During a recent webinar hosted by the American Association for Physician Leadership (AAPL), Naakesh Dewan, MD, CPE, vice president of Behavioral Health at GuideWell and Florida Blue, delivered an engaging presentation on the evolution of U.S. healthcare policy. His presentation revealed striking parallels between today’s challenges and those faced generations ago, while illuminating the scientific foundations underlying modern healthcare reimbursement. This article summarizes the key takeaways from his insightful session.
American healthcare stands at a critical juncture. With expenditures at $5.3 trillion annually and comprising approximately 18% of GDP, the industry faces unprecedented challenges in balancing cost, quality, and access.(1) Yet these concerns are not new. Understanding where we’re headed requires examining where we’ve been — a journey spanning nearly 80 years of federal legislation, scientific innovation, and evolving payment models.
The Numbers Tell a Sobering Story
Recent data from the Kaiser Family Foundation and Peterson Foundation paint a clear picture of healthcare’s growth trajectory. In 1970, total national healthcare expenditure registered below half a trillion dollars. By late 2023, it had surged to nearly $5 trillion, with projections indicating that the $5 trillion threshold will be crossed in 2024, and the most recent data confirms this reality.
Per-capita spending has grown even more dramatically. In the 1970s, healthcare cost relatively little per person. Today, Americans spend nearly $15,000 per capita annually — a massive acceleration that intensified significantly after 1992-1995.(2)
Healthcare’s share of gross domestic product mirrors this escalation. Between 1985 and 1990, policymakers worried about breaching the 10% mark. Now the concern focuses on the 20% threshold. Throughout the last 50 years, healthcare spending growth has consistently outpaced overall economic growth, with only brief exceptions during 2020-2023 when economic expansion temporarily exceeded healthcare cost increases.
Within healthcare spending, prescription drugs have experienced the highest growth rate since the 1970s, followed by hospital care and physician/clinic services. Yet despite this massive investment, U.S. life expectancy has not increased proportionally and lags behind other developed nations — a troubling paradox that has persisted for decades.(3)
The Origins: When Healthcare Financing Began
Most Americans would be surprised to learn that federal involvement in healthcare financing dates to 1798. The Marine Hospital Act — which some historians call America’s first individual mandate and others consider the first employer/employee healthcare requirement — required ship masters to pay 20 cents per sailor entering U.S. ports. These funds supported hospital care for ill seamen, with surplus revenue funding new hospital construction. America’s first insurance program was designed specifically to support hospital care.
But the modern era of comprehensive healthcare policy began during Franklin D. Roosevelt’s presidency. While Roosevelt failed to pass national health insurance, he succeeded with the Social Security Act of 1935 — a foundation that would later expand to encompass healthcare. The 1930s and 1940s also saw critical private-sector innovations. Baylor Hospital in Dallas created a prepaid health plan, Kaiser developed coverage for steelworkers in the Pacific Northwest, and various prepaid physician service plans emerged for loggers and other workers.
“The origins of health insurance were really about taking care of people who could be sick, giving rights to workers, ensuring that hospitals had enough revenue and capability,” Dewan explained. These early efforts established principles that continue shaping healthcare today: shared risk, prepayment, and the linking of health benefits to employment.
Presidential Milestones: Eight Decades of Reform
Each presidential administration from Roosevelt through Biden contributed distinct elements to today’s healthcare landscape:
Harry Truman focused on hospital construction and infrastructure, establishing the first National Institutes of Health. Though he failed to achieve universal coverage, his efforts created the physical and research foundation for modern medicine.
Dwight Eisenhower expanded Social Security disability coverage, broadening the government’s role in supporting Americans unable to work because of health conditions.
John F. Kennedy launched the Community Mental Health Center Act, creating unprecedented access to mental health services — separating the National Institute of Mental Health from its combined services, education, and research role into primarily a research institute.
Lyndon B. Johnson achieved what his predecessors could not: the passage of Medicare and Medicaid in 1965. For the first time, the federal government fundamentally expanded access to health insurance, covering the elderly and the poor.
Richard Nixon mandated that employers offer HMO options, emphasizing health maintenance and prevention over disease treatment — concepts that resonate strongly in today’s value-based care movement.
Ronald Reagan implemented diagnosis-related groups (DRGs) for hospital payment and allowed states to create Medicaid HMOs. These initiatives planted seeds for value-based reimbursement that would flourish decades later.
George H. W. Bush launched what Dewan calls “the actual beginning of value accounting in healthcare.” His administration implemented the resource-based relative value scale (RBRVS) for physician payment and established quality agencies. During this era, private-sector quality accreditation metrics emerged, and healthcare expenditures crossed the dreaded 10% of GDP threshold.
Bill Clinton emphasized technology and privacy with HIPAA implementation, expanded the Children’s Health Insurance Program (CHIP), and advanced Medicare Advantage — though his comprehensive reform efforts failed.
George W. Bush expanded medication access through Medicare Part D, fundamentally changing how seniors obtained prescription drug coverage.
Barack Obama achieved passage of the Affordable Care Act (ACA), which Dewan characterizes as “the conclusion of the Bush years in terms of value-based care, Clinton years of technology, combining all that into a variety of different payment models.” The ACA brought together decades of incremental progress into comprehensive reform.
Donald Trump’s first term focused heavily on COVID-19 response, demonstrating the “miraculous ability of the country, scientists, and the private sector to deliver a solution that would not have been possible in 1918 or 1970.”
Joe Biden expanded ACA subsidies and made significant infrastructure investments in healthcare delivery systems.
Donald Trump’s second term represents a transformation of all facets of health policy, from public health to financial incentives for achieving outcomes through technology and system transformation. The impact of these efforts will take years to measure and understand.
The Architects of Modern Healthcare Reimbursement
Behind the legislative milestones stand individuals whose scientific and policy contributions fundamentally shaped how healthcare is valued and paid for today.
W. Edwards Deming: The Quality Pioneer
A mathematician, physicist, and engineer, W. Edwards Deming developed the original science of quality management. Though his work gained recognition first in Japan’s manufacturing sector, Deming’s principles profoundly impacted American healthcare. “If there’s one person responsible for those of us in healthcare needing to be quality scientists and variability scientists, implementing quality management or quality improvement principles, it’s Deming,” Dewan noted. President Reagan eventually recognized Deming’s contributions with a medal in the 1990s.
John Thompson: The DRG Creator
John Thompson, working at Yale University, developed the methodology for categorizing hospital inputs that became diagnosis-related groups. Remarkably, Thompson never intended his operational classification system to become a financial reimbursement model. “Sometimes serendipity happens when you’re trying to create an operational model that leads itself to a financial model,” Dewan observed. Thompson’s work with Robert Federer and Charles Ross created the scientific foundation for current hospital reimbursement systems.
Paul Elwood: The HMO Visionary
A pediatric neurologist who treated polio patients, Paul Elwood recognized that the healthcare system created too many incentives for hospital care and insufficient emphasis on prevention. Working with Stanford economist Alain Enthoven, Elwood influenced the Nixon administration’s HMO Act. His vision — that health systems should focus on health maintenance rather than disease treatment — sounds remarkably contemporary. “Here we are ... [now], and we’re all thinking about prevention and health improvement, but those laws, structures, and funding mechanisms were thought about in the late 1960s and early 1970s,” Dewan reflected.
William Hsiao: The RBRVS Architect
William Hsiao was contracted specifically to develop a means of creating predictability and accountability in physician payment. His work proved “extraordinarily controversial,” sparking significant conflict between organized medicine, the federal government, and the scientific community. The debate culminated in the American Medical Association agreeing to develop the resource-based relative values for physician services — values that would inform Congress and CMS about appropriate reimbursement levels.
How Physician Payment Actually Works
The RBRVS system that emerged from this work remains foundational to physician payment today. Understanding its components illuminates both its sophistication and its limitations.
The Value of Work
Physician work value comprises several elements:
Time required to perform a service.
Stress related to the risk and potential consequences.
Cognitive complexity of decision-making required.
Historically, complexity included multiple components: history-taking, review of systems, thoroughness of examinations, and decision-making. However, after electronic medical records enabled auto-population of complex histories and reviews, the focus shifted primarily to decision-making complexity.
Additional factors affecting total payment include:
Practice expense (overhead, equipment, staff).
Malpractice insurance costs.
Geographic adjustments.
The relative value scale creates striking contrasts. Cataract surgery carries a value of 18.4 relative value units (RVUs), largely because the risk of surgical failure is permanent blindness — a high-stress outcome. A level-three office visit (99213) has a value of 2 RVUs. A bronchoscopy is valued less than an endoscopy. These determinations emerge from extensive physician committee review, data analysis, and careful comparison.
The Governance Structure
Two primary committees manage CPT codes and their valuation:
The CPT Editorial Panel (managed by the AMA since 1966) defines physician work. What constitutes an evaluation and management visit? How does an endoscopy differ from a bronchoscopy? How should robotic surgery be coded differently from traditional approaches? How will AI impact CPT coding? The panel includes representatives from numerous medical societies, private and public sectors, and non-physician healthcare professionals.
The RVS Update Committee (RUC) includes 30 members from different specialties who review surveys conducted with physicians to compare work across specialties. The committee transmits recommendations to CMS, which either accepts or rejects them before forwarding recommendations to Congress for approval and publication in the Federal Register.
“Having been on committees that decide values like this — values for DRGs, values for MIPS and MACRA — I will tell you this is all volunteer work,” Dewan said. “These are highly accomplished individuals who understand the magnitude of what they’re doing and understand the impact they’re making on healthcare and society at large. It’s thankless work, but I’m pleased that so many physicians have dedicated their time to these efforts.”
The Troubling Stagnation
Despite this sophisticated infrastructure, a troubling reality emerges from AMA data: The monetary value CMS assigns to one unit of physician work has remained essentially flat for 30 years. In the early 1990s, different monetary values existed for surgical work, primary care work, and non-surgical/non-primary care. These differences were resolved in 1997–1998 with standardization.
Since then, one unit of physician work has not been reimbursed at a higher rate than in 1997. While CPT codes have matured and new high-value codes have been added, the fundamental dollar value per unit set by the federal government has stagnated. This stems from complex formulas embedded in legislation — the sustainable growth rate provisions, linkages to inflation, prescribed budget constraints — all passed when policymakers feared healthcare costs rising from 10% to 15% of GDP.
“Is there anything else we can think of in all of society where one unit of work is paid less than what it was in 1997?” Dewan asked pointedly.
Contemporary Controversies: Telehealth Valuation
The newest battleground in physician payment involves telehealth services. In the past 18 months, the CPT panel created new telehealth codes, and the AMA established valuations. While work values were slightly less than face-to-face encounters, the overall valuation created approximately 30% lower reimbursement for evaluation and management codes delivered via telehealth.(4)
CMS did not accept the new codes — twice. This represents a rare instance where CMS did not accept AMA guidance for two consecutive years. The disagreement stems from the administration’s position that telehealth represents a modality rather than a fundamentally different type of service.
“This is creating confusion in the healthcare marketplace,” Dewan warned. “I hope this will be resolved in the next year because the confusion will continue if not resolved. This is one area where I haven’t seen CMS not accept something the AMA has recommended two years in a row. Anyone listening should follow this very closely.”
The Road Ahead: Five Transformative Trends
Looking forward, Dewan identified five major forces that will reshape healthcare over the next decade:
1. Artificial Intelligence and Accelerated Innovation
Unlike the 1940s and 1950s, when computers capable of trillions of calculations per second didn’t exist, that capability is now a reality. AI will transform everything from risk corridor calculations for bundled payment programs to drug discovery.
“You can imagine what would take five years to analyze data, five years to discover a solution, discover protein structures, translation of genes to proteins to immune therapies — that will happen quicker,” Dewan predicted. The first phase will likely involve using AI to analyze older medications’ molecular biology and physics, discerning whether they could treat different diseases from those originally intended.
2. Connected Systems of Care
Technology will drive unprecedented interoperability within the next decade. “The expansion of telehealth, the expansion of interoperability, the ability to have systems of care — payers, providers, clinicians — on one connected system will occur,” Dewan projected.
3. Health Improvement Focus
The ideas Paul Elwood championed in the 1970s are finally gaining real traction. Physicians are establishing direct primary care practices, health clinics, and health improvement capabilities. Diabetes reversal clinics demonstrate that people “are hungry for getting healthier.”
However, a significant barrier exists: Current risk adjustment models create disincentives for health improvement. When someone no longer has a disease, the federal government pays providers less because treating the disease requires more resources. “It will take five or six leading healthcare delivery organizations in the country to say, ‘We are going to focus on health improvement,’ and clinicians will follow,” Dewan said.
4. Complex Risk-Sharing Arrangements
As healthcare is poised to surpasses 20% of GDP — accelerated by new innovations and ongoing cost increases — more sophisticated risk corridors will become necessary. “People say ACOs are complex. You have a fee-for-service arrangement, then you have an end-of-year payout or pay-forward arrangement. This will get more complex because of new innovations and technologies,” Dewan said.
A critical question looms: Will the federal government create new models and laws to control device and drug costs, repeating the 1960s–1980s approach to hospital and physician payment? “That is something I’m going to be watching for the next five years,” Dewan said.
5. Integration and Partnerships
The trend that began in 1798 and accelerated in the 1930s — large providers partnering with large payers — will intensify dramatically. “We will see dramatic growth in partnerships and integration and shared savings” among medical groups, hospital systems, health insurance companies, and staff-model HMOs.
Physician Leadership in a Complex Future
These transformations demand sophisticated physician leadership. Healthcare now employs approximately 75 different types of professionals, requiring unprecedented partnership, integration, and collaboration.
“It’s going to take leadership to be calm, and leaders capable of looking at data and technology and making fair decisions that impact the lives of people, society as a whole, and healthcare as a whole,” Dewan emphasized.
When asked about physician union formation, Dewan expressed skepticism about widespread unionization, instead predicting growing physician sophistication: “I see physicians becoming more sophisticated at group formation, understanding financial and quality metrics, and being partners — whether with hospital systems or mega groups — staying as astute professionals, scientifically driven and financially astute.”
Regarding training, Dewan noted that several specialties — family medicine, pediatrics, OB-GYN — are incorporating healthcare economics and reimbursement into residency standards, particularly in third, fourth, and fifth years. “I think physicians, when we take an oath, we take an oath to help not only the patient, but [also] to help society. Part of our commitment is saying if we’re going to serve humanity, we should be aware of all the complexities of how healthcare reimbursement and healthcare laws work.”
The Employment Shift
The trend toward physician employment rather than solo practice didn’t emerge from specific legislation but from increasing complexity. When RBRVS was being discussed in the early 1990s, solo practitioners lamented that “this would be the end,” viewing it as price control similar to earlier fears of “socialized medicine.”
But as disease grew more complex, healthcare more intricate, and reimbursement rates flattened, solo practice became “extraordinarily difficult.” Physicians faced requirements to be available constantly, working seven days a week, 365 days a year, while doing more administrative work for flat reimbursement.
“When you’re having to do more, not just in your day-to-day work but in the overall work, the exhaustion starts,” Dewan explained. Some physicians enjoy leadership and organizational roles, working with diverse professionals. “But some just want to take care of the human being in front of them. The ability to do that is enhanced when you’re in a larger organization, when somebody else is dealing with the administrative stuff.”
Predictions and Possibilities
Dewan offered an optimistic vision of sophisticated risk-sharing arrangements emerging over the next decade. Physicians and health plans will collaborate more closely: “Here’s the goals we’re trying to achieve. Here’s the quality outcome goals. Here’s the cost goals. Do you think we can work together to achieve this for the benefit of that patient — as well as the member who is taking money out of their pocket that they could spend on food, clothing, shelter, or other life needs — and the employer?”
“In conversations I have with physicians across specialties, they are very much open to these conversations, very much open to meaningful discussions about how do we bend the curve,” he said.
Yet urgency will intensify. “I heard 10% is the cliff, then 15% is the cliff, now we’re hearing 20% is the cliff. I don’t think 20% is going to be the cliff, but the urgency of decelerating healthcare costs is going to be higher. The noise will be higher because I don’t think society can, in a worst-case scenario, afford in a few decades, one-third of all dollars going towards healthcare.”
Conclusion: An Awe-Inspiring Era
Despite challenges, Dewan expressed profound optimism about the coming decade: “We are in for an era that is awe-inspiring. It is a magical time in healthcare. It is an awe-inspiring time. It is also for some people a fear-inspiring time,” he said.
The parallels between today and 80 years ago are striking. The 1930s saw the mathematical foundations for AI being developed. The 1940s and 1950s witnessed debates about quality, media influence, urbanization, and disconnection — themes resonating strongly today. “What we’re seeing today really started almost 80 years ago in terms of the math, the science, the policy,” Dewan reflected.
The infrastructure exists: sophisticated quality measurement systems, mature risk adjustment methodologies, decades of experience with alternative payment models, and growing physician leadership capability. The scientific foundations — painstakingly developed by Deming, Thompson, Elwood, Hsiao, and countless volunteer committee members — provide solid ground for innovation.
“It takes partnership, integration, collaboration, and a very astute capability of looking at data, looking at technology, and making fair decisions,” Dewan concluded. With physician leaders embracing this complexity and new technologies accelerating discovery and care delivery, American healthcare stands poised not for crisis, but for transformation — if we learn from our history and lead with wisdom, courage, and commitment to patients and society alike.
Disclaimer: This article is adapted from a webinar presentation originally delivered on October 29, 2025.
REFERENCES
Rakshit S, Winger A, Cotter L, McGough M, Wager M, Cox C. How has US Healthcare Spending Changed Over Time. Peterson-KFF Tracker. Published January 22, 2026.
Smith K. A (Brief) History of Health Policy in the United States. Published 2023. https://doi.org/10.32481/djph.2023.12.003 .
American Medical Association. AMA Specialty Society RVS Update Committee. An overview of the RUC process. Published 2024. http://www.ama-assn.org/go/rbrvs .
Telemedicine Evaluation and Management Services. Federal Register. Vol 89, No 236. Published December 9, 2024:97789.