Medicare Payment Models Target Pharma Profits (Patient Costs TBD), CVS Returns to Profitability by Exiting Sick People and Closing Clinics, and CMS Launches 10-Year ACO Model That Might Actually Work

Hey all,

Happy Tuesday! Fixing healthcare economics requires choosing who pays the price, and we keep pretending otherwise. The Trump administration proposed Medicare models tied to international drug prices that could save the government billions while potentially raising senior prescription costs by $3.6 billion. Every solution shifts costs somewhere else—to seniors, to providers, to taxpayers—while we maintain the fiction that reform can somehow make everyone better off simultaneously.

Enjoy the rundown!

Jacob Brody (Co-Founder & CEO, ZorroRX)

(Axios) Trump Administration Proposes Medicare Payment Models Linked to International Prices

The Trump administration has proposed two new payment models for Medicare Part B and Part D aimed at saving billions by requiring drugmakers to pay rebates if their prices exceed international benchmarks. While the Centers for Medicare & Medicaid Services projects significant government savings and lower out-of-pocket costs for outpatient drugs, officials warn that seniors could face a $3.6 billion increase in prescription drug costs as manufacturers may raise prices to offset the pilots' financial impact. These initiatives represent a continued push to align U.S. drug pricing with global standards, drawing sharp criticism from the pharmaceutical industry over stifling innovation, though perhaps they are just realizing the U.S. might finally stop subsidizing the world's R&D like the one friend who always gets stuck with the dinner bill. Full Article

(Modern Healthcare) CVS Health’s Strategic Turnaround and 2026 Outlook

CVS Health staged a major financial comeback in 2025, driving its stock price back up to nearly $80 by exiting public exchanges and drastically reducing its Medicare Advantage footprint to please investors. Despite posting a $1.2 billion net loss through the third quarter, the conglomerate successfully generated revenue growth through aggressive restructuring and leadership changes. Apparently, the secret recipe for their projected 2026 profitability was simply firing thousands of employees, shuttering clinics, and realizing that the business runs much smoother when you just stop trying to insure so many sick people. Full Article

(Robert Longyear) The New CMS LEAD Model

The Centers for Medicare and Medicaid Services has unveiled the Long-term Enhanced ACO Design (LEAD) Model, a ten-year initiative launching in 2027 that addresses historical benchmarking flaws and encourages participation from smaller, rural, and independent providers through flexible risk-sharing options. Replacing the ACO REACH program, this model introduces the CMS Administered Risk Arrangements (CARA) to facilitate better specialist integration and offers non-reconciled infrastructure payments to prevent the "ratchet effect" that has previously penalized high-performing organizations. This structural overhaul represents a critical evolution in federal health policy, aiming to transition accountable care from a series of short-term experiments into a sustainable, long-term delivery system that stabilizes value-based incentives for a broader range of healthcare organizations. Full Article.