Donald Trump and running mate Mike Pence talked about their plans for the U.S. healthcare system again this week, beginning where Republicans usually begin: by calling for the complete repeal of the 2010 Patient Protection and Affordable Care Act, better known as Obamacare.
But to get where they say they want to go — providing more affordable health coverage for more Americans — they would be better off skipping that step and moving on to other elements of their plan. That’s because their overall plan isn't fundamentally sound, but several of its planks could help shore up weaknesses in Obamacare.
As a caveat, there’s a lot we don’t know about the Trump plan. His campaign has provided bullet points, not detailed proposals.
The general thrust, though, is clear. Trump favors a system that helps consumers who aren’t covered by a group plan at work to purchase as much or as little coverage as they care to obtain from a less regulated market, using either tax breaks or (for low-income Americans) direct subsidies.
Here’s one problem: By eliminating the ACA’s minimum essential benefits requirement, Trump's plan would return the individual insurance market to the cherry-picking days of yore. Insurers who didn’t want to be stuck with the bill for costly treatments could offer plans designed not to attract customers with chronic illnesses, for example, or who might become pregnant.
Here’s another: One feature of the ACA that the public has liked since its inception is its requirement that insurers ignore their customers’ preexisting conditions. Trump proposes to continue that protection, but only for people who maintain uninterrupted coverage. At the same time, he would end the requirement for all adults to carry insurance.
The point is to give people an incentive, not a mandate, to pay for coverage even when they’re healthy. But considering how many people don’t comply with the current mandate, it’s highly likely that at least as many people wouldn’t bother to sign up under a voluntary system.
As a result, insurers that offer comprehensive policies would face the same challenge under Trump’s approach that they do in the Obamacare exchanges today: risk pools with disproportionate numbers of sick people imposing unexpectedly high costs that translate into ever-higher premiums. That's another reason insurers would gravitate to less comprehensive plans and try to cherry-pick customers.
On the plus side, some of Trump’s ideas for tax breaks and transparency are worth pursuing because they could bring more market pressure to bear on healthcare providers — the prime factor in high U.S. healthcare costs.
For starters, Trump would make premiums tax deductible for those who buy individual coverage, a tax break already enjoyed by people covered by a group plan at work. Extending the break would be costly, but there’s no good reason for the tax code favoring one type of insurance customer over another. Such a move would be an immediate boon to the people whose incomes aren’t low enough to qualify for the ACA’s premium subsidies — the ones who feel the greatest pinch from the sharp premium increases in recent years.
His tax breaks would also encourage people to sign up for high deductible plans and use health savings accounts to pay for the care not covered by their insurer. HSAs aren’t the best choice for people with costly chronic illnesses, risky occupations or injury-prone families. But for others, they encourage people to shop around for care and negotiate with doctors and hospitals for better prices.
That’s easier said than done in healthcare, where the prices charged for treatments can be hard to discover in advance. To address that problem, Trump proposes to require “price transparency” from all healthcare providers — in essence, enabling people to shop around for a hip replacement or an MRI the same way they do for light fixtures or furniture.
Healthcare isn’t an ordinary market, so there’s a limit to how much consumers can really be empowered. There’s enormous “information asymmetry” — the sellers of healthcare services know far more than buyers do, not just about what they’re selling but also about what the buyers should be demanding. And in many cases, there’s no opportunity to negotiate. You don’t shop around for a Jaws of Life service, you don’t bargain with the doctor when you’re in intensive care.
Nevertheless, the rise in healthcare costs has led insurers (and employers buying group plans) to set ever-higher deductibles as an alternative to even larger increases in premiums. So we’re all paying for at least some of our care with cash now. Requiring healthcare providers to disclose prices will encourage people to start looking for better value, especially from the suppliers of interchangeable healthcare parts (think X-rays and flu shots). And that’s when market forces could go to work, slowing the increases in the cost of care.
Congressional Republicans haven’t been willing to fix the problems that have emerged in Obamacare, choosing instead to focus attention on its drawbacks in the hope of electing more Republicans and repealing it. But if Hillary Clinton wins, it will be the second time presidential voters have rejected a candidate who’s made repealing Obamacare a key campaign promise. By embracing some of Trump’s healthcare ideas, perhaps a President Clinton could finally persuade lawmakers to change healthcare policies in a way that makes the ACA work better, rather than trying to rip it out of the statute books.