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In the News
What happened in healthcare recently—and what we think about it.
- Supreme Court rules in favor of HHS in DSH payment case. The Supreme Court on Tuesday sided with the Department of Health and Human Services (HHS) and against hospitals in a case regarding how disproportionate share hospital (DSH) payments are calculated. The plaintiffs, 200 hospitals, argued that they had been underpaid because patients who were enrolled in the Supplemental Security Income (SSI) system, but did not receive an SSI payment during the month of their hospital stay, were not included in the calculation for DSH payments. In a 7-2 ruling, the Supreme Court affirmed a lower court’s ruling that these hospitals were not underpaid and that patients who did not receive an SSI payment during the month of their hospitalization should not be included when calculating DSH payments.
- The Gist: This is a textbook letter-of-the-law vs. spirit-of-the-law case. In her dissent, Justice Ketanji Brown Jackson pointed out that “whether any such individual actually received a cash payment under the SSI program during the month of their hospitalization is irrelevant” and this metric was meant to identify the neediest. The majority noted that Congress devised a formula to accommodate the multiple interests involved (e.g., administrability, the allocation of limited resources), and it was not the Court’s role to rewrite that formula. Ultimately, this is a disappointing ruling for hospitals that serve some of the neediest populations. There have been several cases regarding federal payments to hospitals in recent years and the majority continues to shift on non-ideological lines. This ruling is quite narrow, leaving the door open for other DSH cases to be brought to the courts and the chance of a different ruling possible.
- HHS to change vaccine testing. HHS Secretary Robert F. Kennedy Jr. intends to require all new vaccines to undergo placebo testing, The Washington Post reported In a placebo test, some participants receive an inert substance instead of the vaccine, allowing researchers to compare the treatment against the baseline. This would be a change from current practice in which only vaccines for new pathogens must undergo a placebo test. Specifics on what will classify as a “new vaccine” are unclear. In related news, the Wall Street Journal reported on Thursday that the Trump administration will be investing $500 million to develop a universal vaccine that would protect against multiple strains of pandemic-prone viruses at once.
- The Gist: The announcement about potential placebo use was criticized by many in the scientific community; one expert said the nation is “watching the gradual dissolution of the vaccine infrastructure in this country.” Given that the specifics on what comprises a “new vaccine” are yet to be seen, this move could be ethically gray; patients, for example, might receive a placebo instead of a new vaccine or updated version of an existing vaccine that has a proven track record. Additionally, vaccine development could become far more expensive and therefore less desirable for drug manufacturers to prioritize. This move could represent a loss of access and sow doubt in vaccine safety when trust in public health is already low.
- Aetna to exit ACA marketplace in 2026. CVS Health announced Thursday that its health insurance and benefits subsidiary Aetna will exit the Affordable Care Act (ACA) marketplace in 2026. Aetna currently has 1 million members across 17 states enrolled in its ACA plans and is expected to post a $350 million to $400 million loss on its ACA offering this year. “We are disappointed by the continued underperformance from our individual exchange products and have recently determined there is not a near- or long-term pathway for Aetna to materially improve its position in this product,” CVS Health CEO David Joyner said on an earnings call Thursday morning. Aetna has exited the marketplaces before, leaving in 2018 and then reentering in 2022. This news was announced in tandem with its 2025 first quarter earnings, which beat analysts’ expectations.
- The Gist: Amid increased utilization that has affected the entire health insurance industry, Aetna has been a financial burden for CVS Health. Payers from Humana to Cigna have recently made similar strategic pivots and exited unprofitable markets or shed offerings to shore up profits. While Aetna was a small player in this space, this move could be the canary in the coal mine for ACA exchanges. Aetna struggled to offer a profitable product while the ACA enhanced subsidies were still in place, and the subsidies’ future beyond 2025 is uncertain. Should the subsidies sunset, enrollment would likely drop significantly, shifting the risk pool. Such dramatic changes could make it more challenging for payers to remain in the exchanges, potentially harming access to coverage nationwide.
Plus—what we’ve been reading.
- Medicaid work requirements: reform, or dismantling? Published late last month in Health Affairs, this piece takes issue with federal Medicaid work requirements. Congress is considering adding a work requirement to the federally funded, state-based medical assistance program as part of sweeping spending reductions detailed in the budget framework and could decide to build on frameworks included in the 2023 House-passed Limit Save Grow Act. However, the authors assert, this requirement could have severe consequences for state Medicaid programs and the people they serve. Past state-based work requirement experiments in Arkansas and Georgia led to large coverage losses without improving employment. The proposed federal model would apply to nearly all working-age adults up to age 65, offer few exemptions and give states no flexibility. The result: states could be forced to meet rigid reporting mandates or risk losing billions of dollars in federal funding.
- The Gist: Unlike previous state-led efforts, Limit Save Grow would impose nonwaivable federal payment exclusions, triggering retroactive clawbacks of Medicaid funds for enrollees who miss documentation for 3 months, even if they otherwise meet work requirements. Experts warn the proposal could overwhelm state systems, cause mass disenrollment and function as a de facto dismantling of Medicaid expansion for low-income adults. Hospitals, especially safety-net and rural ones, tend to oppose Medicaid work requirements because coverage instability leads to more uncompensated care, straining hospital finances and threatening access to care for vulnerable populations. Stable Medicaid coverage is critical to maintaining both patient health and financial viability across the healthcare system. Add work requirements to the growing list of threats to Medicaid at a time in which hospitals and the patients they treat depend on the program.
Graphic of the Week
A key insight illustrated in infographic form.
Healthcare affordability declining
This week’s graphic highlights new Gallup survey data and Bureau of Labor Statistics inflation data to consider growing healthcare affordability challenges. Compared with 2021, a greater share of adults is unable to afford healthcare in 2024, surpassing 1 in 3 adults. In 2024, only about half were considered cost secure for healthcare. Additionally, high inflation over the past few years has financially strained many households. Since January 2021, prices have increased more quickly across all final goods and services in the economy—as measured by the Consumer Price Index (CPI)—than in medical care or hospital care. While prices for medical care and hospital care did increase more quickly than economists would consider ideal, healthcare affordability challenges appear to also be a sign of the challenging economic times. This will make rising costs more challenging for providers to address, especially as inflation expectations for the coming year do not appear to offer any sign of relief.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
The healthcare industry is facing challenging times, and chief financial officers (CFOs) are positioned to make a profound impact.
In a new article, Mark Fryer and Lance Robinson discuss how the CFO’s role is moving from a traditional position of financial stewardship to a new strategic direction. They offer three ingredients that can jumpstart the process toward transformative financial leadership.
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The Gist Weekly team at Kaufman Hall
