Over the last 60 years, the U.S. government’s role in health care has shifted from that of a direct provider and payer through Medicare and Medicaid to a regulator increasingly reliant on private insurers and providers to deliver services. Courts and corporate influence have constrained its regulatory power, according to a new analysis by LDI Senior Fellow and legal scholar Allison Hoffman and her colleague Rachel Sachs.

In a December 2025 article in the Journal of Health Politics, Policy and Law (JHPPL), the authors point out that as private entities have become deeply embedded in public programs like Medicare Advantage and the Affordable Care Act (ACA) marketplaces, they now shape health care delivery while resisting oversight, driving up costs and complicating efforts to improve care quality. The authors further note that recent Supreme Court decisions have limited the government’s ability to regulate, while the Employee Retirement Income Security Act (ERISA) and other legal restrictions block states from stepping in, leaving the future of health law caught between weakening federal and state authority and strengthening private control.

Their JHPPL article argues that the evolving power dynamic they document affects health care financing, access, quality, and cost, with entrenched private sector actors shaping outcomes within programs intended to serve public interests rather than profit goals.

It ends with the warning that “the dramatic evolution in American health law and the role of government in recent decades suggests that health law will continue to rest on unstable ground.”

Hoffman is a Professor of Law at the University of Pennsylvania Carey Law School and an expert in health care law and policy, with a focus on financing, including Medicare and long-term care. Sachs is a Professor of Law at the Washington University in St. Louis School of Law. Her work analyzes problems of innovation and access to new health care technologies, exploring the intersection of health law, food and drug regulation, and patent law.

Their piece defines and dissects the five eras of change health law has gone through:

Pre-1960s: Limited, State-Focused Regulation

Before the 1960s, the federal government had minimal involvement in health care, with regulation and oversight primarily left to states and localities. States, often working closely with professional associations like the American Medical Association (AMA), focused on licensing and setting practice standards, viewing medicine more as a profession than a business requiring antitrust scrutiny. Federal involvement was limited to small programs for veterans and some state-run aid for indigent care, with health care financing and delivery dominated by private arrangements.

Effect: This period meant that health care quality and access were shaped by local norms and professional gatekeeping. Controversies in health care were infrequently on the federal stage or in front of the Supreme Court.

1965 (Medicare/Medicaid): Federal Market Participant

The passage of Medicare and Medicaid in 1965 marked a fundamental shift, with the federal government becoming a direct market participant in health care financing. Through these programs, the government provided funding for care and used its financial power to set standards, such as requiring desegregation in hospitals to receive funds and establishing conditions of participation for providers.

Effect: This era significantly increased federal influence over the delivery and financing of care, using payment as a regulatory hook to shape the health system while relying on private hospitals and physicians to deliver care. It laid the groundwork for the modern health care regulatory state, demonstrating how government dollars could drive systemic change.

1970s-2000s: Blurring of Participant and Regulator Roles

From the 1970s into the early 2000s, the clear division between government as payer and regulator began to blur. Federal programs increasingly incorporated private actors, such as the establishment and expansion of Medicare Advantage, Medicare Part D, and Medicaid managed care. These programs relied on private insurers to administer publicly funded care, marking a shift toward “delegated governance” where private actors began influencing program operations and regulatory decisions.

Effect: This period saw the federal government move from being a direct provider of rules and funds to partnering with, and deferring to, private actors in delivering and shaping care. It deepened private sector influence in public programs, setting the stage for the conflicts that arise when vested interests have profits at stake in the shape of federal laws and regulations.

Post-2010 (ACA): Regulator of Private Insurance

In 2010, the Affordable Care Act (ACA) expanded the government’s role as a regulator of private insurance. It imposed new requirements on employer-sponsored plans and created marketplaces where private insurers offered individual plans under federal standards, with government subsidies and regulatory oversight. However, the ACA also demonstrated the government’s dependence on private insurers for implementation, with no public option fallback if private insurers withdrew from markets, unlike in the case of Medicare and Medicaid.

Effect: This period highlighted the federal government’s ability to set broad regulatory frameworks as well as its limits in influence over private actors upon whom it relied on to deliver care. It exposed how regulatory advances could be undercut by the structural power of the private sector, which retained significant leverage in shaping care delivery and insurance market participation.

Current (2020s): Weakening Regulator Amid Judicial and Industry Contraints

In the current decade, the government’s regulatory power is weakening under judicial constraints, entrenched industry influence, and ERISA preemption that blocks state-level interventions. Supreme Court decisions such as Loper Bright have reduced judicial deference to administrative agencies, empowering courts and regulated industries while limiting the authority of agencies like the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). Simultaneously, industry capture has led to persistent overpayments in programs like Medicare Advantage, with private entities resisting cost containment and regulatory adjustments.

Effect: These developments indicate that while the government retains formal regulatory authority, its practical power to influence health law and the structure of care delivery is increasingly constrained. The system now rests on a fragile mix of public goals mediated through private interests, with rising costs, uneven quality, and restricted accountability defining the implications of this weakened regulatory environment.

Overview

Overall, the authors conclude:

“The levers that have shifted the government out of the role of market participant and that have undermined the force of the government’s regulatory authority are hard to reverse. Once private parties gain significant influence over large federal programs, like Medicare and Medicaid, wresting control back is a herculean task. And once the Supreme Court has gone down a pathway of scrutinizing agency actions more aggressively, it is hard to return to a regime of deference to reasonable agency actions … .”

“There may, however, come to be silver linings. The entrenching of private industry into public health insurance programs creates new stakeholders who can help advocate against congressional cuts to these programs. Although states cannot regulate most employer-sponsored plans due to ERISA, they may regulate other entities, including pharmacy benefit managers, who are vertically integrated with the plans, and may increasingly do so if the potential for federal regulation lessens. The government’s increased role in regulating previously fully private plans, through the ACA, may set new norms for future federal regulation. Although we cannot predict the future, the dramatic evolution in American health law and the role of government in recent decades suggests that health law will continue to rest on unstable ground.”

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The article, “The Changing Role of the Government in American Health Law,” was published in the December, 2025 issue of the Journal of Health Politics, Policy and Law. Authors were Allison K. Hoffman and Rachel E. Sachs.

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