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.
HENRY KOTULA 