Congress returns to DC this week to debate the merits of extending the advanced premium tax credits that enable coverage for 4 million in a climate of high anxiety about U.S. intervention in Venezuela and heightened tension with Russia and China.
For many, these unfolding events are numbing: helplessness, frustration and fear are widespread. As 2026 unfolds for U.S. healthcare, the realities are these:
The healthcare economy will be under pressure to do more with less. The health economy is increasingly controlled by private investors and large publicly traded companies in every sector whose shareholder obligations are primary. Public funding from federal, state and local sources is shrinking as a result of the Big Beautiful Bill and pushback from taxpayers who think the system wasteful and ineffective. The S&P Health Index for 2025 closed the year underperforming the broader market. Private equity investments in healthcare except AI solutions that reduce operating costs at scale are troubled. Thus, in 2026, operating margins in every sector will be stressed, access to private capital will be vital and business as usual obsolete.
Mass populism will magnify attention to the healthcare affordability. Per polls, costs of living are issue one to voters. While prices for gas and groceries have moderated, housing and healthcare prices have escalated unabated. Voters think both essential but the majority think consolidation, corporatization and regulatory protections advantage the biggest players and protect special interests. In housing, it’s simpler for consumers: mortgages, rent and utility costs are straightforward. But healthcare is more complicated: out of pocket costs—premiums, co-pays, deductibles, caregivers, OTC et al—are not easily calculable and price estimator tools, patient support and revenue cycle management policies make it easier for consumers. The net result: a large and growing majority of voters think healthcare is unaffordable and government intervention needed.
The mid-term election November 3, 2026 will be likely be the reset for healthcare’s future in 2028 and beyond. All 435 House Seats, 35 U.S. Senate seats and 39 state/territorial governors will be elected. All will face voters anxious about the future and how they’ll pay their bills. The 2026 results will set the stage for 2028 Presidential campaigns that will feature a wide range of alternatives to the healthcare status quo. Some will be incremental; others labeled radical. But all will promise changes unwelcome to many of its prominent incumbents.
Each sector in healthcare—hospitals, physician services, long-term care, insurers, life science manufacturers, enablers and advisors—is vulnerable. None welcomes unflattering attention and all spend heavily on messaging and advocacy to protect themselves. All recognize the elephant in the room—large employers that have patiently funded the system’s profitability and value protective regulation that limit disruption. And in all, implementation of AI solutions that lower operating costs and streamline performance is THE immediate priority.
The realties of 2026 for healthcare are foreboding: business as usual is not an option.
The U.S. economy was beaten and battered in 2025, and powered ahead despite it all.
The big picture:
The question for 2026 is whether the underlying sources of weakness that are already evident will broaden out into something that threatens to undermine its overall resilience.
Threat level:
Beneath buoyant growth in GDP and asset prices are serious worries.
The labor market is looking softer by the month.
Elevated inflation is pinching family budgets.
And fears are rising that the AI-fueled boom could leave ordinary workers worse off.
The big picture:
Those pain points have already caused public opinion on the economy to turn sharply negative.
At the same time, one lesson of 2025 is that the U.S. economy is awfully adaptable and can withstand more challenges than you might expect.
Zoom in:
In April, President Trump’s “Liberation Day” tariffs sent the stock market swooning and economists upgrading their recession odds.
It wasn’t the only sign of trouble. Job growth came to a near-halt over the summer. Deportations and restrictionist immigration are part of the story, along with the aging of the native-born workforce. But part of it is that companies are trying to get leaner.
Inflation, meanwhile, has become the fire that will not be fully doused. While the sky-high inflation of 2022 is a thing of the past, inflation has been above the Federal Reserve’s target 2% target every single month since March 2021.
Affordability is top of mind in public opinion.
Reality check:
It’s important to remember, though, that the $30 trillion U.S. economy, for all its flaws, can weather a lot, at least at the macro level. It is, as RSM chief economist Joe Brusuelas puts it, a “dynamic and resilient beast.”
By the numbers:
The headline data numbers have held up just fine, a trend punctuated by Tuesday’s report that GDP rose at a 4.3% annual rate in Q3, amid strong consumer spending and the AI-investment surge.
The S&P 500 is up more than 17% so far this year.
The unemployment rate edged up over the course of the year, to 4.6% in November. But that’s still lower than it has been in 69% of months dating back to 1948.
Yes, but:
You can’t eat GDP, or points of the S&P. And the biggest issues for the U.S. economy — and the things that look like pre-eminent risks for 2026, are in what you might call the peripheral data.
While layoffs are still few, employers have slowed their hiring rates, which means those who do lose their jobs face hard sledding.
Job creation has been overwhelmingly driven by health care, with usual cyclical sectors like manufacturing and transportation and warehousing shedding jobs.
Consumer demand is displaying “K-shaped” trends, being highly concentrated among the affluent Americans enjoying surging stock wealth — while the household finances of lower earners are increasingly on a razor’s edge.
What they’re saying:
The fact that strong third-quarter GDP growth coincided with weak job creation, Brusuelas writes in a note, “implies a decoupling between robust topline growth and soft jobs creation which in our estimation is likely to be the major economic narrative looking forward into 2026.”
What we’re watching:
The 2026 economy is set to receive a boost from Washington, as the signature tax law passed in July — the One Big, Beautiful Bill Act — acts as a fiscal stimulus alongside the delayed impact of the Federal Reserve three interest-rate cuts since September.
It’s hard for companies to experience the kind of robust demand for goods and services they’ve seen in 2025 and not eventually have to hire more workers to help fulfill it.
The bottom line:
There are plenty of risks on the horizon for 2026, but the economy’s striking resilience in 2025 is a reminder that doom-and-gloom predictions for the U.S. economy often prove wrong.
As we approach the end of 2025, it’s a good time to take stock of the US economy. There’s justifiable concern that this year has entrenched a K-shaped economy, where the have-mores leave the haves and have-nots behind. But there are more than two stories going on right now.
First, the vibes are bad (just ask anyone coming out of a grocery store). Second, the real economy—prices, jobs, and consumer and business spending, among other factors—is worse than it was a year ago,but holding up OK (4.4 percent unemployment, GDP growth over 2 percent, and inflation around 3 percent is hardly the stuff of recession). Third, a small number of people and companies are doing extremely well.
Depending on where you stand, you’re hearing very different things about the economy, but a pretty consistent theme is an administration that has not delivered on promises made to voters—while delivering to the president’s family and friends.
Under the Hood, the Story Gets More Complicated
It’s been a predictably rough year for the US economy. Tariffs have raised goods prices and hit manufacturing jobs, immigration crackdowns have crippled the labor force, and reversing energy policies dramatically has unwound an energy investment boom. As a result, the job market is softer, prices are still high, and inflation is up and apparently rising based on the data flow that has (finally) started to trickle back in.
That said, if the data are weaker, the economic mood of the country is, in a word, awful.Consumer sentiment in October was only exceeded by lows from the worst of the early 1980s recession, the peak of the 2022 inflation, and the months following the “Liberation Day” tariff announcement this year. Since January, consumer sentiment has plunged, giving up essentially all gains from a steady rise after the inflation peak of 2022.
That pessimism isn’t purely emotional—it reflects months of higher grocery and utility bills. In fact, across both the major household expectations surveys, families expect inflation to keep going up next year—which most economists expect as well. And roughly twice as many consumers surveyed by the Conference Board expect the jobs picture to be weaker rather than stronger in the next six months.
This view is both pessimistic and realistic given the data we’ve seen so far this year. It’s unmistakably true that the labor market and the inflation picture are weaker than last fall. What’s worrying to the wonkier economy watchers, however, is that the pressures on both inflation and unemployment are in the wrong direction. There are real risks that both inflation and the jobs picture could get worse, but (short of policy reversals) few predictable shocks are likely to make either improve in the near term.
Job growth has stayed positive but slowed dramatically, from an average 167,000 jobs a month in January to just 109,000 in September (and will likely be revised down further with annual revisions early next year). Over 87 percent of all jobs added this year are in health care and social assistance (a given in an aging country), while the rest of the economy has added just 71,000 jobs all year. And there’s little sign that tariffs are about to bring down prices, nor are there signs that the demand side of the economy is about to pick up.
It’s Not Great, but There’s Plenty of Time to Panic Later
The closer you are to the data, the less pessimistic you probably are right now. But, as we can see in recent Fed meeting minutes, the debate is largely between two camps: The first is those who think the labor market is middling and the risks of rising inflation are serious. The second is those who think the risks of rising inflation are less worrisome than the chances the labor market deteriorates further.
It’s clearly too soon to panic about a recession, and the best labor market data we have say things are holding up well by historical standards—September’s 4.4 percent unemployment is better than about 80 percent of months since 2000—it’s just that there’s little to suggest things are about to improve significantly.
That said, the economy continues to chug along on the strength of spending by resilient, yet quite frustrated, consumers. The final reading on second quarter GDP shows US consumer spending keeping the economy going, even as savings deplete.
Early holiday spending numbers look strong, so it seems like US consumers are going to muddle through tariffs. The distribution of consumer spending remains pretty narrow—high earners are doing much more of the broad-based spending in the economy
However, if you get your news from stock markets, or even from retirement statements, the world is different entirely, and much more optimistic—at least from a high level. After a massive swoon in April, the US stock market has had a great year, powered by tax cuts for corporations and the wealthy and an AI investment boom that looks bubble-like to some inside it.
Yet, like in the real economy, the more you dig into the data the farther from the extremes your views can go. Job and corporate earnings growth are concentrated in increasingly narrow slices of the economy. Corporate earnings are notoriously concentrated at this point, with the top 1.4 percent of S&P 500 companies accounting for almost all of stock market gains this year—just seven companies are now one-third of the value of S&P 500.
How Do We Square These Takes?
Overall, the data are on a more even keel than either the awful vibes most Americans are feeling from an affordability crisis or the anxiously warm vibes of investors. We’re not living through the economic boom tech investors see everywhere, nor the near-term dystopia consumers are feeling. The economy is weaker than last year and likely to continue to soften a bit more over the first part of next year, but the good news is at least for now things are not as bad in the data as in the headlines. The bad news is . . . that’s the good news.
In what political pundits called a sweeping win by Democrats in Tuesday’s elections, affordability and costs of living emerged as the issues that mattered most to voters. It’s no surprise.
Since 2019 before the pandemic, prices have increased for American businesses and households due to inflation:
Personal Consumption Expenditures (PCE) inflation which measures monthly business spending increased 3.5% annually. The Consumer Price Index (CPI), which measures monthly changes in household spending increased 3.87% annually over the same period (2019-2025).
But in the same period, prices for healthcare services–hospitals, physician services, insurance premiums and long-term care–have taken an odd turn: for businesses, they’ve decreased but for consumers, they increased.
It reflects the success whereby businesses have shifted health benefits costs to employees or suspended benefits altogether, and it explains why consumers are bearing more direct responsibility for healthcare costs and are increasingly price sensitive.
A proper interpretation of PCE and CPI data points to a bigger problem: household exposure to increased prices hits younger, middle-income households hardest because their housing costs consume 36-60% of their disposable income. Food costs are an additional 13-20%. That doesn’t leave much room for healthcare when child care, student debt and transportation costs are factored.
Increased attention to household affordability and costs of living is uncomfortable in the healthcare industry. The good news is that expenses for health services represents a small fraction of spending; the bad news is those expenses are increasing along with competing categories and they’re sometimes unpredictable.
The fundamental operating model in healthcare is ‘Business to Business/B2B’ transactions between producers (physicians, hospitals, drug and device makers), middlemen (insurers, PBMs, employers) and users (consumers) reinforced by state and federal regulation that protect the status quo. And ‘users’ are treated as patients or enrollees, not a market that makes buying decisions based on value and costs. Thus, lack of price transparency in healthcare coupled with lack of predictability when services are used lends to public confusion or, in extreme cases, contempt. The public reaction to the murder of UnitedHealth Executive Brian Thompson last year surfaced the public’s latent animosity toward healthcare’s business practices that treat consumers as pawns on a complicated chessboard.
Shifting direct financial responsibility to consumers is the blunt instrument touted by economists who rightly argue informed decision-making by consumers is necessary to lower costs and improved value from the system. It won’t happen overnight if at all, and the system’s affordability in working age households will be the impetus.
The near-term implications are clear:
Increased household discretionary spending for necessities (food, transportation, and housing) will shrink discretionary spending for healthcare products and services:
Consumers believe their basic needs—food, shelter, transportation–are easier to predict and manage than their out-of-pocket bills for insurance premiums, co-pays, deductibles, over-the-counter products and more. 60% are financially insecure, and unanticipated medical costs is their biggest concern.
Consumers think the healthcare system is ‘dominated by ‘Big Business’ that prioritizes profit before everything else. The majority of consumers in every age, income, education, ethnic and partisan affiliated cohort share this view and are dissatisfied. Elected officials in both parties believe consolidation in health services has increased prices and reduced competition for consumers. The frontline healthcare workforce is demoralized by its corporatization and resentful of leaders they consider overpaid and accountable for financial results only.
Consumers (voters) will support policy changes to the health system that increase its accountability for affordability.
Among providers, momentum for price controls, price transparency, executive compensation limits, justification for tax exemptions, revenue cycle management practices, will be strong especially in state legislatures.
Among insurers, claims data accessibility, standardization & justification of coverage, denials, prior auth and network adequacy, premium pricing, administrative cost accountability, executive compensation, will be foci of regulation.
Among suppliers to the health services industry—drug companies, device makers, information technology solution providers, consultants and professional services advisors, supply chain middlemen et al—disclosure of business relationships and transparency re: direct and indirect costs will be mandated.
Final thought:
Throughout my career, ‘patient centeredness” has been the fundamental presumption on which service delivery by providers has been justified. Affordability has been neglected though increasingly acknowledged in rhetoric. Executives in healthcare services are not compensated for setting household affordability targets and publicly reporting results. Most compensation committees and Boards have marginal understanding of household economics in their communities and depend on “revenue cycle management” to address consumer payment obligations at arms-length. Even the medical community is not immune: one in 5 medical students is food insecure, 4 of 5 medical residents is financially insecure, and their career choices are increasingly dependent on their earning potential. So, calls for greater attention to affordability in healthcare will originate from insiders and outsiders tired of excuses and lip service.
Insecurity about household finances is significant and growing. Per the University of Michigan Index of Consumer Sentiment (50.3 in November 2025) is near an all-time low. It’s reality in the majority of U.S. households. The federal shutdown, discontinuance of SNAP benefits, cuts to ACA subsidies for insurance, corporate layoffs and higher costs for child care, groceries, gas and housing are a tsunami to American households.
Last week, voters elected: Zohran Mamdani, 34 (NYC); Abigail Spanberger, 46 (VA); and Mikie Sherrill, 53 (NJ) in races touted as a weather-vane for elections in 2026 and beyond. It is bigger than partisan elections. Voters in both parties and across the country are worried about affordability. It’s especially true among younger generations who worry about making ends meet and think institutions like the political system, higher education, organized religion and healthcare are outdated.
Healthcare service providers can ill afford to neglect affordability. It more than measuring medical debt, posting prices and referencing concern on websites. It’s about earning the trust and confidence of future generations through concrete actions that increase household financial security beginning with healthcare spending.
Paul
PS As never before, the voices of younger generations are being heard across the country though social media and demonstrations. The health system is among their major concerns as they ponder how they’ll be able to pay for their bills While Medicare seems the focus to policymakers and beltway pundits who rightly recognize seniors as its most costly population, the working age population has been taken for granted. Here’s a voice I follow closely. Fresh Perspective Is Sometimes Needed – by K. Pow
![follow-money-dreams[1]](https://wwwdotcokergroupreportdotcom.files.wordpress.com/2014/06/follow-money-dreams1.jpg)
HENRY KOTULA 