Hospital and health system margins are beginning to reveal two different realities as a growing number of hospitals lose money and cut costs while the strongest add services, shed what doesn’t fit and post gains.
The gap shows struggling facilities like Watsonville (Calif.) Community Hospital that are down to just eight days of cash on hand, while systems like Durham, N.C.-based Duke University Health System reported an operating income of $453.1 million (5.4% margin) in fiscal year 2026, up from an operating income of $179 million (2.5% margin) in fiscal 2025.
Here are the numbers and moves defining the hospital finance divide as hospitals head into 2027.
THE NATIONAL PICTURE
1. More hospitals are losing money. A Kaufman Hall “National Hospital Flash Report” from Oct. 13 found that 43% of hospitals are operating in the red, up from 33% prior to the COVID-19 pandemic. The report pulled from August 2026 financial performance data from 1,300 hospitals.
2. Margins slid through the summer. The average hospital margin fell to 1.8% in August, down from 3.8% in July and 5.6% in June.
3. Geography matters. In August, hospital margins were down 2 percentage points compared with the same month in 2025. Margins rose 5% year over year in the Northeast/Mid-Atlantic but fell 18% in the Great Plains.
4. Revenue is up, but costs and bad debt are increasing faster. Operating revenue per day increased 6% year over year in August. Total expenses have increased 21% over the last three years, with drug expenses up 29%, supply expenses up 25% and labor expenses up 16%. Bad debt and charity care per calendar day increased 13% year over year and 49% over the last three years.
SYSTEMS PULLING AHEARD
5. For-profits remain ahead. Nashville, Tenn.-based HCA Healthcare, which is scheduled to report its third-quarter results Oct. 27, reported a net income of $1.7 billion (8.4% margin) in the second quarter of 2026, roughly flat compared with $1.7 billion (8.9% margin) in the second quarter last year. HCA, Dallas-based Tenet Healthcare and King of Prussia, Pa.-based Universal Health Services have also outpaced the broader market since June 30, even as they split their outlooks for the rest of the year.
6. Certain nonprofits are posting big margin gains. Duke Health’s operating margin for fiscal 2026 was 5.4%, compared with an operating margin of 2.5% for fiscal 2025. Livonia, Mich.-based Trinity Health also saw $281 million in operating income (1.1% margin) in fiscal 2026, up from a $12.2 million operating loss (0% margin) in fiscal 2025.
7. Turnarounds are working. West Reading, Pa.-based Tower Health achieved a positive operating income for the first time in nearly a decade. President and CEO Michael Stern told Becker’s the system is shifting from stabilization toward strategic investment and sustainable growth. St. Louis-based Ascension also completed a $3 billion turnaround in three years, with the system reporting a $120 million operating loss (-0.2% margin) in fiscal 2026, a $371 million improvement from the prior year.
8. System investments reach beyond hospitals. Phoenix-based Banner Health has bet on ASCs and insurance to grow. In 2018, the system entered a joint venture partnership with Phoenix-based Atlas Healthcare Partners to build and operate a network of ASCs in Arizona, Colorado and Wyoming. Additionally, just under 20% of Banner’s total revenue comes from insurance premiums, with its long-term financial strategy including an increase in that share. Ascension also just wrapped its $3.9 billion acquisition of AmSurg in June, growing its ASC footprint from 58 centers to more than 300 across 34 states.
THE HOSPITALS FALLING BEHIND
9. Cash is the strongest divider. An Aug. 13 Moody’s Ratings report found that median days cash on hand was 280 for Aa-rated nonprofit systems, 191 for A-rated systems, 117 for Baa-rated systems and 71 for systems rated below Baa.
10. Some hospitals are down to days, not months, of cash. Watsonville Community Hospital faces “a serious financial gap” with just eight days of cash on hand. Its interim CEO Tim Moran warned the hospital could close within six to 12 months without action.
11. Downgrades are piling up.Becker’s has tracked 19 health system rating downgrades in its latest roundup. Most recently, Ashtabula, Ohio-based ACMC Healthcare System’s credit rating was downgraded to “BBB” from “BBB+” by Fitch. The downgrade reflected deterioration in the system’s liquidity since fiscal 2023.
12. Federal scrutiny has added pressure. An Oct. 8 inspection report obtained by Becker’s found Central Maine Medical Center in Lewiston is at risk of losing Medicare funding after CMS found it out of compliance with three of the program’s conditions of participation.
13. Rural hospital exposure remains high.More than 40% of rural hospitals operate at a loss, according to an Oct. 13 AHA report. Becker’s has reported on just six planned hospital and emergency department closures in 2026, but at this point in 2025, Becker’s had already reported on 22. While this may be viewed positively, many healthcare leaders feel the financial strain hasn’t eased and is showing up in areas like service line cuts and rural emergency hospital conversions and consolidations.
HOW SYSTEMS ARE RESPONDING
14. Workforce cuts aren’t slowing down.Becker’s has reported on 68 hospitals and health systems that have announced job cuts in 2026. In recent months, four systems have also cut corporate and administrative support roles while protecting positions focused on patient care.
15. Portfolios are being reshaped. Many large systems are divesting assets, exiting joint ventures and calling off deals. At the same time, hospital and health system mergers and acquisitions in 2026 have already surpassed 2025 numbers, and are set to see their busiest year since the pandemic. Since 2020, at least 23 health systems have formed or taken new identities through mergers, new launches or rebrands.
As campaign 2026 nears its end in 15 days, polls show the potential for some surprising results and political pundits are already speculating about what to expect in the lame duck session and 120th Congress that convenes in January.
For healthcare, the realities are these:
Healthcare will be on local, state and national ballots in the context of affordability and costs of living. It’s a top-of-mind concern to voters along with housing, gas prices and groceries. A fourth of the population has an unpaid medical bill, and the majority worry about a surprise medical bill that could wipe them out.
Healthcare has lost much of the trust and confidence it enjoyed for decades. It has failed to navigate its positioning with voters because it lost control of its narrative. Among majorities of elected officials and voters across partisan aisles, the “system” is viewed as big businesses that put profits above all else. Reform is desirable to outside stakeholders but there’s no consensus about a ‘future state’ destination.
Healthcare is structurally flawed. Its tribalism is reinforced by laws and regulations that protect its status quo. Primary and preventive health is subordinated. For-profit and non-profit distinctions are artificial. Value is not defined. Business practices are opaque.
As a result, the industry will operate in limbo in the immediate future. Structural change is unlikely. For the near term, states will be the labs for healthcare innovation, and large (non- healthcare) employers might force a needed national discussion. Thus, in the 119th Congress’ lame duck session and 120th Congress next year, public policies in healthcare will center on low-risk efforts in two domains that enjoy widespread, Bipartisan support among elected officials and voters:
Program integrity: Fraud, waste and abuse in the U.S. health system is a soft target. According to CMS’ 2025 Improper Payment data, improper payments in Medicare, Medicaid, CHIP and other programs amounted to amounted to $96.16 billion. The largest categories include:
Medicare Fee‑for‑Service (FFS): 6.55% (≈ $28.83B)
Medicare Part C (Medicare Advantage): 6.09% (≈ $23.67B)
Medicare Part D: 4.00% (≈ $4.23B)
Medicaid overall: 6.12% (≈ $37.39B)
Children’s Health Insurance Program (CHIP): 7.05% ($1.37B)
Advance payment of the Premium Tax Credit (APTC) program: 0.89% ($657.46M).
It includes enrollees or actions for which the DOJ, FTC, FBI or HHS-OIG may seek redress on behalf of the public:
Billing for services not provided
Upcoding or unbundling
Billing for medically unnecessary services
Kickbacks or inducements
Duplicate billing
DME schemes (back braces, wheelchairs) — a high‑risk category highlighted by FTC.
Elected officials and the majority of voters support intensification of policies that reduce FWA spending.
Price transparency: Polls show large majorities of voters want unfettered access to accurate prices for the services they receive from doctors, hospitals, insurers, prescription drugs and everything else. They reject insider reasoning they’re not available today due to complexity and believe most price estimator tools currently in use of limited help to consumers. They believe of willful avoidance of price transparency is a calculated business strategy to protect margins, executive compensation and revenue growth.
There’s no doubt healthcare will significantly impact the results of the November 3 vote. There’s no doubt it will be a major focus in the 120th Congress. The major unknowns are (1) how states and federal policymakers will address the realities noted above, (2) how large employers and community leaders will participate (or not) in the design of a reformed system of health and (3) how voters will decipher reforms that promise offer accessibility, affordability and effectiveness.
Game on.
P.S. I grew up watching ABC’s Wide World of Sports that opened with Jim McKay’s infamous call “The thrill of victory, the agony of defeat”. Last week, we felt both. Pope Leo’s successful lung surgery was the victory; the mass murder of 3 kids and a teacher at Silver Rail Elementary the defeat. Our nation’s psyche is on edge along with many of the 8 billion inhabitants of planet earth. We need hope. We need victories. We need a break from bad news. I’m just sayin’.
On Nov. 3, voters will cast ballots that decide the balance of power in Congress and set the stage for what legislation, investigations, and rulemaking could be possible for years to come.
If the blue wave that polls predict materializes, efforts to enact and change the policy agenda will play out against a backdrop of government divided along political fault lines—with the 2028 presidential contest looming.
In this collection of essays, Brookings experts examine the implications of the upcoming election on the most significant issues facing the nation.
Democrats’ health care agenda may matter even if it stalls
The most consequential health care legislation from the next Congress may be bills that have almost no chance of becoming law.
If Democrats capture one or both chambers, health care will likely be high on their agenda. Given the parties’ divergent views on health care, major changes are unlikely while President Trump remains in office. Yet recent history shows that Democratic efforts could still shape future legislation.
House Democrats passedbills authorizing Medicare drug price negotiation in 2019 and expanding Affordable Care Act (ACA) Marketplace subsidies in 2020, despite little prospect of enactment under President Trump. Versions of both policies became law during the Biden administration. Similarly, House Republicans passed a debt ceiling bill that included Medicaid work requirements in 2023, despite President Biden’s opposition. Similar requirements became law under unified Republican control in 2025.
A Democratic agenda would likely start with reversing cuts to Medicaid and the Marketplaces enacted in 2025 and restoring enhanced Marketplace premium subsidies. But it might also include other efforts to expand or improve insurance coverage, and the appropriate scope of these efforts may spur intense intraparty debate.
Democrats may also explore cost-cutting measures, both as a way of directly lowering costs for consumers and of generating federal savings to help finance coverage improvements. This could include steps to lower hospital or drug prices or to reduce payments to Medicare Advantage plans.
Even if nothing becomes law, effort spent developing and socializing proposals might leave Democrats better positioned to enact reforms when political conditions change.
The challenges of reining in the Iran war, and prospects for broader reform
If Democrats take control of one or both chambers of the 120th Congress, they are likely to feel immense pressure to rein in the Iran war, among other controversial aspects of the Trump administration’s foreign policy. But this will be easier said than done. Trump’s continued pursuit of the war is premised on broad claims of inherent constitutional authority. Even a new majority is unlikely to have the two-thirds support necessary to override a presidential veto in order to install new legislative restrictions. Nor is cutting off funding always a politically viable alternative.
For this reason, if controlled at least in part by Democrats, the 120th Congress is likely to see more of the innovative methods the current minority has used to pressure the Trump administration into winding down the Iran war, including by withholding funding, rehabilitating dormant expedited procedures, enacting nonlegislative measures opposed to administration policies, and even exploring new litigation options. By combining these measures with newly available oversight tools and the sorts of small-bore legislative solutions (including funding limitations) that can be more readily incorporated into annual “must-pass” defense and appropriations legislation—making them difficult for the president to veto—the new majority will be able to put substantial new pressure on the Trump administration. But harder and more forward-looking limits on presidential authority will likely have to wait at least until a change in the presidency in 2029.
At that point, if Democrats secure control of both Congress and the White House—and particularly if restraint-oriented Republicans in Congress are willing to collaborate—there could be a window for foreign relations law reform not seen since the post-Vietnam era. The question will then be whether Democrats will be willing to use their undoubtedly limited time in power to engage in reforms instead of advancing their substantive policy agenda. In 2021, Democratic leaders chose to focus on the latter. But the experiences of the past few years may have changed the calculus the next time around.
Democrats are poised to investigate antitrust enforcement
If the Democrats win control of one or both chambers of Congress, expect considerable focus on antitrust. Why? First, there are serious allegations that the Trump White House worked with favored lobbyists to dictate nonmerits-based resolution of investigations and litigation over the vigorous objections of both political and career staff at the Antitrust Division of the Department of Justice (DOJ). Roger Alford, a Trump appointee who served as the division’s second-ranking official until he was fired in July 2025, laid out those allegations before the House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust. A full Democrat-chaired committee will likely want to uncover the backstories behind actions at both the DOJ and Federal Trade Commission, where the courts have questioned investigations into disfavored news organizations like Media Matters.
In addition, hearings on antitrust legislation will likely be in the offing. There is growing sentiment that antitrust enforcement against tech platforms takes too long and provides little disincentive for dominant firms to stop exploiting their gatekeeper status. That worry carries over into agentic AI. While some AI firms are seeking antitrust immunity to coordinate efforts to address rogue behavior—something they likely can do now under current antitrust law—Democrats and at least some Republicans will probably want to ensure our antitrust laws are updated to prevent a handful of AI firms from dominating this powerful new technology and foreclosing meaningful rivalry. And, if the Democrats control both the Senate and the House, there could even be AI legislation sent to Trump to face an inevitable veto.
Numerous barriers will limit what the next Congress can do
With divided party government likely, a lame duck president evincing little interest in Congress, and the 2028 presidential election already underway, prospects for major legislative change in the new 120th Congress seem slim.
Plenty of issues will be ripe in the new Congress. First in line? Any of the measures that Congress and the president fail to resolve in the upcoming lame duck session. Few expect much of the lame duck, especially if Democrats’ electoral dividends lead them to withhold support until they take the reins of one or both chambers next year. Still, other lawmakers suggest that Democrats might prefer to clear some decks before the new Congress convenes
Divided governments do not always stalemate. Crisis can compel politicians to act, as they did in spades in response to the 2020 global pandemic. That Congress also rewrote NAFTA and enacted several measures targeting China.
First, lawmakers will need supermajorities to overcome potential Senate filibusters. True, it’s technically possible to attempt a filibuster-proof “reconciliation” bill (like the One Big Beautiful Bill Act), but it’s been nearly two decades since Congress pursued one during divided government. Intense partisan team play and onerous federal debt will complicate negotiations. Second, whether in control of one or both chambers, Democrats will likely devote the lion’s share of their attention to investigating the conduct of the Trump administration. With little prospect of cooperation by the administration, “messaging” oversight will be the name of the game.
Finally, the 2028 race for the White House will loom large. Will legislators prefer policy accomplishments to herald on the campaign trail in 2028? Or will each party prefer to run on stalemate, blaming the other party for failure to address voters’ concerns. Either way, the road ahead will be challenging for Congress, let alone for voters demanding change.
A Democratic Congress could curb executive power
During his second term, President Trump has expanded the scope of executive power, often with the support of the Supreme Court and even when some members of the majority have expressed doubts about his approach. Other than the One Big Beautiful Bill, Congress has enacted little significant legislation, and the president has operated mostly through executive fiat.
Would Democratic victories in the forthcoming midterm elections alter this pattern? Democrats are already debating whether they should use expanded executive power for their own purposes if they regain the presidency in 2029 or instead push for a rebalancing that restores the constitutional role of Congress as a coequal branch of government.
In the short term, it is very likely that when Democrats take control of the House, they will use their powers of oversight and investigation to hold the president accountable for his policies. Administration officials will be required to testify, and some will be cited for contempt if they refuse. In addition, Rep. Hakeem Jeffries (D-N.Y.), the Democratic leader who will almost certainly become speaker if Democrats regain the majority, plans to bring to the floor a series of bills that will spell out his party’s policy priorities and underscore the differences between the parties. If Democrats win a majority in the Senate, President Trump may have a hard time getting Cabinet nominees confirmed, confirmation of lower-court judges would slow, and it would be nearly impossible to replace a retiring Supreme Court justice from the conservative bloc with a like-minded appointee.
But even more important, a Democratic-controlled Congress could challenge the president’s actions at every turn, slowing and perhaps halting the steady expansion of executive power since the beginning of President Trump’s second term and making it more difficult for a subsequent president of either party to follow in Trump’s footsteps.
Trump may favor trade battles over military confrontation
On the foreign policy front, President Donald Trump’s response to a turnover in congressional power will differ between trade and national security. On trade, I expect he will show unrelenting activism, testing the outer limits of his authority as he looks for leverage to bend other countries to his will. He will probably not shy away from congressional criticism or legal battles over his trade activism, viewing them as the price of expanding his presidential power. He also will likely view these battles as a way to shift the narrative away from congressional investigations into his actions, those of his family, and his administration. He may see value in casting himself as fighting for American workers and against entrenched interests.
On national security, Trump will likely draw down U.S. troop numbers in the Middle East and Europe, citing a reduced tempo of military operations against Iran and the results of a posture review in Europe as rationales for his decisions. Bringing troops home stands to be broadly popular with the American public, even as such decisions will likely invite scrutiny from the national security establishment. Trump is poised to shield himself against accusations of retreat and isolationism by exercising toothy power projection in Latin America under the guise of stopping narcotics trafficking and stemming immigrant flows. He will likely throw punches in directions where he does not fear counterpunches while avoiding direct confrontation with other major powers, notably China and Russia, in his final two years in office.
Weighing the pursuit of presidential or cabinet officer impeachment
As the norm-breaking first half of the second Trump administration unfolded, several Democratic members of Congress introduced legislation calling for the president’s impeachment. Trump himself raised the specter of impeachment, saying at a Republican retreat, “If we don’t win the midterms … they’ll find a reason to impeach me. I’ll get impeached.”
Yet, as the midterm elections approach and Democratic prospects for significant electoral gains improve, impeachment remains largely absent from the party leadership’s public agenda. The biggest reason is that while impeachment requires only a majority vote, conviction requires a two-thirds vote in the Senate. Even with control of the Senate in sight, Democrats are extremely unlikely to win the two-thirds needed to convict. In addition, Trump’s declining public approval may give Democrats another reason to avoid impeachment. With the 2028 presidential election in mind, Democrats may calculate that keeping an unpopular Trump in office would be more advantageous than elevating a younger JD Vance to the presidency, which would give him an opportunity to establish his own political identity and distance himself from the administration’s record.
But that need not be the end of impeachment. Cabinet secretaries can be impeached in the same way that presidents can. Six articles of impeachment have already been filed against Defense Secretary Hegseth and one against Secretary of Health and Human Services Robert F. Kennedy Jr. In addition, Hegseth could face legal scrutiny for U.S. military strikes against alleged drug traffickers in Latin American waters, which critics argue may constitute unlawful extrajudicial killings. He is also politically vulnerable for the ongoing Iran war. Kennedy has undertaken sweeping changes that have weakened America’s public health infrastructure, and the results are apparent with the worst outbreak of measles in decades.
Odds are that if impeachment of a Cabinet officer proceeds to a trial in the Senate and picks up even a small amount of Republican support, the Cabinet officer will be forced to resign. For those who want to unseat Trump, this scenario would weaken his ability to implement what many think are impeachable policies without actually impeaching him. But perhaps most importantly, the impeachment of Cabinet officers would be a warning to Democratic and Republican presidential candidates that there is another tool that can be used to hold presidents accountable.
Financial regulation could supersede presidential action in new Congress
In financial regulation, personnel is policy. The midterms leave Democrats facing two problems. The first is the Supreme Court, which stripped most financial regulators of their political independence, so these agencies now report to the White House. The second is that Donald Trump, unlike Joe Biden, quickly put his people in place, meaning a Democratic Senate has limited leverage on personnel unless someone leaves. Expect President Trump’s team to continue promoting crypto and rolling back bank regulation with little Congress can do to stop it. Going forward, Democrats face a choice: They can defend institutions like the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) even as their leaders take policy positions at odds with Democratic priorities, or they can acknowledge the court’s restructuring of government has made financial regulation an express policy lever of the White House.
Progressive Democratic chairs could force Republicans to vote on populist ideas President Trump has endorsed, such as capping credit card interest at 10%. This would put Republicans on record either against the president or against their own deregulatory philosophies. Bipartisan legislation remains possible, as it was on housing this year, even though President Trump withheld his signature. Democrats can investigate conflicts of interest around Trump’s personal crypto profits. Investigations tend to increase partisanship. Future deals will depend on whether President Trump views his legacy as being burnished by bipartisan laws or enhanced by unilateral executive action coupled with growing vitriol toward Congress.
Defense budgets, not war powers, are where Democrats can act
If the Democrats control one or both houses of Congress starting in January 2027, I expect some significant changes in national security policymaking, perhaps most notably on the defense budget and related matters.
But first, some areas where I doubt change would be significant: war powers, military reorganization, and decisions on the use of force. In each of these areas, presidents, including Trump, have generally decided that they can avert, outflank, or run over Congress. Even in the case of a modest Democratic advantage, President Trump could likely count on enough Republican support to sustain his vetoes on key issues. For example, if Congress tried to reform or rewrite the 1973 War Powers Resolution, Trump could veto such a bill—and I doubt the next Congress would do what the Senate and House did back in 1973 when they overrode President Nixon’s veto with a two-thirds majority in each chamber.
By contrast, on the core matter of defense budgeting, I expect change if the Democrats gain control (of either one or both houses). President Trump’s efforts to gain $350 billion in “mandatory” funding for the fiscal year 2027 budget, already delayed by the current Congress, would stand virtually no chance, as Congress would insist on the normal budget process and oversight (with annual “discretionary” funding that it helped manage). The Golden Dome missile defense system and Golden Battleship would get no big chunks of financial support absent detailed plans and substantial debate. Trump would probably not be able to tell the Navy how to reposition its aircraft carrier control towers and how to change the technology for its catapults. That is because, knowing of Trump’s personal and even idiosyncratic interests in these matters, Congress could insist as a condition for funding future ships that best technological and scientific practices govern how the ships are designed and built. These demands could be written into defense authorization and appropriations bills, making them binding.
This may not seem like a big deal, but normalcy, and checks and balances, need to start somewhere!
A blue wave election is not likely to create a major shift in ICE activities
As indicators of a potential blue wave begin to take shape across the political landscape, there is growing optimism that Democratic control of the House will lead to notable shifts in policy outcomes across several domestic policy domains, including immigration. Unfortunately, there might not be much change in one of the more controversial and high-profile aspects of the Trump administration’s priorities: the enforcement of deportation policy through ICE. The executive branch has a lot of power independent of Congress to enforce immigration. In fact, it was through executive orders that President Trump expanded the reach of ICE on the first day of his second term. Even if Democrats win the House, they will not be able to do much to overcome the executive power to continue ICE operations.
The main power for Congress in this area is their oversight of the federal budget, which would ordinarily allow the House to curtail operations by cutting off funds. However, Congress has used the reconciliation process in both 2025 and 2026 to appropriate nearly $240 billion for immigration purposes. This is more than enough funds to allow the Trump administration to continue their operations without much resistance from the legislative branch. One of the few prospects for Democrats eager to show voters that they are doing all they can to reform deportation policy would be clawing back unspent funds or restricting how those funds could be leveraged. Whether the new Congress will have the votes to make this happen will depend largely on how big the forecasted blue wave is in November. This is not good news for the immigrant community and the many mixed-status families living through a constant state of fear that they or their loved ones may be deported. They may have to wait until after the 2028 election to see any major changes in immigration policy.
A new Congress should address the impacts of redistricting and racial gerrymandering
The GOP’s efforts to redistrict ahead of the 2026 midterm elections will further disenfranchise Black voters, particularly in the wake of the Supreme Court’s April Louisiana v. Callais decision that delivered another blow to the already weakened Voting Rights Act (VRA). In addition to the ongoing efforts by the Trump administration to impose more stringent voter identification requirements, redistricting, which mirrors the historical process and goals of racial gerrymandering, is disproportionately impacting majority-Black and plurality-Black districts that leaned heavily Democrat in prior elections. Newly redrawn maps are taking away incumbent seats held by Black legislators, while establishing new Republican seats and thus diminishing Black political power. If Democrats can shift control in the midterms, one of their first priorities should be to enact legislation that limits, bans, or institutes objective oversight of the process.
Six states—Texas, Florida, Louisiana, Alabama, Tennessee, and North Carolina—have already split up majority- and plurality-Black districts. Nine additional states have initiated mid-decade restricting efforts. This has forced some incumbent Black legislators to run in majority-white, heavily Republican districts. Leading up to the midterms, it will be critical to thwart these increasing acts of voter suppression through more robust voter education, stronger oversight of AI’s role in enabling mis- and disinformation, and an increased number of poll watchers on Election Day, among other protections.
However, efforts to dilute the Black vote could also backfire for the GOP as Democrat and Republican voters share similar concerns regarding the economy and cost of living. Additionally, a transfer of control to Democrats could revive debates over electoral reform. Congress could pass anti-gerrymandering legislation to avoid future partisan takeovers or require independent, bipartisan commissions as proposed in the Redistricting Reform Act of 2025. Efforts could even be bipartisan as some Republicans have called for outright bans on mid-decade changes to electoral maps. Several states have also instituted their own provisions to stop gerrymandering, and installed state-level, independent commissions that are separate from legislatures to make the process less vulnerable to partisanship. Although not currently active, Michigan has an independent citizens’ redistricting commission to review congressional and state maps.
Congressional and state oversight alone will not fully address the damage done to the Voting Rights Act, which has been pillaged and weakened by a series of Supreme Court decisions that have enabled loopholes for misinterpretation and misuse. The new Congress should make time to address these vulnerabilities in the VRA to eliminate the growing partisan influence that keeps trying to alter who gets to vote, where, and for whom, going forward.
A Democratic Congress would have limited effects on K-12 education
Even if Democrats take the House and Senate, I expect the immediate effects on K-12 education to be modest. There are a few reasons for that. First, the federal government isn’t the main stage for education policymaking; state and local governments matter more. Second, Democrats almost certainly won’t win large enough majorities to override a presidential veto, which limits what they can change from Washington. Third, it’s not all that clear what Democrats want. The party has seemed directionless on K-12 education for some time, and even the DSA platform says little about it.
Still, there would be some impacts. Congressional Democrats would throw sand in the gears of GOP policymaking. That wouldn’t necessarily stop the president’s executive actions, but it’d likely prevent another budget reconciliation package with K-12 policies that Democrats dislike. Democrats also could more forcefully resist the administration’s efforts to dismantle the Department of Education (ED)—with oversight hearings and some concrete actions. For example, they could include language in a funding bill to prohibit the interagency agreements being used to offload ED’s responsibilities to other agencies.
Perhaps the most interesting move would be Democrats passing a bill to signal their future K-12 plans should they retake the White House. One notable development is Rep. Suzanne Bonamici declaring for the race to be the top Democrat on the House Education and Workforce Committee—weeks after introducing a bill with a sprawling set of K-12 proposals. Perhaps that bill is foreshadowing Democrats’ education policy agenda for 2028.
Midterms may reshape energy policy despite little talk of it
Looking at physical reality, you’d think that 2026 would be a banner year for political attention to climate change and energy. Extreme weather, wildfires, and other perils that voters often associate with climate change are constantly in the news. Two wars entangling supplies from major oil and gas producers have sent energy prices soaring. Electricity bills are rising nearly everywhere.
Yet almost none of the midterm races will turn on energy or climate. Climate change is strikingly absent. Even Democrats inclined to support climate policy are wary of becoming too visible on a topic that voters generally don’t prioritize—despite the fact that many voters want them to say more. Despite energy being a key driver of inflation that worries voters, energy itself mostly isn’t a top campaign issue. Of the eight top issues that the Pew Center tracks for political attention, voters put energy nearly last.
Although climate and energy aren’t directly driving the upcoming elections, electoral sweeps by Democrats could have huge implications for policy. In a few states, a swing to unified Democratic control could lead to much stronger climate policies along with regulations against fossil fuels. Democrats leading one or both chambers on Capitol Hill will likely lead to investigations, retaliations, and chaos in Washington, D.C.—hardly the stuff of the stable policy signals needed on energy and climate. That looming gridlock may put a spotlight on the brief lame duck period when more bipartisan legislation might get through Congress and even be signed by the president—for energy mavens, top of that list is a new bill that would help streamline permitting and make it easier to build. With the cost of oil and refined products, such as diesel fuel, you might think that Democrats would pivot toward policies that emphasize all forms of energy, including more oil. But there is little reliable support for oil and gas expansion in the Democratic base; more likely will be investigations about the Trump administration’s diesel fuel deal with Russia and a lot more emphasis on electric vehicles, biofuels, and efficiency—all policies that are unlikely to get consent from the White House, as needed for new legislation.
One of the hottest issues this election cycle is data centers, thanks to a litany of fears that include voter worries that data center power needs will jack up prices for everyone else. Unlike practically everything else in American politics, however, data centers don’t yet have ideological fault lines. Democrats and Republicans alike are scrambling to look decisive on the matter—mainly by supporting bans. No matter who wins federal and local elections, politicians know who they should abhor. Look for more symbolic political pressure on data centers. Beyond symbolism, with D.C. locked in political gridlock, the bulk of legislative efforts may, mostly, offer a sandbox for elaborating concepts that eventually could be adopted by future governments when officeholders shuffle again after the 2028 elections.
Congress should act on AI safety before states fill the gap
One of the big challenges facing policymakers after the midterms will be addressing public concerns about AI. Polls show large majorities expressingworries about AI safety and security. With a number of news stories detailing AI agents going rogue and engaging in unauthorized or prohibited activities, there is a need for members of Congress to address these problems.
There are steps legislators can take. First is mandatory reporting of rogue actions by AI agents from large tech firms. Their tools reachmillions of people and therefore are capable of harming a substantial number of individuals. Mandatory reporting would improve transparency about the scope of the problem and the types of intrusions that are most problematic.
In addition, legislators can improve legal liability for AI agents that inflict harm on consumers, businesses, or government agencies. Right now, accountability for unauthorized behavior is murky, and it’s unclear to what extent existing laws on consumer protection or business practices apply to digital tools. Clarifying liability rules would improve accountability and give tech companies clear incentives to make sure large language models are not engaging in harmful behavior.
If Congress does not move, state legislatures will act. Several states have already passedAI safety bills, and that trend will likely accelerate in the coming months. A patchwork of state rules poses an enormous challenge for tech companies, which would have a difficult time developing different models for California or New York versus Texas or Florida. It makes sense for representatives and senators to enact meaningful safeguards before conflicting policy rules proliferate at the state level.
Senate control will decide Trump’s final judicial legacy
Among presidents’ major accomplishments are significant changes in the federal judiciary’s composition. President Trump’s 231 first-term lower court judicial appointments were fewer than President Carter’s and, by a slim margin, President Biden’s.
If Republicans retain the Senate, Trump, with 308 projected appointments so far (assuming post-election confirmation of pending and announcednominees) may get the roughly 70 appointments he needs to match Presidents Reagan and President Clinton’s eight-year totals. The 22 current and announced vacancies without nominations are—at the moment—mainly in Democratic-senator states, but home-state senators’ “blue-slip” veto over district court nominees may not survive a change in Judiciary Committee leadership. And it’s anyone’s guess how many of the 55 Republican-appointed district judges and 23 circuit judges who will be eligible to retire on salary by late 2028 will do so; judges during Trump’s second term have been more reluctant than under recent predecessors to create vacancies.
A Democratic Senate, however, may be in payback mode. In their final two years, the four two-term presidents before Trump all faced opposition-controlled Senates. Until Obama, final two-year confirmations represented about 20% of total confirmations. Of Reagan’s 379 total confirmations, 84 (22%) came during his final two years. Clinton and Bush had similar percentages.
But Republicans took control of the Senate in 2015 and basically shut down judicial confirmations, resulting in only 22 confirmations—7% of all Obama confirmations.
What about the Supreme Court? If the Senate stays Republican even with a slimmer majority, look for Justice Alito to retire. If Democrats take the Senate, any vacancies will be health related, with ferocious battles over Trump’s proposed replacements either way.
Midterm winners will face pressure to rein in AI power
Data centers were the first place voters could clearly see the costs and risks of AI being shifted to them. The backlash exposed the corporate power dilemma of AI: that a handful of executives are making unsupervised decisions that affect everyone.
Zoning boards and state utility commissions can decide where a data center is located and who pays for its power. Some states are trying to address how AI companies behave. But only Congress can establish uniform national rules.
The challenge for the new Congress is to turn public concern into enforceable oversight of AI. The test will be whether legislators take symbolic but limited action or step up with meaningful requirements supervised by an agency with technical expertise to oversee safety evaluations, mandatory incident reporting, and protections against the abuse of market power.
The data center backlash brought the power of AI into public debate. Elected leaders must now decide whether public interest oversight or private interests will shape that power.
Last Friday, I had the honor of meeting with Fellows in the Milbank Memorial Fund program where top state health department and elected leaders discuss policy issues facing their states. Their issues are mounting and complicated. Their role and the scope of their responsibilities are expanding. Per the National Association of State Budget Officers, health programs accounted for 31% of the average state’s budget in FY2025 though what’s included and how it’s spent varies widely by state.
Most are compensated below their private sector peers. All work long days. All share similar challenges:
State legislatures are asking for simple answers to complex problems about costs, coverage and services.
Governors are asking for solutions to politically-sensitive problems that don’t disturb voter confidence.
Program leads in state health agencies want increased funding and less administrative oversight.
Healthcare trade associations are amping-up their advocacy machinery to protect their interests and fend off election-year losses.
And federal policies, rules and guidelines from HHS, CMS, VA, CDC, DOD, FDA, DOA et al are changing almost daily prompting court actions and regulatory chaos. In tandem. funding cuts via the One Big Beautiful Bill, uncertainty about programs like Rural Health Transformation and vaccine policy, and endless directives paralyze state health leader effectiveness.
The federal government played a back seat to states until the modern era. That changed as Medicare and Medicaid became the primary banks for healthcare. By design, states oversaw the delivery and financing of healthcare services within their borders, often experimenting with innovations in coverage to address growing access issues in underserved populations.
Today, states have a full plate: control licensing and scope of practice, insurer solvency and coverage requirements, retail pharmacies, public health programs, competition, price transparency, facility adequacy and safety (hospitals, nursing homes et al) and many much more. Since the conservative leaning Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization (2022), tricky issues like abortion rights and others have defaulted to states to adjudicate further taxing the state’s healthcare leadership and resources.
The road ahead for state healthcare regulators will be harder regardless of the state’s population, partisan leaning and resources. Spending levels are not sustainable, dissatisfaction with the health system is at an all-time high and neither political party has advanced solutions that achieve the triple aim: better care, lower cost and universal access. Reality:
The healthcare industry changes faster than its laws and regs. As a result, policy changes are primarily focus on corrections to known flaws rather than systemic reforms that enable sustainability long-term.
Short-term opportunities for healthcare investors benefit from the dysfunction. Winners in the industry leverage regs and rules that favor specialty care, consolidation, cost+ business models and profit maximization. Non-profit status protects favorable tax treatment at local, state and federal levels while day to day operations is indistinguishable from investor-owned competitors.
In 2009 in preparation for the White House Office of Health Reform Affordable Care Act deliberations with industry groups, I examined the structures, financing and clinical results of health systems in developed economies (OECD) of the world. Each was unique, but all operated at lower cost than the U.S. and all produced population-based clinical results that rivaled the U.S. Of the 12 I studied closest, the U.S, ranked in the bottom 3 on almost every measure except one: cost.
No two countries are alike like no two states are alike, but three structural elements were apparent in every system that outperformed the U.S.:
Primary and Preventive Health Gatekeeping: Developed systems integrate public health (social determinants) with physical and mental health, nutrition, prophylactic dentistry and restrictive formularies. They enable primary care for all, and facilitate access to specialty services through gatekeeping for the substantial majority of citizens.
Clinical standardization based on evidence: Every system of the world that outperforms the U.S. operates an independent NGO whose purpose is to monitor science and align diagnostics and therapeutics with what is proven to work. As AI-enabled clinical directives become mainstream tools in the U.S. system, adherence to what works best in what order (step therapies) will enable reduction in unnecessary care and engagement of individuals in self-care.
Global budgets: Remarkably, countries that out-perform the U.S. set national budgets for their healthcare programs and ration care toward system-wide priorities. They spend 8-12% of the country’s total GDP (vs. 18% in the U.S.) and appropriate more resources to primary and public health and less to acute services proportionately.
The conundrum for Milbank Fellows is the obvious: big, structural changes like these require federal involvement. They’re common sense. They’re not about bad people; they’re about structural flaws in the status quo that need fixing.
It will require a thoughtful, national plan to transform the U.S. system. States can be the stimulus for change, especially through interstate initiatives and knowledge-sharing akin to the Milbank Fellows Program.
Ultimately, it will require a federal Manhattan Project that subordinates the proprietary wishes of the industry special interests and political gamesmanship by partisans to achieve a system that’s sustainable, effective, efficient and operates with and for the people served.
States are the frontline for system reform in U.S. healthcare.
Last week was business as usual for the U.S. health system as other events grabbed the lion’s share of media attention:
Healthcare affordability and fraud were frequent mentions as GOP candidates railed against socialized medicine and industry’s lack of competition at the 2-day ‘Trumpalooza’ event in Dallas.
An apocalyptic prediction released on X by Evan Hubinger, a former Anthropic alignment lead, that ‘there’s a 10% chance that RSI (recursive self-improvement) AI could kill all humans in the next decade’ prompted social media frenzy and calls for AI regulation.
Wars in Iran and Ukraine continued.
The Jewish High Holy Days began with celebrations of Rosh Hashanah Friday just after 9-11 commemorations concluded across the land.
And the August CPI report from the Bureau of Labor Statistics showed prices elevated as the Iran war’s energy shock spiked an inflation and prompted concern the Fed might raise interest rates at its meeting this week.
With the exception of continued commentary about the Lindsay Clancy’s mistrial and post-partum psychosis defense, the healthcare system was virtually unscathed last week. For many in healthcare, ‘out of sight, out of mind’ is OK. It allows the system to operate without distraction from unwelcome criticism—disdain for media coverage has long been the preferred modus operandi in healthcare, preferring instead its own PR, ads and behind the scenes advocacy to keep things in order to its liking. It isn’t working.
Reality:The U.S. healthcare industry is not the crown jewel of our national pride. At the opening ceremony of the 2012 Olympic Games in London, the Danny Boyle-produced tribute to the National Health Service opened the games. A similar sentiment about the U.S. system is unimaginable. In its place, a dark cloud hovers above U.S. healthcare today. It is the industry’s biggest threat. The eminent cloud burst will wrack havoc on every provider, every investor, every user and every taxpayer in the U.S. unless preparedness is taken seriously.
It did not form overnight: it’s been building for 30 years but it darker and more threatening today than ever before. Here’s why:
Systemic arrogance: For decades, Americans have been told our health system is the envy of the world. We’ve embraced the industry hubris—the best doctors, the best hospitals. the newest drugs, the latest technology and most modern facilities and so on. But through these decades, costs have soared while population health and longevity have declined. Better ways to diagnose, treat, and deliver services are confined to privately-funded organizers whose shareholders see financial upside, while the less lucrative needs are left to public programs and do-gooders to bootstrap. Benign neglect for educating the U.S. population about how the health system works, how it’s organized and financed, how to use it is is the system’s original sin. It was designed so that dependence on the system via doctors, insurance, hospitals and drug companies was its foundational presumption. Evidence shows done right; it works. But it hasn’t. It declares its exceptionalism while hiding its business practices to avoid scrutiny. It rejects self-care deeming it only applicable to simple problems and presumes its concept of value always keeps ‘high quality’ distant from ‘low price’ in the public psyche. And it reinforces politics and policies that keep primary care, preventive health and social services for lower income and older populations subordinate to specialty services. Ironically, its workforce—25 million strong—that’s been warning of the cloud burst loudest. They think compensation for health executives is excessive, un-deserved and contributing to the storm.
Corporatization-driven wealth: The industry’s business practices have created massive wealth for some. 45 of the Fortune 500 companies is an investor-owned healthcare corporation. The industry’s executive class is among the highest paid compared to peers in other industries and the differential between the industry’s working class and its senior managers is the highest of all industries. Physicians have protected the profession’s distinction as the U.S. highest paid career even after accounting for the three-fold median gap between primary care and some surgical specialties. Polls show the majority of voters aren’t sure what ‘not-for-profit’ means or if it matters. Investing in healthcare is a safe bet, especially when overall market conditions are less welcoming. That’s the secret sauce that let’s the industry maintain prominence in wealth creation for risk takers, high compensation for its managers, executives and surgeons and carry grow in the aggregate faster than GDP and household wages. It’s a business, not a calling, for its management ranks, their advisors and private funders, because corporatization produces sizeable wealth for some.
Blame and Shame Advocacy: The major trade associations in healthcare have contributed to the cloud’s growing intensity. Protection of their members’ interests has takes precedent over the overall sustainability of the health system. That’s understandable: their Boards expect no less from their CEOs and teams. Thus, blame and shame advocacy is a priority over coalition building for systemic reform. But voters, employers and lawmakers increasingly recognize the obvious, no trade group in healthcare effectively represents the system as a whole. Short-term wins on proposed regulations, spending authorizations and policy shifts threatening to a specific tribe are their domain. It’s for others to fix the system even as the cloud gets darker.
Political campaigns obscure facts and oversimplify solutions to complex challenges like fixing the health system. Protecting the status quo in healthcare is what its insiders want and it’s why they’re on defense.
Paul
PS On 9/11/01, I was in Harry Jacobson’s conference room at Vanderbilt Medical Center discussing plans for our new Center for Integrative Health. The pictures of planes crashing into the World Trade Center, souls jumping to their deaths, fire-fighters running toward danger and dusty New Yorkers in zombi-like bewilderment are etched forever in my memory. It makes faith and family more meaningful and industry issues less. But in those days and after, our country seemed, if only for short while, united for a purpose. That spirit is needed for transformational change to the health system. It’s collapsing like the twin towers.
Congress wants employers and unions to finally see where their health care dollars go. A last-minute change could let insurers and PBMs keep some of the most important receipts hidden.
For years, employers and other plan sponsors, such as unions, have been fighting to get the one thing they need to better control their own health care spending: the claims data their insurers/third-party administrators and pharmacy benefit managers generate on their behalf but routinely refuse to hand over. A bill working its way through Congress –the Patients Deserve Price Tags Act (PDPTA) – would finally force that data into the open. The bill is also a real test case for a simple idea: that transparency itself can help drive down unnecessary spending, lower overall health care costs, benefit patients, and strip middlemen of the leverage they use to pocket money they were never entitled to.
The fiscal case backs this up. A recent independent analysis by economists Daniel Arnold and Christopher Whaley estimates the bill would generate roughly $122 billion in additional federal revenue over 2026–2035, with a plausible range of $25 billion to $270 billion, by driving down employer plan spending in ways that eventually show up as higher taxable wages. That’s the standard logic the Congressional Budget Office uses for scoring changes in employer-sponsored insurance. Even at the low end of that wide range, it’s a meaningful number.
First, because this is an area where there is a lot of confusion, here’s some information and context. A plan sponsor, as noted above, is typically an employer or union that offers subsidized health benefits to workers and their families. In that role, the employers and unions are the actual “insurers.” They hire companies we typically call insurers (like Cigna, Aetna, UnitedHealthcare or a Blue Cross plan) to administer those health benefits. In that role, those companies are third-party administrators (TPAs) who use the employers’ and unions’ – and workers’ – money to pay claims, create provider networks, serve as gatekeepers to care and handle other administrative responsibilities, like approving and denying coverage for care (called utilization management or prior authorization). Employers and unions pay those TPAs huge fees to do that work.
So huge, in fact, that at Cigna, where I used to work, approximately 80% or more of revenues from the company’s U.S. commercial health insurance operations came from administrative-services-only arrangements. Even though workers have insurance cards in their wallets with the logo of a company like Cigna or Aetna, which we think of as an insurer, the workers’ employer or union is, in fact, the insurer.
Section 7 of the bill gives employer and union health plans the right to access their own complete claims data — from the insurers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) that plan sponsors hire to handle those administrative duties, and the plan sponsors give the TPAs access to the money in the bank accounts the plan sponsors set up to cover the cost of their workers’ health care benefits. Those TPAs and PBMs (which are typically owned by the TPAs) are the middlemen that are involved in every dollar a plan sponsor spends. They set network prices, retain rebates from pharmaceutical companies (kickbacks, in plainer, more precise language) and generally control the only detailed record of where a plan sponsor’s money actually went. When employers and unions can’t see that record – and in today’s world they usually do not, even though we’re talking about their own money – they can’t audit it, and audits are the only way plan sponsors ever catch things like phantom billing, upcoding, duplicate charges or the disparities in denials and prior-authorization patterns that Congress has spent years scrutinizing.
Section 7’s whole purpose is to let the people paying the bills finally be able to trace where their money goes.
The new language in the Senate bill just before it was voted out of the HELP Committee says that, “A covered service provider would not have to disclose data that could ‘reasonably identify’ a participant or beneficiary, as defined under HIPAA’s individually identifiable health information standard.”
On its face, that sounds like ordinary patient-privacy boilerplate, but it is much more than that. HIPAA already has a detailed, well-established process for exactly this situation — dealing with a health plan’s right to receive identifiable claims data for plan administration. That process encompasses two well-defined de-identification methods – the 18-identifier “Safe Harbor” standard, and “expert determination” – for when identifiability genuinely needs to be limited.
The newly inserted language doesn’t invoke either of those. To the delight of my former employers in the health insurance business, it creates a new, undefined standard — “could reasonably identify” — with no cross-reference to how HIPAA actually determines that, and no appeals process if a plan sponsor disagrees. And it hands the decision to the very parties Section 7 exists to hold accountable. If that language stays in the bill, the insurer, TPA, or PBM would get to decide, on its own, what counts as identifiable enough to withhold from plan sponsors. Keep in mind that the TPAs and PBMs, which are constantly trying to maximize their revenues, by their very nature have access to identifiable data on every insured American.
De-identification of that data before it is shared with plan sponsors doesn’t just strip names and Social Security numbers. Done under a vague, self-certified standard, it can also strip exact service dates, zip codes, and the member-level identifiers that let an employer or union sponsored health plan connect one claim to another. Those are precisely the fields that let a plan sponsor piece together a pattern.
Here’s a hypothetical example of how PDPTA would enable employers to get a better handle on how their TPAs/PBMs are using their money to pay claims – and how the inserted language would stymie their ability to do so:
Suppose an employer plan noticed it had been billed for six services in a single week for one patient from one provider. Because it could see the clustered service dates, the plan could investigate, discover the services had never been performed, report the provider for false billing, and recover the money. But strip out exact dates — which the new language would allow — and that same claim would just look like six services spread out over time. The fraud would likely go uncaught, and the health plan (which means, ultimately, workers’ wages and other compensation) would eat the loss.
The same missing fields also hide denial-rate disparities and turnaround-time patterns — the exact behavior lawmakers keep asking about in prior-authorization hearings. And they would block plan sponsors from recovering overcharges they can no longer prove occurred.
Here’s something else to keep in mind: PBMs and insurers already sell claims-level data to drug manufacturers, data brokers, and analytics firms for their own commercial gain. The inserted language would let them keep doing that while blocking the employer or union that actually paid for the data from ever seeing it themselves.
Some of the lawmakers who care most about getting this right have raised a concern that deserves to be taken seriously, hence the newly added language. They don’t want employers gaining routine access to their own employees’ identifiable medical records. That’s not a paranoid fear. An employer that can see an employee receiving mental health treatment, fertility care or substance-use treatment has information that, mishandled, could influence a promotion, a layoff list or a manager’s private judgment about someone, even where no law technically permits that use.
That concern is exactly why HIPAA built a specific structure for it, back when Congress first grappled with this same problem in the 1990s. Think of it as a locked door inside an employer’s own building. When a company sponsors a health plan for its workers, HIPAA doesn’t let that identifiable medical data just flow into the regular HR filing system where a manager could stumble across it. Instead, the law requires the employer to designate a small, specific group of people – usually benefits staff, auditors or a third party working on the plan’s behalf – who are allowed through that locked door to see identifiable claims data, but only to do plan-administration work like trying to ensure that claims are paid correctly by TPAs and PBMs and checking for fraud. Everyone else at the company – HR generalists, supervisors, anyone who could use the information in a hiring, firing or promotion decision – stays on the other side of the door. The employer has to sign a formal certification promising to keep that separation in place, and using the data for an employment decision is exactly the kind of violation HIPAA’s firewall exists to catch. And violating HIPAA can be very costly: fines of $50-$250,000 per offense and up to 10 years in jail. That is a very real disincentive to mishandle the data.
That’s the tool already built for the harm some lawmakers say they have concerns about. It doesn’t block identifiable data from ever reaching the plan; it controls who inside the plan gets to see it and what they’re allowed to do with it.
The Section 7 carve-out language inserted in the bill doesn’t touch that door at all. It does something completely different: It lets the TPA, PBM or insurer decide, on its own, that a given piece of data simply won’t go through the door in the first place – not to the walled-off auditors – not to anyone – no matter how carefully separated they are from HR. That’s not tightening the firewall that some lawmakers are worried about breaching. It’s blocking the room entirely, including the auditors it was built to let in.
Here’s what should trouble anyone who takes the privacy concern seriously: The same companies that would get to make that call are, separately, in the business of selling similar claims data to outside parties, including data brokers, drug manufacturers and marketing analytics firms, under HIPAA’s “de-identified” label. Privacy researchers have spent years documenting how easily that kind of de-identified data can be re-identified, especially once it’s cross-matched against other data sets a broker already holds. In other words, the industry treats “identifiable enough to protect from a plan’s own fiduciary auditors” as an easy bar to clear, while treating “de-identified enough to sell for profit” as an even easier one. That’s not privacy protection with a consistent standard. That’s a standard that moves depending on who’s asking and who profits.
If the goal is protecting employees from having their sensitive health information misused – and it should be – the fix is to reinforce the locked-door system Congress already built: stronger certification requirements, even more severe penalties if an employer ever uses plan data in an employment decision, and access limited strictly to the walled-off audit function. That protects workers without stripping Section 7 of its ability to catch fraud. A vague, vendor-administered “reasonably identify” standard doesn’t strengthen that door. It just lets the vendor decide who never gets a key.
The good news is that PDPTA is moving through Congress. On the Senate side, the HELP Committee approved it on a bipartisan basis in late July. The lead sponsors – Roger Marshall (R-Kansas) and John Hickenlooper (D-Colorado) – were joined by Senators Chuck Grassley and Joni Ernst of Iowa and Cynthia Lummis of Wyoming, all Republicans, and Democrats Tammy Baldwin of Wisconsin, Cory Booker of New Jersey, Elizabeth Warren of Massachusetts and John Fetterman of Pennsylvania. That’s the kind of bipartisan coalition that rarely comes together on health care and even more rarely survives a full committee markup intact.
House versions of the Senate bill also have strong bipartisan support and are working their way through three committees (Energy and Commerce, Education and Workforce, and Ways and Means) — reflecting how many parts of federal law it touches.
With a bill this far along, this close to bipartisan agreement, and this close to the end of the current Congress, the pressure to move fast is real. That’s exactly why the Section 7 carve-out needs fixing now, while it’s still open for amendment, rather than after passage when it would take an entirely new bill to undo it. That clearly is not the intention of the bill’s many sponsors.
The transparency goal of the bill is sound, the projected fiscal upside is real even under conservative assumptions, and Section 7’s data-access right is exactly the kind of tool plan sponsors need.
Companies like the ones I used to work for undoubtedly were happy to see the new language inserted in the bill, and I’m hearing evidence that they’re working behind the scenes to keep it in the bill by creating the false narrative that employers and unions want this data primarily to learn more about their workers’ health. That simply doesn’t hold up. For one thing, as I’ve explained, HIPAA is clear on how employers can use the data and what happens if they violate existing law. But it is important to keep in mind that federal law also now makes it abundantly clear that plan sponsors are fiduciaries of workers’ money. They can be sued – and some are being sued – for not fulfilling their fiduciary responsibility under the law. And plan sponsors need data they all too often cannot get from their TPAs and PBMs to meet the law’s requirements.
I’ve written before about how often plan sponsors that sue their own TPAs and PBMs to get the data they need in order to have any assurance that they are not being double billed or defrauded in other ways get bogged down for the simple reason that they can’t get at their own claims data in a form they can actually audit. Section 7, done right, is a legislative fix for that problem. But “done right” requires closing this loophole before the bill moves further. At minimum, that means:
Cross-referencing HIPAA’s existing Safe Harbor or expert-determination standards instead of inventing a new, undefined one;
Requiring the covered entity to justify any withheld field against that established standard, rather than self-certifying; and
Giving plans a way to challenge a withholding decision, instead of leaving the provider as sole judge.
One sentence, fixed, would let PDPTA keep its promise. Left as recently changed, it lets the middlemen write themselves an exemption from the very oversight the bill is meant to create.
Funding from the Rural Health Transformation Program is beginning to flow to the states. The purpose is larger, but some say its success should be measured by whether it preserves access to care at rural hospitals.
The Rural Health Transformation Program represents one of the largest federal investments ever made in rural healthcare, with $50 billion authorized over five years to help states improve access, strengthen the workforce, and modernize care delivery in rural areas. Still, as states move from planning to implementation, the program faces an immediate test: Can it deliver meaningful transformation while rural hospitals continue to face mounting financial and operational pressures?
The answer is not so cut-and-dried.
Some rural health advocates view the program as an unprecedented opportunity to rethink how care is delivered in underserved communities. Others caution that although the funding can accelerate innovation, it was never designed to replace revenue that providers could lose because of Medicaid policy changes, such as work requirements.
Alan Morgan is CEO of the National Rural Health Association.
“It’s apples and oranges,” says Alan Morgan, M.P.A., CEO of the National Rural Health Association. “The Rural Health Transformation Program was created to invest in long-term innovation, not to replace Medicaid funding. Comparing the two misses the intent of the legislation.”
At the same time, Morgan acknowledged that rural providers remain deeply concerned about what lies ahead.
“The math just doesn’t work,” he said. “Nearly one-half of rural hospitals already operate at a loss, and hundreds remain at risk of closure if financial pressures continue to mount.”
Innovation versus stabilization
Congress created the Rural Health Transformation Program as part of the One Big Beautiful Bill Act that President Donald Trump signed into law on July 4, 2025. It was added in part to offset the federal Medicaid cuts in the bill, which the Congressional Budget Office estimated will total $911 billion over a 10-year period. The program provides $10 billion annually through 2030 to help states invest in new care models, workforce development, technology and other initiatives intended to improve healthcare delivery in rural areas.
Ryan Cohn is chief strategy officer at Sachs Media.
Ryan Cohn, chief strategy officer at Sachs Media, who has advised multiple states, health systems and healthcare organizations on Rural Health Transformation Program applications, says that the funding is not sufficient to offset the broader financial challenges facing rural healthcare, noting that the fund was created after lawmakers expressed concern that the Medicaid cuts could disproportionately affect rural providers, especially rural hospitals. And once CMS implemented the program, its focus shifted toward transforming healthcare delivery rather than serving as a financial backstop for struggling hospitals.
“The real question isn’t whether $50 billion is enough money,” Cohn comments. “It’s whether we can stand up a new care model fast enough to replace a hospital that may close in the next few years.”
Harold D. Miller, M.S., president and CEO of the Center for Healthcare Quality and Payment Reform, says he believes the program has the potential to preserve services in rural communities, but only if states have enough flexibility to direct funding where it is needed most.
“The $10 billion per year in new funds under RHTP [Rural Health Transformation Program] could go a long way to preventing the loss of services in rural areas if the money could be directed to the hospitals that are currently being underpaid,” Miller observes.
Instead, he adds, CMS has limited the amount states can use for direct provider payments while encouraging investment in new initiatives and technology.
“Although those investments may ultimately prove valuable, technology alone cannot replace essential healthcare services,” he says. “A phone app can’t deliver a baby, draw blood, stitch a wound or do a CT scan.”
Implementation
After months spent developing applications, states are now beginning the nuts-and-bolts work of turning proposals into operational programs.
According to Cohn, five priorities appear consistently across state plans: workforce development; telehealth and data infrastructure; prevention; new payment and delivery models; and bringing care closer to patients through mobile clinics and regional care networks.
Joe Ganley, J.D., vice president of government and regulatory affairs for athenahealth, says rural practices already operate with no room to spare. “The margin for error has essentially disappeared,” Ganley said.
Among those priorities, workforce development stands out as the dominant theme, he says. Many states are investing in residency programs, loan repayment initiatives and “grow your own” workforce strategies that encourage students from rural communities to pursue healthcare careers locally in hopes they will eventually remain there.
Technology investments also extend well beyond telehealth. Cohn says states are focusing on improving interoperability so rural hospitals, clinics and emergency medical services can share patient information more effectively. Others are proposing artificial intelligence for population health, drone delivery of medications and laboratory tests, and technology-enabled transportation programs designed to improve access to care.
Even so, implementation presents significant challenges. “This money was built to move fast,” Cohn says. Some states first had to establish entirely new administrative structures before funding could reach providers. Others continue to develop procurement processes while preparing to demonstrate measurable outcomes that will influence future funding allocations.
Sustainability also remains an open question. “A new residency slot or telehealth program only counts if it outlives the initial RHTP funding,” Cohn says. “Not every plan has a fully formed answer for what happens in year six.”
Financial pressures
Although much of the discussion surrounding the Rural Health Transformation Program focuses on future transformation, many providers continue grappling with immediate financial realities.
Joe Ganley, J.D., vice president of government and regulatory affairs for athenahealth, says rural practices already operate with no room to spare. “The margin for error has essentially disappeared,” Ganley said.
When patients delay appointments, ration medications or postpone treatment because of cost, practices experience more than declining revenue. Patients often arrive later with more complex medical needs, increasing clinical and operational burdens. “Providers feel it immediately — in no-shows, in collections and in the clinical complexity of patients who arrive later and sicker,” Ganley says.
Beyond those financial pressures, Ganley notes that rural physician practices also continue to struggle with workforce shortages and limited interoperability.
“Many rural practices operate with one to two months of reserves,” Ganley said. “That’s not a buffer — it’s a cliff. Any disruption to payment flows, whether from coverage losses, billing delays or reimbursement changes, can threaten the viability of organizations that communities depend on as their only access point for primary care.”
He adds that recruiting and retaining clinicians remains difficult, while limited interoperability makes it harder for rural providers to coordinate care and participate in value-based payment models.
Measuring success
Even as the rural health program dollars begin reaching states, many believe it is far too early to determine whether the $50 billion fund will live up to its name and change rural healthcare for the better. “I think it’s too early to determine, and that’s the honest truth,” says Morgan. Many states are only beginning to release requests for proposals and identify where funding will be directed. Although states must obligate the funds within required timelines, many providers are still waiting to learn whether they will receive support and how they will be permitted to use it. “Our members are concerned,” Morgan adds. “Are we going to receive any of the money? How are we going to be able to use the funds? There’s just a lot yet unknown.”
Miller notes the program’s success should not be measured by the number of grants awarded or technology projects launched. He says he believes there is a relatively simple way to take stock of the program.
“If hospitals continue to close and eliminate services in 2026 and 2027, even with $10 billion in new funds available each year, the Rural Health Transformation Program should be viewed as a failure,” Miller says.
In his opinion, preserving essential healthcare services — including obstetrics, emergency care and primary care — must remain the priority. Even if federal Medicaid policy changes were reversed tomorrow, many small rural hospitals would continue struggling because reimbursement from Medicare Advantage, commercial insurers and other payers often fails to cover the cost of providing care in sparsely populated communities.
The No. 1
Morgan said workforce issues remain the No. 1 concern among rural hospitals, followed closely by financial stability. He’s particularly optimistic about states using the rural health funds to create “grow your own” workforce initiatives that recruit students from rural communities, train them locally and encourage them to practice close to home after graduation.
“I think that’s going to be interesting,” Morgan says, noting that locally trained clinicians are far more likely to remain in rural communities over the long term. Cohn heard similar priorities while working with states on their applications. “Workforce development is in most states’ plans because providers everywhere are facing significant staffing shortages,” he says.
Some states are investing in rural residency programs, loan repayment initiatives and accelerated licensing efforts. Others are combining workforce initiatives with telehealth and regional partnerships designed to extend scarce clinical expertise across larger geographic areas.
Ganley notes that technology can help relieve administrative burdens, but only if it simplifies clinicians’ work rather than adding complexity.
“The practices that will sustain access are the ones that can operate efficiently under financial constraints, reduce administrative burden without growing their administrative head count and connect their patients to the right level of care regardless of where that care is delivered,” he says.
Behavioral health providers are experiencing many of the same pressures. Shannon Werb, CEO of Array Behavioral Care, says that disruptions in Medicaid coverage often interrupt outpatient behavioral healthcare, causing patients to delay treatment until they require crisis care.
“When patients lose coverage or face affordability challenges, they often delay care until their condition reaches a crisis point,” says Werb. “At that stage, the emergency room becomes the default access point for treatment.” The result, he said, is longer behavioral health boarding times, increased uncompensated care and additional strain on hospitals.
The long haul
The biggest question about the infusion of federal funds into rural healthcare is whether the investment will continue paying dividends after federal funding expires. For a problem that has been decades in the making, five years is not that much time, and $50 billion is not that much money.
Because the program is scheduled to end after five years, healthcare leaders repeatedly emphasized the importance of building sustainable systems rather than launching short-lived projects.
“The real measure isn’t dollars spent or programs announced,” Cohn says. “It’s whether a rural patient can access care in 2028 that they couldn’t get in 2025.”
Morgan agrees that outcomes, not spending, will determine whether the initiative succeeds. The first warning sign, he says, would be an increase in rural hospital and rural health clinic closures. He says life expectancy is the ultimate yardstick. “We continue to see a decline in the overall life expectancies of rural communities versus urban. At the end of the day, that’s the measure that really matters.”
A 9.5% 2027 increase would mark the fourth consecutive year of near–double-digit employer medical trend, based on data from 1,100+ employers covering 7.9 million employees.
Utilization growth, chronic-condition burden, and increased high-cost claim incidence are central contributors to accelerating plan spend across employer-sponsored coverage.
GLP-1 costs are rising as use extends beyond diabetes/obesity into cardiovascular disease, sleep apnea, and CKD, with oral options expanding eligibility and limiting employer cost-containment.
Employers funded ~82% of total plan costs in 2026, yet employees still paid $5,297 on average, driven by a 10.2% out-of-pocket increase and leaner plan designs.
Industry variation is material, with 2025–2026 employer cost growth ranging from 6.5% (health care) to 9.8% (finance/insurance), echoing KFF and Mercer trend warnings.
Aon projects a fourth straight year of near double-digit health cost growth for U.S. employers, with 2027 costs set to top $19,000 per worker.
Employer health care costs in the United States may rise 9.5% in 2027, extending a fourth consecutive year of near double-digit increases the longest such stretch since 2007, according to a recent analysis by Aon.
Employer healthcare costs could rise 9.5% in 2027, pushing the average per-employee price tag past $19,000, according to a recent analysis by the consulting firm Aon. If this happens, it will be the fourth year running that cost growth has approached double digits, a run Aon says is unmatched in its trend data since 2007. The company currently has data from more than 1,100 U.S. employers representing 7.9 million employees.
Behind the projected growth is a familiar mix of pressures, including climbing utilization of medical services, a growing share of members with chronic conditions, and more high-cost claims moving through employer plans. Specialty and GLP-1 drug spending adds another layer, which is growing as GLP-1s move beyond diabetes and weight management into cardiovascular disease, sleep apnea and chronic kidney disease. New oral formulations are widening the pool of patients who can access the drugs, which cuts against employers’ efforts to hold the line on pharmacy spend. Aon also flagged providers’ use of AI tools for clinical documentation and coding, which the firm says is contributing to higher billed charges in some cases.
“The organizations best positioned for the future will be those that can proactively identify emerging risks and take targeted action before costs escalate,” Debbie Ashford, North America Chief Actuary, Health Solutions for Aon, also said in the news release. “Health care costs are becoming increasingly difficult to manage through traditional approaches alone. Employers will need better data and deeper insights to understand where costs are rising and how they can make more informed decisions about their health care investments.”
Who absorbs the increase?
Employer health plans don’t pass every dollar of that growth on to workers. Aon’s data shows employers picked up approximately 82% of total plan costs in 2026, a share that’s held roughly steady even as the underlying cost trend accelerated. Employer costs more than doubled from 2022 to 2026: climbing from 3.7% to 8.8% in 2026, respectively.
Employees still felt it. The average worker paid $5,297 toward health care in 2026, split between $3,130 in payroll premium contributions and $2,167 in out-of-pocket spending, up from $4,909 the year before. The out-of-pocket piece grew faster than premiums, up 10.2%, which Aon attributes to both higher utilization and a shift toward leaner plan designs with more member cost-sharing built in.
The picture isn’t uniform across sectors. Aon’s industry breakdown shows a wide spread in how much employer costs grew from 2025 to 2026:
Finance and Insurance: 9.8%
Technology and Communications: 9.1%
Public Sector: 8.8%
Professional Services: 8.7%
Retail and Wholesale Trade: 7.7%
Manufacturing: 7.5%
Health Care: 6.5%
How this compares across the industry
Aon’s numbers land alongside other recent industry data pointing the same direction. KFF’s benchmark survey of employer health benefits found family premiums rose 6% in 2025 to reach nearly $27,000, a jump the group said outpaced general inflation by a wide margin. KFF has separately flagged early signals that 2026 cost trends would run even higher. Mercer and the International Foundation of Employee Benefit Plans have published similar warnings over the past year, with some industry surveys describing the coming increase as among the largest employers have faced in over a decade.
“Employers have now experienced several consecutive years of health care cost increases that are approaching double digits,” Mike Pasterick, North America Health Solutions Leader for Aon, said in the news release. “At this level, rising health care costs become much more than a budgeting challenge and influence organizational decisions from benefits strategy and employee affordability to broader workforce and financial planning priorities.”
Last week, during the U.S. Senate and House recess and back-to-school rush, media attention to healthcare was negligible. Healthcare trade media noted impressive earnings for Moderna and Bon Secours and the WSJ Journal announced a Medicare Advantage partnership between Costco and SCAN. No major Executive Orders from the White House or CMS rule changes. No major clinical breakthroughs, vaccine policy changes or lawsuits. But a couple of new reports frame the existential risk facing the industry: spending.
AON forecast for employer health spending: AON forecasts employers will see a 9.5% increase in 2027–the same as this year after increases of 9% in 2025 and 8.5% in 2024.
U.S. National Debt: The national debt officially passed the $40 trillion mark Wednesday, which includes $2 trillion this year. Note: Healthcare spending is a major contributor representing 27% of total federal spending.
The common theme in both is the steady growth of healthcare spending—faster than wages, higher than inflation and GDP growth and increasingly the result of higher prices for drugs, specialty services, facility modernization, technology and administrative overhead.
The industry’s aversion to transparency, protection of its business-to-business economics and dependence on private investment perpetuate four myths that justify its proclivity for uncontested spending:
Myth One: Healthcare utilization is the result of verifiable (true) demand despite evidence that induced demand from financial incentives is significant and unnecessary care widespread.
Myth Two: Healthcare spending above overall economic growth is necessary because demand is increasing though unit price increases for drugs, specialty care and hospital outpatient services exceed demand routinely.
Myth Three: Healthcare spending growth is unavoidable as the population ages, medical problems become more complex and clinical breakthroughs (like GLP-1 obesity drugs) are integrated in the system though the industry enjoys legal protections to insiders that limit competition.
Myth Four: Healthcare spending in the U.S. system is necessary to our performance as the world’s global leader for quality though at least 15 other systems outperform the U.S. in key measures of mortality, morbidity, life expectancy and satisfaction while spending 30-50% less per capita on healthcare.
As the midterm election November 3 nears, affordability and costs of living will be prominent in campaign rhetoric. Polling indicates healthcare costs, especially insurance premiums, prescription drug costs and hospital care, factor heavily in how voters assess promises on the campaign trail. Both parties espouse the need for systemic change in healthcare citing affordability for their reasoning. Three general solutions have found their way into this election cycle:
Price controls imposed selectively by state/federal government applied to hospitals, insurance premiums, physician services and prescription drugs.
Increased competition enacted through mandatory price transparency, constraints on consolidation and incentives based on value (price + outcome) instead of volume.
Government control of healthcare payments (single payer) to providers to align spending with budgets while lowering administrative costs for participation.
The reality is none of these is without risk, and voters are wildly misinformed about all. But there’s no doubt they’ll be on the table as a majority consensus forms around a better system. They’re sick of the status quo. They see little difference between not-for-profit and for-profit operators and want something better. They see healthcare spending increases as the product of an industry that cares about its profit first and everything else second.
Healthcare spending—contributing factors and mitigation– is a topic every organization in healthcare must address candidly and holistically. There should be no delusion that interest will subside anytime soon. Just as consumers are rewarding organizations in financial services, retail, higher education and organized religion that offer “newer, better” alternatives, the healthcare landscape will be re-defined by those that do more than opine about affordability and conduct business as usual.
I was in the 10th grade at Tyner High School in Chattanooga when Medicaid passed as Title XIX of the Medicare and Medicaid Act of 1965. It was the cornerstone of President Johnson’s War on Poverty providing federal funding to states to facilitate access to the health system Americans along with dependent children, seniors, blind, and disabled individuals with insufficient income.
Medicaid, then as now, was the understudy to Medicare. It was understandable: per capita costs for caring for seniors were three times those in Medicaid, and aging was the tsunami health officials saw. In the 60-years since, Medicare has become the arbiter for federal reimbursement in every setting where seniors received services. It has enabled hospitals and specialty care to expand and limited preventive and primary care to the bare minimum. And its version of managed care, Medicare Advantage plans, now enroll over half its 70 million enrollees. It’s ridden on the back of federal policy, while states have been left to fend for themselves in Medicaid. But that’s changing.
While Medicare has gotten the majority of attention from hospitals, physicians, insurers and drug companies historically, it is Medicaid that’s taking center stage in the U.S. health system. Here’s why:
Scale: When Medicaid was enacted in 1966, it enrolled, 4 million, or 2% of the entire population. Today, it enrolls 74 million, or 21%. Enrollment has grown as a result of three factors: changes in eligibility that states control, slower wage growth and shrinking health benefits in working class populations, and the Affordable Care Act’s federal inducement for Medicaid expansion that passed referenda in 40 states. It’s a huge program.
Clinical focus: Medicaid forces attention to mental health in communities, schools and workplaces. It is ground zero for the historic lack of integration of public health programs (i.e. housing, food security, financial insecurity) with local health services. It is an unwelcoming front door to the health system for 40% of America’s children where maternal and child health, behavioral health and essential services are unavailable. And it’s the nation’s lab for ageism, loneliness and anxiety. Notably, private Medicaid Managed Care Organizations (MCOs) are firmly seated at the steering wheel of care coordination in state Medicaid programs covering 72% of enrollees already. Long before Medicare Advantage, community-based and private MCOs were prominent in Medicaid because they’re inclined to focus on whole-person care, not just doctors and hospitals.
Structure: Medicaid forces states to prioritize investments in healthcare vs. education, homeland security, roads and parks. Medicaid forces state legislatures to regulate private managed care operators who contract to coordinate care for enrollees to assure care is evidence-based, accessible and appropriately priced and delivered. And the federal government’s financial participation enables its control of Medicaid funds to states that do not appropriate resources as it deems necessary. The collaboration or dissonance between states and federal health policies is pronounced in Medicaid.
Politics: Medicaid allows partisans in Red and Blue states to defend their positions. Democrats, for example, promote income inequality as the root cause of the health system’s lack of affordability necessitating Medicaid as an imperfect but necessary solution. They see work requirements as a GOP mechanism to reduce enrollment. Republicans, by contrast, associate Medicaid with welfare that’s beset with fraud, waste and abuse and think it a money-pit for dubious operators. And leaders in both camps acknowledge bureaucratic flaws in Medicaid but fall short in fixing them.
Much of this can be traced to deep-seeded beliefs about Medicaid that span generations. In my focus groups with working age adults, the majority believe the U.S, economic system is more challenging for lower-income, uneducated and non-white populations. A significant number associate Medicaid with ‘welfare’ and believe waste and fraud prevalent though the intensity of these views varies widely.
In my surveys, Medicaid enrollees are slightly more likely to agree the health system is broken and favor government intervention than other groups. And the majority in every insurance, age, household income and region agree the system’s unnecessarily expensive and significantly more focused on profits than patient care. They see Medicaid as part of a complex system that’s unfair, unaffordable and unnavigable.
My take:
The public’s views about Medicaid are complicated: the majority believe everyone regardless of income or insurance status should have access to the system, and there’s consensus the system in its current form will not survive. The majority of voters regardless of party label believes Medicaid needs to be fixed but no consensus on how or by whom.
Results from Medicare’s cost containment efforts—accountable care organizations, alternative-payment models, value-based purchasing, price transparency et al—have been mixed. By contrast, Medicaid initiatives in states ranging from payment integrity programs to changes in state directed payment policies have produced significant savings necessary to surviving the $1 trillion, 10-year cut to federal Medicaid funding in the Big Beautiful Bill.
Medicaid is the health system’s most important platform for applying evidence to care cost-effectively from cradle to grave.
