Assessing the potential impacts on U.S. health care in an election year

During his term of office, President Biden went to great lengths to strengthen the Affordable Care Act (ACA)—also known as Obamacare—and expand affordable health care coverage to more Americans. President Biden meaningfully strengthened the ACA exchanges, which allow individuals to shop for subsidized health insurance plans, both through the introduction of enhanced subsidies in 2021, and increasing the income levels eligible for subsidy. An increase in marketing spending also aided ACA exchange awareness. During the most recent 2024 enrollment period, some 21 million Americans signed up for health insurance coverage through ACA exchanges—the highest‑ever total—and a massive increase from 11.4 million members in 2020.¹

With the expanded subsidies set to sunset in 2025, Kamala Harris will be keen to try and make these subsidies permanent, should she win the presidency in November. The main beneficiaries of an extension of the subsidies and continued growth in the ACA exchange enrollment will be managed care companies with sizable exchange businesses, along with providers who have seen incremental volume growth and improved payer mix associated with the increasing exchange membership.

Under a Kamala Harris administration, Medicare—the government‑funded health plan primarily for older Americans—is likely to see a continuation of the status quo. While not expected at the time of the 2020 election, President Biden and the Democratic administrators at Centers for Medicare and Medicaid, which sets Medicare policy and rates, put forth policies that have ultimately proved much more onerous than expected for the Medicare Advantage (MA) industry.

Many of the adjustments made to the Medicare program have created new headwinds to profitability for Medicare plans. These have included meaningful changes to the “risk model,” which MA plans use to determine individual beneficiary payment rates, and much more modest Medicare Advantage rate updates than the industry received during the Trump administration. While the election of Kamala Harris should be a continuation of the status quo, the last two rate‑setting cycles have created challenges for the MA industry, and as such, we believe the industry would welcome a change in administration.

U.S. hospitals have been meaningful beneficiaries of the expanded ACA subsidies introduced under the Biden administration, driving increased patient volumes coming from newly insured ACA enrollees. Since commercial insurance typically reimburses hospitals at higher rates than government programs such as Medicare and Medicaid, and most certainly relative to uninsured patients, the growth in ACA‑insured patients in hospitals has also contributed to higher profit margins for hospitals. A likely continuation of the ACA subsidies under a new Harris administration would see this trend continue.

Less positively, during his time in office President Biden attempted to control consolidation in the hospital subsector, including banning several planned mergers. While hospital mergers are ideally supposed to create cost efficiencies among often struggling hospitals, the creation of huge conglomerates and hospital networks has driven up U.S. medical costs, with some boasting near‑monopoly pricing power. In the absence of any (publicly‑stated) differing views from Kamala Harris, it is reasonable to expect this anti‑consolidation stance will continue—at least in the near term—should she be elected.

The main uncertainty in relation to drug pricing revolves around legislation introduced under the Inflation Reduction Act (IRA) giving Medicare (under Part D of the program, which covers drug prescriptions and subsidies available to plan members) the power for the first time to negotiate drug prices with manufacturers. The negotiations began in August 2023, with 10 drugs selected, and older Americans are already seeing lower out‑of‑pocket costs.

By the time the redesign of Part D is fully implemented in late 2025, it is expected that pharmaceutical companies will be picking up a considerably larger portion of U.S. prescription drug costs than has previously been the case. If elected, Kamala Harris would likely continue to push through measures introduced under the IRA, potentially expanding the number of drugs eligible for price negotiation. It is also worth noting that, in December 2023, the Biden administration announced new plans to boost competition in the pharmaceutical sector, while ensuring lower prescription drug costs.

Former President Trump has resumed his criticism of the ACA this campaign, and vowed to repeal and replace the legislation if he is reelected. While a full repeal and replace is highly unlikely, having failed during President Trump’s prior term, if reelected, President Trump could embark on efforts to weaken key provisions of the ACA.

One key element of the ACA that a Trump victory could impact would be the expanded ACA subsidies that are set to expire at the end of 2025 and would require legislative action to be extended. Other levers available to President Trump, if elected, would be to scale back on ACA marketing investments and, on the Medicaid side, increasing the power of states to restrict eligibility to Medicaid via work requirements and other measures.

A reelection of former President Trump would likely be more positive for the MA program, as his actions in his first presidential term served to strengthen funding for MA and increase the penetration relative to traditional fee‑for‑service Medicare. While a Trump reelection would be a “net win” for the Medicare plans, it is not known if President Trump would be as supportive of MA in a second term as he was in his first due to increasing rhetoric in Washington on both sides of the political aisle around overpayments to Medicare Advantage plans relative to fee for service.

There is concern among investors in hospitals that a Trump administration is unlikely to extend the expanded ACA subsidies once they expire in 2025. These subsidies have driven a sharp increase in ACA enrollment, which has led to an increase in hospital admissions and provided a boost to hospital profitability in recent years.

That said, there is one significant consideration that may give former President Trump reason for pause, namely the fact that the constituents in the key Republican states of Texas and Florida have been huge beneficiaries of the expanded ACA subsidies with ACA enrollment up 120% in Florida and 210% in Texas since 2020. The Trump administration would have to consider both the impact on constituents (voters) in these states, with 4.6 million individuals gaining coverage since 2020 in these two states, as well as the locally important hospital industry. The publicly traded for‑profit hospital companies are highly exposed to Texas and Florida, where the most growth in ACA exchange enrollment has been seen.

State hospitals, which are also large employers in their local markets; state governments; and, importantly, local voters, have all benefited to varying degrees. So, cutting off the current expanded ACA subsidies completely in 2025 may be easier said than done.

Drug pricing has not featured as prominently as it has in previous election campaigns; however, the high cost of prescription medicine remains an important issue on both sides of the political spectrum. Both candidates have voiced a desire to rein in health care inflation and reduce drug prices, albeit via different means. During his time in office, President Trump floated the idea of implementing a “Favored Nation Model,” whereby Medicare Part B prescription drug prices would be pegged to the lowest price paid by other developed nations. While the proposal was ultimately blocked, it highlights a clear commitment to act on what is a key issue for American voters.

Whether or not a new Trump administration would continue with the price negotiation powers granted to Medicare under the IRA remains to be seen. To date, President Trump has said little on this, nor has he proposed any alternative policies aimed at reducing drug prices. Suffice it to say that, previously, President Trump has not been a particular friend to “big pharma,” so a return to office is unlikely to be more favorable than a Harris administration for the sector, and possibly much less so.