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Key takeaways:
US healthcare is in the midst of a structural transformation heading into the 2026 midterms. Funding reductions, deregulation, coverage changes and drug pricing policies will likely continue to reshape the market regardless of the 2026 midterm outcome, shifting greater responsibility to states, the private sector and consumers. Outcomes of the 2026 midterm elections will help provide greater directional clarity for executives around the policy environment ahead. Four dynamics will be particularly important:
- The midterms will provide strategic visibility into legislative priorities. Congressional control will determine the potential for new legislation, while executive action will likely continue to reinforce current Federal healthcare priorities and their impact to the broader operating environment. Narrow majorities or divided government would likely mean greater reliance on must-pass legislation, oversight and targeted bipartisan action, with potential convergence on health legislation such as cybersecurity, AI, drug development modernization, and prior authorization.
- State elections will further shape the regionalization of healthcare policy. With unified party control increasingly common at the state level and 39 governor seats up for election states may have greater ability to advance healthcare priorities independently, accelerating state-level action and widening differences in coverage, financing and regulation across markets.
- Affordability will remain a defining pressure point. Commercial medical cost trend is projected to reach 9% in 2027, the highest level in nearly two decades1. This is intensifying affordability pressures and increasing the urgency for payers, employers, and policymakers to address the underlying drivers of healthcare costs. Over the next two years, that pressure may translate into proposals for larger policy changes that could take shape ahead of the 2028 presidential election.
- Policy exposure will vary across the health industry. Payers and providers face the greatest potential impact from congressional and Medicaid policy changes and impacted funding, while drug pricing, trade and regulatory policy will remain key for pharma. Medtech is less directly tied to the election outcome, with tariffs and FDA action likely to matter more.
What this means for healthcare organizations
While the 120th Congress may produce select legislative reforms, the next phase of healthcare operations will be equally defined by how organizations navigate a more fragmented and volatile operating environment with sustained margin pressures. Across the healthcare sector, lower federal spending, tighter drug pricing programs, greater state variation, continued executive action and heightened affordability scrutiny will increasingly shape market strategy, growth, and investment.
Ultimately, regardless of the midterm outcomes, we expect these dynamics to sharpen the industries focus on priorities already reshaping the industry including reducing costs, improving efficiency, enhancing patient experience, mitigating risk (including cybersecurity), and speeding innovation to market.
Payers
- Prior authorization and price transparency remain key areas for congressional action, while CMS continues implementing Medicaid work requirements, program integrity and state-financing changes.
- Marketplace coverage losses and tighter Medicaid eligibility will continue to pressure enrollment and risk pools, while Medicare Advantage payment policy balances federal spending restraint with beneficiary choice and plan participation.
- The No Surprises Act (NSA) Independent Dispute Resolution (IDR) process may emerge as an area of congressional oversight, as lawmakers examine rising arbitration awards - providers and facilities won 85% of payment determinations in the last half of 20251 - and their potential impact on healthcare costs.3
- Medicare Advantage margin compression is likely to continue, with over 70% of plans operating at breakeven or below amid risk-model, Star ratings, and Part D headwinds worth $90+ per member per month.2
Providers
- 340B reform, price transparency and cybersecurity remain key areas of congressional action, while NIH funding decisions continue to impact research revenue and pressuring cost structures at academic medical centers.
- Medicaid financing changes and fraud, waste, and abuse initiatives are likely to increase reimbursement and compliance pressure, as CMS continues implementing changes to state payment practices and program integrity.
- The NSA IDR will remain an important reimbursement issue, as policymakers oversee dispute volumes and arbitration outcomes.
Pharma
- Drug development modernization and US–China decoupling policies have the strongest potential for congressional action. Drug pricing policy is also likely to remain an area of continued attention, with IRA drug negotiations proceeding on their existing trajectory alongside some CMS refinement. Separately, the administration's tariff-linked MFN drug-pricing deals, now covering 26 manufacturers, serve as near term risk management.
- FDA efforts to modernize and accelerate drug development amid growing international competition, including from China,4 and international benchmarking programs both remain key factors shaping the operating environment, while tariffs and administration efforts to onshore manufacturing and development reshape capital allocation and supply-chain strategy.
Medtech
- Legislative exposure is the lowest of the four subsectors in any scenario, with trade/tariff policy and FDA regulatory action, both executive-branch driven, mattering more than which party holds Congress. Possible legislative activity on site neutral policies may impact site-of-care economics and device utilization patterns.
- Medicaid financing changes and broader reimbursement pressure on providers could also constrain capital budgets and purchasing power for medical devices and equipment, creating an indirect channel through which congressional policy changes could affect medtech demand.
Who could control Congress after the 2026 midterms?
With Election Day nearing, Washington is entering the final stretch of the 2026 midterms. Congress has cleared a continuing resolution through December 11, removing the threat of an October shutdown and giving lawmakers greater space to campaign. On paper, the election is broad: all 435 House seats and 35 Senate seats are on the ballot. In practice, control will be decided by a much smaller group of races. Just 37 House seats are rated Lean or Toss Up, while the Senate battlefield is concentrated in nine races, including six Toss Ups. Democrats need a net gain of three House seats to win control of the chamber and four Senate seats to flip the Senate, assuming each party retains previously held open seats.
History favors the party out of power. The president’s party has lost House seats in 20 of the past 22 midterms, and many forecasters now see Democrats as well positioned to flip the House. In the Senate, Democrats chances of winning the upper chamber have increased. The primaries have highlighted vulnerabilities within both parties. Affordability remains a central voter concern, creating pressure for Republicans as they increasingly rely on a working-class coalition, while Democrats continue to struggle with internal divisions over leadership, messaging and policy direction.
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