In the February 25th Republican Presidential debate which aired on CNN, Senator Marco Rubio challenged Donald Trump on the specifics of his health care reform proposals to replace the Affordable Care Act (ACA). Trump repeated several times a statement calling to “erase the lines between the states” without offering any additional reforms.
To avoid any similar exchanges going forward, Trump’s campaign released a 7-point plan to repeal and replace the ACA yesterday ahead of the next debate. The document is really more of a framework or set of guiding principles. Trump intends to let Congress work out the details. Each element of his plan is listed below along with commentary and analysis.
- Repeal the ACA: On his first day in the White House, Trump would ask Congress to immediately deliver a full repeal of the ACA. The Congressional Budget Office (CBO) has not completed an analysis of all of the spending related to President Obama’s signature health care law. A January 2016 CBO estimate of repealing the ACA showed that direct spending would be reduced by $470.2 billion over five years. There are potentially additional unreported discretionary savings.
- Permit the purchase of insurance across state lines: Currently, a 1945 law permits the states to regulate health insurance plans within their borders; however there is an exemption for certain large employers. CBO conducted a cost estimate for H.R. 2355 (109th Congress), the Health Care Choice Act of 2005. The bill would provide for cooperative governing of individual insurance coverage offered in interstate commerce. At the time, CBO estimated that the bill would increase spending by $160 million over five years ($191 million, adjusted for inflation). It is unclear whether this cost estimate would be higher or lower today given that it was originally calculated prior to the implementation of the ACA. The proposal was reintroduced in the 114th Congress in the form of H.R. 543.
However, Trump’s plan could be more restricted. He adds, “As long as the plan purchased complies with state requirements, any vendor ought to be able to offer insurance in any state.” A state could continue to set limiting requirements on insurance plans originating outside of its border.
- Allow individuals to fully deduct health insurance premium payments from their tax returns under the current tax system: Currently, taxpayers can only deduct the amount of total medical expenses exceeding 10% of adjusted gross income (or, through the end of 2016, 7.5% if the filer or spouse is at least 65 or older). There are additional limits on the deductibility of premiums. For example, you cannot deduct premiums from pre-tax dollars, i.e., employer-based health insurance plans that come out of your paycheck before taxes are calculated.
Trump conditions the plan by noting that this would be deductible “under the current tax system.” His tax reform plan would increase the standard deduction by nearly four times the current level and would also limit certain itemized deductions, but it is unclear how the deductibility of premiums would be treated.
- Allow individuals to use Health Savings Accounts (HSAs): HSAs are permitted under current law. A comprehensive plan put forth by the Center for Health and Economy (CHE) in 2014 to repeal and replace the ACA included an option to create a one-time $1,000 “refundable” credit for HSA enrollees. Refundable credits can be claimed regardless of a filer’s income tax liability and thus increase federal spending. CHE estimated this reform would cost $70 billion over ten years, however Trump has not advocated for this refundable credit.
- Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals: This is not a new proposal as the federal government and state legislatures have sought to increase transparency and disclosure of pricing. While many tools are currently available to consumers, as the health care system is opened up through competition, providers would have greater incentives to further increase transparency of prices.
- Block-grant Medicaid to the states: This option would allow states the opportunity to craft Medicaid plans to serve their population’s needs. NTUF assumes that existing funding levels ($401 billion in FY 2017) would be maintained initially and set to a standard formula for future years.
- Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products: Rather than listing reforms to streamline the Food and Drug Administration’s approval process of pharmaceuticals, Trump focuses on permitting importation of prescription drugs. CBO has reviewed the impact of a related proposal introduced in Congress and determined that savings to consumers would be minimal, the savings to the government would be negligible, and initially the proposal would cost taxpayers money.
While this may sound like a free trade proposal, this policy could have adverse impacts due to the fact that other countries have set price controls on medication. These controlled prices would essentially be imported, diverting resources from the development of new life-saving drugs.
He also advocated for reform of mental health care, citing existing legislation. There are a number of proposals working their way through Congress, but Trump did not specify which he would support.
In addition to these points, Trump also called to “review basic options for Medicaid and work with states to ensure that those who want healthcare coverage can have it” which leaves the door open to some sort of subsidy such as a refundable credit, but it is unclear what he would support (Republicans in Congress have long advocated for a refundable health credit for the purchase of health insurance).
Trump’s main goals are to employ free market principles to expand access, make health care more affordable, and improve quality of care. His most significant reform would be to transform Medicaid into a block grant. Several of his other proposals are not exactly new, but align with his goals. The glaring exception would be importation of drugs, which could have fiscally and economically detrimental consequences for taxpayers and consumers alike.