Months after saying on 60 Minutes that he wants to replace Obamacare with something better, Donald Trump rolled out his healthcare plan this past week. His plan includes seven proposals he believes will make healthcare in America great again, and while some of them, such as price transparency, appear to be no-brainers, other ideas, including these three, may be problematic and lead to unintended consequences.
No. 1: No person should be required to buy insurance unless he or she wants to
Repealing Obamacare is the cornerstone of Trump's plan, but doing away with the health insurance requirement could tilt insurer patient pools toward high-cost Americans with chronic illnesses, and that could lead to higher monthly health insurance premiums.
Today, insurers pool together healthy and unhealthy patients so that premiums from healthy members offset the costs associated with caring for those who are ill or injured. If removing the requirement means that healthy Americans forgo insurance, then slim profit margins may force insurers to raise health insurance premiums to make up the difference.
This problem is greatest if Trump forces companies to insure people with pre-existing conditions. It could also be a problem if Trump relies on the insurance industry to make good on his pledge to provide all Americans with access to healthcare.
Absent a requirement that increases the number of younger, healthier members, insurers could opt against covering people with pre-existing conditions to cut costs. Similarly, insurers would have little incentive to offer insurance in counties that are proportionally older and sicker. In both instances, ditching the insurance requirement could lower costs for those of us who are healthy and increase costs for less-healthy Americans who become unable to find affordable insurance options.
Removing the health insurance requirement could also increase the amount of charity care that's hospitals write off every year, forcing them to increase in-patient and outpatient costs.
Since Obamacare's implementation, 12.7 million Americans have become newly enrolled in health insurance through the ACA exchanges, and another 14.5 million people have been enrolled in Medicaid. That's significantly reduced the amount of uncompensated care hospitals provide to the uninsured. Doing away with the health insurance requirement could cause the un-insurance rate to climb again, putting hospitals on the hook for billions of dollars in uncompensated care. That's not a recipe for lower prices.
No. 2: Modify existing law that inhibits the sale of health insurance across state lines
Greater competition may lead to lower premiums, but premium savings tied to competing across state lines may not be as big as some people hope.
Insurers already move in and out of various markets depending on their profitability, and while smoothing the path to cross-state competition may give insurers advantages when crafting plan patient pools, insurers may still opt against serving markets that are home to a larger proportion of high-cost patients.
The benefit of intrastate competition may also fail to materialize if insurers are unable to craft large, national provider networks. Forming those networks is time-consuming and incredibly expensive, and if insurers balk at negotiating deals within every county in America, people will have little interest in buying their plans.
Insurers' freedom to pick and choose markets and to price plans as they see fit makes me think that the benefit to premium pricing from this move will be far bigger for employer-sponsored plans than it will be for plans in the individual market. If that's true, low- to moderate-income individuals may struggle to find plans they can afford, especially since replacing Obamacare subsidies with tax deductions won't help the average family's monthly cash flow.
3. Offer block-grant Medicaid to the states
Currently, the U.S. government picks up a bit more than half of the total spending by state governments on Medicaid, the safety net insurance program offered to low-income Americans. Because healthcare costs are increasing, the amount that the federal government is spending on Medicaid is climbing. Trump thinks that giving block grants to states could significantly reduce the federal government's spending on the program.
That's true. However, block grants could force significant changes in states with more generous Medicaid eligibility requirements. Thirty-two states, including D.C., currently enroll Americans in Medicaid if their income is up to 138% of the federal poverty level. Eligibility requirements vary significantly among the remaining states. For example, adults with dependents only qualify for Medicaid in Florida if their income is below 30% of the federal poverty level. In Texas, non-disabled adults without children don't qualify for Medicaid, and adults with dependent children only qualify if their income doesn't exceed 18% of the federal poverty level.
Medicaid block grants to states may make states more prudent with their spending, but that prudence could pose big problem for millions of low-income Americans if it means restricting eligibility requirements further.