When two people who have been at odds for their entire careers start nodding at each other, it creates a certain kind of tension in the room. That’s what transpired on March 26 at a briefing hosted by the Leonard Davis Institute of Health Economics at the University of Pennsylvania in Washington, D.C. It was an almost surreal moment for anyone listening. In front of a group of policy experts, Ezekiel Emanuel, a key architect of the Affordable Care Act under Obama, and Brian Blase, a conservative health policy veteran who shaped Republican health agendas during the first Trump administration, essentially stated the same thing: the American health care system is flawed in ways that now jeopardize the nation’s financial viability.
That convergence is important. Talking points are not something that these people are inclined to share. However, both identified hospitals as the primary cause of uncontrollably high health care costs, referred to the current payment arrangements as “perverse,” and cautioned that the federal government is on the verge of a financial precipice that health care spending will push it over. In the background of these conversations, a 2026 CMS estimate indicates that by 2033, national health care spending will account for more than 20% of the US economy. Looking at that figure, it’s difficult not to wonder what Washington is waiting for.
Even though it is incredibly challenging to fix, the mechanism causing costs isn’t complex. A $200 knee injection can legally become a $600 knee injection overnight when a hospital system purchases a private physician’s practice. This isn’t because the care is different, but rather because the location is now categorized as a Hospital Outpatient Department. Both Emanuel and Blase claimed that site-neutral payment reform would close this loophole, but the federal government hasn’t taken any significant action on it for years. Meanwhile, hospital consolidation picks up speed, billing continues to rise, and negotiating power rises.
Then there is the AI dimension, which is more recent and, depending on your perspective, either the start of something more difficult to contain or a minor inflation driver. According to a June 2026 PwC report based on surveys from 27 health plans, nearly 70% of respondents listed providers’ AI coding and documentation tools as one of the top three factors driving up commercial healthcare costs in the upcoming year.
A 9% increase in commercial costs is currently anticipated by health plans, which is the largest estimate in almost 20 years. The mechanism is subtle: even though the clinical work itself hasn’t changed, AI tools enable clinicians to record more diagnoses, document more comorbidities, and code for more complex care. It’s really unclear if that’s systematic upcoding or proper capture of previously overlooked codes. Most likely both, in varying amounts at various establishments.
The WISeR AI model, which is being used in a Medicare pilot program, has been introducing AI-driven prior authorization requirements that appear to be extending approval timelines two to four times beyond what physicians previously experienced. Meanwhile, in Washington State, a Senate report by Maria Cantwell is raising concerns about something more direct. Third-party algorithmic systems are delaying or reversing decisions that were previously made by clinicians. There are waiting patients. Hospitals are irritated. Additionally, CMS has acknowledged issues and provided a few solutions.
Beneath all of this is a larger dysfunction that the Penn LDI panels kept returning to. Decisions about the cost and scope of health care are not made centrally in the United States. Rather, it uses layers of administrative rules that employ a huge number of people and produce a huge amount of waste to make those decisions prescription by prescription and denial by denial. Administrative fragmentation costs $1.2 trillion a year, according to Emanuel. Until you’ve spent time navigating an insurance denial on behalf of someone who needed care last month, that number seems unattainable.
Emanuel and Blase are cautioning about a fiscal crisis that won’t happen in the future. The trajectory is current. The question of whether Congress handles it that way is a different one, and it is truly unsettling to observe how slowly these discussions progress from briefing rooms to legislation.
