Over the last two years, we’ve written about the trends and megatrends in healthcare and healthcare policy. Now, at the beginning of 2025, it seems appropriate to highlight five trends and issues worth watching this year. The first three of these issues build on prior ones that we’ve highlighted, continuing the trend, but the last two are new.
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The Continued Expansion of Computational Data Technologies, Especially Artificial Intelligence
The prominence of certain forms of technology in society generally has grown exponentially in recent years and healthcare is no exception. Since the COVID-19 pandemic, there has been a rapid expansion of new technologies in healthcare and society, including secure telemedicine and conferencing platforms, online scheduling and bill payment, or remote monitoring. Such technologies are enabling a broader range of services to increasingly be provided at home. While this shift was happening, a much bigger trend in technology and data was occurring in healthcare due to advancements in information processing capability. Mathematicians, computer scientists, and major tech companies have already seen the benefits of large computing power in healthcare. In 2023, however, the rapid advancement, normalization, and accessibility of this technology through natural language and large language models (LLMs) in programs like ChatGPT and similar products exploded the use of Artificial Intelligence (AI). Applications of AI within healthcare were already being used, especially for diagnostic imaging, but marrying the use of AI and LLMs within and across the workflow of healthcare professionals has been revolutionary.
AI has now been used in healthcare to achieve faster and more accurate diagnoses, speed up claims processing, and improve the engagement of patients. Although there are drawbacks to AI, including the solidification of biases built into algorithms and data, and concerns about the potential negative impacts of AI in the hands of bad actors, there are also many positive and consequential benefits to AI in healthcare, such as more precise consumer treatments, seamless interactions for providers and consumers, and advancements in cures for previously untreatable diseases. Just as AI is revolutionizing other areas like chemistry and physics, so too can it continue to advance healthcare. As a result, policymakers may want to more closely monitor advancements in the field and determine the best ways to advance the positive aspects of AI in healthcare while minimizing the potential negative impacts, like those due to biases in computational algorithms.
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Insurance Coverage Shifts
When the Affordable Care Act (ACA) passed in 2010 and health insurance became more readily available on insurance exchanges in 2014, the rate of uninsured individuals declined significantly—to nearly half of what it was prior to the ACA. A portion of the increase in coverage was due to the expansion of Medicaid, a public health insurance program for people with low incomes, disabilities, or certain age-related care needs. Medicaid coverage was stabilized further between 2020 and 2023 when the COVID-19-related public health emergency allowed people on Medicaid to have continuous coverage without annual eligibility requirements. When the pandemic and the public health emergency declaration expired, continuous coverage was rescinded and state Medicaid programs were required to undergo a process over the course of several months to redetermine people’s eligibility for Medicaid. As a result of this process, over 16 million people lost Medicaid coverage. Some went onto private insurance. To counteract loss of insurance coverage within the healthcare marketplace, the Biden administration also implemented enhanced subsidies for those purchasing insurance through exchanges until the end of 2025.
With the coming expiration of these subsidies, however, it is possible more people will be unable to afford to purchase insurance on the insurance exchanges since the subsidies will no longer cover as many costs. At the same time, the incoming Trump administration has communicated the possibility of continuing tax cuts that are set to expire at the end of 2025. Medicaid is one likely target for budget cuts to balance tax cuts. The potential cuts could be done in a variety of ways ranging from reductions in state incentives that have provided a higher Medicaid matching rate for covering certain populations to provide coverage, to changes in eligibility requirements (for example, implementing work requirements for people to become eligible for coverage in the first place). Many of these potential policy changes require Congressional action so precisely predicting the impact of potential Medicaid cuts on coverage and the rate of uninsured is difficult.
The incoming presidential administration and Congressional leadership have further indicated that they are likely to favor coverage options that are not as reliant on public insurance, like Medicaid. What is likely to happen is a shift to less regulated insurance products. One such product is called an Individual Coverage Health Reimbursement Arrangement (ICHRA). These plans work by allowing employees to purchase health insurance on the individual market rather than a group market plan. The degree to which employers may use the ICHRA option are difficult to predict. The same employer can offer both types of plans, but only to different types of employees. There are 11 “classes” of employees, such as full-time, part-time, or seasonal. But between fewer incentives for Medicaid expansion, the loss of subsidies for purchasing plans on insurance exchanges, and alternative options like ICHRA gaining traction, policymakers may want to pay closer attention to shifts in the number of people with insurance coverage and their sources of insurance as changes are likely in the next couple years.
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Consolidations
I previously highlighted the large amount of consolidation occurring in healthcare. This includes both horizontal consolidation (between the same types of organizations like hospitals) and vertical consolidation (across different types of entities like insurers acquiring pharmacy providers, or hospitals acquiring physician practices). In an effort to understand the impact of this consolidation on a larger level, I categorized the entities navigating consolidation as well other issues as “today” or “tomorrow” entities and “striving survivors.” Today entities exist today but may not exist in the future because they either fail or are consumed by another entity. Tomorrow entities are those with ample resources and tend to be of significant enough size that they can easily purchase or financially dominate competing entities. The striving survivors are entities that are attempting to adapt to survive in the future so they can be tomorrow entities.
Consolidations in and importantly across these categories continued in 2024. Some of the most notable consolidations included everything from lab chains buying hospital labs, or big hospital systems getting bigger, like the giant Risant Health (a combination of west coast-based Kaiser Permanente and east coast-based Geisinger) acquiring Cone Health (a value-based care entity). The proliferation of mergers and acquisitions has prompted a range of responses from state policymakers. There were at least 34 bills in 22 states in 2024 designed to address issues related to healthcare consolidation. They include bills ranging from changes in the definition of “ambulatory surgery center,” to requiring public notifications about closings for acquisitions. At the national level, congress proposed legislation to limit consolidation between pharmacy benefit managers (PBM) and insurers. Not only are these consolidations likely to continue in 2025, but so too are policy actions that attempt to influence the type and rules around these consolidations.
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Payment, Costs, and Coverage for Pharmaceuticals
Pharmaceutical research and development requires investment. The United States invests a significant amount in the research and development of pharmaceuticals. The US accounts for 40 percent of all drug spending and 7 percent of new molecular entities (NMEs). Pharmaceuticals have always been a large part of healthcare but recent widespread dissatisfaction with the cost of drugs—combined with the emergence and increased use of impactful drugs such as GLP-1s, which may have played a part in reducing adult obesity in the US for the first time in over a decade this last year—has highlighted the need to control the cost of paying for them.
Lowering the cost of prescription drugs has become a priority for policymakers. In 2022, when Congress passed and President Biden signed the Inflation Reduction Act, it allowed the Medicare program, which is administered by the Department of Health and Human Services, to begin negotiating prices for drugs covered by Medicare. In late 2023, the Biden Administration announced the first 10 drugs covered under Medicare that would be subject to price negotiations. More recently, Congress proposed legislation that would curb the influence of what are known as pharmacy benefit managers (PBM), who use their networks and purchasing power to negotiate drug prices with manufacturers and pharmacies as a way to reduce costs. And the incoming Trump administration may also seek to curb PBM’s influence and create transparency about their role in the industry. The combination of the wider availability of efficacious drugs like GLP-1s that help people lose weight or control diabetes, drugs that can cure rare diseases, and concerns over the costs of drugs is likely to make drug policy changes in the industry an important issue to watch in 2025.
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Exponential Advancements in Life Sciences
Similar to the advancements in pharmaceuticals noted above, advancements in other areas of life sciences, like bioinformatics, immunology, and genomics, for example, are occurring rapidly. Although life sciences have long been a major part of healthcare, the sudden rapid advancements in the field are worth watching. Notable examples include precision medicine, defined as innovative approaches to tailoring disease prevention and treatment that take into account differences in people’s genes, environments, and lifestyles. For the first time, gene therapies and gene editing processes like CRISPR, a genetic engineering technique in molecular biology by which the genomes of living organisms may be modified, can address previously incurable diseases like sickle-cell, but also have the potential to cure many other diseases, such as cancers, angioedema, and HIV/AIDS. Although there are ethical issues about gene editing, the greatest concern being that the edited genes are passed down through the generations, gene editing also has many benefits. Similarly, advancements in mRNA research are thwarting diseases like influenza and COVID.
Historically, state policymakers have not always played a large role in the life sciences because much of it is regulated by federal agencies like the Food and Drug Administration (FDA) or funded by federal agencies like the National Institutes of Health (NIH). But state governments have a potential role to play in a few ways. One is by making it easier for life sciences companies to grow, primarily through funding and economic development programs. States can also advance the life sciences through growing the field of “regulatory sciences” at the state level. Regulatory science in this context is defined as “the science of developing new tools, standards, and approaches to assess the safety, effectiveness, quality, toxicity, public health impact, or performance of FDA-regulated products.” Although the FDA is seen as the leading entity for regulatory science with respect to these kinds of applications, nothing prevents state policymakers from developing similar tools and standards in this space. Finally, state policymakers can help facilitate collaboration among existing or potential life science companies within their own state—or even across state lines. With such potential to advance health outcomes, policies around life sciences will also be interesting to watch in 2025.
All five of the issues and trends discussed in this blog will be important to monitor in 2025. In a federalist system that allows experimentation and differences in state policy, it is likely different states will approach policymaking in these five areas in various ways. We look forward to seeing how these healthcare issues and trends evolve in the coming year and revisiting them in the coming months.
ABOUT THE AUTHOR
Courtney Burke is senior fellow for health policy at the Rockefeller Institute of Government