In a rare display of bipartisan alignment, former Obama administration advisor Ezekiel Emanuel and Trump policy architect Brian Blase declared that the U.S. health care system is being choked by “perverse incentives” and monopolistic practices.

The two were participants in the first of three panels at the March 26 “Health Care Affordability: Evidence and Federal Policy Options” seminar organized by the University of Pennsylvania’s Leonard Davis Institute of Health Economics (LDI) and Penn Washington, the university’s policy engagement arm in the capital. Their panel was titled “Solutions for High Health Care Costs” and was moderated by LDI Executive Director Rachel M. Werner, MD, PhD.

As she opened the session, Werner emphasized the critical nature of the affordability issue across the country, noting that a KFF January poll found that two-thirds of the U.S. public say that health care costs rank as their top financial worry, above utilities, food, groceries, housing, and gas. Meanwhile, an Urban Institute analysis says that ACA Marketplace benchmark premiums increased by about 22% between 2025 and 2026. Employer-sponsored insurance also went up, with premium increases of about 6% to 7% in that same time period.

Top Cost Driver: Hospitals

When Werner asked the two “what’s at the top of your list of things driving high health care costs,” Blase pointed to hospitals as the “largest and fastest-growing part of the problem.” Emanuel said that “in thinking about solving the affordability problem, hospitals have to be the main focus; they are a third of all care delivery costs.” Both were in agreement on a suite of aggressive reforms needed — most notably site-neutral payments. They argued that the federal government must stop allowing hospitals to arbitrarily inflate prices simply by changing the location of care.

For instance, in the current system, something like a steroid injection for your knee in a doctor’s private office might cost $200. But if that doctor’s practice is bought up by a hospital, the same injection in the same physician’s office could suddenly jump to $600 because that office has now become a “Hospital Outpatient Department.” A site-neutral payment policy would have the insurer paying $200 in both cases.

Fragmented Payment and Perverse Incentives

The stakes of all this are underscored by a 2026 CMS projection that national health care spending will consume more than 20% of the U.S. economy by 2033. Both panelists warned that current fragmented payment structures and perverse incentives are no longer just a medical issue — they are a looming fiscal catastrophe. This “dysfunctional” system, as Emanuel described it, threatens to overwhelm both the federal budget and the resources available for the country’s other vital societal needs.

Blase, PhD, is a prominent conservative health policy expert who served as a key health adviser in the first Trump administration from 2017 to 2019. After leaving, he founded Paragon Health Institute, a think tank that continues to shape Republican health care agendas.

Emanuel, MD, PhD, is an oncologist and bioethics scholar who is Vice Provost for Global Initiatives and professor at Penn. He previously chaired the NIH Department of Bioethics and, as a senior advisor in the Obama administration, played a major role in the creation of the Affordable Care Act.

Topics Touched on

Blase and Emanuel’s rapid-fire discussion ranged across several other health care structural issues:

• Perverse Incentives — Both agreed that the system rewards volume and political lobbying rather than patient value. Emanuel focused on the $1.2 trillion wasted on administrative fragmentation, while Blase emphasized how government subsidies inflate demand while regulations restrict the supply of care.
• The 340B Drug Discount Program — Blase characterized it as a driver of consolidation because it enables hospitals to buy low and sell high, generating revenue that is not required to be passed on to patients. The more patients and drug volume a hospital controls, the more 340B profit it can generate, a fact that fuels consolidation strategies.
• The Fiscal “Cliff” — Both warned that the federal government cannot sustain trillions of dollars in excessive spending (as compared to comparable nations’ health spending) and that health care reform is essentially a fiscal necessity for national stability.
• The Role of Employers As Health Care Purchasers — Emanuel argued that employers have been “AWOL” and “idiotic” in managing costs. Blase agreed, saying, “I have been disappointed with employers and think that they could be more innovative.”
• Role of Government vs. Market Forces — Blase said “the government has screwed both up on the supply side of the market … it restricts entry and harms competition at the same time it incentivizes consolidation.” Emanuel responded that “it’s not only the government that has screwed things up here. We have plenty of screw-ups from the private sector all on their own.”
• Standardization vs. Market Flexibility — Emanuel called for government-imposed standardization because it is “essential to reduce waste.” Blase responded that “standardization means the government is going to pick what it thinks is best and impose that on everybody. It is an overreach that limits choice and innovation.”
• Price Transparency — “One of the perversities of the health care market is we don’t have price information readily available, but it can discipline markets and employers,” said Blase. Emanuel argued that in health care “transparency has never worked to control costs. Never. Ever.”
• Government Budgets and System Design — “We need a total budget for health care and for hospitals and primary care,” said Emanuel. Blase favors “Medicaid block grants and redesigned subsidies as a much more efficient way” to control costs.

The Second Panel: Plans, Paperwork, and Prior Authorization

The second panel in the March 26 Health Care Affordability event in Washington, D.C., was a lightning talk focused on how the health care system’s complexity — both in plan design and administrative processes — is a central driver of inefficiency, cost, and patient harm.

Moderated by David Grande, MD, MPA, Director of Policy at LDI and professor of medicine at Penn’s Perelman School of Medicine, the panel participants were Aaron Schwartz, MD, PhD, and Michael Anne Kyle, PhD, RN, both Assistant Professors of Medical Ethics and Health Policy at the Perelman School.

Grande explained, “In today’s health care system, consumers have some ability to choose among insurance plans based on factors like benefits, costs, and supplemental offerings. But these choices carry significant consequences, and the coverage decisions individuals make shape not only their own access to care, but also the overall cost of health care across our economy. They also influence the complexity and administrative burden people face when trying to navigate the system. In this second panel, we explore the options available to health care consumers and examine how those choices affect affordability, access, and the broader functioning of the health care system.”

System Complexity

Panelists Schwartz and Kyle approached health care affordability from different angles — insurance design and administrative burden — but converged on a common theme: the system’s complexity is driving both higher costs and worse patient experiences.

Schwartz focused on how Medicare’s structure distorts choices and spending. He said it is “pretty settled science” that Medicare Advantage (MA) costs more than traditional Medicare, citing estimates that it runs about 14% higher per beneficiary — roughly $76 billion annually. While that may sound modest, he emphasized that “it adds up to an incredible amount of money.”

Yet beneficiaries continue to choose MA, not necessarily because it is more efficient, but because it is more attractive. MA plans offer lower premiums, out-of-pocket caps, and extra benefits, while traditional Medicare lacks basic protections like a spending cap. The result, Schwartz said, is not a fair competition: “It’s really not a level playing field.”

Those choices are further shaped by structural constraints. Rules governing supplemental Medigap coverage make it difficult for beneficiaries to switch back to traditional Medicare once they leave. “It’s very hard once you’re in MA to switch back,” he said, describing a system that locks people into earlier decisions.

Skewed Information Environment

At the same time, the information environment is skewed. Beneficiaries are often guided by brokers and marketing efforts tied to Medicare Advantage enrollment, raising concerns that decisions are influenced by financial incentives rather than patient needs. Schwartz argued that improving affordability requires “enrollment efficiency” — ensuring people choose plans that reflect their needs without costing the government more than the value delivered.

He also pointed to specific inefficiencies, including a policy quirk that allows Medicare Advantage plans to be paid for veterans who receive care through the VA, even when those plans provide little or no services.

Kyle, by contrast, focused on what happens after patients enroll, arguing that administrative burden — especially prior authorization — is both a tool for controlling costs and a source of harm.

She explained that cost control in U.S. health care often works by limiting utilization: “Costs are price times quantity,” and administrative tools like prior authorization act on quantity. But that approach creates friction that directly affects patients. Survey data show that nearly three in four Medicare beneficiaries face administrative challenges, and about 30% delay or skip care because of them — “over half” of whom report negative health consequences.

Disrupting Treatment

These barriers can disrupt treatment. When drug coverage changes, some patients fail to transition to new medications, leading to worse outcomes and increased emergency room visits. Even with safeguards, Kyle said, “it’s still not enough. It’s still really hard.”

Clinicians face similar burdens. A fragmented system of insurer-specific rules means navigating “dozens of forms, dozens of policies,” contributing to delays, confusion, and high stress.

Many of these problems, Kyle argued, are solvable. “Administrative hassles are rife,” she said, but they are also “boring and totally fixable,” pointing to standardization, better communication, and modernized systems as practical solutions.

Need for Centralized Decisions

But she cautioned that reform efforts often avoid a deeper issue: every health system must decide what to cover and at what cost. The U.S., reluctant to make centralized decisions, instead makes them indirectly, “prescription by prescription,” through layers of administrative rules.

Together, the two speakers described a system in which policy design and administrative complexity reinforce each other — driving up costs, limiting meaningful choice, and creating barriers that have the potential to ultimately harm patients.

The Third Panel: Consolidation, Corporatization, and Price

In the third and final panel of the University of Pennsylvania’s March 26, 2026, conference on health care affordability, economists Zack Cooper, PhD, and Leemore Dafny, PhD, delivered a blunt assessment of what is driving rising costs in the U.S. health system — and what policymakers can realistically do about it.

Dafny, is a Professor of Business Administration and the Howard Cox Health Care Initiative faculty co-chair at Harvard Business School and Professor of Public Policy at Harvard Kennedy School. Cooper is an Associate Professor of Public Health and Economics at Yale University, where he also is Director of Health Policy at Yale’s Tobin Center for Economic Policy.

Overwhelmingly Concentrated Hospitals

Cooper opened with a central point that framed the entire discussion: if policymakers want to lower insurance premiums, they must confront the underlying cost of care. And that cost, he argued, is overwhelmingly concentrated in hospitals, where prices have risen faster than in almost any other sector of the economy. While some of that growth reflects higher labor and supply costs, the dominant force is consolidation. Over the past two decades, roughly 1,200 hospital mergers have reshaped the market, often leaving regions with little or no meaningful competition. When hospitals merge, he noted, prices routinely rise — sometimes by as much as 30% — with little evidence of improved efficiency or quality.

Those price increases ripple through the broader economy. Because most Americans receive insurance through their employers, higher health care spending translates into lower wages, fewer jobs, and growing income inequality. In effect, Cooper argued, rising health care costs act as a drag on the entire economy, disproportionately affecting workers earning less than $100,000.

Dafny picked up where Cooper left off, arguing that the current system not only tolerates consolidation but actively encourages it. One of the most important — and least understood — drivers, she said, is the lack of site-neutral payment policy. Medicare and many private insurers pay significantly more for the same service when it is delivered in a hospital-owned facility than in an independent clinic, even when the care is identical. That discrepancy creates a powerful incentive for hospitals to acquire physician practices and outpatient centers, expanding their market power and driving prices higher across the system.

Site-Neutral Payments

Moving to site-neutral payments, Dafny argued, would do more than simply reduce spending. It would also remove one of the key incentives for consolidation, allowing independent providers to compete and potentially lowering prices over time. But she acknowledged the political difficulty: hospitals have come to rely heavily on these higher payments, and a sudden shift could produce significant financial disruption. Any reform, she suggested, would likely need a transition period and supplemental funding to cushion the impact.

Beyond payment reform, Dafny outlined two additional policy strategies. First, she called for stronger antitrust enforcement, noting that federal agencies have been under-resourced even as the volume of health care mergers has surged. She also emphasized the need to address not just mergers but anticompetitive practices, such as contract clauses that prevent insurers from steering patients toward lower-cost providers.

Preserving Market Dynamics

Second, she argued that in markets where consolidation is already extreme, competition alone may no longer be sufficient. In those cases, policymakers may need to consider targeted price caps or ceilings that limit how much dominant providers can charge while still preserving some market dynamics beneath them.

Both panelists expressed skepticism that consumer-driven solutions, such as price transparency, can meaningfully discipline prices. Patients rarely shop for care in the way economists might hope, particularly in urgent or complex medical situations. Instead, real competition occurs in negotiations between insurers and providers — negotiations that are often distorted by market power.

Taken together, their message underscored a central conclusion of the overall event: the affordability crisis is fundamentally a price problem rooted in consolidation and system compexity. Addressing it will require not only restoring competition where possible, but also accepting the growing role of price regulation where markets no longer function effectively.

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