In 2025 we breathed. You would have been well advised to bet the anti-portfolio. Although we think (still 😂) that some of our predictions may still come true, an honest rating says we were like the Jets/Mets: only two out of 10.
We’ve seen more payer CEOs losing their jobs (Andrew Witty and Lois Quam) and cell therapy coming back into fashion (four acquisitions, including Capstan by Abbvie for $2.1 billion). Otherwise, we were incredibly poor. We were too skeptical about how long AI point solutions would remain the darlings of healthcare investors, backing seemingly insane companies, and there has only been one healthcare tech IPO, Hinge, which has done well since. We expected Medicare Advantage (MA) to come roaring back in 2025, but Team Trump hasn’t put its thumb on the scale. We are surprised (and not sure we agree) that the Centers for Medicare and Medicaid Services (CMS) projects that MA will shrink by a million members in 2026. We also expected risk adjustment and relaxation of “Stars” premiums, as well as more generous premium increases.
Big companies have surprised us with what they have done and what they haven’t done. Namely, HCSC’s desire to burn a ton of money by acquiring Cigna’s mastery book and Illuminateddown 40% in 2025, is not a given (even if the third quarter results rebound). We were also surprised Apple hasn’t launched glucose detection with WatchOS 26, despite our recurring prediction that Big Tech won’t deliver in healthcare.
After months of recurring tariffs, public health chaos and, unfortunately, the cancellation of billions of dollars in research funding and health coverage support for millions of people, we hope that 2026 will be calmer. Now let’s move on to our predictions for 2026…
- Human crashes. Humana made a bold bid for 2026, offering more generous MA plans in almost every county. We believe this will result in extraordinary growth in membership, surpassing one million new lives. The problem with growing MA is that if you’re not careful, you can lose a lot of money on new members. We believe Humana will rack up huge losses and incite activist investors seeking change.
- Large employers are fleeing the big three pharmacy benefit managers (PBMs). If we’ve learned anything from the last few years of monitoring PBMs, it’s that PBMs are great at inventing new fees and preserving their margins. We think big employers will finally say enough is enough with these puns. Alternatives to the big three now have a track record of savings and service that makes the switch worth the risk (FWIW, we expect the performance of the alternative partners to go well).
- CMS creates a billing code for AI. The Trump administration is optimistic about AI for all things health care: reducing fraud, waste and abuse, data analysis, remote monitoring, reducing administrative complexity, preventive care and expanding access to care. To encourage innovation, we believe CMS will create billing codes for AI. This will give rise to a multitude of new products, some of which will gain popularity and, unfortunately, many frauds. Furthermore, we believe it is far from certain whether AI will improve or worsen our health care cost problem. Without payment model innovation, we could see AI being used to optimize our existing fee-for-service model, which could unfortunately result in increased care and spending.
- Several outbreaks of measles. Unfortunately, we think the dismantling of the CDC, coupled with many states making it easier to opt out of vaccines, is going to go very badly. Measles is the most contagious of childhood diseases, and as community vaccination rates decline, it will make a comeback.
- AI agents have gone crazy, but they have some advantages. Agentic AI is very good at following rules and being goal-oriented. We think this will lead to stupidity. Soon, agents will be talking to agents and they will be going around in circles forever – without compromising or saying no. Although this will result in the benefit of automating many telephone and fax workflows, we expect a massive number of transmissions to humans without an agreement on shared rules between payers and providers. We also think there will be a wave of complaints about agent calls taking longer than old-fashioned calls made by humans.
- Lower cost cell and gene therapies. One area where drug prices will drop significantly over the next five years is cell and gene therapies. Scientific and manufacturing breakthroughs will result in COGS of $5,000 to $50,000, allowing lower prices to be passed on to payers. Access to these treatments will also be significantly improved, not only due to a decrease in COGS, but also improvements in workflow and toxicity profile. We believe that the first glimmers of this progress will be visible from 2026.
- Big discussions but no progress on commercial drug trend. Trump has talked about a big play on drug prices — launching TrumpRx, cheap GLP-1, tariff threats if U.S. prices don’t converge with those in the EU, and tougher Medicare negotiations. Despite the rhetoric, we expect the drug trend for employers and commercially insured patients to continue to increase in 2026, not decrease. Total drug spending will continue to increase as more patients begin treatment, especially with broader GLP-1 eligibility through unit price concessions from Novo and Lilly. The strategic challenge for plans and employers is not just paying for GLP-1s, but also figuring out how to move patients off these drugs by pairing the therapy with meaningful lifestyle change to preserve weight loss and health gains.
- The Republicans maintain control of the House and expand their majority. In a stunning upset, Trump avoids a midterm reset with redistricting, increasing the majority. We believe this is made possible because the US economy maintains its remarkable, AI-powered dynamism, and Trump deserves credit for the peaceful resolution of the wars between Israel and Ukraine (we hope).
- Inflation is accelerating. When we studied economics, we learned that tariffs are taxes paid by consumers. We still believe this to be true. As a result, we believe that businesses cannot wait indefinitely, despite the legitimate fear of being singled out by a retaliatory White House, to pass their costs on to consumers. We believe inflation will intensify in 2026 and, as a result, interest rates will remain higher than expected as the Fed acts in defiance of Trump. Although painful, we do not believe this will be enough to counteract the forces that led to our first prediction.
- AI doctors are good doctors and bad autonomous businesses. We are amazed at how AI can deliver clinical care. That said, we are not optimistic that AI-native clinical services will be standalone, sustainable businesses. We believe these products and features will be great additions within a broader organization to deliver care, provide greater access, and make much more possible between visits, monitoring, and hopefully reduce overall costs for episodes of care. As a result, we expect the traditional “iron triangle” of cost, quality, and access to healthcare to bend, as AI enables the application of clinical intelligence at scale rather than through human labor alone.
We would like to make two bonus predictions. This may be overcompensation for our 2025 (under)performance, but we feel compelled to predict that Judy Faulkner will decide that the risk of antitrust enforcement and being 82 years old makes it time to sell Epic to Microsoft., who knows a thing or two about antitrust and thinks the gamble is to get the upper hand on Oracle it’s worth it.
Finally, we’ll double down on our 2025 prediction that Apple monitors glucose well. We have no inside knowledge of this, but we sincerely hope it comes to pass, as the public health benefits could be enormous.
We look forward to reporting on this in a year’s time and hope our crystal ball turns clearer for 2026. We wish you all a happy holiday season and a healthy New Year.
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