Hospital stocks rallied while drugmakers brace for scrutiny. Here's what the Democratic wave means for healthcare.

By Jaimy Lee

Democratic lawmakers are expected to revisit cuts to Medicaid and the expired enhanced tax credits that made the ACA more affordable

Hospital stocks are rallying after a Democratic sweep in the midterm elections.

The Democratic victory in the midterm elections could be a huge boon to the nation's largest hospitals.

Community Health Systems' stock (CYH) rallied Wednesday, to close 15.8% higher, while shares of HCA Healthcare (HCA), Tenet Healthcare (THC), and Universal Health Services (UHS) all closed more than 9% hgher. Those companies operate more than 300 hospitals across the country.

The blue sweep of the Senate and the House of Representatives puts several Democratic lawmakers back in leadership positions over key healthcare committees, and they're likely to prioritize changes that could benefit hospital systems, analysts say.

That includes Sen. Chuck Schumer, a New York Democrat, who is expected to resume his position as Senate majority leader. With Schumer leading, major changes like hospital site-neutral reforms, which require Medicare and other insurers to reimburse medical services at the same rate regardless of whether they are done in a hospital or a doctor's office, and 340B reforms, which benefit the drug industry and not hospitals, will likely be put on hold.

"Schumer is a longtime stalwart of the hospital industry," Spencer Perlman, director of healthcare policy research at Veda Partners, wrote in a note on Wednesday.

Democrats are also expected to take on major changes to Medicaid, passed by the Republican Congress last year, that limit enrollment, and restart the enhanced premium tax credits that helped middle-class Americans pay for their Affordable Care Act health plans. Lawmakers have said they plan to use the issues as leverage in next summer's debt-ceiling talks. If both are addressed, that would ensure that millions of people in the U.S. still have health coverage, which is better for the business of running a hospital.

That said, President Donald Trump's veto power still exists, and both policy changes occurred under his watch.

"Democrats will prioritize reversing Medicaid cuts, extending ACA subsidies and restricting Trump administration actions," Raymond James analysts told investors. "Major legislation remains unlikely before 2029, but a Democratic sweep could enable substantial reforms."

Leaders like Schumer and Sen. Ron Wyden, an Oregon Democrat, are likely to resume their leadership of the health and finance committees, respectively. Both are proponents of Medicare for All, the movement calling for a national health system, as are some of the new lawmakers who won last night, including Abdul El-Sayed, a Democrat from Michigan, and Darializa Avila Chevalier, a New York Democrat.

"Wins by progressive candidates will jumpstart a national discussion of Medicare for All," Larry Levitt, KFF's EVP of health policy, wrote on X on Wednesday. "Medicare for All isn't going to pass in the next two years. But, newly prominent advocates will have a platform to make sure it's part the discussion, carrying through to the 2028 primaries."

Drug-pricing deals to come under scrutiny

Not all healthcare companies are expected to benefit from the blue wave, particularly health insurers and biopharmaceutical companies.

Democrats have called for reforming the policies that allow upcoding in Medicare Advantage, a practice that benefits insurers, which are incentivized to characterize patients as sicker than they are to get higher payments from the government. And the opaque "most-favored nations" deals struck by drug companies with the Trump administration are expected to face scrutiny from Democratic lawmakers, according to market and policy analysts.

"This creates greater policy uncertainty for pharma in the months ahead, giving European governments more room to slow-play" those negotiations, according to Diederik Stadig, ING's senior healthcare economist.

Biopharmaceutical stocks were also up on Wednesday morning, though none showed the gains of the hospital sector. Democrats are expected to take another crack at trying to lower drug prices, but not until 2028, according to Leerink Partners analyst David Risinger.

"Democrats likely have 'bigger fish to fry' than drug pricing in the near-term," he wrote in a note. "But we do expect investigations related to drug pricing."

-Jaimy Lee

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11-04-26 1610ET