Welcome back to health care predictions season! We invite you to join us and gaze into our crystal ball as we look ahead to 2025. But first, let’s look back and grade last year's performance.
In 2024, we did better than usual. We got eight and a half out of 10 predictions right. We feel smug about our prediction that Medicare Advantage’s (MA) underperformance would lead to turnover at big payors with CEO Karen Lynch departing CVS Health (we are rooting for Steve Nelson and Sree Chaguturu at CVS). We were sadly right that nothing happened to pharmacy benefit managers (PBMs) other than public shaming (but the PBM-branded biosimilars are a cool thing to watch). And we correctly predicted that the Supreme Court would protect access to Mifepristone (though the Trump Administration may now set their sights on the Comstock Act to restrict mail order access). Finally, as anticipated, once mighty unicorns revealed themselves as bad businesses and the Federal Trade Commission set its sights on health care monopolies by unveiling its case against United Healthcare. We are saddened and send our condolences to Brian Thompson’s family and his United Healthcare colleagues.
We were surprised by how emphatically our prediction that artificial intelligence (AI)/large language models (LLMs) would be adopted has proved out. Businesses like Abridge, Nuance, and Suki all experienced astonishing growth and continue to accelerate. We correctly predicted that the Centers for Medicare and Medicaid Services (CMS) would complete drug price negotiations which, at the time of our prediction, was tied up in the courts. However, we were disappointed that the negotiated prices were essentially cost-neutral since the reductions were really just the value of the rebates. Finally, the cracks we predicted in the brick-and-mortar services businesses were larger than we expected. Oak Street Health and VillageMD struggled to cut costs, while Cano Health and Caremax went bankrupt and Forward shut down.
We were less proficient soothsayers about payors playing hardball with hospitals. The opposite actually came true as several hospitals turned the tables on payors, dropping MA insurance plans. We were also overly optimistic about the cost-effectiveness and ease of access to GLP-1s. On this one, we think it is only a matter of time and give ourselves partial credit since adoption was extraordinary, even as many payors tried to restrict access. We believe increasing GLP-1 rebates and more data should make cost-effectiveness clearer over the near term, though incoming Health and Human Services leadership may slow things a tad.
Now on to our guesses for 2025:
1. All the health care policy action will be in the courts, not Congress
Although Trump is entering the White House with an electoral mandate, we do not believe he will spend any political capital on health care legislation. Congress will not try, for the 101st time, to repeal the Affordable Care Act and no major health care legislation will be passed in 2025. Instead, all the action will be in the courts.
In 2024, in Loper Bright, the Supreme Court ended decades of deference to administrative agencies and opened the door to a world of challenges to existing regulations. This, in turn, led to a flurry of cases questioning CMS and Food and Drug Administration (FDA) rulemaking on matters like risk adjustment, MA Stars, broker commissions, and FDA authority.
2. Illumina gets sold as the dream ends
Illumina has gone from being the darling of the human genome project to losing its way for the last five years, punctuated by the disaster of buying and divesting Grail, destroying $10 billion of value.
Today, Illumina faces stiff competition and slowing growth. Its market cap is in the $20 billion range, down 50% over the past years which, along with new management, makes it a ripe takeover target for one of the life sciences tools aggregators (our bet is on Danaher).
3. Multiple down exits in health tech M&A and IPOs
After several years of no liquidity, WE ARE SO BACK! Combine a laissez-faire Trump administration attitude toward antitrust with pent-up demand from growth businesses, large payors, pharma, and tech will all be active acquirers.
We also think M&A premiums and tax cuts will fuel public markets and open the IPO window—the hitch being that pricing will be well below what these companies were prepared to pay at the peak. Nonetheless, management teams and investors will accept “okay” prices four years post-market bust.
4. Litigation and Dr. Oz-led CMS make Stars easier, and Medicare Advantage grows faster
More 4 Star plans would help an Oz-led CMS achieve its goal of Medicare Advantage growth and private sector involvement and innovation in Medicare.
Cessation of the data analytics sleight of hand and tricky foreign language secret shoppers would make Stars cutoffs more predictable and bonuses easier to achieve or at least less foot-fault binary. Additionally, the new administration will have no appetite for more lawsuits like SCAN’s and Elevance’s successful challenges in 2024.
5. At-risk primary care rebounds in 2025 after a disastrous 2024
2024 was a disaster for risk-bearing primary care providers (PCPs). Changes to the CMS V28 risk adjustment model, overly generous health plan benefits eating into their revenues, and lower-than-inflation-rate increases conspired to cause losses, divestitures, and cost cuts. With better cost structures, it’s time to figure out how to win in V28, and with plans cutting benefits in 2025, profits and growth will return to these groups (and continue to improve into 2026).
6. Healthcare Service Corporation (HCSC) walks from Cigna's MA business due to Cigna's rich AEP offerings
While several MA plans cut benefits in a big way in 2024, Cigna’s cuts were much more limited. We believe this was in order to show strong membership growth for the sale (and maybe they didn’t get the Inflation Reduction Act memo and recognize the landmine that is Part D risk).
These benefit designs, especially around drug costs, are attracting a bunch of adverse risk. Realizing they overshot the growth versus profitability balance, in early November Cigna (along with several others, such as Elevance) informed brokers that they would not pay commissions on these plans. But that will have been too late. We expect that HCSC, realizing this, will decide that this mess is too big to clean up, walk, and find another way to grow their MA business.
7. More leadership turnover at big payors
Hard times are synonymous with more leadership turnover. ‘Nuf said. And we won’t count Medical Mutual of Ohio, given they already jumped the gun.
8. Apple does glucose monitoring well
If you have ever tried Dexcom or Freestyle Libre glucose monitors, you have dealt with so-so software and needles. Enter Apple who will bring world-class software and design to non-invasive glucose monitoring. Needleless glucose monitoring is a much more appealing product and will lead glucose monitoring to be as omnipresent as sleep tracking across the population.
9. Health tech AI startups prove to be features, not businesses
While AI has been the investor darling of 2024, with 39 AI companies raising rounds of $100 million or more, most of the health tech-focused AI startups are going to be disappointing.
Most health tech AI companies are commercializing a novel feature that is better as part of a broader product or can be easily emulated once the use case is realized. The health care AI winners will be growth-stage health tech businesses adopting AI to improve their gross margins and opex, in many cases achieving a five-to-10 point increase in net margins.
10. Cell therapy gets out of the doghouse
After several years of being avoided like Bob and Bryan at their 1980s high school dances, cell therapy bounces back. Clinical data in solid tumors and manufacturing improvements across the board rekindle the promise to bring the extraordinary efficacy that a few blood cancer patients have benefited from to a much broader population. Not in autoimmunity, however, where things actually cool off because T-cell engagers show efficacy, rendering cell therapy products less needed.
Again, we want to double down on our evergreen predictions of 2022. Prediction #1: Big Tech will continue to be (generally) terrible at health care. While it’s in position to win in AI by creating general tools for all businesses, we think that Big Tech companies will again fail to build vibrant health care-specific businesses. We continue to root for Amazon and their pharmacy business but predict continued irrelevance for the actual care segments (One Medical, Iora, virtual visits). Apple’s hearing aids will be awesome for a huge swath of seniors and we have high hopes for glucose monitoring.
We also stand by evergreen prediction #2: Non-profit blues will not merge to achieve the scale needed to compete. The non-profit Blues could become a vibrant competitor to national plans, many of which are in disarray. Moreover, the Trump administration is poised to be much friendlier to mergers of all types, helping the regulatory gymnastics that will be needed to make this happen. That said, strong balance sheets, entrenched management, and a lack of a burning platform make us believe that another year (and probably more) goes by before this particular inevitability occurs.
We look forward to reporting back to you in a year. If you agree, disagree, or have a prediction of your own, please share with us on Bluesky at @bobkocher and @brobertsvc and X at @bobkocher and @brobertsvc. In the meantime, we wish you a safe and happy holiday season and 2025.
More must-read commentary published by Fortune:
- AI optimists are behaving like the investors who got burned in the Great Depression and dot-com bubble, Vanguard’s chief economist warns
- Demis Hassabis-James Manyika: AI will help us understand the very fabric of reality
- I worked with Steve Jobs. Here’s what he’d say about today’s leadership style
- The real reason Spain’s economy is bucking the trend of European decline
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
