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Author Archives: henrykotula
Pressure points: 5 ways the shutdown could end
Congress on Wednesday enters the eighth day of the federal shutdown with neither party giving an inch and the path to a resolution nowhere in sight.
But something will have to give if lawmakers hope to reopen the government in any timely fashion, and that movement will likely be the result of external forces exerting pressure on one party — or both of them — to break the deadlock.
That’s been the case in the protracted shutdowns of years past, when a number of outside factors — from economic sirens to public frustration — have combined to compel lawmakers to cede ground and carry their policy battles to another day.
Public sentiment
Among the most recycled quotes on Capitol Hill is attributed to Abraham Lincoln: “Public sentiment is everything.” The trouble, in these early stages of the shutdown fight, is that the verdict is still out on where that sentiment will land.
That uncertainty has led both parties to dig in while they await more concrete evidence of which side is bearing the brunt of the blame. But those polls are coming, and if history is any indication, they will be a potent factor in forcing at least one side to shift positions for the sake of ending the shutdown.
That was the case in 2013, when Republicans demanding a repeal of ObamaCare saw their approval ratings plummet — and dropped their campaign after 16 days without winning any concessions. A similar dynamic governed the shutdown of 2018 and 2019 — the longest in history — when Republicans agreed to reopen the government without securing the border wall money they’d insisted upon.
A recent CBS poll found that 39 percent of voters blame Trump and Republicans for the shutdown; 30 percent blame congressional Democrats; and 31 percent blame both parties equally.
A Harvard/Harris poll also showed that more respondents blame Republicans, 53 to 47 percent, but nearly two-thirds believe Democrats should accept the GOP’s stopgap funding bill without a fix for the expiring Affordable Care Act premium subsidies.
The ambiguity of those sentiments has heightened the partisan blame game — and has given both sides an incentive to hold the line until a clearer picture emerges.
Air traffic controller issues
It was nearly seven years ago that the 35-day shutdown ended after travel chaos and short-staffing of air traffic controllers brought immense strain on the aviation sector — and trouble is already starting up again.
An uptick of air traffic controllers calling in sick Monday forced numerous flight delays and cancellations, prompting concerns that a reprisal of what happened in 2019 could be starting up again.
“We should all be worried,” said Sen. Mike Rounds (R-S.D.), who was part of informal rank-and-file talks last week about a possible resolution.
Transportation Security Administration workers and air traffic controllers are all considered essential workers, with the Department of Transportation announcing more than 13,000 controllers are set to work without pay during this shutdown.
Those calling in sick prompted delays at numerous big airports, including Denver International Airport and Newark Liberty International Airport. The Hollywood Burbank Airport went without any air traffic controller on-site for nearly six hours Monday.
Just like the record-setting 2019 shutdown, Democrats are counting on this issue creating problems for Trump and Republicans. Sen. Chris Van Hollen (D-Md.) told reporters that he and other local officials are holding a press event at Baltimore/Washington International Thurgood Marshall Airport on Wednesday to highlight the rising issue.
“It had a direct impact on people’s abilities to get around the country,” Van Hollen said of the 2019 shutdown issue. “Donald Trump shut down the government in his first term, and he needs to end the shutdown he ended in the second term.”
Frozen paychecks
The central, defining factor of any shutdown is the scaling back of federal services and the siloing of hundreds of thousands of federal employees. Some of those workers are deemed “essential,” meaning they still have to come to work, while others are furloughed, meaning they’ll stay at home. But both groups share the unenviable position of not being paid until the government reopens.
That reality will hit home Oct. 10, when the first round of federal paychecks will fail to go out. The most immediate impact, of course, is on those workers and their families, who will have to find alternative ways to pay bills and make ends meet.
But the pain will also reverberate through the broader economy, as federal workers stay at home and avoid the types of routine daily purchases — lunches, cabs, haircuts — that can make local economies hum.
The numbers are enormous.
The White House Council of Economic Advisers has estimated that every week of the shutdown will reduce the nation’s gross domestic product by $15 billion.
“This is resulting in crippling economic losses right now,” Speaker Mike Johnson (R-La.) warned Tuesday. “A monthlong shutdown would mean not just 750,000 federal civilian employees furloughed right now, but an additional 43,000 more unemployed Americans across the economy, because that is the effect, the ripple effect, that it has in the private sector.”
In a typical shutdown, furloughed workers receive back pay for the days lost during the impasse, providing a delayed bump in economic activity. But even that customary practice is now in question in the face of a threat from Trump’s budget office to withhold back pay for certain workers. Others, Trump has said, will be fired altogether.
The combination is sure to exacerbate a volatile economy that’s already been roiled by declining consumer confidence, sinking job creation and Trump’s tariffs. Whichever party suffers the blame for the economic strain will come under the most pressure to cave in the shutdown fight.
Military paychecks
Pay for members of the military has been a constant talking point in past shutdowns, and that’s no different this go-around.
Military service members could miss their paychecks Oct. 15, a date front and center for lawmakers.
Johnson huddled with Senate Republicans on Tuesday during their weekly policy luncheon and told reporters afterward that he is considering having the House vote on a bill to pay troops.
“I’m certainly open to that. We’ve done it in the past. We want to make sure our troops are paid,” Johnson said, noting one GOP member has filed legislation aimed at doing that. “We’re looking forward to processing all of this as soon as we gather everybody back up.”
The Speaker added that the shutdown would need to end by Monday in order to process the paychecks by Oct. 15.
One problem for Johnson, though, is that the House is not slated to return until Monday at the earliest, and he has indicated that he will keep the chamber out of session until the shutdown is over.
Democrats indicated they are also worried about those impacts, but say Johnson has bigger fish to fry.
“I’m concerned about all the impacts of a shutdown. … There’s a lot of impacts of a shutdown,” Sen. Chris Murphy (D-Conn.) said. “How on earth does Mike Johnson say anything with a straight face right now when he won’t even bring his members here to vote on anything? How does he know what he can deliver if his members aren’t even here?”
“It’s not worth listening to anything the Speaker says until he tells his people to get back and show up for work.”
Health care factors
Democrats have made health care the lynchpin of their opposition to the Republicans’ short-term spending bill, demanding a permanent extension of enhanced Affordable Care Act (ACA) subsidies set to expire at the end of the year.
Citing that expiration date, GOP leaders have refused to negotiate on the issue as part of the current debate, saying there’s time to have that discussion after the government opens up.
“That’s a Dec. 31 issue,” Johnson told reporters Tuesday.
But there are several related factors that will surface long before Jan. 1, and they could put pressure on GOP leaders to reconsider their position in the coming weeks.
For one thing, private insurance companies that sponsor plans on the ObamaCare marketplace are already sending out rate notices to inform patients of next year’s costs. Those rates are crunched based on current law — not predictions about what Congress might do later — meaning they’re being calculated under the assumption that the enhanced subsidies, which were established during the COVID-19 pandemic, will expire Jan. 1.
That distinction is enormous: If Congress doesn’t act, the average out-of-pocket premium for patients enrolled in ObamaCare marketplace plans would jump by 75 percent, according to KFF. Those are the figures patients are already getting in the mail. And faced with drastically higher rates, many are likely to buy lesser coverage next year — or no coverage at all.
Adding to the time squeeze, the ACA’s open enrollment period begins Nov. 1, meaning patients will begin making their decisions long before GOP leaders say they’re ready to act.
“Insurers aren’t waiting around to set rates for next year,” Senate Minority Leader Chuck Schumer (D-N.Y.) warned this week. “They’re doing it right now — not three months from now.”
How The Shutdown Impacts Healthcare
https://www.forbes.com/sites/innovationrx/2025/10/08/how-the-shutdown-impacts-healthcare/
Hospitals and health systems across the country are telling some Medicare and Medicaid patients that they can’t schedule telehealth appointments due to the federal government’s shutdown, now heading into its second week. That’s because Medicare reimbursement for telehealth expired on September 30, leaving health systems with the choice of pausing such visits or keeping them going in hopes of retroactive reimbursement after the shutdown ends.
Reimbursement for the Hospital at Home program, which allows patients to receive care without being admitted to a hospital, also lapsed with the shutdown. That led to providers scrambling to discharge patients under the program or admit them to a hospital. Mayo Clinic, for example, had to move around 30 patients from their homes in Arizona, Florida and Wisconsin to its facilities.
At issue in the government shutdown is healthcare, specifically tax credits for middle- and lower-income Americans that enable them to afford health insurance on the federal exchanges set up by the Affordable Care Act. Democrats want to extend those tax credits, which are set to expire at the end of the year, while Republicans want to reopen the government first and then negotiate about the tax credits in a final budget.
The impasse has prevented the Senate from overcoming a filibuster, despite a Republican majority. Around 24 million Americans get their health insurance through the ACA, and the loss of tax credits will cause their premiums to rise an average of 75%–and as high as 90% in rural areas–and likely cause at least 4 million people to lose coverage entirely.
The government’s closure has reverberated through its operations in healthcare. The Department of Health and Human Services has furloughed some 41% of its staff, making it harder to run oversight operations. CDC’s lack of staff will hinder surveillance of public health threats. And FDA won’t accept any new drug applications until funding is restored.
When the government might reopen remains unclear. Most shutdowns are relatively brief, but the longest one, which lasted 35 days, came during Donald Trump’s first term. Senate majority leader John Thune, R-S.D., and Speaker of the House Mike Johnson, R-La., have both said they won’t negotiate with Democrats, and the House won’t meet again until October 14. Bettors on Polymarket currently expect it to last until at least October 15. Pressure on Congress will increase after that date because there won’t be funds available to pay active military members.
How Insurers That Own Providers Can Game The Medical Loss Ratio Rules
Recent analysis of spending data from five states with health care cost growth targets—Connecticut, Delaware, Massachusetts, Oregon, and Rhode Island—revealed an unexpected trend in 2023: Spending grew sharply in service categories that have historically increased more slowly. The most notable increase was in non-claims payments—payments made through financial arrangements between providers and health insurers that are not tied to individual claims. These payments rose by an average of 40.4 percent across the five states, driven largely by increases in Medicare Advantage non-claims spending.
Increases in non-claims payments are often seen as a positive sign. They suggest a shift away from fee-for-service payments toward alternative payment methods (APMs)—value-based payment models that incentivize care coordination, efficiency, and a focus on outcomes. However, it’s unclear what is included in these non-claims payments. A closer examination of this issue revealed a less visible but important concern: the role of insurer-provider vertical integration in potentially weakening the effectiveness of Medical Loss Ratio (MLR) requirements for insurers.
MLR Requirements
Medical Loss Ratio is a measure of the percentage of premium dollars that a health insurer spends on medical care and quality improvement activities—as opposed to administration, marketing, or profit. Since 2011, the Affordable Care Act has required insurers to maintain an MLR of at least 80 percent in the individual and small group markets, and 85 percent in the large group market. That is, for every dollar spent by an insurer, 80 cents or 85 cents—depending on the market—must go toward actual care and improvement. Insurers that don’t meet these required thresholds must pay a rebate to consumers for the premium dollars that were not spent on health care, less taxes, fees, and adjustments. In 2014, the Centers for Medicare and Medicaid Services instituted a requirement for Medicare Advantage and Part D plans; they must maintain an MLR of at least 85 percent or rebate any excess revenues to the federal government.
These MLR requirements aim to ensure that the majority of premium revenue is used to deliver or improve care. However, a significant loophole allows insurers that have “vertically integrated” with providers to inflate reported medical spending. This reduces their rebate liability while increasing held profits. Since the MLR provisions took effect in 2012, an estimated $13 billion in rebates have been issued—highlighting the strong incentive insurers have to minimize these payouts.
The MLR Loophole
A company is vertically integrated when it owns or controls more than one entity in the supply chain. For insurers, this means acquiring physician practices, outpatient clinics, and even entire health systems. As a result of this vertical integration, payments to these affiliated providers count as medical spending when calculating an MLR for the insurer. However, there is no MLR requirement for providers. This creates an incentive for the insurer to direct spending to these affiliated provider entities, which may charge inflated prices, allowing the insurer to increase its reported MLR without delivering more care or improving quality.
Consider a hypothetical scenario: Company X owns Health Insurer A and Clinic Y. There’s another health insurer, B, in the market, but it is not owned by Company X. It costs Clinic Y $300 to deliver a particular service.
When a patient covered by Health Insurer B receives this service at Clinic Y, Insurer B pays the clinic $300 for delivering the service. But when another patient covered instead by Health Insurer A receives the same particular service at Clinic Y, Health insurer A pays the clinic a lot more: $500. The full $500 is counted as medical spending in Health Insurer A’s MLR calculation, even though the additional $200 didn’t buy any more services or any better care. It just represents internal profit for the vertically integrated entity, Company X, that is captured on the provider side of the business, and not true care delivery (see exhibit 1 below).
Exhibit 1: Incentives for vertically integrated insurers to direct spending to these affiliated provider entities
Source: Authors’ analysis.
The structure of APMs exacerbates this problem by making it easier to mask price increases. In fee-for-service systems, a price increase shows up directly. However, in APM payments that are per capitation or per episode, providers receive lump-sum payments for a group of services or a population. There is no service breakdown for these APMs. These lump-sum payments can facilitate investment in population health improvement, but if vertically integrated entities are exploiting the MLR loophole by increasing internal payment rates, the use of APMs make such profit maximization easier to conceal.
This dynamic reveals a limitation of the MLR rules. When the insurer is also the provider, there is less transparency into how health care dollars are actually allocated. The vertically integrated insurer and provider entity can also artificially inflate prices for medical services, worsening the nation’s health care affordability problem.
Potential Impact
Currently, there is no standardized way to assess the extent to which insurers that own or are otherwise affiliated with clinics and health systems are taking advantage of this loophole, or how much the practice contributes to high health care prices. However, with the growing trend toward insurer-provider vertical integration, the potential cost implications are significant.
Insurers That Own Providers Capture A Significant Share Of Commercial And Medicare Advantage Enrollment
In the large-group commercial market, the three largest insurers—Kaiser Permanente, UnitedHealthcare, and Elevance—held a combined 39 percent of the national market share in 2023. In the Medicare Advantage market, the top five plans—UnitedHealthcare, Humana, CVS Health/Aetna, Elevance, and Centene—accounted for 68 percent of total enrollment in 2023.All of these insurers operate within larger parent companies that own or control a range of health care provider entities.
For example, UnitedHealth Group, UnitedHealthcare’s parent company, also owns OptumHealth, which employs or manages more than 90,000 physicians across the country. The recently released Sunlight Report on UnitedHealth Group shows that it grew more than 10 times its size over the past decade, and the company now consists of nearly 3,000 distinct legal entities.
UnitedHealth Group is not the only insurer pursuing this strategy of vertical integration. Elevance Health (formerly Anthem, Inc.) owns Carelon, a health services provider that claims to serve one in three people in the US. CVS Health encompasses retail pharmacy storefronts (CVS Pharmacy), a pharmacy benefits manager (CVS Caremark), a health insurer (Aetna), in-store clinics (MinuteClinic), and provider groups such as Oak Street Health and Signify Health. This high level of consolidation gives these companies significant control over how care is delivered, priced, and reported.
Transactions Between Insurers And Their Affiliated Provider Entities Are Substantial And Growing
A 2022 analysis by the Brookings Institution suggests that in Medicare Advantage plans, internal transactions between affiliated insurers and providers can account for spending that ranges from about 20 percent to as much as 71 percent of the total. Cost growth target states’ reports on 2023 spending growth appear to confirm these trends within the Medicare Advantage market. Upon examination of the drivers behind the sharp increases in non-claims payments, a clear pattern emerged. In Connecticut, UnitedHealthcare launched a program that paid its affiliated provider group, which was then called OptumCare Network, a fixed percentage of Medicare Advantage premiums to cover care and care coordination. Oregon reported that the rise in Medicare Advantage non-claims payments was largely due to UnitedHealthcare shifting a significant share of its claims payments into non-claims spending through Optum.
These trends are not limited to Medicare Advantage, however. UnitedHealth and other major insurers such as Elevance and Aetna operate across multiple markets, raising concerns about similar dynamics in the commercial market. A recent analysis by Seth Glickman, a physician and former insurance executive, shows that in the past five years, UnitedHealth Group’s reported corporate “eliminations”—intercompany revenues reported in its consolidated financial statements that represent all books of business—more than doubled, increasing from $58.5 billion to $136.4 billion. At the same time, the share of Optum’s revenue derived from UnitedHealthcare, as opposed to unaffiliated entities, increased by nearly 50 percent.
Prices Of Health Care Services From Vertically Integrated Insurers And Providers Are Higher Than Prevailing Market Prices
Growing evidence also suggests that insurers are paying more for services provided through their affiliated entities than for those delivered by non-affiliated entities. A STAT News investigation revealed that UnitedHealth Group reimburses its own physician groups considerably more than other providers in the same markets for the same set of services. Similarly, a Wall Street Journal investigation showed how certain insurers and pharmacy benefit managers are generating substantial profits by overcharging for generic drugs within their own networks. The analysis found that for a selection of specialty generic drugs, Cigna and CVS’s prices were at least 24 times higher, on average, than the drug manufacturers’ prices.
Stronger Oversight Is Needed
The potential impact of these trends is so significant that policy makers are beginning to take notice. In 2023, Senators Elizabeth Warren (D-MA) and Mike Braun (R-IN) requested that the Department of Health and Human Services Office of Inspector General evaluate the extent to which vertical integration is increasing costs and allowing insurers to bypass federal MLR requirements. Earlier this year, Representatives Lloyd Doggett (D-TX) and Greg Murphy (R-NC) submitted a bipartisan request to the Government Accountability Office—Congress’s independent, nonpartisan oversight agency—urging an investigation into the same issue in Medicare Advantage. It is unclear whether these investigations have been initiated.
Some states—understanding the role that market consolidation plays in driving up health care prices—have made efforts to strengthen oversight. In 2024, 22 states passed laws related to health system consolidation and competition. However, historically, these efforts have largely focused on promoting competition, preventing monopolies, and limiting dominant providers’ ability to charge prices well above competitive levels. Little attention has been given to the MLR loophole and the ability of vertically integrated insurers to report profits as medical care.
As states pursue policies to slow cost growth, they must apply greater scrutiny of vertical integration arrangements—especially around internal financial transactions between affiliated entities. States should require insurers to report detailed information on transactions between related parties, including non-claims-based APMs to affiliated providers and the pricing methodology used to develop these APMs. This reporting could be integrated into states’ premium rate review processes, allowing regulators to assess whether such transactions reflect actual medical costs. States could then modify or deny rate increases where evidence points to gaming of MLR rules.
Policy makers should also reassess whether, given these market dynamics, current regulatory tools such as the MLR are adequate. Addressing these issues will be essential for maintaining the integrity of cost containment efforts and ensuring that health care dollars are spent on delivering meaningful care.
Cartoon – Affordable Healthcare
Cartoon – Affordable Medicine
Government shutdown puts hospital funding in peril
Hospitals in rural and underserved areas could lose out on billions of dollars in federal funding if the government shutdown drags on.
Why it matters:
Many hospitals already run on tight margins and are bracing for fallout from Medicaid cuts and other changes in the One Big Beautiful Bill Act.
The big picture:
The immediate concern is health policies that expired when government funding lapsed at midnight Tuesday. Health providers and their lobbyists expect Congress will make providers whole in an eventual funding deal and reimburse claims made during the shutdown.
- But that’s not a given. And uncertainty about how long the shutdown will go on is leaving some of the most financially vulnerable hospitals in limbo.
- “There’s just that underlying fear of, oh my gosh, what if they can’t come together on any agreement to open the government again, and we all get looped into it,” said Kelly Lavin Delmore, health policy adviser and chair of government relations at Hooper Lundy Bookman.
State of play:
Safety-net hospitals face an $8 billion cut to Medicaid add-on payments in the absence of a government funding package.
- The cuts to so-called disproportionate share hospital payments originate from the Affordable Care Act.
- Congress has postponed the pay reductions more than a dozen times, but the most recent delay expired on Tuesday and Congress hasn’t signaled if or when it will step in.
The add-on payments are made quarterly, so hospitals may not feel immediate effects, even if Congress doesn’t further delay the cuts, according to the American Hospital Association. But state Medicaid agencies could let the cuts take place if they think lawmakers’ standoff will continue indeterminately, per AHA.
- The uncertainty “really impacts that predictability and reliability as it relates to funding,” said Leonard Marquez, senior director of government relations and legislative advocacy at the Association of American Medical Colleges.
- If the cuts do take effect, it would significantly hamper hospitals’ ability to care for their communities, Beth Feldpush, senior vice president of advocacy and policy at America’s Essential Hospitals, told Axios in a statement.
Additionally, two long-running programs that give pay bumps to rural hospitals expired on Wednesday.
- One program adjusts Medicare payment upward for rural hospitals that discharge relatively few patients.
- The other gives increased reimbursement rates to rural hospitals that have at least 60% of patients on Medicare.
- They were designed to keep care available in communities that might otherwise not be able to support a hospital.
- Both programs have expired in the past, only to be brought back to life with claims paid retroactively.
Zoom out:
Hospital industry groups have also been urging Congress to extend enhanced Affordable Care Act tax credits, which have become a flashpoint in the shutdown fight. Democrat lawmakers have so far refused to pass GOP-led funding proposals that don’t include a full extension of the subsidies.
What they’re saying:
AHA is urging Congress to find a bipartisan solution and reopen the government, a spokesperson told Axios.
- “Patient care doesn’t go away with the loss of coverage and the loss of funding,” said Lisa Smith, vice president of advocacy and public policy for the Catholic Health Association.
- “I just don’t know how long that’s going to be sustainable for our facilities that are really already operating on the margins.”
Hospital expense growth is outpacing revenue
https://www.healthcarefinancenews.com/news/hospital-expense-growth-outpacing-revenue
Hospital financial and operational performance could be threatened by a trend showing a growth in the cost of expenses outpacing that of revenue, according to a Kaufman Hall National Hospital Flash Report.
“While performance has generally been strong this year, profitability has decreased slightly over the past few months. Bad debt and charity care also continue to rise. In addition, operating margins for health systems are about one percent lower than hospital margins. This points to potential challenges for hospitals and health systems to weather future uncertainty,” said Erik Swanson, managing director and group leader, Data and Analytics, at Kaufman Hall.
WHY THIS MATTERS
What the report shows is that hospital performance has softened in recent months.
While patient volumes and revenues are trending upward, bad debt and charity care are also elevated.
Expense growth is outpacing revenue growth, with non-labor expenses putting pressure on hospitals. Supplies are up 26% compared to 2022, and drugs costs are up 31% compared to 2022.
Margins have improved over prior years, though there has been some softening in recent months. Given an uncertain future outlook, many hospitals are taking steps to build long-term resiliency, the report said.
Operating margins in August 2024 were 4.6% but fell to 5% in December 2024. Starting in January, margins jumped to 6.9% and remained in the 6.2% range until this past June, when they fell to 5.5% and in July, 5.3%.
Profitability is down from 48% in July 2024 to 27% this year.
THE LARGER TREND
Data for the report came from more than 1,300 hospitals sampled on a monthly basis from Strata Decision Technology.
The sample of hospitals for the report represents all types of hospitals in the United States, from large academic to small critical access hospitals, geographically and by bed size.
Kaufman Hall, a Vizient company, provides advisory services and management consulting.
CVS Health’s Omnicare files for Chapter 11 bankruptcy
https://www.healthcarefinancenews.com/news/cvs-healths-omnicare-files-chapter-11-bankruptcy
The financial challenges are linked to a lawsuit charging the PBM with filing more than 3.3 million false claims from 2010 to 2018.
CVS Health subsidiary Omnicare has filed for Chapter 11 bankruptcy due to issues related to its recent litigation in the U.S. District Court for the Southern District of New York, the company said this week.
A federal judge in July determined that Omnicare had illegally charged the U.S. government for prescription drugs and ordered it to pay more than $948 million in damages and penalties. Omnicare filed more than 3.3 million false claims between 2010 and 2018, in violation of the False Claims Act, according to court documents.
The original lawsuit had been filed by a former Omnicare pharmacist, who had accused the pharmacy benefit manager (PBM) of improperly billing Medicare, Medicaid and the Tricare military program for more than $135 million in drugs that weren’t covered.
The Chapter 11 agreement is for $110 million in debtor-in-possession (DIP) financing. Once the court gives the go-ahead, the company expects the financing to provide enough liquidity for it to meet its ongoing business obligations during the process.
Omnicare said it will use the Chapter 11 process to address other financial challenges facing the long-term care pharmacy industry and will potentially mull restructuring options. That could include anything from standalone restructuring to outright sale.
The company said it will seek authorization from the court to continue its operations during the Chapter 11 proceedings. To that end, it said it would meet its commitment to stakeholders, including continuing to pay for employee wages and benefits.
Omnicare said it also expects to pay vendors and suppliers in full, under normal terms, for goods and services.
Responding to Trump Healthcare 2.0: Key Takeaways after 8 Months
The Trump 2.0 administration is 8-months into its MAGA agenda. Summer has passed. Schools are open. Congress is in session. Campaign 2026 is underway. The economy is slowing and public sentiment is dropping.
For U.S. healthcare, it’s more bad news than good. The challenges are unprecedented. Most organizations—hospitals, medical groups, drug and device makers, infomediaries and solution providers, insurers, et al—are defaulting to lower risk bets since the long-term for the health system is unclear.
The good news is that the health system in the U.S. is big, fragmented, complex, expensive (5% CAGR spending increases thru 2034) and slow to change. It is highly regulated at local, state and federal levels, labor intense (20 million) and capital-dependent (government funding, private investment)—a trifecta nightmare for operators and goldmine for private investors who time the system for shareholders effectively. And it operates opaquely: business practices are hidden from everyday users and bona-fide measures of its effectiveness not widely applied or accepted.
The bad news is its long-term sustainability in its current form is suspect and its short-term success is dependent on adapting to key tenets in Trump Healthcare 2.0:
- Trump Healthcare 2.0 is about reducing federal healthcare spending so federal deficits appear to be going down to voters in the mid-term election (November 3, 2026). Healthcare, which represents 27% of federal spending is an attractive target since a significant majority of all voters (especially MAGA Republicans) are dissatisfied with its performance and think is wasteful and inefficient. It views healthcare as a market where less government, more private innovation achieves more.
- The effect of One Big Beautiful Bill Act cuts to Medicaid and marketplace subsidies and imposition of Make America Healthy Again dogma in CMS, CDC, FDA and FCC are popular in the MAGA base while problematic to states, hospitals, physicians and insurers whose business practices and clinical accountability will be more closely scrutinized.
- The federal courts—SCOTUS, 13 circuit and 94 district courts– will support Trump Healthcare 2.0 policy changes in their decisions favoring state authority over federal rules, enabling White House executive orders and administrative actions against challenges and departmental directives that encourage competition, price transparency and cost reduction.
- The FTC and DOJ will pro-actively pursue actions that reverse/disable collusion, horizontal and vertical consolidation in each sector deemed to raise prices and lower choices for consumers.
In the administration’s posturing for the mid-term election November 3, 2026, it’s assumed the economy and prices will be THE major issues to voters: healthcare affordability, housing costs and food prices will get heightened attention as a result. Thus, every healthcare organization board and leadership team should revisit short and long-term strategies, since traditional lag indicators re: utilization, regulations, structure, roles, responsibilities and funding are decreasingly predictive of the future.
Though every organization is different, there are 6 takeaways that merit particular attention as C suites and Boards re-evaluate strategies and timing:
- Monitor the entire economy. The healthcare is 18% of the GDP; 82% of commerce falls outside its domain. Appropriations for healthcare compete with education, defense and public safety and health; household spending for healthcare competes with housing, food and transportation costs. The healthcare dollar is not insulated from competing priorities. If, as expected, the economy slows due to slowdowns in the job market and in housing, and if cuts to marketplace subsidies are enacted, healthcare spending will quickly and significantly drop though utilization will increase.
- Follow clinical innovations carefully. Understand bench to bedside obstacles. The FDA will authorize 50-60 novel drugs and biologics and over 100 AI-enabled devices this year. Some will fundamentally alter care management processes; all will change costs and pricing. Those with short-term cost-reduction potential require consideration first. Given increased margin pressures, capital and operating budgets will reflect a more cautious and risk averse posture.
- Manage fixed costs (more) aggressively and creatively. Direct costs reduction is not enough. Facilities and administrative functions are fair game and for outsourcing, partnerships and risk sharing with suppliers, vendors, advisors and even competitors.
- Don’t underestimate price transparency. Prices matter. Consumers and regulator demand for price transparency from drugmakers, hospitals and insurers are inescapable. Justification and verification will be critical to trust and utilization.
- Navigate AI strategically. The pace and effectiveness of Ai-enabled solutions will define winners and losers in each segment. And private capital—investors, partners—will bring those solutions to market.
- Don’t discount public opinion. Consumer sentiment about the economy is low and dissatisfaction with the health system is high and increasing. Understanding root causes and initiating process improvement are starting points.
As I head back to DC today, the FY26 federal budget is in suspense as the GOP-controlled Senate and House debate a final version to avoid a shutdown next week. Physicians, public health and state officials will digest last week’s ACIP vaccine advisory recommendations and issue their own directives and insurers will file their plan revisions for 2026. That’s what lawmakers and trade groups will be watching.
But at the kitchen tables in at least 40% of America’s households, unpaid healthcare bills from hospitals, labs, doctor offices and set-aside cash for over-the-counter remedies and prescription drug co-pays are on the agenda. Student loan payments, escalating costs for groceries, housing, rent and child care and an unstable employment market are squeezing families. Budgeting for healthcare is more problematic for them than anything else because price are not accessible and charges are not known until after services are performed.
Trump Healthcare 2.0 is not transformational: it is transactional. It aims to simplify the system and facilitate changes certain to disrupt the status quo. Its locus of control, is Main Street USA. not Pennsylvania Ave, in DC.
HENRY KOTULA 