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.
Last week, the American Hospital Association released a study by Kaufman Hall, its preferred data vendor, that took issue with methodologies used by critics of hospital consolidation:
“These findings suggest that a more comprehensive analysis of hospital M&A transactions, one that considers impacts on all patients served, broadens the focus to impacts beyond pricing, and considers the consequences if an M&A transaction is not permitted to proceed, would ensure not only competitive but also healthy hospital markets that can continue to provide the fullest possible range of services.”
The report discusses how hospital merger reviews should look beyond the potential impact on commercial insurance prices and consider what proposed transactions mean for all patients, particularly the nearly 60% of hospital patient days attributable to Medicare, Medicaid and Medicare Advantage beneficiaries whose payment rates are largely set by government programs.” Drawing on analyses of challenged and canceled transactions, the report also finds that hospitals seeking partners often serve more vulnerable communities and face greater financial pressures, and that when proposed deals do not move forward, struggling hospitals can experience significant financial deterioration that threatens services, workforce stability and access to care.”
Kaufman Hall added this disclaimer: “The findings contained in this document may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Past performance is not necessarily indicative of future results. Kaufman Hall accepts no responsibility for actual results or future events.
Also last week, a Health Affairs commentary “In 2026, States Are Leading On Health Care Affordability” noted that “Researchhasconsistentlyshown that hospital prices are the largest driver of commercial health care spending growth. Hospital markets are dominated by monopolies, whichenablehospitals to charge higher prices without improving quality or outcomes. State policymakers are increasingly looking for options to limit excessive hospital prices. Ourresearchshows that capping the highest, most egregious prices charged by hospitals can meaningfully improve health care affordability while still allowing hospitals to generate a healthy margin…
A key driver of rising health care prices is consolidation in health care systems, including through hospital acquisitions of physician practices. These acquisitions, which are a form of vertical integration, increase hospital prices by 3 to 5%. This can be attributed to greater bargaining power, more intensive coding practices, and hospitals charging facility fees at what were previously independent physician practices but are now treated as “hospital outpatient departments.” To address these issues, states are increasingly considering facility fee bans or “site-neutral” policies that would cap prices for certain routine hospital outpatient services that could be provided safely in an office setting.”
Both positions are defensible.
Not for profit and public hospitals are at a disadvantage in managing their finances because they’re obligated to serve entire communities without regard to local economies or population health. Investor-owned hospitals and insurance companies have fewer restrictions and can exit markets at will.
And almost every hospital is dependent on reimbursement from commercially insured patients to offset what is the widely-accepted calculus that Medicare and Medicaid reimbursement doesn’t cover the total cost of care provided enrollees. Thus, across the hospital industry, the playbook has been straightforward: to optimize hospital finances….
Maximize the attractiveness of hospital services that attract privately insured patients via contracting with private insurers.
Negotiate favorable rates with private insurers to enhance cost-shifting to Medicare and Medicaid by private plans.
Optimize leverage (scale) over insurers by consolidating hospitals, acquiring physician practices, expanding ancillary activities and deploying capital to potentially profitable ventures.
Advocate for state and federal laws that dissuade hospital price caps, 340B cuts, site-neutral payments, unreasonable price transparency requirements and limits on private-equity partnerships.
Assert that hospitals are efficient stewards of the public’s trust but disadvantaged by corporate insurers and drug companies that are allowed to enter and exit markets at will, price at “what the market will bear” and put shareholder profit above all else.
This scheme has worked for 40 years to enable hospitals to control at least 50% of total health spending: 31% for traditional hospital services, 12% of total physician services, and ventures, partnerships, ancillary services and post-acute services in addition. In the aggregate, hospitals are the most important cog in the healthcare wheel. They’re labor intense, capital intense, complicated businesses that enjoy public trust that’s slipping away, especially among the 25 million who work in the industry. Complicating matters, distinctions between rural and government safety net hospitals and highly profitable investor-owned and not-for-profit systems are attracting unwanted scrutiny from regulators and in media coverage.
While Kaufman Hall raises legitimate questions about current methodologies used by state and federal regulators to assess consolidation, it does not answer the bigger question: what role should hospitals play in the U.S. system as AI-derived clinical innovation proliferates, labor and supply costs accelerate and fewer people can afford services?
It’s not clear.
Should “hospital services” be redefined bifurcating facility-dependent inpatient services (Part A) and an expanded set of services inclusive of self-care provided in homes, schools, workplaces and virtually?
Should “community-benefits” and “charity care” be redefined so that methodologies are consistent and gaming to receive tax benefits eliminated?
Should hospital clinical performance be linked to improved outcomes and lower costs (affordability)?
Should local primary care and preventive health services (inclusive of nutrition, physical and mental health, prophylactic dentistry) be integrated with hospital services to improve population health and control demand for hospital services?
Should specialized tertiary and quaternary hospital programs be rationalized to optimize outcomes and improve efficiency?
Should consolidated hospital systems disclose administrative costs, functions and allocation methodologies publicly?
Should hospital boards be required to conduct scenario planning that’s comprehensive?
Should hospital administrative services and costs be standardized to facilitate caps on spending and management performance comparisons?
Should physician ownership of hospitals be enabled to increase competition?
And many others.
The American Hospital Association is right to be concerned about how regulators are addressing hospital consolidation and its impact on prices. And they’re right to challenge methodologies applied to questions about hospital prices and competition. But they fall short in offering a vision for the future of the health system that’s plausible, affordable and compelling. Rather, they offer a hospital-centric vision based on suspect assumptions and inadequate sensitivity to market trends not directly associated with traditional health services.
Every stakeholder in the health system—including hospitals and physicians—face heightened pressure to eliminate unnecessary utilization and costs due to willful or unknowing fraud. Just as insurer prior authorization practices have been frustrating to providers, unnecessary care is confounding to regulators and employers. The use of agentic AI tools to examine appropriateness of tests, procedures, medications and visits will exponentially change how “quality of care” is defined and regulated, and how its delivered. It’s a big deal everywhere, especially in Medicaid programs.
It started as a simple question. Who are the biggest health care companies in the United States?
If you rank the ten largest health care companies in America by revenue, you will not find a single hospital system or drugmaker. Not Pfizer, not Eli Lilly, not the Mayo Clinic or HCA. Every company in the top ten is a middleman, and together they take in about $2.6 trillion a year.
Above is a list showing how much of every dollar of revenue each company keeps as net income. Then read about what these companies actually do.
Three of these companies are insurers that swallowed pharmacy benefit managers:UnitedHealth owns Optum Rx; CVS owns Caremark and Aetna; and Cigna owns Express Scripts. Three are drug distributors that move pills from the factory to the pharmacy and touch almost none of them. Three more are built on Medicare and Medicaid managed care. Every one of them sits between the people who deliver care and the money that pays for it.
The sheer size of these companies is another distinctly American feature of the system. On the 2026 Fortune Global 500, UnitedHealth ranks fourth in the world, ahead of Apple; McKesson is seventh; CVS is ninth; and Cigna, where I worked for 15 years, ranks 14th in the U.S. and 21st in the world. Every health care company near the top of the global list is an American intermediary in one way or another. There is no foreign health care business of any nature that comes close.
The closest thing another country has to one of our giants is Allianz, in Germany. Allianz is the largest insurance company in Europe. But it is a general insurer built on property, life and asset management, and health is a minor line. Even at home, Allianz is only the third largest health insurer in Germany. There, roughly nine in ten people are covered by nonprofit sickness funds, which are barred by law from operating as for profit and must send any surplus in funds back into the system.
None of these countries built the kind of for-profit middleman layer that exists in the U.S., where some of those companies have grown into the largest corporations in the world. Pharmacy benefit managers are also a uniquely American creation, which helps explain why that entire category of health care giant does not exist elsewhere.
What the middleman layer costs
The United States spent $5.3 trillion on health care in 2024. That was the first year the country ever crossed $5 trillion, and it is the most recent year with actual figures rather than projections. (The Centers for Medicare and Medicaid Services estimates total U.S. health spending will reach $6 trillion this year.)
A large share of that money never reaches care and instead is consumed by the U.S. health care system’s complicated administration and payment systems.
In 2021, the United States spent $925 per person on health administration, meaning the overhead of insurers and government programs. The average wealthy country spent $245. That gap of $680 a person accounts for about 12% of the entire difference between what America spends on health and what its peers spend. As a share of the total, administration eats about 7.6% of U.S. health spending against 3.8% across comparable nations. We devote twice the share of every health dollar to running our absurd machinery.
The $925 figure counts insurer and government overhead and does not include what hospitals and doctors spend on billing, coding and prior authorization just to get paid. When those costs are included, estimates put total administrative spending between 15% and 25% of all U.S. health care spending — or, based on 2024 spending, roughly $800 billion to $1.3 trillion a year.
The countries with the leanest administrative spending tend to be those (you guessed it!) with the fewest middlemen.
Middlemen spend to keep the status quo
I know how a system this profitable defends itself because I used to help do it. Back at my old gig at Cigna, my team and I wrote talking points for lobbyists to use with lawmakers, and we doled out campaign cash to candidates we liked.
The health sector spent $743.9 million lobbying the federal government in 2024, more than any other sector of the economy and the only one to clear $700 million. UnitedHealth alone spent $16.6 million in the 2024 election cycle. The insurance industry’s trade group, AHIP, and the biggest insurance conglomerates pour tens of millions more into the same effort year after year, and the pharmacy benefit managers keep their own operation running through another insurance industry funded trade group called the Pharmaceutical Care Management Association (PCMA), whose spending has roughly doubled since 2022.
That spending helps protect Medicare Advantage payments, fight efforts to rein in pharmacy benefit managers and oppose proposals that would move the country toward universal coverage. Compared with the $70 billion in combined profit of the seven biggest for-profit insurers last year, the lobbying bill is relatively small.
The price of “choice”
The industry says all of this is the price of “choice,” which they want folks to believe is sacred. It is the argument insurers and their allies reach for every time Congress looks at a single-payer bill or public option or any other approach, for that matter, that could move us closer to reining in the worst abuses of the industry.
Americans say they want to choose their own doctor and their own hospital, but that is exactly the kind of choice the middleman system can take away through narrow networks and prior authorization. What the industry defends instead is the choice among insurers. And for most working people, even that choice is made by an employer. We pay hundreds of billions of dollars a year to run a marketplace of middlemen, and in return we get narrower networks and more denials than patients face in the countries that never built the marketplace at all.
Depending on the results of the next two election cycles, Congress will almost certainly debate how to restructure health care again, with the familiar goals of lowering costs, expanding coverage and improving care. But any serious attempt to do that will have to confront the enormous middleman industry the current system has created and allowed to flourish.
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.
As voters sour on private insurers and health care reform gains political momentum, decades-old warnings about “choice,” “wait times” and “slippery slopes” are resurfacing.
If you want a sense of where the health care debate is headed as we enter the final stretch before the midterm elections, take a look at what has been published over just the past week.
Last Wednesday, the New York Post published an op-ed by Pacific Research Institute President Sally Pipeswarning that Medicare for All would be a “real-life nightmare.” That same day, another Pipes column, this one in Newsmax, warned that a public option would be the first step toward a “complete government takeover of health insurance.” And also last Wednesday, Reason published a piece warning that universal health care means “long waits, rationed care, and unmet medical needs.”
These old tropes are familiar to me, as I am sure they are to many readers. And there is a reason they are back getting airtime.
Health care costs have become a major vulnerability for politicians heading into November. A KFF poll this summer found that 51% of voters considered health care costs an “extremely important” issue for candidates to address. Earlier KFF polling found that 61% said health care costs would have a major impact on which party’s candidates they support. And it is Americans’ sentiments about health care costs that have pushed many Medicare for All candidates over the finish line and lit a fire under current members of Congress who are now seeking a way to increase competition in the health insurance space by creating a nonprofit health plan that would be operated by the federal government.
Americans are increasingly fed up with private health insurers. Complaints about denied care, prior authorization, rising premiums and exorbitant out-of-pocket requirements have put insurers under a level of scrutiny I haven’t seen in years. It’s not just Abdul El Sayed. It’s Marjorie Taylor Green, too.
And it’s because of this political storm brewing that the health insurance industry’s longtime defenders are coming out swinging.
I know Sally Pipes’ work especially well. Pipes, who grew up in Canada but has lived in the U.S. for years, has spent decades warning Americans about reforms that might move the United States closer to a system like our neighbors to the north have. When I was an insurance executive, she was always useful to us.
During the industry’s campaign against Michael Moore’s Sicko, for example, we drew on Pipes’ work to portray Canada’s health care system as a cautionary tale. I wrote about that in the Washington Post. And during the debate over what became the Affordable Care Act, she was a forceful critic of the public insurance option insurers desperately wanted to keep out of the final bill.
She was a reliable ally of the health insurance industry then, and she clearly is returning to that role once again.
In her New York Post column last week, Pipes reaches for one of the oldest and most effective arguments against health care reform: “choice.” Pipes says that (currently) employers can switch insurance companies, people buying their own coverage can shop among plans and Medicare beneficiaries can choose between traditional Medicare and privately run Medicare Advantage plans. Medicare for All, she warns, would take that “choice” away.
It’s an argument that has worked before because “choice” sounds pretty good. Who wants fewer “choices” when it comes to their health care? (That’s a rhetorical question. But one answer is the insurance industry, which has been eliminating “choice” and competition for decades now.)
The trick is that much of the “choice” Pipes is talking about is an illusion. Americans with employer-sponsored coverage most certainly do not get to choose their insurance company. Their employer does. And even if you can choose among a handful of health plans at work, all of them at most U.S. businesses that can still afford to offer coverage are operated by the insurance company your employer chose. That’s not the same as being able to choose your doctors or hospitals, which is the “choice” Americans really want. Your health insurer decides which doctors and hospitals are in your network and can require prior authorization before it will pay for care your doctor recommends.
In other words, Americans may have (some) “choice” of plans – with varying levels of deductibles and copayments – but that doesn’t necessarily mean they have a meaningful “choice” when it comes to their health care.
Pipes’ second column last week reveals something else about the “choice” argument. She warns in Newsmax that a public option would have advantages private insurers couldn’t match, eventually drive them from the market and put the country on a “slippery slope” toward single-payer health care. (I can’t tell you how many times I warned about that so-called “slippery slope” when I ran communications at Cigna.) So Pipes essentially is arguing that private insurers must continue to be protected from additional competition in the name of giving Americans “choices.” But give Americans the “choice” of a public plan—and the possibility that millions might prefer it to what private insurers are selling—and suddenly “choice” itself becomes the problem. She ignores the fact that seniors have long been able to choose a public option – traditional Medicare – or one operated by a private insurer – Medicare Advantage. I can assure you that Medicare Advantage is extraordinarily profitable for private insurers. No one should worry that insurance companies won’t continue to make money if people younger than 65 can also at long last be able to choose a public option.
Reason, the libertarian magazine that has been a persistent critic of the Affordable Care Act, Medicare for All and any concept that would allow the government to pass legislation that would interfere with insurance companies’ business practices, published its own warning last week under the headline: “Universal Healthcare Sounds Great. Here’s What’s Happening in Countries That Have It.”
The piece focuses heavily on Canada and Britain, arguing that people in those countries face long waits for care in overcrowded hospitals, and it cites examples of patients who received inadequate care. Those problems are real and shouldn’t be dismissed. Neither Canada nor Britain has a perfect health care system. But the United States sure as hell doesn’t either. Millions of Americans never get the care they need because they can’t afford to buy health insurance. Millions more with insurance can’t use it because of unaffordable out-of-pockets costs and have no “choice” but to go without the care they need.
Reason leans heavily on one of the most familiar scare tactics used against universal health care: the wait times. In Canada, you might wait a few months for an elective procedure like a knee replacement, and in the U.K. see a specialist or get a procedure. In Britain, you might find yourself in an NHS queue. But in either country, unlike in the U.S., you will not have to wait long at all to see your primary care doctor or be admitted to a hospital for medically urgent care.
To be sure, waiting for an elective procedure or imaging annoys many Canadians and Brits. They are real problems. But in this country, we ration care in a way that creates far more harm than waiting in a queue for a few weeks or months for non-urgent care. In the United States, if you can’t afford care, you don’t wait a few months or get thrown on a waiting list – you all too often never get the care. Because in the U.S. of A, if you’re one of the nearly 30 million Americans who are uninsured, or who can’t cover their deductibles, you don’t get it until you get so sick you have to go to the ER. And then you get saddled with hundreds or thousands of dollars in medical debt.
So comparatively, Americans put off the procedures, scans and medications they need. Americans live with pain and hope whatever is wrong doesn’t get worse. In the worst cases, folks in this country die prematurely with conditions that could have been treated because they couldn’t afford to get the care that could have saved their lives.
Not only did I find propaganda like this effective in my old job, I’ve also seen it effective in real life.
Obviously, the only way we are going to fix our health care system is by debating the difficult things. We can debate Medicare for All. We can debate a public option. Both proposals deserve serious scrutiny if we want to get the next version of our health care system right.
But the attacks against these reforms deserve scrutiny, too — especially when they come from the same people and organizations that have been making them for decades, and when those arguments have historically served the interests of a health insurance system with an enormous financial stake in preventing reform.
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.
As the nation pivoted to its Back-to-School routines last week while the Senate and House were recessed, the new cycle paid attention to familiar stories:
On page one…
US involvement in Iran and Ukraine wars.
Inflation, prices, jobs and costs of living for food, gas and housing.
Mid-term election primary results and surprises.
Weather-related disruptions in Hawaii, Iowa and the persistent heat wave.
On page two…
Courtroom proceedings around Lindsay Clancy (mother of 3 who killed her children), Glen Murdoch (SC lawyer alleged to have killed his wife and son) and Luigi Mangione (alleged killer of UnitedHealth executive Brian Thompson).
Ongoing fallout from proposed vaccine policy changes by HHS.
Data center pushback and everything else.
I am a news junkie. I depend on real-time news feeds across the spectrum from conservative to progressive thru traditional and unconventional sources.
I am a healthcare guy: I study the health system to monitor trends, emergent themes and credible studies that influence its policies, performance and winners and losers.
And I am a consumer: I live a relatively normal life hoping to take care of my family and spend time on matters that matter. Increasingly, that involves the health and wellbeing of those I love.
Last week was inconsequential in the big scheme of healthcare: media attention was limited. The 3 court proceedings carried underlying themes of mental health. Reporting about the economy centered on costs of living sans household health costs chronically overlooked in business reporting. And posturing for the November 3 general election sparked commentary about Democratic socialism and Republican intent to make political points on healthcare.
This week will be no different. Healthcare news will largely be subordinate to Page One headlines unless a pandemic at home is declared or a celebrity’s personal health challenge is disclosed on a slow news day.
National media with few exceptions cover healthcare incompletely and inconsistently. In-depth coverage is rare. Investigative reporting is pre-wired toward misdeeds and corporate greed. Local media is equally inclined but budget limitations limit local coverage.
And social media are all over the place: misinformation, inadequate verification/validation of primary sources, and bias are systemic.
I believe the U.S. health system’s loss of trust and confidence is a direct result of its inadequacy in communicating. That’s not to say it hasn’t tried but it’s strategies and tactics have failed for obvious reasons:
The business of U.S. Healthcare prefers a low profile. Most healthcare companies prefer to promote their successes and hide their failures. Transparency has never been welcome.
The business models that dominate U.S. healthcare are driven by consolidation and corporatization. Access to capital is the gatekeeper. Consolidators are winning and independents aren’t. The industry’s become Big Business to most. It espouses concern for affordability without making it reality.
The public’s at a loss to pursue alternatives. Polls show dissatisfaction with hospitals, drug companies, insurers, et al is at all-time highs. Polls show the majority think the system is fundamentally flawed and a change necessary. But fear of alternatives is even higher, especially a system engineered by the federal government.
Regulation of the industry at the state and federal levels has protected its incumbents and sustained its profitability. Its B2B (business to business) model reinforces value creation for investors and limits B2C (business to consumer) intrusion. Insiders with their trade associations and lobbyists seek incremental changes that protect the status quo and keep others out.
The future of the U.S. health system is uncertain. It faces huge barriers to sustaining its “too big to fail” big brands. Its biggest hurdle will be public support.
The public wants a seamless system that’s easy to navigate and comprehensive, not a patchwork of clinics, specialties, facilities and programs accessible to some but not all.
The public wants a system that’s transparent: clinical evidence, outcomes, errors, business practices, executive compensation, costs and prices easily accessible when needed.
The public wants a system that’s personalized: impersonal service thru automated telephony and AI-generated prompts in the name of efficiency are suspect.
The public wants a system that’s cheaper. It believes there’s a Costco solution in healthcare and they’re not afraid to try it.
The entire industry is now on the defensive. Old playbooks used to tell its stories no longer work. It’s a challenge for most.
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.
