In OMB’s FY 2027 Proposed Budget, Healthcare is the Big Loser

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In OMB’s FY 2027 Proposed Budget, Healthcare is the Big Loser

In 1970 before there was ESPN Sports Center, there was ABC’s “Wide World of Sports” and its iconic montage opening featuring a disastrous ski jump attempt by Yugoslavia’s Vinko Bogataj and Jim Kay’s voice-over “the thrill of victory and agony of defeat.” It’s an apt framework for consideration of current affairs in the U.S. today and an appropriate juxtaposition for consideration the winners and losers in the White House Office of Management and Budget FY2027 released Friday.

  • Last week’s “Thrill of Victory” includes the recovery of Dude 14, the F-15E Strike Eagle pilot shot down over Iran Friday, the college basketball men’s and women’s’ Final 4 contests, the successful launch of Artemis II by NASA and, for some, the additional funding ($441 billion/+44% vs. FY 2026) for the Department of War in the President’s proposed budget.
  • And last week’s “Agony of Defeat” includes continued anxiety about the economy, especially fuel prices, growing concern the war in Iran begun February 28 might extend at a heavy cost in lives and money, and for health industry supporters, a $15 billion (-12% vs. FY 2026) cut to HHS and the 10-year, $911 billion Medicaid reduction in federal funding for Medicaid enacted in 2025 (HR1 The Big Beautiful Bill).

In its current form, this budget is unlikely to be enacted October 1, 2026: it’s best viewed as a signal from the White House about priorities it deems most important to the MAGA faithful in Congress, 28 state legislatures and 26 Governors’ offices controlled by Republicans. Though its explosive growth in of War Department funding to $1.5 trillion is eye-popping, cuts to healthcare are equally notable. Both are calculated bets as the mid-term election draws near (6 months) and clearly OMB is betting healthcare cuts will be acceptable to its base. Its view is based on three assumptions:

1- Healthcare cost cutting is necessary to fund other priorities important to its base. And there’s plenty of room for cuts in Medicaid, prescription drugs and hospitals because waste, fraud and abuse are rampant in all.

  • Medicaid: Medicaid is a state-controlled insurance program that covers 76 million U.S. women, children and low-income seniors primarily through private managed care plans that contract with states. In HR1, a mandatory work requirement was applied to able-bodied adult enrollees with the expectation enrollment will drop and state spending for Medicaid services will be less. But its enrollees are less inclined to vote than seniors in Medicare and its funding burden can be shifted to states.
  • Prescription Drugs: The White House asserts its “favored nation” pricing program will bring down drug costs but the combination of voluntary participation by drug companies and impenetrable patent protections in U.S. law neutralize hoped-for cost reductions. The administration wants to lower drug spending using its blunt instruments it already has: accelerated approvals, price transparency, pharmacy benefits manager restrictions et al. while encouraging states to go further through price controls, restrictive formularies and, in some, importation. In tandem, the administration sees CMMI modifications of alternative payment models (i.e. LEAD) as a means of introducing medication management and patient adherence in new chronic care pilots. Recognizing prescription drug prices are a concern to its base and all voters, the administration will use its arsenal of regulatory and political tools to amp-up support for increased state and federal pricing constraints without imposing price controls—a red line for conservatives.
  • Hospitals: Hospital consolidation is associated with higher prices and increased spending with offsetting community benefits debatable. Hospitals represent 43% of total U.S. health spending (31% inpatient and outpatient services, 12% employed physician services). In 4 of 5 U.S. markets, 2 hospital systems control hospital services. And hospital cost increases have kept pace with others in healthcare (+8.9% in 2024 vs. +8.1% for physician services and 7.9% for prescription drugs) but other household costs, wage increases and inflation. Lobbyists for hospitals have historically favored hospital-friendly legislation like the Affordable Care Act preferred by Democrats. The Trump administration sees site neutral payments, 340B reductions, expanded price transparency, limits on NFP system tax exemptions et al. and Medicaid cuts necessary curtailment of wasteful spending by hospitals. They believe voters agree.

Backdrop: Per the National Health Care Fraud Association, 10% of health spending ($560 billion) was spent fraudulently in 2024: the majority in the areas above.

2- The public is dissatisfied by the status quo and supports overhaul of the U.S. healthcare system to increase its affordability and improve its accessibility.

  • Consolidation: Through its Federal Trade Commission and Department of Justice, the White House has served notice it believes healthcare affordability and unreasonable costs are the result of hyper consolidation among hospitals, insurers, and key suppliers in the healthcare supply chain. It has appointed special commissions, task forces, and filed lawsuits to flex its muscle believing the industry has pursued vertical and horizontal consolidation for the purpose of reducing competition and creating monopolies. It shares this view with the majority of voters.
  • Corporatization: In tandem with consolidation, the White House asserts that Big Pharma, Big Insurer, and Big Hospital have taken advantage of the healthcare economy at the expense of local operators and mom and pop services. It presumes they’re run as corporate strongarms that access capital and leverage aggressive M&A muscle to drive out competitors and bolster their margins and executive bonuses. The administration treads lightly on corporate healthcare, seeking financial and political support while voicing populist concerns about Corporate Healthcare. Photo ops with CEOs is valued by the White House; corporatization is recognized as a necessary plus with a few exceptions.  By contrast, most voters see more harm than good. Thus, the administration courts corporate healthcare purposely and carefully.

Backdrop: Intellectually, the majority of voters understand healthcare is a business that requires capital to operate and margins to be sustainable. But many think most healthcare organizations put too much emphasis on short-term profit and inadequate attention on their mission and long-term performance.

3-The U.S. healthcare industry will be an engine for economic growth domestically and globally if regulated less and consumers play a more direct role.

  • The administration is resetting its trade policies in response to suspension of at-will tariff policies that dominated its first year. At home, it seeks improved market access for U.S. producers of healthcare goods and services. It will associate this effort with US GDP growth and expanded privatization in healthcare. And it will assert that expansion of global demand for U.S. healthcare products and services is the result of the administration’s monetary policy geared to innovation and growth. And it will play a more direct role in oversight of foreign-owned/controlled health products and services and impose limits of their use of U.S. data.
  • The administration also seeks to protect intellectual property owned by U.S. inventors and companies by increasing its policing at home and abroad. In this regard, the administration will play a more direct role in the application of AI-enabled solution providers and expedite technology-enabled interoperability.

Backdrop: U.S. healthcare is the world’s most expensive system, so protections against IP theft are important, but the administration’s legacy in healthcare will be technology-enabled platforms that enable scale, democratize science and shift the system’s decision-making (and financial risk) consumer self-care.

Final thought:

The U.S. healthcare system does not enjoy the confidence of the White House: its proposed FY27 budget illustrates its predisposition to say no to healthcare and yes to other pursuits. It bases its position on three assumptions geared to support from its conservative base.

This budget proposal clearly illustrates why state legislators and Governors will play a bigger role in its future at home and abroad. And it means consumer (voter) awareness and understanding on key issues will be key to the system’s future, lest it is remembered for the agony of its defeat than the thrill of its victory.

It’s March Madness for Hospitals

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It’s March Madness for Hospitals

Hospitals represent 31% of total health spending in the U.S. They directly employ 52% of the nation’s 1.1 million physicians and 44% of the 18 million in the healthcare workforce. Many operate ‘related’ businesses including insurance companies, nursing home and long-term care services, fitness facilities and some are investors in private equity funds and joint ventures pursuing innovations in care delivery and more,

“Hospital administration” was once a pursuit of civic-minded youth armed with MHA degrees and internship experiences. Today, it’s much more. It’s bigger, more complicated and more stressful. And,it finds itself in the spotlight while facing formidable headwinds as never before:

  • Medicaid cuts in One Beautiful Bill impacting finances in every hospital, especially in rural settings.
  • Higher operating costs for labor and prescription drugs (with Most Favored Nation pricing yielding little to date).
  • Growing disputes with corporate insurers over reimbursement rates, network adequacy and prior-authorization stipulations.
  • Increased demand and use of outpatient services as chronic conditions supplant acute episodes as drivers of utilization.
  • Increased attention to affordability (with healthcare a top concern along with housing, gas and groceries and hospital prices the biggest component).
  • Increased anxiety among physicians (many facing maturity-cliff pressures from their private equity owners).
  • Higher costs for capital (debt) to fund technology, facility and programmatic initiatives.
  • And growing public dissatisfaction with the U.S. health system and its most prominent players—hospitals, insurers, and drug companies.

Three March events have compounded the environment for hospitals:

  • The War in Iran precipitated higher gas prices and intensified political brinksmanship about ‘costs of living’ in which hospital costs are a frequent referent.
  • A cautionary set of 1Q 2026 economic reports (Jobs, CPI, U of M Index of Confidence) produced a sobering assessment by the Federal Reserve that the U.S. economy is unhealthy due to uncertainties at home and abroad. Note: the Jan-Feb BLS jobs reports showed a dramatic slowdown in employment and unprecedented lower hiring in healthcare.
  • And, with bipartisan support, the FTC and Congress launched hearings about hospital consolidation signaling regulatory/legislative changes afoot. Notably: in March, FTC and Congressional Committee hearings featured staff reports blaming hospital consolidation for higher costs that increased hospital leverage over insurers and suppliers as the primary impetus and higher costs for communities.

For hospitals, this is March Madness! Strategies to manage demand, reduce costs and leverage favorable operating margins (enjoyed by some) need refreshing because the environment has fundamentally changed. Governing boards and C suites in hospitals face some tough questions about how, and how fast their environment will change.  The Big C’s (Costs, Corporatization, Competition, Compliance, Capital, Coverage) are a useful place to start:

Costs: Likely Direction: to control and lower total costs of care while supporting overall economic growth.

  • How might costs associated with related administration/ownership of unrelated businesses be accounted? Are GAAP directives adequate to accurate understanding of a hospital’s finances?
  • How might the administration’s effort to lower drug costs impact the hospital drug supply chain? How might 340B discounts be modified to enable the administration to more directly target manufacturers and PBMs with lower-your-price-or else’’ price initiatives? How will the Most Favored Nation pricing initiative be expanded? (only 54 drugs covered today with nominal impact on their prices)? How could Trump Rx be factored in the hospital drug procurement (Trump Rx has only 8 manufacturer participation agreements to date but sees integration is hospital procurement a major opportunity).
  • How will AI-enabled point and platform solutions be integrated for maximum cost-reduction benefit? Might the federal government break the interoperability log-jam and mandate standardized solutions for hospital HIT?
  • How might hospital price controls for IP/OP services impact the organization? Will they be state-imposed or federal?
  • How does the hospital define affordability to optimize consumer decision-making? Are underlying assumptions about costs, prices, cost-shifting, bad debt, capital obligations et al readily accessible in communities served? Should hospitals be penalized for lack of affordability?
  • How should employed physicians, mid-levels and clinical staff be compensated to maximize effectiveness? How should senior management be compensated? What factors beyond financial performance are necessary to accurately assess their performance?

Corporatization: Likely Direction: to enable coordination of cost-effective care via private sector systemization and technology.

  • How do community leaders, business leaders and influencers (non-members of governing boards) view the hospital’s mission, vision, values and use of funds? How does the Board and management assess the unique advantages and disadvantages of its ownership status (system/non-system, for-profit/NFP, et al)?
  • Will Congress do away with employer contributions and source Medicare funding from individual taxpayers instead? Will means-testing be the basis for Medicare premiums and funding?
  • How does the Governing Board evaluate the performance of the CEO? Are non-financial factors incorporated? Is compensation of the CEO consistent with Board expectations for short and long-term sustainability, growth, cultural health and financial performance?
  • Where should hospitals growth strategies focus if increased concentration of core businesses (IP and OP care) is constrained by FTC and DOJ rulings?
  • How would a system of health be structured and operate if improvement in population health was the sole objective? Would capital be appropriated toward a balance of primary and preventive health and services for the sick or ill? Is corporatization by hospitals inconsistent with mission-driven purpose?

Competition: Likely Direction: to increase competition by expanding choices for consumers.

  • Is competition across each line of business monitored objectively? Is diversification beyond core patient care activity necessary and appropriate for the hospital?
  • How will physician/alternative care provider competition impact the hospital? How might changes to anti-kickback (Stark et al) regulations impact physician participation in hospital shared savings programs?
  • How will elimination/modification of state CON requirements modify the competitive climate?
  • Will community benefits and charity care be re-defined? How might investor-owned hospitals and not-for-profit hospital compete under new metrics?
  • How will hospitals compete against physician-owned hospitals is current prohibitions are lifted?
  • How might competition between publicly-traded investor-owned and not-for-profit health systems evolve is SEC financial reporting requirements are reduced to twice yearly? How will state and federal legislators and regulators effectively monitor performance if shielded from performance transparency?
  • How might 990 reporting requirements change to enable state/federal regulators and communities to more objectively assess hospital performance, executive compensation and community benefits?
  • Might charity care for all hospitals be re-defined and specified targets re-visited to verify performance and facilitate alignment with public interests?

Compliance: Likely Direction: increased enforcement to reduce high levels of waste and fraud.

  • How will increased federal regulation around fraud, waste and abuse impact each business relationship and transaction of the hospital?
  • How are indirect administrative costs associated with independent physicians, and ancillary providers captured and accounted? Do they adhere to current anti-kickback laws?
  • How might HHS changes to vaccine policies impact standards of care approved by the hospital medical executive committee? How might credentialling of providers be impacted? Might the hospital sued by community members/clinicians who disagree with new vaccine policies?
  • How will new CMS anti-fraud efforts in 10 states (8 Blue, 2 Red) impact services and payments for enrollees using hospital services? Will these provisions expand to other states? Widen to hospital-employed physicians?
  • How will hospital tax exemptions be modified to align with direct community health benefits? Are tax exemptions likely to be cut for not-for-profit hospitals/health systems?
  • Is overbilling in autism services provided by hospital-affiliated clinicians a likely target of potential fraud investigation by state authorities?
  • How will federal requirements for increased price transparency be expanded or modified to facilitate competition? Will states expect more?
  • What is the hospital’s evidence for promotion of its quality of care? Is evidence-based science the primary basis for dispute resolution? Credentialling? Clinical process improvements? Are outcomes, clinical process improvements, root-cause analyses, disciplinary actions and clinical innovations adequately discussed by the hospital governing Board?
  • How might the FTC’s new Task Force on Consolidation impact pending consolidation plans (i.e. Sutter-Allina announced this week and others)? Might the FTC force local systems to divest/restructure where monopolistic behavior by hospitals has been harmful to public interests?

Capital: Likely Direction: expansion of opportunities for private investors in healthcare.

  • How might/will cutbacks in federal funding for Medicaid and Medicare impact the hospitals solvency and liquidity?
  • How will interest rates on debt change as a result of current uncertainty about global security (Iran, Ukraine, Venezuela, et al)? How will bond ratings be impacted?
  • How will increased state/federal policies limiting PE ownership or operation of hospitals impact access to capital for the hospital? Its related businesses?
  • How will the approaching private equity maturity cliff impact hospitals, physicians and other healthcare entities in the market?

Coverage: Likely Direction: to transition insurance coverage to individual policies that require informed consumer engagement.

  • How will mandatory participation in alternative payment models (ACOs, bundled payments) impact the hospital?
  • How should the hospital reimbursement policies be modified if Medicare & Medicare under-payments are disallowed as a community benefit?
  • What is the likelihood voters will pass ‘’Medicare for All’ in 2028?
  • How should insurance regulation stimulate demand for individual high-deductible plans?
  • How are local public health programs integrated into the hospitals primary and preventive health community benefits? Is the hospital pursuing a “Health and Human Services” strategy or reinforcing the “Health or Human Services” status quo?
  • How will states enact/respond to OB3 elimination of marketplace subsidies? Will employers drop/significantly alter employee benefits to lower their costs? Might the employer tax exemption be eliminated by Congress as a means of lowering the federal deficit and shifting healthcare spending to a consumer (B2C) market?
  • How should hospitals enable effective consumer shopping for appropriately priced necessary hospital services? Is it a hospital’s obligation?

These are not comprehensive but they’re directionally accurate: the future for hospitals is not a repeat of the past. The market has fundamentally changed.

The blame and shame game played by the industry’s major sectors—hospitals, insurers, drug companies—has not made life better for the citizens it serves. The public’s asking for something better, and elected officials are on their side.

March Madness is reality for hospitals. It requires fresh thinking and uncomfortable adjustments. It’s not optional.

Hospitals That Sue You for Getting Sick

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Hospitals in just one state filed 1.15 million lawsuits — enabled by insurance plans that shift costs to patients while shielding themselves from the fallout.

“People are having to choose between going to the hospital and staying home and dying. Because at least my family won’t be burdened with a lawsuit if I die at home.”

That’s not a line from a dystopian novel. It’s what a real patient — identified only as GV0242002 in court records — told researchers after being sued by Sentara Health, Virginia’s largest hospital system and its most prolific medical debt litigant.

A major new report from researchers at George Washington University Law School and Stanford University’s Clinical Excellence Research Center, produced with PatientRightsAdvocate.org, documents what happens when American health care’s hidden costs finally catch up with the people least able to pay them. The findings for Virginia alone are staggering: between 2010 and 2024, hospitals and medical providers filed 1.15 million lawsuits against patients, seeking to collect $1.4 billion in medical debt. They followed those suits with more than 400,000 garnishment orders targeting wages and bank accounts. Plaintiffs’ attorneys collected $87 million in fees. Courts tacked on another $46 million in costs. And some providers charged interest as high as 18% annually — four times the prevailing commercial rate — buried in consent documents patients signed while frightened, in pain, and in no position to negotiate.

Read the full report here.

Among the top garnishee employers? Walmart, public schools, grocery stores and the hospitals themselves. Nonprofit hospitals in Virginia filed more than 4,100 garnishment orders against their own employees.

As the report notes, the hospitals’ patients have almost no way of knowing how much an inpatient stay or an outpatient service will cost or how much they will be on the hook for even if they are insured. The researchers describe health care providers operating “with insurers as accomplices” in keeping prices hidden from patients. That word — accomplices — is important and appropriate. This is not just a hospital story with an insurance footnote. It is also an insurance story. Both hospitals and insurers are complicit, although I would argue that hospitals have to operate in a system that is increasingly controlled by Big Insurance. That said, the relationship between hospitals and insurers is symbiotic, and the cost-sharing requirements imposed by insurers and the opacity of the agreements they enter into with hospitals enables both parties to increase prices and premiums in a way that ensures a rate of medical inflation that is perennially much higher than regular inflation and wage increases.

Here is the mechanism. An insurer designs a health plan with a $4,000 or $6,000 or $8,000 deductible. A patient — let’s say she works at a Kroger in Charlottesville, covered by her employer’s plan — gets sick and goes to Sentara Martha Jefferson Hospital. She signs an admissions agreement she cannot meaningfully read, consenting to pay “charges” based on a chargemaster that reflects prices no willing purchaser would ever agree to. She receives care. Weeks later, she gets a bill she cannot understand, for an amount she cannot verify, tied to prices that were never disclosed. She can’t pay. The hospital refers the account to one of the 20 law firms that brought more than half of all medical debt cases in Virginia during this period. She gets sued. The insurer that collected her premium — and her employer’s premium contribution — faces no lawsuit, no garnishment, no reputational consequence. It moves on to the next enrollment cycle.

The report covers 2010 through 2024 — the first 14 years of the Affordable Care Act. The ACA expanded coverage and has saved countless lives. But it did not stop the proliferation of high-deductible health plans that left millions of newly insured Americans technically covered and financially exposed. In fact, the ACA legitimized them. Since 2000, employer-sponsored family health insurance premiums have risen 321%, according to data cited in the report, and deductibles and other out-of-pocket costs have also skyrocketed. Wages rose 123% over the same period.

Patients are not drowning in medical debt because they are irresponsible. They are drowning because the insurance industry spent years engineering products that shift financial risk onto health plan enrollees and then collecting ever-increasing premiums for doing so.

I should note one finding with particular resonance for me personally. Ballad Health — the dominant hospital system serving the Tri-Cities of Northeast Tennessee and Southwest Virginia, the region where I grew up — filed 26,300 lawsuits against patients during this period. Ballad was created through a controversial 2018 merger that was granted antitrust immunity under a rare state certificate of public advantage, in exchange for commitments to maintain services and community benefit. The merger eliminated competition across one of the poorest stretches of Appalachia, leaving patients in communities like Scott County, Lee County, and Wise County, Virginia — some of the most economically distressed in either state — with effectively no choice in where they seek care.

Whether Ballad has honored its merger commitments has been disputed ever since. What is no longer in dispute: The system that was handed a regional monopoly turned around and sued its captive patients tens of thousands of times. Wise County, for those who don’t know, is also where Remote Area Medical for years set up a makeshift clinic at the county fairgrounds — the place that first showed me, up close, what this industry does to people when it stops pretending.

Virginia’s legislature took a meaningful step last year to give patients some relief. Former Governor Glenn Youngkin signed the Medical Debt Protection Act last May, capping interest on medical debt at 3%, eliminating interest for the first 90 days, and barring hospitals from foreclosing on homes or placing property liens. Those are real protections, and they matter. But as the researchers note, the law does almost nothing about the hidden prices and opaque billing at the point of care that generate the debt in the first place. The legislature addressed the collection machinery. It did not touch the engine driving it.

That engine — high cost-sharing, hidden prices, insurer-designed benefit structures that make patients financially liable before they walk through the door — is what I’ll be examining in depth in the coming weeks, as the major insurers report their first-quarter 2026 earnings. The Virginia data describe how this system costs patients. The earnings reports will tell you how it benefits big insurers and their shareholders.

Stay with me.

WSJ’s Editorial Board Contradicts What Its Newsroom Has Reported on Medicare Advantage

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The Wall Street Journal’s Editorial Board vs. The Wall Street Journal’s Newsroom.

The paper that exposed Medicare Advantage’s $50 billion overbilling scheme is now urging the government to make it the default for every senior in America.

During my two decades working for Big Insurance, I learned what industry spin looks like. I know what it sounds like. And I know that when a major newspaper’s editorial board publishes a piece defending an industry that has spent millions cultivating its editorial goodwill, the result often reads exactly like the Wall Street Journal’s editorial yesterday, “The Truth About Medicare Advantage.”

The piece is a masterclass in selective evidence. But what makes it remarkable is that the most damning rebuttal to it doesn’t come from me, or from Medicare Advantage’s many critics, or from the political left. It comes from the Wall Street Journal’s own newsroom.

In the fall of 2022, a team of Journal reporters did something extraordinary. They negotiated a data-sharing agreement with the Centers for Medicare and Medicaid Services, gaining access to 1.6 billion Medicare Advantage records over a 12-year period — every prescription filled, every doctor visit, every hospitalization. The investigation that followed was among the most rigorous pieces of health care journalism in years.

What they found was damning. Medicare Advantage plans received roughly $50 billion in payments between 2018 and 2021 for diagnoses that were questionable — conditions added to patients’ records not by their doctors, but by the insurers themselves. The Pulitzer Prize committee called it a series showing how health insurers gamed the Medicare Advantage program to collect billions for nonexistent ailments while shunting expensive cases onto the public.

The Journal’s editorial board was apparently not paying attention to its own reporters. Because in its editorial yesterday, the board cites a study funded by Elevance Health — one of the largest Medicare Advantage insurers in the country — to argue that private MA plans reduce Medicare spending. It calls opposition to Medicare Advantage “ideological, no matter the facts.”

“No matter the facts” certainly applies to the Journal’s editorial.

The central fact the editorial board cannot afford to acknowledge — because the entire argument would collapse if it did — is the ongoing Medicare Advantage overpayment scandal. MedPAC, the independent congressional agency that advises Congress on Medicare, projects that for 2026, Medicare Advantage payments will run $76 billion — or 14% — above what traditional Medicare would spend on the same beneficiaries, after accounting for health status, coding differences, and geographic factors. Note that the $76 billion in overpayments is just for this year. Looking back over the history of the Medicare Advantage program and the total likely would grow to nearly a trillion dollars if not more.

This is not a partisan number. MedPAC is a nonpartisan body. The methodology accounts for the very factors the industry argues should be included. And the conclusion is unambiguous: the federal government spends substantially more of our tax dollars per person under Medicare Advantage than it would under traditional Medicare. That $76 billion overpayment is not a rounding error. It is more than the entire annual budget of the Department of Education.

The Journal’s editorial board also ignores what that overpayment costs seniors who never chose a private plan. The Journal’s own reporting detailed how MA overpayments translated into roughly $13.4 billion in additional Part B premium costs in 2025 alone — costs borne by every Medicare beneficiary, including those in traditional Medicare who never signed up for a private Medicare replacement plan, which is what Medicare Advantage is. Every senior paying Part B premiums is, in effect, subsidizing the insurers the editorial board is championing.

The editorial argues that Medicare Advantage reduces the incentives for hospitals to upcode patients to a higher level of complexity. This would be a compelling point if the Journal’s own investigation had not spent years documenting how MA insurers themselves are the upcoding problem.

The Journal’s investigation found that coding intensity in Medicare Advantage runs 20% higher than in traditional fee-for-service Medicare. Of the 17 audits the Department of Health and Human Services Office of Inspector General has conducted since 2019, there was no support for nearly 69% of diagnoses that Medicare Advantage plans used for risk adjustment, leading to more than $100 million in overpayments to MA plans from upcoding alone. That’s not a rounding error either.

In the early years of private Medicare plans, insurers went to great lengths to sign up only the healthiest seniors and to run off the seniors when they got sick. It was called “cherry picking” and “lemon dropping.” I saw it up close in the early ‘90s when I was at Humana, one of the first insurers to get into the private Medicare replacement business. It was so prevalent in the industry that in 2003 Congress passed legislation to authorize the government to pay insurers more for signing up less-healthy seniors. So for two decades now, insurers have been paid more for sicker patients, which means they have powerful financial incentives to make patients look sicker on paper — but not to pay for treatments they supposedly would need. The Journal’s reporters found that among Medicare Advantage beneficiaries who had an HIV diagnosis added to their record by their insurer, just 17% received any treatment for the disease. Among beneficiaries diagnosed with HIV by their own physician, 92% received treatment. Diagnoses without treatment are not better care. They are extra revenue.

The editorial’s most revealing sentence may be this one: “The opposition to Advantage is ideological, no matter the facts.” This is a tell. It reframes data as politics, and politics as bias — a classic spin move designed to preempt legitimate criticism by impugning the critic’s motives.

But the criticism of Medicare Advantage is most certainly not ideological, and it is not coming only from Democrats. Sen. Chuck Grassley of Iowa, a Republican, wrote to UnitedHealth Group’s CEO arguing that the “apparent fraud, waste, and abuse at issue is simply unacceptable and harms not only Medicare beneficiaries, but also the American taxpayer.” The Trump administration’s Department of Justice opened a criminal investigation into UnitedHealth Group’s Medicare Advantage billing practices (which the Journal reported as a scoop). The Senate Judiciary Committee, which Grassley chairs, published a 104-page report on MA overbilling.

Another senior Republican, Sen. Bill Cassidy, who chairs the Senate Health, Education, Labor and Pensions (HELP) Committee, is the lead sponsor of a bill that would crack down on upcoding. It’s called The No UPCODE Act. These are not the actions of ideologues. They are the actions of Republican legislative leaders and committee investigators who read the Journal’s own reporting and followed up.

The editorial’s timing is no coincidence. Trump’s Medicare director, Chris Klomp, recently confirmed that the administration is actively considering a policy that would automatically enroll new Medicare beneficiaries into private Medicare Advantage plans — a proposal straight out of the Project 2025 blueprint. The editorial reads, at least in part, as advance justification for that policy.

Under current law, seniors who enroll in Medicare are automatically covered by traditional Medicare unless they affirmatively choose a private plan. Under a default enrollment scheme, the reverse would be true: seniors who fail to make an active choice would be placed into a private plan, with the option to switch back – but not for three years. Seniors would be locked in a plan that the government chose for them, that has a limited network of doctors and hospitals, that makes them pay the entire bill for services they might receive outside of that network, and that denies coverage for medically necessary care far more than traditional Medicare – for three years.

The consequences of getting automatic enrollment in MA wrong are severe and often irreversible. The vast majority of states do not require Medigap insurers to sell supplemental coverage to beneficiaries who want to switch back from Medicare Advantage to traditional Medicare outside of limited time windows. For many seniors, once they are in, they are in. The editorial board does not mention this.

And the program is hardly the stable backstop the board describes. A Johns Hopkins Bloomberg School of Public Health analysis found that approximately 10% of Medicare Advantage enrollees — roughly 2.9 million seniors — are being forced to find new coverage in 2026 as insurers exit markets, a tenfold increase in the forced disenrollment rate compared to just two years ago. The board wants to make this the default destination for every new senior in America, just as the private market is demonstrating it cannot sustain its current commitments.

Let’s return to the study the editorial board cites as evidence that Medicare Advantage saves money. The board presents it as peer-reviewed fact. What it does not say is that the researchers are affiliated with Elevance Health — formerly Anthem — one of the largest Medicare Advantage insurers in the country. Industry-funded research is not automatically wrong, but it requires disclosure and scrutiny that the editorial board does not provide. I know from personal experience that industry-funded research is typically rigged to support conclusions the funder wants to convey – to policymakers, the business community, the media and the public – and that any data that do not support the funder’s business objectives never make it into the final report.

In the communications business, we used to call this kind of thing a “third-party validator” — research that carries the appearance of independence while advancing the funder’s interests. I helped produce the playbook. I know how this works.

The Wall Street Journal’s newsroom has done some of the most consequential health care journalism of the past decade. Its reporters negotiated extraordinary data access. They documented, with precision, how the insurance industry has extracted billions from Medicare through practices that the Pulitzer committee described as gaming the system. They named names and they showed their work. And you can be certain that every word they wrote was carefully fact-checked and vetted by the Journal’s legal team.

The editorial board is in the same building as the Journal’s newsroom. I know because I’ve been in those rooms. I know and have worked with many of the reporters who cover the health insurance business, going back to my days in the industry. I can assure you that the Journal’s reporters are among the best in the business and, unlike the editorial writers, most certainly are not motivated by ideology.

The newspaper’s editorial board owes readers the same fidelity to evidence that its reporters have demonstrated. Instead, it has produced a piece of advocacy that reads like it was drafted in a health insurance industry communications shop — cherry-picked studies, industry talking points, and a dismissal of critics as ideologues “no matter the facts.”

I have spent the years since leaving the insurance industry trying to help people understand how spin works – how it is produced, how it travels, and how it takes hold even in institutions that should know better. The Journal editorial board’s Medicare Advantage advocacy is a case study.

This should be studied in every journalism school in America: The paper that exposed Medicare Advantage’s overbilling scheme is now urging the government to make it the default plan for every senior in America. Someone needs to explain that to the reporters who spent three years proving why that is a terrible idea.

Why drugs cost so much, 101: Medicine monopolies

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Why drugs cost so much, 101: Medicine monopolies
https://omny.fm/shows/an-arm-and-a-leg/why-drugs-cost-so-much-101-medicine-monopolies/embed?media=audio&size=wide&style=cover

We’re always asking: Why do drugs cost so freaking much? 

And it’s a complicated question. There are a bunch of reasons — to be sure. But in our reporting over the years, like our stories on insulin and tuberculosis drugs, experts cited one big reason over and over again: 

The pharmaceutical industry wages sophisticated legal battles to keep monopoly control over their best selling, most lucrative drugs — blocking generic competition, and increasing their prices along the way. 

How did it come to be this way? 

In this first episode of a new series – what we’re calling An Arm and a Leg 101 – we’re doing a crash course in the history of the drug patent system.

And the rags-to-riches story of one amazing guy is going to help us do it. 

Al Engelberg got schooled in the Art of the Hustle at a young age, collecting dimes at an illegal bingo game on the Atlantic City boardwalk. 

Later, he’d put those street smarts to use as he sat at the negotiation table in Washington D.C., hashing out the details of a law that would usher in the generic drug industry as we know it. Then made millions from the rules he helped write.

And as he admits, his legacy is mixed. 

On the one hand: The rules Al Engelberg helped write — a grand bargain between generic drugmakers and patent-holding brand pharma companies — unleashed the power of generic drugs to save Americans money. 

Nine out of ten prescriptions written today get filled with a generic.

On the other hand: In the process of making his fortune, Al Engelberg discovered loopholes, gaps, and perverse incentives in that grand bargain. 

Gaps that allowed brand and generic drugmakers to profit by keeping generics for many hit drugs off the market.  

So we now spend more than ever on medicine — and more than 20 percent of Americans report skipping their medication because they can’t afford it. 

Al Engelberg, now 86, has spent the last 30 years — and millions of his own dollars — trying to close those gaps. 

“I live in a world — a pharma world — where half the people think I’m dead, and the other half wish I was,” he tells us. 

You can read more of Al’s story — plus his prescription for fixing the crisis of high drug prices — in his book, Breaking the Medicine Monopolies: Reflections of a Generic Drug Pioneer.

And you can hear our earlier reporting on drug patents here:

John Green vs. Johnson & Johnson (part 1)

John Green vs. Johnson & Johnson (part 2)

The surprising history behind insulin’s absurd price (and some hopeful signs in the wild)

An Arm and a Leg 101 is made possible in part by support from Arnold Ventures.

Private Medicare plans get a break

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https://www.axios.com/2026/04/07/trump-medicare-advantage-united-humana?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

After saying it wanted to keep federal payments to private Medicare plans roughly flat next year, the Trump administration reversed course on Monday and gave the insurers a $13 billion pay bump.

Why it matters: 

The average 2.48% pay increase for 2027 was on the high end of analysts’ expectations and marked a win for UnitedHealthcare, Humana and other Medicare Advantage plans, whose stocks tumbled after the administration’s initial proposal in January.

  • The plans will instead see an average increase of nearly 5% when payments are adjusted to reflect how sick enrollees appear, Medicare officials said.
  • The administration was swamped by tens of thousands of comments after the initial proposal of less than a 0.1% increase for 2027.

Driving the news: 

The pay increase reflects higher health cost growth in traditional Medicare that became apparent after additional data from the end of 2025 was crunched.

  • The Centers for Medicare and Medicaid Services also dropped a proposal to update payments to plans based on the health status and demographics of enrollees, which insurers said would have disrupted their ability to care for seniors.
  • Medicare officials said that it makes sense to give insurers more time to absorb prior “risk adjustment” updates.

The administration is moving forward with a plan to prevent insurers from adding diagnoses after reviewing patients’ medical records — a move that addresses coding practices that have received scrutiny and is expected to save nearly $7 billion next year.

What they’re saying: 

Some Medicare providers said the pay boost still doesn’t reflect economic realities, at a time when the cost of drugs, supplies and more patient visits is stoking medical inflation.

  • “When payments fail to keep pace with care delivery costs, the consequences are predictable,” said Jerry Penso, president of medical group association AMGA, predicting possible cuts to supplemental benefits like vision and dental, higher costs to beneficiaries and, in some instances, plans exiting markets.
  • Medicare Advantage enrollment declined in seven states this year as plans pulled out of some markets.

Between the lines: 

The administration’s original flat-funding proposal reflected bipartisan concern over how much money Medicare Advantage costs the health care system.

  • Policymakers’ concerns that health plans aren’t sufficiently lowering costs “will remain a headwind” for Medicare insurers, Duane Wright, senior health policy analyst at Bloomberg, said in an email.
  • Director of Medicare Chris Klomp said the finalized update aims to strike a balance between protecting seniors and protecting taxpayers.
  • “I’m sure that there will be folks on both sides of the equation who may have concerns about where we’ve landed,” he said.
  • “We’re certainly not abdicating responsibility [to taxpayers], nor are we saying that we are done.”

Zoom out: 

Medicare administrators late last week finalized a separate plan to overhaul Medicare Advantage’s quality reporting and ratings system, which they expect will increase payments to plans by $18.6 billion over the next decade.

  • “As health plans incorporate the policies released in recent days, they will continue to focus on keeping coverage and care as affordable as possible during this time of sharply rising medical costs,” Chris Bond, spokesperson for insurance lobbying group AHIP, said in a statement.

What we’re watching: 

Whether insurers run ads accusing the administration of cutting Medicare in the run-up to the midterm elections, as they did with the Biden administration in 2023.

Grit: The power of passion and perseverance

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Leaving a high-flying job in consulting, Angela Lee Duckworth took a job teaching math to seventh graders in a New York public school. She quickly realized that IQ wasn’t the only thing separating the successful students from those who struggled. Here, she explains her theory of “grit” as a predictor of success.

Washington and Lee University’s Speaking Tradition

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Washington and Lee University’s Speaking Tradition is a long-standing campus custom where students, faculty, and staff greet each other with a “hi” or “hello” while passing on campus. Promoting a welcoming, friendly atmosphere and a sense of community, it reflects the university’s values of civility and personal connection. 

Key Aspects of the Speaking Tradition:

  • Origin & Purpose: It is a deeply embedded, informal custom meant to foster community and ensure every individual feels acknowledged.
  • Application: It involves smiling, nodding, or saying hello, especially when walking along the historic Colonnade or paths.
  • “Say Hey” Day: Kathekon students often promote this tradition on campus.
  • Challenges: The tradition faces pressure from technology, such as smartphone usage and headphones.
  • Distinction: The “speaking” part refers to greeting others, not public speaking. 

The tradition is considered a “positive chain reaction” that helps make the university feel like a welcoming community.

The Health of a Civilization

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This insightful observation from science fiction author Robert A. Heinlein suggests that the health of a civilization is best measured by its smallest interactions, not its biggest conflicts.

Here is a breakdown of its meaning:

Civility as Social Glue: Politeness and “gentle manners” are more than just etiquette; they represent a fundamental respect for the social contract. When people stop showing consideration in “minor matters,” it signals that they no longer value their neighbors or the community at large.

The Subtle Rot vs. The Loud Event: A riot is an explosive, often temporary, reaction to a specific problem. However, widespread rudeness is a slow, pervasive rot. Heinlein argues that this quiet erosion of decency is more dangerous because it signifies a deep, internal collapse of shared values that is much harder to repair.

The Foundation of Order: Large-scale order is built upon small-scale respect. If a culture loses its ability to maintain daily politeness, it has lost the very foundation that prevents total chaos. Once mutual consideration is gone, the culture is essentially already “dead.”

In essence, when a culture stops practicing common decency in “minor matters,” it is already “dead”.