In January, President Trump said, “We’re going to have insurance for everybody. They’ll be beautifully covered. I don’t want single payer; what I do want is to be able to take care of people.” While Obamacare is severely flawed, the Congressional Budget Office’s (CBO) take is that the newly proposed American Health Care Act (AHCA) is not the answer either. President Trump’s goal is only achievable by taking the pieces of the Affordable Care Act (ACA) that are working and combining them with some of the good ideas proposed by Republican Congressional leaders in the AHCA.
This strategy is different than the ‘Repeal and Replace’ approach favored by Republican hardliners. But, the hybrid model offers a real opportunity for President Trump to achieve something great—insurance for everybody—while also giving him the opportunity to demonstrate his ability to be the type of leader he campaigned to be—a strong, solutions-oriented businessman who fights for the working class and is not beholden to the political class.
Below is an outline of a policy proposal that borrows from the best of both plans, and includes other ideas that have been discussed, but aren’t in either bill and should be. The objectives of this proposal are threefold: move the country closer to insurance for everybody; lower insurance premiums in the non-group market; and accomplish this without increasing the deficit.
Insurance for Everybody (At Least More People Than Today)
Incentives to Purchase. Whether it is a stick (mandate) or a carrot (tax subsidy), these incentives need to be significant enough to get people and employers to buy insurance. If you drive a car, you are required to have car insurance; if you’re human, you need health insurance. A weak mandate is part of the reason insurers dropped out of the exchanges, and the CBO estimates that with no mandate and lower net subsidies even more people will drop insurance. A compromise here would be to create a combination of mandates and tax subsidies that encourage more people to enroll.
Non-group Market Subsidies. If the subsides in the ACA are lowered, fewer people will have insurance. Subsidies are the only way to increase coverage among low-income people. In order to be most effective and efficient, these subsidies should be both age- and means-tested, as they are in the ACA.
Medicaid Compromise. The biggest driver of enrollment and cost in the ACA is Medicaid expansion, and changes in Medicaid funding in the AHCA drive the majority of the decline in coverage. There are two ways to bridge this gap.
The first is to find a middle ground in the Medicaid spending trend between the ACA and the AHCA. In both plans, federal funding of Medicaid spending slows and state responsibilities increase, but the switch happens faster in AHCA. A better way is to split the difference.
The second approach is to make up this difference by accelerating payment and delivery system reform activities in the Medicaid market, including Medicaid managed care programs, Accountable Care Organizations, and Bundled Payment initiatives. These are discussed more in the deficit section below.
Individual Tax Deductibility. Another big reason the exchanges languished is that health insurance is tax-deductible for employers, but not for individuals. Making health insurance tax deductible for the individual as well will increase the value of the subsidies and the incentive for individuals to purchase insurance; it will also increase competition in the market.
Lower Insurance Premiums in the Non-Group Market
High-Risk Pools. The AHCA includes a provision for federal and state-funded high-risk pools, and the CBO projects that they will reduce exchange plan premiums, drive more competition among health plans, and create greater consumer choice.
Age Rating Rules. The AHCA allows for a 5-to-1 ratio between the cost of plans for older enrollees versus younger enrollees. This structure will encourage more young and healthy people to enroll, which in turn will reduce the overall cost of coverage. Older, low-income enrollees, however, will require ACA-like income-based subsidies in order to afford coverage.
Plan Design Flexibility. By eliminating restrictions on health plan design requirements the AHCA allows for insurers to create more choices and lower-priced options for consumers, both young and old.
ACA Taxes. The AHCA eliminates most of the ACA taxes on high-income taxpayers, health insurers, and device manufacturers. President Trump simply cannot achieve health insurance for everybody while also eliminating these taxes. If these taxes are retained, more people will be “beautifully covered.” We already have these taxes in place, all we have to do is keep them. As President George H.W. Bush famously said, “Read my lips: no new taxes.”
Delivery System Reform. It is also true that we cannot fix healthcare without changing the way we pay for it. Over the past five years, the Centers for Medicare and Medicaid Services (CMS), along with commercial health plans, have made meaningful, bipartisan progress in shifting from paying for volume to paying for value. President Trump and the new Health and Human Services Secretary, Tom Price, have real opportunities to continue to improve care and reduce costs by accelerating the growth of Medicare and Medicaid managed care plans, Accountable Care Organizations, Bundled Payment programs and other value-based initiatives. All of these programs help make healthcare less expensive, which will make coverage more accessible and affordable into the future.
Can President Trump Drive the Deal?
There is a lot for hardline Republicans and liberal Democrats to hate about combining the ACA and the AHCA—this proposal is not a full repeal of Obamacare, it deregulates the exchanges, and it moves Medicare and Medicaid more toward the private market. On the other hand, this approach takes the best ideas from Republicans and Democrats and meets the President’s goal of taking care of people. In today’s highly charged political environment, the only way to make this happen is for the White House to drive the process and make the deal. This is President Trump’s “Nixon-in-China” moment—the time for him to lead is now.