What the election means for the healthcare industry and economy

In the days after Donald Trump won the 2024 presidential election, the Dow Jones Industrial Average rose more than 1,500 points to a record high. The S&P 500 and Nasdaq each rose more than 2%, hitting new all-time highs. An election-related spike of this size suggests that the market believes the Trump-Vance administration will be more business-friendly than the Harris-Waltz administration.

This is especially true given that President Trump campaigned on rebuilding the economy, reducing inflation, investing in energy, stability around the world, safer borders, safer cities, and less government regulation. Not surprising. He also announced the creation of a new non-governmental agency, the Department of Government Efficiency (DOGE), to advise the White House on how to eliminate bureaucratic waste. This platform has a broad positive impact across the business community, but is particularly important for the healthcare ecosystem.

The next administration may not know exactly how to improve health care, but it recognizes that the current emphasis on regulation is distorting markets and driving up health costs. A more hospitable business environment means that opportunities for substantial system-wide change may be on our doorstep.

As I discuss in my book, Bringing Value to Health Care, public dissatisfaction with the health care system has increased significantly in recent decades. This is because costs have increased without a corresponding increase in positive health outcomes. Lawmakers and regulators, failing to recognize that sometimes less is more when it comes to government involvement, have responded with new laws, new mandates, and states negotiating prices with private companies. Two of the most significant health policy changes in recent memory, the Affordable Care Act of 2010 and the Control Inflation Act of 2022, brought an avalanche of additional regulation to health care.

For example, consider the medical loss ratio example used in a previous column. MLR is a requirement of the ACA that requires insurers to spend 80% of premiums (85% in large group markets) on direct care and quality improvement initiatives. Insurers must submit detailed annual reports to regulators at the Centers for Medicare and Medicaid Services that explain how they spend their premiums. The report provides a breakdown of clinical services, quality improvement activities, administrative costs, and other non-medical expenditures.

These reporting requirements provide no clear value to plan members, but do drive up premium costs. Countless other regulations follow this same pattern. Regulations like MLR further complicate a health care system that is visibly failing. The myriad regulatory structures that stifle innovation and indefinitely postpone fundamental reform are crumbling under their own weight.

It's not that regulations don't exist. That's right. However, regulations that lack intelligent design, fail to clearly frame the problem being addressed, and do not consider how the parts of the whole fit together are expected to exacerbate existing problems. This may lead to unintended consequences. Creating more rational regulations is a necessary but insufficient step to solving America's health care problems. That in itself is not enough. Unless we rethink the underlying structures and payment models that create inefficiencies and rising costs, attempts at deregulation risk leaving the system in its current broken state. Deregulating without seriously considering the misaligned incentives that are at the heart of the problem being addressed is just another band-aid solution to a problem that will persist until the root causes are addressed.

Real progress will come, as I've written previously, in broadening our perspective and considering piecemeal fixes to comprehensive solutions that link payments to important outcomes and ensure accountability across the continuum of care. It's taking place.

I have repeatedly argued that moving to a market-based model can improve outcomes for both the healthcare industry and patients. Such models can limit bureaucracy, but also increase transparency in the cost and quality of medical goods and services provided. And payments tied to outcomes that matter to patients can bring accountability across the continuum of care.

In today's medical practice, there is limited recognition of the power of paying for results, or conversely, not paying for something that doesn't work. In every other industry, if a product doesn't work, consumers demand a refund. However, the healthcare industry as a whole continues to sidestep this critical element of the market economy, allowing patients and consumers to make informed decisions and hold healthcare providers accountable for the value of the care they provide. is fighting tooth and nail for price transparency initiatives. .

In this respect, too, the new administration is showing positive signs. President Trump instituted price transparency requirements for hospitals during his first term in office, but those efforts were met with resistance from health care providers. Future Vice President J.D. Vance similarly emphasized the importance of this issue during a recent vice presidential debate.

The incoming administration's desire to purge unnecessary regulations and reduce bureaucratic bloat, and its emphasis on transparency, suggests the system is ripe for overhaul. Stock market confidence suggests that the business community believes the new administration can drive meaningful change in a way that helps both businesses and Americans.

But they must do more than simply eliminate red tape. We can create an environment in which reform is not only possible, but encouraged. You can foster a healthcare ecosystem that rewards innovation, aligns incentives, promotes transparency, and delivers measurable value to patients. If this happens, we all win.