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ARTICLE CAN STATES REINVENT U.S. HEALTHCARE?  
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Lynn Parramore
July 29, 2025
Institute for New Economic Thinking
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_ Phillip Alvelda, a former DARPA program manager, reveals how a
fracturing federal system has opened the door for bold state
leadership. Will blue states rise to build a healthier, more just
future? _

, istock

 

America’s healthcare system is collapsing — but not evenly. It’s
fracturing into separate realities.

Call it MADA: Making America Divided Again.

Once held together by a strong federal backbone, public health in the
U.S. is now tearing into a patchwork of wildly unequal systems. From
vaccine access to basic care, your ZIP code may determine whether you
live. Or die.

As federal agencies weaken under political interference and
anti-science leadership, states are left to pick up the pieces.

Phillip Alvelda, a former DARPA program manager in the office that
helped pioneer synthetic biology and mRNA vaccine technology, argues
that some states, especially science-driven “blue states,” have
the tools, the talent, and the financial wherewithal to build their
own public health infrastructure.

This includes real-time disease surveillance, universal care, and even
the development of next-generation vaccines. Whether they seize this
opportunity remains to be seen. Meanwhile, other states are moving in
the opposite direction — dismantling protections, slashing funding,
and aligning with private interests that put profit ahead of public
health.

In a conversation with the Institute for New Economic Thinking
[[link removed]], Alvelda explains how this crisis
presents a rare chance: to rebuild a system that is leaner, smarter,
and truly centered on care rather than profit.

LYNN PARRAMORE: LET’S START WITH THE CURRENT STATE OF AMERICA’S
PUBLIC HEALTH. WHAT CONCERNS YOU MOST RIGHT NOW?

Phillip Alvelda: There are so many assaults on different fronts. But
perhaps the most significant change is the claw back of Medicare and
Medicaid support. An estimated 17 million people
[[link removed]]
could lose their health insurance.

But that number underrepresents the impact. For many, losing health
insurance means losing access to care altogether. These are vulnerable
populations with no other safety nets. And now there’s talk in
Congress about requiring proof of work to receive coverage. It’s a
draconian move that amounts to a money grab. People will die without
care.

We’re also seeing changes in leadership at the U.S. Department of
Health and Human Services (HHS), the Centers for Disease Control and
Prevention (CDC), and the National Institutes of Health (NIH), which
are now pushing anti-science, anti-vaccine policies. They’ve fired
many experienced third-party advisors and replaced them with people
who have little experience and long-standing anti-vax positions. The
new leadership has already made access to COVID vaccines more
difficult and expensive. They’ve removed distribution requirements
and failed to approve important drugs like Novavax.

We’re seeing a coordinated campaign against one of the most
effective public health interventions in human history —
vaccination. The consequences are deadly.

LP: GIVEN THE COLLAPSE OF FEDERAL PUBLIC HEALTH INFRASTRUCTURE, DO YOU
THINK STATES MIGHT EFFECTIVELY STEP IN TO BUILD THE KIND OF REAL-TIME
HEALTH MONITORING SYSTEMS WE NEED FOR MANAGING ONGOING AND FUTURE
HEALTH CRISES?

PA: I often refer to this as the surveillance piece of public health.
Effective surveillance requires infrastructure, clear policy, and
enforcement. It’s not that expensive, but it is absolutely
essential.

Unfortunately, we’re now up against an anti-science movement that
actively resists data collection because it might contradict their
political agendas. The CDC has cut funding, stopped maintaining key
websites, and allowed once-impressive national surveillance systems to
collapse.

But yes, states can and should pick up the slack. Wastewater testing,
hospital reporting — these are affordable, manageable systems.
States like California already have the infrastructure and capacity to
implement them.

This isn’t just about COVID anymore; we’re also facing rising
threats like bird flu and measles due to weakened vaccination efforts.
To respond effectively, states need to maintain their own reporting
requirements. And if only the science-oriented “blue states” have
the political will, then perhaps it’s time to form a coalition — a
networked public health system to safeguard against future crises.

Our once-envied institutions, like the CDC and HHS, have lost
independence, but this is an opportunity to build new agencies, funded
and governed by the states. Perhaps a California CDC, a New York CDC,
or a regional blue-state CDC, and so on.

LP: THAT MAKES SENSE. STATES LIKE CALIFORNIA AND NEW YORK ALREADY HAVE
STRONG PUBLIC HEALTH DEPARTMENTS.

PA: Exactly. These states live and die by public health. The economic
impact of long COVID alone is already visible.

California, New York, Oregon, Washington, Massachusetts — these
states absolutely have the capacity to lead. And they can also stand
up to the insurance industry. A state can decide what it wants to pay
for and how.

This is urgent. We need to act now — recruit the right people, who,
by the way, are newly unemployed due to federal cuts.

LP: SO THE TALENT IS THERE—IT’S JUST A MATTER OF POLICY AND
FUNDING?

PA: Yes. We need state-level policy leaders willing to back it and
budget for it. Surveillance is just one area. We also need broader
bio-surveillance.

LP: ARE YOU CONCERNED ABOUT THE RISKS POSED BY BIOLOGICAL RESEARCH OR
VIRUS DEVELOPMENT EFFORTS IN OTHER COUNTRIES?

PA: Absolutely. The technology needed to make dangerous viruses is not
very advanced – all you need is basic lab equipment and a few
knowledgeable people. The global impact of COVID has surpassed that of
nuclear weapons. Yet we spend far more on preventing nuclear accidents
than on preventing biological disasters.

LP: VIRUSES AND DISEASES DON’T RESPECT STATE LINES. IF WE END UP
WITH ESSENTIALLY SEPARATE PUBLIC HEALTH SYSTEMS—ONE FOR RED STATES
AND ANOTHER FOR BLUE—WITH DIFFERENT RULES FOR REGULATION,
SURVEILLANCE, AND RESPONSE, WHAT DOES THAT MEAN FOR THE COUNTRY AS A
WHOLE?

PA: That’s exactly the danger of the “leave it to the states”
approach. We’ve already seen the consequences — fatality rates as
much as seven times higher in areas with low vaccination rates and
underfunded health systems
[[link removed]].

We need state-level public health systems that are universal,
accessible, and focused on prevention. Wealthier states must lead the
way, because when one part of the country is vulnerable, we’re all
at risk.

LP: COULD BLUE STATES TAKE THE LEAD IN DEVELOPING NEXT-GENERATION
VACCINES—LIKE THE NASAL MUCOSAL VACCINES WIDELY HELD TO BE
ESPECIALLY EFFECTIVE AT STOPPING COVID INFECTIONS?

PA: They absolutely could, and they should. States like California,
with world-class research institutions and a thriving biotech sector,
are uniquely positioned to lead the next wave of vaccine innovation.
Nasal vaccines, in particular, could be a game-changer.

If the federal government won’t lead, states have to. That means
building and maintaining the entire vaccine development pipeline, from
education and research to clinical trials and manufacturing.

Right now, that pipeline is under threat. Funding for advanced
training programs has been slashed by nearly 50%, and we’re actively
discouraging the international talent that has long powered American
science.

California, for example, should invest directly in universities like
UC Berkeley and Stanford, and support in-state clinical trials. We may
not be able to preserve the full national infrastructure, but we can
build strong, self-sustaining regional capacity. The stakes are too
high to wait.

LP: SO, POTENTIALLY, A RESIDENT OF CALIFORNIA COULD GET ACCESS TO A
VACCINE THAT ISN’T EVEN AVAILABLE IN ANOTHER STATE?

PA: It’s already happening. Some states have stopped stocking key
vaccines entirely. We’ve effectively fractured into multiple
healthcare systems, where your access to lifesaving medicine depends
on where you live. It’s a dangerous precedent, and it’s
accelerating.

Poor healthcare in under-resourced states isn’t new, but it’s more
visible now, thanks to broader media coverage and national crises like
COVID. The Trump administration accelerated the dismantling of the
safety net. Rural hospitals are shutting down. Public health
infrastructure is collapsing. More and more, the system is designed to
serve the wealthy—while abandoning workers and the vulnerable.

We’re already seeing the cost: the life expectancy gap between
wealthy white Americans and poor Black Americans is now about seven
years
[[link removed]].
It’s even worse for Native Americans.

That’s not just a health disparity. It’s a national failure.

LP: LET’S TALK ABOUT AI. WHAT ROLE COULD IT PLAY IN ADDRESSING THE
FAILURES OF OUR HEALTHCARE SYSTEM?

PA: There’s huge potential, though not necessarily in the ways
people expect. While many worry about AI replacing jobs, it’s
already outperforming doctors in one of the most critical areas:
diagnostics.

General AI models like Claude, ChatGPT, and Gemini are now achieving
diagnostic accuracy rates above 90%. For comparison, the average
physician gets it right only about 20% of the time, and even
top-performing doctors cap out around 40%. That’s a staggering gap
— and a massive opportunity to expand access, improve outcomes, and
reduce medical errors, especially in underserved communities.

Consider the case of long COVID. Most clinicians are out of date on
it, haven’t read the latest papers, and so on. Patient-led treatment
groups are doing a better job directing clinical trials. AI models,
with access to the latest research, are proving more helpful than
clinicians in treating long COVID.

LP: COULD AI ALSO HELP WITH PUBLIC HEALTH SURVEILLANCE?

PA: Yes. It can help analyze trends, predict outbreaks, and guide
policy decisions in response to real-time surveillance data. For
example, if the surveillance system detects rising viral loads, AI can
recommend specific mitigation steps — like indoor air quality
mandates for schools.

LP: PAINT A PICTURE OF YOUR VISION FOR A BETTER HEALTHCARE FUTURE.
WHAT DOES IT LOOK LIKE?

PA: First, we have to confront the reality: our healthcare system is
driven by profit, not care. It’s bloated with administrators,
insurance middlemen, and pharmacy benefit managers—all extracting
value without delivering any actual healthcare.

Health insurance isn’t healthcare—it’s a financial product
designed to limit access and deny claims. The ratio of administrators
to care providers is absurd
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We’re spending more and getting less.

If the federal system continues to break down, we have a rare
opportunity to build something better from the ground up. Strip away
the bureaucracy. Fund doctors and nurses directly. Deliver real care
to everyone — not just coverage, but actual services that improve
lives.

We’d save money. We’d save lives. It’s time to build healthcare,
not health insurance.

[Figure 1: Evolution of the US Healthcare Workforce, 1970-2024]

[Panel B: Clinical-to-Administrative Worker Ration Evolution]

[Table 1: 2024 Healthcare Workforce Composition (verified data)]

See footnote for policy implications and references
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LP: HOW EFFECTIVE DO YOU THINK PRIVATE INTEGRATED CARE MODELS LIKE
KAISER PERMANENTE REALLY ARE? DO THEY OFFER A PATH TOWARD BETTER
HEALTHCARE, OR DO THEY SHARE SOME OF THE SAME SYSTEMIC PROBLEMS AS THE
BROADER INDUSTRY?

PA: Kaiser is probably one of the more efficient ones, but don’t
mistake their giant buildings for good governance.

They suffer from the same disease: they claim, “We’re only
generating 3% profit,” but they grew 20% last year. How did they
grow? Not in doctors and nurses. They grew in administrators and
overhead. They’re becoming larger and more impactful for
shareholders, but less impactful for actual care.

Kaiser is very good at managing and minimizing the cost of care —
with a huge apparatus generating administrative overhead and revenue.
So yes, they fall into the same category as others.

Another example would be pharmacy benefit managers (PBMs). PBMs were
originally designed to stand between consumers and pharmaceutical
companies, using collective bargaining and economies of scale to
negotiate better prices and pass savings on to the consumer. But once
pharma companies realized what was happening, they started acquiring
PBMs. And then PBMs were turned against the consumer, to extract more
money on behalf of pharma.

PBMs became one of the most rapacious tools of the last few decades.
Several states, like OREGON
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have now cracked down on them for that reason. But we still have
rapacious pharmaceutical companies charging hundreds of dollars for
things like insulin that cost just a few dollars to make.

LP: STATES LIKE OREGON ARE ALSO RESTRICTING PRIVATE EQUITY FROM
GETTING INVOLVED IN MEDICAL PRACTICES. DO YOU SEE THIS KIND OF
STATE-LEVEL ACTION AS A PROMISING STEP?

PA: Absolutely. I’d like to see more states follow suit. The problem
with private equity in healthcare is that it leverages financial
tactics to extract increasing profits while cutting back on actual
services. This isn’t just a few bad actors. It’s a systemic issue
that demands broad, meaningful regulation, not just piecemeal bans.

We need clear, enforceable rules that ensure healthcare funds go
directly to patient care — not bloated administration, overhead, or
systems designed to deny coverage.

LP: WOULD YOU SUPPORT BANNING PRIVATE EQUITY ALTOGETHER FROM
HEALTHCARE?

PA: Honestly, yes. That would be my favorite outcome. But I also
recognize that private equity can play a role. The real question is:
What limits do we place on profitability? And where can these firms
contribute by building systems that provide fair market value?

There are responsible examples. Take Mark Cuban’s Cost Plus Drugs
— it’s an open, transparent company that sells medications at a
fair price and exposes the entire value chain. It’s disrupting the
big pharma model, and they hate it.

Unplugging healthcare from the profit machine is essential. Many of
these companies market themselves as “just making 3% profit,” but
that’s after massive reinvestment in technology, acquisitions, and
expansion. To go back to Kaiser, they were building new campuses in
Oakland during the height of the pandemic, when everything else was
shutting down. And they had their most profitable run ever during that
period—even as Americans were dying in record numbers.

This system has created a parasite that’s feeding off Americans, and
it’s gotten too big to bear.

The federal government is stepping back, but the states can step
forward.

LP: IS THERE ANYTHING YOU WISH THE MEDIA WERE FOCUSING ON RIGHT NOW
BUT AREN’T?

PA: Absolutely. They need to expose how the federal government is
systematically dismantling the very institutions that hold this nation
together. This isn’t just policy. It’s a fundamental attack on our
unity.

We call ourselves the United States because together we are stronger.
But that bond is fraying fast.

Rights and access to basic services — abortion, LGBTQ+ protections,
healthcare, clean air, education — are no longer universal. They
depend on your ZIP code. We’re unraveling the very fabric that binds
us as a nation.

This feels like the unresolved wounds of the Civil War reopening, with
the Confederacy’s ideology rising again: stripping protections from
the poor, suppressing wages, denying education and healthcare. The
Supreme Court is pushing these battles back to the states, just like
before the civil rights movement. That’s precisely why we
established federal agencies — to protect those who states
historically abandoned.

Now, we’re watching all that progress unwind. The Confederacy is
returning.

LP: YOU COULD IMAGINE FIGURES LIKE JOHN C. CALHOUN SMILING AT THIS.

PA: Absolutely. But there is hope. Strong, responsible leadership
exists in many blue states. The problem is the Democratic
establishment hasn’t yet grasped that this is an existential fight
for democracy itself. Clinging to old norms and moral posturing
won’t be enough. We need bold, decisive action.

Here’s the bright spot: California is the fourth-largest economy in
the world. It has the power to act independently—in healthcare,
education, disease control, public policy—even if the federal
government collapses.

What we need now are leaders like Newsom, Hochul, and others to seize
that moment. To build the future by making states strong, independent
actors stepping into the void left behind.

NOTES
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Economic Analysis and Policy Implications

ADMINISTRATIVE COST BURDEN
Administrative spending represents 34.2% of total healthcare
expenditures, approximately $1.2 trillion annually. This far exceeds
administrative costs in other developed healthcare systems
(Himmelstein et al., 2020).

WORKFORCE STRUCTURAL SHIFT
The U.S. healthcare system evolved from 3.6 clinical workers per
administrator (1970) to near parity by 2024, representing a
fundamental restructuring of healthcare labor allocation.

NURSING WORKFORCE EXPANSION
Registered nurse employment reached 5.64 million in 2024, 61% higher
than previous projections, now representing 33% of the total
healthcare workforce and driving much of the sector’s employment
growth.

INSURANCE SECTOR TRANSFORMATION
Health insurance industry employment expanded 1,913% from 1970-2024,
becoming the largest single administrative category and employing more
workers than physicians and physician assistants combined.

REFERENCES AND DATA SOURCES

PRIMARY GOVERNMENT SOURCES

• U.S. Bureau of Labor Statistics. (2024). Occupational Employment
and Wage Statistics [[link removed]].

• U.S. Bureau of Labor Statistics. (2024). Insurance Carriers and
Related Activities: NAICS 524
[[link removed]].

• Centers for Disease Control and Prevention. (2015). Health, United
States, 2015 [[link removed]].

• Health Resources and Services Administration. (2024). State of the
Health Workforce Report
[[link removed]].

PROFESSIONAL ASSOCIATION DATA

• Association of American Medical Colleges. (2024). US. Physician
Workforce Data Dashboard
[[link removed]].

• National Commission on Certification of Physician Assistants.
(2024). 2023 Statistical Profile of Board Certified PAs
[[link removed]].

• National Council of State Boards of Nursing. (2024). The 2024
National Nursing Workforce Survey
[[link removed]].

ACADEMIC LITERATURE

• Himmelstein, D.U., Campbell, T., & Woolhandler, S. (2020). Health
Care Administrative Costs in the United States and Canada, 2017
[[link removed]]. _A__nnals of Internal Medicine_,
172(2), 134-142.

• Woolhandler, S., Campbell, T. & Himmelstein, D.U, (2003), Costs of
Health Care Administration in the United states are Canada
[[link removed]]. _New England Journal of
Medicine_, 349, 768-776.

INDUSTRY REPORTS

• Insurance Business America. (2024). US insurance employment
surpasses 3 million
[[link removed]].

• Athenahealth. (2024). How a rise in healthcare administrators is
shaping care delivery
[[link removed]].

DATA NOTES: Historical figures for 1970-1990 estimated using CDC
Health Statistics, Census occupational data, and professional
association reports. Post-1990 data from BLS Occupational Employment
Statistics. 2024 nursing data represents active licenses (NCSBN);
other professions represent employed workers (BLS).

METHODOLOGY: Administrative workforce categories defined as
non-clinical positions involved in healthcare financing, regulation,
billing, claims processing, and facility management. Direct care
workers defined as licensed professionals providing direct patient
care services.

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