Looking Forward

Supreme Court Alters Regulatory Landscape for Health Care

Overturning 40 years of legal precedent created by the decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., the Supreme Court majority concluded in Loper Bright Enterprises v. Raimondo that the courts are required to exercise their own judgment in interpreting statutes that are ambiguous or silent on specific issues.¹ This shift from deference to federal agencies to the judicial branch could have a large impact on many aspects of U.S. health care, most significantly by removing decisive power from the U.S. Department of Health and Human Services (HHS), U.S. Food and Drug Administration, HHS Office of Civil Rights, and Centers for Medicare & Medicaid Services (CMS) on broadly worded legislation. The removal of Chevron deference could result in inconsistent health regulations across the country; multiple lawsuits in different jurisdictions might lead to conflicting court decisions and regulatory standards.² Consequently, health care policies affecting patients, providers, and insurers could vary significantly between regions, injecting uncertainty and delays into an already complex system. One significant example already playing out is that of the Dobbs v. Jackson Women’s Health Organization decision, which has created a patchwork of state laws regarding reproductive health.³ Indeed, much like the earlier Patient Protection and Affordable Care Act (ACA)—the subject of more than 2,000 legal challenges to date—both the Inflation Reduction Act (IRA) and the No Surprises Act are sparking lawsuits from impacted stakeholders, further exacerbating delays for CMS in its efforts to steward care for a growing population and to implement new rules, such as the one creating a new drug pricing authority for Medicare.^4–7 One case moving through the courts challenges the preventive services provision of the ACA. At present, mandatory coverage of preventive services within private plans and Medicaid expansion programs is based on an A- or B-level recommendation by the U.S. Preventive Services Task Force and includes a range of services, such as screening tests, immunizations, behavioral counseling, and select medications.⁸ These recommendations are now vulnerable to litigation, and basic tenets of current law could be tied up in courts for years. Should coverage requirements for preventive care shift, so could the trajectory of the nation’s transition to value-based payments, a structure underpinned by patient-centric care, where providers focus more on preventive care and the overall health and wellness of each patient.⁹ Although the full repercussions of this ruling might not be felt for years, its immediate effects could change key personnel involved in critical decisions surrounding U.S. health care.

November Election Offers Differing Visions of U.S. Health Care

The passing of the ACA in 2010 created the focal point for one of the most vocal discussions of U.S. health care between the two major political parties, one that continues into the upcoming election. Currently, Democrats and Republicans are offering drastically different views on what the future should hold for American health care, and the roles payers, providers, and patients should play in it. On one hand, the Democratic Party has embraced a platform that pledges to further strengthen and support the ACA. Plans to achieve this include expanding the provisions cutting prices for insulin and other drugs, which were enacted for Medicare enrollees last year as part of the IRA, and further bolstering the health insurance exchanges (HIXs) by making the enhanced federal premium subsidies for HIX coverage permanent. The party is campaigning on bringing those outcomes about, as both provisions are set to expire after 2025.¹⁰ Concurrently, Democrats are expected to continue to push to further regulate the health care industry as a means to reduce those costs; they have also touted commitments to support increasing funding for research into health disparities, with a particular focus on how social determinants of health contribute to differences in health outcomes.¹¹

The Republican party has been less specific with its health care goals, though former President Donald Trump recently doubled down on a previous campaign pledge to repeal and replace the ACA, continuing a Republican theme since 2010.¹² Should the party take control in 2025, experts predict Republicans will let the enhanced federal premium subsidies expire.¹³ Apart from a renewed vow to repeal and replace the ACA by Trump, the Republican Party’s stance on other aspects of health care are more nebulous, though the efforts of recent administrations might point toward certain goals. Deregulation of the health care space was a significant achievement for the first Trump administration, including a notable loosening of restrictions for telehealth, a pandemic-era response which has persisted.¹⁴ Similar goals of deregulation and increasing focus on free-market rather than government-subsidized health care will likely be an area of concern for a Republican president as well. Regardless of which party prevails, the majority will have considerable powers to affect policy and could usher in a federal government that will bring about sweeping changes to the current system. With a judicial branch that has recently altered the expectations around executive power, the upcoming presidential election could fundamentally change the direction of U.S. health care.

State and Federal Policies Set Fresh Guardrails for Managed Care

According to estimates from the Congressional Budget Office (CBO), net federal subsidies in 2024 for people covered by health insurance in the U.S. will reach $2.0 trillion. By 2034, those subsidies will reach $3.5 trillion, with a combined $27.5 trillion in projected spending for such subsidies from 2025 to 2034. Nearly half (46%) of the 10-year amount would go to Medicare, with the remainder supporting Medicaid and the Children’s Health Insurance Program (CHIP; 25% for both), employment-based coverage (21%), health insurance exchange or Basic Health Program plans (5%), and other programs (2%).¹⁵ Given these vast sums, it is not surprising that pressure continues to build across all of U.S. health care to slow the rise of expenditures.

Within the Medicare and Medicaid programs, private payers play increasingly important roles in restraining costs through managed care contracts. Recently, enrollment growth for this segment has been particularly strong in Medicare Advantage (MA)—especially for dual-eligible Special Needs Plans (D-SNPs), which are designed to cover those eligible for both Medicare and Medicaid. Yet, this rise in managed enrollment within public insurance programs is attracting attention from stakeholders and policymakers alike, who are concerned not only about quality-of-care issues—such as timely and appropriate access to care—but also, in some cases, the value proposition underlying such public-payer programs.^16,17 The state and federal governments overseeing these partnerships are seeking ways to ensure the plan’s operating rules, as set by managed care companies, constrain costs without inappropriately impeding members’ access to care. For example, a 2022 report from the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) took aim at MA denials arising from prior authorization (PA) requests. The findings suggested at least some of those denials were inappropriate, leading the OIG to recommend that the Centers for Medicare & Medicaid Services (CMS) issue new guidance for MA organizations on the use of clinical criteria that are not contained in Medicare coverage rules.¹⁸ In its 2024 final MA rule, CMS targeted three such areas: i) the two-midnight rule, ii) inpatient-only lists, and iii) case-by-case exceptions for inpatient admissions.¹⁹

Similar concerns about PAs are arising within Medicaid. In a recent report, the Medicaid and CHIP Payment and Access Commission (MACPAC) reviewed the pluses and minuses of the PA process, including initiatives in some states to achieve the following: i) standardizing the development of clinical criteria to determine medical necessity; ii) improving transparency of PA rules; and iii) requiring reporting to state authorities.²⁰ Given the large footprint of managed Medicare and Medicaid, we are likely to see continued balancing of the need to trim costs with guardrails to ensure managed care policies are not jeopardizing patients’ access to appropriate and timely care.

AI, Improved Leadership Are Key to Addressing Hospital Challenges

As they face ongoing financial struggles, staffing shortages, and operational inefficiencies, hospital systems may find increased value in individuals with specialized health care leadership skills and an ability to establish multidisciplinary and integrated care models. People with both clinical and leadership expertise are best equipped to balance administrative needs while prioritizing the provision of high-quality care and patient/provider safety.²¹ This renewed focus by hospital C-suite leaders on more personalized medicine, improved patient outcomes, and quality of care could serve as a key component of the timely transition to value-based care, where financial and operational efficiencies are incentivized.

Hospital financial struggles caused by unnecessary costs already come with a steep price tag—totaling $760 billion to $935 billion (2019 dollars) annually, or 25% of the U.S. total health care budget.8 Redundant yet crucial administrative tasks are the main cause of this waste. Artificial intelligence (AI) presents opportunities for significant financial savings, with a nearly $150 billion cost savings expected by 2026.²² AI can, for example, automate these administrative tasks to better enable providers to focus on patient care quality. Staffing shortages and operational inefficiencies also drive excess spending, as hospitals struggling with these issues may become too resource-constrained to discharge patients in a timely manner.^22,23 Indeed, patients are staying longer in hospitals post-pandemic than they were in the first half of 2020. In 2021, average adjusted expenses per inpatient day at hospitals were $2,883, peaking in California at $4,181. As a result, C-suite leaders are now shifting their focus toward building cultures of capacity, in which they work to lower costs via reductions in hospital length of stay. Initial efforts are bearing fruit, though room for improvement remains: the first half of 2023 saw an increase of 5% in average discharges per calendar day compared with the first half of 2020; the average length of stay dropped 4% in 2023 but remained 2% higher than the 2020 average.²³

Innovation, communication, self-development, and consumer engagement are four important competencies poised to alleviate the fiscal burden and the aforementioned challenges hospitals continue to face in 2024.²¹ Health systems—and their leaders—that demonstrate these competencies may better foster collaboration between stakeholders and continuously innovate for improved quality of care, which are crucial steps in overcoming current and future challenges in U.S. health care.