Big Insurance has hauled in $500B in profits since 2014— enough to cover extending the enhanced ACA subsidies and leave $150B — yet it’s gone to shareholders and executive bonuses instead of patients.
As open enrollment begins and Congress remains deadlocked on whether to extend the ACA’s enhanced premium subsidies, one question looms large: Where does all the money we pay for health coverage actually go?
It’s a fair question. Premiums and out-of-pocket costs have risen relentlessly over the past decade. Since the Affordable Care Act was fully implemented, the average premium for an ACA marketplace plan has doubled, and the average deductible for a Silver plan has increased by 92%. Every year, families pay more, yet the coverage often feels thinner.
What the Insurers Say
Health insurance companies routinely claim these increases simply reflect rising medical costs and higher utilization. For example, when justifying rate hikes in 2024, Cigna of Texas wrote:
“The increasing cost of medical and pharmacy services and supplies accounts for a sizable portion of the premium rate increases.”
But the financial filings of these same companies tell a different story.
What the Numbers Show
As Wendell Potter recently wrote, from 2014 to 2024 the seven largest publicly traded health insurance companies, UnitedHealth Group, CVS/Aetna, Cigna, Elevance (formerly Anthem), Humana, Centene, and Molina, reported that they collectively made more than half a trillion dollars in profits.
That’s money collected from individuals, employers and taxpayers for health coverage — dollars that didn’t go to medical care but instead flowed to corporate shareholders and executive bonuses. To put this in perspective, those profits alone could fund the enhanced ACA premium subsidies for another ten years, at an estimated cost of $350 billion.
Over the same period, these seven companies spent $146 billion buying back their own stock or, in other words, using premium dollars from patients and employers to boost share prices and executive compensation (the CEOs and many other top executives of big insurers are compensated primarily through stock grants and options).
Stock buybacks don’t lower premiums, expand networks, or improve care. They simply make investors and executives richer. If that same money had been reinvested in enrollees, it could have provided premium-free health coverage to more than 5 million families for an entire year, based on the average employer-sponsored plan cost of $27,000 in 2026.
Lobbying With Our Premium Dollars
Insurers aren’t just rewarding shareholders, they’re also shaping the political system that protects their profits. Since 2014, the seven largest insurers and their trade association, AHIP, have spent $618 million on lobbying.
That’s money that could have been used to lower out-of-pocket costs or improve patient care, but instead it’s spent to influence Congress and federal agencies to maintain the status quo.
The Real Problem — and the Real Solution
As the cost of health insurance continues to climb, politicians debate how to control those costs and expand coverage. But the truth is, there’s already enough money in the system to cover everyone. It’s just being siphoned off by insurance corporations for profits, lobbying, and stock buybacks.
Though some have been calling for less regulation of Big Insurance, that is not the answer and is partly how we ended up in this situation. Right now, Big Insurance is allowed to use premium dollars and tax dollars on things that do nothing to improve anyone’s health – such as stock buybacks and lobbying – instead of on medical care.
Rather than asking families and taxpayers to pay more, it’s time to demand accountability from insurers. At a minimum, they should not be allowed to use premium dollars, or taxpayer dollars, to enrich shareholders through stock buybacks (which wasn’t even legal until the 1980s) or lobby for policies that drive up costs.
If we want to contain health care costs, the first step is simple: Stop the profiteering by Big Insurance.
New analysis shows hospitals are increasingly closing in poorer communities while new facilities are built in wealthier ones, reshaping access to care along economic lines.
As I wrote a few days ago, 700 rural hospitals are in danger of closing because they’re not getting enough money from either private insurers or Medicare and Medicaid to stay open. That would be on top of the 743 general acute-care hospitals that have closed across the United States since 2000. In that same stretch of years, however, hundreds more hospitals have opened. Taken together, that sounds almost reassuring — a sector in churn, but not in freefall. Yale’s Health Care Affordability Lab, which just published the most comprehensive accounting of this churn to date, even framed it that way: for every ten hospitals that closed, eight opened.
But churn isn’t neutral. It matters enormously where the closing happens and where the opening happens, because, as it turns out, they are not the same places.
I pulled the underlying hospital-level data behind Yale’s new numbers and matched every closure and opening since 2000 to its county, then layered in U.S. Census data on income, poverty, and population density. The pattern that emerged is clear: The hospitals closing serve poorer communities than the hospitals opening. Almost all of the new hospitals were built in zip codes with wealthier residents.
The median household income in counties where hospitals closed was $45,992. In counties where hospitals opened, it was $52,873 — nearly $7,000 higher.
Breathe data into income quintiles and the divide sharpens further. Hospitals closing in the poorest fifth of U.S. counties outnumber hospitals closing in that same tier by three-to-one compared with openings. Meanwhile nearly three-quarters of all new hospitals — 73% — have opened in the richest 40% of counties. The country isn’t just losing hospitals and gaining hospitals. It’s losing them in one America and gaining them in another.
The easy explanation is that this is just population following growth — hospitals close in the declining Rust Belt and open in the booming Sunbelt, and income differences are just a side effect of which regions are growing. I checked for that, because it would matter: if that’s all this is, it’s a story about demographic drift, not about who a health system chooses to serve.
It isn’t just that. I broke the same comparison out by state, and in 23 of the 24 states with enough closures to compare, the hospitals that closed were in lower-income counties than the hospitals that opened — within that same state. Illinois lost hospitals in counties averaging $52,693 in household income while gaining them in counties averaging $65,217. Minnesota: $51,525 versus $72,971. North Carolina: $38,090 versus $49,874. Even in Texas — which added a net 40 hospitals, the best record of any state — the closed hospitals were in counties averaging nearly $10,000 less than the counties where new ones opened. The only state in the sample where this didn’t hold was Arizona, and there it was essentially a wash.
That consistency shows this isn’t primarily a story about regional growth patterns. It’s a story about who health systems — hospital operators, investors, health systems chasing better payer mix — decide is worth building for, and it’s happening inside the same state borders, sometimes inside the same metro areas, at the same time.
What “closure” actually means depends on the zip code
It’s important to be somewhat specific about which facilities are closing, because “hospital closure” isn’t one phenomenon. Some of what shows up in this data is the slow bleed familiar to anyone who’s covered rural health care: all too often, the last hospital in a county goes away and with it obstetrics, the ER, and in many cases the last stable employer in town. But some of the closures in dense urban counties are something else — consolidation, where systems fold a facility into a nearby campus.
What both kinds of closures share, though, is the income pattern. Whether it’s the last rural hospital in a county or an urban system trimming a facility in a lower-income neighborhood, the destination for new capital is disproportionately a wealthier community or across the state.
If you live in the county that lost its hospital, the fact that a gleaming new facility opened forty minutes away in a wealthier suburb does not shorten your ambulance ride, doesn’t help you deliver a baby, and doesn’t change the calculation an uninsured or underinsured patient makes about whether a symptom is worth the trip.
Health systems, quite rationally from a balance-sheet perspective, build where the payer mix is better — commercial insurance, higher reimbursement, wealthier patients who can absorb high-deductible cost-sharing. They close or shrink where the payer mix is worse — more Medicaid, more Medicare Advantage, more uninsured, more bad debt. Every individual decision can make business sense. The aggregate effect, repeated in state after state for a quarter century, is a health care system quietly re-sorting itself by income, county by county.
First-time prescription rejections rose 67% between 2018 and 2024, with nearly half of denied patients receiving no comparable medication within 90 days.
A new study published in JAMA puts hard numbers behind something patients and doctors have been telling me for years: getting a prescription filled increasingly means running an obstacle course of denials, prior authorization forms, and step therapy requirements — and a lot of people never make it through.
Researchers from Johns Hopkins Bloomberg School of Public Health and the American Enterprise Institute analyzed more than 2 million first-time attempts to fill prescriptions for brand-name drugs that have no generic alternative, using pharmacy claims data covering nearly every major insurance market in the country: commercial plans, Medicare, Medicare Advantage, Medicaid, and ACA marketplace plans. The data ran from January 2018 through September 2024.
Here’s what they found:
Rejections are way up. In 2018, insurers turned down 24.3% of first-time fill attempts for these drugs. By 2024, that had jumped to 40.7% — a 67% increase.
Coverage rules are the driver. Overall, 32% of initial attempts were rejected: 14.8% because the drug was excluded from the formulary outright, and 17.2% because it required prior authorization or step therapy — insurer-speak for “try something cheaper first.”
Nearly half of rejected patients got nothing. Of everyone who was turned down, only 38.6% eventually got the original drug within 90 days, and 13% got a different drug in the same class. But 48.4% — essentially half — received no medication in that class at all within three months.
Delays add up. Even patients who eventually got their medicine waited an average of 12.2 days after the initial rejection.
Where you get your coverage matters enormously. Rejection rates were highest in ACA marketplace plans (48.7%) and Medicaid managed care (49.8%) — nearly one in two prescriptions. Traditional Medicare drug plans (24.0%) and Medicare Advantage (19.8%) had noticeably lower rejection rates.
Why this matters
The insurance industry has a ready answer for all of this: prior authorization and step therapy exist to control costs and steer patients toward drugs with the best evidence behind them, not just the most expensive ones. There’s some truth in that — utilization management can reduce unnecessary spending and has, in some cases, nudged prescribing toward cheaper, equally effective alternatives.
But this study makes clear that the tradeoff is not small or hypothetical. When nearly half the people who get turned down simply never receive treatment in that drug class — not “later,” not “with a substitute,” but never, at least within 90 days — that’s not utilization management working as intended but as a barrier that outright blocks care for a huge share of patients, many of whom presumably still need what their doctor originally prescribed.
The study lands in the middle of a real fight over these practices. Federal regulators have been pushing to speed up and standardize prior authorization. Several states have passed laws limiting insurer review times, exempting doctors with track records of low rejection rates from prior authorization requirements altogether, or requiring plans to honor authorizations a patient already has when they switch coverage.
Insurers will point out that some of the increase in rejections reflects more brand-name drugs entering the market during the study period. But that doesn’t explain away the core finding: patients across every type of coverage are hitting more roadblocks, and for close to half of them, the medicine their doctor decided they needed simply never arrives.
Why CFOs must prepare for more than just coverage loss.
KEY TAKEAWAYS
Higher deductibles and cost sharing are driving collection challenges even among patients with coverage.
ACA and Medicaid policy changes can quickly alter payer mix, making financial flexibility a competitive advantage.
Strengthening payer partnerships, optimizing revenue cycle performance, and investing in sustainable growth are becoming unarguably critical.
The expiration of enhanced ACA premium subsidies is not just a policy issue, but a steep revenue cycle and margin challenge. The loss of the subsidies represents far more than a temporary decline in insurance coverage, it’s a structural shift in payer mix, revenue predictability, and financial strategy that is reshaping how health systems plan for an uncertain future.
Recent earnings reports from major for-profit systems underscore the reality of the challenge. HCA Healthcare, Community Health Systems, and Tenet Healthcare have all reported that the impact of ACA marketplace disruptions has been more severe than expected. Rather than transitioning to employer-sponsored coverage or delaying care, many patients who lost subsidized exchange plans are continuing to seek treatment without the ability to cover their growing financial responsibility—meaning rising uncompensated care, higher bad debt expense, and increased pressure on operating margins.
CFO outlook is overall optimistic, and although healthcare demand has remained remarkably resilient, patients’ ability to pay has not. That reality is playing out in real time at hospitals across the country.
Bill Pack, CFO of Methodist Le Bonheur in Tennessee, describes the expiration of ACA subsidies as one of the system’s most significant financial headwinds. According to Pack, enrollment in Gold, Silver, and Platinum marketplace plans has fallen by approximately 70%, while enrollment in Bronze and catastrophic plans has increased by nearly 30%. For Pack’s organization, the disruption is driving a sharp increase in self-pay patients.
“To a certain extent, the mindset of a lot of people in government is ‘COVID’s over, so we don’t need these things anymore,'” Pack says. “But I don’t think there’s a good appreciation for the impact that has had.”
Technically patients are still insured, but many now carry substantially higher deductibles, copayments, and coinsurance obligations than they cannot realistically afford.
“This just adds to the self-pay as well because a lot of people are not going to be able to pay that patient portion,” Pack says.
Pack and his organization’s experience reflects a broader national trend. According to an HFMA analysis, the expiration of enhanced ACA premium tax credits is expected to leave approximately five million Americans without marketplace coverage, increasing uncompensated care while reducing hospital revenue. As a result, traditional payer mix metrics will likely no longer tell the full financial story, making revenue cycle performance and patient collections even more vital to margin preservation.
Further, this is also a subtle but meaningful evolution of the revenue cycle challenge: collections become more difficult, bad debt increases, and cash flow becomes less predictable despite stable patient volumes. At the same time, policy uncertainty is making long-term planning increasingly difficult.
Beyond labor shortages, inflation, reimbursement pressure, and supply chain costs, CFOs are now preparing for additional changes to Medicaid eligibility and future federal policy. Pack says the experience of the past several years has fundamentally changed how organizations approach financial planning.
“One thing we learned from COVID is no matter how hard we try, we cannot predict the future,” he says. “We’ve got to be very flexible. We’ve got to be nimble.“
That philosophy is growing amongst CFOs, ultimately because it has to.
Rather than relying on typical assumptions about reimbursement and payer mix, systems are building flexibility into their financial planning. For this Pack’s system, this means strengthening managed care contracting, deepening relationships with commercial payers, pursuing strategic service-line growth, maintaining disciplined cost management, and making thoughtful capital investments while preparing for potential Medicaid policy changes.
As the challenges persist, optimization is becoming the star of the CFO’s playbook. Today health systems depend on how they can optimize payer strategy, improve revenue cycle performance, make disciplined capital allocation decisions, and invest in services for long-term demand.
Absence of mandatory federal reporting on 340B revenues and expenditures is viewed as the program’s core governance gap, despite existing audit authority focused on duplicate discounts and diversion.
Eligibility criteria tied to disproportionate Medicaid/uninsured volume remain contested, with examples showing large academic systems generating far more 340B margin than charity-care outlays compared with public safety-net hospitals.
Use of savings ranges from keeping small hospitals solvent to subsidizing high-cost service lines, yet lack of spending requirements can incentivize expansion in affluent markets and shift costs to payers.
Manufacturers are criticized for contract-pharmacy restrictions and demands for claims data, while also allegedly pricing 340B discounts into list prices; limited HRSA rulemaking authority perpetuates litigation.
Does the 340B program help hospitals provide care and other services to low-income patients? Or has the program grown beyond what was initially intended, with undeserving institutions taking advantage of it?
Two industry leaders addressed these questions and more during a webinar sponsored by Managed Healthcare Executive, Drug Topics and the Pharmacy Benefit Management Institute.
Tom Kraus, J.D., chief advocacy officer and vice president of government relations at the American Society of Health-System Pharmacists, argued in favor of the program’s value to patients. “Hospitals are still operating on incredibly thin margins across the board. The average is around 1%; almost half are operating at negative margins. It’s just not true that they’re somehow getting rich off this. They’re using it to provide patient care in communities that need it and to patients that need it.”
But Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said the program has “grown out of control, and it doesn’t have the guardrails it needs. What 340B has tried to accomplish is absolutely valid; I fully support it. But it’s plainly obvious to anybody that the time is now for Congress and policymakers to get together and say we can make this program actually work.”
The 340B program allows qualifying hospitals and other providers, such as federally qualified health centers, to purchase medications at discounted rates from drug manufacturers and use the difference between the discounted price and the reimbursement from commercial insurers and other payers to fund patient care services.
The 340B program generated roughly $100 billion in discounted drug purchases last year, growing 23%, compared with less than 10% growth in overall U.S. prescription drug spending.
Since its implementation in 1992, more than half of U.S. hospitals participate in the program.
The Health Resources & Services Administration (HRSA), which oversees the 340B program, is currently reviewing comments and determining next steps for a pilot 340B rebate program for drugs that were part of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program.
Here are four key takeaways from the webinar:
1: Transparency and oversight
There is no federal requirement that hospitals report how much 340B revenue they collect or how they spend it. Gremminger argued that this absence of reporting is the program’s central flaw. “The underlying problem with 340B is it creates economic distortions,” he said. “The program is so problematic because it has virtually no oversight. The Health Resources and Services Administration, which oversees nominally 340B, has been found by courts to have basically no ability to actually create rules.”
Gremminger said payers want to know how much hospitals make and what they do with the money. He pointed to states, such as Minnesota, that are beginning to require covered entities to report this information.
Kraus countered that HRSA and manufacturers already have audit authority when there is a specific concern, such as a suspected duplicate discount, and that 340B dollars are not separately traceable once they reach a hospital’s books.
2: What counts as a safety net hospital?
Much of the debate centered on which hospitals should qualify for participation in the program. Gremminger cited Minnesota data showing that M Health Fairview, the University of Minnesota’s academic medical center, netted more than $300 million in 340B revenue last year while providing about $17 million in charity care, compared with Hennepin Healthcare, a public safety-net hospital that made roughly $100 million in 340B revenue against $107 million in charity care. He argued dollars are flowing disproportionately to large, financially healthy systems rather than the rural and community providers the program was designed to protect.
Kraus said that hospitals in the program already treat a disproportionate share of Medicaid and uninsured patients to qualify. “The states have said payers should pay the normal rate, and they want the clinic or hospital to be able to use those dollars to subsidize care in their communities. I think that’s like a reasonable decision that states can make, and I think from my perspective, it helps us provide care to patients.”
3: What services should 340B dollars fund?
Kraus maintained that the law implies, though does not strictly require, that 340B savings support safety net care and noted three-quarters of small participating hospitals use the savings simply to stay open. Additionally, he said large academic centers often house the trauma centers, cancer centers, and emergency departments that require substantial, ongoing subsidy.
“At the end of the day, the program exists in order to subsidize the care of patients by allowing providers to purchase at a lower cost and sell to payers at a higher cost, which is the contracted rate. The program’s not designed to subsidize payers; it’s designed to subsidize providers so that they can survive.”
Gremminger said the lack of any spending requirement means some systems reinvest the 340B margin into facilities in higher-income, better-insured markets rather than expanding services for low-income patients, calling that an economic distortion that raises costs for employers, taxpayers, and working families through reduced Medicaid rebates and higher commercial pricing.
4: Pharma’s role in drug pricing
Both panelists were critical of drug manufacturers, although for different reasons. Kraus said pharmaceutical companies, which he noted operate on roughly 40% margins compared with hospitals’ roughly 1%, have pursued restrictions on contract pharmacy arrangements that have ended up in litigation. Manufacturers such as Eli Lilly are now requiring covered entities to turn over claims data as a condition of receiving discounts, which he characterized as a “fishing expedition” rather than a targeted integrity effort.
Gremminger agreed pharma bears responsibility for high drug prices because companies simply prices 340B’s cost into list prices, which he argued undermines any savings the program is meant to generate. Both agreed HRSA lacks the statutory authority for meaningful rulemaking, a gap they said invites continued litigation between manufacturers and hospitals.
Medicare reimburses hospitals at an average of 82% to 87% of the actual cost of providing patient care. According to long-term data from the American Hospital Association (AHA) and the Congressional Budget Office (CBO), this means hospitals face a shortfall, receiving roughly 82 to 87 cents for every dollar they spend caring for Medicare beneficiaries.
Financial Impact and Hospital Margins
Because Medicare reimbursement rates are fixed by the federal government, they often fail to keep pace with the rising costs of labor, drugs, and supplies:
Negative Profit Margins: The Medicare Payment Advisory Commission (MedPAC) reported that hospitals experienced an average -12% margin on fee-for-service Medicare services, with projections remaining deeply negative at -10%. [1]
Widespread Losses: Approximately 67% of all U.S. hospitals operate at a net financial loss specifically on their Medicare patient population. [1]
Aggregate Underpayments: This payment-to-cost deficit translates to roughly $99.2 billion in annual underpayments that hospitals must absorb or offset through other revenue streams.
How Hospitals Balance the Deficit
To remain financially viable while absorbing underpayments from Medicare and Medicaid, hospitals rely on cost-shifting to the private sector:
Commercial Insurance Rates: Private, employer-sponsored health plans pay hospitals significantly more to subsidize public program shortfalls. On average, commercial insurers reimburse hospitals at 196% to 199% of Medicare rates.
Payer Mix Vulnerability: Hospitals located in regions with high concentrations of elderly or low-income residents are at higher financial risk. At 96% of U.S. hospitals, government programs (Medicare and Medicaid) account for more than half of all inpatient days.
If you are tracking hospital financials or healthcare policy, would you like to see how Medicaid reimbursement rates compare, or look closer at the differences between inpatient and outpatient Medicare payment structures?
Medicaid reimburses hospitals at an average of 88% to 90% of the actual cost of care, but this figure heavily relies on supplemental government funding. Without these extra state and federal payments, standard Medicaid base rates only cover roughly 58% to 65% of hospital costs.
Because Medicaid is jointly funded by federal and state governments, the exact payment-to-cost ratio varies wildly by state, fluctuating between 49% and 169% of Medicare benchmarks.
The Core Components of Medicaid Payments
Medicaid hospital payment structures are highly complex and divided into two primary tiers:
Base Rates (Severe Shortfalls): Standard Fee-For-Service (FFS) base rates and Managed Care Organization (MCO) plans pay well below actual expenditures. According to industry data published by the American Hospital Association (AHA), standard MCO plans cover just 65 cents on the dollar, while FFS base payments plummet to 58 cents on the dollar.
Supplemental Payments (The Lifeline): To minimize this gap, states issue extra payments to hospitals. These account for over 52% of total Medicaid hospital spending nationwide and are broken down into:
Disproportionate Share Hospital (DSH) Payments: Extra funds legally required for safety-net hospitals serving high volumes of low-income or uninsured patients.
Non-DSH Supplemental Payments: Upper Payment Limit (UPL) adjustments and state-directed payments meant to artificially boost base rates closer to commercial or Medicare levels.
Operational Impacts on Hospitals
The gap between Medicaid base reimbursement and actual cost strains hospital systems in several distinct ways:
Widespread Financial Loss: Even after accounting for all safety-net supplemental payments, roughly 62% of U.S. hospitals operate at a net loss on their Medicaid patient populations.
Aggregate Underfunding: The total nationwide Medicaid underpayment deficit adds up to approximately $24.8 billion annually that hospitals must absorb.
The Commercial Subsidy: Because public programs underpay, hospitals shift costs onto employer-sponsored health plans. As a result, private insurers are charged nearly double (up to 200%) what Medicare and Medicaid pay for the exact same medical services.
Minnesota lawmakers approved a $205 million funding package to stabilize Hennepin Healthcare, but it underscores that the safety-net risk is escalating. Here’s what Hennepin told us.
KEY TAKEAWAYS
Hennepin’s financial struggles highlight how hospitals with heavy Medicaid and uninsured populations remain vulnerable when reimbursement growth lags expense inflation.
CFOs should model scenarios involving Medicaid funding reductions, rising uncompensated care, and sustained labor-cost pressures to assess liquidity and capital needs.
While government funding can provide short-term relief, finance leaders should focus on long-term sustainability through revenue diversification, service-line optimization, and proactive advocacy efforts.
Hennepin Healthcare’s financial crisis has become one of the most closely watched healthcare stories in the country. Now bolstered with state funding, its story illustrates the mounting pressure on safety-net hospitals.
The CFO Take Away
Think of this headline as an underscore to the growing vulnerability of health systems whose payer mix is concentrated in government programs. Hennepin Healthcare’s situation demonstrates that even large, clinically essential institutions can find themselves in liquidity crises when reimbursement growth consistently trails expense inflation.
CFOs should view this as a warning to stress-test their organizations against scenarios involving Medicaid funding reductions, higher uncompensated-care volumes, and continued labor-cost pressure. The strategy lesson here is that traditional margin-improvement initiatives alone may not be enough. CFOs should be strengthening advocacy efforts, diversifying revenue streams where possible, reassessing service-line profitability, and building long-range capital plans that assume greater reimbursement volatility.
The market is tightening, and the broader takeaway is that safety-net economics are becoming a board-level risk issue. Organizations that wait until cash reserves deteriorate before pursuing structural solutions will find themselves relying on emergency legislative interventions rather than executing deliberate financial strategy.
The System
Hennepin Healthcare leaders have warned lawmakers that the organization faces severe financial challenges driven by a combination of factors: rising labor and operating costs, inadequate reimbursement from government programs, and a heavily Medicaid-dependent population.
The system has already tried to shrink costs by reducing beds and eliminating services, while seeking additional state support to stabilize operations. But policymakers ultimately negotiated a funding package worth approximately $205 million to help preserve the organization’s role as Minnesota’s largest trauma center and a critical provider for vulnerable and low-income populations.
In an email to me, the system stated:
“Hennepin Healthcare is deeply grateful to the lawmakers who acted with urgency and collaboration, and to our employees, patients, and advocates whose voices brought needed attention to this crisis. The stabilization funding does not resolve the long-term impacts of HR1 or the structural deficits that uniquely challenge safety-net hospital systems. But it does accomplish two essential things: it delivers historic support that sustains us, and it gives us the time and stability to work with the state on durable, long-term solutions.
Our immediate priorities are to stabilize our team and invest in patient care while carefully stewarding the funds allocated to us. We have essential needs that have been deferred because of financial challenges, including staffing, equipment, and other investments that support patient care.
Looking ahead, our strategy is focused on both operational improvement and long-term sustainability. We will continue working with state leaders, the Governor-appointed task force, and our future professional governing board to identify lasting solutions that strengthen Minnesota’s healthcare safety net and ensure Hennepin Healthcare can continue serving patients for generations to come.”
It’s clear the system views the package only as a bridge. It’s obviously not a solution. But beyond that, it’s also clear that this is not a Minnesota-confined story.
Hennepin Healthcare showcases the financial fragility of safety-net hospitals nationwide. In 2023, well before any of today’s Medicaid chaos, safety-net hospitals provided roughly $11 billion in uncompensated care.
Roughly three-quarters of Hennepin Healthcare’s patients are uninsured or covered by public insurance programs, creating a structural gap between the cost of care and reimbursement levels.
Hennepin Healthcare was projecting up to $50 million in operating losses for 2026 and a staggering $1.7 billion in deficits over the next decade. The organization’s repeated losses and dependence on government intervention underscore the challenges many urban safety-net systems face as Medicaid funding uncertainty, amongst other pressures, converge.
New National Health Expenditure projections show sustained cost growth outpacing GDP, driven by Medicare expansion, rising drug spend, and persistent utilization pressures.
KEY TAKEAWAYS
Medicare is projected to grow faster than other payers, increasing exposure to lower reimbursement rates and tightening system-wide margins.
Utilization is driving costs. Post-pandemic service use remains elevated, undermining the assumptions that demand would normalize.
Rapid pharmaceutical growth and shifting federal pricing policy make pharmacy costs unpredictable and scenario-dependent.
The latest National Health Expenditure projections from Health Affairs and CMS confirm what CFOs already suspect: cost growth is structural. Total U.S. health spending is expected to grow at roughly 5.4% annually through 2034, consistently outpacing GDP growth of about 4.1%, pushing healthcare’s share of the economy from roughly 18% today to more than 20% by 2034.
The first major implication is funding-source imbalance. Medicare is projected to grow the fastest at roughly 7.7% annually, driven by demographics and utilization intensity. Medicaid and commercial insurance trail at about 5% each, but still above general inflation. This divergence matters. Payer mix will steadily tilt toward government payers with structurally lower reimbursement growth. Even small shifts in payer composition will exacerbate pressure on operating margins unless productivity gains or rate improvements offset them.
Secondly, utilization is what’s really driving the next wave of cost growth. Recent data show elevated service use across hospital, physician, and pharmaceutical categories, with little evidence that post-pandemic demand has normalized. That suggests budgeting cycles can no longer assume regression to pre-2020 utilization trends. For CFOs, this complicates volume forecasting: demand is becoming less predictable and more sensitive to coverage expansion and policy-driven enrollment changes.
Third, prescription drug spending is now the fastest-growing category, with retail pharmaceuticals set to outpace hospital and physician services through the projection window. The combination of specialty drug uptake and policy-driven price reforms creates a dual volatility problem: higher baseline spend alongside uncertain future savings from federal negotiations and benefit redesigns. CFOs in both provider and payer organizations should treat pharmacy cost projections as scenario-driven, not point estimates.
Fourth, federal policy is increasingly the dominant driver of revenue exposure. The federal government’s share of total health spending is expected to rise from roughly 31% to 33% by 2034, reinforcing dependence on Medicare and federal Medicaid financing. At the same time, policy volatility—particularly around subsidies, eligibility rules, and drug pricing—introduces new forecasting risk that cannot be diversified away. CFOs should expect more frequent mid-cycle reimbursement adjustments and greater lag between policy adoption and financial realization.
Fifth, the insured population is expected to slightly decline as a share of total population over the next decade. This is a subtle but important signal for providers, because even small coverage shifts can disproportionately affect elective volume, bad debt exposure, and charity care assumptions. CFOs should incorporate coverage elasticity into long-range planning models, especially in markets with high exchange enrollment sensitivity.
Finally, healthcare is steadily absorbing a larger share of the U.S. GDP. Look out for structural revenue tailwinds for the sector and intensifying political and payer pressure to contain costs. CFOs should expect sustained scrutiny on operating efficiency, administrative overhead, and price justification across all service lines.
Ultimately, the shift here is from static 10-year budgeting to dynamic scenario planning. Health systems that quickly model policy sensitivity, payer mix drift, and utilization volatility in real time will be better positioned than those relying on historical cost curves that just no longer hold up.
The administrations new ACA rules encourage health insurers to offer loans for medical bills instead of addressing the soaring out-of-pocket costs driving Americans into debt.
Most Americans are familiar with UnitedHealth, the largest private health insurer in America – if not because the corporate giant provides their medical coverage, then because of the massive publicity when the CEO of its key subsidiary was assassinated on a Manhattan street in December 2024.
The shooting of Brian Thompson also sparked a nationwide debate over Big Insurance practices, after many came forward with horror stories about their denied claims for urgent medical care or other bad health insurance experiences. Yet there is one thing most Americans do not know about UnitedHealth: It also has a bank.
But a number of physicians did know about Optum Financial by the spring of 2025, and they were not happy. Some doctors said their practices had been forced to borrow money from Optum to deal with a crippling cyberattack on the medical payments system, and Optum then pressured them to quickly repay the money. One New Jersey specialist in pediatric neurology and neurosurgery told The New York Times: “Optum, in my opinion, is acting like a loan shark trying to rapidly collect.”
Now, financially pressed U.S. families might learn what it’s like to owe money to Optum, under a new plan from the Trump administration.
With out-of-pocket medical costs for Americans skyrocketing, new guidelines for the Affordable Care Act marketplace suggest that insurers begin offering loans to patients with sky-high deductibles and unexpected large medical bills, a loan that presumably would be repaid with interest.
“We note that multiyear and 1-year catastrophic plans may be able to offer relief from the high deductible and maximum annual limitation on cost sharing through other mechanisms,” reads the final rule. “For example, issuers of catastrophic plans could consider financing the deductible by providing enrollees a loan.”
Experts say the ACA rules for 2027 and 2028 from the Centers for Medicare & Medicaid Services reveal the administration’s focus on expanding consumer choice and reducing federal outlays while ignoring the core issue: higher out-of-pocket costs.
“They’re putting a lot of stock into the idea that people really want these extremely, extremely high deductibles and out-of-pocket costs,” said Katie Keith, director of the Center for Health Policy and the Law at the Georgetown University Law Center. “And so they’re coming up with all these attempts at workarounds, including things like making your insurance company your bank.”
The New York Times noted that UnitedHealth, with its Optum financial unit, is the one large insurer that’s already equipped to offer loan packages to patients who can’t afford their bills. In addition to its controversial program of loans to physician practices, Optum’s bank currently offers government-approved Health Savings Accounts, or HSAs, which allow patients to set aside pre-tax earnings for future medical bills. A UnitedHealth spokesperson wouldn’t comment to the Times on the new ACA rules.
It’s understandable why the Big Insurance icon wouldn’t be eager to weigh in on a concept that will only fuel consumer anger over the increasing unaffordability of health care. U.S. Rep. Shontel Brown, an Ohio Democrat, weighed in on the Trump administration scheme on the social media platform X by noting this would “supercharge medical debt.” She added: “This could ruin people’s finances, while creating a financial incentive for insurers to deny coverage.”
Indeed, a 2025 report from the health-policy organization KFF found that UnitedHealth had – along with two Blue Cross Blue Shield affiliates – one of the nation’s three highest rates of claims denials for its ACA Marketplace policies. Its reported denial rate of 33% was nearly double the overall national rate of 19%. Now UnitedHealth – which posted more than $12 billion in profits in 2025, the highest of the nation’s insurers – could make even more money from denying claims or raising deductibles and offering loans.
The crisis of high out-of-pocket medical costs in America has been spiraling rapidly since the Trump administration and the Republican-controlled Congress rejected extending enhanced federal subsidies that had made coverage under the ACA, or Obamacare, reasonably affordable.
For millions of Americans, the end of those subsidies – with some consumers getting 2026 monthly premium bills that have more than doubled – has meant shifting to the lowest level of Bronze ACA plans, which come with high annual deductibles. This will mean thousands of dollars in bills for an unexpected major illness.
The soaring premiums have also seen many families joining the growing ranks of the uninsured. One early analysis from KFF predicted that as many as 5.5 million Americans – or about 25% of the peak enrollment – will have dropped their ACA insurance by the end of 2026, The new negative aura around health insurance – higher premiums, higher-out-of-pocket costs for those choosing inferior plans, or those without any coverage at all – is behind a recent report that about one-third of all Americans are cutting routine expenditures or even skipping meals to deal with their rising doctor bills and drug costs.
Instead of continuing the subsidies that had brought a steep rise in ACA enrollment earlier in the decade, the Republican-led government insists it is addressing the growing affordability crisis with new options that dangle lower premiums with the much greater risk of painful out-of-pocket costs in an emergency.
The government’s new ACA rules for 2027 increase the number of people who’d be eligible to buy so-called catastrophic plans that might defray costs for an extreme medical emergency but put consumers on the hook for the costs of most doctor visits or prescriptions. This is on top of new rules that will allow insurers to raise deductibles for the third-tier Bronze plans to $15,600 for individual coverage or $31,200 per family.
The Trump administration hoped to boost catastrophic plans to spike their enrollment as high as 3 million Americans, but Louise Norris, the longtime expert who writes for Healthinsurance.org, noted that a variety of factors have prevented any surge in customers for these high-deductible plans. In some states, she noted, premiums are actually lower for the Bronze plans, and this year, only about 67,000 people have signed up for the catastrophic plans.
Norris said the Trump administration’s idea for insurance-company loans is “that you can pay back that deductible over time, [but] I’m not sure that would really offset those other factors in terms of making those plans appealing.” She added that, “if you don’t qualify for subsidies, and you’re looking for the cheapest plan you can get in a lot of areas, that’s actually going to be a Bronze plan.”
So the government seems determined to make catastrophic insurance popular when American consumers don’t really want it.
Instead, the various schemes in the new ACA rules for 2027 and beyond – pitched with a notion of offering consumers more choices instead of the cost relief that Americans need – are projected to cost a whopping $1.3 billion annually, while it’s projected that two million more people will likely drop their ACA coverage because of the expense.
While the Trump administration and its GOP allies on Capitol Hill own this current crisis, Democrats need to acknowledge their own complicity in the situation.
Democrats in the past have bent to insurers’ demands to make sure all the health plans offered in the ACA marketplace have cost-sharing requirements of some amount and also to allow the out-of-pocket maximum to be unaffordably high for most Americans – especially for people with chronic conditions and those with low incomes.
This year’s midterm election is an opportunity for candidates to promise that health care affordability will be a priority. The centerpiece of such an agenda should be lowering the outrageous out–of-pocket maximums. The Lower Out of Pockets NOW coalition, which I founded, supports a bill sponsored by Massachusetts Democratic U.S. Rep. Jake Auchincloss to extend the Biden-era Medicare prescription drug yearly out-of-pocket maximum of $2,000 (rising to $2,100 this year) to people enrolled in ACA marketplace plans.
Some states already offer innovative cost-control plans. For example, Massachusetts now requires issuers of individual coverage and fully insured group coverage to limit increases in the enrollees’ out-of-pocket costs to the Consumer Price Index inflation rate for the Boston area. For 2027, the cap will be 3.6%. The covered expenses include plan deductibles, copayments and coinsurance bills.
When the idea of loans from insurers like UnitedHealth was reported in The New York Times, an attorney commented on social media that “it’s hard to top this level of dystopia.” This is a wake-up call to focus on the real pathways to affordable health care.
At least 568 healthcare facilities operate through nonprofit-private equity joint ventures, according to a new report calling for scrutiny into those arrangements.
The figure is likely an undercount, considering only public data were used. The report (PDF) was published by the Private Equity Stakeholder Project (PESP), a nonprofit that advocates for more disclosure about private equity deals.
More than a fifth of private equity (PE)-owned hospitals operate under joint venture arrangements with nonprofit health systems.Apollo Global Management-owned Lifepoint Health, for instance, runs nearly two-thirds of its hospitals through joint ventures.
Such joint ventures extend beyond hospitals, spanning subsectors such as inpatient rehab, hospice, home health, behavioral health, ambulatory surgery centers and urgent care, per the report. And regulations have not kept up with these evolving complex ownership structures.
“While joint ventures may be advantageous configurations for the businesses involved, PE-backed joint ventures may still represent the risks associated with PE buyouts in healthcare,” the report said.
The report identified several patterns related to such arrangements. First, joint ventures with a provider offer an opportunity for a PE-backed company to expand into new markets. Joint ventures may also help companies get around regulatory restrictions, like in some states that forbid non-doctors from owning medical practices. It may help avoid the challenges associated with converting a health system from a nonprofit to a for-profit. Joint ventures also grant access to private capital and may drive revenue from the sale of real estate, a practice critics have said fueled high-profile health system bankruptcies in recent years.
One negative pattern, the report cautioned, is patient and caregiver risks due to poor facility conditions, declining care quality, reduced services and higher prices. PESP gave as an example Lifepoint’s involvement in Duke, where associated facilities have seen poor quality of care and have cut services. Lifepoint was the subject of a recent bipartisan Senate investigation, supported by other PESP research, which found underinvestment has affected patient care.
Another example worthy of caution, per the report, is Ascension, which, in addition to having a joint venture with Lifepoint, also works with PE firm TowerBrook Capital to acquire healthcare companies. This case study shows how executives and PE businesses make outsized profits from entering healthcare markets, despite clinician concerns about future negative impacts to patient care.
While much of the public and an increasing share of policymakers have been wary of PE’s involvement in healthcare due to these cases and others,proponents contend that funds can help fill in gaps where public funding for healthcare falls short, such as by supporting services in underserved areas or providing resources and managerial expertise that would otherwise be out of reach.
PESP’s report said the examples it documented “expose significant gaps in federal and state oversight of private equity in healthcare.”
To address this, PESP recommends that the IRS update its joint venture guidance; that the HHS Office of the Inspector General update its guidance on anti-kickback statutes; and that CMS clarify whether exceptions to Stark Law—which protects medical decisions from financial conflicts of interest—apply in PE-backed joint ventures. PESP also called on the Federal Trade Commission and the Department of Justice to better scrutinize joint ventures that don’t trigger individual premerger review, but still amass market influence.
Additionally, the report was accompanied by a public searchable database of 568 nonprofit-PE joint ventures as identified by PESP. The database is embedded on PESP’s site.
“Patients, payers and employees need protection from the risks associated with PE ownership of healthcare systems and joint ventures expose significant gaps in oversight and regulation,” the report concluded.
HENRY KOTULA 