Well, we finally have Donald Trump’s long-awaited plan for dealing with Obamacare, and it is, as the pundits and the children might say, pretty much a nothingburger.
The plan was announced on the candidate’s website a few days ago: https://www.donaldjtrump.com/positions/healthcare-reform
The plan is long on promised outcomes (the country will be a better place, etc.) and short on the proposed steps for achieving those outcomes. The specifics are these seven proposals:
• Repeal Obamacare. OK, fine, a good start.
• Modify existing law that inhibits the sale of health insurance across state lines. Also OK, though one would have preferred “eliminate” rather than “modify,” which is vague.
• Allow individuals to fully deduct health insurance premium payments from their tax returns. OK, very good.
• Allow individuals to use Health Savings Accounts. OK, a good idea, but not enough. Seniors should able to use the federal funds that are used under present law to fund Medicare, to be deposited into HSAs and used to pay their medical bills directly, which would be essential in restoring free-market shopping and pricing for healthcare for seniors.
• Require price transparency from all healthcare providers, to allow individuals to shop for the best prices. OK, a good idea, but futile if the prices for healthcare are still being set by the government, via its regulation of healthcare insurance and Medicare. Until you break up that model, and destroy the system whereby the government controls healthcare-pricing by controlling healthcare insurance and Medicare, price-transparency is of little value. Shop all you want, you would still have to go where the insurance carrier or Medicare permits, and you would still pay whatever they dictate.
• Block-grant Medicaid to the states. OK, a good idea.
• Remove barriers to entry into free markets for drug providers. OK, another good idea, though vague and, like the rest of the program, not directed to the heart of the healthcare problem.
So, there you have it. A proposal that contains several items that sound good/feel good but do not seriously tackle the essential problems of the U.S. healthcare and healthcare-insurance system. Worse, it is a proposal that implies that everything about Obamacare that is not addressed in the proposal, is to be retained in Trumpcare. Here is a summary of the more-important things that Mr. Trump does not address:
• Tort reform. A surprise that he does mention it, as most commentators (other than the tort lawyers) consider it to be one of the biggest contributors to runaway healthcare expenses in the U.S. Is there a reason why Mr. Trump has failed to take on the tort bar?
• Health savings accounts – great idea, but is there a reason why Mr. Trump does not make such accounts available to seniors on Medicare, who could use them to buy healthcare directly instead of having to obtain their healthcare through Medicare? This is very important, because seniors are the biggest healthcare users of all.
• Pre-existing conditions – is there a reason why Mr. Trump has failed to address this topic, thereby implying that he will do nothing to address it? He must know that a great many people are choosing to stay out of Obamacare until they have a major medical problem, and then jumping in on an emergency basis. This issue, a huge problem, could be solved, simply by subsidizing those who already have PECs (grandfathering them), but for everyone else, making it very costly to defer the purchase of insurance until they are hit by a major illness or injury. Sounds like Mr. Trump is playing to the crowd, dodging a much-needed reform.
• The big one: healthcare pricing and insurance pricing, the two topics that should be the essence of any serious reform plan and that are the essence of the program presented by House Speaker Paul Ryan and generally endorsed within the Republican Party. This topic is so crucial, it requires a fuller explanation.
The primary problem with U.S. healthcare and with healthcare insurance programs (including Medicare) is that they do not operate in a free market where patient and provider can negotiate the prices of healthcare services (doctors’ bills, hospital bills, bills for lab tests, etc.). Instead, they operate in a system where the government replaces the market. The government determines which providers can be used and what prices can be charged for their services – for all practical purposes, it is a “single payer” system that eliminates the free-market element and is tightly controlled by the government. You sense that you are paying too much – as is always the case with price-fixing – but, by how much?
The second major problem with the U.S. healthcare and healthcare-insurance programs is that they are burdened with a maze of regulatory controls that obscure the real costs of healthcare. The critical feature of the system is that it embodies an almost infinite number of hidden, built-in subsidies and cross-subsidies for various favored categories (most prominently, for those in financial need). There is no way for you to have any idea of how much of your medical bill, or your health insurance policy, represents a payment to support social policies rather than a payment for health care and risk-based insurance, because the subsidies are baked into the ultimate pricing and never disclosed. You sense that you are paying too much, but you have no idea how much of the cost is subsidies.
The conservative/Ryan approach, unlike the Trump approach, confronts and solves these problems. The Ryan approach un-bundles the healthcare and insurance factor from the subsidization factor, exposes the healthcare and insurance factor to a freed-up market, and then separately provides governmental subsidies or vouchers directly to those who need it (“premium support”). Healthcare insurance reverts to being true insurance, based solely upon actuarially-based calculations of risk. Without these types of reform, there is no basis for hope that healthcare and insurance costs will ever be reduced.
It would have been helpful had Trumpcare also addressed some of the other problems in the current system that are addressed and solved by the Ryan approach, such as the imbalances and cross-subsidies that occur within group insurance policies, which should have no role in a system in which healthcare insurance is truly based upon actuarial calculations of risk and embodies no subsidies or cross-subsidies.
In sum, the Trump proposal contains a few feel-good features and promises and appears to address the common criticism that Mr. Trump tends to provide few specifics on his plans, but in fact, the proposal is not likely to have any substantial effect upon the runaway costs of healthcare and insurance. Is Trumpcare better than Obamacare? Well, yes, but only a little. It is a band-aid, not a cure.