What The Election Means For The Healthcare Industry And The Economy
NEW YORK, NEW YORK: The New York Stock Exchange is seen during the morning trading on November 07, … [+]
Getty Images
In the days following Donald Trump’s 2024 presidential election victory, the Dow Jones Industrial Average soared to a record high, rising more than 1,500 points. The S&P 500 and the Nasdaq each rose by more than 2%, hitting their own highs. Election-related spikes of this magnitude suggest the market believes a Trump-Vance administration will be more hospitable to business than a Harris-Walz administration would have been.
This is not surprising, given that Trump campaigned on fixing the economy, bringing down inflation, investing in energy, bringing stability across the globe, a more secure border, safety in cities, and reduced government regulation. He’s even announced the creation of a new non-governmental agency, the Department of Government Efficiency, or DOGE, to advise the White House on how to eliminate bureaucratic waste. While this platform has broad positive implications across the business community, it will be especially significant to the healthcare ecosystem.
While the incoming administration may not know exactly how to fix healthcare, they recognize that the current emphasis on regulation is distorting the market and driving up the cost of care. A more hospitable business environment means the opportunity for substantive, system-wide change may be in front of us.
As I discuss in my book Bringing Value to Healthcare, popular discontent with the healthcare system has grown significantly in recent decades as costs have risen without a corresponding rise in positive health outcomes. Legislators and regulators have responded with new laws, new mandates, the state negotiating prices with private companies, and more, unable to recognize that sometimes less is more when it comes to government involvement. The two most significant healthcare policy changes in recent memory – the Affordable Care Act of 2010 and the Inflation Reduction Act of 2022 – brought an avalanche of additional regulation to healthcare.
Take the Medical Loss Ratio, for instance, an example I’ve used in a previous column. The MLR is a requirement of the ACA forcing insurance companies to spend 80% (85% in the large group market) of premiums on direct medical care and efforts aimed at improving quality. Insurers must submit detailed annual reports to regulators at the Centers for Medicare & Medicaid Services, explaining how premium dollars are spent. The reports break down expenditures on clinical services, quality improvement activities, administrative costs, and other non-healthcare-related spending.
These reporting requirements provide no clear value to plan members, but they drive up premium costs. Countless other regulations follow this same pattern. Regulations like the MLR have added more complexity to a healthcare system that is visibly failing. The edifice of countless regulations that stifle innovation and indefinitely postpone fundamental reforms is poised to collapse under its own weight.
It’s not that regulation has no place; it does. But regulation that lacks intelligent design, fails to clearly frame the problem that’s being addressed, and does not account for how pieces of the whole fit together will lead to unintended consequences that will exacerbate existing issues. Creating more rational regulation is a necessary but insufficient step in solving the problems with American healthcare; by itself it is not enough. Without rethinking the underlying structures and payment model that drive inefficiency and rising costs, attempts at deregulation risks leaving the system in its current, broken state. Deregulating without taking a hard look at the misaligned incentives that are core to the problems that need to be addressed is one more band aid solution for a problem that will continue until root causes are addressed.
Real progress depends on broadening the aperture and looking past piecemeal fixes to comprehensive solutions that connect payment to outcomes that matter and ensure accountability across the care continuum as I have written before.
I’ve argued repeatedly that we can improve outcomes for both the healthcare industry and patients by transitioning to a market-based model. Such a model can limit bureaucracy but also increase transparency in the cost and quality of medical goods and services being offered. And it can bring about accountability for care across the continuum with payment tied to outcomes that matter to patients.
In healthcare today, there is limited awareness of the power of paying for outcomes or conversely, not paying for something that doesn’t work. In every other industry, consumers demand their money back when a product doesn’t work. Yet the healthcare industry as a whole has continued to bypass this critical element of a market economy, fighting tooth and nail against the price transparency efforts that would allow patient-consumers to make informed decisions and hold providers accountable for the value of the care they deliver.
On this point too, the new administration has shown promising signs. During his first term in office, president Trump instituted price transparency requirements for hospitals, although these efforts have been resisted by healthcare delivery providers. His future Vice President J.D. Vance likewise highlighted the importance of this issue in the recent vice presidential debate.
The incoming administration’s desire to clear unnecessary regulation and reduce bureaucratic bloat, as well as its emphasis on transparency, signal that the time is ripe for a system overhaul. Confidence from the stock market suggests the business community believes the new administration can drive meaningful change in a way that supports both business and everyday Americans.
But they must do more than simply cut red tape; they can create an environment where reform is not only possible but encouraged. They can foster a healthcare ecosystem that rewards innovation, aligns incentives, promotes transparency, and delivers measurable value to patients. If this happens, we all win.
No Byline Policy
Editorial Guidelines
Corrections Policy
Source