What the Health System Can Expect from a Second Trump Term

Health Policy

Aug 5, 2024

By JEFF GOLDSMITH

Though the results of the November election are by no means a foregone conclusion, it is worth thinking about how a second Trump administration might affect the nation’s $4.7 trillion health system. People were not the problem with the first Trump term; his healthcare team was strong and capable: Alex Azar, Scott Gottlieb, Seema Verma,. Bret Giroir, Brad Smith etc.  

After the embarrassing political failure of Repealing and Replacing ObamaCare in 2017 (for which blame look to his White House staff), his healthcare team settled in to a quiet and unremarkable term until the COVID wave broke over them and helped drive them out of office. It was not merely ironic but deeply disturbing that MAGA politics prevented Trump from claiming credit for the Operation Warp Speed vaccine miracle his team produced. 

A second Trump term would likely be very different- both more ideologically driven but also fiscally constrained. The people part is completely unreadable at this early hour. But health policy will almost certainly be a second tier priority because trade and tariffs, conflicts with our traditional allies and trading partners, and inflamed social issues like illegal immigration, wokeness, and abortion will crowd out changes in health coverage, costs and payment policy.   

Show Me the Money! 

However, fiscal pressures will force a second Trump administration to confront federal health spending and set him on a collision course with the hospital and pharmaceutical industries, two of the three largest organized actors in healthcare. Trump inherits a 2024 $5 trillion federal budget with a $1.7 trillion deficit, an anomalous degree of fiscal stimulus at the height of an economic boom. That deficit is also a major driver of the inflation Trump has promised to conquer.   

Trump is committed to reauthorizing the individual tax cuts from his 2017 Tax Cuts and Jobs Act which are scheduled to expire in 2025, which would add $3.3 trillion to the deficit over the next ten years. He also wants to reduce the corporate tax rate from 21% to 15%. If Trump does nothing meaningful about federal spending, his FY 26 budget, due shortly after he arrives in the White House, would harbor immense out year deficits and completely gross out both the bond and currency markets–a “Liz Truss” moment for the new regime. The promise of immediately reducing inflation which Trump made in his RNC acceptance speech goes sailing out the window.  

Savaging Medicaid Spending  (or Trying to)

Trump has tied his budgetary hands by committing to not cutting a single penny from Medicare and Social Security, which are forty percent (!) of the federal budget. This commitment appears both in the Republican platform and in Agenda47, which is the Trump campaign’s compilation of commitments made in his speeches. Trump has also committed to not reducing the $850 billion spent on Defense.

Ringfencing Social Security, Medicare and Defense leaves the more than trillion dollar Medicaid program (state and federal combined) as the largest single potential source of potential budgetary savings to avoid inflationary blow-out growth in the federal deficit. At its peak in March of 2023, Medicaid/CHIP enrolled 94 million people, or 28% of the US population. Expect an incoming Trump administration to attack Medicaid spending, both by accelerating the decline in enrollment that began in 2023 with the expiration of the COVID Public Health Emergency and by cutting rates and payments to Medicaid Managed Care providers. Some 24 million Medicaid beneficiaries have been “redetermined” and over 15 million have lost coverage. KFF says present Medicaid enrollment is about 80 million in mid-2024 but that number is certainly moving down 

While Trump has distanced himself from the Heritage Foundation’s Project 2025, that policy blueprint characterized the ObamaCare Medicaid expansion as “inappropriate” and the program itself as a “cumbersome, complicated and unaffordable burden on nearly every state”. It advocated ending what it called “financing loopholes” (e.g. provider taxes that have trued up Medicaid rates to hospitals and physicians vs. Medicare), tightening Medicaid eligibility, and imposing both work requirements and cost sharing, “reforming” disproportionate share payments, time limits and lifetime caps on Medicaid benefits and ending coverage for “middle and upper income beneficiaries”! We can certainly expect inflammatory publicity from a Trump White House on states that have expanded Medicaid eligibility to  “undocumented aliens”, followed by pressure on Congress to prohibit this coverage by statute.   

When former Trump press secretary and present Arkansas Governor Sarah Huckabee Sanders, announced her removal of 400 thousand Arkansans from Medicaid enrollment, she said she was “liberating them from dependency”.  It is likely that that millions more Americans will be “liberated from dependency” on Medicaid during the first two years of a second Trump Administration. There will be work requirements (with politically damaging pressure on the 11 million very poor or disabled “dual eligibles” eg. Medicare plus Medicaid) population), as well as cost sharing and an voucher option to purchase private insurance (!?) for Medicaid beneficiaries. An aggressive effort to “re-welfare-ize” the Medicaid program will raise numerous bureaucratic barriers to Medicaid enrollment, scaring off a lot of otherwise eligible beneficiaries. 

However, tinkering with the federal match, which Project 2025 hinted at: cancelling those “financing loopholes”–read provider taxes–which juice up federal funding, is like hammering on the fuse of a bomb for Trump’s southern political base. It would not just be California that is affected by such an effort.  Even though large Trump-states like Florida and Texas declined to expand Medicaid, they aggressively availed themselves of provider tax leverage to more generously compensate both hospitals and physicians as well as balance their budgets. Solving a federal funding crisis at a cost of pushing political allies’ state budgets into the red is a non-starter. 

It is interesting to speculate upon how much the Supreme Court’s recent demolition of the so-called “Chevron” doctrine will inhibit fiscally motivated administrative changes in the Medicaid program by a second Trump administration. But Republican control over both houses of Congress could provide a Trump administration the statutory authority it needs to make non-incremental changes in the program.   Academic health centers and safety net providers could anticipate a lethal cocktail comprised of sharply higher uncompensated care costs and reduced Medicaid payment rates (channeled conveniently through Medicaid Managed Care entities). 

Health Policy Viewed thru the Prism of Hot Button Social Issues

We do not know how a second Trump regime would frame health policy. Our only clues are a remarkably unenlightening Republican platform and the now notorious Heritage Foundation Project 2025 policy blueprint, from which Trump has nominally distanced himself. The Republican platform devotes four short paragraphs to healthcare, assuring seniors of no Medicare cuts and strengthening chronic care and home care options. That’s about it. 

However, Project 2025 devotes 54 pages to healthcare–an otherworldly discourse haunted by inflamed social issues, particularly abortion (which somehow miraculously disappeared from the Republican platform!) and gender identity. If Project 2025 is any guide,  we should expect a much more ideological and aggressive regime in healthcare across all federal agencies, with a laser focus on abortion, use of aborted fetal tissues, “gender redefinition” and strengthening of the traditional “Leave it to Beaver” family.  

For example, the sun total of Project 2025 policy priorities for the $48 billion National Institutes of Health were: making sure fetal tissues were not used in research, eliminating conflicts of interest among current and former NIH scientists and administrators, block granting research fund to the states to do their own research (!?) and eliminating woke policies (like supporting Pride Month). That was it! 

Project 2025’s first priority for the Department of Health and Human Services, which they want to rename “The Department of Life” was “Protecting Life, Conscience and Bodily Integrity.” It highlighted the importance of affirming marriage between men and women, teaching “sexual risk avoidance” or SRA (a rebranded “abstinence” program), and stamping out access to abortion pills (a stance explicitly repudiated by candidate Trump) and the morning-after pill (a feint in the direction of restricting contraception).  

Project 2025 takes a blowtorch to the Centers for Disease Control, accusing it of administrative incompetence and exceeding its public health mandate during COVID. It advocated partitioning CDC into two parts–an epidemiological data collection agency and a much pared back public health enterprise with a “severely confined ability to make policy recommendations”. Project 2025 authors asked “how much risk mitigation is worth the price of shutting down churches on the holiest day of the Christian calendar?” and “What is the proper balance  of lives saved vs. souls saved?”

A major priority for the first part of the partitioned CDC will be a rigorous tracking (antecedent to stamping out) what the authors call “abortion tourism”, by collecting detailed information on abortion incidence by state of residence, migration patterns, specific procedures and outcomes. The repudiation of the agency’s public health agenda in favor of a libertarian approach to health risk management presages major reductions in force in the agency. 

Also targeted were pharmaceutical funding both of CDC and FDA, whose user fees are a major source of support of FDA’s drug review process, which were characterized as a “conflict of interest” for both agencies. So, reading between the lines, FDA is also likely to experience major staff reductions, (and a lengthened approval cycle for new drugs).  Overall, I expect HHS to experience five figure reductions in career staff (especially the super grade GS15-18 levels) as the Trump administration conducts an ideological purge, attempting to root out “deep state” opposition to its social agenda.

Pharma is Warned (and Not Quaking in its Boots)

One controversial commitment Trump made during his 2020 campaign was to rein in Medicare beneficiaries’ drug costs by forcing drug companies to match their prices with those charged in European countries. He issued two executive orders to attempt to do this, to little measurable effect. This claim is repeated in the 2024 Agenda 47 materials. It is not clear that HHS can do this without legislative authorization, which he will be unlikely to get even with Republican control of Congress. He also promised to alleviate shortages of drugs by “reshoring” the production of generic drugs.  

Medicare Advantage Health Insurers Get a Pass

Project 2025 recommended making Medicare Advantage the default enrollment option, which would presumably accelerate the trend away from regular Medicare. Medicare Advantage is likely to see reduced federal efforts to rein in aggressive risk coding, AI assisted care denials and other administrative hot button issues, in favor of efforts to “simplify program administration”, telegraphing an easing of regulatory pressure on carriers. These measures would help restore Medicare Advantage profitability for the major carriers that control this program. 

However, and a large “however” it is, Project 2025 also advocated “competitive bidding” for MA, which could generate vital savings (somehow “not cutting Medicare”) by burning down the MA rate structure (possibly below the DRG/APG level) and potentially damaging both MA margins, which have declined sharply in the past two years. This would also have the effect of pushing down negotiated payment rates to providers, perhaps reducing Medicare spending while nominally avoiding cuts in DRG/APG rates or the Part B fee schedule. 

There was no mention of anti-trust  issues, despite the fact that only two MA providers account for 46% of present enrollment and the top four over 60%. The Project 2025 Federal Trade discussion did not mention healthcare.  Health insurers dependent on Medicare (like Humana and United saw their stocks rise sharply after the failed Trump assassination  attempt, while those dependent on Medicaid sank.

Amusingly, Project 2025 advocated moving payments to “value based care” while advocating repealing the Medicare Shared Savings Program, the main Medicare value based payment initiative.

Hospitals, Physicians, etc,–Nary a Mention

Hospitals and physicians are about half of health spending, yet both were studiously avoided in the Project 2025 policy blueprint.  While physicians were barely mentioned in discussion of HHS, it is not difficult to detect in Project 2025 an intent to “de-federalize” policy regarding physicians and physician practice. Nods were given to reducing their paperwork burden (no details given), but also repealing the ObamaCare prohibition on physician-owned hospitals as well as federal pre-emption of state licensure laws (e.g. for telehealth provision). There was also discussion of gutting the arbitration process in the No Surprises Act, which was targeted at hospital-based physicians, in favor of a “truth in advertising” approach, whatever that means. This would be a gift to physicians and a backhanded swipe at the health plans who were No Surprises’ main advocates. 

Project 2025 underlined the position that state government, where Medical Societies are powerful advocates, is the appropriate locus of regulatory authority over medical practice. How this will jibe with efforts to address a looming shortage of physicians remains unclear; the expected shortage was not mentioned in the report.

Hospitals were singled out as recipients of questionable subsidies, particularly for drug purchasing under 340B and so-called “site of service” payments increasing hospitals’ ambulatory revenues and tilting the balance of power away from physician practice and toward the hospital. However, cutting “site of service” payments would violate Trump’s assurances that he will not “cut a penny from Medicare or Social Security”. It is hard to believe after four years that Trump is unaware that Medicare is a highly influential $1 trillion provider payment program, not merely an entitlement program for a core electoral constituency.

Overall, health care policy will be a lower second tier issue in a second Trump administration, and will be viewed mainly as a vehicle for prosecuting the sixty year long cultural war against promiscuity, abortion and gender fluidity at the heart of the Trump agenda.  However, fiscal problems–the prospect of a rebellion inside Trump’s own party over soaring deficits–will force a second Trump administration to confront federal health spending, and set the stage for a battle with some of the most powerful interest groups in the US- the “elderly”, health plans, hospitals and big pharma.  Guess who wins?

Jeff Goldsmith is a veteran health care futurist, President of Health Futures Inc and regular THCB Contributor. This comes from his personal substack