2025 Policy Forecasts: Healthcare

Welcome to Capstone’s annual forecast of unappreciated policy and regulatory themes companies, investors, and, industries should expect to play out over the course of the year in the healthcare sector.

Healthy Diagnosis: Providers Well-positioned for the Year Ahead

Capstone believes 2025 will feature a broadly positive policy backdrop for healthcare providers, with three major themes dominating. We expect a reversal of labor union alignment rules passed by the Biden administration, stepped-up momentum in Congress to resolve the future of the physician fee schedule (PFS), and relative insulation for “core population” services from the potential trickle-down effects of potential Medicaid cuts.

Prescription for Risk: Drug Price Cuts Loom, Little Recourse for Payors

Capstone believes the healthcare impacts of Biden’s Inflation Reduction Act will be felt in 2025, posing underappreciated risk and little recourse for payors, manufacturers, and pharmacies. The Trump Administration will revisit the Most Favored Nations (MFN) pricing model, which would significantly disrupt the pharmaceutical supply chain. However, concerns about the BIOSECURE Act’s impact are overstated, and the bill is unlikely to pass.

Underwriting Amid Volatility: Health Insurers Will Brace for Policy Shifts and Risks

Capstone believes the incoming Trump administration will usher in a volatile 2025 for health insurance payors. There are several themes within payors that investors are underappreciating, primarily involving the Affordable Care Act (ACA) subsidy extension, Medicare Advantage’s (MA) tailwinds, and nuanced risks, and the target Medicaid spending and Medicaid managed care organizations (MCOs) have on their back.

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