News on the Obamacare-replacement front was dominated this past weekend by Donald Trump and Sen. Rand Paul (R-Ky.), who both touted their Obamacare replacement plans.
To be absolutely precise, they touted the claim that they had Obamacare replacement plans. They didn’t go into any great detail about what would be in those plans. (That didn’t stop CNN from captioning its interview with Paul, “Rand Paul Releases Obamacare Replacement Details.”)
The few details, or guideposts, or guidelines that they did disclose only underscored how difficult it will be for Trump, Paul and the the Republicans on Capitol Hill to fashion a replacement that meets all their stated goals. For Trump, according to an interview with the Washington Post published Sunday, this includes “insurance for everybody” that will encompass “great health care … in a much simplified form. Much less expensive and much better.” He promised “lower numbers, much lower deductibles.”
I never understood the appeal of [selling insurance across state lines]. It only makes sense if you don’t know what you’re talking about.”
Paul, speaking on CNN’s Sunday morning “State of the Union” program, said his plan would “insure the most amount of people, give access to the most amount of people, at the least amount of cost.” That sounds like a set of concrete goals, but actually they’re ambiguous. “Most people” compared to what? “Least cost” compared to what?
Before we get into the details, such as they are, we should recognize that if one takes as the goal of healthcare policy to provide universal coverage in which everyone is “beautifully covered,” as Trump promised, then a few limitations immediately appear. Health coverage is the product of three factors: How many people are covered; the benefits provided; and the cost of those benefits. Since the 1940s, U.S. politicians and policymakers have tried to find a balance among these factors. Every effort has been confounded by the immutable facts that treating the sick costs money and treating more people costs more money. One can save money by treating fewer people, or giving the same number of people less treatment. So any politician who says he can do more for less money is almost certainly blowing smoke.
How do the Trump and Paul “details” stack up?
On Monday’s “Today” show, Trump spokesman Sean Spicer put a tiny bit of meat on the bones of his boss’ plan. He said the plan would increase coverage and reduce costs “through marketplace solutions … through negotiating with pharmaceutical companies, allowing competition over state lines.”
The two specific suggestions in that brief discussion are negotiating with drug companies and allowing insurance sales across state lines. As we’ve reported, neither is likely to have an appreciable effect on the cost of healthcare or the breadth of coverage. Although most Americans, including Trump, don’t seem to be aware of this, the government already negotiates with drug companies: the Department of Veterans Affairs negotiates vigorously, and obtains good discounts; Medicare negotiates through the private insurance companies that provide medicines to enrollees in its prescription drug benefit, Part D.
How much greater savings the government could obtain without imposing flat price controls — an option unlikely to be favored by a Republican Congress — is questionable. The VA squeezes discounts from drug makers by maintaining a limited roster of approved drugs; drug companies have to offer a discount or they can’t sell to the VA at all.
What about allowing insurance companies to compete across state lines? As I’ve reported, this popular GOP nostrum already is permitted by the Affordable Care Act. No one cares, because it actually makes no sense. To begin with, requiring every state to accept the insurance regulations of any other state would set off a race to the bottom, in which insurers would domicile in the states with the most indulgent regulations and export their lax requirements nationwide.
More important, no stakeholders in the healthcare field think this reform makes sense. Georgia, Maine and Wyoming have passed laws enabling such compacts under the Affordable Care Act. No other states have joined them, and not a single insurer has expressed any interest in taking advantage of them.
As a Georgetown University study team reported, laws allowing cross-state health insurance sales have no organized champions. Consumers aren’t clamoring for them; insurers aren’t interested in them; doctors and hospitals don’t care; and state regulators aren’t inclined to cede their oversight to interlopers from somewhere else. Their only backers are preening political candidates who don’t understand health insurance and hope you don’t either. “Selling insurance across state lines” is a slogan, not a policy.
“I never understood the appeal of this idea,” health economist Austin Frakt wrote in 2015. “It only makes sense if you don’t know what you’re talking about.”
Paul was similarly parsimonious with details of his plan. He did say, however, that he would scrap the 10 “essential health benefits” that the Affordable Care Act mandates every qualified plan to provide. He also spoke up for health savings accounts and for allowing “individuals to come together in associations to buy insurance.”
Let’s take these in order. “We’re going to legalize the sale of inexpensive insurance,” he said. By this he means policies devoid of those 10 mandated benefits, so it’s proper to list them. They include outpatient services, emergency services, hospitalization, maternity and newborn care, mental health and substance abuse treatment, prescription drugs, rehabilitative services, laboratory tests, preventive care and chronic disease management, and pediatric care including dental and vision care.
Certainly insurance would be cheaper if it didn’t have to cover these services, but would it be worthwhile? Before Obamacare, it was common for insurers to pitch limited-benefit policies; the problem is that many customers didn’t realize that their coverage didn’t cover, say, hospitalization until they received a five-figure bill from the hospital.
Paul took special aim at pregnancy coverage. Its inclusion as a required benefit is a common complaint from conservatives, but it’s possibly the most important of the 10. Prior to the Affordable Care Act, only 12% of policies in the individual insurance market offered maternity coverage. Those that did often required separate riders imposing huge deductibles for maternity care alone, and limits on benefits of only a few thousand dollars.
The cost of maternity and newborn care was the principal reason that, pre-Obamacare, women were systematically charged more for health insurance than men. A sample 2011 underwriting guide from Blue Shield of California, for example, lists pregnancy as a condition warranting an family applicant’s rejection “without medical record review,” and exempts only males buying insurance for themselves. Eliminate maternity and newborn care from the standard coverage and you’re consigning women to the ghetto of overpriced insurance and ignoring society’s interest in having healthy babies and mothers. Is it worth the savings?
(Paul claimed that the essential health benefits include “dental coverage.” He’s wrong, or at least imprecise. Dental coverage, like vision care, is a required benefit only for children.)
As for Paul’s other proposals, health savings accounts, as I’ve shown, are giveaways to the rich. Their tax benefits are of little value to lower-income Americans with relatively little income tax liability or the wherewithal to fund them adequately. His idea of allowing individuals to band together to buy insurance as a group is sound in principle — but that’s what the Affordable Care Act did, by establishing statewide exchanges for individuals with standardized benefits.
Take them altogether, and the little we know about the Trump and Paul plans doesn’t point to a dramatic march forward to the goals of better insurance coverage for more Americans at lower costs. Rather, they point to skimpier coverage without significant savings.
That’s not surprising. American policymakers have been pursuing the goal of universal coverage on the cheap for decades. It’s a chimera. Providing health insurance for all Americans costs money, and any politician who claims to know the key to doing so without spending more or imposing costs on patients, doctors or hospitals is hiding something. That’s surely the reason that Trump and Paul have kept the details of their plans under wraps.
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