With ballots (mostly) counted, the Associated Press and other media outlets have called the presidential election for former Vice President Joe Biden (although legal challenges to ballots continue).
Slide deck: A deep dive on what the election means for health care
While Biden's ascent to the presidency augurs a new regulatory era for U.S. health care, many of the Democrats' legislative priorities are likely to face an uphill battle, with a diminished House majority and the Senate potentially remaining in GOP hands. The Democrats will need to capture both Georgia Senate seats in runoff elections in early January to just barely hand Senate control to the Democrats, with future Vice President Kamala Harris casting the deciding vote. In such a scenario, many Democratic priorities will still face hurdles, with zero room for defections. But expect huge sums of money spent by both sides in the run-up to the runoffs.
Normally I'd launch into the various policy goals of the incoming administration and the potential impacts on the health care world—and I'll get to that, I promise. But this election has a few immediate impacts that we should note first.
Immediate impact: New Covid-19 relief, old Covid-19 funding, and the ACA
The immediate impact of the election is on the Covid-19 relief bill negotiations between Congress and the White House. With Democrats about to retake the White House, House Democrats are unlikely to compromise with the current Republican-led Senate for any measures other than emergency stopgaps through the presidential inauguration. Although Senate Republicans would prefer to see a deal done by the end of the year, House Democrats may find it more favorable to wait until the Biden administration (or a potential recapture of the Senate). The current differences between House Democrats and Senate Republicans focus on the cost of relief, liability protections from Covid-related lawsuits, and more aid for local and state governments. However, even with a Biden administration, Senate Republicans (if they maintain control) are unlikely to pass the huge spending increases for states included in the House's Heroes Act, largely seen as the blueprint for how they would govern through the pandemic. A Biden administration would nonetheless centralize more efforts at the federal level, compared to the Trump actions. More rigorous guidelines around mask usage, testing, etc., are likely, even if they fall short of mandates. Otherwise, many of the Trump administration's efforts around vaccine development and distribution are likely to continue.
In the meantime, of the original $175 billion for providers, $31 billion remains outstanding after the recent announcement of a planned $20 billion dispersal. The Trump administration could accelerate those payments to keep it out of the hands of the incoming Democrats.
And finally, there's the Affordable Care Act. The new fully seated Supreme Court will hear oral arguments on the constitutionality of the individual mandate and ACA next week. While a change in administration is unlikely to affect its decision, a split Congress and Biden administration could conceivably address any ruling adverse to the ACA (for example, by reinstating the individual mandate as a trivial tax, or re-passing the ACA again in some form that retains its most popular provisions). Expect Republicans to demand some significant concessions or modifications to the law.
5 predictions on how a Biden administration could approach key health care issues
All of that is just between now and the end of January. Let's look to the future by examining the Biden's likely governing philosophy, with a few predictions:
1. A Biden administration will likely favor participation over performance in value-based care
When it comes to value-based care, there has been more continuity than departure between the Trump and Obama administrations. Both affirmed their commitment to risk-based payment and reimbursement models that reward value over volume. But while the Obama administration focused on maximizing participation in VBC programs, the Trump administration prioritized performance within those programs. In seeing proportionally more savings generated by physician-led ACOs, the latter has doubled-down on physician-led care models (such as its Primary Cares program) while tightening performance restrictions on hospitals and health systems. We don't expect the Biden administration to suddenly reverse course and favor systems over physicians, but if it resembles the Obama era, it will likely relax performance standards to favor a bigger tent, allowing more organizations to participate, with a long-term goal of curbing cost growth (it's clear that restraining spending will not be a near-term Democratic priority).
2. The future of health care provider consolidation probably contains many surprises
The prevailing wisdom says that a Biden administration will turn a far more skeptical eye toward provider aggregation, but the reality will likely be more complicated. For one, the longer the pandemic lingers, the worse it is for provider finances. Struggling organizations are going to face enormous pressure to get acquired or close, the latter of which will almost certainly prove politically unpopular.
Intra-market horizontal mergers (hospitals acquiring other hospitals) are likely to receive extra scrutiny (as they have during the Trump years). But under a Biden administration, vertical mergers (acquisitions of downstream or upstream providers) will be under greater pressure to prove their commitment to delivering higher-quality, lower-cost care that stems from integration to pass regulatory muster.
3. Expect more states to embrace Medicaid expansion, the feds to restore cost-sharing subsidies, and states to take the lead on public option development
During the presidential campaign, there was little incentive for state governments to expand ACA Medicaid access because, if elected, Biden's potential public option could fund that expansion at the federal level, assuming it made it through Congress. But GOP Senate control all but precludes a federal public option emerging any time soon (and even a narrow Democratic majority would make passage of such significant legislation difficult, though not impossible). States looking to expand Medicaid would then have little recourse other than to embrace the funding conditions of the ACA. We would also likely see the reacceleration of public option innovation among the states. Prior to 2020, several states (most prominently Washington and Colorado) had moved forward with creating public options, only to shelve them when the pandemic hit. Expect those ideas to get resurrected when state tax revenues stabilize.
Biden is also almost certain to restore cost-sharing subsidies that reduce out of pocket costs for ACA exchange enrollees, which Trump had criticized as overly generous to insurance companies.
4. Health care spending controls will need to be addressed in the next four years, one way or another
Congress loves to spend money. That's its main job, after all. But the Congressional Budget Office has recently announced that the Medicare trust fund is currently on track to go into deficit in 2024, which will force Congress to act to prop it up and avoid significant shortfalls. That could take the form of tax increases, Medicare beneficiary premium hikes, or provider rate cuts—and possibly a combination of all three. So even if the Biden administration will want to prioritize coverage over cost, at some point during his administration, Congress and the president will have to take on this issue, and the result will likely be more draconian measures curb spending—site of care shifts, payment models (probably physician-led) that encourage steering patients to lower-cost providers, and outright price cuts or rate freezes.
5. If Biden holds true to his campaign promises, compromise and common ground are actually possible
Throughout the campaign, Biden frequently cited his ability to work with Republicans to pass legislation—and he'll need all of the skills at his disposal to make that possible. But while it may not seem like it at first glance, there are a number of areas in which Biden and the Democrats can work with the GOP toward common goals:
- Drug pricing. Reining in the cost of prescription drugs was a priority of both Trump and Biden, with both favoring increased price controls, either in the form of international indexing or imposed spending caps—though both proposals would be tough to push through Congress.
- Surprise billing. Before the pandemic hit, this was the most likely candidate for compromise between Trump and the Democratic House. Both parties have a strong interest in limiting large and unexpected health care bills, and we could see limits placed on surprise bills that map to the restrictions placed on bills for Covid patients.
- Support for telehealth. Federal Communications Commission during the Trump administration has already prioritized expanding rural and exurban broadband. A Biden administration would likely have similar goals to expand telehealth access to underserved communities.
- Improving maternal health, especially in communities of color. The Biden campaign supports public-private partnerships that have been effective in reducing maternal mortality in California, and could find some support among GOP members of Congress.
- Price transparency. Although price transparency isn't likely to take nearly as much attention as coverage expansion, Trump-era efforts to mandate more price disclosure from providers and drug and device makers are likely to continue.
The bottom line: where and how physicians choose to practice is the single biggest force shaping the industry now—and it will continue to be
Regular readers will know that Advisory Board has been charting the huge changes flowing through the medical group market. Increased consolidation into mega-groups, the emergence of non-traditional providers that target particular patient segments, an increased role for private equity, and the development of new telehealth and artificial intelligence technologies all herald a period of profound disruption for the physician landscape.
A Biden administration is likely to continue (1) fostering models that persuade doctors to adopt value-based care (albeit with more cooperation from health systems), (2) encouraging or protecting physician competition where possible, and (3) safeguarding reimbursement for primary care doctors. Their loyalties and preferences are likely to shape our industry far more significantly in the next few years than anything the federal government is likely to accomplish with a sharply divided government. Our near-term advice: focus on those physicians for now.
What to watch for next
The biggest question (besides the outcomes of Senate runoffs and legal challenges to ballot counts): Who's going to be in charge of government health agencies? We'll be keeping close tabs on the shortlist of candidates to lead HHS, CMS, and CMMI. These staffing picks will provide some clarity on where the Biden administration will be placing its priorities—and the likely GOP pushback. Whoever leads these agencies will stamp his or her priorities on the industry for the next four years at least. Senate majority leader Mitch McConnell (R-Ky.) has already stated that he plans to use the Senate's advice-and-consent power to force moderate cabinet picks, preferably sourced from the Senate. If the Democrats regain control of the Senate, they will have to ensure perfect unity to push through Biden's cabinet nominees, though the process will certainly be easier.
But I'm sure you have tons more questions. We'll be answering them in our upcoming CEO Special Series that will go into detail on the impact of the election on the health care sector. For a deeper dive on the big policy implications, tune in for our Dec. 10 "Stay Up to Date" webinar, where I'll be discussing the election and more with my longtime colleague, Yulan Egan. And don't forget to subscribe to our podcast, Radio Advisory. In the next episode, I'll be joining host Rachel Woods for a candid discussion of what to expect across the next several months.
Slide deck: A deep dive on what the election means for health care
Access the slide deck and recording from our December webinar where we take a deep dive into the election's aftermath and discuss what the choices for incoming officials say about the future direction of our industry.