Summary of Donald Trump’s Health Care Proposals: Making Americans Less Healthy Again

Summary of Donald Trump’s Health Care Proposals:

Making Americans Less Healthy Again

In this blog post I review Republican Presumptive Presidential nominee Donald Trump’s health care reform proposals to make America great again. Mr. Trump has seven key points: 1) completely repeal ObamaCare, 2) permit interstate sale of health insurance, 3) deductibility of individual insurance premiums, 4) broader Health Savings Accounts, 5) price transparency, 6) Medicaid block grant and 7) reduce barriers to market entry for pharmaceuticals. Some are good ideas, some are bad, and two are atrociously bad ideas.

1) Completely repealing ObamaCare. About 6.5 million low, moderate and middle income Californians now have coverage through the Medicaid expansions and the refundable tax credits of Covered California; all would lose coverage. About half a million young adult Californians have coverage through their parents; all would lose coverage. About 200,000 Californians with very serious medical illnesses now have coverage due to the insurance reforms in Obamacare; all would lose this guaranteed access to coverage. Over 5 million senior and disabled Californians have better coverage for preventive care and for prescription drugs (the donut hole) under Obamacare; all would lose their expanded coverage. Close to a million more California employees have private coverage due to the employer mandates of Obamacare; all would lose their new coverage. Over 35 million Californians have better access to preventive care with no copays or deductibles due to Obamacare; these protections would be repealed. Millions of Californians with mental health and substance use disorders would be at risk to lose the essential behavioral health coverage, which is now mandated by Obamacare.

2) Permit interstate sale of health insurance. This is a misleading title since an Indiana based company such as Blue Cross/Anthem can and does already sell coverage in California as can and does a Minnesota based company such as United or a Connecticut based company such as CIGNA. What it means is that the company based outside of California does not have to comply with California law when it sells health insurance to California customers. So for example the Flim Flam Insurance Company based in Wyoming and its owners assets cached in the Cayman Islands would only have to comply with Wyoming law and regulatory officials, not California law. This little sleight of hand effectively undercuts all the state insurance rules enacted in California for every Californian, unless Wyoming has similar protections.

3) Deductibility of individual insurance premiums. This needs a little explanation. A self-employed individual who buys individual insurance can take a deduction for the costs of their premiums. The higher their income, the greater their deduction, due to the progressive federal and California state income tax brackets. A self employed individual who buys individual insurance under Obamacare (Covered California) can receive a tax credit for the costs of their premium, the lower their income, the greater their tax credit so they can better afford coverage. Mr. Trump would repeal the tax credits for the lower income self-employed so they can no longer afford coverage, and expand the existing tax deductibility from the self-employed to employees. Employees can already get the benefit of pre-tax purchasing through their employment-based coverage, unless of course their employer does not offer health coverage. This would allow the higher income employees (e.g. corporate executives) to get an even greater tax benefit by buying their own individual coverage, rather than taking the company policy like the rest of the workforce. Flex workers (part time, seasonal, temporary and contract workers) would lose their refundable tax credits under Obamacare, but gain deductibility under Mr. Trump – in other words low, moderate and middle income flex workers would lose their federal tax assistance while high income flex workers would gain federal tax assistance.

4) Broader health savings accounts (HSAs). HSAs currently allow individuals to tax shelter their income so they can pay their deductibles, copays, cost sharing and shares of premiums. Like tax deductibility discussed above, the higher your income and tax bracket, the greater are the tax advantages of HSAs. Mr. Trump would allow individuals to pass-on the accumulated savings in their HSAs to their heirs with no tax consequences and/or without being subject to inheritance taxes. This is a truly excellent idea for billionaires and their progeny.

5) Require price transparency from providers. Under this proposal, doctors, clinics and hospitals would need to disclose their prices to consumers so they can comparison shop based on price. This is a very good idea and some insurers are already moving in this direction. The challenge is which price must a provider disclose: their cost, their best price to their favored insurance company, their price to Medicare, or their highest price to an uninsured Saudi prince. The difference between these prices is about 500%.

6) Medicaid block grant. The Medicaid block grant has been a long time favorite of certain Republican Governors and legislatures opposed to Obamacare and Medicaid’s entitlement program. Under a block grant as proposed by Mr. Trump, states would receive their Medicaid funds with no strings attached – no rules on eligibility, no rules on covered services, no rules on reimbursement to providers, no rules on consumer rights with HMOs, no rules governing state or local matches. Past block grants for social services, welfare, and community development have invariably led to less funding, for fewer people, and little or no accountability and transparency for state or local officials who administer them. Most of Medicaid’s current rules are the direct result of abuses by states, providers or health plans. This change would adversely impact over 13 million Californians with Medi-Cal coverage.

The poverty level for a family of three is $20,090 annually. California and 29 other states have now increased their Medicaid income eligibility to 138% of the federal poverty level with federal funds available under Obamacare. Texas and 19 other states have declined the 100% federal match available through ObamaCare to expand their Medicaid programs: their current income eligibility levels are a national embarrassment: Texas (18%), Alabama (18%), Missouri (22%), Louisiana (24%, Mississippi (27%), Florida (34%). In other words, a family of three in Texas must have incomes at or below $3762 annually ($313 a month) to qualify for Medicaid.

7) Reduce barriers to market entry for pharmaceuticals. This could allow better patient access to generic drugs or to lower priced Canadian drugs. This could slow the price rises for drugs to American consumers and would be strenuously opposed as it has been in the past by the Pharmaceutical manufacturers. Another approach is to permit Medicare to negotiate drug prices – also strenuously opposed.

In short Mr. Trump’s health reform proposals are 10 steps back and two steps forward. Low, moderate and middle-income workers lose federal assistance with the costs of their health coverage in a variety of different ways while high-income individuals gain (HSAs and tax deductibility). Price transparency (if properly implemented) and greater competition in the pharmaceutical industry would be gains.

Prepared by: Lucien Wulsin

Dated: May 21, 2016

Summary of the Survey Results from the National Health Insurance Survey By the Centers for Disease Control (January-March, 2015)

Summary of the Democratic Presidential Health Care Proposals