Trump Healthcare 2.0: The Laundry List of Disruption Targets
December 2, 2024
The incoming Trump administration is committed to cutting government waste and reducing regulation. That pledge puts the U.S. healthcare industry in the crosshairs for budget cuts and heightened attention. It’s also a high-profile industry that’s ripe for disruption.
Healthcare is the economy’s biggest private-sector employer (18.3 million) and accounts for 17.3% of the GDP and 28% of total federal spending. Since 2008, annual increases for prescription drugs, hospitals and physician services have increased faster than the “All Items” index widening every year (See Chart above)..From 2012 to 2022, the average annual growth rate was 4.2% for physician services, 4.4% for hospital care, 4.7% for prescription drugs and 5.0% for insurers who experienced the highest volatility of the four.
For the most part, these sectors have weathered financial storms fairly well. The biggest players in each sector navigated the pandemic and volatility through consolidation and scale advantages while smaller players in their ranks were debilitated. Public policy changes were, by and large, incremental with one exception: the Affordable Care Act (2010) which sought to increase coverage for small employers and low-income individuals while improving quality and reducing costs. Its effectiveness remains a toss-up though Fix and Repair has replaced Repeal and Replace even among its most ardent critics. Health spending continues to go up, quality is wildly variable depending on what measures one chooses, and coverage has enabled the uninsured rate to plummet from 17.8% in 2010 to 7.6% last year.
Looking ahead, per the Congressional Budget Office, spending for healthcare is forecast to increase 5.6% per year for the next decade to 19.7% of the GDP—well above GDP growth (4.3%). Assuming continued aging, medical inflation (drugs, technologies and facilities) and labor costs, the health industry’s dominance will be increasingly problematic to the rest of the economy. It underlies the Trump Healthcare team’s belief that incremental changes to the health system are a waste of time and money.
The Trump Healthcare 2.0 team (Trump, Musk, Ramaswamy, Kennedy, Oz, Makary, et al) believes the U.S. industry is wasteful, over-regulated and deceptive. They know other countries spend a third less than the U.S. and get comparable or better outcomes. Their message resonates with the majority of employers and consumers facing higher costs and persistent issues with affordability, accessibility and variable quality. And it presents a laundry list of opportunities for disruption including these…
- Expansion of price transparency mandates for insurers, hospitals, prescription drugs and physicians.
- Medicare payment cuts to certain hospitals vis a vis approval of site neutral payments, limits on tax exemptions for NFP systems and administrative cost reduction mandates.
- Re-vamping of CMSs Center for Medicare and Medicaid Innovation to refocus its value agenda and alternative payment programs.
- Restrictions on insurer prior authorization and surprise billing policies.
- Stimuli for rapid adoption of the Rural Emergency Hospital (REH) program in collaboration with public health integration.
- Lifting of restrictions for physician-owned hospital ownership and expansion of access for certain alternative and behavioral health professions.
- Suspension of minimum staffing mandates for nursing homes.
- Evaluation and expansion of the Veteran’s Choice Program (VHA).
- Allowance for Marketplace subsidies to expire (December 2025) to stimulate individual market competition.
- Executive orders to facilitate interoperability.
- Standardization and acceleration of Gen AI applications in healthcare workforce modernization.
- Updating of regulatory policy to stimulate Medicare Advantage enrollment growth.
- Accelerated approval for new drugs in tandem with drug price transparency mandates
- Expansion of nutrition and food-as-medicine efforts in public health, primary care, and veterans’ health in tandem with overhaul of the U.S. D.A. “healthy eating” guidelines.
- Elimination and streamlining of HHS programs and agencies accompanied by reduced appropriations.
- CMS, FTC executive review: health insurance coverage determinations, administrative costs, prior authorizations and premiums, et al
- HHS-USDA Executive Review: food supply & nutrition, additives, corporate influence, et al
- Continued default to state determinations and court proceedings on abortion.
- FTC review of promised savings, public health improvements and lower prices resulting from hospital consolidation.
- And many others.
Recognizing the eminence of Campaign 2026 and narrow GOP margins in Congress, the Trump team will rely on administrative directives in key agencies (DOJ, FTC, FDA, CMS, VHA et al), high profile investigations and White House Executive Orders to post wins on these. Legislative initiatives (new laws) will be few and far between. And the laundry list will expand as the team is confirmed.
How to prepare
Most boards of directors of U.S. healthcare organizations are reasonably comfortable opining about their organizations’ finances and short-term strategy. They’re not prepared to discuss issues outside their sector nor system-wide changes that lie ahead. Board education based on a complete, objective environmental assessment and deliberative process of scenario planning are necessary starting points.
And, given the Trump Healthcare team’s penchant for high-profile disruption, every organization must revisit its performance and public messaging around four questions:
- Do we take affordability seriously? What’s the evidence?
- Are our administrative costs (including wages, executive compensation, et al), direct (supplies, technology et al) and indirect costs (capital, et al) reasonable and shrinking?
- Do we base clinical decisions (treatments, coverage, formulary, drug efficacy et al) on scientific evidence? Are non-conventional clinical strategies and non-traditional providers thoughtfully considered in clinical strategies?
- Are we trusted?
The laundry list for Trump Healthcare 2.0 disruption is long. The public expects changes. Responding in business-as-usual fashion—especially thru well-worn trade association advocacy pronouncements-- is short-sighted. It’s time to take a fresh look starting with a mirror.
Paul
PS: This Saturday is the deadline for Medicare Open enrollment.-. Approximately 1.8 million MA members and 500,000 Part D enrollees will need to change their Medicare Advantage plans because their current policies are not available next year. MA will play a big role in Trump Healthcare plans. Stay tuned |
|
|
