With Health-Care Reform, Listen Carefully to Trump’s Words
During the Presidential campaign, one of the consistent policy positions held by candidate Donald Trump was that he would, as his Web site puts it, “immediately deliver a full repeal” of the Affordable Care Act, more familiarly known as Obamacare, and replace it with a plan that will use “free market principles . . . that will broaden healthcare access, make healthcare more affordable and improve the quality of the care available to all Americans.” On Sunday, however, when Trump appeared on “60 Minutes,” he surprised many when he said he would keep some of Obamacare in place, particularly its guarantee of health insurance regardless of any preëxisting medical conditions.
Trump’s official transition Web site doesn’t provide much clarity as to how he will deliver on this promise; the policies described there—and not just those related to health care, but also to defense, taxation, immigration—are still in the vague phase. The Speaker of the House, Paul Ryan, in a giddy interview on Fox News’s “Special Report with Bret Baier,” essentially suggested that Trump would turn to Ryan’s long-standing agenda for America, especially when it comes to health care. Ryan has drafted several health-care proposals over the years, all of which have the goal of reducing the amount of money the federal government spends to cover health costs. Ryan’s plans, while much more detailed than Trump’s, are not fully formed, but both he and Trump have said they expect health-care reform to be among the first actions of the new Administration. Some Republicans have suggested that Congress could pass a law and present it to Trump on January 20, 2017, the first day of his Administration, making a repeal of Obamacare effective one or two years down the road. If that happens, it will begin a lengthy process in which congressional staff, lobbyists, advocates for patients and providers, and White House officials negotiate the technical details.
The language used to discuss these changes will, often, be technical or obfuscating, following a seeming unwritten rule that health-care legislation must be drafted with the maximum number of acronyms and technical terms. So, as the discussion of what will happen to the Affordable Care Act proceeds, it’s important to focus on what the words used to discuss the reforms actually mean.
When you hear “preëxisting conditions,” ask about underwriting. Trump made at least some skeptics happy when he said that he planned to keep one of the most popular provisions of Obamacare, the guarantee of coverage for all, regardless of any preëxisting conditions. This may sound easy, but it’s anything but. Obamacare not only requires coverage for those with preëxisting conditions, it also guarantees that everyone will pay the same premiums regardless of his health status. So, for example, if you have diabetes, your insurance premium won’t be higher than a person who lives in the same state and is of the same age but doesn’t have diabetes. This was one of the essential and revolutionary transformations made by Obamacare, and it is why there is a much more vibrant—if troubled—independent health-insurance marketplace for people who don’t get coverage through their jobs. Previously, in many states, insurers charged each person a risk-adjusted premium based on his or her health history. The process of evaluating the risk of patients and charging them accordingly is called underwriting, and if Trump allows underwriting, insurance will be so expensive for people with some preëxisting conditions that it will be unobtainable. Guaranteeing coverage to all but charging each person individually is, effectively, the same as refusing coverage to those with any history of cancer, chronic disease, life-altering accidents, or other health issues. Sure, you are guaranteed coverage, but it will cost hundreds of thousands of dollars a year.
When you hear “ban on underwriting,” ask about mandates. If Trump and Congress do ban individual underwriting, guaranteeing that everyone can get insurance and pay the same premium, the question is whether there’s a mechanism that requires healthy people to sign up along with the sick. New York State offers the classic example of the disaster that can unfold when insurance companies are prohibited from underwriting individuals, but individuals are free to opt out of insurance. Economists call it adverse selection. Sick people, the ones most likely to use health care, sign up first, which forces the insurance companies to raise premiums so that their health-care costs will be covered. Healthy people, especially the young, refuse to pay these high premiums and are not covered at all. Health insurance becomes wildly expensive and rare. The solution in Obamacare was the mandate, which required all citizens to have some form of insurance. Many of the challenges facing Obamacare stem from the fact that too few young and healthy people signed up for policies—even with the mandate. (The law tried to whack people with penalties if they didn’t sign up, but that didn’t work as effectively as expected.) In criticizing Obamacare, Trump has singled out the mandate as the most pernicious aspect of the law, but he hasn’t explained how, if there is no mandate, he would insure affordable coverage for people with preëxisting conditions.
When you hear “vouchers,” ask how their value will be determined. Ryan’s most radical plans for reforming health care involve Medicare. Currently, Medicare provides insurance to tens of millions of people, most of them over sixty-five. Its benefits rise in rough proportion to the cost of the care they receive. Ryan proposes a system in which Medicare recipients receive vouchers—essentially, cash payments—to cover their health-care premiums. In past proposals, Ryan has suggested that the vouchers be set at specific dollar amounts that have no relationship to the cost of health care. Health-care costs have risen far faster than inflation for years (although the pace of increase slowed considerably since Obamacare was enacted). Under Ryan’s plans, people who have Medicare would have to cover a rapidly growing share of their care out of their own pockets. How the voucher amount is calculated will determine whether Medicare continues to be a program that insures that older Americans will have reliable, affordable health insurance, or if it will become an unaffordable luxury for the wealthy.
When you hear “block grants,” ask how state legislatures will protect the poor. Another major transformation of health-care funding would come from Ryan’s proposal to eliminate federal grants to states and replace them with block grants. Much health coverage for the poor goes through state-administered Medicaid programs, with funding provided by the federal government. As health-care costs increase, the federal government automatically sends more money to the states. Ryan would replace this system with one in which the federal government provides a block grant that only rises with over-all inflation, not with the cost of health care, which rises faster than inflation. As health-care costs increase, each state government will be left with a difficult choice. It can redirect funding from other state functions, it can raise taxes, or it can reduce benefits for the poor. This could likely lead to wide disparities in the quality and affordability of health care for poor people in different states. If the differences are stark enough, it’s easy to imagine many poor people moving from less generous states to those offering greater coverage.
As a nation, we decided with the passage of Obamacare that every citizen should get some degree of health care, regardless of past health history or lack of money. This means we need to subsidize the poor, the sick, and the risky, and the core question in any program is how big that subsidy will be. There are two simple questions to ask of any policy: How will older people, sick people, and the poor receive care under this plan? How much of the rising cost of health care will they have to cover?