Guest post by Abhinav Shashank, CEO & co-founder, Innovaccer.
On Nov. 9, 2016 the United States of America witnessed a major turnaround in the administration. Republican candidate Donald Trump is the 45th president-elect of the United States. Donald Trump plans to bring about numerous changes to “Make America Great Again,” and true to his Republican roots, Trump’s plans for the healthcare focus on some key facets which have always been a concern for the GOP.
Trump has outlined his healthcare plan for America that is centered around mainly the following key facets. A study conducted by the Commonwealth Fund with RAND Corporation using simulation analyzed his plans and came up with probable impacts.
1.) Repeal Affordable Care Act
Donald Trump and the GOP want to fully repeal the ACA and replace it with something new, dubbed “Healthcare Reform to Make America Great Again.” However, the intention is to achieve a better law with some parts of ACA.
Planned changes: Pre-existing condition clause will remain. As the Republican plan “the better way” dated June 22, 2016, Trump plans to continue with it as no American should be denied on the basis of pre-existing medical conditions or demographics. Remove the individual and employer mandate, as no one should be forced to buy health insurance. Reduce the growth rate of Medicare spending and implementation of new taxes and fees.
2.) Use of Health Savings Accounts (HSA)
A Health savings account is a tax-advantaged medical saving account available to the people of US, which allows people to contribute or draw money from for paying off medical expenses, tax-free.
Planned changes: Under Obamacare, HSAs were available to only individuals who were enrolled in “High Deductible Health Plans.” Keeping the basics same, Trump proposes to expand HSAs, allowing all individuals to use HSAs where the contributions would not only be tax-free but will also accumulate over time. Moreover, he would allow HSAs to become a part of a person’s estate and would be passed on to heirs without any penalty.
3.) Making premiums tax deductible
Before ACA came along, there were substantial tax advantages available to people who had their employer cover for them, but that privilege did not extend to people who took up private, individual-market policies not provided by the employer. To solve this disparity, ACA had the provision of means-tested advance premium tax credits, known as APTCs – where the government reduces the cost of insurance by providing APTCs to bridge the gap between the cost of premium and payment limit.
Planned changes: Trump’s plan will allow individuals to fully deduct their premiums from their tax returns under the current tax system, facilitating a free market to provide insurance coverage to companies and individuals. The scheme Trump has will abolish APTCs and let individuals use pre-tax money to purchase individual market insurance.
The aim is to provide people with an incentive to pay for coverage when they are healthy, and not make it mandatory.
4.) Funding Medicaid through block-grants
Under the current law, Medicaid gets join funds by the federal and state government and the federal government contributes 50 percent to 75 percent of the total costs and the rest is borne by the states.
Planned changes: Trump proposes to fund Medicaid all over the country through block grants. Under this, the federal government would give a fixed amount of money to states and let them fund their programs.
The rationale behind this is that state governments know best about their population and should have the sole authority on how the money should be spent and will fare better without federal administration overhead.
5.) Health insurance companies to sell their plans across states
So far, health insurance in the US was regulated by the ACA, with minimum standards to avoid variations in underwriting, guarantees and denying coverage. Owing to these regulations, health insurance companies who plan to sell their insurance plans in multiple states have to abide by the state regulations.
Planned Changes: Trump plans to allow. health insurance companies to sell their plans across the state lines. Any vendor that complies with the state guidelines can offer insurance plans in that state. Trump believes that with such a competitive environment, the cost of insurance will go down with increased customer satisfaction.
6.) Increased transparency
As mentioned in Donald Trump’s healthcare plans, there is a call for greater price transparency especially from the providers in various healthcare organizations. The goal is to make individuals aware of the best prices of procedures, tests, and other medical procedures. How and to what effect will it be implemented is uncertain so far, thus impacts of this are unknown.
7.) Free market for drug providers
Donald Trump believes that the cost of care could be reduced to a great extent if Medicare negotiated with pharmaceutical companies. He wants to remove the existing barriers to entry into the free markets for drug companies. Trump declared in one of his speeches that Medicare could “save $300 billion” per year if it negotiated prices with the drug companies. According to the paper published by Carleton University and Public Citizen, an advocacy group, there could be savings of $16 billion per year by negotiating with drug companies for Medicare
Impacts of Changes: Now that Trump has decided not to repeal ACA; there is a lot of uncertainty as to what will exactly happen and what the impacts of his healthcare plans will be. But few things like pre-existing condition clause or young children getting their parent’s cover will stay. There might be more to it which makes it hard to say how many people will be insured after the plan is fully implemented. But few things are for sure:
- The health savings account program gives taxpayers a chance to put their money in a special fund, solely for their health coverage, without paying any federal taxes.
- The provisions in HSAs are flexible and secure, which could be a great benefit to all the people who enroll for it.
- If the Medicaid block grant is in accordance with pre-ACA levels for inflation, it would only slightly increase the burden on the deficit, by $.5 million.
- The cost of premiums would go down once a competitive market is established.
The Road Ahead
In his health care pitch, Trump has focused on making the system voluntary rather than mandatory, where citizens can buy as much coverage as they need. However, it goes without saying that it is too soon to be analyzing impacts of the plan which is not even clear yet.
Bringing about a transformation in the healthcare industry is easier said than done. It’s been only a few days since Donald J. Trump was declared president-elect and even though he has mentioned a lot of concepts he hopes to implement, the number of unknowns, make it seem like a long road ahead, especially repealing a comprehensive law like ACA.