TrustWorks On Call: Million-Dollar Bandages

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. DOJ charges over 450 defendants with $6.5B of healthcare fraud.

The Department of Justice (DOJ) announced on Tuesday the results of its 2026 National Health Care Fraud Takedown, with the agency charging 455 people, including at least 90 medical professionals, for submitting $6.5B of false claims to Medicare, Medicaid, and other health care programs.
One such scheme involved 11 people allegedly exploiting a loophole in Medicare’s skin-substitute payment system that caused Medicare spending on these bandages to grow from less than $1B in 2019 to $14.4B in 2025; after the loophole was closed, claims have dropped to $100M in 2026 so far.

TrustWorks Take: Healthcare fraud enforcement should be viewed primarily as a program integrity issue, but the Trump administration has mobilized it into a political issue to justify its policy agenda of slashing social spending. Medicare and Medicaid fraud exists, and fraudsters should be held to account, but specifically for the sake of preserving and restoring these programs, not as an excuse to further deprive them. What the DOJ’s work here shows is that healthcare fraud is most often perpetrated by providers and vendors, rather than patients, but Medicaid work requirements, for example, target only the latter.

The Medicare skin substitute fraud case provides a good example of our system functioning imperfectly, but acceptably. There was a genuine flaw in Medicare’s payment rules for this obscure procedure that bad actors were exploiting. The Biden administration eventually noticed and proposed a fix, which was delayed by the Trump administration before it ultimately implemented a similar solution. Medicare payments have returned to a reasonable level with the loophole now closed, which matters more than the incomplete set of individual prosecutions. As the New York Times noted, one skin substitute manufacturer with over $1B in Medicare revenue escaped prosecution, while also donating $5M to a Trump PAC in February 2025.

2. JAMA publishes COVID shot study suppressed by CDC.

On Tuesday, JAMA Network Open, a monthly open-access medical journal, published a study on the effectiveness of the 2025-2026 COVID vaccines, which found that adults who received the vaccine were roughly 50 percent less likely to need urgent care visits or hospitalizations.
The Centers for Disease Control and Prevention (CDC) was scheduled to release the study in March, only for acting CDC Director Jay Bhattacharya, MD, to quash it over concerns that the observational study’s “test-negative” methodology, which analyzed the vaccination status of people who sought care for COVID-like symptoms, undermines "the validity of the study’s conclusion.”

TrustWorks Take: Dr. Bhattacharya’s decision to cancel the publication of this study was widely seen as an ideological objection to the COVID vaccine rather than a good-faith scientific disagreement, as he claimed in his op-ed. That the study ultimately met the publishing standards of JAMA lends further credence to this view. One of this administration’s favorite moves is to use the veneer of promoting scientific debate as cover for the suppression of ideas it opposes.

The main reason we measure the efficacy of approved vaccines with observational studies, rather than the “gold-standard” randomized controlled trial (RCT) that Health Secretary Robert F. Kennedy Jr. has lobbied for, is because observational studies are far cheaper to run than RCTs. More importantly, medical ethicists believe it is unethical to administer placebos to people who think they are getting an approved vaccine. The study’s “test-negative” methodology is imperfect and subject to confounding, as Dr. Bhattacharya claims, but to deny its publication altogether is holding COVID vaccine research to an unreasonably high bar.

3. Utilization driving NHE to hit $9T by 2034.

National health expenditures (NHE) reached $5.7T this year, following three consecutive years of growth over seven percent, according to actuarial analysis from the Centers for Medicare and Medicaid Services published in Health Affairs this week.
The authors found that increased utilization is adding more to NHE growth than price inflation, although both will contribute to NHE growing faster than GDP, reaching $9T and 20.6 percent of the economy by 2034.

TrustWorks Take: Healthcare continues its steady march toward comprising one fifth of the US economy. Demographic change, namely Baby Boomers aging into their highest-cost years, is the most powerful and unavoidable force driving utilization changes and NHE growth. The authors note that, “With the oldest baby boomers now reaching their eighties, the share of national health expenditures attributable to home health services is expected to rise,” but also that “many of those who require more care as they age are increasingly substituting home health care for nursing home and hospital care.” Our facility-based aging system is woefully underprepared for the oncoming “silver tsunami,” and, following COVID, fewer people than ever want to live in or work at nursing homes. Whether provider organizations can pivot to deliver sustainably the home-based services seniors demand will be one of the defining questions of the next decade.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

Employers Searching for Answers to Cost Growth
As strong as NHE growth has been, employers’ healthcare expenses have been growing even faster. Employers’ group health plan costs are expected to jump 9 percent in 2027, the largest annual increase since 2011. In the last 20 years, employer healthcare costs have increased by over 400 percent, or over 2.5 times the rate of inflation. The proliferation of GLP-1s and specialty drugs, a surge in behavioral health utilization, and providers’ use of AI tools to capture more charges are cited among the key drivers of cost growth.

Employers are struggling to find deflationary levers to pull. They can increase employee premiums, as two thirds of large employers are doing, or they can reduce benefit generosity by cutting network size, restricting GLP-1 utilization, and raising employee cost-sharing levels. However, none of these moves change the economics of employer-sponsored care more than incrementally. The most intriguing innovation: the 31 percent of employers experimenting with non-traditional plan designs, like employer-provider partnerships and high-performance networks. Because employers are some of the most-powerful and least-satisfied forces in healthcare, it feels inevitable that eventually (one of these years or decades) the dam will break, and we shift to a new payment model.

Dialing In

Sharing insights from our work with clients

The Knock-On Effects of Upcoding by AI Scribes
AI’s tendency to maximize billing intensity is a potential headache for not only the insurers and employers paying the bills. A health system CMO recently told us that her system’s initial rollout of AI scribes has been a hit with their physicians, with one important caveat: they “make a diagnostic mountain out of a mole hill” too often for her liking. A routine check-up gets coded as a complex visit just because the physician gets to have a fuller conversation with their patient. “No one minds the extra RVUs, but we have to make sure the charges are accurate, so whose job is that going to be?” She told me that the system is already planning a meeting around this issue.

The promise of AI scribes is to reduce both administrative work for physicians and costs for systems. If providers feel compelled to spend time reviewing the accuracy of their AI-generated notes, or if systems have to staff medical coders to review charges before submitting to payers, the utility of AI scribes is undermined, if not negated. Payers, knowing that virtual scribes are inflating providers’ billing intensity, are deploying their own AI tools to manage utilization in response, or else planning to seek across-the-board rate cuts to compensate for what they see as upcoding. Providers need to be mindful that the accuracy of AI scribes is an important strategic consideration, and that blindly maximizing short-term revenue could come back to bite them.

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Million-Dollar Bandages