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Trump’s health care plan: not truly on point

Donald Trump speaking via satellite to Republican National Convention. REUTERS/Mike Segar

Aside from repealing the Affordable Care Act, Donald Trump’s website gives only a few details for his health care policy, one of the most important issues facing Americans. He argues that “Obamacare” has “resulted in runaway costs, websites that don’t work, greater rationing of care, higher premiums, less competition and fewer choices.”

None of these claims can be substantiated by research. In fact, a recent study by the Urban Institute showed that, even adjusted for the improving economy, the ACA provided affordable health insurance to millions. Even so, millions do not like the law and, like Trump, would like to see it repealed.

As the Republican National Convention is underway this week, now is a good time to look at Trump’s health care plan.

Let’s start with Trump’s desire to repeal the Affordable Care Act. Research has shown that repealing the Affordable Care Act would result in 18 million Americans losing health care coverage. Some would lose coverage because health insurance would no longer be offered to them at any price. Most would lose coverage because they would no longer be able to afford health insurance.

Sell insurance across state lines

The Trump website provides six policy prescriptions intended to increase affordability. The first of those policies would be to allow the sale of health insurance across state lines.

Currently health insurance is regulated by each state. In order to sell insurance in a given state, an insurer must be licensed in that state and obey the laws of that state.

Trump’s proposal means that insurers licensed by one state and obeying that state’s laws could sell coverage in another state. That potentially would allow insurers to ignore the other state’s laws.

There is a wide variation in insurance laws across states. This proposal would allow insurers to choose those states whose laws give them the greatest ability to manage their risks.

As a result, some individuals would see lower premiums while others will face higher costs, if they are offered coverage at all. The National Association of Insurance Commissioners has argued fewer consumers would be able to afford coverage under this proposal.

In 2011, the state of Georgia was the first state to pass a law similar to this proposal, but it has not found insurers willing to offer this coverage. At least 20 other states have since followed suit, but insurers are not sure they want to do this. Numbers are not available on how many insurers have applied in various states, but it is safe to say that the idea has not been popular.

In fact, the National Association of Insurance Commissioners has said in a report that this plan “would also make insurance less available, make insurers less accountable, and prevent regulators from assisting consumers in their states.”

Tax deductions for health insurance for all

Another Trump proposal would allow everyone to deduct the cost of health insurance from their taxes. The website states that “Businesses are allowed to take these deductions so why wouldn’t Congress allow individuals the same exemptions?”

This is not quite correct. The tax benefit of employment-based health coverage goes to the workers, not the company. Employees of companies that pay a portion of the cost of health insurance for their workers do not have that form of compensation included in their taxable income.

Individuals who purchase coverage outside the workplace have to use after-tax dollars to do so. This proposal would allow those individuals to pay for coverage with pre-tax dollars as employees of firms who offer coverage do now.

The effect of this proposal depends on the repeal of the Affordable Care Act. With the ACA in place, this proposal would lower the cost of coverage for many individuals and thus increase the number of individuals with health insurance.

If the ACA were repealed, however, then the individual protections would vanish. That means that insurers would no longer have to offer coverage to all, at premiums the same for everybody, in the same region, of the same age.

Expanding the tax advantage of health insurance coverage after repeal of the ACA could lead some employees to leave their employer coverage, or some employers to discontinue their coverage. Healthy individuals would be able to purchase coverage in the individual market, but older and less healthy individuals would find coverage more expensive, or unavailable.

Expansion of health savings accounts; call for transparency

A fourth proposal would expand the use of Health Savings Accounts (HSAs). HSAs are coupled with health insurance plans that have high deductibles. Individuals can save money tax free in their HSA accounts. That money is never taxed if it is used to pay for health care services.

About 20 million Americans already use health savings accounts. The number of individuals with HSAs increased 23 percent in the first year of the Affordable Care Act. It is not clear that Trump’s proposal would have much effect on the current insurance market, or lead to more people using a health savings account.

Form 8889 for HSA deduction.

A fifth proposal would increase price transparency in health care, although the proposal doesn’t state how to achieve this objective. If consumers knew the prices of health care goods and services, they could help contain health care cost inflation by choosing lower cost services. Or so the thinking goes.

This has been a goal of private firms and public agencies for more than a decade. There have been some successes already. However, many health care consumers are suspicious of lower-cost services, believing those cost savings may be achieved through lower-quality care.

Measuring and documenting the quality of care is a difficult and often expensive problem.

Poor could lose coverage

Finally, Trump proposes to “block grant Medicaid to states.” A block grant is a grant from the federal government that states can use as they see fit, for a broad range of services.

Medicaid is an insurance program for the poor. Before the Affordable Care Act, it was mainly a program for poor children, pregnant women and disabled adults. Most states did not cover poor adults aged 19 to 64, however.

The ACA called for states to expand Medicaid to that population of the poor as well. It offered a financial incentive to do so. As of today, however, 19 states have chosen not to expand Medicaid.

Medicaid is administered by each state. Much of the money for it, however, comes from the federal government. In turn, the federal government sets guidelines on how the Medicaid programs should be run. It helps fund each state’s Medicaid program with a matching grant: the more states spend on their program, the more the federal government contributes.

The federal government contributes between US$1 and $3 for every dollar the state contributes to the program. The match depends on the state’s per capita income.

Poorer states get a larger federal match. For example, Mississippi gets almost three federal dollars for every dollar it spends, while Massachusetts gets one federal dollar for every state dollar it expends.

In addition, those states that expanded Medicaid under the ACA get a match of over $9 for every $1 they contribute for those individuals made eligible by the ACA expansion. Assuming full repeal of the ACA, those federal dollars are no longer available to the state.

The matching grant was enacted in 1965 with the Medicaid program to encourage states to expand coverage and to provide assistance to poorer states.

Under Trump’s block grant plan, each state would receive a fixed amount of money instead of having their money matched, in part, by the federal government. State efforts would no longer affect the money the federal government contributes.

Such a plan would remove both the incentives and the increased assistance for states that expanded Medicaid. For this proposal to have any effect at all, the federal government’s contribution to state’s Medicaid programs has to fall over time.

The result would likely be smaller Medicaid programs, with fewer individuals covered, especially in southern and western states. Many of these same states already have refused to expand Medicaid. Thus, thousands, if not millions, more poor people would go uncovered.

This is not only a problem for the poor. Hospitals and other providers make up for their losses by raising prices for those patients who have insurance or who can pay out of their pockets.

The Affordable Care Act has been knotted in political controversy since it was first introduced. An individual’s view on its effectiveness and importance is influenced by his or her political leanings. Knowing the facts, however, can help us decide whether we support a candidate’s proposals on health care.

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