Congressional Balance of Power & Implications for the 118th Congress

For up to date balance of power, see here.

Republicans are in line to regain control of the House of Representatives, although with a narrower margin than predicted. As of Wednesday (Nov. 9) evening, Republicans are just over 200 votes in the House, needing 218 to capture the Majority. We expect additional races to be called in the coming hours and days and should formally know control of the House later this week. The narrowness of the Majority (in either case) is notable, as we saw Speaker Pelosi struggle to keep her caucus in line on major votes. While Republican gains were far less than what some anticipated, the party has picked up or is contending for some seats in regions of the country that had been breaking for Democrats in more recent years, such as the New York suburbs. With an anticipated narrow GOP majority, one question will be how these gains will be reflected in the caucus which has moved rightward.

In the Senate, Democrats were able to flip Pennsylvania with John Fetterman defeating Dr. Mehmet Oz. Elsewhere, Republicans are ahead in Nevada, where incumbent Catherine Cortez Masto is trailing challenger Adam Laxalt in their most likely pick-up. Other vulnerable Democrats included Mark Kelly in Arizona and Raphael Warnock in Georgia. Democrats are leading in both those races currently; however, Warnock has not reached the 50% threshold, and a run-off election will be held on December 6. Republican incumbent Ron Johnson of Wisconsin won his re-election. In Alaska, the winner will be a Republican, though it is not clear if it will be incumbent Sen. Lisa Murkowski or challenger Kelly Tshibaka, who was backed by former President Trump.

Given the expected makeup of a House narrowly controlled by Republicans and a near-evenly divided Senate, legislating in the incoming 118^th Congress will most certainly require a level of bipartisanship. The budget reconciliation pathway that allows legislation to move through the Senate with a simple majority vote will not be an option in a divided government. There are several pressure points for the upcoming Congress that will need to be navigated — ongoing funding for the federal government, an eventual raising of the federal debt limit, a reauthorization of the Farm bill as well as the annual defense authorization in addition to geopolitical tensions and concerns about the nation’s debt and entitlement programs. Additionally, with a narrower-than-expected majority, House Republicans may reconsider where they place their energies in the new year, particularly with regard to oversight and investigations and other political activities. Complicating the long-term legislative outlook is the 2024 Presidential election, which to some extent is already moving forward and which will dominate attention and energy by the midpoint of 2023. Along with the ability to control the legislative agenda, Democrats are hoping they can maintain the Senate to ensure President Biden’s nominations (judicial and otherwise) are able to make it through confirmation.

The 118^th Congress will be sworn in on January 3, at which time formal leadership elections will take place. If Republicans capture the House, expectations are that House Minority Leader McCarthy (R-CA) will become the next Speaker. McCarthy has indicated recently that Republicans will focus on inflation, border security and crime in addition to fulfilling their oversight obligations. In the Senate, expectations are that leadership will remain the same though Sen. Josh Hawley and Senator-elect Eric Schmitt, both of Missouri, have publicly indicated they would not support retaining Mitch McConnell as Republican leader.

Committees of Relevance for Health Care

For a few of the top Committees relevant to health care issues, leadership changes are assured due to retirements:

• Senate Appropriations — Chairman Leahy (D-VT) and Ranking Member Shelby (R-AL) are retiring at the end of this term. They are expected to be replaced by Sen. Murray (D-WA) and Sen. Collins (R-ME).
• Senate Committee on Health, Education, Labor and Pensions (HELP) — Since Chairwoman Murray (D-WA) is expected to lead on the Appropriations Committee, it is expected that Sen. Sanders (I-VT) will lead HELP for Democrats. Ranking Member Burr (R-NC) is retiring; he is expected to be replaced by Sen. Paul (R-KY) unless he takes another position, in which case Sen. Cassidy (R-LA) is expected to be next in line. 
• House Ways and Means — Ranking Member Brady (R-TX) is retiring. Candidates to fill the role include Rep. Jason Smith (R-MO), Rep. Buchanan (R-FL), and Rep. Adrian Smith (R-NE). Rep. Neal (D-MA) is expected to stay as the Democratic committee head.

In other Committees, leadership changes will only occur if there are unexpected election losses:

• Senate Finance — Expected to continue to be led by Sen. Crapo (R-ID) and Sen. Wyden (D-OR).
• House Energy and Commerce — Expected to continue to be led by Rep. McMorris Rodgers (R-WA) and Rep. Pallone (D-NJ).
• House Appropriations — Expected to continue to be led by Rep. Granger (R-TX) and Rep. DeLauro (D-CT).

Final Committee ratios will not be determined until all the races have been called and organizational meetings can occur. In addition to Committee ratios, the House could see Committee numbers and sizes change. House Republicans indicated their intention of a ‘Select Committee on China’ and the Democrats’ ‘Select Committee on the Climate Crisis’ could be eliminated.

Committees of Relevance to Financial Services

• House Ways and Means — Ranking Member Brady (R-TX) is retiring. Candidates to fill the role include Rep. Jason Smith (R-MO), Rep. Buchanan (R-FL), and Rep. Adrian Smith (R-NE). Rep. Neal (D-MA) is expected to stay as the Democratic committee head.
• House Financial Services — Expected to be led by Chairman Patrick McHenry (R-NC) and Ranking Member Maxine Waters D-CA).
• Senate Finance — Expected to continue to be led by Sen. Crapo (R-ID) and Sen. Wyden (D-OR).
• Senate Banking — Expected to be led by Sen. Sherrod Brown (D-OH) and Tim Scott (R-SC).

Final Committee ratios will not be determined until all the races have been called and organizational meetings can occur. In addition to Committee ratios, the House could see Committee numbers and sizes change. House Republicans indicated their intention of a ‘Select Committee on China’ and the Democrats’ ‘Select Committee on the Climate Crisis’ could be eliminated.

Health Care Policy in the 118^th Congress

After being a dominant topic of many election cycles, notably implementation of the Affordable Care Act (ACA) and Republican-led “repeal and replace” efforts followed by response to the COVID-19 pandemic, the looming health care agenda may be more understated in the new Congress. A dominant topic will be the anticipated transition from the COVID-19 public health emergency (PHE) and its implications for an array of policies, such as continued access to care via telehealth within public programs and a wind-down or transition of several emergency policies. Another topic that will be pushed for will be legislation to codify the right to abortion, though a Republican-controlled House would make action on such a bill highly unlikely. Several topics on the lame duck agenda — including unaddressed FDA policies that did not move with the reauthorization of user fees, reforms to the nation’s pandemic response system, and possibly policy to address the nation’s mental health crisis — may be addressed and removed from the 118^th agenda. Beyond these big-ticket items, Congress will likely have the usual slew of healthcare bills on its agenda, including Medicare, Medicaid and other program extenders and reauthorizations.

Financial Services Focal Areas During the 118^th Congress

Oversight – Assuming Republicans re-capture the House, Ranking Member McHenry (R-NC) will likely focus his position on the House Financial Services Committee oversight on ensuring executive branch agencies are focused on inflation and other economic problems as opposed to pursuing social agendas.

NFIP Extension – While a long-term reauthorization of the National Flood Insurance Program (NFIP) has eluded Congress for years, McHenry will likely make another attempt after having reached a deal with Waters during the 117^th Congress.

Extension of 2017 Tax Cuts – In a year where the economy is at the forefront and we are heading into a presidential election, Republicans will want to tout the tax-cut package enacted under Trump. Aspects of the package will also need to be extended and, likely, need bi-partisan support to be passed.

Farm Bill (crop insurance) – Congress will need to reauthorize the Farm bill and its underlying programs. Among them will be federal crop insurance programs. The bill is seen as a must-pass measure.

Privacy legislation – Privacy legislation saw significant progress this Congress with the American Data Privacy & Protection Act being approved by the House Energy & Commerce Committee. The legislation had the support of bipartisan leadership in the House Committee; however, was not considered by the full House over concerns with how the bill would impact California’s own privacy law. The privacy debate will continue in the new Congress; however, the divided government and jurisdictional concerns will continue to complicate final passage.

Retirement Security – Expectations are that bi-partisan support around retirement security (SECURE 2.0, EARN IT Act, etc.) could result in numerous provisions being included in this year’s spending deal. If that package of provisions is not included, it will likely return in the new Congress.