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There is some debate as to how Medicaid funds should be spent. One core question is whether Medicaid funds should be restricted to medical care, or if they should be allowed to pay for activities that improve health and reduce the need for medical care. KFF Health News highlighted one study showing that patients who received "medically tailored meals for at least three months needed less medical care." Among the findings: "The Massachusetts researchers found that the meals — at a cost of $125 per person per week [about $3,250 for six months] — essentially paid for themselves. Patients with heart disease used about $10,000 less in healthcare services over six months, and patients with kidney disease used $12,000 less in healthcare. There were also savings for people with diabetes, depression, and anxiety." Yet, on the other side, are those who "believe federal health spending is too high and riddled with fraud. Sen. John Kennedy... , for example, has accused California of 'outrageous fraud' for using Medicaid dollars to fund housing and nutrition programs." The article notes that "Some companies have been accused of billing Medicaid for meals that were neither healthy nor nutritious, raising concerns about lax regulation of these programs."

It seems that in the best cases, "food as medicine" can lead to better outcomes and more savings. However, the possibility of fraud or even ineffective programs should not be ignored.

As hospitals buy up nearby practices, they exert more control over patients. KFF Health News profiled one patient who ended up paying roughly double of the initial estimate she was given because a hospital had bought her physician's practice and they mandated that her procedure be done in a surgery center. The hospital's mandate contradicts the guidelines of a relevant professional organization. The article notes that "while the stated purpose [of acquisitions in the healthcare industry] is generally greater efficiency, studies have shown that for patients the net result has been higher prices and no benefit, or worse health outcomes." Some might be surprised that "82% of physicians are employed by hospitals, other corporate entities (like insurers), or private equity firms," leaving a much smaller percentage of physicians who work in private practice.

Understandably, hospitals and health systems are trying to increase their revenues, similar to many businesses. However, these extra costs make the entire system more expensive (for example, higher insurance premiums). It would be interesting to know how much of growth in healthcare spending over the last ten years has been due to mergers and acquisitions.

Continuing in the theme of states trying to curb the rise of healthcare costs, there is an article on NPR about two changes that the state of Indiana has legislated. The first change is that employers can now negotiate directly with hospitals, who are obligated to offer prices "no more expensive than 2.6 times Medicare prices." In exchange, the healthcare providers get "more patients and faster payment." The second change is that by 2029, large nonprofit hospitals risk their non-profit status if their prices continue to be above a statewide average.

The first change imposes a price ceiling, which economists point out will distort the market. While 2.6 times Medicare prices might sound reasonable, many providers will not accept Medicare because the payment is too low. One interesting aspect of this change, however, is that it will likely encourage employers to build more direct relationships with providers, which might remove some administrative overhead.

The second change seems to be a significant deterrent for high prices. However, the details matter for how non-profit providers with high prices actually lose their status. Additionally, if these non-profit health systems end up as for-profit corporations, it is unclear whether the prices will simply resume their previous trajectory.

In an attempt to limit the growth in healthcare spending, California is considering fining "hospitals, medical groups, insurers, and others" if their services grow in cost above the state's targets (as reported by KFF Health News). Unsurprisingly, the hospital industry is fighting back with a lawsuit. California is not alone in trying to rein in costs: "Connecticut, Massachusetts, Oregon, and Rhode Island have also authorized the use of some type of financial penalty. The specifics of each vary widely, although so far no state has applied them."

Clearly, the rise in healthcare costs seems unsustainable. At the same time, fining organizations for rise in costs seems legally dubious. Instead, the state might be able to revoke non-profit status for institutions whose costs rise too quickly. At the very least, the state could be more aggressive in disallowing mergers. Potentially, the state could also affect patient volumes by encouraging patients to seek lower-cost providers.

KFF Health News reported on California's successful effort to bring its own branded insulin to market. "Seven months after the launch of its own low-cost insulin brand, state health officials said California has distributed more than 120,000 five-pen packs of insulin glargine priced at $55 each, significantly less than the $89 to $411 that the state says most popular brand names charge before any retail markups or consumer discounts."

The volume sounds low, potentially because "patient advocates said many people with diabetes aren't aware it's an option." It is also unclear how widespread insurance acceptance of this new option is, and how much the out-of-pocket cost differences are for patients with insurance. Nevertheless, it is at least symbolically meaningful that the state was able to establish this as an option for diabetic patients. It would be interesting to know how much the state has had to spend on this effort, and whether the investment will pay off in the long-term.