Dive Brief:

• Changes to healthcare policy under President Donald Trump could negatively impact the credit ratings of a broad array of healthcare companies, including providers, payers, pharmaceutical companies and medical device firms, according to a new report from Fitch Ratings.
• Providers and payers would be most impacted by possible cuts to Medicaid, according to the report. Absolute federal funding cuts that are not offset by increased state spending would be the most damaging to providers, Fitch said.
• Insurers could feel downstream effects of Medicaid cuts if hospitals seek to hike payment rates for privately insured patients in an effort to mitigate the costs of providing care for more uninsured patients.

Dive Insight:

Since Trump won reelection in November, analysts have sought to anticipate how he might reshape the healthcare industry.

Accordingly, Fitch released a 2025 outlook report in December that predicted Trump would redirect federal resources toward new priority programs, such as vaccine efficacy assessments.

However, the credit ratings agency now says it didn’t accurately forecast how “drastic” the Trump administration’s efforts would be to shrink the size of federal agencies.

Already, the administration has sought to reduce headcount at the Food and Drug Administration, which has caused delays for medical device manufacturers hoping to bring new products to market. Although some of the fired FDA workers tasked with reviewing new products have since been brought back on, Fitch said the threat of a slower drug and device approval process could spur companies to consider mergers and acquisitions in the face of expiring patents.

The credit implications of M&A will be company specific, and hinge on whether the companies have execution risk or need to engage in a prolonged deleveraging process to complete the deal, Fitch said.

Congress is also weighing cuts to the Medicaid program after Trump tasked lawmakers with reducing federal spending by $2 trillion.

There are few specifics about what those cuts might look like. However, a recent analysis from the Urban Institute and Robert Wood Johnson Foundation found that cutting current levels of federal funding to the 41 states that have expanded Medicaid would shift over $44 billion in costs to states if they want to continue offering coverage. If they opt not to do so, nearly 11 million Americans could become uninsured. 

Less severe changes to the program, such as implementing work requirements, would be less harmful for providers, according to Fitch.

Still, providers can expect to see a “material” negative impact from any reductions to Medicaid, according to Fitch. Providers that have received a boost from recently expanded Medicaid supplemental payment programs would likely be hit hardest.

In the short term, Fitch is least concerned about the possible impact of new tariffs on the industry. 

“We believe most companies’ supply chains and credit profiles can withstand the impact of tariffs against China, Canada and Mexico, especially for innovative products with pricing power,” Fitch said.

However, if the Trump administration chooses to make major changes to trade with European nations, the healthcare industry could be more affected. The ratings agency also said retaliation from China for tariffs remains a risk for all global manufacturers.