Key Takeaways

  • A split Senate limits legislation to what can pass through budget reconciliation and gain support of all 50 Democrats
  • Anticipate Biden to expand Obamacare and Medicare instead of introducing new programs, like a “public option”
  • The selections of Harris for VP and Becerra for HHS Secretary signal continued tight anti-trust enforcement
  • Expect increased and well-financed PE-backed disruption

 

A Joe Biden-Kamala Harris administration has significant implications for U.S. healthcare.  While it is instructive to review candidates’ platforms related to the industry, they tend to be better predictors of priority than the ultimate shape of policy or legislation. Biden’s boldest plans will be challenging to achieve, even with Vice President Harris serving as the tiebreaker in the evenly-split Senate.

Democrats are not unified behind sweeping expansion of federal health coverage like the public option, as we saw during the 2010 ACA debate. With little hope of GOP support for most liberal healthcare policies, it is unlikely that any significant legislation will receive the required 60-vote approval in the Senate to bypass the filibuster. Experts agree that Biden will have to rely on the budget reconciliation process- which requires only a simple majority- to pass healthcare legislation. Yet there are parameters to budget reconciliation. Only legislation that impacts revenue or spending can be passed this way, meaning that broad health legislation would doubtlessly be precluded from this process.

With that in mind, we predict several implications of a Biden-Harris administration.

First, expect some degree of expanded access to health coverage in the first 100 days. Healthcare has been a campaign trail go-to for Biden and it is seen as unfinished business by both Obama- and Clinton-Democrats.  Further, the pandemic has caused massive insurance disruption as furloughed employees have lost healthcare coverage and employers have cut healthcare benefits under significant financial strain. There are several levers the Biden administration could pull to address access to coverage for those impacted by the pandemic and possibly mitigate the significant disruption that would occur in the unlikely event that the new 6-3 conservative Supreme Court overturns the ACA next year. One is to make health plans purchased on the ACA exchanges more attractive.  This may be achieved by increasing subsidies and tax credits, legislating lower deductibles or changing the criteria for who is eligible for subsidies, for example, by raising the income ceiling. Another approach is to further incent the 12 holdout states that have not expanded Medicaid by upping the federal share of expansion costs from 90% to 100%. Other items that may be addressed include capping insurance costs based on income and limiting prescription drug prices, although these approaches appear more likely to face resistance from select Democratic Senators. Two of Biden’s biggest access expansion priorities, the creation of a public option and lowering the Medicare age to 60, are likely unachievable with this Congress.

Second, anticipate more stringent anti-trust enforcement of healthcare transactions.  Harris made her name in California, in part, by closely examining hospital mergers as State Attorney General. Many of the notable transactions that were approved by her office came with extensive conditions.  Biden’s nominee for Secretary of Health and Human Services, Xavier Becerra, currently serves in Harris’ old role as California Attorney General and shares her skepticism of provider scale. Their positions may influence FTC and DOJ policy.  Becerra could also possibly leverage CMS’ provider enrollment and certification conditions in an effort to deter mergers.  Unlike other industries, healthcare did not see a loosening of anti-trust regulation under Trump. During the Biden-Harris administration, strategic and geographically contiguous mergers will only face increased scrutiny.  The growing trend of evaluating physician concentration in anti-trust reviews will also continue. Hospitals considering a transaction in the near future should be prepared for a thorough review.

Third, and most amorphous, will be the impact of a Biden White House on the flow of private equity capital into healthcare. Much of the massive flow of PE dollars into healthcare has been chasing inefficiencies in fee-for-service reimbursement. As the model shifts towards population health, these incentives will change, but new opportunities will emerge.  Anticipate private equity to remain as a potent force in reshaping the provider landscape.

Of course, it is important to note that the most pressing healthcare priority for the Biden administration will be curtailing COVID-19. With COVID front and center, expect all health policy to be presented as a means to an end for this devastating pandemic.

With Biden in the White House, hospitals can expect a moderate increase of patients with some form of health coverage (likely at Medicare comparable rates) and also greater quality and cost demands. A Becerra-led HHS will also likely pursue an array of regulatory requirements for healthcare providers, from continuing Trump’s push towards price transparency, to limits on out-of-network billing and other consumer healthcare protections. The likely legislative changes coming down the pike, coupled with the pressures of the pandemic, will only accelerate the pace of change in healthcare.