A Healthcare Excellence Agenda for the New Administration

In 2023 the United States federal government spent about $1.5T on healthcare. It is the single biggest component of the federal budget: double the $817B allocated to defense, sixty times NASA’s $26B budget, and about 100-fold more than the $16B spent on securing our borders.

Our healthcare system is not making us healthy

For $800B a year, America boasts the strongest military force on planet Earth. How much health does $1.5T buy us? One answer is “not enough”. Despite astronomical spending, by a number of measures America is actually getting sicker every year:

• Obesity: Chronic disease like obesity in American adults has gone from 13.5% in 1980 to over 40% today.
• Maternal mortality: Vastly more American mothers are dying in childbirth today than in the Reagan era, despite advances in medical technology and investment in modern hospital facilities.
• Drug overdoses: Drug overdose deaths have grown by more than tenfold since 1980. And in just the last decade, the rate of alcohol use deaths is up 70%.
• Cancer in young adults: The incidence of cancer in young Americans has alarmingly climbed by 35% since the mid 1980s.
• Life expectancy: Life expectancy has barely improved over a forty year period.

Now pick five friends at random and give them each a call. Ask each of them if they have had a bad experience with our healthcare system: a confusing bill, a primary care visit cut short by a busy doctor, or a situation where they have had to repeat, for the thirty-fourth time, their detailed medical history. You don’t need to make the calls, you say? You know the answers already?

Doctors don’t have it much better. Physicians leave medical school holding $265k in debt before beginning years of earning less than minimum wage during residency. Endless documentation and compliance requirements drive many healthcare professionals to burnout.

Our healthcare system is not affordable

You can probably guess that healthcare entitlements have been on the uptick, but you may not have guessed that they have been compounding at a blistering 8.5% annually for decades. This inexorable march upward is predicted to continue. Spending will reach $4.7T in 2044 as our country continues to age.

Because 8.5% growth is much faster than the 2-3% growth of the economy and tax receipts, every year healthcare becomes a bigger component of the federal budget. It’s now rapidly approaching 30%.

In 2023 the United States ran a $1.7T budget deficit. If we don’t touch healthcare and Social Security, this means finding $1.7T in savings from the $3.3T that remains. Are we going to cut defense, infrastructure, and support for veterans by half? If trends continue, by 2035 we would have to slash those areas by something like 60% to break even.

How much healthcare spending is too much? It’s a good question, but not one we can answer precisely. We can say that the current trajectory of healthcare entitlements will make it next to impossible to balance the budget. Another framing is that we’d have vastly more funding for space, science, and infrastructure if we got healthcare under control.

Make America healthy again, inclusive of fiscal health

If we are currently on a path of increasing sickness and spending, the new administration has set forward healthcare priorities that will require us to chart a different course:

• Maintain Our Promises to Society: President Trump has committed to maintaining and strengthening healthcare benefits for seniors, keeping the promise to society put forward in the Social Security Amendments of 1965 that established Medicare.
• Tame Spending and Inflation: President Trump has also committed to reining in federal spending and reducing inflation. Ballooning healthcare costs will make this goal extraordinarily challenging if not impossible if current trends continue.
• Make America Healthy Again: HHS secretary nominee Robert F. Kennedy Jr. has made the inspiring call to Make America Healthy Again. America is the wealthiest and most innovative country on the planet – why should we not be the healthiest country too?

These are ambitious goals. How do we possibly get healthier and spend less money doing it?

Single payer solutions and government control favored by the left are no solutions at all. Moving to a monopsonist system like Canada is a recipe for strangling innovation and rationing access. Just ask our neighbors to the north who have to wait a year for orthopedic surgery. The UK’s National Health Service (NHS) is teetering on the brink of collapse. We need to sort out some other way forward.

Other parts of the economy provide inspiration for what may actually work. In the realm of information technology, for example, fifty years has taken us from expensive four operation calculators to ubiquitous, free, artificial intelligence capable of passing the Turing Test. We can argue about the precise details but most of this miracle came from profit-seeking enterprises competing in a free market to deliver the best value for the buyer’s dollar.

We at 8VC believe that we can be healthier, happier, and more fiscally responsible if we take the same approach to healthcare. The only viable way to cut our Gordian knot is to harness American creativity and entrepreneurship to make healthcare vastly more productive.

A healthcare excellence agenda for the new administration

Current regulations fail to create the right incentives, block entrepreneurship, and thwart our imperative to do more with less in American healthcare. According to HHS Deputy Secretary nominee Jim O’Neill:

The new administration can enact reforms that will allow productivity-enhancing innovation in healthcare to be rewarded. In doing so we will unblock Americans from solving one of the most important problems our country faces. Tactically, we see opportunities in the following areas:

1. Reform healthcare payments - pay for value (i.e. health outcomes), not volume of work;

2. Eliminate barriers to market entry - open the door to new market entrants who will compete to produce the strongest health outcomes at the lowest cost;

3. Liberate healthcare data - allow all patients and healthcare providers to benefit from seamless sharing of health records;

4. Accelerate scientific inquiry - speed up research that will yield valuable new technologies and care models;

5. Address fraud and abuse - clean up areas where bad actors siphon off federal funds for personal benefit.

1. Reform healthcare payments

The government maintains a list of tens of thousands of codes that describe all of the services that healthcare providers can offer along with prices that will be paid for those services. But innovations like AI that can perform diabetic retinopathy screenings may not have an assigned code and it may not be clear how newcomers can obtain one. 

Another problem is that codes are aligned with a unit of work performed but not with the outcomes we seek: cured disease and healthier patients. It’s like if we paid contractors for every twist of a screwdriver or swing of the hammer but didn’t check if they built a house or a pile of rubble. We pay for the volume of work instead of value.

Payment reform is one of the biggest levers we have for incentivizing American innovators to solve the important problem of making more Americans healthier with less spending. 

1.A. Reduce the conflicted role of the AMA in determining payments [CMS]

One problem with service codes is that they are largely defined by the physicians’ advocacy group - The American Medical Association (AMA). The AMA also sets the prices that government will pay for those services. This is an obvious conflict of interest: should we ask the radiologists if and how much we should pay for AI radiology? And adding insult to injury, the AMA charges CMS annual licensing fee that could exceed $100M for the use of these service codes.

We support HHS secretary nominee RFK Jr.’s proposal to reduce the role of the AMA in determining what CMS pays for and the prices it will pay. Physicians should be stakeholders in determining what medical services can be paid and what a reasonable price should be. But making the AMA arbiter of codes and prices does not make sense, and paying handsomely for the privilege does not either.

1.B. Create a pathway for healthcare AI evaluation and reimbursement [FDA, CMS]

Autonomous AI is or soon will be capable of offering many of the same services as medical professionals: e.g. interpreting imaging and pathology studies, delivering therapy, offering second opinions, and routine medication management. These technologies have the potential to radically expand access to care for Medicare and especially Medicaid beneficiaries. But what review processes will the FDA require? And what reimbursement will be available from CMS? The opaque regulatory risk and unknown rewards make it challenging for investors to fund healthcare AI.

The FDA should expand the TAP program to facilitate the development of healthcare AI as a top national priority. Approval requirements should focus on showing similar performance and safety to human clinicians. CMS should coordinate with FDA to establish clear reimbursement codes and rates that are accessible immediately upon FDA approval which can be refined as real world evidence demonstrates value to taxpayers and beneficiaries. The Transitional Coverage for Emerging Technologies (TCET) could possibly be expanded to serve these purposes, or CMS could publish rates for particular AI capabilities as “bounties” for entrepreneurs. 

More important than the specific means is a clear, coordinated solution sitting across FDA and CMS that accelerates the development of high value healthcare AI.

1.C. Expand Direct Primary Care payment models [CMS]

CMS supports a number of programs that pay primary care providers not using service codes but a fixed monthly capitated fee – much like a subscription – that covers a bundle of services such as routine and preventative care, referrals, coordination, medication refills, and more for empaneled patients. This payment mechanism is often called Direct Primary Care (DPC). Certain payment models deployed by the CMS Innovation Center (CMMI) include additional rewards to primary care providers for hitting specific quality measures or reducing hospitalizations for empaneled patients.

By stepping outside the constraints of fee-for-service reimbursement, DPC models provide flexibility for healthcare innovation and rewards for improving the quality of care and reducing costs. CMS should continue to develop DPC models that are good for patients, providers, and healthcare spending, and promote participation in models that demonstrably yield the strongest results. CMS should give particular attention to low-income Medicaid populations where the need for stronger primary care access is acute.

1.D. Implement site-neutral payments [CMS]

Our current payment policies often allow health systems to charge vastly higher rates than independent provider practices for delivering virtually the exact same services. Common examples include imaging studies, infusions and chemotherapy, and a number of surgical procedures. One consequence is a strong incentive for consolidation since health systems can acquire independent locations and immediately start generating more revenue for effectively the same work. Increased costs are borne both by CMS and the patients who are stuck with much higher medical bills.

CMS should pursue a policy of site-neutral payments, introduced gradually over a period of several years. Services should be reimbursed as close to equally as possible across hospital outpatient departments (HOPD), ambulatory surgical centers (ASC), and outpatient clinics – the value of a cure should be rewarded, not the labor and capital equipment costs that went into the service.

2. Eliminate barriers to market entry

Healthcare is unfriendly to outsiders. On the one hand we should be proud that many former officials in the Obama and Trump administrations have built successful healthcare businesses. On the other hand, it’s a little concerning that only the people who wrote the rules seem to understand them well enough to play the game.

More generally, if we want to see healthcare innovation we need to find ways not to not close the door for newcomers and new businesses, but to fling the doors wide open.

2.A. Build bridges to the entrepreneur economy [CMS]

Find a friend who has no exposure to healthcare and ask them to read about ACO REACH and explain how it works. How well did that go? Healthcare is inherently complex, but if we want to see entrepreneurship that benefits the country, CMS needs to explain itself to outsiders better so that the best technologists can get involved.

One idea would be to issue grand challenges around new CMS Innovation Center payment models, AI capabilities we would like to see developed, or administrative problems CMS would like to see the private sector tackle. Putting things in plain English will pull more talent into the fold and spending time proactively educating the startup community is a great way to enlist its help. It should become common for CMS or HHS officials to give talks at YCombinator and expand the number of companies building in healthcare.

2.B. Create a provider credentialing clearinghouse [CMS]

Every fast-growing healthcare company has experienced the pain of provider credentialing. The credentialing process requires weeks of repetitive data entry to check over medical licenses in each state and ensure providers are in good standing. In many cases, beyond the administrative burden, companies are burning cash on salaries for providers that cannot generate revenue until these hurdles have been cleared.

Providers must be credentialed in order to bill Medicare for services. A huge proportion of clinicians in the country bill Medicare. Why should we reduplicate work? CMS should create and maintain a national credentialing clearinghouse for all participating providers. When those providers change jobs, a green light from the CMS credentialing clearinghouse should suffice for new employers. Such a change would uniformly improve the capital efficiency of any healthcare organization.

2.C. Oppose AI assurance labs [CMS, ASTP/ONC, FDA]

ASTP/ONC under former President Biden has sought to regulate healthcare AI market entry through the creation of AI assurance labs that would “evaluate models for use in healthcare using consensus-driven standards and best practices”. Who wouldn’t want healthcare AI to be safe? Consensus-driven standards and best practices sound great!

Setting aside the question of ASTP’s very questionable statutory authority in this area, conflict with FDA’s existing authority, and the challenge of introducing innovative technologies without adding even more red tape, these standards are being developed by obviously-conflicted tech giants Microsoft and Google. We agree with Rep. Mariannette Miller-Meeks: “It does not pass the smell test," and shows "clear signs of attempt at regulatory capture." 

The same cronyism that created near monopolies in the EHR market cannot be allowed to thwart market entry in healthcare AI, and AI assurance labs cannot be allowed to rob patients of benefit to enrich an elite, connected few.

3. Liberate healthcare data

The 21st Century Cures Act was passed in 2016 with numerous provisions promoting the sharing of healthcare data. The ONC Cures Act Final Rule and CMS Interoperability and Patient Access Final Rule implemented interoperability standards in 2020. And yet: in the year 2025 patients are still unable to easily access their own claims and records and share them from doctor to doctor. Accusations of abuses abound, such as Particle Health’s information blocking suit against Epic, and the hundreds of information blocking complaints submitted to the Assistant Secretary for Technology Policy (ASTP) annually. Where there is smoke there is often fire. 

Policy changes could help drive compliance with existing rules. Additional steps focused on the Trusted Exchange Framework and Common Agreement (TEFCA) could make data sharing even more convenient. 

The benefits of healthcare data liquidity would accrue to virtually everyone in the healthcare ecosystem. Patients could see their full medical histories on demand, records could travel with patients from provider to provider, and no longer would anyone have to fill out another patient intake questionnaire in the waiting room of a doctor’s office.

3.A. Proactively enforce data blocking restrictions [ASTP/ONC]

In spite of the clear regulations put forward from CMS and ONC in 2020, information blocking remains a problem. A complaint-driven enforcement mechanism isn’t working and ASTP should take proactive steps to ensure APIs are functioning as intended.

One approach would be to incorporate testing of production deployments of Certified EHR Technology into Medicare’s Promoting Interoperability Program instead of using notional data and simplified software deployments that don’t reflect real world conditions. Another idea would be to test API implementation with a standardized application deployment: green light if data elements can be populated, and significant fines due when information is blocked. In practice, multiple strategies could work and any stronger enforcement action will help improve over the status quo.

3.B. Expand participation in TECFA to create a federated query engine for healthcare data [ASTP/ONC, CMS]

ASTP created TEFCA in order to facilitate data sharing between various provider, payer, and IT vendors across the healthcare ecosystem. More TEFCA participation can help ecosystem stakeholders get value from accessible data: it’s one thing to have working APIs but another to make those capabilities valuable to patients.

CMS should join TEFCA via an existing or new Qualified Health Information Network (QHIN) and incentivize TEFCA participation for all providers who accept Medicare and Medicaid through the Promoting Interoperability Program. Medicare Advantage (MA) plans and Medicaid Managed Care Organizations (MCOs) should also be incentivized to join. The resulting network would create a federated query engine for all healthcare data relevant to Americans receiving coverage through CMS programs. 

Among other benefits: physicians could rapidly pull patient records from wherever patients receive care, and care coordinators at health plans would have a near real-time picture of the services that any patient is receiving across settings. The result could be vastly less frustration for patients tired of endlessly entering and re-entering medical history or toting around USB drives with imaging studies from doctor to doctor.

3.C. Empower participants to make use of the TEFCA network [ASTP/ONC, CMS]

TEFCA participants are required to respond to queries as they pertain to treatment and individual patient requests. However, the current TEFCA Common Agreement does not require responses in other situations where it would be valuable for patients or where it may be possible to streamline various administrative tasks: e.g. quality reporting and fraud auditing.

ASTP should modify the TEFCA Common Agreement to make care coordination, quality reporting, HEDIS reporting, and healthcare operations required response Exchange Purposes (XPs). This would allow CMS, provider organizations, and patients alike to get more value out of the TEFCA network.

4. Accelerate scientific inquiry

Biomedical research is the foundation for new medicines, devices, AI capabilities, and care models that grow our economy and cure disease. Yet grant making mechanisms favor certain ideas to the exclusion of others. And in many instances we burden scientists, clinicians, and technologists with more red tape than we need to. We believe that unblocking research can help us get useful innovations to patients sooner.

4.A. Reduce indirect fees to fund science, not administrative bloat [NIH]

When an investigator at Stanford receives a grant from the NIH, 54% of those hard-won dollars are taken off the top by the university for facilities and administration. Most prominent academic institutions are no different. 

Some of these “indirect costs” are necessary to pay for laboratory and medical center facilities, but much of it feeds a bloated bureaucracy. Enforcing a lower limit would make vastly more federal money available for basic science and clinical research.

4.B. End IRB tyranny that slows clinical research [NIH, FDA]

Institutional Review Boards (IRBs) are required by NIH and FDA for all research involving human subjects to protect the welfare and rights of trial participants. But a lack of standardization and accountability mean IRBs often slow down clinical research and hamstring scientists with arbitrary concerns and slow-moving review processes. Some estimate that IRBs might save a tiny number of people each decade, while killing 10,000 to 100,000 more, all for a cost of $1.6 billion.

Reducing the heterogeneity of IRBs from institution to institution and enforcing a standard of timely adjudication can yield a system with fewer unnecessary delays and headaches, that is friendlier to science.

4.C. Create a competition of processes for grant making [NIH, ARPA-H, HHS]

NIH grant review processes include peer review and oversight from the relevant institute’s advisory boards.. Because the leading scientists in a field hold so much sway, there is inherent bias against ideas that challenge established theories. Ambitious heterodox thinkers and risk takers have a much harder time supporting their work than those who pursue safe, incremental programs of research.

We believe that a bigger range of review processes that compete to back breakthrough research will pay a bigger knowledge dividend for every dollar spent. We are inspired by models as diverse as the Arc Institute, Damon Runyon Cancer Institute, and Fast Grants.

4.D. Support industry and academia equally at ARPA-H [ARPA-H]

We were excited to see the creation of the Advanced Research Projects Agency for Health (ARPA-H) as one such alternative to the NIH for funding breakthrough science. But unfortunately we are hearing anecdotal evidence that grant makers are falling into some of the same pitfalls attributed to NIH: bias for investigators at safer, established academic institutions and suspicion of industry sponsors.

A healthy research ecosystem has a role for both academics and research conducted in the private sector. It is in our best interests as a country to consider for-profit businesses that can access funding streams outside of grants and philanthropy on equal footing with non-profits.

5. Address fraud and abuse

Whenever the government is spending vast sums of money it is difficult to avoid bad actors who violate either the spirit or the letter of the law for personal gain. We believe there are a number of ways to tighten loopholes, harness technology to enforce rules, and reduce tens of billions of dollars’ worth of leakage from CMS programs while simultaneously protecting Americans from frustration and confusion.

5.A. Modernize payments fraud capabilities [CMS]

Improper payments made by CMS to providers may exceed $100B each year. Not all of these improper payments are necessarily fraudulent, but it stands to reason that billions of dollars a year should rightfully be returned to taxpayers. Many cases slip through the cracks because only a small fraction of medical charts are audited by CMS to check for alignment with submitted claims.

CMS should pull a much larger fraction of medical charts related to submitted claims (perhaps using TEFCA participation as outlined earlier). Large Language Models (LLMs) are well-suited to analyzing this higher volume of auditable data and AI vendors like Palantir have successfully delivered high ROI fraud programs in other parts of government. Bold leadership would be required to withstand the inevitable blowback from providers, but strong and proactive enforcement of claims fraud could claw back billions of dollars a year.

5.B. Stop double payment for Veterans enrolled in Medicare Advantage [CMS, VA]

CMS paid $44B between 2018 and 2021 to Medicare Advantage plans for military veteran enrollees. Veterans are known to be a highly profitable population for Medicare Advantage because they seldom use their Medicare benefits but rather seek care at VA facilities. CMS effectively funds MA plans for veterans that don’t get used.

Some of this giveaway to MA plans should be reclaimed by CMS. One option would be to require VA encounter submission and reimbursement from the MA plan like most provider organizations. Another option would be to apply a downwards adjustment to the Risk Adjustment Factor (RAF) for Veterans to reduce premium payments on the basis of their lower utilization – among other possibilities. 

5.C. Sanction brokers who abuse seniors [CMS]

Deceptive marketing practices flourish in Medicare Advantage - a troubling and true statement, and also the title of a report from the US Senate Committee on Finance. It is not uncommon to hear anecdotes about seniors with low English proficiency who end up enrolled in products they did not understand, as well as situations where a broker says a favorite provider is in-network, but beneficiaries discover the opposite is true after enrollment.

Brokers must record all of their calls with clients and make them available to CMS on request for spot audits. Because only a random sample can be reviewed, there are bad actors that slip through the cracks. A strong improvement over the status quo (and savings opportunity) would be to do away with random call audits and simply scan all call transcripts with LLMs for compliance with the law.

5.D. Align state with federal incentives across Medicaid [CMS]

States have committed over $5B in contract value to Deloitte for Medicaid enrollment software that does not appear to work. Because of the 90% Medicaid Management Information Systems (MMIS) match, the federal government largely foots the bill for poor procurement decisions at the state level. This is a classic principal-agent problem: states pick vendors but CMS foots the bill. States may even be able to capture some of that federal spending directly through vendor tax revenues that flow back to state coffers.

Specifically in IT procurement and thematically across all Medicaid spending, CMS should take steps to maximize states’ skin in the game. A defined contribution block grant model is one such mechanism but other approaches could serve the same purpose.

Future directions

We have been excited to hear ideas from great minds across our network. The new administration has inspired many people to think about what could be possible and share their thoughts on health policy.

Some other ideas we have heard about and are excited to investigate further include:

• Harmonization of payment reforms across CMS and private payers to reduce complexity for providers and further spur investment in healthcare service innovation;
• Potential fraudulent activity in claiming means-tested Affordable Care Act (ACA) plan premium tax credits;
• Promotion of combined funding streams for Medicare-Medicaid dual eligibles in ways that yield better patient experience and save cost such as FIDE-SNP, MMP, PACE;
• Facilitating the study of promising new medicines for behavioral health conditions and neurological disease such as ibogaine, psilocybin, and MDMA;
• Exploring progressive drug approvals that get medicines to willing patients faster and harness post-market real world evidence to continually evaluate safety, efficacy, and refine reimbursement rates.

We are optimistic about healthcare in America

An American hospital in 2025 looks quite similar to a hospital from the year 2000 – the only difference is that the patients are a lot sicker, the doctors are burned out, and everything costs more. 

We can’t afford 25 more years that look like the last 25. But we should set our sights higher than mere survival: America should be the healthiest country on Earth by 2050. We can get there by embracing the AI revolution and harnessing the creativity of the American people from the bottom up.

Both patriotism and reasoned optimism are core values at 8VC. We are excited for the golden age to come. If you have policy ideas for the new administration, we would be eager to hear them.

Acknowledgements:

Dr. Michael Abramoff

Dr. Clive Fields 

Nikhil Krishnan

Joe Lonsdale

Adam Meier

Governor Rick Perry

Dan Petkevich

Nabeel Qureshi

Samir Unni

Dr. Ashwini Zenooz