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340B Rebate Fight Puts Hospital Cash Flow on the Line
https://www.healthleadersmedia.com/cfo/340b-rebate-fight-puts-hospital-cash-flow-line

A new lawsuit from the American Hospital Association and four safety-net hospitals challenges a proposed federal drug rebate model, raising fresh concerns about liquidity, administrative spending and the financial stability of providers.
KEY TAKEAWAYS
Hospitals would pay wholesale prices for certain drugs upfront and seek 340B discounts through rebates.
Hospital groups estimate annual administrative expenses could exceed $1 billion, nearly double the federal government’s estimate of approximately $537 million.
The revised pilot is scheduled to begin January 1, 2027, but a new legal challenge could disrupt implementation.
The financial stakes of the federal 340B Drug Pricing Program are back in court. The American Hospital Association (AHA), the Maine Hospital Association and four safety-net hospitals filed a federal lawsuit October 9 seeking to block a revised rebate pilot that could change how participating providers obtain discounts on certain outpatient drugs.
The plaintiffs also requested a temporary restraining order to prevent the program from taking effect January 1, 2027. They argue that the Department of Health and Human Services (HHS) and the Health Resources and Services Administration (HRSA) failed to adequately assess the program’s financial consequences and consider less burdensome alternatives.
Under the current 340B model, eligible hospitals generally purchase covered outpatient medications at discounted prices. The revised pilot would instead require providers to buy participating drugs at wholesale acquisition cost, submit claims data and receive rebates for the difference between that price and the 340B ceiling price.
That change could create a significant working-capital challenge. Hospitals would have to front more money for medications and wait for rebates, while also managing claims submissions, payment reconciliation, potential denials and additional compliance work.
The cost estimates are the real disagreement. Hospital analyses cited by the AHA put annual administrative expenses above $1 billion, compared with the federal government’s estimate of roughly $537 million. The hospital groups contend that the government failed to fully account for startup costs, staff training, vendor expenses and the financial burden of advancing funds for drug purchases.
For hospitals operating on narrow margins, those expenses could have consequences well beyond the pharmacy department. Maine Hospital Association President Jeff Austin has said hospitals in the state average less than two weeks of cash on hand, underscoring how quickly additional working-capital demands could become a liquidity concern.
The HRSA, meanwhile, says the rebate model would improve transparency and program integrity by allowing individual transactions to be verified before rebates are paid. The agency also says the approach would help prevent overlapping discounts under 340B and the Medicare Drug Price Negotiation Program. The pilot is voluntary for manufacturers, and HRSA has approved plans from 10 manufacturers covering 18 drugs for the planned January launch, according to the lawsuit.
What CFOs should be watching
A shift from upfront discounts to retrospective rebates could increase cash-conversion-cycle pressure, require new investments in revenue-cycle and pharmacy systems, and expose hospitals to reconciliation delays. CFOs should therefore model potential cash requirements, assess vendor and staffing needs, and coordinate with pharmacy, compliance and legal teams rather than waiting for the litigation to conclude.
If the plaintiffs’ cost projections prove accurate, hospitals may have to redirect funds from patient assistance, specialty services and other community programs to cover administrative overhead and drug purchases. Smaller rural providers could be especially vulnerable because they have fewer reserves to absorb delays.
This is not the first legal challenge to the rebate approach. A federal judge temporarily blocked the original pilot in December 2025, and HHS later withdrew that version. HRSA announced the revised program in August 2026, but the latest lawsuit puts its planned launch back in question.
For now, CFOs should treat January 2027 as a planning deadline, not a settled outcome. The ultimate decision could shape how hospitals manage drug costs, liquidity and 340B-funded services for years to come.
Hospital Finance: Things to Know

Hospital and health system margins are beginning to reveal two different realities as a growing number of hospitals lose money and cut costs while the strongest add services, shed what doesn’t fit and post gains.
The gap shows struggling facilities like Watsonville (Calif.) Community Hospital that are down to just eight days of cash on hand, while systems like Durham, N.C.-based Duke University Health System reported an operating income of $453.1 million (5.4% margin) in fiscal year 2026, up from an operating income of $179 million (2.5% margin) in fiscal 2025.
Here are the numbers and moves defining the hospital finance divide as hospitals head into 2027.
THE NATIONAL PICTURE
1. More hospitals are losing money. A Kaufman Hall “National Hospital Flash Report” from Oct. 13 found that 43% of hospitals are operating in the red, up from 33% prior to the COVID-19 pandemic. The report pulled from August 2026 financial performance data from 1,300 hospitals.
2. Margins slid through the summer. The average hospital margin fell to 1.8% in August, down from 3.8% in July and 5.6% in June.
3. Geography matters. In August, hospital margins were down 2 percentage points compared with the same month in 2025. Margins rose 5% year over year in the Northeast/Mid-Atlantic but fell 18% in the Great Plains.
4. Revenue is up, but costs and bad debt are increasing faster. Operating revenue per day increased 6% year over year in August. Total expenses have increased 21% over the last three years, with drug expenses up 29%, supply expenses up 25% and labor expenses up 16%. Bad debt and charity care per calendar day increased 13% year over year and 49% over the last three years.
SYSTEMS PULLING AHEARD
5. For-profits remain ahead. Nashville, Tenn.-based HCA Healthcare, which is scheduled to report its third-quarter results Oct. 27, reported a net income of $1.7 billion (8.4% margin) in the second quarter of 2026, roughly flat compared with $1.7 billion (8.9% margin) in the second quarter last year. HCA, Dallas-based Tenet Healthcare and King of Prussia, Pa.-based Universal Health Services have also outpaced the broader market since June 30, even as they split their outlooks for the rest of the year.
6. Certain nonprofits are posting big margin gains. Duke Health’s operating margin for fiscal 2026 was 5.4%, compared with an operating margin of 2.5% for fiscal 2025. Livonia, Mich.-based Trinity Health also saw $281 million in operating income (1.1% margin) in fiscal 2026, up from a $12.2 million operating loss (0% margin) in fiscal 2025.
7. Turnarounds are working. West Reading, Pa.-based Tower Health achieved a positive operating income for the first time in nearly a decade. President and CEO Michael Stern told Becker’s the system is shifting from stabilization toward strategic investment and sustainable growth. St. Louis-based Ascension also completed a $3 billion turnaround in three years, with the system reporting a $120 million operating loss (-0.2% margin) in fiscal 2026, a $371 million improvement from the prior year.
8. System investments reach beyond hospitals. Phoenix-based Banner Health has bet on ASCs and insurance to grow. In 2018, the system entered a joint venture partnership with Phoenix-based Atlas Healthcare Partners to build and operate a network of ASCs in Arizona, Colorado and Wyoming. Additionally, just under 20% of Banner’s total revenue comes from insurance premiums, with its long-term financial strategy including an increase in that share. Ascension also just wrapped its $3.9 billion acquisition of AmSurg in June, growing its ASC footprint from 58 centers to more than 300 across 34 states.
THE HOSPITALS FALLING BEHIND
9. Cash is the strongest divider. An Aug. 13 Moody’s Ratings report found that median days cash on hand was 280 for Aa-rated nonprofit systems, 191 for A-rated systems, 117 for Baa-rated systems and 71 for systems rated below Baa.
10. Some hospitals are down to days, not months, of cash. Watsonville Community Hospital faces “a serious financial gap” with just eight days of cash on hand. Its interim CEO Tim Moran warned the hospital could close within six to 12 months without action.
11. Downgrades are piling up. Becker’s has tracked 19 health system rating downgrades in its latest roundup. Most recently, Ashtabula, Ohio-based ACMC Healthcare System’s credit rating was downgraded to “BBB” from “BBB+” by Fitch. The downgrade reflected deterioration in the system’s liquidity since fiscal 2023.
12. Federal scrutiny has added pressure. An Oct. 8 inspection report obtained by Becker’s found Central Maine Medical Center in Lewiston is at risk of losing Medicare funding after CMS found it out of compliance with three of the program’s conditions of participation.
13. Rural hospital exposure remains high. More than 40% of rural hospitals operate at a loss, according to an Oct. 13 AHA report. Becker’s has reported on just six planned hospital and emergency department closures in 2026, but at this point in 2025, Becker’s had already reported on 22. While this may be viewed positively, many healthcare leaders feel the financial strain hasn’t eased and is showing up in areas like service line cuts and rural emergency hospital conversions and consolidations.
HOW SYSTEMS ARE RESPONDING
14. Workforce cuts aren’t slowing down. Becker’s has reported on 68 hospitals and health systems that have announced job cuts in 2026. In recent months, four systems have also cut corporate and administrative support roles while protecting positions focused on patient care.
15. Portfolios are being reshaped. Many large systems are divesting assets, exiting joint ventures and calling off deals. At the same time, hospital and health system mergers and acquisitions in 2026 have already surpassed 2025 numbers, and are set to see their busiest year since the pandemic. Since 2020, at least 23 health systems have formed or taken new identities through mergers, new launches or rebrands.
Healthcare Is Still on the Ballot. But the Debate Has Changed.

As medical students in New York City, we spend our days witnessing firsthand how economics shapes patient care. Patients struggle to afford needed medications, battle insurance requirements, and wait months for specialty appointments. Rotating from Upper East Side hospitals to public safety nets in Queens, we also see how the precarious state of hospital finances makes care more difficult. So, as a consequential midterm election approaches, we’ve been following the news closely.
Since the 1990s, healthcare has been among the most important electoral issues. President Clinton proposed an ambitious restructuring of the system in the 1990s, Medicare Part D was born under President George W. Bush, and then came President Obama’s Affordable Care Act (ACA). In perhaps the most analogous election, healthcare became a top issue in the 2018 midterms during the first Trump administration, following dramatic “repeal and replace” efforts led by Republicans. Most recently, in 2020, “Medicare for All” was compared to a public option or the expansion of the ACA. These past policies differed tremendously, but they all asked a version of the same fundamental question: how should American healthcare be organized and provided?
Yet, in 2026, as we watch the midterms take shape, something seems different. Healthcare has hardly disappeared from American politics. But instead of grand structural reforms, candidates are particularly focused on individual affordability. The change may have more to do with voters than with politicians.
Healthcare affordability has become increasingly salient over the last few years: In 2024, when KFF asked voters about rising household expenses, food and grocery costs were the main concern. In January 2026, healthcare costs were voters’ top economic concern, with 31% saying they were “very worried.” Concern persisted across parties: 33% of Democrats, 36% of Independents, and 25% of Republicans were “very worried.” On top of that, 58% of voters said they expected healthcare to become less affordable next year.
While the issue is the same, the major parties are taking different approaches. Republicans are championing the Trump administration’s push for “most favored nation” drug pricing, reducing waste and fraud, and calling for direct subsidies for some Americans to purchase insurance. Democrats like Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) have introduced a bill to make it illegal “for private equity funds, insurance companies, and other for-profit corporations to own or control medical practices,” with a co-sponsor, Sen. Ron Wyden (D-Ore.), saying explicitly in the bill’s announcement that “corporate medicine is making health care more expensive for everyone.” House Democrats have also created a “Cost of Living Healthcare Working Group” to highlight this issue as a campaign topic, alongside other household budget woes.
But these policies do not mean healthcare reform has stalled. Drug pricing, restricting corporate ownership, and shining a spotlight on the price of healthcare are themselves important reforms. What has changed is how both parties frame them: as solutions to the high cost of living.
Clearly affordability matters. However, from inside the hospital, we cannot help but wonder if something is lost when healthcare debates evolve into purely an affordability crisis. Healthcare is both a consumer expenditure and a social good — its success cannot only be measured by its price. As medical students, we see problems that don’t fit neatly into costs: avoidable cancer diagnoses due to shortages of primary care physicians, emergency departments overwhelmed with boarded patients, people in need of mental healthcare discharged to the streets, and re-emergence of infections due to eroding trust in public institutions.
Increasingly, clinicians themselves are left to compensate for these problems of healthcare delivery. When patients wait months to see a specialist, primary care physicians wind up managing niche, complex conditions. When beds are unavailable, emergency physicians care for chronically ill patients for days. When outpatient services are inaccessible, hospitals, like those we have rotated through, become the safety net instead. Patient care suffers.
Naturally, even those problems have financial roots, and prices are easy targets for politicians. Yet, while an insurance premium or prescription price can decrease, improvements in continuity, trust, and ultimately clinical outcomes are much harder to measure. And unfortunately, they may be even more difficult to campaign on in 2026.
Healthcare has not vanished from the midterms. Voters are increasingly concerned, candidates campaign on it, and parties disagree about how the government should address these issues. Yet, the foundation of the debate has changed. Increasingly the question is not how we should re-engineer the system, but rather, how we should make the system that we already have less expensive. In other words, instead of asking what kind of care Americans deserve, the 2026 debate is increasingly asking what Americans can afford.
Maybe that change is overdue. However, as medical students entering a system that these debates will shape, we hope that by confronting what healthcare costs, we do not stop asking what — and for whom — healthcare is for.
Health System Reform: The Two Areas where Support is Strongest

As campaign 2026 nears its end in 15 days, polls show the potential for some surprising results and political pundits are already speculating about what to expect in the lame duck session and 120th Congress that convenes in January.
For healthcare, the realities are these:
- Healthcare will be on local, state and national ballots in the context of affordability and costs of living. It’s a top-of-mind concern to voters along with housing, gas prices and groceries. A fourth of the population has an unpaid medical bill, and the majority worry about a surprise medical bill that could wipe them out.
- Healthcare has lost much of the trust and confidence it enjoyed for decades. It has failed to navigate its positioning with voters because it lost control of its narrative. Among majorities of elected officials and voters across partisan aisles, the “system” is viewed as big businesses that put profits above all else. Reform is desirable to outside stakeholders but there’s no consensus about a ‘future state’ destination.
- Healthcare is structurally flawed. Its tribalism is reinforced by laws and regulations that protect its status quo. Primary and preventive health is subordinated. For-profit and non-profit distinctions are artificial. Value is not defined. Business practices are opaque.
As a result, the industry will operate in limbo in the immediate future. Structural change is unlikely. For the near term, states will be the labs for healthcare innovation, and large (non- healthcare) employers might force a needed national discussion. Thus, in the 119th Congress’ lame duck session and 120th Congress next year, public policies in healthcare will center on low-risk efforts in two domains that enjoy widespread, Bipartisan support among elected officials and voters:
Program integrity: Fraud, waste and abuse in the U.S. health system is a soft target. According to CMS’ 2025 Improper Payment data, improper payments in Medicare, Medicaid, CHIP and other programs amounted to amounted to $96.16 billion. The largest categories include:
- Medicare Fee‑for‑Service (FFS): 6.55% (≈ $28.83B)
- Medicare Part C (Medicare Advantage): 6.09% (≈ $23.67B)
- Medicare Part D: 4.00% (≈ $4.23B)
- Medicaid overall: 6.12% (≈ $37.39B)
- Children’s Health Insurance Program (CHIP): 7.05% ($1.37B)
- Advance payment of the Premium Tax Credit (APTC) program: 0.89% ($657.46M).
It includes enrollees or actions for which the DOJ, FTC, FBI or HHS-OIG may seek redress on behalf of the public:
- Billing for services not provided
- Upcoding or unbundling
- Billing for medically unnecessary services
- Kickbacks or inducements
- Duplicate billing
- DME schemes (back braces, wheelchairs) — a high‑risk category highlighted by FTC.
Elected officials and the majority of voters support intensification of policies that reduce FWA spending.
Price transparency: Polls show large majorities of voters want unfettered access to accurate prices for the services they receive from doctors, hospitals, insurers, prescription drugs and everything else. They reject insider reasoning they’re not available today due to complexity and believe most price estimator tools currently in use of limited help to consumers. They believe of willful avoidance of price transparency is a calculated business strategy to protect margins, executive compensation and revenue growth.
There’s no doubt healthcare will significantly impact the results of the November 3 vote. There’s no doubt it will be a major focus in the 120th Congress. The major unknowns are (1) how states and federal policymakers will address the realities noted above, (2) how large employers and community leaders will participate (or not) in the design of a reformed system of health and (3) how voters will decipher reforms that promise offer accessibility, affordability and effectiveness.
Game on.
P.S. I grew up watching ABC’s Wide World of Sports that opened with Jim McKay’s infamous call “The thrill of victory, the agony of defeat”. Last week, we felt both. Pope Leo’s successful lung surgery was the victory; the mass murder of 3 kids and a teacher at Silver Rail Elementary the defeat. Our nation’s psyche is on edge along with many of the 8 billion inhabitants of planet earth. We need hope. We need victories. We need a break from bad news. I’m just sayin’.
The midterm effect: What the 2026 election could mean for public policy

On Nov. 3, voters will cast ballots that decide the balance of power in Congress and set the stage for what legislation, investigations, and rulemaking could be possible for years to come.
If the blue wave that polls predict materializes, efforts to enact and change the policy agenda will play out against a backdrop of government divided along political fault lines—with the 2028 presidential contest looming.
In this collection of essays, Brookings experts examine the implications of the upcoming election on the most significant issues facing the nation.
Democrats’ health care agenda may matter even if it stalls
The most consequential health care legislation from the next Congress may be bills that have almost no chance of becoming law.
If Democrats capture one or both chambers, health care will likely be high on their agenda. Given the parties’ divergent views on health care, major changes are unlikely while President Trump remains in office. Yet recent history shows that Democratic efforts could still shape future legislation.
House Democrats passed bills authorizing Medicare drug price negotiation in 2019 and expanding Affordable Care Act (ACA) Marketplace subsidies in 2020, despite little prospect of enactment under President Trump. Versions of both policies became law during the Biden administration. Similarly, House Republicans passed a debt ceiling bill that included Medicaid work requirements in 2023, despite President Biden’s opposition. Similar requirements became law under unified Republican control in 2025.
A Democratic agenda would likely start with reversing cuts to Medicaid and the Marketplaces enacted in 2025 and restoring enhanced Marketplace premium subsidies. But it might also include other efforts to expand or improve insurance coverage, and the appropriate scope of these efforts may spur intense intraparty debate.
Democrats may also explore cost-cutting measures, both as a way of directly lowering costs for consumers and of generating federal savings to help finance coverage improvements. This could include steps to lower hospital or drug prices or to reduce payments to Medicare Advantage plans.
Even if nothing becomes law, effort spent developing and socializing proposals might leave Democrats better positioned to enact reforms when political conditions change.
The challenges of reining in the Iran war, and prospects for broader reform
If Democrats take control of one or both chambers of the 120th Congress, they are likely to feel immense pressure to rein in the Iran war, among other controversial aspects of the Trump administration’s foreign policy. But this will be easier said than done. Trump’s continued pursuit of the war is premised on broad claims of inherent constitutional authority. Even a new majority is unlikely to have the two-thirds support necessary to override a presidential veto in order to install new legislative restrictions. Nor is cutting off funding always a politically viable alternative.
For this reason, if controlled at least in part by Democrats, the 120th Congress is likely to see more of the innovative methods the current minority has used to pressure the Trump administration into winding down the Iran war, including by withholding funding, rehabilitating dormant expedited procedures, enacting nonlegislative measures opposed to administration policies, and even exploring new litigation options. By combining these measures with newly available oversight tools and the sorts of small-bore legislative solutions (including funding limitations) that can be more readily incorporated into annual “must-pass” defense and appropriations legislation—making them difficult for the president to veto—the new majority will be able to put substantial new pressure on the Trump administration. But harder and more forward-looking limits on presidential authority will likely have to wait at least until a change in the presidency in 2029.
At that point, if Democrats secure control of both Congress and the White House—and particularly if restraint-oriented Republicans in Congress are willing to collaborate—there could be a window for foreign relations law reform not seen since the post-Vietnam era. The question will then be whether Democrats will be willing to use their undoubtedly limited time in power to engage in reforms instead of advancing their substantive policy agenda. In 2021, Democratic leaders chose to focus on the latter. But the experiences of the past few years may have changed the calculus the next time around.
Democrats are poised to investigate antitrust enforcement
If the Democrats win control of one or both chambers of Congress, expect considerable focus on antitrust. Why? First, there are serious allegations that the Trump White House worked with favored lobbyists to dictate nonmerits-based resolution of investigations and litigation over the vigorous objections of both political and career staff at the Antitrust Division of the Department of Justice (DOJ). Roger Alford, a Trump appointee who served as the division’s second-ranking official until he was fired in July 2025, laid out those allegations before the House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust. A full Democrat-chaired committee will likely want to uncover the backstories behind actions at both the DOJ and Federal Trade Commission, where the courts have questioned investigations into disfavored news organizations like Media Matters.
In addition, hearings on antitrust legislation will likely be in the offing. There is growing sentiment that antitrust enforcement against tech platforms takes too long and provides little disincentive for dominant firms to stop exploiting their gatekeeper status. That worry carries over into agentic AI. While some AI firms are seeking antitrust immunity to coordinate efforts to address rogue behavior—something they likely can do now under current antitrust law—Democrats and at least some Republicans will probably want to ensure our antitrust laws are updated to prevent a handful of AI firms from dominating this powerful new technology and foreclosing meaningful rivalry. And, if the Democrats control both the Senate and the House, there could even be AI legislation sent to Trump to face an inevitable veto.
Numerous barriers will limit what the next Congress can do
With divided party government likely, a lame duck president evincing little interest in Congress, and the 2028 presidential election already underway, prospects for major legislative change in the new 120th Congress seem slim.
Plenty of issues will be ripe in the new Congress. First in line? Any of the measures that Congress and the president fail to resolve in the upcoming lame duck session. Few expect much of the lame duck, especially if Democrats’ electoral dividends lead them to withhold support until they take the reins of one or both chambers next year. Still, other lawmakers suggest that Democrats might prefer to clear some decks before the new Congress convenes
What’s at stake for next year if not finished by year-end? Full-year funding for nearly every government agency, bipartisan permitting reform and multiyear farm bills, reauthorizing Pentagon programs (plus Trump’s demand for large increases in defense funding), and increasing the government’s borrowing limit.
Divided governments do not always stalemate. Crisis can compel politicians to act, as they did in spades in response to the 2020 global pandemic. That Congress also rewrote NAFTA and enacted several measures targeting China.
But the 120th Congress will face several barriers.
First, lawmakers will need supermajorities to overcome potential Senate filibusters. True, it’s technically possible to attempt a filibuster-proof “reconciliation” bill (like the One Big Beautiful Bill Act), but it’s been nearly two decades since Congress pursued one during divided government. Intense partisan team play and onerous federal debt will complicate negotiations. Second, whether in control of one or both chambers, Democrats will likely devote the lion’s share of their attention to investigating the conduct of the Trump administration. With little prospect of cooperation by the administration, “messaging” oversight will be the name of the game.
Finally, the 2028 race for the White House will loom large. Will legislators prefer policy accomplishments to herald on the campaign trail in 2028? Or will each party prefer to run on stalemate, blaming the other party for failure to address voters’ concerns. Either way, the road ahead will be challenging for Congress, let alone for voters demanding change.
A Democratic Congress could curb executive power
During his second term, President Trump has expanded the scope of executive power, often with the support of the Supreme Court and even when some members of the majority have expressed doubts about his approach. Other than the One Big Beautiful Bill, Congress has enacted little significant legislation, and the president has operated mostly through executive fiat.
Would Democratic victories in the forthcoming midterm elections alter this pattern? Democrats are already debating whether they should use expanded executive power for their own purposes if they regain the presidency in 2029 or instead push for a rebalancing that restores the constitutional role of Congress as a coequal branch of government.
In the short term, it is very likely that when Democrats take control of the House, they will use their powers of oversight and investigation to hold the president accountable for his policies. Administration officials will be required to testify, and some will be cited for contempt if they refuse. In addition, Rep. Hakeem Jeffries (D-N.Y.), the Democratic leader who will almost certainly become speaker if Democrats regain the majority, plans to bring to the floor a series of bills that will spell out his party’s policy priorities and underscore the differences between the parties. If Democrats win a majority in the Senate, President Trump may have a hard time getting Cabinet nominees confirmed, confirmation of lower-court judges would slow, and it would be nearly impossible to replace a retiring Supreme Court justice from the conservative bloc with a like-minded appointee.
But even more important, a Democratic-controlled Congress could challenge the president’s actions at every turn, slowing and perhaps halting the steady expansion of executive power since the beginning of President Trump’s second term and making it more difficult for a subsequent president of either party to follow in Trump’s footsteps.
Trump may favor trade battles over military confrontation
On the foreign policy front, President Donald Trump’s response to a turnover in congressional power will differ between trade and national security. On trade, I expect he will show unrelenting activism, testing the outer limits of his authority as he looks for leverage to bend other countries to his will. He will probably not shy away from congressional criticism or legal battles over his trade activism, viewing them as the price of expanding his presidential power. He also will likely view these battles as a way to shift the narrative away from congressional investigations into his actions, those of his family, and his administration. He may see value in casting himself as fighting for American workers and against entrenched interests.
On national security, Trump will likely draw down U.S. troop numbers in the Middle East and Europe, citing a reduced tempo of military operations against Iran and the results of a posture review in Europe as rationales for his decisions. Bringing troops home stands to be broadly popular with the American public, even as such decisions will likely invite scrutiny from the national security establishment. Trump is poised to shield himself against accusations of retreat and isolationism by exercising toothy power projection in Latin America under the guise of stopping narcotics trafficking and stemming immigrant flows. He will likely throw punches in directions where he does not fear counterpunches while avoiding direct confrontation with other major powers, notably China and Russia, in his final two years in office.
Weighing the pursuit of presidential or cabinet officer impeachment
As the norm-breaking first half of the second Trump administration unfolded, several Democratic members of Congress introduced legislation calling for the president’s impeachment. Trump himself raised the specter of impeachment, saying at a Republican retreat, “If we don’t win the midterms … they’ll find a reason to impeach me. I’ll get impeached.”
Yet, as the midterm elections approach and Democratic prospects for significant electoral gains improve, impeachment remains largely absent from the party leadership’s public agenda. The biggest reason is that while impeachment requires only a majority vote, conviction requires a two-thirds vote in the Senate. Even with control of the Senate in sight, Democrats are extremely unlikely to win the two-thirds needed to convict. In addition, Trump’s declining public approval may give Democrats another reason to avoid impeachment. With the 2028 presidential election in mind, Democrats may calculate that keeping an unpopular Trump in office would be more advantageous than elevating a younger JD Vance to the presidency, which would give him an opportunity to establish his own political identity and distance himself from the administration’s record.
But that need not be the end of impeachment. Cabinet secretaries can be impeached in the same way that presidents can. Six articles of impeachment have already been filed against Defense Secretary Hegseth and one against Secretary of Health and Human Services Robert F. Kennedy Jr. In addition, Hegseth could face legal scrutiny for U.S. military strikes against alleged drug traffickers in Latin American waters, which critics argue may constitute unlawful extrajudicial killings. He is also politically vulnerable for the ongoing Iran war. Kennedy has undertaken sweeping changes that have weakened America’s public health infrastructure, and the results are apparent with the worst outbreak of measles in decades.
Odds are that if impeachment of a Cabinet officer proceeds to a trial in the Senate and picks up even a small amount of Republican support, the Cabinet officer will be forced to resign. For those who want to unseat Trump, this scenario would weaken his ability to implement what many think are impeachable policies without actually impeaching him. But perhaps most importantly, the impeachment of Cabinet officers would be a warning to Democratic and Republican presidential candidates that there is another tool that can be used to hold presidents accountable.
Financial regulation could supersede presidential action in new Congress
In financial regulation, personnel is policy. The midterms leave Democrats facing two problems. The first is the Supreme Court, which stripped most financial regulators of their political independence, so these agencies now report to the White House. The second is that Donald Trump, unlike Joe Biden, quickly put his people in place, meaning a Democratic Senate has limited leverage on personnel unless someone leaves. Expect President Trump’s team to continue promoting crypto and rolling back bank regulation with little Congress can do to stop it. Going forward, Democrats face a choice: They can defend institutions like the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) even as their leaders take policy positions at odds with Democratic priorities, or they can acknowledge the court’s restructuring of government has made financial regulation an express policy lever of the White House.
Progressive Democratic chairs could force Republicans to vote on populist ideas President Trump has endorsed, such as capping credit card interest at 10%. This would put Republicans on record either against the president or against their own deregulatory philosophies. Bipartisan legislation remains possible, as it was on housing this year, even though President Trump withheld his signature. Democrats can investigate conflicts of interest around Trump’s personal crypto profits. Investigations tend to increase partisanship. Future deals will depend on whether President Trump views his legacy as being burnished by bipartisan laws or enhanced by unilateral executive action coupled with growing vitriol toward Congress.
Defense budgets, not war powers, are where Democrats can act
If the Democrats control one or both houses of Congress starting in January 2027, I expect some significant changes in national security policymaking, perhaps most notably on the defense budget and related matters.
But first, some areas where I doubt change would be significant: war powers, military reorganization, and decisions on the use of force. In each of these areas, presidents, including Trump, have generally decided that they can avert, outflank, or run over Congress. Even in the case of a modest Democratic advantage, President Trump could likely count on enough Republican support to sustain his vetoes on key issues. For example, if Congress tried to reform or rewrite the 1973 War Powers Resolution, Trump could veto such a bill—and I doubt the next Congress would do what the Senate and House did back in 1973 when they overrode President Nixon’s veto with a two-thirds majority in each chamber.
By contrast, on the core matter of defense budgeting, I expect change if the Democrats gain control (of either one or both houses). President Trump’s efforts to gain $350 billion in “mandatory” funding for the fiscal year 2027 budget, already delayed by the current Congress, would stand virtually no chance, as Congress would insist on the normal budget process and oversight (with annual “discretionary” funding that it helped manage). The Golden Dome missile defense system and Golden Battleship would get no big chunks of financial support absent detailed plans and substantial debate. Trump would probably not be able to tell the Navy how to reposition its aircraft carrier control towers and how to change the technology for its catapults. That is because, knowing of Trump’s personal and even idiosyncratic interests in these matters, Congress could insist as a condition for funding future ships that best technological and scientific practices govern how the ships are designed and built. These demands could be written into defense authorization and appropriations bills, making them binding.
This may not seem like a big deal, but normalcy, and checks and balances, need to start somewhere!
A blue wave election is not likely to create a major shift in ICE activities
As indicators of a potential blue wave begin to take shape across the political landscape, there is growing optimism that Democratic control of the House will lead to notable shifts in policy outcomes across several domestic policy domains, including immigration. Unfortunately, there might not be much change in one of the more controversial and high-profile aspects of the Trump administration’s priorities: the enforcement of deportation policy through ICE. The executive branch has a lot of power independent of Congress to enforce immigration. In fact, it was through executive orders that President Trump expanded the reach of ICE on the first day of his second term. Even if Democrats win the House, they will not be able to do much to overcome the executive power to continue ICE operations.
The main power for Congress in this area is their oversight of the federal budget, which would ordinarily allow the House to curtail operations by cutting off funds. However, Congress has used the reconciliation process in both 2025 and 2026 to appropriate nearly $240 billion for immigration purposes. This is more than enough funds to allow the Trump administration to continue their operations without much resistance from the legislative branch. One of the few prospects for Democrats eager to show voters that they are doing all they can to reform deportation policy would be clawing back unspent funds or restricting how those funds could be leveraged. Whether the new Congress will have the votes to make this happen will depend largely on how big the forecasted blue wave is in November. This is not good news for the immigrant community and the many mixed-status families living through a constant state of fear that they or their loved ones may be deported. They may have to wait until after the 2028 election to see any major changes in immigration policy.
A new Congress should address the impacts of redistricting and racial gerrymandering
The GOP’s efforts to redistrict ahead of the 2026 midterm elections will further disenfranchise Black voters, particularly in the wake of the Supreme Court’s April Louisiana v. Callais decision that delivered another blow to the already weakened Voting Rights Act (VRA). In addition to the ongoing efforts by the Trump administration to impose more stringent voter identification requirements, redistricting, which mirrors the historical process and goals of racial gerrymandering, is disproportionately impacting majority-Black and plurality-Black districts that leaned heavily Democrat in prior elections. Newly redrawn maps are taking away incumbent seats held by Black legislators, while establishing new Republican seats and thus diminishing Black political power. If Democrats can shift control in the midterms, one of their first priorities should be to enact legislation that limits, bans, or institutes objective oversight of the process.
Six states—Texas, Florida, Louisiana, Alabama, Tennessee, and North Carolina—have already split up majority- and plurality-Black districts. Nine additional states have initiated mid-decade restricting efforts. This has forced some incumbent Black legislators to run in majority-white, heavily Republican districts. Leading up to the midterms, it will be critical to thwart these increasing acts of voter suppression through more robust voter education, stronger oversight of AI’s role in enabling mis- and disinformation, and an increased number of poll watchers on Election Day, among other protections.
However, efforts to dilute the Black vote could also backfire for the GOP as Democrat and Republican voters share similar concerns regarding the economy and cost of living. Additionally, a transfer of control to Democrats could revive debates over electoral reform. Congress could pass anti-gerrymandering legislation to avoid future partisan takeovers or require independent, bipartisan commissions as proposed in the Redistricting Reform Act of 2025. Efforts could even be bipartisan as some Republicans have called for outright bans on mid-decade changes to electoral maps. Several states have also instituted their own provisions to stop gerrymandering, and installed state-level, independent commissions that are separate from legislatures to make the process less vulnerable to partisanship. Although not currently active, Michigan has an independent citizens’ redistricting commission to review congressional and state maps.
Congressional and state oversight alone will not fully address the damage done to the Voting Rights Act, which has been pillaged and weakened by a series of Supreme Court decisions that have enabled loopholes for misinterpretation and misuse. The new Congress should make time to address these vulnerabilities in the VRA to eliminate the growing partisan influence that keeps trying to alter who gets to vote, where, and for whom, going forward.
A Democratic Congress would have limited effects on K-12 education
Even if Democrats take the House and Senate, I expect the immediate effects on K-12 education to be modest. There are a few reasons for that. First, the federal government isn’t the main stage for education policymaking; state and local governments matter more. Second, Democrats almost certainly won’t win large enough majorities to override a presidential veto, which limits what they can change from Washington. Third, it’s not all that clear what Democrats want. The party has seemed directionless on K-12 education for some time, and even the DSA platform says little about it.
Still, there would be some impacts. Congressional Democrats would throw sand in the gears of GOP policymaking. That wouldn’t necessarily stop the president’s executive actions, but it’d likely prevent another budget reconciliation package with K-12 policies that Democrats dislike. Democrats also could more forcefully resist the administration’s efforts to dismantle the Department of Education (ED)—with oversight hearings and some concrete actions. For example, they could include language in a funding bill to prohibit the interagency agreements being used to offload ED’s responsibilities to other agencies.
Perhaps the most interesting move would be Democrats passing a bill to signal their future K-12 plans should they retake the White House. One notable development is Rep. Suzanne Bonamici declaring for the race to be the top Democrat on the House Education and Workforce Committee—weeks after introducing a bill with a sprawling set of K-12 proposals. Perhaps that bill is foreshadowing Democrats’ education policy agenda for 2028.
Midterms may reshape energy policy despite little talk of it
Looking at physical reality, you’d think that 2026 would be a banner year for political attention to climate change and energy. Extreme weather, wildfires, and other perils that voters often associate with climate change are constantly in the news. Two wars entangling supplies from major oil and gas producers have sent energy prices soaring. Electricity bills are rising nearly everywhere.
Yet almost none of the midterm races will turn on energy or climate. Climate change is strikingly absent. Even Democrats inclined to support climate policy are wary of becoming too visible on a topic that voters generally don’t prioritize—despite the fact that many voters want them to say more. Despite energy being a key driver of inflation that worries voters, energy itself mostly isn’t a top campaign issue. Of the eight top issues that the Pew Center tracks for political attention, voters put energy nearly last.
Although climate and energy aren’t directly driving the upcoming elections, electoral sweeps by Democrats could have huge implications for policy. In a few states, a swing to unified Democratic control could lead to much stronger climate policies along with regulations against fossil fuels. Democrats leading one or both chambers on Capitol Hill will likely lead to investigations, retaliations, and chaos in Washington, D.C.—hardly the stuff of the stable policy signals needed on energy and climate. That looming gridlock may put a spotlight on the brief lame duck period when more bipartisan legislation might get through Congress and even be signed by the president—for energy mavens, top of that list is a new bill that would help streamline permitting and make it easier to build. With the cost of oil and refined products, such as diesel fuel, you might think that Democrats would pivot toward policies that emphasize all forms of energy, including more oil. But there is little reliable support for oil and gas expansion in the Democratic base; more likely will be investigations about the Trump administration’s diesel fuel deal with Russia and a lot more emphasis on electric vehicles, biofuels, and efficiency—all policies that are unlikely to get consent from the White House, as needed for new legislation.
One of the hottest issues this election cycle is data centers, thanks to a litany of fears that include voter worries that data center power needs will jack up prices for everyone else. Unlike practically everything else in American politics, however, data centers don’t yet have ideological fault lines. Democrats and Republicans alike are scrambling to look decisive on the matter—mainly by supporting bans. No matter who wins federal and local elections, politicians know who they should abhor. Look for more symbolic political pressure on data centers. Beyond symbolism, with D.C. locked in political gridlock, the bulk of legislative efforts may, mostly, offer a sandbox for elaborating concepts that eventually could be adopted by future governments when officeholders shuffle again after the 2028 elections.
Congress should act on AI safety before states fill the gap
One of the big challenges facing policymakers after the midterms will be addressing public concerns about AI. Polls show large majorities expressing worries about AI safety and security. With a number of news stories detailing AI agents going rogue and engaging in unauthorized or prohibited activities, there is a need for members of Congress to address these problems.
There are steps legislators can take. First is mandatory reporting of rogue actions by AI agents from large tech firms. Their tools reach millions of people and therefore are capable of harming a substantial number of individuals. Mandatory reporting would improve transparency about the scope of the problem and the types of intrusions that are most problematic.
In addition, legislators can improve legal liability for AI agents that inflict harm on consumers, businesses, or government agencies. Right now, accountability for unauthorized behavior is murky, and it’s unclear to what extent existing laws on consumer protection or business practices apply to digital tools. Clarifying liability rules would improve accountability and give tech companies clear incentives to make sure large language models are not engaging in harmful behavior.
If Congress does not move, state legislatures will act. Several states have already passed AI safety bills, and that trend will likely accelerate in the coming months. A patchwork of state rules poses an enormous challenge for tech companies, which would have a difficult time developing different models for California or New York versus Texas or Florida. It makes sense for representatives and senators to enact meaningful safeguards before conflicting policy rules proliferate at the state level.
Senate control will decide Trump’s final judicial legacy
Among presidents’ major accomplishments are significant changes in the federal judiciary’s composition. President Trump’s 231 first-term lower court judicial appointments were fewer than President Carter’s and, by a slim margin, President Biden’s.
If Republicans retain the Senate, Trump, with 308 projected appointments so far (assuming post-election confirmation of pending and announced nominees) may get the roughly 70 appointments he needs to match Presidents Reagan and President Clinton’s eight-year totals. The 22 current and announced vacancies without nominations are—at the moment—mainly in Democratic-senator states, but home-state senators’ “blue-slip” veto over district court nominees may not survive a change in Judiciary Committee leadership. And it’s anyone’s guess how many of the 55 Republican-appointed district judges and 23 circuit judges who will be eligible to retire on salary by late 2028 will do so; judges during Trump’s second term have been more reluctant than under recent predecessors to create vacancies.
A Democratic Senate, however, may be in payback mode. In their final two years, the four two-term presidents before Trump all faced opposition-controlled Senates. Until Obama, final two-year confirmations represented about 20% of total confirmations. Of Reagan’s 379 total confirmations, 84 (22%) came during his final two years. Clinton and Bush had similar percentages.
But Republicans took control of the Senate in 2015 and basically shut down judicial confirmations, resulting in only 22 confirmations—7% of all Obama confirmations.
What about the Supreme Court? If the Senate stays Republican even with a slimmer majority, look for Justice Alito to retire. If Democrats take the Senate, any vacancies will be health related, with ferocious battles over Trump’s proposed replacements either way.
Midterm winners will face pressure to rein in AI power
The backlash over data centers necessary for artificial intelligence (AI) became a major campaign topic involving everyone from local candidates to the president of the United States. What began as neighborhood concerns about local environmental and utility issues grew into a fight over AI power.
Data centers were the first place voters could clearly see the costs and risks of AI being shifted to them. The backlash exposed the corporate power dilemma of AI: that a handful of executives are making unsupervised decisions that affect everyone.
Zoning boards and state utility commissions can decide where a data center is located and who pays for its power. Some states are trying to address how AI companies behave. But only Congress can establish uniform national rules.
The challenge for the new Congress is to turn public concern into enforceable oversight of AI. The test will be whether legislators take symbolic but limited action or step up with meaningful requirements supervised by an agency with technical expertise to oversee safety evaluations, mandatory incident reporting, and protections against the abuse of market power.
The data center backlash brought the power of AI into public debate. Elected leaders must now decide whether public interest oversight or private interests will shape that power.
ProPublica Wants to Hear About Your Prior Authorization Denial

Insurers promised to cut back on prior authorization. Now, ProPublica wants to know whether patients are still being denied or delayed care – and they need your help.
Last year, many of the country’s biggest health insurers promised to cut back on prior authorization. That’s the extra approval step insurers require before they’ll pay for a treatment, test, drug or piece of medical equipment. The pledge came after years of anger from patients, doctors and lawmakers in both parties.
I was skeptical then and I’m skeptical now. Prior authorization makes money for insurers. Every delay and every denial can mean care that never gets paid for. Companies don’t easily give up tools that pad their bottom line.
ProPublica is now trying to find out whether the promises meant anything. Reporters Max Blau and Brandon Roberts are investigating how insurers’ continued use of prior authorization is affecting patients. They want to know if people are still facing delayed or missed care.
I’m delighted they’re doing this. ProPublica can do the kind of reporting my small team can’t do yet – and they need your help.
If you’re covered by Medicaid, CHIP, an ACA marketplace plan or Medicare, and you’ve had a prior authorization request delayed or denied, they want to hear from you. That includes people in Medicare Advantage plans, where prior authorization is especially prevalent. It also includes people in traditional Medicare, where it has been rare until very recently.
The Trump administration is testing a program called WISeR that brings prior authorization into traditional Medicare for certain services in several states. Private tech companies are doing the reviews. As we have reported previously, this could be the start of turning traditional Medicare into something that looks a lot more like Medicare Advantage. If you’re in traditional Medicare and have run into WISeR, ProPublica wants to hear about it.
The reporters also want to hear from people who see the process from the inside. That includes doctors, nurses and office staff who fight these battles every day. It also includes regulators and people who work for insurance companies.
That last group matters. I know from my own years in the industry how much insiders know that the public never sees. If you work at an insurer and you’ve seen how prior authorization really works, please consider reaching out.
ProPublica says it will read everything submitted and won’t publish anything without your consent.
Why workers are giving up health insurance

Amber Kostka, who owns The Stockpot restaurant in Hampton Roads, Va., says she has tried to do right by her employees by offering them health insurance, alongside good wages and a 401k.
But as costs have risen—premiums have roughly tripled since the company first started offering health insurance in 2018—her employees are increasingly telling her they can’t afford health insurance. That’s even though she splits the cost of premiums with employees, which are roughly $400 a month.
Instead, employees are dropping out of the plan and going uninsured, she says. About 35% of her eligible employees now buy the employer-sponsored health insurance, she says, down from 50% prior to COVID. She wants to warn them about the risks of going without insurance, she says, but also knows their finances are extremely tight. “It’s just a cost thing, at the end of the day,” she says. “You can’t stop paying for groceries.”
Her employees aren’t alone. The share of working-age U.S. adults without health insurance rose to 11.2% in 2026, up from 8.9% in 2024, according to new research from the Commonwealth Fund. People don’t have health insurance because the costs of everything—including gasoline, housing, and food—are rising, and they’re deciding they can’t afford to pay for even employer-sponsored plans like Kostka’s. “The whole system just seems like a complete gamble with people’s lives,” she says.
Some people are looking at the price of plans on the Affordable Care Act marketplace and deciding they can’t afford health insurance. Premiums on the ACA marketplaces increased by an average of 58% in 2026 after Congress decided last year not to renew expiring subsidies.
Ironically, these uninsured Americans may be helping drive the cost of health care even higher, fueling a cycle in which health insurance gets more expensive, forcing more people to drop coverage. As hospitals field more uninsured patients, they have to pass the costs of uncompensated care onto someone. “When providers have to provide a lot of uncompensated care, how do they make themselves whole? They raise prices,” says Beth Umland, director of employer research for Marsh, the health benefits consultant company formerly known as Mercer.
Of course, having more uninsured Americans isn’t the only reason costs are rising. A Marsh survey of employers recently found that they expected total health benefit costs per employee to rise 8.2% in 2027, the highest increase since 2003. One reason was that the consolidation of health systems was leading to higher prices, as some systems had monopolies in certain markets. Another was that lower government spending for public health programs was leading to higher costs for private sector plans.
“This is starting to feel—’unsustainable’ is the word you hear,” she says.
Many of the reasons why health care costs are rising may seem minimal until you start adding them up, Umland says. For example, more doctors are using AI scribes in care, which are helping them bill for more services, making care more expensive, she says. A clause of the No Surprises Act, which was passed by Congress in 2020 to protect patients from surprise medical bills but which allows disputes to be settled by arbitration, has also added billions to costs, she says.
There are also increasingly more treatments available for patients, and those treatments are more expensive than the ones they’re replacing, she says. One example: GLP-1s, which may save insurers money in the long run on health costs but which are expensive upfront. “That’s just a whole new category of expense that didn’t exist before,” she says.
In its survey, Marsh found that many employers were planning to pass costs onto employees after years of trying not to do so.
Overall, workers are paying on average about $7,471 annually towards premiums for employer-sponsored family health benefits this year, up 9% from 2025, according to a new employer health benefits survey from KFF. Workers at small firms with less than 200 employees—like Kostka’s—are especially hard hit, paying about $9,687 towards family coverage: $2,847 more than workers in larger firms.
And even as they pay more for health care, the plans available to them are getting costlier to use. The average deductible for employer sponsored plans has increased 34% over the last 10 years, according to KFF.
What employers are doing
Kostka says there have recently been fewer health insurers in her area to choose from. Two years ago, she switched from just buying insurance outright for her employees, which many small businesses do, to self-funding the plan. She was able to do this because her employees are relatively young and healthy, she says, making her risk of incurring big medical costs for cancer or a catastrophic illness relatively low.
But she knows she’s just a major diagnosis away from being dropped from the self-funded plan, she says. “It’s a little bit of a gamble right now,” she says.
There are some things employers can do to push back against high health care costs, says Jim Winkler, chief strategy of the Business Group on Health, which published its own recent survey of employers which projected health care costs to rise 9% in 2027, the highest forecast the group has ever recorded.
Some employers are dropping coverage for GLP-1s for weight loss to save money, he says. Others are trying to drive employees toward what are called Centers of Excellence—essentially hospitals or medical practices with high ratings that may save money in the long-term since employees won’t need to return again and again for care. Some employers are also telling employees to try to find cheap, legitimate medications where they can—from sites like GoodRx, for example—and reimbursing them, rather than getting medications from a pharmacy benefit manager.
“We’re just painting a really challenging picture for health care costs,” he says, “which leads employers down the path of needing to find things to do to take action to mitigate them.”
A small number of employers are deciding not to offer health care at all and are instead offering employees cash to buy their own plans through the ACA marketplace. This option, called an ICHRA (Individual Coverage Health Reimbursement Arrangement) is pushed by Republicans, Winkler says, and was introduced during the first Trump Administration.
Small employers, though, often can only choose from available plans, and if there aren’t many, they don’t have much room to negotiate.
It’s a problem facing Mas Torito, owner of Kokoro restaurant in Denver. He spent close to $150,000 in premium payments for his employees in 2025 and is on track to spend $200,000 in 2026. That’s about 2.7% of revenues; most restaurants only have margins of 2-3%.
“Really since COVID, every single year feels like there are these extra pressures on us,” he says.
Kokoro has been in business for 40 years, and some of Torito’s employees have been working at the restaurant the whole time. He suspects that having an older pool of employees is part of what’s driving his health care costs up every year.
“I think they see the number of claims and costs every year going up,” he says, “and that translates into higher premiums.”
Like Kostka, Torito is committed to offering health insurance for his employees, even as his own costs rise. And like Kostka, he’s hearing from more employees that they can’t afford it. Now, only about 40% of his employees buy the insurance, he says.
“I get it,” he says. “The deductible keeps going up every year, the insurance keeps going up. It’s enough where people are really thinking, ‘Hey, do I want insurance or not?’”



