Rising Costs and Coverage Challenges Shape Health Policy Debate
Rising health plan premiums, the impact of payment model changes on health systems, and increased medical care costs pose challenges for the field and everyday Americans.
In this edition of AcademyHealth’s Situation Report, we examine the growing challenge of health care affordability as rising premiums, increasing medical costs, and ongoing payment policy debates place pressure on patients, providers, and health systems. We highlight concerns from leading hospital associations about proposed Medicare payment updates and mandatory care model expansions, new projections showing health care cost trends reaching their highest levels in nearly two decades, and a federal court decision that preserves key Affordable Care Act enrollment protections. We also spotlight AcademyHealth’s new blog series, Work Interrupted: Voices from the Field, which shares firsthand accounts of how layoffs, grant disruptions, and workforce changes are affecting the public health and health services research community.
In today’s issue:
New Blog Series - Work Interrupted: Voices from the Field
Hospital Groups Push Back on CMS Payment Update and Mandatory Care Model Expansion
Medical Cost Trend Expected to Reach 9 Percent in 2027: Key Drivers of Rising Health Care Costs
ACA Enrollment, Eligibility Rule Mostly Blocked by Federal Judge
When Guidance Outpaces Evidence: Lessons from Food Allergy Recommendations
New Blog Series - Work Interrupted: Voices from the Field
AcademyHealth launched a new blog series, Work Interrupted: Voices from the Field, to highlight the lived experiences of individuals across public health and health services research whose work has been unexpectedly disrupted. From layoffs and early retirements to rescinded grants and fellowship transitions, these stories reflect a moment of profound change across the field. Through honest, first-person reflections, the series aims to foster connection, visibility, and a shared sense of purpose during uncertain times.
We’re proud to begin with Elizabeth Cope’s powerful piece, “An Open Letter to the RIF’d,” with more voices to follow in the weeks ahead.
Hospital Groups Push Back on CMS Payment Update and Mandatory Care Model Expansion
Hospital associations are urging the Centers for Medicare & Medicaid Services (CMS) to revise its proposed 2.4 percent increase in inpatient payment rates for 2027, the amount Medicare pays hospitals for treating patients during a hospital stay, arguing that the update does not adequately reflect rising costs such as labor, supplies, and infrastructure. In comment letters on the proposed Inpatient Prospective Payment System (IPPS) rule (Medicare’s annual system for setting hospital payment rates), groups, including the American Hospital Association, said the increase falls short of real-world inflation and could contribute to ongoing financial strain, particularly for hospitals already operating on thin margins. Provider groups are urging CMS to increase the payment update and reduce or eliminate the built‑in “productivity adjustment,” which lowers annual payment increases regardless of actual cost growth. They also encouraged CMS to use more current inflation data and adjust its methodology so that payments better reflect real‑world operating costs.
Hospital groups also raised concerns about CMS’s proposal to expand a mandatory episode-based payment model for joint replacement care. Episode-based, or “bundled,” payment models set a single, fixed payment amount for an entire course of care, for example, a hip replacement surgery and the 90 days of follow‑up care after discharge, rather than paying separately for each service. Under these models, hospitals can keep savings if they reduce costs below the target amount but may also face financial penalties if spending exceeds it.
While CMS has pointed to earlier versions of this model as improving care quality and reducing costs, hospital groups argue that requiring all hospitals to participate could create challenges, especially for smaller or resource‑limited facilities that may lack the staffing, data systems, or care coordination infrastructure needed to succeed under this model.
This debate highlights ongoing tensions between efforts to control health care spending and the financial realities facing providers. It also raises questions about how payment models designed to improve efficiency perform in practice across different types of hospitals. Researchers have a key role in evaluating whether bundled payments reduce costs without compromising care, how payment updates affect hospital stability, and whether these policies have different impacts on rural, safety‑net, and large health systems.
Medical Cost Trend Expected to Reach 9 Percent in 2027: Key Drivers of Rising Health Care Costs
In a recent PwC’s report, it is projected that the commercial medical cost trend will rise to 9 percent in 2027, marking the highest medical cost trend in 17 years. Commercial medical cost trend is the yearly anticipated percentage increase in the cost of care for privately insured patients, assuming plan benefits remain the same. Health plans attribute the rising costs of treating patients to several inflationary factors such as AI adoption, provider reimbursement rates, pharmaceutical costs, behavioral health services utilization, and regulatory pressures.
The increased use of AI-enabled documentation and coding tools allows for more comprehensive and complex billing, which can result in more billable diagnoses and contribute to higher reimbursement per claim. Inflation and concentrated provider markets make it harder for payers to negotiate lower prices. Additionally, advances in specialty drugs and high-cost therapies contribute to the rising pharmacy costs. Another key driver of higher costs is the rise of behavioral health services utilization between 2018 and 2024, according to the PwC’s report. The rising medical cost trend is also influenced by ongoing regulatory pressures, specifically the No Surprises Act. This federal law protects patients from unexpected medical bills when they unknowingly seek care from out-of-network providers. As a result, health insurers face increasingly higher out-of-network payment disputes under the No Surprises Act. In response to the rising cost trend, PwC health researchers recommend that health insurers prioritize managing health care costs through payment reforms, reimbursement strategy, and utilization management.
Although the report focuses on health plans, the anticipated surge in costs signals a need to explore how rising costs impact the entire health care ecosystem including providers, patients, employers, and policymakers. For health services researchers, there is a growing urgency to generate evidence that identify and address the key drivers of rising health care costs. The health policy conversation will likely shift from improving care to improving care while controlling costs to ensure all Americans have access to affordable, quality care.
ACA Enrollment, Eligibility Rule Mostly Blocked by Federal Judge
A federal judge struck down several provisions of a CMS rule that would have made it more difficult for people to enroll in and maintain Affordable Care Act (ACA) Marketplace coverage. The blocked policies included shortening the open enrollment period, adding stricter eligibility checks for special enrollment periods, removing certain protections related to premium tax credits, and eliminating the 60-day window for resolving household income discrepancies. However, the court allowed CMS to move forward with changes to how premium adjustment percentages are calculated, which could lead to higher premiums for consumers.
This decision is significant for health services researchers because it preserves policies that help reduce barriers to obtaining and keeping health insurance coverage. It also reinforces the importance of studying how administrative requirements and enrollment rules affect access to care, continuity of coverage, and health outcomes. As legal challenges over Marketplace policies continue, research will be critical in informing evidence-based decisions that shape the future of coverage and affordability.
Health Care Affordability a Major Issue Ahead of Midterms; Policy Proposals Build on ACA
As the health care affordability crisis becomes ever more acute for Americans, the Democratic Party is looking for a new policy platform ahead of the midterm elections to address the rising cost of healthcare, similar to the popular ObamaCare platform from years earlier. Recent polling found that health care ranked in the top five issues for voters, while premiums in the ACA Marketplace have jumped more than 20 percent and enrollment declined after the Republican-controlled Congress allowed the enhanced premium tax credits to expire last year. Various organizations are highlighting different health care platforms, including a proposal called “Medicare by Choice,” which would allow Americans to enroll in Medicare, regardless of age, and for employers to select this option as their employees’ workplace benefit. Another proposal would make primary care free for all Americans and create a nonprofit public option, claiming it would build upon the promise of the ACA as a “starter home” for affordable health care. Although polling shows that voters trust Democrats more to address health care issues, a meaningful share of voters don’t trust either party, which experts believe creates a pathway for candidates to stand out on the issue. Other political strategists, however, believe that candidates should hold off on promising large-scale changes until the Party controls both houses of Congress. Regardless of election outcomes, health care affordability is clearly an issue that is here to stay – health services researchers can continue to promote evidence-based policymaking by connecting with policymakers and sharing the evidence of how to reduce health care costs for Americans.
When Guidance Outpaces Evidence: Lessons from Food Allergy Recommendations
Following a recent JAMA Pediatrics article, AcademyHealth CEO Aaron Carroll recently reflected in the Washington Post the consequences of issuing public health guidance before sufficient evidence exists. Drawing on his own experience as a new parent during a period when experts advised families to avoid introducing common allergens to infants, he highlights how previous recommendations that breastfeeding mothers and infants should avoid common allergens such as peanuts, tree nuts, and eggs, turned out to increase the prevalence of allergies. This well-intentioned guidance may have contributed to allergy risk and continued to influence behavior long after it was rescinded. The article also highlights the essential role of health services research in assessing real-world outcomes, improving health guidance over time, and maintaining public trust in science as well as the importance of honestly around uncertainty. Read more in JAMA, as well as the coverage in MedPage Today and CNN.