Healthcare Under Trump: A Public and Private Divide
Now that the 2024 presidential election is over, Americans can anticipate changes in the healthcare system during the Trump Administration’s second term. To gain insight, we can look at his first term and market responses to the most recent election outcomes to understand how the Trump Administration will potentially alter healthcare policy.
Medicare Advantage: A Clear Winner
Medicare Advantage, a program that permits commercial health plans to offer Medicare benefits, has been continuously backed by the Trump Administration. The response from the stock market, involving businesses such as UnitedHealth Group and Humana that have significant investments in their Medicare Advantage programs, further showed this expected trend in favor of the program. From election day (November 5), to November 6, Humana, Inc. saw a return of 13.26%, while UnitedHealth Group saw a gain of 7.49%. These gains continued, with UnitedHealth Group up 9.62% and Humana up 15.07% as of market close on December 2. Based on this data, investors appear optimistic about the future of these companies with the Trump Administration’s planned expansion of these programs.
Medicare Advantage plans often include additional benefits, such as vision, dental, and wellness programs, and may lower out-of-pocket costs for enrollees. During his first term, President-elect Trump implemented policies that expanded Medicare Advantage’s reach and benefits. The market’s positive reaction underscores the expectation that these favorable conditions will continue in his second term. The Trump Administration advocates for privatizing Medicare and encouraging greater competition among private insurers, arguing that this approach could drive innovation, improve service quality, and reduce costs.
Medicaid: Facing Headwinds
In contrast, the outlook for Medicaid under the Trump Administration has been less favorable. Medicaid is a joint federal and state program that helps with medical costs for people with limited income and resources. It also offers benefits not normally covered by Medicare, like nursing home care and personal care services. Companies with significant exposure to Medicaid populations, such as Centene Corporation and Molina Healthcare, experienced less positive market reactions. Over the same period, Centene Corporation was down (1.45%), while Molina Healthcare Inc. was down (0.95%) from November 5 to November 6. These declines continued, with Centene Corporation down (5.39%) and Molina Healthcare Inc. down (8.34%) from November 5 to December 2. The Administration’s proposals to cut Medicaid funding and impose stricter eligibility requirements have created uncertainty and potential challenges for these firms.
Children make up a sizable percentage of Medicaid beneficiaries. Nearly half of all children in the U.S. are covered in some way through a combination of Medicaid and the Children’s Health Insurance Program (CHIP). For low-income families, this coverage ensures essential healthcare access, contributing to long-term health and development. Potential cuts and regulatory changes under the Trump Administration could disproportionately affect these beneficiaries, possibly leading to reduced access to care and increased financial burdens for families. These changes could negatively impact the business performance of Medicaid-serving organizations by reducing Medicaid enrollment, heightening operational costs, and increase the difficulty of planning for long-term business growth because of market uncertainty. Trump’s first term saw attempts to restructure Medicaid through block grants and per capita limits, aiming to reduce federal spending and give states more control. While these measures were intended to increase efficiency, they also raised concerns about reduced coverage and access to care for underserved populations. The market’s cautious response reflects these concerns, highlighting the potential risks for companies reliant on Medicaid revenues.
Impact on Providers: Hospitals, ASCs, and Physicians
While there is a clear divide amongst major payers and how they may be affected by the incoming Trump Administration, the future for providers is much more uncertain. Market responses for healthcare providers were generally negative in the major sectors. Surgery Partners, Inc., which is one of the few publicly traded ambulatory surgery center (ASC) operators, saw a decline of (17.56%) from November 5 to December 2. Despite this decline, decreasing regulatory constraints are expected to promote competition and growth in the ASC space. Large hospital operators including HCA Healthcare (HCA), Community Health Systems (CYH), Tenet Healthcare (THC), and Universal Health Services (UHS), experienced varied declines: HCA (9.77%), CYH (22.10%), THC (12.77%), and UHS (3.49%) from November 5 to December 2. These declines are observed as there is growing investor pessimism about reimbursement model changes and regulatory shifts in the sector. Furthermore, Trump’s potential tariffs on imported goods could increase the prices of medical supplies, including medical equipment and diagnostic devices, as many of these products are manufactured outside the U.S. by countries potentially impacted by the proposed tariffs. This will likely affect hospitals, ASCs, clinics, and patients by raising overall healthcare costs and potentially causing supply chain disruptions. Although these large providers have seen poor results in the previous weeks, their well-diversified portfolios and exposure to various sectors within healthcare may mitigate some of the risks associated with this decline.
Despite this poor, post-election performance, the Trump Administration’s policies could also present opportunities for growth and innovation. By reducing regulatory burdens and promoting market-based care systems, providers may achieve greater operational efficiencies and enhanced patient care. Providers who adapt to these changes and embrace new technologies could find themselves in a strong position to thrive in the evolving healthcare landscape.
The Trump Administration’s impact on physicians remains unclear, as the American Medical Association, the national lobby representing physicians, had no statement on the election on their website. Additionally, the Association of American Medical Colleges issued a statement that they will work with Trump and stressed that they are a non-partisan organization that works with all policymakers.
Looking Forward
As we look ahead, the nomination of Dr. Mehmet Oz, a long-time television celebrity, as the proposed head of the Centers for Medicare & Medicaid Services signals a continued emphasis on Medicare Advantage. Dr. Oz has expressed his plans to expand Medicare Advantage plans to everyone who is not already enrolled in Medicaid.
Trump has also nominated Vivek Ramaswamy and Elon Musk to lead a proposed Office of Government Efficiency. Elon Musk has stated that he intends to slash at least $2 trillion, which would amount to roughly one-third of the nation’s budget. Ramaswamy and Musk have vowed to target waste, fraud, abuse, and inefficiency in government spending to help achieve this goal. However, it remains to be seen whether these potential, wide-ranging cuts will have a significant impact on the healthcare sector in the United States.
Trump has also recently nominated Robert F. Kennedy Jr. to be his next secretary of the Department of Health and Human Services. In a social media post on X (formerly Twitter), Kennedy vowed to “Clean up corruption, return health agencies to their tradition of gold-standard, evidence-based science. Provide Americans with transparency and access to all the data so they can make informed choices for themselves and their families.”
Additionally, the potential replacement of Lina Khan as the chair of the Federal Trade Commission could have significant implications for healthcare transactions. Khan, who is known for her aggressive stance on antitrust enforcement during her tenure, is expected to be replaced by a more business-friendly candidate under the Trump Administration. This change could facilitate a more favorable environment for mergers and acquisitions in the healthcare sector, further influencing market dynamics.
In conclusion, the Trump Administration’s anticipated healthcare policies are creating a growing market gap for companies focused on Medicare Advantage and Medicaid. The latter confronts several obstacles, while the former looks to benefit from ongoing assistance and growth. While it is somewhat clear how payers may be impacted, providers have a more uncertain outlook under the Trump Administration. The market’s recent response to the election results reflects negative investor sentiment and expectations for large hospital operators and other providers. Furthermore, it remains to be seen how many of Trump’s nominations will impact the industry if confirmed for their various roles. Due to the uncertainty around much of the Trump Administration’s plans and his proposed candidates, it remains unclear how many sectors of the healthcare industry will be impacted.
Sources
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