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The Administrative Drivers Behind Modern Healthcare Delivery: Medicare

The first 100 days of the current administration have brought a series of executive orders with a large focus on reforming the Affordable Care Act (“ACA”) and Centers for Medicare and Medicaid Services (“CMS”), expanding healthcare competition and reducing regulatory intervention. With the administration’s promised intent of reducing the role of the federal government in healthcare delivery, today’s systems must prepare for a shift in reimbursement structures and competition. Creative strategic and budgeting adjustments are likely necessary to navigate changes and scale operations efficiently in order to remain competitive in the market while maintaining adherence to healthcare access and patient safety. This article focuses on proposed changes to Medicare and how they may affect private and public health systems at large.

Medicare Part C: A Transition to Privatized Healthcare

In recent years, there was a push toward deregulation. In the current administration, this trend has continued with further efforts to reduce regulatory oversight. Medicare Advantage (Part C) will likely be a key focus under the administration, as the CMS administrator, Dr. Mehmet Oz, has previously advocated for expansion of Medicare Advantage (“MA”) and the replacement of traditional Medicare with private MA plans, with reduced regulatory oversight.¹ In the coming days, MA may become the primary option for new Medicare beneficiaries allowed under the “seamless continuation of coverage” clause.² Changes under the clause will have a range of potential impacts, including:

Reduced access to specialty care and specialized providers, leading to changes in service line demand and reduced specialty care usage. Traditional Medicare offers broad access to any providers accepting Medicare, while MA plans have a limited provider network confined to a specified service area.³ Thus, patients under MA may face restricted access to specialty care, depending on their provider network, with the most affected specialty being gynecology across the board.⁴ Additionally, MA plan requirements for prior authorization for services may further limit access, resulting in the provision of fewer services overall.⁵
Increased utilization of preventive and care coordination services as the MA capitated payment model incentivizes proactive health management to reduce costly interventions down the line. With a greater demand for preventive and care coordination services, health systems will need to place an even greater emphasis on value-based care (“VBC”) models and prepare to adjust delivery models to focus on preventative and care coordination services.
Reduced utilization of services from providers that do not employ Medicare Advantage networks.
Shift in observed payor mix in health systems, which may greatly impact operations and revenue cycle. Health systems need to prepare for more complex reimbursement processes by adapting to capitated payment models and complex risk-adjustment systems.

Medicare Part D: Cancellations and Delays of Proposed Policy

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Changes to prescription drug pricing could have significant implications for Medicare Part D. Although no direct action has been taken and uncertainty still surrounds federal efforts, the reversal of Executive Order 14897 (Lowering Prescription Drug Costs for Americans) of October 14, 2022, may signal potential changes to come.⁶ Although the reversal of the executive order did not directly alter existing laws, it poses challenges to efforts to reduce drug costs. For example, on March 12, 2025, CMS announced that it would not implement the Medicare High-Value Drug List Model, a model under development that proposed limiting Part D sponsors to a maximum $2 co-pay for specific high-value generic drugs.⁷ Furthermore, the reversal of the executive order impacts cost caps, such as the $35 monthly cap on insulin costs and a yearly $2,000 cap on out-of-pocket prescription drug costs in Medicare.⁸ Limiting cost caps could lead to effects including, but not limited to:

Affordability concerns and potential disruptions to treatment plans for beneficiaries.
Decreased prescription volume for health systems that run pharmacies on-site.
Altered prescription behaviors as providers are forced to rely more heavily on preventative care and alternative therapies.

An Uncertain Future for Telehealth

Impacts to telehealth coverage may also be seen as a result of actions taken by the administration. Currently the telehealth coverage bill, initially authorized during the COVID-19 pandemic, allows Medicare beneficiaries to receive telehealth services from any location.⁹ The coverage was set to expire March 31, 2025, but Congress passed a law extending coverage through September 30, 2025.¹⁰ After September 2025, to be eligible for most telehealth services, Medicare beneficiaries must be in an office or medical facility located in a rural area or be seeking assistance for one of the following: Monthly treatment of end-stage renal disease; diagnosis, evaluation or treatment of an acute stroke; or diagnosis, evaluation or treatment of a mental and/or behavioral health disorder.^{11, 12}

Another bill (H.R. 7623) has been reintroduced to extend the telehealth flexibilities permanently, but there is uncertainty surrounding whether or not it will pass.¹³ It was most recently referred to the Subcommittee on Health on December 17, 2024.¹⁴ If the bill does not pass, there are several anticipated consequences:

Reduced care access for many Americans, which will be particularly detrimental for those who have disabilities that affect their mobility to physically visit a provider.
Increased need for transportation services provided by healthcare entities.
Growing demand for critical-access hospitals, which must strategically prepare to meet care needs.
Rising costs for patients who must seek more costly in-person care rather than relying on telehealth services.
Increased need to employ in-person providers rather than relying on contracted locum tenens telehealth providers.

Where Do We Go Now?

With the aforementioned changes in Medicare on the horizon, it is crucial for hospitals, physicians, insurance companies and other providers to ensure compliant quality of care is maintained while surviving in a competitive market. Healthcare leaders must be agile, stay abreast of pending legislative decisions, and take the initiative to plan strategically, while educating providers and patients.

Footnotes:

1: Forbes, Steve, “Medicare Advantage for All Can Save Our Healthcare System,” Forbes (June 11, 2020).

2: Finkelstein, Adam. “How the Trump Administration May Change Medicare Advantage,” Manatt (March 5, 2025).

3: “Compare Original Medicare & Medicare Advantage,” Medicare (n.d.).

4: Feyman, Yevgeniy. Figueroa, Jose. Garrido, Melissa. Jacobson, Gretchen. Adelberg, Michael. Frakt, Austin, “Restrictiveness of Medicare Advantage provider networks across physician specialties,” PubMed (August 2024).

5: Ibid.

6:“Initial Rescissions of Harmful Executive Orders and Actions,” White House (January 20, 2025).

7: “Medicare Two Dollar Drug List Model,” Centers for Medicare & Medicaid Services (n.d.).

8: “Inflation Reduction Act and Medicare,” Centers for Medicare & Medicaid Services (n.d.).

9: “Law Averting Government Shutdown Extends Medicare Telehealth Coverage until Sept. 30,” AARP, (March 15, 2025).

10: Ibid.

11: “Telehealth,” Medicare, (n.d.).

12: Ibid.

13: “H.R.7623 – Telehealth Modernization Act of 2024,” Congress, (n.d.).

14: Ibid.