Market Insight

Healthcare (technology) is on the 2020 presidential ballot

February 05, 2020

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Although the year 2020 has only just begun, it is gearing up to be a monumental year for politics in the United States. From the impeachment trial of President Trump in January and February, to the Democratic Party primaries spanning from February to July, and the presidential election in November, the 2020 agenda is jam-packed. Events throughout the year could have lasting repercussions on the political and economic landscape of the country, nearing the top of the list of Americans concerns is healthcare policy.

The world’s largest healthcare technology market is at stake

When it comes to healthcare, most of the media attention is rightfully from the patient perspective. However, little attention is paid to how changes to healthcare policy could impact the healthcare technology market. IHS Markit | Technology forecasts that US medical imaging revenues alone will total nearly $7.5 billion in 2020 (not accounting for clinical care, health care IT, and digital health markets) making the United States the largest healthcare technology market in the world. Additionally, the United States is one of the most technologically advanced healthcare technology markets globally and often paves the way for the rest of the world to adopt the latest innovations. Thus, the effects of any significant change to US healthcare policy will be felt far beyond the nation’s borders.

Healthcare policy drove the recent wave of growth in the US market

To set the scene in 2020, it is necessary to address recent changes to healthcare policy. The most significant of these changes was the signing (2010) and implementation (most major provisions in 2014) of the Affordable Care Act (ACA). The ACA was one of the US’ largest healthcare reforms this century as it expanded health insurance coverage and accessibility. Since the establishment of the ACA, nearly 20 million citizens gained public health insurance and the national uninsured rate fell from 14.5% to 8.9% from 2013 to 2018. Furthermore, the percentage of Americans covered by public health insurance rose from 31.6% to 35.6% (Source: United States Census Bureau). This rapid influx of insured patients resulted in high demand for medical equipment and played a major role in the expansion of the US healthcare technology market.

The ACA is hotly contested legislation

Since before its initiation, the Republican Party has been clearly opposed the ACA. Republican politicians have attempted to repeal the act in its entirety and as consolation have sought to nullify the act by targeting individual and employer mandates and taxes designed to fund the policy. Notably, one of the taxes that was repealed, with bipartisan support, was the Medical Device Excise Tax. This tariff would have subjected each medical device to a 2.3% tax resulting in depressed growth of the medical equipment market. President Donald Trump is staunchly opposed to the ACA and in the event of his reelection, efforts to repeal the act will continue. If the ACA is repealed, the healthcare technology market would likely suffer; millions of Americans would be uninsured, unless the Republican Party enacts a new healthcare policy that accounts for this. Across the aisle from the Republicans, the Democrats have fought to uphold the ACA. Victories in the 2018 midterm elections gave Democrats control of the House of Representatives which bodes well for the near-term longevity of the ACA.

Democrats are running on healthcare expansion

With the 2020 presidential election in sight, the Democratic Party sees its opportunity to not only defend public health insurance, but to expand it. Among the top four nationally polling Democratic candidates, all are running for the nomination on platforms that support the expansion of public health insurance. Former Vice President Joe Biden and Mayor Pete Buttigieg are in favor of expanding the ACA through a “public option” that would give citizens the ability to buy-into public health insurance. Alternatively, Senators Bernie Sanders and Elizabeth Warren are running on the platform of “Medicare for All”, promoting a bill that would put all Americans on a public insurance plan. Even with the election of Sanders or Warren, the implementation of universal healthcare in the short-term is unlikely, especially if Republicans maintain control of the Senate. Nonetheless, if a Democrat is elected as president, and Democrats make gains in Congress, the ACA’s coverage would likely expand, and the US healthcare system would become a combination of statutory government-funded insurance along with optional private payers.

Healthcare expansion could drive another wave of growth

Regardless of scale, the expansion of public health insurance will likely have a mixed but net-positive effect on the healthcare technology market. If a public option is introduced, some people will elect to leave their private insurance for public insurance. Subsequently, the Centers for Medicare and Medicaid Services (CMS) will gain power as it becomes the primary payer. Reimbursement per code will decrease since CMS reimbursement is on average 200% lower for medical procedures compared to private reimbursement (Source: The United States Congressional Budget Office). However, as in the case of its initiation, the increase in insured Americans will increase patient utilization and drive demand and growth for medical equipment. With greater utilization and funding, the CMS will seek to save on inefficiencies that account for far more than the 3.4% of US health spend dedicated to medical equipment (Source: CMS). These inefficiencies include: waste due to fraud and bad debt; poor utilization of clinical staff; and excessive administrative costs, which largely are associated with complicated billing and insurance schemes and would be minimized with more people on public insurance. By enabling savings in the most obvious problem areas of the healthcare system, more money can be invested in technologies that improve patient outcomes and promote innovation in healthcare technology.

2020 could drastically alter the US healthcare market one way or another

With the Democrats and Republicans directly opposed, the 2020 presidential election could be a sliding door for US healthcare market. On one side, the repeal of the ACA could hinder growth in the market. On the other expansion of public health insurance could drive another wave of steady growth.  But for now, the country will have to wait and see.

Research by Market
Healthcare Technology
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