Why affordability will be a key issue in the 2026 midterm elections

Posted on by • Posted in Uncategorized • Tagged , , , , • Leave a comment
Why affordability will be a key issue in the 2026 midterm elections

Since the pandemic, Americans have ranked the cost of living (often labeled “affordability”) as the top problem they want America’s leaders to address. The typical household budget has many different components, of course. Some of them, such as health care, have been pressuring families for several decades. Problems in other areas, such as housing, have become acute only in recent years. But the rapid rise in overall prices since the beginning of the pandemic has merged these areas into a broader public concern. Although average hourly wages have risen by 30.8% since then1, costs for many core elements of household budgets have risen even more, and most Americans feel that they are at best running in place.2 Because the rate of price increases remains well above the Federal Reserve Board’s target of 2%, this concern shows no sign of abating, and the effects of the war with Iran will make matters worse.

Health care

Between 1999 and 2024, health care rose from 13% to 18% as a share of GDP, an increase that has serious consequences for family budgets. While wages rose by 119% during this period, workers’ contributions to family health care insurance premiums surged by 308%, almost three times the pace of wages. This increase was not the result of employers shifting the burden of health insurance to workers; the overall cost of insurance premiums rose even faster, by 342%—more than five times as much as the economy-wide rate of inflation. Since the pandemic began, the burden on average families has accelerated: Out-of-pocket expenses per person rose by nearly one-third, from $1,239 to $1,652, in just five years.

Against this backdrop, it is not surprising that health care has risen to the top of Americans’ concerns about affordability. A recent survey found that 32% of respondents were “very worried” about health care costs, compared to 24% for food and groceries, 23% for rent or mortgage payments, 22% for utilities, and 17% for gas and other transportation.

Because the problems of health care in the U.S. are structural and deeply rooted, the prospects for quick relief are not bright.

Housing

Unlike health care, the housing affordability crisis mostly began with the pandemic. Since early 2020, the cost of median-priced housing has risen by 28%, from $317,000 to $405,000, while mortgage interest rates surged from 3.45% to 6.11%.

These increases have disrupted the long-established balance between housing prices and household incomes. Until 2020, a median-income household could afford mortgages to buy median-priced homes. Now, households need incomes of $120,000 to qualify for such mortgages, but the median income stands at only $85,000. Otherwise put, families in the middle of the income distribution can afford houses that cost about $330,000, 20% below the sales price of the median home. The result: the majority of homes are now beyond the reach of average families.

This development has hurt young families trying to buy their first homes especially hard. For decades, the median age for first home purchases moved in a narrow range between 29 and 31 years—about when young adults were getting married and starting families. Today, the median age for first home purchases stands at 40 years. Families headed by young adults in their 30s are stuck in apartments that are too small, many in locations that no longer meet their changing needs.

Mounting evidence suggests that the receding prospect for homeownership has troubling ripple effects. Because home ownership is the most reliable source of wealth accumulation for average families, lower rates of homeownership will diminish the assets on which many families can draw as they move through the life cycle. Young adults who have given up on homeownership have no incentive to save for a down payment, reducing their savings rate and encouraging an outlook focused on the present, not the future. Some are plunging into sports betting, while others are turning to risky investments that are hard to distinguish from gambling. When traditional paths to economic mobility seem blocked, the calculus that leads working-class Americans to buy lottery tickets spreads to educated young people. Homeownership has positive externalities that will be hard to replace.

Groceries

For most Americans, trips to the grocery store provide the most regular and vivid indication of what is happening to prices. Since the beginning of the pandemic, the news has been mostly bad. Overall grocery prices have risen by 31% since February 2020, and for some high-profile items—ground beef, for example—the increase has been much steeper.

Even short-term changes are noticeable. The government’s inflation report for February 2026 showed grocery prices rising by 0.4% during the month, an annual pace of roughly 5%. There was bad news for salad-eaters: Lettuce prices rose by 12.2% during the month, and tomatoes, 6.4%. Coffee prices, which rose by 18.4% in 2025, increased by another 1.7% in February.

The surge in energy prices resulting from the war in Iran will probably ratchet grocery prices up another notch. Much of the food U.S. consumers buy is transported long distances from the point of production, and many of the factories that produce fertilizer for U.S. farmers are located in the Persian Gulf.

Other key elements of the affordability issue

Utilities

Household utility costs have risen by 41% in the five years after the beginning of the pandemic. Electricity is up 32%, water 43%, and natural gas 60%, and 17% of households have fallen behind on their monthly electricity bills. These figures help explain the political sensitivity of AI data centers, which consume large amounts of water and put upward pressure on household electricity rates.

Automobiles

Since the onset of the pandemic, the average price of a new car has risen from $38,000 to $50,000, an increase of 32%. Hard-pressed consumers who turned to used cars found little respite; used cars rose by 28% during this period. And auto purchasers have been hit by an array of rising fees, such as “destination charges” for moving purchased autos to the point of sale. Meanwhile, auto insurance premiums have risen by a stunning 55% since the pandemic began.

Child care

Between 2020 and 2024, the average cost of child care rose by 29%, 7 points more than the overall inflation of 22% during these years. Starting in mid-2024, the pace of child care inflation accelerated to twice the rate of overall inflation, a trend that persisted through 2025. Parents are increasingly likely to cite the costs of child-rearing as hard to manage and as a reason to have fewer children than they otherwise would have.

The politics of affordability

The political power of affordability became undeniable when Zohran Mamdani won an improbable victory last November in the contest for mayor of New York, while Mikie Sherrill and Abigail Spanberger won the governorships of New Jersey and Virginia by surprisingly wide margins. Since then, Democratic candidates have continued to press their Republican opponents on the issue, and the inflationary effects of the war in Iran may make the midterms even tougher for the GOP.

The affordability issue has affected President Trump’s standing as well. Most Americans believe that his priorities do not align with theirs, and they want him to focus more on the bread-and-butter challenges they face every day. Whatever the merits of the president’s claim that he inherited these challenges, Americans reject it by a margin of 2-to-1. It is Mr. Trump’s economy now, and Americans want him to do more to fix it than he has so far.

The electorate’s judgment matters because President Trump’s job approval affects his party’s prospects in the forthcoming midterm election. Right now, his dismal approval rating of 34% for his handling of inflation is endangering the survival of Republican House candidates in swing districts and is raising the odds (which are still low) that Democrats will take control of the Senate. With the war in Iran raising energy prices, which will flow through much of the economy, the time for the administration to turn this around is growing shorter.

How China Tripled Health Coverage in Less Than a Decade

Posted on by • Posted in Uncategorized • Tagged , , , , • Leave a comment
Since 2000, most countries around the world have achieved or committed to pursuing universal coverage, or to ensuring their populations have “access to the full range of quality health services” without financial hardship. Nations have, however, pursued different paths to that end. China, with the world’s largest health system, achieved near-universal coverage in just over a decade. In 2000, less than a third of its citizens and permanent residents had coverage; by 2011, that figure had risen to 95 percent. While China’s highly centralized political system differs from many other countries, the government’s focus on rural and unemployed residents and its targeted health infrastructure investments can offer insights for policymakers around the world. China’s Pathway to Universal Coverage By the late 1990s, China’s collective and work-unit-based health insurance systems had largely collapsed following market reforms in the 1980s and 1990s. In 1998, the government launched Urban Employee Basic Medical Insurance (UEBMI), a mandatory program for employed people financed by a payroll tax. In response to the poor performance of the Chinese health system during the 2002 SARS outbreak, the Chinese government moved to make major improvements. This was realized in 2003 and 2007, when the New Rural Cooperative Medical Scheme and Urban Residents Basic Medical Insurance were introduced to cover rural residents and urban unemployed citizens, respectively. To reduce inequities between the two groups, both programs were merged in 2016 to create Urban and Rural Resident Basic Medical Insurance (URRBMI). Today, UEBMI and URRBMI make up China’s basic medical insurance, which partially covers in- and outpatient care, primary and mental health care, pharmaceuticals, traditional Chinese medicine, and dental and eye care. Coverage grew rapidly between 2008 and 2011 through significant government subsidies for those enrolled in the two programs that now make up URRBMI, as well as massive government investment in improving primary care and public hospitals, and establishing a national essential drug list.
Intl_Insights_exhibit_April-2026_China-coverage-expansion_vol48_800
Since these coverage gains, China has seen a significant improvement in overall health outcomes, including a seven-year increase in average life expectancy, a 73 percent decrease in maternal mortality, an 86 percent decrease in child mortality, and lower rates of communicable diseases. However, China’s basic medical insurance faces some key challenges. Given China’s lower per capita income and more limited fiscal capacity compared to the United States, the government prioritizes universal baseline coverage rather than comprehensive benefits, resulting in high out-of-pocket costs — roughly a third of total health expenditures. The basic medical insurance program also has struggled to address systemic inequities between rural and urban residents. For example, the urban employed populations covered by UEBMI receive more comprehensive benefits packages, including medical savings accounts for out-of-pocket expenses. Migrant workers — who make up a fifth of China’s population — are another demographic whose coverage can be fragmented, partly because of the difficulty transferring between different insurance programs if they move to and from rural and urban areas. China also faces major challenges in health care delivery. Lacking a strong primary care system or primary care gatekeeping, hospitals are vastly overused by patients. When you add growing care utilization by China’s rapidly aging population and some people dropping coverage due to rising premiums and copayments, you get a health system under increasing pressure. In 2025, to ease some of this strain, the government announced plans to incentivize long-term enrollment by increasing government subsidies for length of time enrolled and developing long-term care insurance programs focused on older people. America’s Patchwork Health Insurance System Prior to 2010, the United States relied on a fragmented, employment-based health insurance system made up of private, largely employer-sponsored insurance and public programs like Medicaid and Medicare. It left nearly 16 percent of the population, more than 40 million Americans, uninsured. More people gained coverage following full implementation of the Affordable Care Act (ACA) in 2014, which:Expanded Medicaid eligibilityPrevented coverage denials for people with preexisting conditionsAllowed young adults to stay on their parents’ insurance until age 26Established health insurance marketplaces to purchase private plans.By 2023, the U.S. uninsured rate declined to an all-time low of 7.9 percent. However, following passage of the Trump administration’s budget reconciliation bill in July 2025 — featuring $900 billion in Medicaid cuts over the next 10 years — the U.S. is expected to return to pre-ACA highs of nearly 40 million uninsured by 2034.
Intl_Insights_fact_800_vol48
U.S. coverage expansion relies heavily on voluntary enrollment in private plans, often with high deductibles and cost sharing, creating sizeable affordability barriers. In 2024, out-of-pocket costs increased to $1,632 per capita. For subsidized care through Medicaid or cost-sharing reductions, qualification is dependent on income and area of residence, creating variable coverage from state to state. While China structured its reforms to explicitly incorporate rural residents, unemployed urban residents, and migrant workers, U.S. coverage is hampered by the exclusion of groups like undocumented migrants and people with low incomes in non-Medicaid-expansion states. China and the United States have taken remarkably different paths to expanding health insurance coverage. The U.S. has relied on a fragmented public–private model with variable and dwindling government subsidies, resulting in persistent disparities in coverage and access — both of which are expected to only worsen in the coming decade. Meanwhile, despite a vastly different political structure to the U.S., China’s coverage gains are notable due to its massive population (nearly four times the U.S. population) and much lower per capita income. China offers a unique case study of a coordinated health insurance system designed to address disparities in access, ultimately achieving near-universal coverage in just over 10 years.

What Is Medicaid’s Value?

Posted on by • Posted in Uncategorized • Tagged , , , , • Leave a comment
https://www.commonwealthfund.org/publications/explainer/2025/jan/what-is-medicaids-value?utm_campaign=Achieving%20Universal%20Coverage&utm_medium=Social&_hsenc=p2ANqtz-_F4ETQcD5D-ZQy9j25fmSbb7EZC5wWaU_YfRbEBwUs-LiMtbt0BBDRsyu64QWdRCJRfMGkZBO-m6d6tPlglWviE5nOCQ&_hsmi=378634773&utm_source=lead_form

What is Medicaid?

Medicaid is the public health insurance program for people with low income, including children, some adults, pregnant women, and people with disabilities. It was created in 1965 along with Medicare, the federal program that covers adults over age 65 and some people with disabilities, to expand access to a range of health services and to improve health outcomes for these groups.

More than 72 million people are enrolled in Medicaid, making it the single largest insurer in the United States. It is the principal source of health insurance for Americans with low incomes and covers a wide range of services, from preventive care to hospital stays and prescription drugs. Medicaid also pays for nearly half of all U.S. births, as well as end-of-life care for millions of Americans.

While the federal government and the states jointly fund Medicaid, each state runs its own program, subject to federal requirements. The federal government covers between 50 percent and 77 percent of the cost of insuring people with Medicaid, depending on the state.

What is Medicaid expansion?

The Affordable Care Act (ACA) expanded the number of Americans who are eligible for Medicaid and increased the federal government’s contribution toward covering these new enrollees. Starting in 2014, states became eligible for this additional federal funding if they expanded Medicaid eligibility for all adults up to 138 percent of the federal poverty level ($28,207 for a family of two, as of 2024). The ACA also made it easier for people to enroll in Medicaid, such as by eliminating the need for in-person interviews, reducing the amount of information applicants need to provide, and using data from other federal and state agencies to electronically verify eligibility information.

So far, 40 states, along with Washington, D.C., have expanded Medicaid as allowed under the ACA. The federal government pays for 90 percent of the coverage costs for new enrollees under the expansion; states pay for the remaining 10 percent.

What is Medicaid’s impact on health care access and health outcomes?

There is ample evidence showing that Medicaid coverage helps people gain better access to health care services, leading to improvements in health and well-being. Researchers found that low-income adults in Arkansas, which expanded Medicaid eligibility in 2014, have better access to primary care and preventive health services, improved medication compliance, and better self-reported health status than their counterparts in Texas, which has not expanded eligibility for the program. (It should be noted, however, that some of Arkansas’s gains were eroded in 2018, when the state became the first to implement work requirements for Medicaid beneficiaries.)

Other studies show Medicaid expansion is associated with decreased mortality rates, increased rates of early cancer diagnosis and insurance coverage among cancer patients, improved access to care for chronic disease, improved maternal and infant health outcomes, and better access to medications and services for people with behavioral and mental health conditions.

How does Medicaid expansion affect uninsured rates?

States that have expanded Medicaid have a much lower uninsured rate than states that haven’t, and the gap continues to widen. The uninsured rate in expansion states dropped 6.4 percentage points between 2013 and 2017, from 13 percent to 6.6 percent, according to census data. Moreover, health care disparities narrowed between whites, Blacks, and Hispanics in expansion states, with smaller differences seen in uninsured rates among working-age adults, as well as in the percentages who skipped needed care because of costs or who lacked a usual care provider.

The coverage gains in states that have expanded their Medicaid program are not solely the result of newly eligible individuals enrolling. Some of the gains are due to the enrollment of individuals already eligible for Medicaid who took the opportunity to sign up for the first time (sometimes referred to as the “welcome mat effect”).

What are the financial impacts of Medicaid expansion?

Medicaid expansion protects beneficiaries from financial stress by improving access to affordable care. A national study found that expansion was associated with significant improvements in low-income people’s financial well-being, leading to reduced levels of debt in collections and unpaid bills. People living in expansion states are also less likely than those in nonexpansion states to have medical debt. Another study comparing the experiences of low-income adults in Texas, which has not expanded Medicaid, to those of low-income adults in three southern states that have expanded Medicaid found that Texas respondents were much more likely to report financial barriers to getting health care.

Medicaid expansion has improved the financial stability of community health centers and safety-net hospitals. There is also evidence that Medicaid expansion provides an economic boost to states. Recent studies of expansion’s financial impacts all find positive economic effects for states, such as growth in the health sector and greater tax revenue from increased economic activity. Expanding Medicaid can also save states money by offsetting costs in other areas, including uncompensated care for the uninsured, mental health and substance use disorder treatment, and other non-Medicaid health programs. After accounting for these new savings and revenues, the net cost of expansion for states is much lower than its 10 percent “sticker price.” In some states, expansion has already paid for itself.

In OMB’s FY 2027 Proposed Budget, Healthcare is the Big Loser

Posted on by • Posted in Uncategorized • Tagged , , , , • Leave a comment
In OMB’s FY 2027 Proposed Budget, Healthcare is the Big Loser

In 1970 before there was ESPN Sports Center, there was ABC’s “Wide World of Sports” and its iconic montage opening featuring a disastrous ski jump attempt by Yugoslavia’s Vinko Bogataj and Jim Kay’s voice-over “the thrill of victory and agony of defeat.” It’s an apt framework for consideration of current affairs in the U.S. today and an appropriate juxtaposition for consideration the winners and losers in the White House Office of Management and Budget FY2027 released Friday.

  • Last week’s “Thrill of Victory” includes the recovery of Dude 14, the F-15E Strike Eagle pilot shot down over Iran Friday, the college basketball men’s and women’s’ Final 4 contests, the successful launch of Artemis II by NASA and, for some, the additional funding ($441 billion/+44% vs. FY 2026) for the Department of War in the President’s proposed budget.
  • And last week’s “Agony of Defeat” includes continued anxiety about the economy, especially fuel prices, growing concern the war in Iran begun February 28 might extend at a heavy cost in lives and money, and for health industry supporters, a $15 billion (-12% vs. FY 2026) cut to HHS and the 10-year, $911 billion Medicaid reduction in federal funding for Medicaid enacted in 2025 (HR1 The Big Beautiful Bill).

In its current form, this budget is unlikely to be enacted October 1, 2026: it’s best viewed as a signal from the White House about priorities it deems most important to the MAGA faithful in Congress, 28 state legislatures and 26 Governors’ offices controlled by Republicans. Though its explosive growth in of War Department funding to $1.5 trillion is eye-popping, cuts to healthcare are equally notable. Both are calculated bets as the mid-term election draws near (6 months) and clearly OMB is betting healthcare cuts will be acceptable to its base. Its view is based on three assumptions:

1- Healthcare cost cutting is necessary to fund other priorities important to its base. And there’s plenty of room for cuts in Medicaid, prescription drugs and hospitals because waste, fraud and abuse are rampant in all.

  • Medicaid: Medicaid is a state-controlled insurance program that covers 76 million U.S. women, children and low-income seniors primarily through private managed care plans that contract with states. In HR1, a mandatory work requirement was applied to able-bodied adult enrollees with the expectation enrollment will drop and state spending for Medicaid services will be less. But its enrollees are less inclined to vote than seniors in Medicare and its funding burden can be shifted to states.
  • Prescription Drugs: The White House asserts its “favored nation” pricing program will bring down drug costs but the combination of voluntary participation by drug companies and impenetrable patent protections in U.S. law neutralize hoped-for cost reductions. The administration wants to lower drug spending using its blunt instruments it already has: accelerated approvals, price transparency, pharmacy benefits manager restrictions et al. while encouraging states to go further through price controls, restrictive formularies and, in some, importation. In tandem, the administration sees CMMI modifications of alternative payment models (i.e. LEAD) as a means of introducing medication management and patient adherence in new chronic care pilots. Recognizing prescription drug prices are a concern to its base and all voters, the administration will use its arsenal of regulatory and political tools to amp-up support for increased state and federal pricing constraints without imposing price controls—a red line for conservatives.
  • Hospitals: Hospital consolidation is associated with higher prices and increased spending with offsetting community benefits debatable. Hospitals represent 43% of total U.S. health spending (31% inpatient and outpatient services, 12% employed physician services). In 4 of 5 U.S. markets, 2 hospital systems control hospital services. And hospital cost increases have kept pace with others in healthcare (+8.9% in 2024 vs. +8.1% for physician services and 7.9% for prescription drugs) but other household costs, wage increases and inflation. Lobbyists for hospitals have historically favored hospital-friendly legislation like the Affordable Care Act preferred by Democrats. The Trump administration sees site neutral payments, 340B reductions, expanded price transparency, limits on NFP system tax exemptions et al. and Medicaid cuts necessary curtailment of wasteful spending by hospitals. They believe voters agree.

Backdrop: Per the National Health Care Fraud Association, 10% of health spending ($560 billion) was spent fraudulently in 2024: the majority in the areas above.

2- The public is dissatisfied by the status quo and supports overhaul of the U.S. healthcare system to increase its affordability and improve its accessibility.

  • Consolidation: Through its Federal Trade Commission and Department of Justice, the White House has served notice it believes healthcare affordability and unreasonable costs are the result of hyper consolidation among hospitals, insurers, and key suppliers in the healthcare supply chain. It has appointed special commissions, task forces, and filed lawsuits to flex its muscle believing the industry has pursued vertical and horizontal consolidation for the purpose of reducing competition and creating monopolies. It shares this view with the majority of voters.
  • Corporatization: In tandem with consolidation, the White House asserts that Big Pharma, Big Insurer, and Big Hospital have taken advantage of the healthcare economy at the expense of local operators and mom and pop services. It presumes they’re run as corporate strongarms that access capital and leverage aggressive M&A muscle to drive out competitors and bolster their margins and executive bonuses. The administration treads lightly on corporate healthcare, seeking financial and political support while voicing populist concerns about Corporate Healthcare. Photo ops with CEOs is valued by the White House; corporatization is recognized as a necessary plus with a few exceptions.  By contrast, most voters see more harm than good. Thus, the administration courts corporate healthcare purposely and carefully.

Backdrop: Intellectually, the majority of voters understand healthcare is a business that requires capital to operate and margins to be sustainable. But many think most healthcare organizations put too much emphasis on short-term profit and inadequate attention on their mission and long-term performance.

3-The U.S. healthcare industry will be an engine for economic growth domestically and globally if regulated less and consumers play a more direct role.

  • The administration is resetting its trade policies in response to suspension of at-will tariff policies that dominated its first year. At home, it seeks improved market access for U.S. producers of healthcare goods and services. It will associate this effort with US GDP growth and expanded privatization in healthcare. And it will assert that expansion of global demand for U.S. healthcare products and services is the result of the administration’s monetary policy geared to innovation and growth. And it will play a more direct role in oversight of foreign-owned/controlled health products and services and impose limits of their use of U.S. data.
  • The administration also seeks to protect intellectual property owned by U.S. inventors and companies by increasing its policing at home and abroad. In this regard, the administration will play a more direct role in the application of AI-enabled solution providers and expedite technology-enabled interoperability.

Backdrop: U.S. healthcare is the world’s most expensive system, so protections against IP theft are important, but the administration’s legacy in healthcare will be technology-enabled platforms that enable scale, democratize science and shift the system’s decision-making (and financial risk) consumer self-care.

Final thought:

The U.S. healthcare system does not enjoy the confidence of the White House: its proposed FY27 budget illustrates its predisposition to say no to healthcare and yes to other pursuits. It bases its position on three assumptions geared to support from its conservative base.

This budget proposal clearly illustrates why state legislators and Governors will play a bigger role in its future at home and abroad. And it means consumer (voter) awareness and understanding on key issues will be key to the system’s future, lest it is remembered for the agony of its defeat than the thrill of its victory.

It’s March Madness for Hospitals

Posted on by • Posted in Uncategorized • Leave a comment
It’s March Madness for Hospitals

Hospitals represent 31% of total health spending in the U.S. They directly employ 52% of the nation’s 1.1 million physicians and 44% of the 18 million in the healthcare workforce. Many operate ‘related’ businesses including insurance companies, nursing home and long-term care services, fitness facilities and some are investors in private equity funds and joint ventures pursuing innovations in care delivery and more,

“Hospital administration” was once a pursuit of civic-minded youth armed with MHA degrees and internship experiences. Today, it’s much more. It’s bigger, more complicated and more stressful. And,it finds itself in the spotlight while facing formidable headwinds as never before:

  • Medicaid cuts in One Beautiful Bill impacting finances in every hospital, especially in rural settings.
  • Higher operating costs for labor and prescription drugs (with Most Favored Nation pricing yielding little to date).
  • Growing disputes with corporate insurers over reimbursement rates, network adequacy and prior-authorization stipulations.
  • Increased demand and use of outpatient services as chronic conditions supplant acute episodes as drivers of utilization.
  • Increased attention to affordability (with healthcare a top concern along with housing, gas and groceries and hospital prices the biggest component).
  • Increased anxiety among physicians (many facing maturity-cliff pressures from their private equity owners).
  • Higher costs for capital (debt) to fund technology, facility and programmatic initiatives.
  • And growing public dissatisfaction with the U.S. health system and its most prominent players—hospitals, insurers, and drug companies.

Three March events have compounded the environment for hospitals:

  • The War in Iran precipitated higher gas prices and intensified political brinksmanship about ‘costs of living’ in which hospital costs are a frequent referent.
  • A cautionary set of 1Q 2026 economic reports (Jobs, CPI, U of M Index of Confidence) produced a sobering assessment by the Federal Reserve that the U.S. economy is unhealthy due to uncertainties at home and abroad. Note: the Jan-Feb BLS jobs reports showed a dramatic slowdown in employment and unprecedented lower hiring in healthcare.
  • And, with bipartisan support, the FTC and Congress launched hearings about hospital consolidation signaling regulatory/legislative changes afoot. Notably: in March, FTC and Congressional Committee hearings featured staff reports blaming hospital consolidation for higher costs that increased hospital leverage over insurers and suppliers as the primary impetus and higher costs for communities.

For hospitals, this is March Madness! Strategies to manage demand, reduce costs and leverage favorable operating margins (enjoyed by some) need refreshing because the environment has fundamentally changed. Governing boards and C suites in hospitals face some tough questions about how, and how fast their environment will change.  The Big C’s (Costs, Corporatization, Competition, Compliance, Capital, Coverage) are a useful place to start:

Costs: Likely Direction: to control and lower total costs of care while supporting overall economic growth.

  • How might costs associated with related administration/ownership of unrelated businesses be accounted? Are GAAP directives adequate to accurate understanding of a hospital’s finances?
  • How might the administration’s effort to lower drug costs impact the hospital drug supply chain? How might 340B discounts be modified to enable the administration to more directly target manufacturers and PBMs with lower-your-price-or else’’ price initiatives? How will the Most Favored Nation pricing initiative be expanded? (only 54 drugs covered today with nominal impact on their prices)? How could Trump Rx be factored in the hospital drug procurement (Trump Rx has only 8 manufacturer participation agreements to date but sees integration is hospital procurement a major opportunity).
  • How will AI-enabled point and platform solutions be integrated for maximum cost-reduction benefit? Might the federal government break the interoperability log-jam and mandate standardized solutions for hospital HIT?
  • How might hospital price controls for IP/OP services impact the organization? Will they be state-imposed or federal?
  • How does the hospital define affordability to optimize consumer decision-making? Are underlying assumptions about costs, prices, cost-shifting, bad debt, capital obligations et al readily accessible in communities served? Should hospitals be penalized for lack of affordability?
  • How should employed physicians, mid-levels and clinical staff be compensated to maximize effectiveness? How should senior management be compensated? What factors beyond financial performance are necessary to accurately assess their performance?

Corporatization: Likely Direction: to enable coordination of cost-effective care via private sector systemization and technology.

  • How do community leaders, business leaders and influencers (non-members of governing boards) view the hospital’s mission, vision, values and use of funds? How does the Board and management assess the unique advantages and disadvantages of its ownership status (system/non-system, for-profit/NFP, et al)?
  • Will Congress do away with employer contributions and source Medicare funding from individual taxpayers instead? Will means-testing be the basis for Medicare premiums and funding?
  • How does the Governing Board evaluate the performance of the CEO? Are non-financial factors incorporated? Is compensation of the CEO consistent with Board expectations for short and long-term sustainability, growth, cultural health and financial performance?
  • Where should hospitals growth strategies focus if increased concentration of core businesses (IP and OP care) is constrained by FTC and DOJ rulings?
  • How would a system of health be structured and operate if improvement in population health was the sole objective? Would capital be appropriated toward a balance of primary and preventive health and services for the sick or ill? Is corporatization by hospitals inconsistent with mission-driven purpose?

Competition: Likely Direction: to increase competition by expanding choices for consumers.

  • Is competition across each line of business monitored objectively? Is diversification beyond core patient care activity necessary and appropriate for the hospital?
  • How will physician/alternative care provider competition impact the hospital? How might changes to anti-kickback (Stark et al) regulations impact physician participation in hospital shared savings programs?
  • How will elimination/modification of state CON requirements modify the competitive climate?
  • Will community benefits and charity care be re-defined? How might investor-owned hospitals and not-for-profit hospital compete under new metrics?
  • How will hospitals compete against physician-owned hospitals is current prohibitions are lifted?
  • How might competition between publicly-traded investor-owned and not-for-profit health systems evolve is SEC financial reporting requirements are reduced to twice yearly? How will state and federal legislators and regulators effectively monitor performance if shielded from performance transparency?
  • How might 990 reporting requirements change to enable state/federal regulators and communities to more objectively assess hospital performance, executive compensation and community benefits?
  • Might charity care for all hospitals be re-defined and specified targets re-visited to verify performance and facilitate alignment with public interests?

Compliance: Likely Direction: increased enforcement to reduce high levels of waste and fraud.

  • How will increased federal regulation around fraud, waste and abuse impact each business relationship and transaction of the hospital?
  • How are indirect administrative costs associated with independent physicians, and ancillary providers captured and accounted? Do they adhere to current anti-kickback laws?
  • How might HHS changes to vaccine policies impact standards of care approved by the hospital medical executive committee? How might credentialling of providers be impacted? Might the hospital sued by community members/clinicians who disagree with new vaccine policies?
  • How will new CMS anti-fraud efforts in 10 states (8 Blue, 2 Red) impact services and payments for enrollees using hospital services? Will these provisions expand to other states? Widen to hospital-employed physicians?
  • How will hospital tax exemptions be modified to align with direct community health benefits? Are tax exemptions likely to be cut for not-for-profit hospitals/health systems?
  • Is overbilling in autism services provided by hospital-affiliated clinicians a likely target of potential fraud investigation by state authorities?
  • How will federal requirements for increased price transparency be expanded or modified to facilitate competition? Will states expect more?
  • What is the hospital’s evidence for promotion of its quality of care? Is evidence-based science the primary basis for dispute resolution? Credentialling? Clinical process improvements? Are outcomes, clinical process improvements, root-cause analyses, disciplinary actions and clinical innovations adequately discussed by the hospital governing Board?
  • How might the FTC’s new Task Force on Consolidation impact pending consolidation plans (i.e. Sutter-Allina announced this week and others)? Might the FTC force local systems to divest/restructure where monopolistic behavior by hospitals has been harmful to public interests?

Capital: Likely Direction: expansion of opportunities for private investors in healthcare.

  • How might/will cutbacks in federal funding for Medicaid and Medicare impact the hospitals solvency and liquidity?
  • How will interest rates on debt change as a result of current uncertainty about global security (Iran, Ukraine, Venezuela, et al)? How will bond ratings be impacted?
  • How will increased state/federal policies limiting PE ownership or operation of hospitals impact access to capital for the hospital? Its related businesses?
  • How will the approaching private equity maturity cliff impact hospitals, physicians and other healthcare entities in the market?

Coverage: Likely Direction: to transition insurance coverage to individual policies that require informed consumer engagement.

  • How will mandatory participation in alternative payment models (ACOs, bundled payments) impact the hospital?
  • How should the hospital reimbursement policies be modified if Medicare & Medicare under-payments are disallowed as a community benefit?
  • What is the likelihood voters will pass ‘’Medicare for All’ in 2028?
  • How should insurance regulation stimulate demand for individual high-deductible plans?
  • How are local public health programs integrated into the hospitals primary and preventive health community benefits? Is the hospital pursuing a “Health and Human Services” strategy or reinforcing the “Health or Human Services” status quo?
  • How will states enact/respond to OB3 elimination of marketplace subsidies? Will employers drop/significantly alter employee benefits to lower their costs? Might the employer tax exemption be eliminated by Congress as a means of lowering the federal deficit and shifting healthcare spending to a consumer (B2C) market?
  • How should hospitals enable effective consumer shopping for appropriately priced necessary hospital services? Is it a hospital’s obligation?

These are not comprehensive but they’re directionally accurate: the future for hospitals is not a repeat of the past. The market has fundamentally changed.

The blame and shame game played by the industry’s major sectors—hospitals, insurers, drug companies—has not made life better for the citizens it serves. The public’s asking for something better, and elected officials are on their side.

March Madness is reality for hospitals. It requires fresh thinking and uncomfortable adjustments. It’s not optional.