Most Challenged Law, Challenged Again

• The Supreme Court heard oral arguments on Monday for Kennedy v. Braidwood Management, a case seeking to invalidate the preventive care mandate of the Affordable Care Act (ACA).
• The plaintiffs—Braidwood Management, Kelley Orthodontics, and six individuals—are arguing that the federal advisory panels recommending preventive-care coverage decisions lack constitutional authority.
• The 5th Circuit Court of Appeals issued a narrow ruling last year that rejected the constitutional authority of the US Preventive Services Task Force (USPSTF), while limiting the injunction so that only the plaintiffs did not have to comply with the law.
• The Trump administration has chosen to continue the Biden administration’s appeal of this decision, with the Supreme Court expected to rule on the matter this June.

TrustWorks Take: The ACA has been called “the most challenged statute in American history.” Despite this, the law still stands, weakened but mostly intact. The last time the Supreme Court ruled on the ACA, in their 2021 decision on California v. Texas, the justices rejected the plaintiffs’ request to strike down the entire law by dismissing the case on standing. Since then, conservative legal activists have shifted tactics to more targeted disputes, resulting in this effort to nullify the cost-free preventive care mandate. Those activists would not have anticipated that the Trump administration to be the ones defending the law, but Trump’s interest in a muscular executive seemingly outweighs his opposition to the ACA. Based on yesterday’s arguments, professional court watchers are expecting the Court to uphold the coverage mandate, but it has surprised us on ACA cases before. Following a recent pattern, the Court may settle on a narrower ruling, something that acknowledges a constitutional flaw in the appointment structure of the USPSTF but preserves in effect the preventive care mandate. 

2. UHG lowers earnings outlook after difficult Q1.

• In its Q1 2025 earnings report posted last Thursday, UnitedHealth Group (UHG) revealed that higher-than-expected medical costs in its Medicare Advantage (MA) plans and slower-than-expected earnings growth for its Optum Health provider arm resulted in an “unacceptable” Q1 performance.  
• UHG downgraded its adjusted full-year earnings outlook by about 12 percent, resulting in a 22 percent drop in company share price upon release of the earnings report, its largest single-day decline since 1999.
• The unexpected increase in utilization was isolated to MA among UHG’s coverage lines; meanwhile, Elevance Health is projecting it outperformed expectations for Q1 2025, having accurately predicted utilization levels.

TrustWorks Take: Most insurers have struggled with rising medical costs in recent quarters, especially in MA plans, prompting strategic pivots to raise premiums and focus on margins over growth. The real surprise here is that UHG missed on its predictions so severely, and that its choice to raise premiums had an unexpectedly large impact on its beneficiaries’ care utilization, as they tried to get their money’s worth. Focusing on investor expectations and reactions can obscure the reality that UHG continues to be highly profitable (its net margin improved slightly from Q4 2024), but MA is nonetheless becoming a less reliable engine of profitability and growth for payers. Although the Trump administration’s generous MA rate hike for 2026 will help assuage investor concerns, UHG still faces the difficult task of managing a growing population of sicker, older, more expensive seniors, who will seek care whether UHG wants them to or not. 

3. Trump issues grab-bag executive order targeting drug prices.

• President Trump issued a wide-ranging executive order last Tuesday instructing executive agencies to pursue various strategies to reduce drug prices, including by working with Congress.
• The executive order largely builds off initiatives from the first Trump administration, such as promoting drug importation and scrutinizing hospitals’ acquisition costs for 340B drugs, or else advocates for addressing popular concerns, such as pharmacy benefit reform and increasing drug access and innovation, without offering specifics.
• One notable provision in the executive order calls for Congress to amend the Inflation Reduction Act’s Medicare Drug Price Negotiation Program by “align[ing] the treatment of small molecule prescription drugs with that of biological products”—small molecule drugs, which tend to be simpler and more stable, are eligible for negotiations 9 years after approval, while biologics, which are more complex and degradable, are eligible after 13 years.

TrustWorks Take: It’s encouraging to see the administration turn its attention to matters that could, at least theoretically, benefit Americans’ access to healthcare, but the success of this order may be undermined by the ongoing gutting of the agencies responsible for its execution. The drug innovation pipeline, for example, is expected to be hampered by dismissals of Food & Drug Administration leadership and support staff, even though the drug review teams were largely spared. Concerningly, the proposal’s language to “align” small molecule drugs and biologics for Medicare negotiations also appears to be going in the wrong direction. Using the pharmaceutical industry’s term of “pill penalty” suggests that the administration wants to push small-molecule drug eligibility back, rather than moving up biologics’ eligibility. Had this alignment been written into the original law, 13 of the first 25 drugs selected for negotiations would have been ineligible. Delaying drugs’ eligibility windows would secure more profits for drugmakers and result in higher prices for Medicare and its beneficiaries.

The healthcare AI legislation we’ve seen from states so far has mostly fallen into two buckets: algorithmic discrimination protections, such as in Virginia’s vetoed bill, and AI disclosure requirements, as featured in laws recently passed by California, Colorado, and Utah. Disclosure regulations seem fairly anodyne, but a patchwork of state laws governing algorithmic discrimination could quickly get messy. These bills are well intentioned, and could even be well designed, but AI developers may opt to avoid doing business in highly regulated states rather than amending their models to achieve compliance.

Where this health system’s executives agreed was that they didn’t want this to be Virginia’s problem. States may be the laboratories of democracy, but an overly ambitious experiment in AI regulation could deprive them access to potentially game-changing innovations. Instead, a federal regulatory framework for AI could level the playing field by instituting a minimum standard of consumer protections for national developers to follow, while still leaving states’ room to regulate on the margins. For a technology as new and disruptive as AI, a deft touch of consistently applied guardrails will be essential to maximize its potential and assure providers that their investments will remain compatible with the law.

So why isn’t it getting more attention? First, the concept is complex and confusing, hence why budget baselines and scoring rules rarely make headlines. Second, acknowledging the real cost would force tough choices that elected officials prefer to avoid. Third, bigger political stories are dominating the news cycle. And fourth, while the tactic is misleading, it isn’t illegal. That gives lawmakers cover, even if it distorts fiscal reality.

In the short term, this gimmick may actually benefit providers and patients, as a full accounting of the extended tax cut would require even deeper cuts to social spending to achieve the reconciliation process’s nominal budget neutrality. However, by kicking the can down the road, Congress continues to balloon the deficit and set the stage for harsher austerity forced by an unmanageable national debt. This echoes problematic thinking we’re seeing across the healthcare sector—an unwillingness by many leaders to address the problems of today before they become the disasters of tomorrow. During times of crisis and change such as these, we should be laying the foundation for a better future, not sticking our heads in the sand.