Medicaid is critical to our nation’s healthcare system, providing necessary care for more than 72 million Americans – including our neighbors and friends.
Who it Affects
Medicaid covers children, seniors in nursing homes, veterans, people with long-term chronic illnesses, those with mental health issues and working families.
The program helps keep Americans healthy at all stages of life, providing healthcare to families in need — especially as the country continues to recover from record-high inflation.
The Problem
Some policymakers are considering Medicaid cuts that would undermine coverage for countless patients and threaten Americans’ access to comprehensive, 24/7 hospital care.
Medicaid covers health services for patients who otherwise wouldn’t be able to pay for care. Coverage of services is essential for hospitals, and helps ensure all Americans have access to high-quality, 24/7 care, no matter where they live.
Who Medicaid covers
Providing Lifesaving Healthcare Services
Medicaid covers patients with complex and chronic illnesses in need of long-term care, as well as emergency services and prescription coverage.
As the nation faces a growing mental health crisis, Medicaid also ensures millions of Americans — including veterans — have access to mental healthcare and substance abuse services.
Without access to affordable mental healthcare through Medicaid, veterans often lack the long-term support they deserve, and are left to deal with complex health issues years after their service.
In these areas, where primary care providers are few and far between, hospitals become even more vital sites of care — and in some cases, the only sites of care available.
Rural hospitals, already more likely to be at risk of closure, rely on Medicaid funding to stay open and to continue providing lifesaving care to their patients. Nearly 150 rural hospitals have closed or converted since 2010 alone. Further cuts to care would eliminate a lifeline for Americans across the country — with devastating consequences for rural communities.
The Solution
Cuts to Medicaid funding will create irreparable harm for our nation’s most vulnerable communities, including millions of children, veterans, those with chronic illnesses, seniors in nursing homes, and working families. Medicaid helps provide security to these Americans, keeping them healthy at every stage of life.
Congress should vote against efforts to reduce Medicaid funding and instead focus on policies that strengthen access to 24/7 care, rather than take it away.
The CBO projects that 10.9 million more people would be uninsured under President Trump’s sweeping budget bill — mostly from the way it would overhaul Medicaid, including new work requirements.
Why it matters:
That would amount to major coverage losses that are certain to fuel Democratic attacks on the measure, and put new pressure on vulnerable Republicans heading into the midterm election cycle, Peter Sullivan wrote first on Pro.
By the numbers:
The CBO on Wednesday projected that 7.8 million more people would be uninsured due to the Medicaid changes, with the rest likely due to Affordable Care Act marketplace changes, including new barriers to signing up that are aimed at fighting fraud.
The estimate includes 1.4 million people without verified citizenship “or satisfactory immigration status,” a reference to undocumented immigrants that some states opt to cover with non-federal dollars in their Medicaid programs.
The CBO was responding to a request from congressional Democrats about the number of uninsured people stemming from the package the House passed last month.
Republicans say the changes would ensure that Medicaid is targeted at beneficiaries deserving of coverage, and that taxpayer money should not be spent on healthy adults who are choosing not to work.
Opponents say people who are working will be caught up in the red tape from the changes and could still lose coverage.
The CBO also said another 5.1 million would become uninsured if Congress opts to let Affordable Care Act premium tax credit subsidies expire next year.
The GOP’s reconciliation bill, the “One Big Beautiful Bill Act” (yes, it’s actually called that), is a cruel exercise in slashing benefits for the poor, the elderly, and the sick to free up fiscal space for yet more tax cuts for the rich. Compounding the harm, these benefit cuts are nowhere near enough to pay for the bill’s tax cuts for the wealthy.
Central to this effort are massive cuts to Medicaid and the Affordable Care Act (ACA) marketplaces that, as I argued in my recent paper, will exacerbate our ongoing medical debt crisis.
The GOP reconciliation package that the Senate and House recently agreed to instructed the House Energy and Commerce Committee, which oversees spending on health-care programs including Medicaid and the Children’s Health Insurance Program (CHIP), to identify up to $880 billion in savings over the next 10 years.
Under the rules of the budget reconciliation process, Republicans need to offset any tax cuts they wish to make permanent with an equal dollar value in cuts to spending so as to remain deficit neutral. Trillions of dollars in tax cuts for the wealthier therefore necessitate trillions of dollars in cuts to spending that fall mostly on the social safety net.
Although they did not quite reach that target, the committee still returned a proposed package of deep cuts and changes to Medicaid and to the ACA marketplaces that would reduce federal medical spending by at least $715 billion over 10 years, with about $625 billion in reduced Medicaid spending.1
After public backlash, Republicans seem to have backed off some of their most radical plans for Medicaid (at least for now—one of the challenges of taking health care from people is that it’s terrible politics, so the precise details of the cuts are likely to remain a moving target until the bill passes).
But all options they are close to settling on would still do horrific damage to the well-being of working-class families.
This includes requiring all Medicaid recipients above the federal poverty line to “cost share” by paying (larger) premiums and copayments,2 cutting federal matching to states that provide public health insurance coverage to undocumented and perhaps documented immigrants (on their own dime), and imposing harsh work requirements on “able-bodied adults without dependent children.” This latter provision will cut federal Medicaid spending by roughly $300 billion over 10 years even though the vast majority (92 percent) of nondisabled, non-elderly adult Medicaid recipients are already working, studying full time, or serving as caregivers. This is because work requirements create burdensome reporting requirements to demonstrate compliance that will cause Medicaid recipients who are already employed to lose their insurance as well—blaming the victim for losing their health care, in essence.
The Congressional Budget Office estimates that the reconciliation bill would decrease Medicaid enrollment by 10.3 million in 2034(the end of the reconciliation bill budget window).
According to this same analysis, most of these individuals would not obtain other insurance (e.g., through an employer) and would thus become uninsured.
When combined with the bill’s changes to the ACA marketplace and the expiration of the enhanced premium tax credits—a wildly successful policy that was introduced as part of the American Rescue Plan Act (ARPA) and one that Republicans have shown no inclination to extend—this would result in an additional 13.7 million uninsured individuals in 2034, a 30 percent increase, according to KFF estimates.
Republicans seem hell-bent on undoing the remarkable progress made in the 15 years since the passage of the ACA in reducing the non-elderly uninsured rate from 17.8 percent in 2010 to roughly 9.5 percent today (plus ça change).
But we’ve seen less focus on how this will affect the problem of underinsurance.
Republicans’ Medicaid cost-sharing requirements, the changes they have proposed to the ACA marketplaces, and their determination to let the ARPA premium tax credit enhancements expire will also worsen the problem of underinsurance, an area where we have made considerably less progress.
Taken together, this will worsen the ongoing medical crisis because medical debt is driven by uninsurance and underinsurance.
Medical debt is, unlike in most other countries, and despite the successes of the ACA, a major problem in the United States. KFF found that 20 million adults (almost 1 in 12) owed “significant” medical debt to a health-care provider.3 This number rises when we consider a more expansive definition of medical debt including credit card balances and bank loans used to pay medical providers. Under that definition, an estimated 41 percent of American adults (~107 million people) carried some form of medical debt and 24 percent of American adults (~62 million people) had medical debt that was past due or that they were unable to pay. Among those with medical debt using this more expansive definition, nearly half (44 percent) reported owing at least $2,500, and about one in eight (12 percent) said they owe $10,000 or more. The poor, the sick, the middle-aged, and Black and Hispanic individuals disproportionately bear the brunt of this problem.
The crisis of medical debt and underinsurance is so widely recognized by Americans that a state attorney general candidate can go viral just by talking about the reality of a GoFundMe health-care system millions of Americans face.
The consequences of all this debt are dire—and reflect a health-care system that heals people physically but leaves many permanently scared financially. In 2022, medical debt (using the narrow definition) made up an estimated 58 percent of all debts that had gone to collections, and 62 percent of bankruptcies were attributed in part to medical debt. Medical debt also damages credit scores, leading to a wide variety of negative impacts on financial well-being that can follow families for years.
A poor credit score means that families may be unable to obtain a mortgage or a car loan or may end up paying much higher interest rates.
Credit scores are commonly used by landlords to screen tenants and by employers as part of a background check during the hiring process. Even for those who manage to maintain their credit after taking on medical debt, there are real costs. For those with limited income and assets, debt service may displace spending on food, clothing, and other essentials, leading to material hardship. It can make savings impossible and limit economic mobility.
Medical debt is a problem largely generated by poor policy decisions including, as I argue in my paper, prioritizing and incentivizing health insurance coverage through the private market rather than through Medicaid and Medicare, which offer comprehensive coverage more cheaply. The problem would rapidly disappear if we could extend comprehensive health insurance coverage to the millions of uninsured and underinsured people who live with the constant risk that a sudden medical event could ruin their finances and constrain their futures.
But rather than fix the problem, the GOP plans to throw millions off Medicaid and saddle those who remain with higher costs and more limited coverage. The results of these poor policy decisions will be more sickness, more debt, and higher costs for everyone in exchange for on-paper “savings.” And all this in service of tax cuts for the wealthy they haven’t even bothered to justify.
If you ask Eleanor
“If the old people cannot afford their medical care under their own Social Security allowances, then the burden is going to fall on their children who are in their earning years. This will mean that just at the time when these children who may be having young children of their own and needing medical care, a young couple will also have to consider shouldering the burden for parents as well. This is not fair, and leads to both the children and the older people not getting full coverage, since both will try to shave a little off their needs in order not to make the burden impossible to carry.”
In chaos theory, there’s a concept known as the butterfly effect—the idea that a seemingly small action, occurring at just the right moment, can trigger ripple effects that grow across time and space. A butterfly flaps its wings in Brazil, the saying goes, and a tornado forms weeks later in Texas.
Presidential decisions can carry the same weight, especially those made in the first 100 days of a new administration. Time and again, these early choices unleash far-reaching consequences that reshape a nation.
As Donald Trump wraps up the opening stretch of his second term, his healthcare-focused executive actions underscore the consequentiality of this early window. And when compared with Barack Obama’s approach in 2009 (the last time a president pursued major healthcare reforms right out of the gate), the contrast becomes even more striking.
Two presidents. Two defining moments. And one fundamental question that both men had to answer in the first 100 days: Where should healthcare reform begin — by expanding coverage, improving quality or cutting costs?
Crisis, Control And A Key Healthcare Choice
The idea that a president’s first 100 days matter dates back to Franklin D. Roosevelt. In 1933, during the depths of the Great Depression, FDR passed a wave of New Deal reforms that redefined the role of government in American life.
Ever since, the opening months of a new presidency have served as both proving ground and preview. They reveal how a president intends to govern and what he values most.
For both presidents Obama and Trump, their answer to the healthcare question — where to begin? — would shape what followed. Obama chose to expand coverage. Trump has chosen to cut costs. Those decisions set them on opposing paths. And with every subsequent policy decision, the gap between their contrasting approaches only grows.
’09 Obama: Health Coverage And Congressional Action
In the quiet calculus of early governance, President Obama concluded that without health insurance coverage, access to high-quality medical care would remain out of reach for tens of millions of Americans.
Confronting a system that left 60 million uninsured, he believed that expanding access to coverage was a vital first step — not only to improve individual health outcomes, but to create a healthier nation that ultimately would require less medical care (and spending) overall.
That belief was grounded in lived experience: his mother’s battle with cancer and the insurance disputes that followed, as well as his years as a community organizer working with families who couldn’t afford medical care.
He also understood that only Congressional legislation — rather than executive action — would make those gains durable. So, in his first 100 days, he pursued a strategy grounded in consensus-building. He convened healthcare stakeholders, hosted public healthcare summits, expanded the Children’s Health Insurance Program (CHIP) and proposed a federal budget that included a $634 billion “down payment” on healthcare reform.
’25 Trump: Cost Cutting And Executive Control
Donald Trump didn’t ease into his second term. He charged in, pen in hand. His priorities for the country were clear: cut taxes, impose tariffs and reduce federal spending.
For Trump, speed was of the essence. So, he bypassed Congress in favor of executive orders, downsizing healthcare agencies and dismantling regulatory oversight wherever possible.
At the center of Trump’s domestic agenda is an ambitious income tax overhaul, dubbed the “big beautiful bill.” But passing it will require support from fiscal conservatives in his own party. To offset the steep drop in tax revenue, Trump has signaled a willingness to slash federal spending, starting with healthcare programs.
What Comes Next: Mapping Health Policy Consequences
Presidents make thousands of decisions over the course of a four-year term, but those made in the first few months typically matter most. Both Obama and Trump had to decide whether to prioritize expanding coverage or cutting costs, and that choice would shape the steps that follow.
For Obama, the consequences of his choice were sweeping. His early focus on increasing health insurance coverage laid the foundation for the Affordable Care Act, the most ambitious healthcare reform since Medicare and Medicaid in the 1960s. The ACA provided affordable insurance to more than 30 million Americans, offered subsidies to low- and middle-income families, cut the uninsured rate in half and guaranteed protections for those with preexisting conditions. The law survived political opposition, legal challenges and subsequent presidencies.
Trump’s early decisions are reshaping healthcare, too, but in ways that reflect a very different set of priorities and a sharply contrasting vision for the federal government’s role.
1. Cost-Driven Actions: Reducing Government Healthcare Spending
Guided by a business-oriented focus on cost containment, Trump has sought to reduce the federal government’s role in healthcare through sweeping budget and staffing changes. Among the most significant:
Agency layoffs: The Department of Health and Human Services has initiated mass layoffs across the CDC, NIH and FDA, reducing staff capacity by 20,000 and cutting critical programs, including HIV research grants and initiatives targeting autism, chronic disease, teen pregnancy and substance abuse.
ACA support rollbacks: The administration slashed funding for ACA navigators and rescinded extended enrollment periods, making it more difficult for individuals (especially low-income Americans) to obtain coverage.
Planned Parenthood and family planning cuts: Freezing Title X funds has reduced access to reproductive healthcare in multiple states.
Medicaid at risk: A proposed $880 billion reduction over 10 years could eliminate expanded Medicaid coverage in many states. Additional moves (like work requirements or application hurdles) would likely reduce enrollment further.
2. Cultural And Executive Power Moves: Redefining Government’s Role In Health
While cutting costs has been the central goal, many of Trump’s actions reflect a broader ideological stance. He’s using executive authority to reshape the values, norms and institutions that have defined American healthcare. These include:
Withdrawal from the World Health Organization (WHO): The administration formally ended U.S. participation, citing concerns about funding and governance.
Restructuring USAID’s health portfolio: Multiple contracts and programs related to maternal health, infectious disease prevention and international public health have been ended or scaled back.
Policy changes on federal language and research topics: Executive directives have modified how agencies are allowed to address topics related to gender and sexuality, leading to the removal of LGBTQ+ content from health resources and websites.
Reorganization of DEI programs: Diversity, equity and inclusion initiatives have been rolled back or eliminated across several federal departments.
The Likely Consequences Of Trump’s First 100 Days
President Trump’s early actions reveal two defining trends: cutting government healthcare spending and reshaping federal priorities through executive authority. Both are already changing how care is accessed, funded and delivered. And both are likely to produce lasting consequences.
The most immediate impact will come from efforts to reduce healthcare spending. Cuts to Medicaid, ACA enrollment support and family planning programs are expected to lower insurance enrollment, particularly among low-income families, young adults and people with chronic illness.
As coverage declines, care becomes harder to access and more expensive when it’s needed. The results: delayed diagnoses, avoidable complications and rising levels of uncompensated care.
His second set of actions — including reduced investment in federal science agencies — will slow drug development and weaken the infrastructure needed to respond to future public health threats.
Meanwhile, a more constrained and domestically focused healthcare agenda is likely to diminish trust in federal health agencies, limit access to culturally competent care and produce a loss of global leadership in health innovation.
The U.S. Constitution gives presidents broad power to chart the nation’s course. And the decisions made in their first 100 days shape the trajectory of an entire presidency.
One president decided to prioritize coverage, while a second chose cost-cutting. And like the flap of a butterfly’s wings, these early actions generate ripples — expanding in size over time and radically altering American healthcare, for better or worse.
Most Americans believe their healthcare is private, and the majority prefers it that way. Gallup polling shows more Americans favor a system based on private insurance rather than government-run healthcare.
But here’s a surprising reality: 91% of Americans receive government-subsidized healthcare.
Unless you’re among the uninsured or the few who receive no subsidies, government dollars are helping pay your medical bills — whether your insurance comes from an employer, a privately managed care organization or the online marketplace.
Now, as lawmakers face mounting budget pressures, those subsidies (and your coverage) could be at risk. If the government scales back its healthcare spending, your medical costs could skyrocket.
Here’s a closer look at the five ways the U.S. government funds healthcare. If you have health insurance, you’re almost certainly benefiting from one of them:
Medicare, the government-run healthcare program for those 65 and older, covers 67 million Americans at a cost of more than $1 trillion annually. Approximately half of enrollees are covered through the traditional fee-for-service plan and the other half in privately managed Medicare Advantage plans.
Medicaid and CHIP provide health coverage for around 80 million low-income and disabled Americans, including tens of millions of children. Even though 41 states have turned over their Medicaid programs over to privately managed care organizations, the cost remains public. Total Medicaid spending is $900 billion annually — the federal government pays 70% with states footing the rest.
The online healthcare marketplace is for Americans whose employer doesn’t provide medical coverage or who are self-employed. This Affordable Care Act program offers federal subsidies to 92% of its 23 million enrollees, which help lower the cost of premiums and, for many, subsidize their out-of-pocket expenses. The Congressional Budget Office projects that a permanent extension of these subsidies, which are scheduled to end this year, would cost $383 billion over the next 10 years.
Veterans and military families also benefit from government healthcare through TRICARE and VA Care, programs covering roughly 16 million individuals at a combined cost of $148 billion for the federal government annually.
Employer-sponsored health insurance comes with a significant, yet often overlooked, government subsidy. For nearly 165 million American workers and their families, U.S. companies pay the majority of their health insurance premiums. However, those dollars are excluded from employees’ taxable income. This tax break, which originated during World War II and was formally codified in the 1950s, subsidizes workers at an annual government cost of approximately $300 billion. For a typical family of four, this translates into approximately $8,000 per year of added take-home pay.
With 91% of Americans receiving some form of government healthcare assistance, the idea that U.S. healthcare is predominantly “private” is an illusion.
Now, as the new administration searches for ways to rein in the growing federal deficit, all five of these programs (collectively funding healthcare for 9 in 10 Americans) will be in the crosshairs.
Twelve percent of the federal budget already goes toward debt interest payments, and this share is expected to rise sharply. Many of the bonds used to finance existing debt were issued back when interest rates were much lower. As those bonds mature and are refinanced at today’s higher rates, federal interest payments are projected to double within the next decade, according to the Congressional Budget Office.
With deficits mounting and borrowing costs soaring, most economists agree this trajectory is unsustainable. Lawmakers will eventually need to rein in spending, and healthcare subsidies will almost certainly be among the first targets. Policy experts predict Medicaid, which the House has already proposed cutting by $880 billion over the next decade, and ACA subsidies for out-of-pocket costs will likely be the first on the chopping block. But given the CBO’s projections, these cuts won’t be the last.
A Better Way: Three Solutions To Lower Healthcare Costs Without Cuts
Cutting some or all of these healthcare subsidies may seem like the simplest way to reduce the deficit. In reality, it merely shifts costs elsewhere, making medical care more expensive for everyone and increasing future government spending. Here’s why:
Eliminating subsidies doesn’t eliminate the need for care. Under the Emergency Medical Treatment and Labor Act (EMTALA), hospitals must treat emergency patients regardless of their ability to pay. When millions lose insurance, more turn to ERs for medical care they can’t afford. The cost of that uncompensated care doesn’t vanish. It gets passed on to state governments, hospitals and privately insured patients through higher taxes, inflated hospital bills and rising insurance premiums.
Delaying care drives up long-term costs. People who can’t afford doctor visits skip preventive care, screenings and early treatments. Manageable conditions like high blood pressure and diabetes then spiral into costly, life-threatening complications including heart attacks, strokes and kidney failures, which ultimately increase government spending.
The solution isn’t cutting coverage. It’s fixing the root causes of high healthcare costs. Here are three ways to achieve this:
1. Address The Obesity Epidemic
Obesity is a leading driver of diabetes, heart disease, stroke and breast cancer, which kill millions of Americans and cost the U.S. healthcare system hundreds of billions annually. Congress can take two immediate steps to reverse this crisis:
Tax high-calorie, highly processed foods and use the revenue to subsidize healthier options, making nutritious food more affordable for all Americans.
2. Enhance Chronic Disease Management With Technology
In every other industry, broad adoption of generative AI technology is already increasing quality while reducing costs. Healthcare could do the same by applying generative AI to more effectively manage chronic disease. According to the Centers for Disease Control and Prevention, improved control of these lifelong conditions could cut the frequency of heart attacks, strokes, kidney failures and cancers by up to 50%.
With swift and reasonable Food and Drug Administration approval, generative AI and wearable monitors would revolutionize how these conditions are managed, providing real-time updates on patient health and identifying when medications need adjustment. Instead of waiting months for their next in-office visit, patients with chronic diseases would receive continuous monitoring, preventing costly and life-threatening complications. Rather than restricting AI’s role in healthcare, Congress can streamline the FDA’s approval process and allocate National Institutes of Health funding to accelerate these advancements.
3. Reform Healthcare Payment Models
Under today’s fee-for-service system, doctors and hospitals are paid based on the how often they see patients for the same problem and the number of procedures performed. This approach rewards the volume of care, not the best and most effective treatments. A better alternative is a pay-for-value model like capitation, in which providers do best financially when they help keep patients healthy. To encourage participation, Congress should fund pilot programs and create financial incentives for insurers, doctors and hospitals willing to transition to this system. By aligning financial incentives with long-term health, this model would encourage doctors to prioritize prevention and effective chronic disease control, ultimately lowering medical costs by improving overall health.
The Time For Change Is Now
If Congress slashes healthcare subsidies this year, restoring them will be nearly impossible. Once the cuts take effect, the financial and political pressures driving them will only intensify, making reversal unlikely.
The voices shaping this debate can’t come solely from industry lobbyists. Elected officials need to hear from the 91% of Americans who rely on government healthcare assistance for some or all of their medical coverage. Now is the time to speak up.
This week, the House Energy and Commerce and Ways and Means Committees begins work on the reconciliation bill they hope to complete by Memorial Day. Healthcare cuts are expected to figure prominently in the committee’s work.
And in San Diego, America’s Physician Groups (APG) will host its spring meeting “Kickstarting Accountable Care: Innovations for an Urgent Future” featuring Presidential historian Dorris Kearns Goodwin and new CMS Innovation Center Director Abe Sutton. Its focus will be the immediate future of value-based programs in Trump Healthcare 2.0, especially accountable care organizations (ACOs) and alternative payment models (APMs).
Central to both efforts is the administration’s mandate to reduce federal spending which it deems achievable, in part, by replacing fee for services with value-based payments to providers from the government’s Medicare and Medicaid programs.
The CMS Center for Medicare and Medicaid Innovation (CMMI) is the government’s primary vehicle to test and implement alternative payment programs that reduce federal spending and improve the quality and effectiveness of services simultaneously.
Pledges to replace fee-for-service payments with value-based incentives are not new to Medicare. Twenty-five years ago, they were called “pay for performance” programs and, in 2010, included in the Affordable Care as alternative payment models overseen by CMMI.
But the effectiveness of APMs has been modest at best: of 50+ models attempted, only 6 proved effective in reducing Medicare spending while spending $5.4 billion on the programs. Few were adopted in Medicaid and only a handful by commercial payers and large self-insured employers. Critics argue the APMs were poorly structured, more costly to implement than potential shared savings payments and sometimes more focused on equity and DEI aims than actual savings.
The question is how the Mehmet Oz-Abe Sutten version of CMMI will approach its version of value-based care, given modest APM results historically and the administration’s focus on cost-cutting.
Context is key:
Recent efforts by the Trump Healthcare 2.0 team and its leadership appointments in CMS and CMMI point to a value-agenda will change significantly. Alternative payment models will be fewer and participation by provider groups will be mandated for several. Measures of quality and savings will be fewer, more easily measured and and standardized across more episodes of care. Financial risks and shared savings will be higher and regulatory compliance will be simplified in tandem with restructuring in HHS, CMS and CMMI to improve responsiveness and consistency across federal agencies and programs.
Sutton’s experience as the point for CMMI is significant. Like Adam Boehler, Brad Smith and other top Trump Healthcare 2.0 leaders, he brings prior experience in federal health agencies and operating insight from private equity-backed ventures (Honest Health, Privia, Evergreen Nephrology funded through Nashville-based Rubicon Founders). Sutton’s deals have focused on physician-driven risk-bearing arrangements with Medicare with funding from private investors.
The Trump Healthcare 2.0 team share a view that the healthcare system is unnecessarily expensive and wasteful, overly-regulated and under-performing. They see big hospitals and drug companies as complicit—more concerned about self-protection than consumer engagement and affordability.
They see flawed incentives as a root cause, and believe previous efforts by CMS and CMMI veered inappropriately toward DEI and equity rather than reducing health costs.
And they think physicians organized into risk bearing structures with shared incentives, point of care technologies and dependable data will reduce unnecessary utilization (spending) and improve care for patients (including access and affordability).
There’s will be a more aggressive approach to spending reduction and value-creation with Medicare as the focus: stronger alternative payment models and expansion of Medicare Advantage will book-end their collective efforts as Trump Healthcare 2.0 seeks cost-reduction in Medicare.
What’s ahead?
Trump Healthcare 2.0 value-based care is a take-no prisoners strategy in which private insurers in Medicare Advantage have a seat at their table alongside hospitals that sponsor ACOs and distribute the majority of shared savings to the practicing physicians. But the agenda will be set, and re-set by the administration and link-minded physician organizations like America’s Physician Groups and others that welcome financial risk-sharing with Medicare and beyond.
The results of the Trump Healthcare 2.0 value agenda will be unknown to voters in the November 2026 mid-term but apparent by the Presidential campaign in 2028. In the interim, surrogate measures for performance—like physician participation and projected savings–will be used to show progress and the administration will claim success. It will also spark criticism especially from providers who believe access to needed specialty care will be restricted, public and rural health advocates whose funding is threatened, teaching and clinical research organizations who facing DOGE cuts and regulatory uncertainty, patient’s right advocacy groups fearing lack of attention and private payers lacking scalable experience in Medicare Advantage and risk-based relationships with physicians.
Last week, the American Medical Association named Dr. John Whyte its next President replacing widely-respected 12-year CEO/EVP Jim Madara. When he assumes this office in July, he’ll inherit an association that has historically steered clear of major policy issues but the administration’s value-based care agenda will quickly require his attention.
Physicians including AMA members are restless:
At last fall’s House of Delegates (HOD), members passed a resolution calling for constraints on not-for-profit hospital’ tax exemptions due to misleading community benefits reporting and more consistency in charity care reporting by all hospitals.
The majority of practicing physicians are burned-out due to loss of clinical autonomy and income pressures—especially the 75% who are employees of hospitals and private-equity backed groups. And last week, the American College of Physicians went on record favoring “collective action” to remedy physician grievances. All impact the execution of the administration’s value-based agenda.
Arguably, the most important key to success for the Trump Healthcare 2.0 is its value agenda and physician support—especially the primary care physicians on whom the consumer engagement and appropriate utilization is based. It’s a tall order.
The Trump Healthcare 2.0 value agenda is focused on near-term spending reductions in Medicare. Savings in federal spending for Medicaid will come thru reconciliation efforts in Congress that will likely include work-requirements for enrollees, elimination of subsidies for low-income adults and drug formulary restrictions among others. And, at least for the time being, attention to those with private insurance will be on the back burner, though the administration favors insurance reforms adding flexible options for individuals and small groups.
The Trump Healthcare 2.0 value-agenda is disruptive, aggressive and opportunistic for physician organizations and their partners who embrace performance risk as a permanent replacement for fee for service healthcare. It’s a threat to those that don’t.
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.
HENRY KOTULA 