How the Biden Administration Can Change Healthcare
Even without significant legislation, the Biden administration could have a meaningful influence on industry profitability through executive orders.
After last week’s Georgia runoff election gave the Democrats two seats in the Senate, the party will control both houses of the US Congress.
Fitch Ratings says this outcome should provide the US corporate healthcare sector with better clarity around potential legislative changes. With slim control of the Senate, legislation will need to either be centrist enough to garner bipartisan support or narrow enough in scope that it can be passed with a simple majority rather than 60 votes in the Senate. Fitch says sector-wide rating actions stemming from changes to healthcare policy are unlikely.
Overall, Fitch’s outlook is stable for the healthcare sector. It views the odds of transformational changes in healthcare legislation as unlikely and expects the operating environment to be mostly supportive of issuers’ credit profiles over the next several years.
President-Elect Biden’s healthcare policies are more incremental, such as building upon the Affordable Care Act (ACA), rather than making more extensive changes, like proposing a single-payer system.
But there are healthcare variables beyond the incoming administration. The Supreme Court is expected to announce its decision in California v. Texas in 2021, determining the ACA’s fate. Fitch believes the ACA is likely to remain in place even if the SCOTUS rules against the law since a Democrat-controlled Congress provides an easier path for a legislative fix.
To build upon the ACA, Fitch says Democrats could seek to reinstate taxes and fees included in the legislation that was never implemented, such as the 2.3% medical device excise tax. If that happens, it predicts companies should be able to absorb these incremental costs with credit profiles intact.
Even without significant legislation, the Biden administration could have a meaningful influence on industry profitability through executive orders and influencing how regulators apply existing legislation, according to Fitch.
Along with industrial, healthcare should be a strong CRE performer during the pandemic, assuming no significant policy changes that harm the asset class.
Cushman & Wakefield thinks healthcare will be vital in the long run, driven by fast growth in the 65 and overpopulation. That should drive demand for medical services at the fastest rate in history. •
From 2010 to 2019, the 65 and over cohort in the US increased by 1.4 million people per year. That growth will accelerate to 1.7 million per year over the next 10 years, which should be the fastest increase for that age group in history, according to C&W.