I had the pleasure of camping in the high desert Tuesday night as the rest of the world watched in horror, one jaw-dropping state at a time. In the morning I drove into town and turned on the radio to be shocked by the news, all at once. I began to race through the rhetoric of Trump's campaign, the policies he vowed to extinguish and the power he’ll have with a congress behind him: supreme court, trade policies, immigration, national security, social policy, healthcare—holy crap, he’s going to repeal Obamacare. As with much of his campaign promises, he vowed to remove legislation without a plan as to what would replace it. So what will Trumpcare look like?
What’s wrong with Obamacare?
“Obamacare is a disaster.”
Trump is clear on his stance. Republicans in congress have tried to repeal the Affordable Care Act literally dozens of times. The extraordinary vigor behind the attempts was likely motivated by the simple fact that the bill is paramount to its adopted namesake (and mortal enemy), Obama. However, partisan politics aside, the main gripe with the bill was in the mandate to purchase care. I like to summarize ACA initiatives by how they were meant to affect uninsured populations:
- Those who are too sick - ACA imposed regulations on insurers to prevent blocking people with pre-existing conditions. Those with chronic conditions are huge cost drivers for payers so, accordingly, they charged them more. The problem is insurance got so expensive that it wasn't much insurance at all and this population was driven out of the market. ACA restricted pricing on a given policy to simply age, smoking status, and location.
- Those who are too healthy - As you might imagine, forcing insurers to cover the most sickly at the same price would turn actuarial models upside-down. This is where the mandate comes in. People who regard themselves as healthy and rarely use healthcare were finding that the price of insurance outweighed the limited peace of mind they get from having it. So accordingly these folks dropped out of the market and payers lose their revenue driving population. ACA mandates that everyone needs to purchase a base level of insurance.
- Those who are too poor or without employer-provided coverage - ACA introduced insurance subsidies as well as increased regulations for employers to provide assistance. Additionally, it introduced health insurance exchanges in an attempt to decouple insurance from your job and bring price and service transparency to drive competition in the private market.
A few years in and we're now at the lowest national uninsured rate in recent history. But that's not without costs. Insurance premiums have continued their upward trend, turning more sharply in the most recent cycle as private payers took losses and dropped out of certain exchanges, thus diminishing competition.
What will Trumpcare look like?
“We have to replace it with something absolutely much less expensive.”
Ah, the elusive something. It's unlikely that the Affordable Care Act will be totally repealed as congress would end up spinning on the six years of massive investment put into it. However, he’ll have the power to alter it to showcase the types of plans he’d like to see in its place. Namely, we're likely to see policies meant to drive open market behavior while eliminating the employer and individual mandates.
Trump's website includes a sophomoric essay on his Seven Step plan.
Trumpcare's Seven Steps
- Repeal Obamacare, specifically the mandate
- Enable insurance to be sold across state lines
- Create tax deduction for paid premiums
- Create tax-free health savings accounts
- Require price transparency from providers and hospitals
- Remove federal oversight of Medicaid
- Remove barriers for drug providers to enter the market
While the details of Trump’s plan do not exist, we can look to a few examples from the wild to inform us as to how it will likely materialize. (Because now that he’ll be in the White House in January, these things have to materialize, right?)
Ryan's Better Way
"I'll ask my most trusted generals to come up with a plan."
This was Trump's approach to national security and will probably be expanded to all complicated matters a president must deal with. Despite his long-held dissent, we can likely consider house speaker, Paul Ryan, the general to trust when it comes to healthcare. Ryan authored the main counterpoint back when ACA was being debated: The Patient's Choice Act (PCA). It's since evolved into his "A Better Way" plan. If Trump's Seven Steps are a slammed out blog post, Ryan's plan, in comparison, is a dissertation.
Ryan outlines the specifics around much of Trump's seven steps including financial analysis and implementation plans. This will likely form the basis for what Trumpcare will become.
At the center of this are tax-free health savings accounts. Many insurers offer an HSA plan that you may be familiar with. Come the holidays, families rush to Walgreen's to stock up on cough syrup, saline solution, and other HSA approved purchases before the account expires. A federal solution should not turnover annually but instead grow over time. The idea being that the money will be there in the final years of life medical expenses are typically highest.
Compulsory Savings in Singapore
Do HSA's work? We can find an example in Singapore, where they’ve had a compulsory savings model since 1955. Citizens are forced to save a minimum amount each year for healthcare. Essentially, a portion of their tax is set aside in a “Medisave” investment account with their name on it. Poorer people’s accounts are subsidized to ensure they’re saving too.
Your Medisave account is to be used on primary care, prescriptions, urgent care, and the majority of expected healthcare costs. Health insurance is really limited to catastrophic events creating a much more efficient insurance market. Insurance, in general, is meant for things you never expect to happen: catastrophe. This is a different approach to resolving the adverse selection death spiral.
Once you've saved enough and are old enough, you can draw down on your Medisave account as retirement income. And when you die, you're able to leave your account to your loved ones. This creates incentives for patients to be engaged in their care and shop for care with the highest value since the money they spend on it is money out of their pockets. At every point in your life, you're making that cost/benefit decision. Singapore's compulsory savings model boasts some of the best KPIs in the world spending less than 5% of GDP on healthcare (compared to nearly 18% in the US).
While MediSave is designed to remove the need for a bloated insurance market, Ryan's HSAs as described in his Better Way and PCA describe a simple mechanism to allow patients to pay for premiums tax-free. Trump's brief description of his HSA is much more in line with Singapore's approach. There is a clear gap here between Ryan and Trump.
Trumpcare vs. Obamacare
These terms make me feel like we're rooting for sports teams in a competition where only one will win. I'd much prefer an iterative approach, a sense of reform rather than repeal and replace. It suggests that something was learned and can be built upon, rather than an extravagant waste. But Trump has defined his healthcare plan in what it is not: Obamacare.
In fact, there are many similarities between A Better Way and the Affordable Care Act:
- Both sought to implement health insurance exchanges
- Both encouraged price transparency
- Both offer subsidies to help pay for coverage
The main differences are in the approach to coverage. The ACA took the heavy hand of a mandate while A Better Way suggests a tax credit and wrap around support to get folks signed up. At the end of the day, moving to a more A Better Way-like implementation of the ACA won't feel very different than what we have now. However, a clear win for the ACA is in the 20 million American lives now covered by health insurance. The major roadblock for Trumpcare will be in not taking a step backward while undoing the very policies that brought this population coverage.