers over the price of certain medicines. Not being able to negotiate prices has meant that Medicare — the pharmaceutical market’s biggest single buyer — could not leverage its weight to secure lower prices for taxpayers.

The bill is projected to reduce federal spending by almost $300 billion, but that would reflect government savings and not benefit cuts; Medicare recipients would receive the same amount of medicines.

“In reality, the bill’s prescription drug savings would save the federal government nearly $300 billion through 2031 without cutting benefits,” wrote the Committee for a Responsible Federal Budget, a group that favors deficit reduction and has been skeptical of many of Biden’s legislative efforts, citing their cost.

“Lowering Medicare costs is not the same as reducing benefits,” the committee wrote. “Quite the opposite — many measures to reduce costs for the government would reduce costs for individuals as well.”

After combining the drug-cost savings with the bill’s other health care provisions, Medicare beneficiaries would see decreases in premiums and out-of-pocket costs, including through a $2,000 annual cap on out-of-pocket costs, the committee projected. “In addition to saving the government nearly $300 billion, the [bill] would save American families nearly $300 billion more,” the committee has projected.

Steve Ellis, president of Taxpayers for Common Sense, another group that seeks to keep deficits low, told PolitiFact he agrees that the ad’s portrayal of the bill is problematic.

“Those are savings resulting mostly from the government negotiating prescription drug prices and limiting drug price increases to inflation,” Ellis said. “So rather than taking money out of Medicare, it is reducing Medicare costs.”

Our RulingThe American Prosperity Alliance said in an ad that the Senate Democrats’ reconciliation bill “will strip $300 billion from Medicare.”

The federal government would see its outlays reduced by about $300 billion as a result of a Medicare drug-price negotiation provision. However, that reduction wouldn’t represent cuts to Medicare beneficiaries. Rather, by leveraging Medicare’s market power, the government would be able to pay less to provide the same medicines.

We rate the statement False.

Sources

American Prosperity Alliance, ad, accessed Aug. 4, 2022

American Prosperity Alliance, homepage, accessed Aug. 5, 2022

Draft of H.R. 5376

Congressional Budget Office, “Estimated Budgetary Effects of H.R. 5376, the Inflation Reduction Act of 2022,” Aug. 3, 2022

Committee for a Responsible Federal Budget, “CBO Estimates Drug Savings for Reconciliation,” July 8, 2022

Committee for a Responsible Federal Budget, “IRA Would Lower Medicare Costs, NOT Cut Benefits,” Aug. 2, 2022

The Washington Post, “Democrats, Sinema Reach Deal on Inflation Reduction Act, After Key Changes to Tax Policies,” Aug. 4, 2022

The Washington Post Fact Checker, “Ad Targeting Manchin on Prescription Drugs Uses Misleading Math,” June 17, 2022

HuffPost, “Drugmakers Try to Scare Seniors in Last-Ditch Effort to Stop Democrats’ Economic Plan,” Aug. 5, 2022

PolitiFact, “Ad Targeting Manchin, AARP Misses on Medicare Drug Price Negotiations,” July 25, 2022

Email interview with Bill Riggs, spokesperson for Americans for Prosperity, Aug. 5, 2022

Email interview with Steve Ellis, president of Taxpayers for Common Sense, Aug. 5, 2022

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