Top political issues in risk and VBC

Time to separate the settled from the volatile issues in risk/VBC politics today

With so much policy upheaval these days, it can be easy to lose sight of important changes happening in any given healthcare policy domain. Today, I want to zero in on the realm of risk/VBC and walk through three categories of policy issues:

• 'No problem here': The factors making risk/VBC as a payment mechanism a settled policy, a stable market feature, and a form of payment that is likely to carry on in mostly a business-as-usual way, no matter who is in the White House.

• The politically volatile issues: Some important moving pieces in risk/VBC that different administrations have viewed very differently—making them highly vulnerable to a pendulum swing under Trump 47.

• Powder kegs affecting VBC and far beyond: Some examples of healthcare policy issues that are currently on the table with potential destabilizing effects on all of healthcare economics.

Point of clarification: When I say “risk/VBC” today, I’m including both population risk (insurers/providers being paid for achieving outcomes at the population level) as well as episodic risk (AKA specialty bundles). But not pay-for-performance models, because those are even more ‘settled policy’ (at the moment).

As a payment mechanism, risk/VBC is a permanent feature of the landscape

No matter how much chaos unfolds around us in the policy realm, risk/VBC as a payment model isn’t going anywhere. And not just because the Medicare Shared Savings Program (MSSP) was established by law through the Affordable Care Act. In healthcare today, all relevant stakeholders agree that rewarding providers solely for delivering more services leads to waste; and that it's a worthy and legitimate policy aim to encourage providers to demonstrate cost management and quality performance to earn incentives or avoid penalties. At this point, both ACOs and bundled payments have racked up a lot of lessons learned and measurable savings.

Anyone out there associating risk/VBC with Democrats? Just in case...

We had a bit of a debate among our team as to whether conventional wisdom in the industry would agree with the statement "Risk/VBC is a generically Democratic idea that a generic Republican administration may try to sweep away".

Just in case the answer in your case is "yes, that is what I am thinking!", we think that's no longer a reflection of healthcare politics in 2025. True, rolling the tape back, HMO-style capitation became closely associated with the Clinton administration in the 1990s because of that presidency's failed attempt to pass universal healthcare built around that model. And of course, the Obama administration was for a time almost-literally synonymous with risk/VBC, AKA "Obamacare", because of the 2010 ACA which launched MSSP, CMMI, and so forth.

However, the Trump 45 administration made no attempt to dismantle risk/VBC as a core payment model within original Medicare. In fact, CMS under Seema Verma accelerated the push of provider ACOs toward more significant downside risk. And while extrapolating from the Trump 45 administration to predict the actions of the Trump 47 administration is somewhat dicey at this point, we see no signs of the current administration working to abolish risk/VBC—again, as a payment model. There are plenty of partisan differences in the how of risk/VBC programs, which I'm about to get into.

Remember, risk/VBC was originally an employer/private-insurer idea

No matter what is happening in the political realm at any given moment, it's worth remembering that private insurers and industry came up with risk/VBC 1.0 (capitation and HMOs), and over time, private interests have continued to opt into and iterate on the model. Private industry experimentation—for instance BCBS of MA's Alternative Quality Model back in the mid 2000s—played a huge role in developing the the elements of risk/VBC 2.0, the version that we are most familiar with today:

• A basic chassis of FFS: Providers paid based on a per-unit basis for services rendered, with a certain percentage of payment at risk (not commonly 100%-though there is a 100% risk track in ACO REACH).

• Efficiency-based incentives: Bonuses or penalties tied to total spend, or proxies such as cutting down on avoidable hospitalizations for chronic conditions).

• Severity adjustment with ongoing regulatory efforts to keep coding intensity in check, reduce variation, and prevent overpayments.

• A quality performance gate that providers must pass to unlock any efficiency incentives—to keep providers/insurers from exclusively focusing on cost.

This form of risk/VBC is now regarded as both a government and a market-based solution to healthcare quality/cost issues. It is an entrenched part of providers’ overall payment portfolio. Exhibit A: While Medicare Advantage (MA) is not synonymous with two-sided risk—it, not original Medicare, is now the pace car in terms of uptake of this type of payment.  Bottom line: The more risk/VBC is adopted by private industry (in general, or in any specific form), the less vulnerable it is to federal policy swings.

On the flip side: Plenty of elements of VBC are subject to an active partisan tug-of-war

Alright, time to cut to the controversy. Recent Republican and Democratic administrations have felt drastically different about many important elements of risk/VBC.

From Obama to Trump 45 to Biden and now Trump 47, here are the partisan elements within risk/VBC programs that we see being tugged back and forth, with different administrations adding, subtracting, and potentially adding back in again depending on their leaders' beliefs about the goals of healthcare policy in general. 

These are clearly pieces of risk/VBC world that are directly at risk of a major shift in the months and years ahead under Trump 47..

Flashpoint #1: Health Equity

Democratic administrations have elevated social determinants of health (SDoH) in risk/VBC programs, and made the finding and closing of demographic-linked disparities in healthcare outcome an important aspect of measuring and improving healthcare quality. It’s so thoroughly baked into the (Biden era) ‘ACO REACH” program, it's in the name: REACH stands for Realizing Equity, Access, and Community Health. 

Obviously, the Trump 47 administration vehemently disagrees with the idea that health equity belongs in the goal set of federally funded healthcare programs.  

We haven't seen any specific alterations to ACO REACH so far—maybe because ACO REACH is scheduled to end in 2026, and the Trump healthcare regime may be focusing on designing whatever the successor program may be.

However, the Trump 47 administration's general actions in related areas are also throwing fundamental goals and activities of ACO REACH into question, and are clearly changing the risk/VBC policy framework for any future programs coming out while Trump 47 is in power.

For example:

• Executive Order 14151 terminating federal DEI and equity programs

• Executive Order 14168 rescinding gender identity policies and protections

• The disbanding of CMS Health Equity Advisory Committee and other equity-focused advisory bodies

This is a major shift, and risk/VBC stakeholders, including insurers, provider organizations, and technology and service vendors specializing in disparity-related analytics or mitigation work, are all trying to figure out what to do next. Implication-wise, a lot more that can be said here. But suffice it for now to state that over time, we are likely to see major data gaps around disparities, setbacks to efforts to address inequities, and increased market fragmentation as some states, providers, and payers maintain equity-oriented goals, activities, and resourcing, while others do not.

Flashpoint #2: Provider governance

The governance structure issue in risk/VBC models centers on who holds decision-making power and accountability within organizations that take on financial risk for patient populations. The question is whether only provider organizations, versus private investors or other stakeholders, should have majority control over strategic direction, resource allocation, and oversight of ACOs or other risk-bearing organizations. Here, again, Democratic and Republican administrations are clearly on different pages.

Under the Trump 45 administration, the program originally known as the Direct Contracting (GPDC) model required only 25% of an ACO’s governing body to be provider-led, raising concerns about outside investor influence. Responding to these concerns, the Biden administration overhauled the model, turning it into ACO REACH. The provider governance threshold was raised to 75% and the program also mandated separate voting seats for both a beneficiary and a consumer advocate-mechanisms designed to ensure provider leadership and community accountability.

Again, no specific program change has been forthcoming yet under Trump 47, but the industry is now watching for signals of a possible return to more flexible or investor-friendly governance model, either within ACO REACH or, in whatever program (if any) takes its place after the scheduled program end in 2026.

...And then there are the volatile healthcare policy issues that will affect the healthcare economy broadly. Including and far beyond risk/VBC

Lifting up from the issues that pertain specifically to risk/VBC, I want to just quickly acknowledge that there are also a wealth of up-for-grabs healthcare policy issues that we are closely tracking because they will affect not just the risk/VBC world but also far beyond.

There's no room in blog world for a truly exhaustive list, so here are three major examples.

Healthcare economy change factor #1: GLP-1 coverage changes

Under the Biden administration, CMS proposed expanding Medicare and Medicaid coverage for GLP-1 anti-obesity medications. It was basically a bet that scaling up spending in the short term would achieve modeled-out long-term cost-avoidance savings in the long term. But the Trump 47 administration reversed course in April 2025, scrapping the Biden-era proposal and maintaining the longstanding statutory exclusion of weight-loss drugs from Medicare coverage. Administration officials and HHS leadership essentially said they didn't believe in the financial sustainability of such an expansion. (This despite evidence of behind-the-scenes disagreements about the pros/cons of covering GLP-1s among prominent Trump 47 leadership figures ,) . The move immediately impacted market expectations: pharma stocks with heavy GLP-1 exposure dipped on the news.

Strategically, the reversal raises major questions for healthcare industry economics in general. For payers and providers, the lack of federal coverage means continued high out-of-pocket costs for beneficiaries and persistent disparities in patient access. Economically, the decision reins in a potential surge in federal drug spending but does nothing to capture any long-term savings from improved chronic disease management. I.e., it's essentially a bet against a classic population health framework (invest more upfront for long-term payoff and savings).

The industry is now watching for price changes among GLP-1s, alternative pathways to coverage, as well the evolving picture on new clinical indications for GLP-1s that may change the situation again.

Healthcare economy change factor #2: Prior authorization AI deregulation

Under the Biden administration, CMS proposed and advanced new guardrails to try to constrain insurer use of AI, especially in MA, as a barrier to care. These proposals required that any denial or modification of care recommended by AI systems be subject to review by a licensed clinician, and that insurers demonstrate their algorithms did not introduce bias or inequity.

The Trump 47 administration has reversed this course, rescinding Biden’s executive order on AI oversight and issuing new directives that prioritize rapid AI innovation and minimal regulatory barriers. The administration’s January 2025 executive order explicitly removed federal requirements for human oversight in AI-driven prior authorization, emphasizing the need to foster U.S. leadership in AI and reduce what it called “unnecessarily burdensome” compliance costs.

Implication-wise, we see this deregulatory approach as accelerating the “AI arms race” among payers and providers' approaches to the revenue cycle, with both sides investing in increasingly sophisticated automation to manage claims and denials. It is also making for a more fragmented regulatory environment. States like California have enacted laws (SB 1120, the “Physicians Make Decisions Act”) that strictly limit or prohibit the use of AI as the sole basis for prior authorization denials, mandating physician review and algorithmic transparency. Implications: This patchwork of state and federal policies creates strategic uncertainty for national insurers and technology vendors, who must now navigate divergent standards, potential legal exposure, and operational complexity.

From a risk/VBC angle, this has particularly important implications for MA, where utilization spikes are destabilizing insurer MLRs, and plan efforts to dial up denials are prompting hospitals to reconsider their MA contracts (and/or to scale up the use of AI in their own revenue cycle infrastructure).

Healthcare economy change factor #3: Deep Medicaid cuts (proposed),

This is in third place on our list only because it's proposed at this point, and how politically feasible it is is a question mark. The biggest, most obvious change the Trump 47 administration is pushing to make to healthcare in general is its push to slash Medicaid funding.

During the Biden administration, Medicaid enrollment hit historic highs, driven largely by pandemic-era policies that paused disenrollment and temporarily increased federal funding. Post-Covid, states began the process of “unwinding” the continuous enrollment provision, leading to gradual declines. However, enrollment today remains above pre-pandemic levels.

Since taking office, the Trump 47 administration has endorsed a House budget blueprint proposing $880 billion in federal Medicaid cuts over the next decade, primarily through restricting state financing mechanisms and reducing federal contributions. Keep in mind, these cuts are currently only proposed, have not been enacted, and are highly debated at this time within Congress. 

But even the prospect of large-scale federal cuts creates significant strategic and economic uncertainty for healthcare providers, states, and the broader industry. If enacted, these cuts would have ripple effects across states, insurers, healthcare tech/service companies, and providers. In provider world especially, cuts this big could threatening the viability of some safety-net hospitals, nursing homes, and community health centers. 

Needless to say, reducing Medicaid funding would also have significant implications for the risk/VBC ecosystem—for instance, raising eligibility requirements would instantly alter conditions in ACO risk pools. But that's just one piece of the puzzle. This development would affect practically every part of the healthcare ecosystem.

What about the broader public health environment under MAHA?

One elephant-sized issue we are leaving out in today's discussion: The effect on risk/VBC (or healthcare in general) of a broad range of other changes under the Trump 47 HHS. Topic for another day--especially because the link between the general public health environment and even just risk/VBC is nuanced, to say the least.

Stay tuned for more policy focus from Union

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