“Repeal and replace”–the mantra of the Republican opposition to the Affordable Care Act (ACA)–is about to become a reality.
President-Elect Trump has identified this as his immediate priority. Representative Tom Price, a long-standing opponent of the ACA who has his own replacement, adds legitimacy to the president-elect’s plan as the nominee for secretary of health and human services. Although less heralded, the Centers for Medicare and Medicaid Services’ (CMS) nomination of Seema Verma, the consultant behind the Medicaid reforms in several states that added premium support, health savings accounts, and personal responsibility, speaks just as powerfully.
As expected, Democrats and others wedded to preserving the ACA have already issued dire warnings about a catastrophic disruption should the law be repealed. Incongruously, they claim that the ACA cannot be replaced because the hyper-regulated state of health care abruptly imposed by the ACA is somehow too complex to unwind, regardless of its destructive impact on consumers.
Under the incoming administration, Americans should expect a significant and dramatic reversal of the ACA in fundamental ways:
1. Costly regulations will be streamlined and taxes will be rolled back
Under the misnomer of essential benefits the ACA excessively regulated private insurance, raising premiums and reducing insurer participation in the individual market. For instance it expanded the already bloated requirements of health insurance by which insurance is required to cover care for everything from acupuncture to marriage therapy (i.e., care that many consumers would never opt to purchase).
California includes sixty-three coverage mandates, aside from federal ACA essential mandates. Particularly when combined with low deductibles, such broad coverage increases insurance prices and removes any incentive to consider price and value, leading to higher prices for care. Deregulating to permit limited-mandate plans with catastrophic benefits in every state would add low-cost coverage and reduce expenses for individuals who deem that coverage appropriate.
Many of the $500 billion in taxes introduced by the ACA are highly detrimental to the consumer; these likely will be eliminated. For example, the $60 billion Health Insurance Providers tax that, per the Congressional Budget Office’s estimate, increases insurance costs by thousands of dollars over the decade for individuals and businesses should be stricken. The individual tax/mandate that forces purchase of government-defined insurance will be removed, as will the employer mandate to furnish the expensive coverage that ultimately replaces take-home wages.
2. Health savings accounts will be expanded to empower consumers
Health savings accounts (HSAs) are effective vehicles for enabling individuals to pay for health care while encouraging shopping for value. Through HSAs health-care prices become subject to the constraints of cost-conscious buyers.
Rather than arbitrary price setting by bureaucrats, which distorts markets and limits supply, individuals and families determine the fair price of care; health expenditures and prices come down. HSA enrollees also use more wellness programs, saving money and improving health. In the Trump reform, consumers should expect HSAs to have a central role in any new proposal, with far higher maximums and more liberalized uses.
3. Medicare will be modernized to preserve the program
Medicare’s Hospitalization Insurance fund will be depleted in 2030. As the population of seniors is dramatically expanding, the taxpayer base financing the program is shrinking.
In California, the projections for Medicare eligibility are staggering. From now to 2060, the sixty-five to seventy-four, seventy-five to eighty-four, and eighty-five or older populations will grow at rates six- to fifteenfold greater than the population of working adults. Meanwhile, health expenses for a sixty-five-year-old will triple by 2030. Fewer doctors are now accepting new Medicare patients. The program must change.
Modernized Medicare should allow beneficiaries to choose private insurance competing for their benefit dollars. Because American seniors now have a life expectancy of eighty-five, they need to save for decades of health care. That calls for HSAs, with the same limits and features of other HSAs, including optional tax-free rollovers from retirement accounts. Add competing private insurance choices and HSAs will further constrain medical care prices system-wide because the heaviest users of care are seniors. The age of eligibility should reflect today’s demographics, not when the program began more than fifty years ago.
4. The isolation of the poor to substandard medical care under Medicaid will be ended
Even of the limited providers formally contracted to accept Medicaid, health and human services reported in 2014 that 56 percent of primary-care and 43 percent of specialist doctors were not available to new patients. Despite that, the ACA dramatically expanded Medicaid and continued this second-class health system, with its inferior outcomes and limited access to doctors for poor Americans, at a cost rising to $890 billion in 2024.
As governor of Indiana (with the assistance of the aforementioned Seema Verma), Mike Pence included important reforms in his state’s Medicaid plan, such as HSA accounts with premium support for private coverage; obligatory out-of-pocket payments for all beneficiaries beginning at $1 per month, and copayments for nonemergency use of emergency rooms; and incentivized personal responsibility, including rewards for healthy behavior and disenrollment for failure to pay premiums.
A Trump-Pence administration will likely immediately grant federal waivers to all states, so that Medicaid could include the options to use current federal funding toward private insurance. In California that amounts to 62.5 percent of the state’s Medicaid costs. That money could also seed-fund HSAs with part of the current federal contribution, creating assets and encouraging healthy lifestyles to protect those assets.
Concomitantly, deregulating the hyper-regulated ACA insurance exchanges is essential to avoid shifting Medicaid into that counterproductive environment. Federal funding to state Medicaid programs should be contingent on states’ meeting enrollment thresholds into private coverage. Those changes would transform Medicaid into a bridge toward private insurance, with the same access to doctors, specialists, and treatments and the same outcomes as everyone else.
5. Health-care innovation will be facilitated
Consumers always benefit from competition, and health care is no exception. This administration will look at ways to inject competition among providers and increase supply via regulatory reform.
One important step is to remove unnecessary scope-of-practice restrictions on nurse practitioners and physician assistants, who are fully capable of issuing routine primary care at lower costs than doctors. More directly felt by consumers is the deleterious impact of government bureaucracy on drugs, the development of which has extended to require fourteen years and more than $2 billion in costs.
Because competition drastically reduces drug prices, the Trump administration will focus on reducing barriers to entry, especially those that have delayed new generics coming to market instead of price-fixing, which would limit availability and hinder new drug development.
The ACA’s $24 billion device tax and the $30 billion tax on brand-name drugs have impaired innovation and cost jobs, resulting in facility expansion offshore rather than in the United States. Thousands of high-paying jobs will have been lost to ACA taxes and regulations, especially in states like California, the epicenter of medical innovation and health-care start-ups, and Indiana, with its three hundred medical device companies and $10 billion dollars in life science exports a year. Under a temporary freeze until January 2018, this administration should, and likely will, finalize a repeal of the medical device tax.
By now most recognize that the ACA’s harmful regulations generated skyrocketing premiums, reduced choice of doctors, expanded failed government programs, and accelerated harmful health sector consolidation. Expectations are high that the Trump administration will quickly deliver on its promises about health-care reform. The November election provided the opportunity not only to rid our system of the harms of the ACA but to remedy the flaws in America’s health care that have been promulgated by entrenched politicians of both parties for decades.
CALIFORNIA OBAMACARE–BY THE NUMBERS
More than five million Californians would be directly affected by an Obamacare repeal. About 3.7 million Californians who weren’t eligible before Obamacare now have Medi-Cal, the state’s Medicaid health-care program. Before January 2014 only adults earning up to the federal poverty line were eligible; single adults without children were excluded. That eligibility limit has since been raised to 138 percent of the federal poverty level ($16,400 in 2016) for Medi-Cal. An additional 1.4 million Californians now have private insurance through Covered California, with nearly 90 percent of them receiving federal subsidies. Los Angeles County has California’s highest Obamacare subscription, about 1.5 million residents, or 15 percent of the state’s population.
REPEAL/REFORM MEANS COUNTING TO SIXTY–BUT NOT IN CALIFORNIA
A simple piece of math that may prove key to the Obamacare repeal/replace effort: twenty-five Senate Democratic seats are on the line in 2018, including ten in states that Donald Trump carried last November (Florida, Indiana, Michigan, Missouri, Montana, North Dakota, Ohio, Pennsylvania, West Virginia, and Wisconsin). Adding eight of those ten Democratic votes to the Republicans’ fifty-two-seat majority would be enough to put an end to a filibuster effort. All of which suggests that ending Obamacare entails twisting arms in Congress and a presidential hard sell in a select few red states.
CALIFORNIA DOCTORS MAKE A WASHINGTON HOUSE CALL
Is there a doctor in the (White) House? Six of the fifty-five signers of the Declaration of Independence and two of the thirty-nine crafters of the US Constitution were physicians, as were 17 of the 535 members of the last Congress. In California, that includes Democratic Representatives Ami Bera (Sacramento area) and Raul Ruiz (eastern Riverside County). Americans have never elected an MD to lead the nation (the closest we’ve come is William Henry Harrison, a med school dropout). Two, however, have been nominated to serve in the Trump cabinet: Representative Tom Price (health and human services) and neurosurgeon Ben Carson (housing and urban development).
