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In an extraordinary year, healthcare has been center stage in the US as the sector grapples with the ongoing Covid-19 pandemic.
Despite the presence of its Medicare insurance program, America lacks a comprehensive and unified national healthcare system – a fact the coronavirus has at times starkly exposed through the varying responses and success rates of US private and public hospitals across the country.
This patchwork reflects longstanding political divisions on how the US should approach healthcare. Medical care has historically drawn clear dividing lines between Republicans and Democrats, with Republicans favoring minimal state intervention in the sector and private provision and the Democratic Party tending to back wider government support for healthcare.
Explaining this, Mellon senior research analyst Matthew Jenkin says: “By and large, the Republican Party prefers the healthcare system to operate under the market system with as little government involvement as possible. Specifically, it supports Medicare Advantage, a popular senior health program that, in essence, is partly designed to privatize the existing publicly backed Medicare program. The party also supports a market based system for pharmaceutical pricing and believes this has the best chance of supporting innovation.
“In contrast, the Democrats generally support government programs that directly insure citizens and supports US governors on pricing in order to keep healthcare costs in check. Democrats broadly believe government can cover more people for less money than the market based system.”
With all this in mind, the key question facing the American electorate in 2020 is: how might either party change the healthcare sector after the November US election?
In terms of 2020 election pledges on healthcare, the Democrats say they want to expand healthcare coverage for US citizens, with many of their members favoring the creation of a Medicare-for-all type health insurance system.
Democratic presidential contender Joe Biden supports the introduction of a so-called ‘Public option’ health insurance scheme1 which would allow many more Americans to choose public insurance plans instead of private ones.2 He also wants government to negotiate directly with pharmaceutical companies for drug prices in an attempt to lower prices and make them more affordable.
While the Republican Party has so far been light on healthcare election pledges, it continues to support more market based medical systems and wants to see increased federal funding for research. It also favors tort reform, as many Republicans believe spiraling healthcare costs are due, in part, to legal costs, adds Jenkin.
In terms of election outcomes, Jenkin believes a second presidential term for Donald Trump would bring little change. In contrast, he feels victory for Biden could prompt a much more significant shift, broadening and boosting public sector engagement in healthcare.
“In our view, a Biden presidency would likely work to expand healthcare coverage by either offering more subsidies to more people to expand coverage or by creating a ‘Public option’ health insurance system and/or expanding the Medicaid system to more enrollees on lower incomes.3 That said, in order to enact a public health insurance option, Biden would most likely need a large Democratic majority in the US Senate,” he says.
“If we do have a Biden presidency, it might also try to encourage the Federal government to negotiate directly with pharmaceutical companies on drug prices. However, this would not be universally popular across the healthcare sector and political divide, so, again, a large Senate majority for the Democrats would likely be required to enact this,” adds Jenkin.
If Biden were to win big in 2020 and go on to gain a large Democratic Senate majority, Jenkin expects public sector spending on healthcare to rise materially over time. Yet on a more cautious note, he adds this could potentially come at the expense of the private sector if public sector healthcare providers end up competing with and ‘crowding out’ private operators. In contrast, Jenkin believes a Trump win would leave public sector spending as a percentage of healthcare spend broadly unchanged.
All of this could have an impact on specific healthcare sectors, he adds. Commenting on likely change under a Biden or Trump presidency, Jenkin points to telemedicine as just one potential growth area, but warns greater public sector involvement in US healthcare could hit some private companies.
“Under either a Trump or Biden presidency, the telemedicine industry should continue to benefit as the Covid-19 pandemic has already accelerated the use of remote tele-health facilities such as virtual healthcare checks. We also think the life science tools industry could fare well under both administrations as each party has committed to government spending on basic research and development.
“Under a Trump administration, managed care and the pharmaceutical Industry would likely fare well given the Republican Party’s more hands-off approach to healthcare provision. Alternatively, if a Public option insurance system were to be implemented under a Biden administration, several related industries could feel pressure, including facilities, managed care, pharmaceuticals, biotech and medical devices sectors,” he concludes.
1 Joebiden.com. Healthcare. 30 April 2019.
2 New York Times. The difference between a ‘public option’ and ‘Medicare for all’? Let’s define our terms. 19 February 2019.
3 Healthcare Dive: 5 key pillars of Biden's healthcare plan. April 2020.
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