On February 28, 2017, President Trump presented his first address to a joint session of Congress. One focus of his remarks was the repeal of the Affordable Care Act (ACA), which accounted for almost 400 words of his nearly 5,000 word speech. There had been hints that he might use the occasion of the address to lay out in detail his plan for repealing and replacing the ACA (which he referred to throughout as “Obamacare”). However, he confined himself to endorsing general principles.
President Trump began by stating that he was calling on Congress to repeal the ACA and replace it “with reforms that expand choice, increase access, lower costs, and at the same time, provide better Healthcare.” These are noble aspirations; indeed they were the aspirations that grounded the ACA in the first place. The challenges to achieving them under the program the President proceeded to describe is addressed below.
The ACA’s Record
The President next described what he sees as the failure of the ACA — “double and triple digit” premium increases and loss of choice of insurer, doctors, and plans. President Trump’s specific examples that followed are true — the second-lowest cost silver plan premium for a 27-year old did increase by 116 percent in Arizona in 2017 and one third of the counties in the country do as of 2017 have only one exchange insurer. It is also true, as the President asserted, that Governor Matt Bevin of Kentucky believes that the ACA is failing in Kentucky, although its difficulties are in part due to his abandonment of one of the most successful state exchanges in the country.
Of course, the President could have mentioned that people receiving premium tax credits in fact paid no more for health insurance in Arizona in 2017 than they did in 2016, that 20 million more Americans have health coverage under the ACA than had it before even as health care costs have grown at historically low levels for much of the ACA’s lifespan, or that the ACA has made coverage possible for people with pre-existing conditions who could not have found affordable health insurance in the individual market before 2013. But President Trump was not there to praise the ACA, but rather to bury it.
Access To Coverage
So what are the President’s reform principles? The first is to “ensure that Americans with pre-existing conditions have access to coverage.” The key issue here is what is meant by “access,” and how it would be afforded. If pre-existing conditions are only covered for those who have continuous coverage, then millions of Americans who do not have coverage or who have coverage but lose it because of financial or other problems may not have access. Initial open enrollment periods could help those currently without insurance but would not help those who subsequently lose coverage because of, for example, an inability to pay premiums.
If pre-existing conditions are only covered through high-risk pools, then only those who can qualify for and afford high-risk pool coverage will have access (assuming high-risk pools cover pre-existing conditions, which many did not before the ACA). If means-tested tax credits and the Medicaid expansions are repealed, many people with pre-existing conditions may have “access” to coverage but simply find it unaffordable.
A Stable Transition From The ACA To What Follows
In the same sentence, the President called for “a stable transition for Americans currently enrolled in the health care exchanges.” The Trump administration has already proposed a rule intended to stabilize the exchange risk pool by offering the insurers the measures that they believe are necessary to that end. But by pulling advertising during the last week of open enrollment and creating confusion as to whether the Internal Revenue Service (IRS) is enforcing the individual responsibility requirement, the Trump administration has undermined exchange stability. In the end, stabilizing the exchanges is going to take full funding of reinsurance and cost-sharing reduction payments due to insurers. A stable transition will be difficult to achieve in an atmosphere of hostility to the ACA.
Helping Americans Purchase Coverage
President Trump next called for helping “Americans to purchase their own coverage, through the use of tax credits and Health Savings Accounts — but it must be the plan they want, not the plan forced on them by the Government.” The mention of tax credits seemed to be a message in support of House Republican leadership which favors the continuation of tax credits and to reject the position of House conservatives who oppose continuation of tax credits, although Trump did not specify that the tax credits should be advanceable and refundable, features that the conservatives find most objectionable. If tax credits are not advanceable and refundable, they will be virtually useless to the lower- and moderate-income Americans helped by the ACA, who do not have high tax bills against which they can offset the credits.
Moreover, the fixed-dollar tax credits being considered by Republican plans will likely not be large enough to enable many low-income or older Americans, or people who live in parts of the country where health care is more expensive, to afford health care. HSAs must be generously subsidized or they will only help those who have enough disposable income to save and enough of a tax burden to benefit from a tax shelter.
Loosening Regulatory Restrictions
Republican proposals would reduce regulatory restrictions on health plans and allow individuals to purchase plans with higher deductibles or that do not cover mental health, substance abuse, or maternity benefits. Of course, this would likely mean that individuals who need mental health or maternity coverage, or who cannot afford high deductibles, would face higher premiums. Plans “forced on” individuals by the government are plans with coverage defined by public policy choices — such as the decision that since we all (or almost all) benefited from maternity services when we were born, we should be willing to help bear the cost of bringing future generations into the world.
The next principle Trump articulated was that “we should give our great State Governors the resources and flexibility they need with Medicaid to make sure no one is left out.” The “resources” part of this principle seems at variance with current Republican congressional proposals, which are directed toward providing states flexibility but also toward cutting federal Medicaid resources and driving down Medicaid enrollments. If the President means what he is saying about resources, he may face stiff headwinds on Capitol Hill. (The speech nowhere mentioned Medicare, another program as to which the President and Congress may be heading in opposite directions.)
President Trump next called for “legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance.” Limiting access to malpractice litigation has been a major concern of HHS Secretary Tom Price. Although our malpractice system could use real reform to reduce transaction costs, deter medical error, and compensate injured patients, malpractice in fact accounts for a trivial share of medical costs. Malpractice reform is not a major focus of Republican proposals, other than that of former Congressman Price, although legislation to cap damages available to malpractice victims was approved by the House Judiciary Committee on February 28.
Reducing Drug Prices
President Trump also called for working “to bring down the artificially high price of drugs and bring them down immediately.” On this issue, President Trump has public opinion behind him and the support of members of both political parties. How to bring down drug prices, however—how much to depend on regulations and how much on market forces—is sharply contested, and in any event any serious attempt will face massive, and historically effective, opposition from the pharmaceutical sector.
Interstate Sale Of Insurance
Finally, President Trump returned to one of his campaign themes — sale of health insurance across state lines: “The time has come to give Americans the freedom to purchase health insurance across State lines — creating a truly competitive national marketplace that will bring cost way down and provide far better care.” As has been widely noted, sale of insurance is in fact possible in some states and is provided, with consumer safeguards, under the ACA. Insurers can already sell insurance in any state in which they are licensed and see few advantages in selling where they are not licensed — and do not have distribution or provider networks.
The insurers most likely to take advantage of selling products in states where they are not licensed would be those trying to escape consumer protections. State regulators oppose interstate sales.
Paying For Reform
The President also did not describe how he would pay for the changes that he proposes. Providing tax credits and new tax subsidies for health savings accounts, as well as paying for a Medicaid program that leaves no one out, will cost a great deal of money. But Republican proposals would generally repeal the trillion dollars (over 10 years) in new taxes on health care providers, insurers, and the very rich that funded the ACA. The only new tax mentioned in the recently leaked Republican plan was a tax on high-cost employer plans, but President Trump said nothing about taxing employer coverage.
Would the changes President Trump calls for “expand choice, increase access, lower costs, and at the same time, provide better health care?” They would likely expand choice for those looking for barebones, high cost-sharing plans, but they could reduce choice for those with low-incomes or health care problems. They could increase access and reduce premium costs for higher-income and younger individuals who do not qualify now for income-based premium tax credits but who could receive fixed-dollar credits, as well as for people who, again, want limited, fixed-dollar coverage. But repeal could reduce access for people now benefited by the ACA’s means-tested tax credits and Medicaid, and it also could increase costs for people with pre-existing conditions.
As for “better health care,” at least in his speech President Trump focused primarily on health care financing rather than on health care itself.
The Democratic Response
Former Governor Beshear of Kentucky delivered the Democratic Response to President Trump’s speech, presenting a very different vision of the role of government in health care. He called for repairing rather than repealing the ACA and noted that “every Republican idea to replace the Affordable Care Act would reduce the number of Americans covered, despite your promises to the contrary.” He asserted that the President’s proposals “promise access to care, but deny the importance of making care affordable and effective. They would charge families more for fewer benefits and put the insurance companies back in control.”
Behind these ideas is the belief that folks at the lower end of the economic ladder just don’t deserve health care. That it is somehow their fault that their employer doesn’t offer insurance or that they can’t afford to buy expensive health plans. But just who are these 22 million Americans, including 500,000 people right here in Kentucky, who now have health care that didn’t have it before?
Look, they’re not aliens from some distant planet. They are our friends and neighbors. We sit in the bleachers with them on Friday night, we worship in the pews with them on Sunday morning. They’re farmers, restaurant workers, part-time teachers, nurses’ aides, construction workers, and entrepreneurs working at high-tech startups. And before the Affordable Care Act, they woke up every morning and went to work, just hoping and praying they wouldn’t get sick because they knew that they were just one bad diagnosis away from bankruptcy.
We have seen over the last seven years what the ACA and its vision achieved, and where it has fallen short. Over the next four years, we may see how President Trump’s vision works out for Americans, including the people Governor Beshear invoked.