Even a master seer would have problems predicting what will occur in healthcare in 2025
In my last blog, I gave you my healthcare year-in-review for 2024. After that, as I always do each year, I play Nostradamus to prognosticate about what will happen in the next twelve months in the world of healthcare. Despite my Irish last name, I do have French blood (well, 50% French Canadien, so I count it). But I don’t claim to be an oracle or seer like our 16th century physician, apothecary, and astrologer friend.
I do take a page from Nostradamus, though, in that my healthcare predictions for 2025 (not really prophecies) will be sometimes deliberately vague (they include a lot of mays, coulds, shoulds, perhaps, likelys and possibles) so as to amass a reasonable record for those tracking and putting together my forecasting report card for the history books. It also tends to make my head bigger (as if it needs it) and boost my sometimes fragile ego.
Here is hoping my crystal ball is clear and not cloudy, but don’t hold me to any of this; I am simply your intrepid Healthcare Labyrinth blogger having a little fun.
Happy New Year and to a great 2025 for all of us personally and professionally. I have a hard time practicing this, but remember that a lasting legacy is not in the money you leave behind, but in the lives you impact – family, friends, and the greater community.
My 2024 Prediction Report Card
I was a little off when I said insurers would generally meet targets, but some could continue to struggle in Medicare Advantage (MA). Some did meet targets, but the financial woes were much bigger than I expected, with some real meltdowns.
I also botched a prediction that, sometime in 2024, the following reforms would pass: site neutral payments, a ban on spread pricing for PBMs, and more rigorous transparency reporting requirements for hospitals, health plans and PBMs on the price front.
I was wrong, too, when I said that Congress will finally begin to look at Medicare insolvency and will make perceived over-payments to MA some part of their solution.
I was a little off when I said MA growth would struggle to hit 7%. It almost hit 9%.
I said the uninsured rate would inch up. Surprisingly, it didn’t – it stayed steady.
I was right and wrong on Exchange enrollment. I said it would grow strongly, but it did even better than I thought.
I surmised there could be a government shutdown. There was not.
Some highlights of where I was right:
- Utilization would return along with inflation.
- There would be further job cutbacks at insurers.
- Health plans would continue to reduce emphasis on prior authorizations (PA) in favor of care management and provider education/collaboration.
- There would be major attacks on the policy and legal front on the use of AI with PA and claim denials.
- Interoperability would be prioritized.
- That Congress and the administration would open up investigations into health plan gaming of the minimum medical loss ratio (MLR) requirements across lines of business.
- Private equity investment would be hobbled by an antitrust focus.
- Transparent pricing would take greater hold with traditional PBMs and the startups would gain traction with their transparency agenda.
- Mark Cuban’s Cost Plus Drug (along with similar entities) would continue to innovate and transform beyond generics.
- The various legal actions against the Inflation Reduction Act’s (IRA) Medicare price negotiations would fail and implementation would progress.
- The Chevron deference would be overturned.
- MA Special Needs Plans (SNPs) would continue to show explosive growth.
- MA rates would again be tight with the new risk adjustment phase-in.
- Other regulatory focuses would be on network adequacy, SNPs, and marketing.
- Plans would continue to struggle with Star performance overall.
- Donald Trump and Ron DeSantis would not propose anything that is remotely a credible alternative to the Affordable Care Act (ACA).
2025 Predictions
Here are my predictions for 2025 in healthcare. One caveat: do not confuse my predictions with my desires. I am an investment-minded Republican, who thinks reasonably expansive coverage is a good thing for the nation, healthcare, and its people. Unfortunately, I do predict some things that deviate from that core philosophy.
The new political regime
While Donald Trump is perceived to have a mandate with his trifecta in Washington, governing may not be smooth sailing given the tight numbers in each chamber of Congress. Trump will weigh in on the Speaker’s race and urge unity, but current Speaker Mike Johnson may not survive, which could create even more volatility in 2025.
Congress has to pass a final FFY 2025 budget, pass appropriations bills for FFY 2026, and make room for the extension of the 2017 tax cuts set to expire at the end of 2025. Thus, spending cuts will dominate in 2025. The Republicans will have a hard time going real deep in some areas, but the Department of Government Efficiency (DOGE) will mean sweeping cuts to the federal budget. Trump will be focused on a legacy of shrinking the size of government, tax cuts, and a robust economy. While “Making America Healthy Again” will be a reality, it will be much lower on the priority list for the administration and Congress.
I predict that Trump and the GOP may shy away from a master overhaul of healthcare programs, such as tossing the ACA and instituting Medicaid block grants. Instead, the spending cuts package could “sculpt out” some critical funding in healthcare programs through more nuanced approaches to benefits, mandates, and regulations. This will impact funding in government programs as well as coverage over time. This gives the GOP the ability to save, but lessen the political attacks (somewhat) from Democrats regarding gutting safety net programs.
The GOP will stay with Trump on his nominees and he will get almost all of them. This includes Robert F. Kenndy Jr. to lead the Department of Health and Human Services (HHS) and Dr. Mehmet Oz to lead the Centers for Medicare and Medicaid Services (CMS). Other healthcare nominees will be secured as well.
Prominent conservative healthcare think tanks, such as the Paragon Health Institute and the Heritage Foundation, will have some sway in the administration. I think Trump may resist adopting more radical proposals on healthcare, but essentially mine spending cut ideas from these groups to save dollars. I predict that, while Trump won’t seek to overly disrupt employer coverage, he may be intrigued by ideas for creating more accountable and cost-effective individual coverage options.
Overall healthcare
The long-term outlook of health plan stocks will look mixed. Trump could be friendlier on some rate issues for Medicare Advantage (MA) in the short term, but the somewhat deep overall budget cuts will be seen as eroding enrollment and earning potential in Medicaid, the Exchanges, and to some degree in employer coverage and MA.
While Trump will be friendlier to healthcare, I do predict continued scrutiny of insurers’ vertical integration and size. The antitrust focus of the Biden administration should moderate, but not go away. Trump and the GOP are likely to continue to have some focus on provider consolidation and acquisition.
The budget cuts by nature will lead to passage of some key healthcare reforms on the plan and provider fronts.
Given the downfall of Chevron deference and courts striking regulatory oversteps in general, Trump will use the opportunity to repeal rules and regulations, including in healthcare.
There will be further steps toward greater interoperability given a focus on technology and innovation. Worried about the threat of foreign actors undermining the economy, some cyber preparedness funding possibly will be allocated for healthcare.
Health plans
Again, health plans should breathe a sigh of relief with Trump being friendlier to managed care, but reforms will occur, including on the pharmacy benefits manager (PBM) front, transparency, and overall accountability. Anti-corporate welfare Republicans possibly will influence Trump here and temper his more friendly approach.
We could see continued actions to restrict prior authorization (PA) and claims denials.
Health plans will continue to struggle in 2025 due to high utilization, some inflation, and a generally poor rate environment for government programs. In general, though, the big plans will plot their course for a return to normal margins after a tumultuous 2024. Expect some possible concessions on MA rate issues. Further health plan job cuts will occur in 2025.
PBMs
A bipartisan consensus will emerge around PBM reform, with the passage of sweeping changes to how PBMs earn money and operate in the market. The administrative investigation of PBMs via the Federal Trade Commission (FTC) will continue. Transparency focused PBMs will gain further traction with the changes and the Big 3 PBMs will suffer.
Providers
Medicare physicians will see a reversal of their CY 2025 rate cut, but likely will not see a permanent doc fix given spending cuts. There is the possibility of a partial fix. Hospitals will begin to lose their battle on site neutral payments as Trump and the GOP need the savings. The Trump administration will continue efforts across Medicare and Medicaid to bring value-based care and payments.
Medicare Advantage
Despite the spending cuts, insurers could get the administration to ease or reverse a third year of negative rates in 2026 to help stabilize MA finances. Still, plans will again reduce footprints and benefits for 2026 to meet investor margin demands.
MA will grow in 2025 as well as for the 2026 open enrollment, but I expect growth to be more tempered than in the past. SNP investments will continue within CMS (to tackle dual eligible costs) as well as by MA plans.
The GOP lawmakers focused on corporate welfare will team up with some Democrats, and perhaps Trump’s CMS, to make some changes on the MA front, possibly including:
- Overpayments and risk adjustment (these make good savings targets)
- Star reform
- Supplemental benefits
- Marketing
Trump’s CMS likely will pull back some on the MA and Part D rule for 2026. Some changes to the minimum MLR will be removed from any final rule or it will be removed in toto. Trump also may eliminate the Biden proposal to extend coverage of GLP-1s to those who are obese (it will be deemed too expensive).
After three years of poor Star performance, I predict there could be a fourth year of bad ratings – whether another decline or roughly comparable results to 2025 ratings.
One last quasi-prediction: while it is more of a long shot, Trump’s budget cuts could include a provision to make MA the default enrollment option for Medicare enrollees in the future (an opt-out concept rather than opt-in) combined with a voucher-like system that caps annual growth in the Medicare program on a per-person expenditure basis. This would surely send insurer stocks soaring.
Part D
The Trump administration likely will not undue the IRA’s Medicare drug price negotiations or inflation rebate provisions. While Trump has backed away from attacks on Big Pharma prices, I still see him as friendly to consumers on this issue and he could make some other proposals to rein in drug prices. While he backed off his earlier support of international reference pricing (also known as most favored nation pricing), he might revisit this again. He also could seek to negotiate directly with drug makers via trade agreements.
The Trump administration will investigate the Part D changes in the IRA and perhaps pull back some on those out of concern for the financial stability of the standalone Part D program and rising premiums.
Medicaid
While I don’t predict radical restructuring of Medicaid – no block grant or per-capita-cap program – I do expect the budget cuts to rein in Medicaid expenditures. Possibly on the list are lowering the Medicaid expansion federal match and reducing the Medicaid floor reimbursement. Trump will deprioritize coverage expansion here and back work requirements and novel state waivers.
Exchanges
Exchange enrollment will continue to grow in 2025, but perhaps falter going into 2026. Betting odds are that the enhanced premium subsidies will expire at the end of 2025 due to the sheer cost. (There is a long shot possibility of an extension for one year.)
Otherwise, Trump will not seek to repeal Obamacare, but budget cuts could reduce benefits and subsidies as well as make other more quiet reforms. Trump will use regulations and limits on outreach funding to deprioritize Exchange enrollment.
Of course, these changes as well as ones in Medicaid could mean the uninsured rate goes up in 2025 and beyond.
Employer coverage
While the business lobby is strong, there is a low to medium probability that the spending cuts could reduce in some form the tax deductibility of employer healthcare costs. Employer coverage will see major cost increases due to utilization and retail drug costs.
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— Marc S. Ryan
