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We asked industry insiders to detail and analyze each component of Trump’s healthcare plan.
Republican presidential candidate Donald Trump laid out a seven-point healthcare plan that calls for, among other things, repealing Obamacare and making individuals’ health insurance premium payments fully tax deductible.
We asked industry insiders to detail and analyze each component of his plan. Here are the seven key elements of Trump’s plan and what our insiders are saying:
1. Repeal Obamacare, including the individual mandate to purchase insurance.
“A Republican repealing the ACA [Affordable Care Act] is no surprise,” says Paul Johnson, CEO of Redirect Health. “It may be less politically appealing to the base, but from a market standpoint keeping the Affordable Care Act and amending it with free-market approaches seems a more favorable approach. And while a free-market approach is better, we did not have a free market in healthcare before the ACA.”
According to William Hoagland, former staff member and director of the Senate Budget Committee, Trump’s proposal could backfire on health plans.
“By eliminating the Obamacare mandate and means-tested, financial support to purchase health insurance, but requiring insurers to cover individuals with pre-existing conditions, guarantees higher costs for private insurance or major increases in Medicaid expenditures,” he says.
No safeguards for lower-income families and patients with pre-existing conditions means that up to 26 million Americans could lose access to healthcare, with higher premium costs, says Managed Healthcare Executive Editorial Advisor Joel Brill, MD, chief medical officer, Predictive Health LLC.
Joseph M. Mack, MPA, of Joseph Mack & Associates, a managed care and value-based consultant, says that some states have provisions limiting an insurer’s ability to use a pre-existing condition to exclude coverage by requiring a waiting period for newly hired employees to become eligible.
“Does Trumpcare supersede a state’s right to limit the use of pre-existing conditions?” asks Mack. “Individuals who are currently ‘off-exchange’ would likely not be eligible if they have a pre-existing condition.
“Trumpcare relies on market forces, including tax deductions, to limit costs of private insurance coverage,” Mack continues. “Medicaid funding would shift from the federal to state governments.”
2. Allow health insurance to be sold across state lines.
This proposes allowing consumers to compare plans across the U.S., regardless of state.
“Doing so should increase competition and would presumably help control premium cost inflation,” says Brill.
Although there are issues involving the varying state insurance laws, “insurance companies have gone way too far and are taking advantage of the lack of competition,” says Johnson. “Many states have only a few real choices for insurance. Competition does not really exist so prices are high.
“But the best free-market approach would be focused on reducing costs for employers who provide healthcare for their employees, and then also control the pricing of healthcare services,” he says. “Sixty-percent of employers use some form of self-funding/self-insurance. Helping smaller employers gain the benefits of self-insurance and buying very high deductible stop-loss insurance, which does cross state lines, would be wise.”
Hoagland says that he is not certain how Trump’s proposal differs from current law.
“Health insurance companies can sell their products in any state as long as the product meets state insurance compliance requirements,” he says. “If the proposal is to do away with state insurance licensing and preempt with federal law, the proposal would effectively be having the federal government regulate all health insurance and create a single national market.”
Implicit in the proposal is that premium costs for products offered would be less, according to Mack. “However, historically because of administrative slack, reduction of administrative expenses have rarely been passed on to consumers in the form of reduced premiums,” he says
“What may occur is that insurance companies would design products and premiums to cherry pick individuals who are higher earning, and lower risk,” Mack adds. “Federal government may see decreased regulatory costs of insurance to the detriment of states: It may be merely a shift from one to another.”
Antitrust issues, which are the purview of the federal government, would likely increase as insurance companies grow and acquire increasing market clout, potentially to the detriment of competitive pricing, Mack believes.
“A Trump presidency, especially with a Republican-controlled Congress, would likely not enforce antitrust review or actions,” he says. “Will insurance companies become ‘too big to fail’?”
3. Full health-premium tax deductions for individuals.
“This would allow individual taxpayers to act like a corporation and take a full deduction on premium payments made when filing their tax return,” Brill explains.
Johnson calls this proposal a “no-brainer.”
“Either healthcare should be tax deductible or it shouldn’t. To differentiate between employer-purchased or self-purchased healthcare makes no logical sense to us from a principle-based standpoint,” he says.
Most major healthcare reform proposals have some element of this tax benefit for individuals or families that purchase health insurance on their own-not through their employer, according to Hoagland. However, the problem with the Trump proposal, he says, is that “once he eliminates Obamacare, and subsidies, most low-income or modest-income families would not benefit from solely a deduction. They would only benefit partially if the support was in the form of a refundable tax credit.”
Mack says he is not clear if Trump’s proposal would also allow coinsurance and copayment tax deductions.
“Hillary Clinton has proposed a tax credit for out-of-pocket expenses, but not for premium payments, Trump would provide tax credits for premium payments.
“Trump’s proposal may provide a disproportionately greater benefit to high-income individuals purchasing high-end, more costly policies than for lower-income people that can only afford to purchase more basic plans,” Mack says.
4. Allow individuals to use health savings accounts (HSAs).
Expanding HSAs places the responsibility for healthcare choices on consumers by creating a reward to the consumer for getting less care and spending less money, according to Johnson.
“Trump’s plan allows withdraws tax-free and upon death,” he says. “Money in an HSA would be passed on to the deceased’s heirs. While not unique, they are solid market-based ideas.”
HSA’s are a double-edged sword though, Johnson explains. “For example, if a high-deductible HSA leads a cost-sensitive individual to skip important routine care for diabetes or other chronic disease, then we shouldn’t be surprised if a $20,000 to $50,000 hospital admission occurs because someone wanted to preserve a few hundred dollars in their HSA.”
Contributions to an HSA today are tax-advantaged to be used for the purchase of a high-deductible health insurance plan. “A high-deductible health plan is defined as one with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses do not exceed $6,450 for self-only coverage or $12,900 for family coverage,” says Hoagland. “Trump’s proposal does not address these definitions.”
This proposal raises several issues and questions for Mack:
“First, if an individual is eligible to participate in their employer’s health plan, then the state or federal [ERISA] laws would have to be changed to allow contributions to be made instead to the HSAs,” he says. “If employed, does the employer or individual get the tax benefit of the contribution? Is the contribution considered income by the employer if it does not obtain a tax benefit? Can HSAs be comingled among family members without tax or other penalties? Are healthcare costs no longer deductible when paid yearly?”
5. Require price transparency from all healthcare providers.
Hoagland calls this component a “laudable goal.”
“What is not clear from the Trump proposal is how it would alter what is currently happening organically in the market place today and how it would require private-contractual arrangements between stakeholders to reveal their prices. One could envision such a proposal leading to a government-wide price fixing mechanism,” he says.
“Trump’s proposal is to make price comparisons very easy to understand and allow consumers to make an educated decision regarding their health plan purchase,” Johnson says. “Hopefully this will go beyond an exchange where consumers buy health insurance and will translate down to hospital transparency where the majority of healthcare dollars are spent. Think about this: Our most vulnerable time is when a doctor recommends we check into a hospital. The last thing we think of, even if we thought we were knowledgeable about it, is price. The result is a inefficiency that has been exploited in a very spectacular fashion.”
Mack believes that price transparency among providers focuses on costs, and not on innovation and entrepreneurship.
“The exclusive focus on price transparency does not address network adequacy [e.g., narrow networks], antitrust issues [e.g., mergers of organizations to fix prices below market rates to buy business-antitrust is a federal authority], or increasing access for patients seeking healthcare,” Mack says. “There is no mention of quality transparency. An organization may be the cheapest, but the lowest quality. Price transparency should reward the highest quality, most cost-effective healthcare.”
6. Block grant Medicaid to the states.
The idea here is that local and state governments could manage their Medicaid programs (and reduce waste) far better without federal intervention.
“States should be concerned that this is just a liability dump,” Johnson says. “The better answer would be give states the choice, and reward the states that were the most efficient.”
Current federal-state Medicaid program is a grant to the states, explains Hoagland. “The federal grant allows states to cover people earning less than 133% of poverty; traditional federal matching rates range from 50% to 70% depending on the state,” he says. “Total expenditures vary depending on the number of qualified recipients in a state and the matching rate. It is unclear from the Trump proposal what the block grant would be to the State from the Federal Government and if this grant would change depending on the number of eligible individuals or the cost of healthcare in the state.”
Mack believes that providing block grant Medicaid funding to states would likely increase the number of uninsured and decrease benefits because states offer widely varying access and benefits to their residents
“Women’s services will likely decrease, especially in states that have enacted laws limiting family planning and abortion services,” he says.
7. Remove barriers to entry into free markets for overseas drug providers.
“This proposal would allow consumers to actively look overseas for pharmaceutical products that are cheap and effective,” says Brill.
Hoagland believes that this component is unlikely to have any direct effect on those factors that currently are responsible for increasing drug costs. In fact, “It would likely require additional bureaucratic measures to evaluate the safety and reliability of the imported drug.”
Mack would like to see Trump’s proposal address how, or by whom, these drugs will be purchased: Individuals; payers; providers; Medicare/Medicaid?
“What is the role, if any, of the FDA in ensuring quality?” Mack asks. “Will Trump allow the importation of drugs from any country in the world? Will Trumpcare encourage or prohibit deals that keep generic drugs off the market, including ‘pay-for-delay’ agreements between brand and generic drug makers that increase prices?”
In addition, Mack says that Trump’s proposal does not mention price and cost transparency-including costs related to research and development, lobbying, etc.
For Johnson, it seems that allowing consumers to actively look overseas for pharmaceutical products that are “cheaper and equally effective makes sense as long as we clamp down on property rights enforcement on patents. However, the pharmaceutical lobby’s power over Congress and the Oval Office cannot be overstated. It would take tremendous political courage to tackle this issue. Both Republicans and Democrats equally have their hands tied unless they work together.”