The House of Representatives’ reconciliation bill, passed by the powerful Energy and Commerce Committee today, cuts just about everything when it comes to health care – except the actual waste, fraud and abuse. Now the bill heads to the floor for a vote of the full House of Representatives before it must also be passed by the Senate to become law.
I know what you’re thinking: not another story about Medicaid. With the flood of articles detailing the devastating Medicaid cuts proposed by House Republicans —cuts that could strip 8.7 million people of their health coverage — there’s an important fact being overlooked: Members of Congress chose to sidestep policies aimed at reining in Big Insurance abuses and, instead, opted to cut Medicaid.
And the real irony of it all is they could have saved a ton of money if they would just address the elephant in the room.
Abuses by Big Insurance companies have been going on for decades but have only recently come under scrutiny. Insurance companies figured out how to take advantage of the structure of the Medicare Advantage program to receive higher payments from the government.
They do this in two ways:
They make their enrollees seem sicker than they are through a strategy called “upcoding” and;
They use care obstacles such as prior authorization and inadequate provider networks that eventually drive sicker people to drop their plans and leave them with healthier enrollees, referred to as “favorable selection.”
According to the Medicare Payment Advisory Commission (MedPAC) these tactics lead the government to overpay insurance corporations running MA plans by $84 billion a year. This number is expected to grow, and estimates show that overpayments will cost the government more than a $1 trillion from 2025-2034. That is $1 trillion dollars in potential savings Republicans could have included in their bill instead of cutting Medicaid spending that provides care for vulnerable communities.
These overpayments do not lead to better care in MA plans; in fact, research has shown that care quality and outcomes are often worse in MA compared to traditional Medicare. Even worse, these overpayments are tax dollars meant for health care that end up in the pockets of shareholders of big insurance corporations, which spend billions of taxpayer dollars on things like stock buybacks and executive bonuses.
One of the most frustrating parts of the lawmaker’s choice to target Medicaid rather than Big Insurance abuses is that there are multiple policies supported by both Republicans and Democrats to stop these abuses. Sen. Bill Cassidy (R-Louisiana), along with Sen. Jeff Merkley (D-Oregon), have introduced the NO UPCODE Act, which would cut down on the practice of upcoding explained above. President Trump’s Administrator of the Centers for Medicare and Medicaid Services, Dr. Mehmet Oz, said during his confirmation hearing that he supports efforts to crack down on practices used by insurers to upcode. And Rep. Mark Green (R-Tennessee) introduced a bipartisan bill to decrease improper prior authorization denials in MA.
In a somewhat cruel twist, the only mention of Medicare fraud in the Republican reconciliation bill proposals is a section claiming to crack down on improper payments in Medicare Parts A and B (which make up traditional Medicare) by using artificial intelligence.
The total improper payments in TM represent just over one-third of the overpayments going to MA plans each year, and many of the payments flagged as improper in TM are flagged due to missing documentation rather than questionable tactics that MA insurers use.
In reflecting on why Republicans in Congress ignored potential savings from Big Insurance reforms and instead pursued cuts to care for people depending on Medicaid, which do not save as much, my biggest question was, why?
Why would lawmakers swerve around a populist policy right in front of them to stop Big Insurance from profiting off of the federal government to instead propose a regressive policy that targets millions of working Americans and leaves health insurance corporations that make billions in profits each year untouched?
Unfortunately, the answer likely lies in money. Although people enrolled in Medicaid and the Children’s Health Insurance Program (CHIP) make up roughly one-third of the U.S. population, they account for just 0.5% of all political campaign contributions — about $60 million annually. This disparity is likely driven by financial constraints: Many of these individuals are rightly focused on covering basic needs such as housing, food, and childcare, especially as wages have not kept pace with the rising cost of living.
In contrast, the health care sector — which includes major players like big insurance, pharmaceutical and hospital companies—contributed $357 million during the 2020 election cycle, including $97 million to outside groups such as Super PACs. These outside spending groups are largely funded by corporations and wealthy individuals, who represent less than 1% of the population but wield significant political influence.
Super PACs spent more than $2 billion during the 2020 election cycle, amplifying the voices of industry-aligned donors. This stark imbalance in political spending may help explain why congressional proposals targeted Medicaid recipients while leaving the powerful health insurance industry largely untouched.
It is not only Republicans who have failed to stop Big Insurance from taking advantage of federal health programs, Democrats declined to take action when negotiating their health care legislation during President Biden’s term. Rather, it seems to be a failure of policymakers of both parties to pass legislation that makes it clear to Big Insurance that our health care is not an investment opportunity for Wall Street, and the dollars we pay in taxes to support Medicare are not pocket change for executives to use for stock buybacks.
The failure to include MA reform represents a missed opportunity to prioritize patient care over corporate profits. However, the growing strength and voices of patients across the nation will ultimately make it impossible for lawmakers to ignore this issue much longer. With continued momentum, the fight to put patients over Big Insurance profits will succeed.
In what’s becoming an all-too-familiar pattern, CVS Health announced it will pull Aetna out of the Affordable Care Act (ACA) marketplace in 2026, leaving about a million people across 17 states searching for new health coverage — and in some cases, fighting to afford any at all.
This marks yet another retreat by a major for-profit insurer from a program designed to provide affordable health coverage to Americans who don’t get it through work. CVS made the announcement while simultaneously celebrating a 60% increase in quarterly profit and revealing a new deal to boost sales of the pricey weight-loss drug Wegovy through its pharmacy and pharmacy benefit manager (PBM) arms.
Let me repeat that: Aetna is exiting the ACA because it claims it can’t make enough money on people enrolled in those plans, on the same day its parent company posted nearly $1.8 billion in profits in just the first three months of this year.
This is the same company, by the way, that dumped hundreds of thousands of seniors and disabled people at the end of 2024 because some of them were using more medical care than Wall Street found acceptable. If this doesn’t tell you everything you need to know about who the health insurance industry is really working for, I don’t know what will.
From “Commitment” to Abandonment
Aetna first bailed on the ACA exchanges in 2018, then re-entered in 2022 when insurers could see more clearly how they could make significant profits on that book of business. Now, after just a few years of moderate participation, it’s heading for the exits again. CVS Health executives blamed “regulatory uncertainty” and “highly variable economic factors,” according to a statement to The Columbus Dispatch.
But make no mistake—this was a cold business calculation. Uncertainties and economic variabilities are constants in the insurance game.
CVS’ CEO David Joyner told investors:
“We are disappointed by the continued underperformance from our individual exchange products … this is not a decision we made lightly.”
That’s corporate-speak for “our Wall Street friends weren’t impressed.”
Aetna’s ACA exchange business, covering roughly 1 million people, is just a sliver of CVS’ overall medical membership of 27.1 million. But even though the profits weren’t massive, the people depending on this coverage — many of them self-employed, working multiple part-time jobs, or recently uninsured — will now be thrown into chaos.
And it’s happening at a time when health insurance for many Americans hangs by a thread. Unless Congress acts in the coming months, the ACA’s enhanced tax subsidies—first implemented under the American Rescue Plan—are set to expire at the end of this year.Without them, premiums could spike by 50% to 100% depending on income and geography.
The Congressional Budget Office projects that the lapse in subsidies could leave 3.8 million more Americans uninsured— and now, 1 million more will be forced to find new plans as CVS/Aetna walks away.
Same Song: Prioritizing Profit, Not Patients
Let’s be clear about what CVS is doing here: It’s ditching an essential safety net for millions in order to chase higher profits elsewhere—most notably, in the exploding market for GLP-1 drugs like Wegovy. On the same day it abandoned the ACA, CVS announced a new deal to give Wegovy preferred placement on its PBM formulary, displacing Eli Lilly’s Zepbound. This will help CVS dominate the obesity drug market—and rake in profits through its Caremark PBM and nearly 9,000 retail pharmacies.
It’s a powerful example of vertical integration in action.
CVS owns the insurer (Aetna), the PBM (Caremark), and the pharmacy (CVS retail stores). When it walks away from lower-margin business like ACA plans and doubles down on high-dollar drug deals, we see its true priorities: selling expensive drugs, saddling individuals, families and employers with the costs, and keeping Wall Street happy.
Even worse, the decision is taking place against a troubling political backdrop. The Trump administration has already taken steps to undermine ACA infrastructure and expressed skepticism toward core public health programs. Cuts to navigator funding, changes to vaccine guidelines, and looming uncertainty around tax credits are all part of a slow-motion sabotage of the ACA. This is not to say that the ACA doesn’t have its flaws that need to be addressed.
But instead of penalizing hard-working Americans and their families, lawmakers and the Trump administration should focus instead on lowering the ridiculously high out-of-pocket maximum that the ACA established (and that keeps going up every year) and fixing the medical loss ratio provision that has fueled the vertical integration in the insurance industry.
Hi, everybody. I’m Elizabeth Wilkins, president and CEO of the Roosevelt Institute, and I am delighted to be here today with some big news and a very special guest. I am thrilled to announce that Nobel Prize–winning economist Paul Krugman will be joining the Roosevelt Institute as a senior fellow. Paul is one of the world’s most cited economists and widely read commentators, and for good reason. His longtime New YorkTimes column and his Substack now prove that he is not just a bold thinker, he is one of the clearest and most dynamic communicators in the field—skills that come in handy when you want to break through the noise of this moment and get people thinking about what the future of our economy and democracy might look like. And, of course, this is what Roosevelt is all about: understanding where we are in the moment and where we need to go.
So, Paul, I’m so excited to talk with you today. I started at Roosevelt in February, so we’re both new kids on the block here, and I will start with a question that I am getting a lot recently: Why your interest in affiliating with Roosevelt, and why now?
Paul Krugman:
Well, now I think because partly having retired from the New York Times, I’m free to pursue other affiliations. The Times is kind of a jealous organization. But now that I’m no longer there, I can do this. Roosevelt has been a tremendous reservoir of progressive thinking and progressive economics. I was heavily reliant on Roosevelt research particularly during the aftermath of the 2008 financial crisis—I’ve been around for a while here. [There’s] still novel stuff going on, and this seemed like a good affiliation to have in these times, to join the ranks of people with Roosevelt affiliations who have been providing really urgent commentary.
Elizabeth:
Thank you for the kind words. We appreciate it. One of the things that made your Times column such a hit for decades was the unique voice that you bring to economics: your ability to break down orthodoxy and cut to the core of what’s happening in plain terms. It almost goes without saying that there is a lot to cut through right now. We’ve seen attacks on government programs and on whole government agencies. And as you have noted and I have noted, the fate of Social Security and our social compact hangs in the balance right now. So, can you talk—with a little bit of your perspective on economic history—about what you think makes this moment unique? And through all this noise, what people should be paying attention to, and why?
Paul:
We are in a moment where we’ve lived, really since the New Deal in—whatever you want to call it—the Keynesian consensus. We’ve lived in a world where, we by no means went to socialism, but we had capitalism with some of the rough edges sanded off. Not as many of the rough edges that I would like, but we have Social Security, we’ve had Medicare since the 60s. We have Medicaid. We have the Affordable Care Act. We have a whole bunch of social insurance programs. We have government efforts to at least somewhat regulate the excesses and harms of markets. And now we are at a moment where there’s a real possibility that we may really lose that. We’re talking about possible retrogression, and the possibility of moving forward after this current moment has passed. But we really are at a point where the certainties of the underlying continuity of a fairly decent social compact is at risk. And so this is really new.
Elizabeth:
I really like that phrase, this “capitalism with the rough edges sanded off.” And what I’m hearing you say is basically the idea of the social compact is that, yes, we have capitalism, but we also have a commitment to providing a measure of security for people, and that’s the deal we have struck. You write a ton about the New Deal and FDR [Franklin D. Roosevelt]. Can you just expand a little bit about how to think about that trade-off, how long that consensus has held, and if there are any other moments in our economic history where there have been similar threats to that compact that we can learn from?
Paul:
I like to think about—it’s 1933, and the world economy has collapsed. There are a lot of reasonable people [who] have concluded that capitalism is irredeemable and can’t be saved, and that on the other hand, you have a lot of forces of repression out there. And along comes several countries—with the US in some ways leading the New Deal order, which says, no, we’re not actually going to go socialist. We’re not going to seize the commanding heights of production, but we are going to try to make sure that extreme hardship is vanished, as far as we can manage. We’re going to try to make sure that workers feel that they are a part of, and that they have rights and claims to, the system. There was very much this moment when we reached a kind of—I don’t know if it’s a compromise or a synthesis—but the idea of a basic standard of decency, the Four Freedoms. While at the same time saying that it’s not evil to make profits. It’s not evil to be personally ambitious. But we are going to try to make it so that everyone shares in the gains from economic activity.
And that really held. I mean, there was the moment when the Reagan administration came in, which represented, in many ways, a turn away from that New Deal consensus. But not to the extent that we have now. In moments of economic stress, people tend to say, well, maybe this thing doesn’t work anymore. The 1970s with stagflation, the aftermath of the 2008 financial crisis. That has basically been the case during attempts to turn away from the basic structure (which in the US context have always been a turn to the right, but in principle, you could imagine a turn to the left, but that hasn’t ever really happened in this country). And until right now, it has always seemed that the public wouldn’t stand for it. When push came to shove, when George W. Bush tried to privatize Social Security, it was a sort of resounding, “no, you don’t. We love Social Security.” But the possibility that we will have either explicitly or de facto undermining of those institutions seems much higher right now just because we live in such—well, we’re not gonna talk about the politics particularly, but there’s a possibility that we’ll lose it, that it will go away. And the one thing that I would say is that there’s this political action by itself, but there’s also the importance of getting the facts clear, getting the way the world works clear. No, there are not 10 million dead people receiving Social Security benefits. No, tax cuts and deregulation are not the only way to achieve economic growth. These are really critical things. Facts matter, analysis matters.
Elizabeth:
I’m just gonna pick up on that last thing you said about facts matter, analysis matters, and maybe go a little bit toward your true economist side. It’s not just Social Security we’re talking about. As you know and just mentioned, we’re in the middle of a tax and budget fight where we are very much looking at a situation where tax cuts for the wealthy might be traded for cuts to the programs that are specifically for our most vulnerable, like Medicaid and SNAP. This obviously has both political economy and democratic implications. It also has economic implications. Can you talk a little bit about this idea of what it means—this kind of wealth transfer, frankly, from the poorest to the richest, both in terms of hard facts, economics, and growth? And in terms of the social compacts that we’ve been talking about.
Paul:
It’s become increasingly clear that taking care of the most vulnerable members of society—it’s something you should do. It’s a moral obligation. But it’s also good economics, especially by the way of children. If you ask, a dollar spent on ensuring adequate health care and nutrition for children clearly pays off with multiple dollars of economic performance, because those children grow up to be more productive adults.
One way to say this is that conservative economic doctrine is all about punishing, it’s all about incentives: Poverty should be painful and wealth should be glorious. And what that all misses is the importance of just plain resources. That if low-income families cannot devote the resources to their children that you need to make those children fully productive adults—some will manage despite that, but just plain making sure that everybody in the country has the resources to make the most of themselves and their children is an enormously practical thing. It’s not just soft-hearted liberal talk, though I am a soft-hearted liberal, but it’s also just what you need to do if you want to make the most of your country’s potential.
Elizabeth:
I’m going to take another policy area, one actually that you know a lot about. It’s the area of focus that won you your Nobel Prize. You, in recent months, have been saying that one of the biggest risks of the Trump administration’s economic agenda is their chaotic tariff policy. We are currently recording the day after Liberation Day. And last year you predicted that the cronyism of those tariffs might be the biggest story in the long run, in addition to the chaos. So can you walk us through those risks, the chaos and the cronyism, and to what degree you’re seeing that play out for American workers and consumers? And, you know, why—I mean, there’s a lot of reasons why—but why are these tariffs different than the years that we’ve seen them in the past?
Paul:
There’s a standard economics case against tariffs, which is that it basically leads your economy to turn away from the things it’s really good at and start doing the things that it’s not especially good at. So for example, in New York, there’s lots of memories of the garment industry, but we really don’t wanna bring the garment industry back. Those were pretty bad jobs, and it happens to be stuff that can be done—where they can do it reasonably well—in Bangladesh, which desperately needs that industry, and we should be doing the things that we’re really good at instead. So that’s the classic case. What we’re discovering is that the rise of this hostility toward trade has additional costs. And the most immediate one is just plain that we don’t know what it’s gonna be.
As you said, we’re recording this the day after Liberation Day, which—nobody knows. I have to say that the actual tariff announcement shocked a lot of people, because it was both much bigger and much more arbitrary than people expected. I wouldn’t have been really shocked if there was a 15 percent across-the-board tariff, because that had been foreshadowed. But instead, there’s different tariffs for every country and this wasn’t really on anybody’s playbook. And nobody knows whether it [will] persist.
Think of yourself as being a business person trying to make decisions. You’re going to make an investment in your business—or are you? I mean, should you be spending money and making commitments on the basis that, okay, we’re gonna have 20 percent tariffs on all goods from Europe, or should you make it on the proposition that, “look, that’s crazy, those won’t last”? And both of those are defensible propositions. Anything you do, if you invest on the assumption that the tariffs are here to stay, then you’ll have made a terrible decision if they don’t. And so there’s a lot of paralysis that comes from the chaos. I’ve always been skeptical of people who invoke uncertainty as a reason that policy is holding the economy back, but because it’s often used as an argument against progressive policies: Oh, you know, your universal health care goals, that creates uncertainty. But in this case, this really is a major harmful issue.
We have not yet seen the cronyism, but it’s clearly potential. The whole root of—the reason why trade is where the dramatic stuff is happening [is because] US law creates a lot of discretion for the executive branch in tariff setting. Tariffs were only supposed to be applied as remedies for specific kinds of shocks or specific kinds of threats, but the decision about whether those conditions apply lies with the executive branch. So a president who wants to can do whatever they want on trade. And in the past, that’s always been held back by concern about: How will other countries react? What about the system? We built this global trading system. So it’s always been assumed that the president would have a wider view.
But if you take that away, then it’s not just arbitrary in terms of what are the overall levels of tariffs, it’s who gets a tariff break. And in fact, every time we do impose tariffs, there tend to be some exemptions. There are good reasons why sometimes you might want to exempt somebody from a tariff. But if it’s all arbitrary, the exemption might come because you go golfing with the president. And so that creates a lot of problematic incentives. We actually saw that in 2017, 2018, when the US was putting on tariffs—which looked trivial compared to what’s now on the plate—but it was very clear that industries and companies that were politically tied to the administration in power were much more likely to get exemptions than those that weren’t. So we actually saw this. We live in amazing times, and I mean that in the worst way. But everything that happened in the first go-around of what we called the trade war, it was really nothing—it was a skirmish compared with what’s happening now. But now, the possibilities are huge.
There’s a whole field of economic research on what the field calls rent-seeking. Economies where the way to succeed in business is not to be good at business, but to be good at cultivating political connections. And much of that actually was about tariffs and import quotas, but typically in developing countries. So there was a large concern that in places like Brazil or India, they were actually sacrificing a lot of potential gainful economic activity because businesses were focused instead on currying political favor. Well, could that happen here? Yes, it could. Very much down the road. I mean, I have to say that the speed and scale of the stuff that’s going on makes me think that we may have a global trade war and massive disruption before we even get around to the cronyism. But it’s down there, it’s in there. It’s in the mix.
Elizabeth:
We have seen, before yesterday, a real stop-start, put-on put-off, someone complains and we delay for a month. So I think we’ll really have to see, post-yesterday, where this goes. And this is a helpful roadmap for what to look for.
Paul:
And we should bear in mind also that the rest of the world has agency too. And part of the issue here is that the chaotic nature of the rollout is—again, the rest of the world has agency. And if you want to avoid getting into a lot of tit-for-tat, you probably want to at least explain what you’re doing and not be offending other countries unnecessarily. But, of course, we are doing that. I mean, to make Canada turn anti-American really takes—I didn’t think that—that wasn’t on my dance card for my career.
Elizabeth:
Roosevelt has argued for a long time for the strategic and targeted use of tariffs alongside industrial policy. And also, of course, alongside a strong sense of what rules and regulations you have to use to control unproductive uses of corporate and market power in that context, to make sure that the incentive structure that you’re creating actually targets the gains that you’re trying to make. But we’ve also argued for a way to transition into those things that takes account of some of the concerns that you’ve raised in terms of creating a stable business environment for investment, creating predictability, explaining things to mitigate the risk of fallout. And we’ve heard members of the administration say, “hey, yes.” [They] admit that this is going to be a little bit painful for a while, but it’ll be beneficial in the end.
You started to say this, but can you just pick apart for us when we hear someone say, “there might be a little bit of turmoil for a while,” what are the real costs of what that kind of turmoil might be for businesses, workers, consumers?
Paul:
I actually don’t buy—I mean, yes, there’s short-term pain, but it’s not short-term pain in exchange for a long-run gain, by any economic model I can think of applying. It’s actually short-term pain in return for probably even bigger long-term pain. The story about how this gets better is really not there.
I’m not a purist free trader. I’m not a laissez-faire guy. I mean, there’s a kind of idealized version of the post–New Deal consensus, which is, leave economic activity up to the markets, and then we’ll have a social safety net. But that has never been enough. We always need some additional stuff. We always need some industrial policy. And I think we need it more than we have actually had. But the reality is that you still want to have a lot of [trade]. International trade has, for the most part, been a plus for the US economy. There were distributional issues, but even there, it’s probably been a net-plus for the great majority of workers. And you’d want to mitigate the parts that aren’t. So the idea that shutting it down is going to produce a better outcome 5, 10 years down the pike, there’s really no clear argument to that effect. What is true is that we have this additional overlay, which is that nobody knows what the world is gonna look like next year. And so this is a tremendous inhibiting force.
Normally, when people say that, well, protectionism causes recessions, my answer has been no. There are lots of reasons not to like protectionism, but there’s no story about how it causes recessions. But protectionism where nobody knows what it’s gonna be, where nobody knows what the tariff rates are gonna be next year, that could cause a recession. So we may have the first real tariff-induced recession that I’m aware of in history, like, now.
Elizabeth:
That will give us something to keep an eye on over the next year and more.
I’m gonna change topics a little bit. We started, a little bit, to talk about power in the economy. Who has it? Who doesn’t? It’s something that you’ve explored. In your book Conscience of a Liberal, you wrote something that I really like: “The New Deal did more than create a middle-class society. It also brought America closer to its democratic ideals by giving working Americans real political power and ending the dominant position of the wealthy elite.”
Particularly in the environment we’re in today, what do you think policymakers should be thinking about in terms of what we can do to bring that New Deal power lens both to this moment and to a moment where we would have the ability to set the rules to put our country on a better course?
Paul:
There are two ends to that. One is just giving ordinary working- or middle-class people effective vehicles to exert political influence. And of course, we have the vote. (There may be that there’s no “of course” about that, but in principle, at least we have votes.) But I don’t think we really realized how much a strong union movement contributed toward making democracy work better. You can say, well, why isn’t the individual right to vote enough? And the answer is, look, there’s collective action problems. Politics is completely pervasive of things that would be good if everybody did them, but maybe [there’s] no individual incentives. So organizing politically is always hard, and unions are a big force in that—or were. And to some extent, still are, but much less than they used to be. And that’s really important. We are a less democratic country in practice because we don’t have workers organized. That’s one end of it, and there may be other ways, although I have to admit that I’m not all that creative. I think the success of unions in really making America more American in the postwar generation is something that we have never managed to find other routes to do.
Then on the other hand, there’s the question of the influence of malefactors of great wealth. The influence of vast wealth. And you don’t have to get too much into current events to say, well, we can really see that. I have to say, going back now, it looks like the plutocrats of the Gilded Age, by contemporary standards, were remarkable in their restraint and discretion. They didn’t try to buy influence as openly as the plutocrats today do. So now there are things you can do. It’s funny that our great grandfathers were much more open than we are in saying that one of the purposes of progressive taxation is to actually limit extreme wealth. And not simply because it’s more money to serve the common people, but because extreme wealth distorts democracy. Woodrow Wilson was much more willing to say things that would be regarded as extremely radical leftism now.
So really to reclaim who we are as a nation, [who we] are supposed to be, we need to work on both those ends. We need to try to empower basically working Americans, ordinary workers to have a role. And maybe there are other things besides unions, but that’s the obvious route.
And then you also need to try both with rules about money and politics, but also perhaps, if we can eventually, [through] constraining policy that limits the accumulation of enormous fortunes. That also limits that distortion because we really are in a situation now where it’s—all of the warnings about, as FDR would have said, the powers of organized money seem far more acute now than they ever did in the past.
Elizabeth:
You mentioned ideas that once were acceptable to say in polite company that seem more radical now. This is sort of the business of Roosevelt, to think big about how we can solve these questions of the maldistribution of power in the economy and do them at a structural level. And how to make ideas about that part of the common sense. You’ve talked about how that is part of what happened with the New Deal—that New Deal institutions that were at first considered novel and radical, by the Eisenhower presidency had become [a] normal part of American life. How did that happen in your view, that change in the common sense? And what made them so enduring and what lessons can we find for today about how to reorient what seems impossible and what seems a normal part of life?
Paul:
One of the things that strikes me when I look at history, both of economic institutions and of economic ideas, is that lots of things seem radical and scary until people have had a chance to experience them. So there’s the famous Nancy Pelosi quote—often out of context—where she said that for people to really understand the Affordable Care Act, we have to pass it. And it wasn’t like we were going to pull one over on people. It was that, as long as it was merely a theoretical thing, as long as it was something in prospect, it was possible to tell scare stories about death panels and just say, what will this do? But then after a few years, it becomes part of the fabric of life. And then, by the time we actually came fairly close to losing it, people were outraged because even imperfect as it is, Obamacare is a terrifically important safety net for many people.
You see that on a much larger scale [with] the New Deal changes. So if you go back to when FDR did his really stem-winding address in 1936 about the “I welcome their hatred” thing. The thing that was really the flash point—[that] was widely portrayed on one side of the political spectrum as an outrageous step that would destroy the market economy—was actually not Social Security, but unemployment insurance. It was like, “oh my god. You’re gonna actually pay people when they don’t have jobs.” And it turned out that hey, that’s okay. In fact—unemployment insurance was the most important thing that got us through COVID with minimal hardship. And now there are people, there’s always people who want to do away with these safety net programs. But things that can be made to sound ominous and radical when no one has actually experienced them can, after a few years, become part of the landscape.
The New Deal first got us through the Great Depression, then got us through the war. And by the time the war was over, we had become a very different country—and I would say a much better country—in which people accepted that, yeah, we have a kind of public responsibility to limit extreme inequality, to limit extreme hardship.
Elizabeth:
I want to close this out with a note that you struck in your final New York Timescolumn last December. It was a tough one. You wrote, “optimism has been replaced by anger and resentment,” and that “the public no longer has faith that the people running things know what they’re doing, or that we can assume that they’re being honest.”
I think that applies to government. It also applies to a lot of institutions across the board. So here is my question for you: What do you think it will take to rebuild trust in public institutions? And also, on a more personal level, how do you find the hope that we can make it there from here?
Paul:
Well, there’s nothing like actually doing good to build trust. If we can find our way past the current turmoil, I think that there’s an underlying reservoir of optimism still in America. And if we can get our way past this, all of these things that led us to this rather scary moment, then a few years of good governance can actually do wonders. I mean, I’m older than you are, and certainly older than a lot of the people I deal with, but I remember the 1990s. And although there are many imperfections and lots of things, it’s hard to remember just how positive people were feeling about America by the end of that decade. And that was thrown away through a variety of bad decisions. But still, it’s not that distant. It’s not that inconceivable.
And so I would think that the way forward is to get people in power who really do try to use it for good, get good programs, get good policy, get decent people. And there’s a lot of strengths in America. And this atmosphere of distrust and feeling that everyone is out to get you is self-serving. That will go away fairly quickly if it’s demonstrably not true.
Now personally, I’m terrified. I’m not giving up, but you can see a lot of the things that we read about in the history books about how societies go wrong are no longer abstract. We can see those emotions, we can see those forces out there. But the truth is that a better environment is actually—people become more generous, more positive when things are going okay. And we really don’t want to have a situation where [this] zero-sum, “I’ve got mine, I don’t want anybody else to get it” thinking is validated by experience. So, try to make things work is how we go from here.
Elizabeth:
I can tell you one of the things that gives me hope, Paul, is that in a moment where we are watching some institutions capitulate and fold in a way that is really disheartening, we also have some voices that are getting louder, not softer, and I think one of them is yours. So I wanna say how appreciative I know I am personally and how excited I know the [Roosevelt] Institute is generally to have you on as a senior fellow, in part because I really do think you are a voice out there that’s making sense of what’s happening. That’s helping us put into a context that we can understand the flood of news that we are experiencing. And, again, to demonstrate what it looks like to be a consistent voice with good analysis and moral clarity about what’s happening now, and also who we have been in the past and who we could be again. So we really appreciate your work, and we really appreciate you taking the time to chat today.
Hospitals across the country are starting to reckon with the effects President Trump’s tariffs are having on medical supplies like syringes and PPE, and in some cases freezing spending and making other contingencies.
Why it matters:
A global trade war could bring a return to pandemic disruptions if imported goods that health systems purchase in high volumes from China can’t be replenished. And there’s still the prospect of Trump’s tariffs on pharmaceuticals.
Ultimately, experts warn, supply disruptions and price hikes could drive up the price of patient care.
“Tariffs have the potential to add a layer of complication to [hospitals’] ability to get all of those medical goods, the drugs and the devices that they need to deliver care,” said Akin Demehin, the American Hospital Association’s vice president of quality and patient safety policy.
State of play:
So far, there have been no widespread shortages or price spikes.
What most concerns the providers is a reliance on medical gear from China. Enteral syringes used to deliver drugs or nutrition through feeding tubes have no alternative sources and are subject to a 245% tariff, according to group purchasing organization Premier.
“With the consumables — the gowns, the gloves, masks … hospitals go through an enormous volume of those every year. Certainly there is some risk there,” said Kyle MacKinnon, senior director of operational excellence at Premier.
The pandemic spawned more domestic manufacturing of medical gear — and an anticipated reduction in dependence on overseas suppliers. But many of the startups have since disappeared, the New York Times reported, leaving the health system once again vulnerable to supply shocks amid threats like measles outbreaks and avian flu.
Between the lines:
The situation could be further complicated by tariffs on pharmaceuticals that could weigh particularly hard on imported generics.
Cancer and cardiovascular medications, as well as immunosuppressives and antibiotics, are of great concern to hospitals, per a letter the American Hospital Association sent earlier this year to Trump. MD Anderson Cancer Center in Houston instituted a hiring freeze due to uncertainty, in part, from the tariffs’ impact on drug prices.
Medical devices are also facing a high level of exposure with roughly 70% of U.S. marketed medical devices manufactured exclusively outside the U.S., Premier wrote.
The American Hospital Association on Wednesday pointed to data that found 82% of health care experts expect tariff-related expenses to raise hospital costs by at least 15% over the next six months.
94% of health care administrators expected to put off equipment upgrades, in response.
Reality check:
Many hospitals may still be insulated from the worst effects because of long-term purchasing contracts.
Universal Health Services CFO Steve Filton said during an earnings call that three-quarters of the company’s supply chain had fixed contracted prices, Fierce Healthcare reported.
The company had begun to see “fees or stipends” on invoices with vendors with fixed contracted prices but had been ignoring them. “At the moment, it feels like there’s not a great deal of pressure,” he said.
But a dramatic reduction in goods from a major trading partner will eventually hit multiple players needing to replenish inventories, experts predict.
What to watch:
Hospitals are among trade groups lobbying for tariff exemptions for critical medical supplies, including drugs. One question is whether pharmaceutical manufacturers can limit their exposure by “reshoring” more intellectual property in order to pay more U.S. taxes, Leerink Partners wrote in an investor note on Wednesday.
As supplies that have been stockpiled by hospitals begin to run low or as contracted prices expire, the true costs will begin to be felt.
“We especially worry about the potential impacts to vulnerable and to rural health care providers who already are operating on thin margins, and for whom changes in the cost of those kinds of goods could have a disproportionate impact,” Demehin said.
Judge Mary McElroy of the U.S. District Court for the District of Rhode Island ruled Friday to extend a temporary restrainingorder she issued last month that barred the Trump administration from wiping out pandemic-era funding to Washington D.C., and 23 Democratic-led states.
States behind the lawsuit argued that HHS acted unlawfully by abruptly ending the grant funding without any analysis of the move’s benefits or consequences.
HHS said that the $11.4 billion worth of grant funding was mainly used to pay for testing, vaccines and hiring community health workers to combat COVID-19. And the agency argues since the pandemic is over, state and local health agencies no longer need that money.
Although the grants were initially authorized by COVID-19 relief legislation, the funds were allowed to be spent on other efforts like combating the ongoing measles outbreak in Texas. State and local health departments said the funds were already being used for such efforts.
McElroy ruled that the agency does not have the legal right to unilaterally withhold the grant funding that has already been allocated to localities, especially in states where that funding has been used to build essential health programs.
She wrote in her ruling that the funding cuts would “result in devastating consequences to their local jurisdictions … would constrain the States’ infectious disease research, thwart treatment efforts to those struggling with mental health and addiction, and impact the availability of vaccines to children, the elderly and those living in rural areas.”
Moody’s on Friday downgraded its credit rating of the United States by a notch to “Aa1” from “Aaa”, citing rising debt and interest “that are significantly higher than similarly rated sovereigns.”
The rating agency had been the last among major ratings agencies to keep a top, triple-A rating for U.S. sovereign debt, though it had lowered its outlook in late 2023 due to wider fiscal deficit and higher interest payments.
“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s said on Friday, as it changed its outlook on the U.S. to “stable” from “negative.”
Since his return to the White House on January 20, President Donald Trump has pledged to balance the U.S. budget while his Treasury Secretary, Scott Bessent, has repeatedly said the current administration aims to lower U.S. government funding costs.
The administration’s mix of revenue-generating tariffs and spending cuts through Elon Musk’s Department of Government Efficiency have highlighted a keen awareness of the risks posed by mounting government debt, which, if unchecked, could trigger a bond market rout and hinder the administration’s ability to pursue its agenda.
The downgrade comes as Trump’s sweeping tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress.
“We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” Moody’s said, while forecasting federal debt burden to rise to about 134% of GDP by 2035, compared with 98% in 2024.
The cut follows a downgrade by rival Fitch, which in August 2023 also cut the U.S. sovereign rating by one notch, citing expected fiscal deterioration and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills.
Whether they owe providers directly or carry the financial burden in long-term loans and credit card bills, an estimated 41 percent of Americans hold some form of medical debt.
“Medical debt is not inevitable. Rather, it is the product of decades of dysfunctional health-care policy, a market-oriented insurance system, and a patchwork of safety net programs with notable gaps,” writes Stephen Nuñez, Roosevelt’s director of stratification economics, in a new brief.
Health-care policy permeates every stage of American life—whether it’s students applying for Medicaid, workers struggling to find insurance coverage between jobs, or the elderly signing up for Medicare—and the scale of the resulting debt crisis is massive. But these problems are also solvable.
“Biden administration efforts over the past several years have shown that our health-care system can be strengthened to extend insurance to millions more working-class people and help millions more upgrade their insurance coverage with better plans, at incrementally small costs,” Nuñez explains. “But the Trump administration is now poised not only to undo these steps but to enact savage cuts to federal health-care spending that will supercharge the medical debt crisis and together leave millions of people, disproportionately Black and Hispanic, uninsured and underinsured.”
Ultimately, a crisis created by policy choices must also be solved by policy choices:
In 2025, Congress should protect Medicaid and the American Rescue Plan tax credits.
In upcoming state legislative sessions, the 10 states withholding federal Medicaid funds from their residents should expand coverage as stipulated in the Affordable Care Act.
In the coming years, the federal government should implement a comprehensive plan to close the gaps in the American health insurance system.
Congress and the Trump administration are trying to limit how much states can tax hospitals, nursing homes and other providers to help cover the cost of their Medicaid programs.
That could tie governors’ and legislatures’ hands at a critical moment.
Why it matters:
The taxes have been a friction point for decades, but they’re deeply ingrained in the safety net program. Every state except Alaska levies at least one type of provider tax to help cover the non-federal part of Medicaid spending.
How it works:
States typically cover about 30% of Medicaid costs annually and use general funds along with taxes on hospitals, nursing homes and even managed care organizations. The more they collect, the more they receive in federal matching funds.
That’s key in the current debate over federal Medicaid spending, with projections showing that limiting provider taxes could reduce federal outlays by hundreds of billions over a decade.
The stakes are particularly high for red states. Mississippi, South Carolina, Utah and Alabama would all lose more than one-third of their federal Medicaid funding without the ability to levy provider taxes.
State of play:
The House Energy and Commerce Committee on Wednesday advanced a sweeping overhaul of Medicaid that would prevent states from establishing new provider taxes and freeze those taxes already on the books at their current rates.
Democrats unsuccessfully fought the move during a marathon 26-hour markup. But the committee ultimately advanced the restrictions and the rest of the legislation along party lines.
The Congressional Budget Office estimated the restrictions would save about $87 billion through 2034.
Meanwhile,the Trump administration this week proposed additional restrictions on how states can structure their provider taxes. Seven states currently have waivers for provider taxes that would have to be restructured under the new policy, mostly for taxes on insurers.
That proposal alone, which mirrors another provision in the House reconciliation bill, would reduce federal Medicaid spending by $33 billion over five years, CMS estimates.
“Every state is going to have a really different situation in front of them,” said Morgan Craven, a director in ATI Advisory’s state program and policy practice.
“Because it’s been such a part of the fabric of how so many states finance and deliver care, undoing that is going to be really complex, and states will need time and will need a really strategic lens for how they can sustainably undo these policies,” she added.
Zoom out:
Hospitals and patient advocates are concerned about the effects of such a foundational change in Medicaid financing.
“By freezing the taxes, the proposal ignores circumstances that drive increased health care costs including inflation, increased labor and drug costs, increased utilization and increased population demand for service,” the American Hospital Association wrote in a statement to the Energy and Commerce Committee this week.
Yes, but: Hospital stocks actually gained, on the premise that the House’s Medicaid changes could have been more onerous, per the Wall Street Journal.
And the CMS proposal suggested that the Trump administration won’t further try to dock provider taxes outside of congressional efforts — good news for hospital investors, Capstone senior vice president Wylie Butler wrote in an analyst note.
What to watch:
There are some signs that Senate Republicans aren’t as interested in cracking down on provider taxes as their counterparts in the House.
“It’s not that I think that provider taxes are good; it’s that the Medicaid reimbursements have been insufficient,” Sen. Susan Collins (R-Maine) told reporters this week.
“Our rural hospitals in my state and across the country are really teetering.”
Millions of people could lose coverage under potential policy changes to Medicaid under consideration by Republicans in Congress, according to a letter sent to lawmakers this week from the Congressional Budget Office.
One option, reducing the federal government’s share of costs for enrollees covered under Medicaid expansion, would reduce the federal deficit by $710 billion over the next decade. But in 2034, 5.5 million people would be removed from the safety-net program, with 2.4 million of these enrollees becoming uninsured, according to the CBO.
Another potential policy, placing a per-enrollee cap on federal spending, would remove 5.8 million people from Medicaid. Nearly 3 million of those people would lose coverage entirely. The policy would reduce the deficit by $682 billion, the analysis found.
Dive Insight:
Debates surrounding potential cuts to Medicaid — and their implications for patients and providers — have been heating up in Congress for weeks.
Last month, lawmakers approved a budget resolution that called for the House Energy and Commerce Committee, which oversees Medicare and Medicaid, to find $880 billion in savings. That budget goal is likely impossible to hit without targeting major healthcare programs under the committee’s purview, according to an earlier analysis published in March by the CBO.
The committee is expected to meet next week to mark up its portion of the reconciliation package and hash out legislation.
However, cutting Medicaid is a politically contentious move for Republican lawmakers. Some legislators have pushed back on potential cuts, and others have argued they’ll preserve Medicaid for the most vulnerable by targeting fraud, waste and abuse in the safety-net insurance program.
But Rep. Frank Pallone Jr., D-N.J., and Sen. Ron Wyden, D-Ore., who requested the latest CBO analysis, said the policies will ultimately limit benefits and result in coverage losses.
“This analysis from the non-partisan, independent CBO is straightforward: the Republican plan for health care means benefit cuts and terminated health insurance for millions of Americans who count on Medicaid,” Wyden said in a statement. “Republicans continue to use smoke and mirrors to try to trick Americans into thinking they aren’t going to hurt anybody when they proceed with this reckless plan, but fighting reality is an uphill battle.”
The letter from the CBO analyzes five potential policy options for Medicaid: setting the federal matching rate for the expansion population at the same rate as other enrollees; limiting state taxes on providers; setting federal caps on spending for the entire Medicaid population or just the expansion group; and repealing two regulations linked to eligibility and enrollment.
Most of the options reduce the funds available to states, according to the CBO. The agency expects states will replace about half of the reduced support with their own resources, and then reduce spending by cutting provider payment rates, reducing optional benefits and cutting enrollment.
For example, if Congress decides to limit provider taxes, where states levy taxes that finance a portion of their Medicaid spending, thatwould result in 8.6 million fewer people enrolled in Medicaid in 2034, including nearly 4 million becoming uninsured. The move would ultimately lessen the federal deficit by $668 billion, as the government would offer reimbursement for lower state spending, the analysis found.
Another option, placing a cap on federal spending for the expansion population, would save $225 billion — but 3.3 million people would lose Medicaid coverage. Repealing regulations that aim to reduce barriers to enrollment and simplify the renewal process would reduce the federal deficit by $162 billion over the next decade, but 2.3 million fewer people would be enrolled in Medicaid, the CBO found.
HENRY KOTULA 