Thursday, at the Workers’ Compensation Research Institute (WCRI) Annual Conference being held in Phoenix, AZ, Keynote speaker Lanhee Chen, Ph.D., from Stanford University offered a comprehensive analysis of the US healthcare system’s trajectory. His presentation, “The US Healthcare System in 2025, Where We’ve Been, Where We Are, and What’s to Come ” provided insights into past transformations and projected future developments.
Chen opened with a central thesis: after a period of dramatic change since 2010, the American healthcare system is now entering an era of incremental adjustments rather than sweeping reforms. Despite Republican discussions about repealing the Affordable Care Act (ACA), Chen believes “that ship has sailed,” noting the law’s growing popularity, with approval ratings now at 65-70% among the general public.
The past decade has witnessed fundamental shifts in healthcare policy. The ACA significantly altered the traditional balance between federal and state responsibilities in healthcare regulation. Where states historically managed healthcare and insurance regulation, the ACA federalized much of this framework through modified community rating, standardized benefits requirements, and expanded federal subsidies for both private insurance and Medicaid. Chen emphasized that the majority of coverage gains from the ACA came through Medicaid expansion.
Another major shift came with the Medicare Access and CHIP Reauthorization Act (MACRA), designed to transform provider compensation from volume-based to value-based models. However, Chen noted MACRA’s limited success, as Congress regularly circumvents the law through annual “patches” that undermine its effectiveness.
The Trump administration introduced healthcare price transparency regulations in 2021, requiring hospitals and health plans to publish pricing information. While these were temporarily suspended by the Biden administration, Chen expects them to be reinstated under the new Trump term. However, he criticized the current transparency measures as inadequate, since published rates rarely reflect what insurers or consumers actually pay.
This point resonated with me, as I have often noted that medical billing is essentially a fictitious shell game, with network discounts and other reductions greatly affecting an actual “bill.”
Chen noted what he called the “inaccurately named” Inflation Reduction Act further expanded healthcare subsidies for Americans in private insurance markets and continued generous federal matching for states that expanded Medicaid.
While acknowledging these extensive changes representing approximately 20% of the economy, Chen offered a balanced assessment of the current system. He described the US healthcare system as the world’s most innovative but noted persistent challenges:
- Despite the ACA, 20-25 million Americans remain uninsured, creating a “chronic insurance problem” likely to continue
- Healthcare costs continue to rise faster than core inflation, with per capita expenditures growing significantly since 2014
- The system remains focused on “sick care” rather than preventive care
- Inequities persist, particularly between urban and rural areas where healthcare access is limited
- Basic health measures like infant mortality rates lag behind other developed nations
Regarding cost drivers, Chen highlighted that over 50% of national health expenditures go to physicians, clinics, and hospitals—not prescription drugs, which account for only about 9% of total spending, contrary to popular perception. The primary cost escalation stems from the provider side, particularly through vertical consolidation across healthcare systems.
Looking ahead, Chen predicts limited healthcare policy changes, citing a historically unproductive Congress and President Trump’s minimal focus on healthcare during his recent address. However, he anticipates significant reforms to Medicaid, noting the House Committee on Energy and Commerce has been tasked with finding $900 billion in savings over ten years.
Potential Medicaid reforms might include:
- Reducing federal matching rates, particularly for expansion populations
- Implementing spending caps that provide states fixed funding
- Addressing improper payments and waste
- Instituting work requirements for able-bodied beneficiaries
Chen, who gave one of the best keynote presentations I have seen at WCRI, concluded by emphasizing that political feasibility will ultimately determine which healthcare policies move forward. The complex interplay of partisan politics makes alignment on any single solution challenging, suggesting that meaningful healthcare reform will remain an incremental process rather than a revolutionary one.
“Pay attention to politics,” Chen advised, “because nothing happens in Washington without the politics being aligned first.”
Originally published in From Bob’s Cluttered Desk
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Thanks for sharing, Bob. He is absolutely right that politics will dictate the ultimate direction of healthcare!