The policy environment for healthcare industries has been under constant attack since the passage of the Affordable Care Act (ACA) in 2010. Partisan bickering in Washington and in state capitals across the country created significant noise, but with President Obama in the White House, few major changes to the bedrock of care under the ACA were implemented.

But now, paradoxically, with Republicans controlling the House, Senate and the White House, there is greater uncertainty about the future of healthcare in the United States and what the Trump administration and Congress can do to address rising costs, regulatory challenges and consumer demand for nothing less than the status quo.

In fact, the greatest challenge – and the Gordian knot – for the Republican Party is how to control spending without increasing the number of uninsured. The party’s right flank admits this can’t happen and is willing to stand by their beliefs that getting the government out of the exam room is the priority. President Trump’s proposed fiscal year 2018 budget reflects this view. The Republicans’ moderate wing recognizes that unless you are from a wholly conservative congressional district or state, reductions in the number of covered Americans could cause a significant political impact in the 2018 and 2020 elections.

The uncertain future of this debate affects the spectrum of healthcare industries:

  • Insurance: Ending the pre-existing condition and basic services requirements are central to the American Healthcare Act (ACHA) as passed by the House. However, it is unlikely that these politically sensitive proposals will be maintained as currently written in the bill that will emerge from the Senate. And, by removing the individual mandate requirement and tax credits, and not continuing the cost-sharing reduction payments as prescribed in the ACA, the impact on the insurance market could be devastating (in 2016, insurers received approximately $7 billion in payments).
  • Pharmaceuticals: The pricing debate – and the range of solutions offered at the national and state levels – will have a profound effect on the U.S. market. Direct Medicare Part D price negotiations are the most concerning for the industry, but so are proposals to import drugs from Canada and demands for companies to share research and development costs. The pharmaceutical sector likely see benefits from new FDA Commissioner Scott Gottlieb who has expressed a desire to speed approvals of both generic and innovative medicines.
  • Hospitals: Reductions in Medicaid spending and the number of enrollees eligible for Medicaid, a key part of the AHCA and proposals being discussed in the Senate, could severely impact the ability of hospitals to care effectively for vulnerable populations.
  • Medical devices: This industry’s most pressing demand, withdrawal of the 2.3 percent excise tax, appears in the House-passed AHCA and has a history of bipartisan support (President Obama signed a two-year suspension of the tax in December 2015). However, some Senate Republicans are now suggesting that all ACA taxes should be maintained to promote the fiscal stability of the system.

The likelihood of significant, wide-ranging healthcare reform happening is small, but it will get great attention as President Trump’s budget proposal is discussed and the Senate designs its own repeal-and-replace bill. Democrats don’t want to provide the president a victory, and, as we saw in the House, there is a big gap between what the conservative wing of the Republican Party wants and what moderates believe is politically wise. This divide will be stronger in the Senate, since they recognize that what they pass has an actual chance of becoming law. Unfortunately, this means that an uncertain, unpredictable future for the U.S. healthcare sector will continue to be the one constant in the healthcare industry.

If you have questions, Burson-Marsteller’s Healthcare Managing Director Jonathan Kimball is tracking the uncertainty and its implications.