Trump’s ACA Reform Principles and What They May Mean

President Donald Trump gave a speech to a joint session of Congress Tuesday night. A significant portion of his speech dealt with his commitment to repeal and replace the Affordable Care Act. What did he say, what does what he said mean, and what will be the impact on the ACA?

What He Said

President Trump devoted considerable time to discussing his goal to repeal and replace Obamacare. Here is what the President said, “Tonight, I am also calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better Healthcare.”

Then, after reciting his criticism of the Affordable Care Act he proclaimed, “We must act decisively to protect all Americans.  Action is not a choice — it is a necessity. “So I am calling on all Democrats and Republicans in the Congress to work with us to save Americans from this imploding Obamacare disaster.”

He then cited five principles that “should guide the Congress as we move to create a better healthcare system for all Americans:

“First, we should ensure that Americans with pre-existing conditions have access to coverage, and that we have a stable transition for Americans currently enrolled in the healthcare exchanges.

“Secondly, we should help Americans purchase their own coverage, through the use of tax credits and expanded Health Savings Accounts — but it must be the plan they want, not the plan forced on them by the Government.

“Thirdly, we should give our great State Governors the resources and flexibility they need with Medicaid to make sure no one is left out.

“Fourthly, we should implement legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance — and work to bring down the artificially high price of drugs and bring them down immediately.

“Finally, the time has come to give Americans the freedom to purchase health insurance across State lines — creating a truly competitive national marketplace that will bring cost way down and provide far better care.”

What He Meant

I hesitate to try interpret what President Trump means when he, well, uses words. We’re talking a moving target here.  However, given the gravity of the speech, I assume what he said was thoroughly vetted and intentional.  So, I’ll go try to interpret the President’s message. Full disclosure, however, Republicans are already fighting over the meaning of his five health care reform principles, so there’s clearly room for differing interpretations.

Pre-existing conditions: In the past, President Trump has expressed the desire to keep the ACA’s guarantee issue provisions that prevents insurers from declining coverage due to a consumer’s health status.  Last night, however, he said used a different wording, stating that pre-existing conditions should not bar Americans from having “access” to coverage. These are two different things. The ACA requires carriers accept consumers, even those with expensive medical conditions, into any plan for which the consumer is eligible. Calling for access means that, as an alternative, these Americans could be shunted into high-risk pools or plans designed specifically for high cost insureds.

Offering access to high-risk pools means Americans with existing medical conditions would have fewer choices, limited benefits and pay higher premiums than their healthier neighbors. In testimony before a California legislative committee I once referred to high-risk pools as “a ghetto of second-hand coverage.” The author of the legislation establishing the state’s pool sat on the committee. Oops. But I stand by my description.

The President indicating a willingness to accept high-risk pools was good news for House Speaker Paul Ryan, who supports them. However, there are millions of Americans with pre-existing health conditions. How will they react to being removed from the “normal” market? And how will they, and their family and friends, express those feelings at the polls?

Tax Credits and HSAs: Health Savings Accounts have long been a staple of Republican health care reform proposals.  In a draft of Speaker Ryan’s Obamacare replacement bill, leaked last week, tax credits are the primary means of making health insurance premiums affordable. Conservatives have pushed back against tax credits calling them a new non-means tested entitlement program. The President’s backing of this approach will give the Speaker some leverage in negotiations with these members of the GOP caucus in the House.

Medicaid: President Trump’s call for giving governors more say in how their states implement Medicaid seems to support efforts to move federal payments for the program into block grants, which aligns the White House with Republicans in the House.  Currently states receive funds based on Medicaid enrollment (subject to a host of adjustments for a variety of factors, but let’s keep it simple for now). Block grants would give states a fixed amount to spend within very broad federal guidelines. This approach enables the federal government to cap their spending on the program and leaves it to states to manage the program.

Lowering the Cost of Care: Too often the debate over health insurance affordability ignores a harsh reality: the major driver of health insurance premiums is the cost of medical care. Most of the President’s principles concerning health care reform focuses on health care coverage. But he’s also seeking to lower costs through malpractice reform and through taking steps to drive down the cost of prescriptions. That the President is addressing medical expenses at all is a good thing. Hopefully as a replacement to the Affordable Care Act moves through Congress there will be an even greater emphasis placed on reducing the cost of medical treatments and services.

Interstate Sales: President Trump and many Republicans invoke letting consumers buy out-of-state coverage with the same passion as Hogwarts students learning their first spells. They proclaim it will increase competition and lower premiums across the country. Like that school of witchcraft and wizardry, however, this proposal is, unfortunately, a fantasy. I’ll write a post on why soon, but for now consider just one factor. Virtually all health insurance policies sold today rely on discounts offered by “in-network” doctors, hospitals and other providers of care. Plans sold in State A may look good to a consumer in State B, but if that carrier doesn’t have a strong network in State B, what good is that policy? In short,

The Impact

Let’s assume I’ve interpreted what the President said correctly. What will be the impact of his position on whatever Obamacare repeal and replace bill that emerges from Congress and lands on his desk to sign?

First, it is very significant that the President’s health care reform principles align as closely as they do with those of Speaker Ryan. This gives the Speaker a powerful card to play when herding his splintered caucus behind his preferred legislation.

Second, it seems to signal that the White House is ceding to Congress the responsibility to develop an ACA replacement. The President carved out no bold vision for what he wants nor are his principles in conflict with longstanding Republican positions. The only exception is his call for federal action to lower prescription drug costs. But would President Trump veto a bill that meets all of his principles except for this one? Doubtful.

Third, we’re only at the beginning of long, arduous march to reforming or replacing the Affordable Care Act. There’s many more parties will be heard from, including Senate Republicans, insurers, pharmaceutical companies, doctors, hospitals and other special interest groups. The public will have a lot to say on this subject, too. Plus, any reform package will likely require support from Democrats, and negotiations for those votes have not yet begun.

As I’ve written previously, what Republicans are putting forward now may bear only a passing resemblance to the health care reform we get at the end of what will be a very long, messy slog.

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5 thoughts on “Trump’s ACA Reform Principles and What They May Mean

  1. Hey Alan,

    Great article as usual! What about feds becoming re-insurer for big bills and bill at medicare rate for that portion so providers have skin in the game and there’s a built-in mechanism to offset the “everything and the kitchen sink” mentality with health care services. Any talk along these lines?

    • Hello. Thanks for the kind words. That’s an interesting concept. Folks are talking about reinsurance mechanisms, but I haven’t heard anything quite like what you’re proposing. It would be interesting to have it fleshed out.
      Thanks for raising it.

  2. Hi Alan! Your blogs are great! Thanks for the overview and keep us posted as you learn more. Your insight is helpful as this unfolds. The direction seems good at this point but let’s see where this all ends up.

  3. Alan, you don’t know how much I enjoy reading your blogs, since I share many of your insights. There aren’t many people who understand this stuff enough to discuss it intelligently without using stupid talking points. PS my browser (IE) is not compatible with Flipboard.

    • Hello. Thanks for the kind words and thanks for following the blog. I didn’t realize Flipboard doesn’t work with IE. I use Firefox and it’s been great. I also have the app on my phone, which works well.

      Anyway, it’s going to be an interesting several months as Washington tries to do something complicated. Please feel free to add to the conversation here.
      Alan

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