ABIG Signal: Spending Races Ahead of Trust

TL;DR - Welcome to the ABIG Signal! UnitedHealth bet $3B on AI as Congress and HHS split over Medicare's WISeR pilot, the government squeezed hospital contracting and blue-state Medicaid while loosening the reins on wearables and trials, and ACA coverage slid, but capital kept flowing.

Spending Races Ahead of Trust

The money and the policy machinery around healthcare AI both picked up this month, while the question underneath all of it, whether anyone trusts the technology, stayed open. The loudest signal came from the largest payer. UnitedHealth said it will invest $3 billion in AI across 2026 and 2027, and executives claim a 2-to-1 return as the tools automate work like medical coding and prior authorization, with close to $1 billion in operating costs slated to come out this year. They were unusually direct that the spending is also about damage control, citing a Gallup finding that roughly 69% of people do not trust businesses to use AI responsibly. Insurance chief Tim Noel said trust has to be earned through actions. That is a hard sell for a company still in court over the naviHealth algorithm, which a federal inspector general linked to higher denial rates that were almost always reversed on appeal.

That trust gap is driving the fight on Capitol Hill. On June 22, 31 House Democrats pressed CMS Administrator Mehmet Oz for detailed data on WISeR, the pilot running AI-backed prior authorization in traditional Medicare across six states, asking for determination turnaround times, denial and dismissal rates, appeal counts, and how long physicians wait on peer-to-peer review. The letter landed two weeks after a House Appropriations Committee vote to block the program's funding in the 2027 HHS spending bill. The objection has held steady since launch: contractors are paid a share of the spending they avert, which critics read as a reward for denials. Rep. Suzan DelBene's framing, that Washington seniors should not be guinea pigs for the administration's AI experiment, set the tone.

While one corner of the government works to kill an AI program, the rest of HHS is trying to grow the technology in the clinic. On a June 25 webinar, the department walked through early takeaways from its AI request for information, reporting that its roughly 7,300 comments pointed to three consistent needs: coordination across HHS agencies, practical help putting AI tools to work safely, and better ways to evaluate which tools actually work. Deputy chief AI officer Arman Sharma tied the whole effort back to trust, calling it the only path to adoption that is both responsible and effective. The framing is telling, because the RFI exists in the first place since clinical uptake has lagged while the easy wins have landed in back-office work like documentation and revenue cycle.

The clinical frontier is moving, just cautiously. The FDA granted breakthrough device designation to two generative tools that draft radiology reports, Aidoc's First Read in June and Cognita's chest X-ray model in March, a sign that the agency now treats image-to-report generation as its own device category. Breakthrough status is not clearance, only a faster line to regulators while the rules get written, and both tools draft a preliminary read that a radiologist reviews and signs. The pressure behind them is real, with a Neiman Health Policy Institute study finding outpatient imaging turnaround times more than doubled between 2014 and 2023 as volume outran capacity. The vendors concede the catch. Aidoc's own announcement names automation bias as a known risk and notes that in a drafted report, the wording carries real clinical and legal consequences.

All of that automation is justified by a burden that keeps climbing. A JAMA study published June 22 found patient portal messages jumped 153% between 2020 and 2025, while office visits rose 17%, meaning the messaging is stacking on top of in-person care rather than replacing it. The NYU Langone authors point to generative AI triage and drafting as the relief valve, then flag that those tools still need validation and reimbursement matched to the clinician time they consume. That is the month in one line. The investment case is real and the documentation burden is real, but the tools keep arriving faster than the trust or the evidence needed to rely on them.

In case you missed it: States are leaning on AI to run safety-net programs as new work requirements take hold, with Florida budgeting an AI system to screen SNAP eligibility and New Hampshire using Google Gemini to process unemployment claims, though advocates warn a small data mismatch can wrongly cut off eligible people. And a rush of consumer data sharing drew fresh scrutiny after Whoop and Oura moved to pull users' medical records into their apps, where that data loses HIPAA protection the moment it leaves the doctor's office.

Squeeze and Release

The administration spent the month tightening its grip on healthcare costs in some places and easing it in others, sometimes in the same news cycle. The clearest squeeze came on hospital contracting. DOJ settled its antitrust case against OhioHealth, with the Columbus system agreeing to drop contract terms that forced insurers to carry all of its hospitals at the most-favored benefit level and barred them from steering patients toward cheaper rivals. OhioHealth admitted no wrongdoing and paid no penalty, but accepted a five-year monitor. Two days later, a White House Council of Economic Advisers report made the bigger play, estimating that a nationwide ban on those contracting practices could cut hospital and affiliated-physician prices by roughly 18% and save about $45 billion a year in employer premiums. Paired with a parallel suit against NewYork-Presbyterian, the timing suggests a template the administration intends to extend.

The squeeze on states tightened too, and it got loud. State Medicaid directors from Minnesota, California, New York, and Ohio testified before a House Energy and Commerce oversight subcommittee on June 25, after CMS withheld funding from blue states over fraud allegations. Republicans defended the crackdown as overdue protection of taxpayer dollars. Democrats called it cover for a campaign against blue states and a way to divert attention from GOP healthcare cuts, with ranking member Yvette Clarke arguing the administration decided to go after New York and then tried to manufacture the basis for it. The directors all conceded fraud exists and pointed to their own enforcement, including California's suspension of roughly 5,000 providers and more than $1 billion recovered over three years. The hearing extends the program-integrity fight that produced this spring's $46.6 million Minnesota autism-therapy takedown.

Now the release. While clamping down on costs, the administration loosened the regulatory reins where it wants speed. The FDA dropped its warning letter against wearable maker Whoop over the blood pressure feature it flagged last July, after Whoop modified the display and labeling, consistent with the agency's January guidance that exempts more wellness features from device oversight. Critics worry the new posture leaves validation to the market. The bigger loosening came on drug development, where HHS rolled out a clinical-trial overhaul branded Operation Trial Blazer to speed early-stage studies and pull them back from overseas. Acting FDA Commissioner Kyle Diamantas said the reforms, which include an expedited investigational-drug pilot and updated trial-design guidance, aim to cut phase 1 timelines by six to 12 months. The driver is competitive: China now runs more clinical trials than the United States.

Drug pricing produced the month's most awkward intraparty math. A bipartisan INSULIN Act gathered momentum, with the bill to cap insulin at $35 a month for private and employer plans, plus a 10-state pilot for the uninsured, drawing more than two dozen Senate cosponsors that backers say clear the 60-vote threshold. That puts Republicans in the position of weighing a price cap many of them stripped from the 2022 reconciliation bill, with Trump's affordability messaging and Sen. Susan Collins's 2026 race both pushing in favor.

In case you missed it: An FDA advisory panel voted 9-0 to back Moderna's mRNA flu vaccine for adults 50 and older, a turnaround after the agency refused to even review it in February under since-departed officials, though a final decision waits until August and the embattled CDC immunization panel could still complicate insurance coverage. And disability researchers are sounding alarms over stalled federal grants, with more than 90% of NIDILRR's $37 million in 2026 funding still unreleased months behind schedule as Kennedy's HHS restructuring slows grantmaking across the department.

Flush and Fraying

The headline number set the tone. U.S. health spending jumped 7.3% in 2025 to $5.7 trillion, the third straight year of growth above 7% and well ahead of the broader economy, according to CMS actuaries writing in Health Affairs. The increase came from utilization rather than prices, with high-cost drugs like GLP-1s and a rebound in hospital use pulling spending up as pandemic-delayed care returned. CMS expects the tab to reach nearly $9 trillion, or 20.6% of GDP, by 2034. The administration's main answer so far has been voluntary cost-cutting pledges from insurers and drugmakers, which critics call ineffective given the profit incentives pointing the other way.

Coverage is heading the opposite direction. ACA marketplace enrollment fell by nearly 3 million people, down to 19.2 million in February from a 22.1 million peak in 2025, after the enhanced premium subsidies expired on January 1. KFF put the resulting premium jump at 58% on average, from $113 to $178 a month, and expects enrollment to keep sliding toward roughly 17.5 million by year-end. The administration credits its fraud-prevention crackdown for most of the drop, while analysts point to the subsidy cliff as the obvious driver. Either way, insurers are left with a smaller and sicker risk pool, which feeds right back into those spending projections.

Now flip the screen. While the coverage math erodes, capital kept moving toward innovation. AbbVie agreed to buy Apogee Therapeutics for $10.9 billion, its largest deal since the $63 billion Allergan purchase completed in 2020, to get hold of zumilokibart, a long-acting eczema antibody heading into Phase 3 that could challenge Sanofi and Regeneron's Dupixent and Eli Lilly's Ebglyss with dosing as infrequent as twice a year. On the device side, Tissium secured up to $68 million to launch its FDA-authorized sutureless nerve-repair system in the U.S., the sort of single-product commercialization bet medtech investors keep funding even as the broader system tightens.

The same industry writing those checks spent the month clawing for margin elsewhere. Eli Lilly followed through on its 340B ultimatum, cutting off discounts to roughly 1,000 hospitals that refused to hand over claims data, a group Lilly says is led by the largest disproportionate-share systems. Lilly frames the demand as a way to stop duplicate discounts. Hospitals call it an unlawful attempt to rewrite the program and have urged HRSA to step in. With Novo Nordisk and other manufacturers running similar plays while HRSA stays quiet, the fight over who keeps 340B's discount dollars is escalating fast.

In case you missed it: The $50 billion Rural Health Transformation Fund is pushing many rural hospitals to shrink rather than grow, after states got only seven weeks to apply and leaned on cost-cutting plans that will force systems to cut services or convert to inpatient-free emergency hospitals, with the fund offsetting only about 37% of the same law's rural Medicaid cuts. And psychedelics had a banner week after Definium's LSD-based depression drug hit all its trial goals, results analysts said help validate the whole field, paired with an upsized public offering of up to roughly $800 million.

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