Counterpoint

The election of Donald Trump as the 47th President of the United States, together with projected Republican control of Congress, could have significant implications for health economy stakeholders.  

The purpose of this brief is to identify key strategic issues for health economy stakeholders based on hindsight analysis of the health policy initiatives in the previous Trump Administration, the Biden Administration and the 118th Congress in the context of certain key trends identified in our 2024 Trends Shaping the Health Economy Report.  

Healthcare Affordability 

Voters expressed meaningful concerns about the economy, cost of living and inflation in Election Day exit polling.  

Even though healthcare was a key concern for only 10% of respondents, cost of living and inflation was cited by 28% of respondents, and almost half of Americans struggle to afford healthcare.

Every White House administration since President Clinton has acknowledged, if failed to remedy, the relentless increase in healthcare costs. In September 2022, the Congressional Budget Office published its assessment of various policy approaches to limit price increases in the commercial health insurance market. Perhaps unsurprisingly, the Congressional Budget Office concluded that price controls were the most effective approach to control prices.  

Last week President-elect Trump won 58.6% of the vote in Indiana, while Senator Mike Braun (R) was elected Governor. Indiana is a reliably “red” state, as evidenced by the fact that Republicans have had a “trifecta” for the past 16 years, holding the Governor’s office and control of both chambers in the General Assembly. The fact that the Indiana General Assembly has enacted several laws that attempt to limit healthcare costs in the last two years suggests that lowering healthcare costs is a priority at both the Federal and state levels. Notably, the well-known RAND Corporation study that revealed that the average commercial reimbursement rate for hospital services is 255% of Medicare was a touchstone for the Indiana General Assembly. Providers whose commercial reimbursement rates exceed 250% of Medicare could increasingly face scrutiny from elected officials, employers and consumers. 

Site-Neutral Payment

Depending on its scope, site-neutral payment would be detrimental for every health system and devastating for some, particularly those with breakeven or negative operating margins. Site-neutral payment was first implemented pursuant to the Bipartisan Budget Act (BBA) of 2015, proof that it has long received bipartisan support. Site-neutral payment had bipartisan support in the 118th Congress, and logic suggests that focus will continue in the 119th Congress commencing on January 3, 2025.  

Perhaps the most important data point is that it has the support of House Budget Committee Chairman Jodey Arrington, a Republican from the Texas panhandle who was re-elected with almost 81% of the vote. In his opening remarks at a hearing on May 23, 2024, Chairman Arrington said this: 

The House Budget Committee and the House Republican Conference have been leading the way to combat healthcare consolidation through policies in our "Reverse the Curse" balanced budget, such as site neutral payment reform, which is a Democrat and Republican idea. I think it emanated with President Obama. We agree with it. Equalizing payments for the same service through Medicare site neutral reform, while ensuring our rural providers are unaffected is not only common sense, but it would save taxpayers over $150 billion in the 10-year budget window.¹

Presumably, every health system has performed sensitivity analyses of the numerous proposals to implement site-neutral payment given its enduring popularity in Congress as a cost control measure. More importantly, delivering services of equivalent (or better) quality in lower-cost settings produces more value for money for the ultimate payer, whether the Federal government, state government, employer or individual. 

Because of the value proposition that ambulatory care offers, prudence suggests that every hospital and health system accelerate their investment in ambulatory facilities, using HCA’s metric of 1 hospital: 12 ambulatory sites of care. 

Inpatient Only List

The Inpatient Only list “is a list of services that, due to their medical complexity, Medicare will only pay for when performed in the inpatient setting.”² On December 2, 2020, the Trump Administration attempted to eliminate the Inpatient Only list in its entirety over a three-year period, beginning with 300 musculoskeletal codes. The Biden Administration halted the elimination of the Inpatient Only list in November 2021. 

As with the implications of site-neutral payment, each hospital and health system should model the potential loss of inpatient surgeries for many, if not the majority, of the 1,700 codes on the Inpatient Only list. If past is prologue, hospitals and health systems should expect to lose 50-60% of their inpatient volume in the three-year period after a code is removed from the Inpatient Only list. 

Price Transparency and Value for Money

In November 2019, the Trump Administration announced its price transparency initiative as part of its focus on reducing healthcare costs. While the Biden Administration reversed the Trump Administration on elimination of the Inpatient Only list, the Biden Administration has continued to support healthcare transparency initiatives.  

Health plan price transparency data published by health plans under CMS’s Transparency in Coverage initiative reveals massive reimbursement differences between and within markets for the same set of services. 

In Delaware, directors and officers of corporations owe a fiduciary duty of care to the corporation and its stockholders, which requires them “to make informed business decisions” based on “the information that is material to the decision” and “to review the information critically.”^3,4   

Because health benefit costs are a material expense for every corporation that provides them, the advent of health plan price transparency implicates the fiduciary duty of care for directors and officers – especially chief financial officers – to “make informed business decisions” about health benefit costs using health plan price transparency data. Several lawsuits have been filed in the past 12 months alleging failure to meet this fiduciary standard. 

Health plan price transparency also allows the calculation of value – the intersection of quality and rate – for any service for which quality is measured. Using post-discharge mortality as the measure of quality, there is no observable correlation between quality and price for the most common medical inpatient admissions in any major metropolitan area in the United States.

Rising Prescription Drug Costs 

The role of pharmacy benefit managers in increasing prescription drug costs is another issue with bipartisan support in the 118th Congress and a key area of focus for the Federal Trade Commission. Between now and 2032, prescription drug spending in the United States is projected to increase by nearly 500%, higher than any other segment of the health economy. 

In September 2020, President Trump issued an Executive Order to reduce prescription drug costs through a most-favored nations approach that would set CMS reimbursement at the lowest cost of that drug paid by an OECD country. A Federal judge blocked the order because CMS had not allowed public comment. During the 2024 campaign, President-elect Trump has vacillated on whether to re-introduce that policy, but prescription drug costs continue to be a high-visibility issue.  

President Trump’s view on CMS’s ability to negotiate prescription drug prices is not clear. However, because CMS’s power originates in the Inflation Reduction Act (IRA), Congress would likely have to amend the IRA to limit CMS’s ability to negotiate prescription drug prices. 

Biologics are another potential area of focus in any White House administration seeking to reduce healthcare costs. While brand biologics typically increase in price before biosimilar entry, afterwards brand prices decrease by 25% on average. Despite demonstrable savings, biosimilar market share remains below 20%, suggesting that brand-name drugs are still being dispensed even when a biosimilar is available. 

Food and Drug Administration 

While Robert F. Kennedy, Jr.’s controversial views on numerous issues make it unlikely that he would receive Senate confirmation for Commissioner of Food and Drugs, his Presidential campaign’s focus on the health status of Americans has elevated public awareness of numerous issues related to food, leading to questions about the effectiveness of the Food and Drug Administration (FDA).

The FDA might also receive scrutiny for its role in approving prescription drugs.  While the FDA is tasked with measuring whether the benefits of a therapy outweigh its risks, many EU countries have a more rigorous approach measuring whether a drug’s additional benefit is an improvement against standard treatment, not just placebo.⁵ The additional benefits are calculated “in patient-relevant outcomes, such as a decrease in mortality or in the burden of disease (morbidity) or an increase in quality of life.”⁶ Notably, pharmaceutical companies receive higher reimbursement only if an added benefit is demonstrated. 

Not surprisingly, many drugs approved by the FDA are not approved in foreign countries. 

It is well known, if infrequently stated, that the United States effectively underwrites drug development for the rest of the world. Notably, the U.S. pays over 400% more on the same brand drugs than other OECD countries. Patent laws allow pharmaceutical companies exclusive rights to market “brand-name” drugs, which underpin high prescription drug prices. Because patent law is expressly reserved to Congress in Article I, Section 8  of the Constitution, Congress is the most appropriate branch of the U.S. government to attempt to reduce prescription drug costs by limiting patent extensions.

Regulation of Competition 

Financial markets and executives alike crave certainty, and the certainty of last week’s results spurred Wall Street’s performance. In the first Trump Administration, 46% of the Federal Trade Commission’s (FTC) antitrust enforcement actions focused on the health economy, with 25% of all FTC enforcement actions from 2016-2020 in the pharmaceutical and medical device sector and 21% in the general healthcare category.⁷ While the Trump campaign has publicly identified several Federal agencies that it plans to overhaul, the Federal Trade Commission is not on that list. The most important question to many stakeholders is whether the incoming Trump Administration will reverse the revisions to Hart Scott Rodino notification finalized a few weeks before Election Day.

Conclusion 

Media reports suggest that President-elect Trump and a Republican-led Congress believe that the American electorate has given them a mandate to govern. If Americans continue to be motivated by economic concerns, then this chart is ominous for every health economy stakeholder. 

Peter Drucker noted that “innovation means the creation of new value and new satisfaction for the customer.”⁸ As in higher education, there are few, if any, data points to demonstrate that the health economy is delivering “new value and new satisfaction for the customer” even as it demonstrates an unslakable thirst for more revenue. It is certain that the value delivered by health economy stakeholders has not increased by 150% in the past 25 years. 

Even if the most important customers in the health economy – the Federal government, state governments, employers and individual Americans – were enthusiastic about the value they receive from health economy stakeholders, they are increasingly unable to afford what they need. The electorate voiced general economic concerns in last week’s election. Health economy stakeholders would be wise to assume that, in either the 2028 or 2032 Presidential elections, all those customers become specifically focused on the fact that America’s financial challenges cannot be addressed without a radical overhaul of the U.S. health economy. As Dr. Drucker also noted, “most innovations in public service institutions are imposed on them either by outsiders or by catastrophe.”⁹ 

Because President-elect Trump has not articulated a comprehensive theory of healthcare policy in the past, it is impossible to know whether, and to what extent, all the issues identified above will affect health economy stakeholders. Even so, President-elect Trump has displayed an intuitive understanding of how a specific healthcare policy can impact health economy stakeholders, like price transparency, making it equally impossible to predict which issues will impact health economy stakeholders over the next four years. As a result, failing to prepare for the potential impact of each of these issues is preparing to fail. Every health economy stakeholder would benefit from applying a “first principles” framework to their mission and strategy to ensure that they are well-positioned to deliver value to every customer.