What to Expect from the Biden Administration

What to Expect in a Divided Washington

The net effect of the federal and state elections is that major new policy on any topic—including healthcare—is unlikely to be enacted in the next two years. Federal and state fiscal environments during a recession are also a constraint on bold policy initiatives. And, of course, COVID-19 response efforts will consume governments at the expense of new policy efforts.

In the wake of the $900 billion in COVID-19 relief approved by Congress in late December as part of a $2.3 trillion government spending bill, we should expect some smaller or less ideologically charged legislation, and regulations will continue to be promulgated. Congress will begin work on the five-year cycle of Food and Drug Administration user-fee reauthorization that is due by September 2022. User fees fund about 45 percent of the FDA’s budget. This is a bipartisan, consensus legislative effort that will include incremental policy adjustments for the life sciences industry.

On the regulatory front, not many new policies are on the agenda—particularly with a change of administration. The next clinical lab fee schedule repricing will be for 2022. Home health budget neutrality lookback also is scheduled for 2022 but may slip due to COVID disruptions. The new administration will end Centers for Medicare & Medicaid Services (CMS) support for Medicaid eligibility restrictions (e.g., work requirements) and block-granted Medicaid funding, and will revisit or reverse policies that have granted more flexibility in health insurance offerings in the individual and employer markets.

The US Supreme Court will render a decision on the latest Affordable Care Act case in the summer. After oral arguments, it appears unlikely the entire law is in jeopardy. At most, a narrow voiding of the individual mandate is a potential outcome, with the entirety of the current law remaining intact.

— John Kelliher

Markets Stable on Biden Win, But Watch for Sky-High Prices, Inflation

Many people are wondering what a Biden administration means for the stock market, but the market has probably already answered that question. The stock market is forward-looking—how else could Tesla be worth nearly half a trillion dollars on miniscule current earnings—meaning that the market already has accounted for the new administration and its proposed policies in setting prices. But that does not mean that every investor agrees with the market’s current assessment.

Some might think that President-elect Biden taking power will lead to higher prices, and others the reverse, but they would agree that the current market assessment is wrong. If the market as a whole believed that prices needed to change to reflect future government policies, they would have changed already.

The biggest stock market threat the administration faces will be sky-high prices. Only during 1929 and the dot.com bubble have stock reached these peaks, relative to earnings. Missteps in Washington could lead to a significant drop—and the higher prices are, the more room there is for them to fall.

A final concern is inflation. Inflation has been low and stable for so long the people tend to forget about it. However, current monetary policies are massively stimulative, and current budget deficits are at wartime levels. If inflation rises in reaction to those policies, it would push up interest rates, a significant threat to a stock market accustomed to record low rates.

— Bradford Cornell

Needed: A Three-Pronged Approach to Revive US International Competitiveness

In order for the US to regain its competitive footing internationally, President-elect Biden should champion a three-pronged approach that enhances reform of the world’s key markets to abide by the globally sanctioned rules-based system governing trade; ensures investors can capture full value from their endeavors while protecting host countries’ national security; and reorients like-minded nations to cooperate on investments in pre-competitive research and development (R&D) that harnesses their collective innovative prowess.

Biden’s foreign policy chops make him a natural to rebuild our country’s historically robust multilateral approach to trade and move past the Trump administration’s diversion toward bilateralism. Doing so will be especially important in dealing with China. To this end, Biden should build a coalition with other world trading powers to test, once and for all, China’s willingness to adhere to the domestic reforms it committed to in 2001 to gain entry into the WTO.

The coalition should present China with three options: adopt the reforms it signed onto; renegotiate and adopt terms of a new (less-preferential) WTO accession agreement; or leave the WTO altogether (and forfeit its WTO preferences). This mature approach should suit not only the Chinese but also Biden, who understands it is likely the only path to ensure the WTO’s credibility, since China is the world’s second largest economy.

On foreign investment, perhaps the most immediate issue facing Biden will be here at home. The US would be served well if Biden were less chaotic than his predecessor when it comes to decisions by the Committee on Foreign Investment in the United States (CFIUS). CFIUS has become more prominent in recent years, in part due to the increased transactions by the Chinese, but also due to a new law passed by Congress. Given the legislative branch’s strong interest in CFIUS, a systematic approach by Biden would signal the US has an all-government national security posture toward foreign investment.

Finally, Biden should help the US R&D enterprise—businesses, universities and government labs—play a lead role in fostering international collaboration among other advanced democracies. This is critical given China’s unchecked rise in state-sponsored technology and global value capture of R&D. A Biden initiative to create a G7 group that emphasizes R&D cooperation—”the R&D7”—would be well received and could be a game changer.

— Harry G. Broadman

COVID-19 Shapes Healthcare Focus

The Biden administration’s first, second and third healthcare priorities will be to minimize the spread of COVID-19 and make vaccines available to as many people as possible, as quickly as possible. We have seen a preview of their playbook—i.e., involve public health and infectious disease specialists, promote mask-wearing without a national mandate and try to instill trust in clinicians and experts. Given how partisan and slow Congress has been this fall, the administration will try to take executive action to further its agenda, while still pushing for stimulus and funding that depends on legislation.

As noted above, smaller or less ideologically charged legislation still could get through Congress—despite the COVID-19 focus and federal and state fiscal constraints—and regulatory promulgation will continue. It’s also clear that COVID-19’s impact on healthcare utilization during 2020 and likely spilling into 2021 will drive certain health policy decisions.

Medicare Advantage and several of Medicare’s value-based purchasing programs base payments on past healthcare spend levels, which declined significantly in 2020. Over the next year or two, the Biden administration will consider modifying policies to avoid negative impacts to these programs, like accountable care organizations. Reforms to Medicare’s physician payment system likely will continue to be on the agenda, with Congress and the administration facing cuts to specialists in order to increase primary care rates.

The Biden administration, like every prior administration, will want to make its mark on a range of programs through regulation. Most of these will either return policies to Obama-era goals and guidelines or shift programs incrementally toward more value-based care—now a bipartisan approach.

— Ruth Tabak

Dramatic Changes for Labor and Employment Laws

The Biden administration has indicated that it will reverse many of the Trump administration’s labor and employment policies and practices, resulting in a dramatic shift in the landscape. The new administration’s most urgent priority likely will involve implementing COVID-19-related protections for workplace safety and establishing comprehensive paid leave policies. In addition, the administration has indicated that it will focus on building union strength and on the prevention of workplace discrimination.

As leadership changes at the relevant federal agencies (e.g., Department of Labor, Office of Federal Contract Compliance Programs, Equal Employment Opportunity Commission, Occupational Safety and Health Administration, National Labor Relations Board), specific policies regarding joint employment and independent contractor classification are expected to shift to become more “employee friendly.” Changes to either policy would have a significant impact on businesses across the country.

There also is speculation that the Biden administration is aiming to implement an overall labor and employment agenda that may be even more progressive than that of the Obama administration. However, achieving the desired changes may be a challenge due to current political dynamics. Despite these obstacles, work has begun on this front with the announcement of Biden’s “agency review teams,” which will be tasked with studying each agency’s activities, budgets and staffing to prepare for the upcoming changes.

— Elizabeth Arnold

Continued Support for Telehealth

Telehealth historically has not been a partisan issue, and COVID-19 revealed telehealth’s ability to facilitate the delivery of critical services when in-person visits were considered risky or not possible. While Democrats and Republicans disagree on many aspects of US healthcare, both political parties support telehealth’s continued use and expansion, even after the pandemic ends.

During the past four years, and especially during the pandemic, the Trump administration has waived many federal regulations that have allowed telehealth to be used more freely across healthcare settings, providers and patients. President-elect Biden’s healthcare plan shows he favors continued deregulation of telehealth.

Biden also seeks to build on the Affordable Care Act, which could encourage continued and expanded use of virtual care as providers and payers continue to seek and build upon innovative care delivery and payment solutions that include telehealth. We expect to see greater provider autonomy in the use of telehealth, expanded reimbursement to incentivize the use of virtual care and continued changes to provider licensing requirements to facilitate telehealth services across state lines. Biden’s interest and support of the healthcare safety net, including Medicaid expansion, also may result in initiatives to make telehealth more accessible for low-income, at-risk and underserved communities and populations.

— JoAnna Younts

Financial Recovery Focus, Increased Regulatory Pressure on Banks Likely

Supporting economic recovery—i.e., getting cash to those individuals and entities that need it most—will be the Biden administration’s top priority. As Biden’s team reviews existing programs and establishes new ones, banks will be seen as critical infrastructure to get economic relief where it needs to go, just as they were during the Paycheck Protection Program in the pandemic’s early days.

Biden also will focus on consumer protections, giving a fresh look to things like fair lending and anti-discrimination rules to ensure banks are lending across all sectors of the economy. Further down the road, expect a post-pandemic review to determine if there were irregularities in programs that were passed immediately as part of the government response.

There will likely be a return to some of the policies under Dodd–Frank-era rules that were reversed or limited under the Trump administration. Items such as living wills and stress testing will likely receive a new look under Biden, along with a review of capital/liquidity applicability requirements. Longer term, regulatory supervision of banks likely will be reviewed, as the regulators did pull back a bit in the last four years.

New areas also need to be tackled due to societal shifts. The Federal Reserve has openly discussed incorporating climate risk impacts to banks in their supervisory processes, and more of that is likely. Stress tests provide regulators insight and assist in formulating opinions/policy. Finally, marijuana legalization has occurred extensively throughout the country, while the banking regulations have not really been updated.

— Joseph Sergienko

Gas Resilient During Pandemic, But Decarbonization to Challenge Long-Term Viability of Gas and LNG Industry

The economic effects of COVID-19 have roiled energy markets in 2020 and have intensified, rather than deterred, the climate-change imperative for energy transition. Now, anticipated moves by policymakers—led by expectations about the incoming Biden administration—are poised to expand US decarbonization efforts.

The Biden administration plans to rejoin the Paris Agreement, promote net-zero power generation by 2035 and reach a 100 percent clean energy economy by 2050. There also are promising signs of bipartisan support in Washington for escalating carbon taxes. Similar initiatives are happening in Europe and Asia. Significantly, China has targeted the goal of carbon neutrality by 2060, joining other regional players such as Japan and South Korea.

These decarbonization policies will require substantial growth of renewable energy and, in emerging Asian economies, moderate growth in natural gas generation, which will be necessary to displace some coal-fired generation before transitioning more heavily to renewable energy and perhaps hydrogen.

These developments portend tremendous change for natural gas and liquefied natural gas (LNG) markets over the next 15 years. In the US, decarbonization policies would slash natural gas demand by 25 percent and Henry Hub prices by more than $1 per MMBtu by 2035. This would liberate vast supplies of natural gas and stimulate LNG exports from North America. With US and European gas demand in decline and overall Asian gas and LNG demand continuing to grow, excess low-cost North American LNG supplies will increase the volume of LNG trade flow from west to east.

On balance, however, we project a moderate decline in overall gas demand by 2035, which would have an amplified and devastating effect on global demand for LNG as the marginal source of gas supply. LNG export volumes would decrease by 18 percent by 2035, and non-US global gas price benchmarks would fall from their already low levels by nearly $1.50 per MMBtu by 2035.

The coming energy transition suggests that industry leaders will have formidable strategic and commercial opportunities and risks. For example, development of LNG import projects could gain traction in a low-price environment, but under-construction export projects might not recoup expended capital, and new greenfield LNG export projects would be unlikely to obtain financing or take a Final Investment Decision (FID). These developments also would afford LNG buyers lower prices and ever greater commercial flexibility from new North American LNG supplies, in turn subjecting existing sale and purchase agreements to greater demands for commercial renegotiation, price review and international arbitration.

— Christopher Goncalves