New Leadership, Policies: What It Could Mean for Health Care, Life Sciences

With the election of a new president, the new administration sets its priorities, which could mean shifts in policy focus and potential changes for health care and life sciences (HLCS) organizations. The incoming administration will also need to work with the new incoming Congress to effectuate some of these changes.

Full executive branch, legislative control

In addition to a new president, the U.S. Congress also underwent shifts this election cycle with control of the U.S. Senate flipping from Democrats to Republicans. The U.S. House of Representatives, controlled by Republicans in the 118th Congress, will remain in Republican control during the 119th Congress (2025 – 2026).

This means one party will control both the executive and legislative branches of government during the 119th Congress. This has many implications for legislation and regulations.

The selection of key health care agency leaders will also provide insights to potential policy directions. Robert F. Kennedy, Jr., has been proposed to lead the department of Health & Human Services. Under Kennedy’s leadership, the new administration will likely take more interest in certain health care agencies and policies related to health, food, and drugs.

Mehmet Oz, M.D., has been proposed to lead the Centers for Medicare & Medicaid (CMS). Like Kennedy, he and the administration will likely focus on certain policies to impact changes in the agency. To date, no one has been announced to run the Federal Drug Administration (FDA).

Potential changes to tax, health care policies

For both the HHS and CMS organizations, the new administration may prioritize other issues like changes to federal taxes, trade, and foreign affairs over health care. However, some of those tax and economic policies could impact HCLS.

For example, increased tariffs could impact HCLS organizations where various drugs, drug ingredients, and medical supplies are imported. Depending on what policies are advanced, they could have negative impacts on HCLS supply chains, making access more difficult or raising costs for HCLS entities and even consumers.

Also, tax policies included in the Tax Cuts and Jobs Act (TCJA) are scheduled to sunset at the end of 2025. Unless addressed, increased tax rates and the expiration of the qualified business income tax deduction, as examples, could have large tax implications for HCLS business owners. The new administration and Congress are expected to dig into these policies in 2025.

As the months unfold and policy approaches take shape, this could be the perfect opportunity to undertake financial scenario planning for you and your HCLS organization. Please reach out to CLA for assistance. Contact us.

Let’s take a look at a few more policies.

Inflation Reduction Act (IRA)

Congress may repeal all or part of the IRA to pay for TCJA extenders.

Affordable Care Act (ACA) premium tax credit

The American Rescue Plan Act significantly enhanced ACA premium tax credits, which assisted many individuals in purchasing affordable insurance on ACA exchanges.

These enhanced credits are set to sunset at the end of 2025, and the new administration and Congress may let them partially or even fully do so due to the estimated cost of $335 billion to the federal government over the next decade. Further, other ACA policy changes may be considered to reflect a more flexible, market-focused ACA.

Drug costs

The new administration may propose various policies related to drug costs, potentially focusing on transparency or pharmacy benefit manager changes. This could also include reviewing the IRA’s Medicare drug negotiation law.

Integrity reforms

The new administration will likely focus on integrity policies across all of government. This could include a focus on price transparency, changes to agencies, or addressing government’s approach to health care programs like Medicaid. For example, ideas to consider state block grants or work requirements have been floated.

Unwinding previous regulations

Various regulations put into place under the previous administration may be targeted for removal by executive or congressional action. Some examples include eliminating the nursing home staffing mandate, repealing the ban on noncompete clauses, or stopping the independent contractor rule.

Another difference may be a more free-market, hands-off regulatory approach to mergers and acquisitions (M&A) compared to the current focus on antitrust. That said, health care consolidation could still be of concern, keeping M&A or even private equity on the radar, though deals will certainly be viewed through a different lens.

Other issues to watch in lame duck, 2025

The first order of business Congress faces is funding the federal government. The current federal fiscal year (FFY), FFY 2025, is funded through December 20, 2024. The sitting Congress and president could partially or fully address FFY 2025 funding during what’s called the “lame duck” sessions in November or December.

Depending on their approach, the new Congress will have to deal with either the remainder of FFY 2025 and/or FFY 2026 appropriations budget next year. It will also face the debt ceiling limit, which comes into play in early 2025. It is premature to know how they will handle these issues, but it will likely look different from the previous four years.

There could be changes proposed for HCLS agencies like the FDA, Centers for Disease Control, or savings from other policies, such as site-neutral payments in Medicare or repealing the nursing home staffing mandate — but only time will tell.

With respect to the lame duck, many physicians are hopeful Congress will mitigate or eliminate payment cuts that go into effect January 1, 2025.

Hospitals may be looking for Congress to address expiring policies, such as the Medicare Dependent Hospital and low-volume adjustment, plus stop impending disproportionate share hospital payment cuts that begin January 1, 2025.

Community health centers may be seeking renewal of funding set to expire at year’s end, and many telehealth advocates are urging extension of various policies also expiring at the end of the year. Whether these policies are addressed and how they will be paid for is an open issue.

How CLA can help navigate health care, tax policy

While HCLS polices will likely be a part of the new administration’s agenda, they are only part of a larger mix of issues. Stakeholders must stay informed and adaptable as these policies evolve.

CLA’s health care team and strategic advisory and tax strategy teams will continue to monitor these developments closely, providing insights and updates to help navigate the changing environment.