A political battle is brewing in Washington over the fate of the U.S. health care and health insurance system. And it all centers on two key forces – choice and coverage.
Quite simply, President Trump is looking to dismantle Obamacare one piece at a time through executive orders that can easily be reversed by a future administration. Trump and his supporters hope their approach will lower costs making a reversal of their proposals unpopular. The Democrats are blaming price increases for Obamacare on Trump meddling. They are touting a Medicare-For-All approach that would eliminate some or all private health insurance. Medicare-For-All would alter the current landscape where a majority of Americans get their health insurance through their employer.
So, let’s look at the actions that President Trump has taken to introduce more choice, information and transparency into the market.
President Trump Has Tried to Put You in Charge and Give More Options
According to the Health Policy Consensus Group (HPCG), health insurance premiums have skyrocketed since Obamacare took effect. Rates for an individual policy went from $232 to $476 per month in the first four years of Obamacare. Rising rates led fewer people to buy individual policies. Half of those buying coverage in the Obamacare exchanges had only one insurance option. Less choice in the marketplace led many small employers to stop offering health benefits to workers, which dropped by 24% from 2012 to 2016.
While Obamacare did provide more coverage and cover more things, it did have an adverse effect on overall costs. It also led to less choice and more restrictions in the marketplace. At the core of Trump’s approach is to offer more choice and information to patients.
A new study by the president’s Council of Economic Advisors found that eliminating federal tax penalties on the uninsured and giving consumers more options will prove economic benefits totaling $450 billion over the next decade.
So, what have Trump and the Republicans done to change the health care landscape?
• Congress eliminated the individual mandate penalty in its 2017 tax bill as well as delayed some Obamacare taxes on Cadillac health care plans until 2022 and some medical devices until 2020. While the individual mandate remains in the law, the penalty was zeroed out effective 2019.
• The Trump administration issued a directive to federal agencies to review and reinterpret regulations to promote greater choice and consumer information.
• In 2017, federal agency officials indicated willingness for greater flexibility in how states enact Obamacare rules. Some states have taken advantage of this in how they develop risk-mitigation mechanisms and format their Medicaid expansion efforts.
• The Trump administration issued a major regulatory change in 2018 to ease restrictions on associations and small businesses grouping together to form health care purchasing groups.
• Turning away from the one-sized-fits-all approach of Obamacare, in 2018 the Trump administration authorized short-term, limited-duration insurance options. These do not have to follow the same costly benefit requirements of Obamacare policies.
• In June, the Trump administration changed the rules for health reimbursement arrangements (HRAs). In the past, HRAs could only be used with group health plans sponsored by employers. Starting in 2020, companies can use HRAs to subsidize workers buying health plans on the individual market. The Trump administration suggested this will allow greater flexibility and competition. It projects that 800,000 employers, most with 20 workers or less, will eventually offer this option to help workers buy coverage.
• Very recently, President Trump issued an executive order calling on federal agencies to develop rules requiring hospitals and insurers to make more public true costs of health care procedures and provide estimates on out-of-pocket costs before a patient goes in for a non-emergency procedure. The idea is to create greater cost transparency for consumers so that they can make more informed decisions. This could definitely benefit those with high-deductible insurance plans. The rules will only apply to hospitals and medical staff they employ.
• Beyond legislation, the Trump administration has challenged the Affordable Care Act in federal court seeking to get the entire law thrown out. Currently, this challenge is working its way through the federal court system.
• President Trump has suggested he will issue even more changes in the coming months to create more competition and openness in the marketplace.
Key Factors in the Health Care Debate
In the current health care debate, you have three basic approaches – a free market system with some government controls, Obamacare (a government run exchange system using private health insurance) or a single player government run system, otherwise known as Medicare-For-All. Trump is pushing the agenda toward a more market-oriented system. Democrats want a tax-payer-funded, government run system that eliminates private health insurance for basic health coverage and only allows supplemental coverage via private insurance.
In Obamacare, you have a quasi-private, quasi-government-run approach that has failed to deliver on its promises to preserve choice and lower costs. Some believe that Obamacare was designed to be only so effective so that it eventually led to a Medicare-For-All approach. Obamacare did successfully expand coverage and protect those who had pre-existing conditions. It also greatly expanded what was covered by plans under Obamacare rules. This partially explains why it has failed to lower costs. One problem with Obamacare is that the system was designed to only work well when younger, healthier people opted to participate. Otherwise, only the unhealthy would participate driving up the total system costs. This is true for almost all insurance, but it is especially true when you increase coverage and eliminate pre-existing condition criteria.
Already before Trump, the tax penalties for failing to purchase insurance were too low for many of the young and poorer healthy people to convince them to participate. Now that the Republicans have virtually eliminated the tax penalty, the individual mandate is meaningless. Healthy people will continue to opt for no insurance or some other less costly version. Obamacare as it currently stands is not sustainable in the long run.
Democrats could reverse most of what Trump has done if they take over the White House in 2020. But they would need Congressional action to reinstate the individual mandate tax penalty to a rate that would really incentive participation by the young and healthy consumers.
Democrats mostly favor more government control and wider coverage, especially Medicare-For-All. Various Democratic presidential candidates are opting for this approach although exactly how it would be enacted or enforced vary depending on the candidate. Some like Senator Bernie Sanders (I-VT) want a mandated program where people are automatically enrolled and private insurance is mostly eliminated. Others simply want a Medicare option for everyone if they want it and don’t get private insurance through their employer.
One of the challenges to Medicare-For-All is that millions of Americans have health insurance through their employer and at least like this option as much if not better than a forced Medicare approach. About 155 million Americans receive health coverage through their employer. According to a news report by NBC News, most report being satisfied with their plans and could be upset if they’re required to join a government program. This group includes people from all political parties and could backfire on Democrats if they push too hard, too fast. According to a report by the Kaiser Family Foundation, the number of uninsured in the country is 27 million people, and the signs suggest that number is growing.
The biggest challenge for expanded Medicare is the price tag. A study by the RAND Corporation estimated that federal spending on health care would more than triple under a single-payer plan. The fear is that a government run system would lead to longer lines, more restrictions on procedures. The government currently pays less than many private insurers for procedures at hospitals. Critics suggest that a government-run system will lower payment to doctors and hospitals, which may decrease the number of people who opt for medical professions. Also, the worry is that tighter budgets will lead to more rationed care and less medical innovation.
Current tax law is also part of the problem. For example, direct primary care (DPC) where a patient pays a medical practice a monthly fee in exchange for services and discounts is not viewed as medical care. As a result, those payments must be paid with after-tax money. You can’t use money from tax-free medical accounts to pay for these services. Ironically, the Internal Revenue Service categorizes DPC as heath insurance. DPCs are growing in popularity, and this is just another place where Washington interference has stifled innovation. DPCs are growing in popularity because patients have more access to doctors and more personal care without paying a lot more.
What Does This Mean For You?
The current elections are very important for the future of the American health care system. If the Democrats win, the country will move toward a more universal approach with a Medicare-like system. This approach means less individual choice although it would lead to greater coverage accompanied by much higher taxes and deficits.
If the Republicans win, they will make strides toward more options, more pricing transparency and more medical saving accounts (HSAs or HRAs) where consumers have the say in how their health care dollars are spent. Some will be left out without coverage although more options may lead to lower costs.
The current health care system is broken in some ways. Neither major approach will fix everything. It will take creative solutions and greater reliance on technology to drive down costs while improving diagnosis accuracy. New professions may need to emerge, such as health and wellness experts who aren’t doctors but can provide valuable screening, training, etc.
Given the recent changes in the law, you may want to talk with your health insurance broker or expert. There may be more opportunities to offer better coverage for workers. This would be a major selling point for the pallet and lumber industries, which continue to struggle attracting workers.
