Congress Set to Return for Healthcare, ACA Showdown

Published September 2, 2025 – By Tatiana Brown Johnson, Senior Vice President, Healthcare Policy, Laura Hobbs, Senior Vice President, Healthcare Policy and Monet Stanford, Senior Vice President, Healthcare Policy, and Ryan Visnovec, Washington Analysis Research Assistant

Congress Returns: Healthcare Policy in Focus

With Congress back on September 2nd, investors will be watching the September 30th government funding deadline. For healthcare, three market-relevant questions dominate:

Will Congress extend the enhanced ACA premium tax credits (EPTCs) set to expire on Dec. 31, 2025?
Will it waive the Statutory PAYGO to avert a 4% across-the-board Medicare cut?
Will it delay FY2026 Medicaid Disproportionate Share Hospital (DSH) payment reductions?

Our View: EPTCs Likely Renewed – Out of Consensus

Despite broad skepticism from ACA Marketplace insurers [UnitedHealthcare (UNH), Elevance (ELV), CVS/Aetna (CVS), Centene (CNC), Humana (HUM), and Oscar (OSCR)], we assign a 65% probability that EPTCs are extended, with adjusted eligibility and/or timeline, as part of a healthcare “grand bargain.” The political calculus is most acute in Republican-leaning, non-expansion states, where failure to act could heighten voter risk. Should EPTCs lapse without action by February 2026, we see potential for a rebranded version, likely tied to a Republican-led initiative, to advance before the PY2027 open enrollment period (Nov. 1, 2026). While proximity to the Nov. 4, 2026, midterms may blunt voter impact, a summer 2026 extension could provide Republicans a campaign policy win.

Countdown to Expirations: Key Healthcare Programs in Play

Multiple healthcare extenders, including community health center funding, the teaching health center graduate medical education (GME) program, and Medicare low-volume hospital payments, also expire Sept. 30, 2025. We expect these to be included in a short-term continuing resolution (CR) until December, as well as in a year-end package.
Congress is also expected to revisit provisions excluded from the One Big Beautiful Bill (OBBB), including the SUPPORT Act, which addresses substance use disorder programming, and PAHPA reauthorizations, which maintains funding for national security risks pertaining to healthcare and Medicare telehealth flexibility extensions.
Policy riders removed during OBBB negotiations under the Senate Byrd rule may re-emerge, notably pharmacy benefit manager (PBM) reform, targeted Medicare/Medicaid adjustments, and possibly a narrowed site-neutral payment policy as a budget offset.
Broader Medicaid reforms beyond OBBB remain a low probability.

“Grand Bargain” on EPTCs: The Bull and Bear Cases

The Bull Case

Clearing the Decks – If a Republican-led Congress reaches a government funding deal with Democrats that incorporates their key healthcare priorities, it would effectively “clear the decks” of bipartisan items. This would reduce near-term policy overhang for healthcare investors, while also setting the stage for 2026, when narrower congressional margins and the midterm cycle are likely to make healthcare debates more partisan and less predictable.
A “Glide Down Path” – A more likely path for extending the EPTCs is a ‘glide down’ approach, where credit amounts are gradually reduced over time or eligibility criteria are tightened. This approach maintains broad marketplace support while reducing federal outlays, balancing political priorities and minimizing near-term disruption for insurers and beneficiaries.
Expiration of EPTCs Impact to Red States – As of 2024, “56% of Affordable Care Act (ACA) Marketplace enrollees reside in congressional districts represented by Republicans, and 76% of enrollees live in states carried by President Trump in the 2024 election,” according to KFF.
It’s All Politics – Historically, midterm elections tend to favor the party opposite the sitting President. Issue dynamics also play a role: Democrats generally perform better in elections where healthcare dominates the agenda, while Republicans tend to benefit when economic concerns are front and center

The Bear Case

EPTCs Weren’t Part of ACA’s original design – Instead, they were first enacted under the American Rescue Plan Act) and later extended by the Inflation Reduction Act. This distinction could allow Republicans to frame them as a temporary COVID-era policy, i.e. “Biden COVID Credits”, rather than a permanent ACA feature, providing political cover for their expiration.
EPTCs Lead to “Fraud, Waste, and Abuse” – Leading Republican healthcare think tanks, including the Paragon Health Institute, oppose extending EPTCs, citing concerns over fraud, waste, and abuse, as illustrated by recent Department of Justice litigation against several ACA brokers.
Exorbitant Cost – Extension of the EPTCs will likely cost between $33-40B a year; while we expect modification of the EPTCs if passed, the initial sticker shock could be off putting for some fiscal hawks.
It’s All Politics, AKA “Let It All Blow Up” – If a deal acceptable to Democrats is not reached, they could leverage the expiration of EPTCs and the effects of the OBBB as an alternative campaign issue, shifting the narrative from “No Trump” to tangible healthcare impacts that resonate with voters.
All or Nothing – Congress faces two potential paths for the upcoming government funding decision: 1) it can pass a clean funding package that covers only the bare minimum required to keep the government operating, or 2) it can approve a more inclusive package that incorporates a broader set of priorities for congressional leadership. In our view, Democrats may be less inclined for assist in passing a government funding package that does not include EPTCs.

End of Year Healthcare Priorities
Category	Policy Item	Description	Likelihood	Stocks	Outlook
Health Extenders	Community Health Centers and Teaching Health Center Graduate Medical Education (GME) Program	A bipartisan compromise in December would have increased mandatory funding for health centers and increased and extended funding for the National Health Service Corp and GME for two and five years, respectively. However, given that the provisions were dropped in 2024, a short-term extension this year seems more likely.	Extension Highly Likely	CVS, ELV, CNC, MOH	Tailwind
	Medicare Dependent Hospital Program and Low-Volume Hospital Payment Adjustment	Given Republicans’ penchant for supporting rural hospitals, we expect an extension of the fund; the question is for how long? We expect something less than the five-year extension included in the Assistance for Rural Community Hospitals Act (ARCH Act).	Extension Highly Likely	CYH	Tailwind
	Medicare Rural Ambulance Health Extender	The most recent appropriations extended temporary Medicaid ambulance add-on payments at current levels. While congressional discussion has been limited, stakeholders are expected to push for a long-term extension at higher rates—3.4% for urban, 4.3% for rural, and 26.7% for super-rural areas—likely through a reintroduction of the Protecting Access to Ground Ambulance Medical Services Act.	Extension Highly Likely	Global Medical Response, Acadian Ambulance	Tailwind
	Medicare Telehealth Flexibilities	Medicare telehealth flexibilities are set to expire on September 30, 2025, triggering a reimposition of geographic restrictions on originating sites starting October 1. While there was bipartisan support in the December package to extend these flexibilities for an additional two years, it was ultimately dropped. Failure to secure an extension would significantly limit telehealth access—posing downside risk to virtual care providers and impacting care delivery models reliant on remote services.	Extension Highly Likely	TDOC, AMWL, DOCS	Tailwind
Reauthorizations	Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act	The House passed a reauthorization of the SUPPORT Act in June. Given its bipartisan support in both the House and the Seante, we expect lawmakers to include it in a year-end package; however, Trump has previously argued the funding bill shouldn’t include extraneous provisions.	Passage Likely	ACHC, UHS, INDV LN, PFE	Tailwind
Reauthorizations	Pandemic and All-Hazards Preparedness (PAHPA) Act	Included in S.891, the Bipartisan Health Care Act, and the December healthcare package, PAHPA originally expired in 2023. The bill, if enacted, would enhance the U.S.’ public health and medical preparedness. However, we caution that House conservatives could push for a reauthorization that requires changes such as cutting funding levels and establishing a vaccine liability commission.	Passage In Some Form Likely	MCK, CAH, COR	Tailwind
Medicare	Medicare PAYGO Waiver	Given OBBB increased the deficit by $3.4tn, it will likely trigger S-PAYGO mandatory sequester. In the event of a sequester, reductions in Medicare spending up to 4% annually would be allowed, which translates to a loss of almost $500 billion over 10 years for the program unless Congress steps in.	Waiver Highly Likely	UNH, HUM, CVS, ELV, CNC, MOH	Tailwind
	Site Neutral Reform (Minor)	The Senate will likely revive the National Provider Identifier (NPI) policy from the Lower Costs, More Transparency Act for inclusion in a year-end bill, as it was also included in the December package.	Minor Reform Likely	HCA, THC, UHS, CYH	Tailwind
	Site Neutral Reform (Major)	While broad-based site neutral reform has significant support in Congress, the opposition of two key Senators Chuck Schumer (D-NY) and Susan Collins (R-ME), will likely halt its inclusion in a year-end package.	Major Reform Unlikely	HCA, THC, UHS, CYH	Headwind
	“Doc Fix”	OBBB included a 2.5% increase in the PFS conversion factor for services from January 1, 2026, through December 31, 2026. This differs from the previous House version, which provided an update of 75% of the Medicare Economic Index (MEI) in 2026 and 10% of MEI thereafter. In our view, it is unlikely that Congress will address a more permanent fix until next year.	Doc Fix Unlikely	RDNT, MD, USPH	Headwind
Medicaid	Medicaid Disproportionate Share Hospital (DSH) Payment Cuts	Congress is likely to delay Medicaid DSH payment cuts, as these have historically been tied to government funding bills. However, whether a delay occurs will depend on the outcome of broader government funding negotiations. Without further congressional action, Medicaid DSH payments to states are scheduled to be reduced by $8 billion in FY 2026.	Likely	HCA, THC, UHS, CYH	Tailwind
Medicaid	Acute Hospital Care at Home (AHCAH) program	An extension of the AHCAH program would likely increase the number of state Medicaid agencies covering hospital-at-home services. As of September 2024, 12 state Medicaid agencies cover hospital-at-home services; more state Medicaid programs are waiting for a long-term AHCAH extension before covering these services. The program expires September 30, 2025. Currently introduced legislation, the Hospital Inpatient Services Modernization Act, would extend the program until 2030.	Extension Likely	HCA, THC, UHS, CYH	Tailwind
Drug Pricing and Pharmacy Reform	340B Reform	Expanding this administration’s initial step of aligning insulin and epinephrine products with 340B pricing, we expect Congress to require covered entities to provide detailed annual reporting on 340B revenue and establish guidelines that mandate manufacturer discounts be passed directly to 340B-eligible patients.	Reform  Likely	GILD, LLY, NVO, SNY	Tailwind for Drug Makers; Headwind for Hospitals
	Ensuring Pathways to Innovative Cures (EPIC) Act	This legislation, aimed at extending the negotiation eligibility period for small molecule drugs from seven years after FDA approval to eleven years, matching the timeline currently applied to biologics, is a top priority for House E&C Committee Chairman Brett Guthrie (R-KY). However, Democrats have expressed no appetite to reach a deal on this bill.	Passage Highly Unlikely	JNJ, PFE, NVS, SNY	Headwind
	Rare Pediatric Disease Priority Review Vouchers (PRVs)	We anticipate an extension of the FDA’s authority to issue priority review vouchers to encourage treatments for rare pediatric diseases	Extension Likely	RARE, SRPT, AZN, LLY	Tailwind
	Pharmacy Benefit Manager (PBM) Reform	The final version of OBBB did not include PBM reform that was in the House-passed version of the bill, which would have banned spread pricing in Medicaid and increased transparency between PBMs and prescription drug plan (PDP) arrangements. Given that the two provisions were included in versions of both the December 2024 package and reconciliation package, we expect the provisions to be at minimum debated, although inclusion remains fluid and we maintain the impact would be low.	Reform Likely	UNH, CVS, CI	Neutral
Consumer Health Accounts	ICHRA/CHOICE Reform	Interest in Individual Coverage Health Reimbursement Arrangements (ICHRAs) and their expanded Custom Health Option and Individual Care Expense (CHOICE) arrangements continue to build. Expansion measures were included in the House-passed bill but ultimately dropped in the final version of the package due to cost concerns.	Reform Unlikely	BNFT, HQY, GOCO	Tailwind
	Health Savings Accounts (HSA) – Gym Membership Use	OBBB omitted the House-passed provision, which would have permitted HSA use for gym memberships. However, in our view, given the multitude of priorities, this will likely fall to the wayside.	Highly Unlikely	LTH, PLNT, PTON	Headwind
	Health Insurance Reform for Independent Workers (Association Health Plans – AHPs)	Republican Senators Cassidy, Scott, and Paul recently introduced the Unlocking Benefits for Independent Workers Act aimed at expanding access to portable benefits for independent (gig) workers.	Reform Unlikely	HQY, UNH, Fidelity Investments (private)	Headwind

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