Donald Trump on Health Care

What Happened to Trump's Plan to Replace Obamacare?

Paul Ryan presents Trumpcare
U.S. Speaker of the House Paul Ryan (R-WI) explains the Republican plan to replace the Affordable Care Act during his weekly press conference at the U.S. Capitol March 9, 2017 in Washington, DC. Photo by Win McNamee/Getty Images

On March 6, President Donald Trump and congressional Republicans released the American Health Care Act to replace Obamacare. The Republicans never had the 60-vote majority in the Senate to repeal the Affordable Care Act.  Instead, they used a budget reconciliation bill to dismantle the spending and revenue portions of the ACA. They tried to repeal the middle-class subsidies, end the Medicaid expansion, eliminate Obamacare taxes and abolish the individual mandate.

They couldn't remove the non-budgetary elements. These include lifetime and annual limits on coverage and limits on annual out-of-pocket costs. (Source: "Budget Reconciliation Explained," Vox, November 23, 2017.)

House Republicans amended the plan on March 23, 2017 to gain more Republican votes. But it wasn't enough, and they pulled the bill on March 24, 2017. Trump said he would not support another plan to replace Obamacare. He insisted he would move on to his tax cut plan.

Next Steps

Trump's head of the Department of Health and Human Services is former Representative Tom Price (R-GA). HHS manages Medicare, Medicaid and Obamacare. Price wrote the Empowering Patients First Act which Obama vetoed. He has vowed to weaken requirements for health insurance to provide all of the 10 essential benefits. (Source: "By Picking Tom Price to Lead HHS, Trumps Shows He Is Serious About Dismantling Obamacare," Vox, November 28, 2016.) 

Price can relax requirements that insurers cover some preventive services, such as contraception. He could also end subsidies to insurance companies. He can require that Medicaid recipients must work. He has already assured states that HHS would support them if they started requiring that. He might allow states to establish premiums, lifetime caps on benefits or other cost-sharing rules for Medicaid recipients.

But he must have public hearings to do so. (Source: "With GOP Plan Dead, Trump Eyes Other Ways to Reshape Health Care," The Wall Street Journal, March 25, 2017.)

Price does not have the support of lobbyists for health insurance companies and pharmaceutical companies. The health insurance lobby, America's Health Insurance Plans, opposes any reductions to Medicaid financing. The ACA's expansion brought them many new customers paid for by the federal government. (Source: "Health Groups Denounce G.O.P. Bill as Its Backers Scramble," New York Times, March 9, 2017.)

The health insurance industry will file lawsuits against any plan they don't support. The industry played a significant role in forming Obamacare. For example, it was responsible for the individual mandate. The insurance companies wouldn't insure those who are sick unless the government mandated that the healthy are also covered.

Trump's Health Care Act Had 11 Components

If it had passed, the plan would have had these 11 elements. Trump promised to keep the two most popular Obamacare benefits

1. Three million young adults up to age 26 could stay on their parents' plan.

2. Those with pre-existing conditions could still get insurance.

Companies couldn't withhold insurance from people who are sick. The federal government would have paid $100 billion over 10 years to a Patient and State Stability Fund. States could use the Fund to increase tax credits. Some states might send the money to insurance companies who have a lot of very sick patients. The Congressional Budget Office estimates that the fund would have helped lower premiums by 20 percent after 2026. (Source: "The Congressional Budget Office Cost Estimate American Health Care Act," CBO, March 13, 2017.)

States could also use the Fund to create high-risk pools for those with pre-existing conditions.

 That would raise the costs for those in the high-risk pools. People with chronic illnesses would face higher premiums and larger deductibles. This would also affect those with pre-existing conditions, if they had more than a 63-day gap in coverage. Many companies already offer high-risk pools, called "Cadillac" plans, to their employees. Insurance companies like this option. (Source: Sarah Kliff, "The American Health Care Act: The Republicans' Bill to Replace Obamacare, Explained," Vox, March 6, 2017.)

Tax Changes 

3. Remove the individual tax on those who don't buy insurance. This amendment would have been retroactive to December 31, 2015. It would have meant people who didn't have insurance in 2016 wouldn't have to pay the penalty when they filed in April. The CBO estimates that 14 million people would drop their insurance coverage once they no longer had to pay the penalty. (Source: "CBO Cost Estimate American Health Care Act," CBO, March 13, 2017.)

But, there would be a penalty for reapplying for coverage after being without it for longer than 63 days. The insurance company could add 30 percent to premiums for a year when someone reenrolls.

Removing the mandate would have increased health insurance costs overall. The CBO estimated that, on average, premiums would be 15 percent to 20 percent higher in 2018 and 2019. That's because insurance companies would raise premiums to cover their costs from insuring fewer healthy people. The mandate kept prices low because there were enough healthy people in the risk pool to pay for the sick ones. Without the mandate, many people will wait until they are sick before buying insurance. If only the sick bought insurance, insurance companies would not be profitable.

Congress added the 30 percent premium increase to help insurers pay for these added costs. But it wouldn't have solved the problem. A healthy person who let their insurance lapse would avoid the increase. Only a very sick person would feel the increase was worth it if it meant getting insured. (Source: Sarah Kliff, "The American Health Care Act: The Republicans' Bill to Replace Obamacare, Explained," Vox, March 6, 2017.)

4. Remove the tax on companies that didn't provide health insurance. Many employees would have lost coverage as employers opted out. They would have found that individual insurance costs much more than company-sponsored plans. 

5. Eliminate taxes on high-income earners in six years. Those earning over $200,000 a year wouldn't have had to pay extra Medicare taxes. On March 23, House Speaker Ryan delayed the tax repeal for six years to fund $15 billion toward the State Stability Fund. That would have helped states pay for treatment for low-income recipients. (Source: "House Leaders Prepare to Vote Friday," Washington Post, March 24, 2017.)

The bill repealed taxes on drug and other medical supply companies. But these Obamacare taxes are necessary to pay for the benefits.

The Congressional Joint Committee on Taxation estimated that the tax cuts would have cost $460 billion in revenue over 10 years.  

  • $270 billion from high-income and investment taxes.
  • $145 billion from insurers.
  • $25 billion from drug makers.
  • $20 billion from manufacturers of medical devices.

The plan’s backers never explained how their plan wouldn't add to the debt. That was one reason many conservatives were opposed to it. (Source: "Health Groups Denounce G.O.P. Bill as Its Backers Scramble," New York Times, March 9, 2017.)

6. Replace the Obamacare tax credits. The Obamacare exchanges allow people without company-sponsored insurance to shop for individual and family plans. They also distribute subsidies based on income. The tax credit is based on the cost of the "silver plan." As insurance costs rise, so does the subsidy. 

The Health Care Act provided a flat tax credit based on age. 

AgeTax Credit
Younger than 30$2,000
30-39$2,500
40-49$3,000
50-59$3,500
60 and older$4,000

The credits started to phase out for individuals who earn $75,000 or more and households that earn $150,000 or more. The subsidy was not based on the cost of plans. As insurance costs rise, the subsidy remained the same. That meant it did not take into account the higher cost of living in states such as Hawaii and Alaska. (Source: "Analysis: GOP Plan to Cost Obamacare Enrollees $1,542 More a Year," Vox, March 7, 2017.)

It also meant the cost of individual plans would have increased for most people. A study by the Commonwealth Fund and Rand Corp found that an individual policy would cost $4,700 by 2018 if Obamacare were repealed. If Trump pushed through his tax deduction on premiums, the cost would be $3,500. That compares to the average cost of an exchange policy of $3,200. (Source: "What Trump's Win Means for Your Wallet," Money, November 9, 2016.)

In addition, women could not use tax credits to pay for abortions. Low-income families would lose additional ACA subsidies that pay for out-of-pocket costs. (Source: "The GOP Healthcare Plan Just Won't Work," NBC, March 8, 2017. "The GOP Obamacare Replacement Plan Defunds Planned Parenthood and Restricts Abortion Coverage," Vox, March 7, 2017.)

7. Allow everyone to use and deduct Health Savings Accounts. Currently, HSAs are only available for those with high-deductible insurance plans. The accounts help pay for care until the deductible is reached. It doesn't help people who can't afford to set aside income in the HSA. 

Changes to Coverage and Costs

8. Remove the mandate to provide essential health benefits. That would have provided low-cost plans for those who don't need coverage for all 10 essential health benefits. The ACA currently requires all insurers to cover things like pregnancy, mental health or equipment for chronic diseases. The bad news is that the mandate increased premium costs for plans that offer the 10 essential benefits. 

9. Replace limits on premiums for older people. Under the ACA, premiums for older people can't be more than three times the costs for younger people. The AHCA would have allowed companies to charge seniors five times as much as younger Americans.  

10. Give states a block grant for Medicaid. Phase out Medicaid expansion by 2020. The block grant meant the federal government would stop sharing a percentage cost of Medicaid. Instead, it would have given each state a fixed amount. In return, states could have designed their own Medicaid benefits. The fixed block grants wouldn't pay for as many people as the ACA's percentage federal coverage.  

In 2020 under the AHCA, states could no longer sign up new adults to the expanded Medicaid program.  Many conservative Republicans thought expanded Medicaid should be eliminated immediately. The CBO estimated that would prevent seven to 10 million people from getting insurance by 2024. (Source: "Ten Million to Lose Insurance Under GOP's Obamacare Replacement Plan, S&P Says," NBC, March 7, 2017.)

Insurance companies would only have to comply with state, not federal, regulations. Trump believes that would make the states more efficient in their use of funds. It also means that Medicaid would compete with other state priorities for the funds. That's what led to the failure of community mental health centers under deinstitutionalization

Trump nominated Seema Verma to lead the Centers for Medicare and Medicaid Services. Verma had helped Mike Pence create a Medicaid expansion plan in Indiana. She advocates that Medicaid recipients pay a small monthly fee to receive Medicaid. (Sources: "If Trump's Medicare Chief Is Approved, You'll Need to Be on Your Best Behavior," Time, March 6, 2017. "Why the Health Insurance Industry Is Calm Despite Trump's Obamacare Threats," Fortune, November 30, 2016.)

With Verma’s policy, Medicare recipients would not be able to afford preventive care or treatment for chronic diseases. They would likely wait until the diseases created a crisis. They could then go to emergency rooms that must treat everyone. This more expensive care is billed to Medicaid. Substituting expensive hospital emergency rooms for primary care physicians increases health care costs for everyone. (Source: "House GOP Releases Plan to Repeal, Replace Obamacare," CNBC, March 7, 2017.)

For that reason, major hospital groups opposed Trump's plan. They know their emergency room costs will increase if preventive care under expanded Medicaid is withdrawn. (Source: "Health Groups Denounce G.O.P. Bill as Its Backers Scramble," New York Times, March 9, 2017.)

11. Strip federal funds from Planned Parenthood. It would have stripped Medicaid and Title X reimbursement for Planned Parenthood health care services for low-income patients. These federal funds are never used for abortions. But Republicans are concerned that the organization uses the funds for research they oppose.

This action could have increased Medicaid costs, since many of its recipients use Planned Parenthood for routine health care, including family planning and contraceptives. If those services are cut, the Act could actually increase the number of women seeking abortions. Two Republican Senators oppose Planned Parenthood defunding. (Source: "The GOP Obamacare Replacement Plan Defunds Planned Parenthood and Restricts Abortion Coverage," Vox, March 7, 2017.)

11. Strip federal funds from Planned Parenthood. It would have stripped Medicaid and Title X reimbursement for Planned Parenthood health care services for low-income patients. These federal funds are never used for abortions. But Republicans are concerned that the organization uses the funds for research they oppose.

This action could have increased Medicaid costs, since many of its recipients use Planned Parenthood for routine health care. That includes family planning and contraceptives. If those services are cut, the Act could ironically increase the number of women seeking abortions. Two Republican Senators oppose Planned Parenthood defunding. (Source: "The GOP Obamacare Replacement Plan Defunds Planned Parenthood and Restricts Abortion Coverage," Vox, March 7, 2017.)

How the AHCA Would Have Affected You

The CBO estimated the plan would have reduced the federal budget deficit by $150 billion from 2017 to 2026. The revenue loss from tax cuts was offset by spending cuts in Medicaid and subsidies. That's because many of Obamacare's cost-cutting measures remain in place. (Source: "CBO: Latest House GOP Health Care Bill," Washington Post, March 23, 2017.)

If the plan had passed, you would have had higher premiums if you fall into one of the following categories:

  • You have a chronic disease.
  • You are older. Premiums for a 64-year-old were estimated to rise $8,500-$10,600 a year. (Source: "I Read Seven Obamacare Replacement Plans. Here's What I Learned," Vox, November 17, 2016.)
  • You become pregnant.
  • You lose coverage for 63 days or more, then reapply.
  • Your company only provided coverage because the ACA forced them to.
  • You are one of the 22 million people who received subsidies or the Medicaid expansion.
  • You use mental health services, including drug rehab.

The plan would have lowered your costs, and possibly services, if you fall into one of these categories:

  • You are healthy.
  • You are young. The Vox article estimates that premiums for a healthy 24-year-old are estimated to decline from $2,800 to $2,100 a year. 
  • You don't lose coverage.
  • You don't have insurance.
  • You earn more than $200,000 a year.

Even if it had passed, the AHCA wouldn't have affected individuals until November 1, 2017 at the earliest. That's because plans bought on the exchanges are a legally binding contract between the person and the health insurance company. (Source: "Trump and the GOP Can Absolutely Repeal Obamacare," Vox, November 9, 2016.) 

Keeping the ACA means that health care costs will continue to rise at a slower rate than before Obamacare. Until 2010, health care costs increased 3 percent a month. They are now rising less than 1 percent a month. For the facts, see Current U.S. Inflation Statistics

This is because Obamacare helped more people receive lower-cost preventive care before they needed high-cost emergency room care. (Source: "Trump Promised to Repeal Obamacare. Now What?" Reuters, November 9, 2016.)

To understand the ACA better, see my book, The Ultimate Obamacare Handbook (2015 - 2016).

Background

Trump needed to submit his proposal to the states by April or May 2017 for any changes to occur in 2018. Each state set up its health insurance exchange or signed onto the federal government's site. The states have the final approval since they are responsible for implementation. (Source: "Trump Stands By Universal Health Care," STAT, February 5, 2016.)

Head of HHS Price and Speaker of the House Ryan never received enough support from other Republicans. Some conservatives thought the plan didn't do enough to repeal Obamacare. Others didn't like that the bill was being put to a vote without hearings. Two Senators oppose defunding Planned Parenthood. (Source: "Health Groups Denounce G.O.P. Bill as Its Backers Scramble," New York Times, March 9, 2017.)

Ryan first outlined his health reform ideas in the "Better Way" in 2016 and the "Patient's Choice Act" in 2009. He supported using block grants to fund Medicaid. That would cut Medicaid spending by $160 billion by 2022. He suggested replacing Medicare with vouchers to purchase private health insurance. (Source: "Why the Health Insurance Industry Is Calm Despite Trump's Obamacare Threats," Fortune, November 30, 2016. "Analyzing the House GOP Replacement for Obamacare," Citizens Against Government Waste, July 2016.)

Trump's plan would have forced companies to take the high proportion of sick people who would sign up. That's like asking auto insurance companies to insure only those who have been in car accidents. If forced to do so, insurance companies would go out of business because they couldn't make a profit. It wouldn't work, and they wouldn't agree to it.

Other Trumpcare Possibilities

On his first day in office, President Trump signed an executive order to "ease the burden" of Obamacare. It directs agencies to do what they can within the existing law to lift the ACA regulations. They can create more exemptions for people. This is a way to weaken Obamacare's requirement that everyone must have insurance or pay a tax. (Source: "Trump Signs Obamacare Executive Order," TheHill.com, January 20, 2017.)

Trump announced on March 7 and 8 that these two proposals will be forthcoming. It's unclear if that will happen now.

1. Allow health insurance companies to operate across states lines. Each state has specific regulations. That makes it expensive for a national company to operate in different states. As a result, five companies serviced half the insured population. Trump maintains that the increased competition would drive insurance costs down. But it could increase these five companies' monopoly power instead. This would raise costs. The Supreme Court would have to change the law. That's because it has ruled that insurance is not subject to federal oversight. Another way to modify the law is to amend the Constitution itself. (Source: Susan Randall, “Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners,” Florida State University Law Review, 2014.)

2. Allow Medicare to negotiate lower prescription drug prices with pharmaceutical companies. Trump had backed away from that idea in a meeting with pharmaceutical companies on January 31, 2017. Obama, Clinton and Sanders have also proposed this idea. But Congress would have to amend the Act that established Medicare Part D. It explicitly prohibited Medicare from negotiating. Drug companies said they needed that protection to provide funds for research and development of new cures. Also, the CBO found that Medicare wouldn't save much more by negotiating. That's because health insurance companies already do a lot of negotiation. (Sources: "After Meeting With Pharma Lobbyists, Trump Drops Promise to Negotiate Drug Prices," Vox, January 31, 2017. "Not Up for Negotiation," USNews, February 26, 2016.) 

Trump has mentioned the following four ideas, but they are not in any current congressional plans.

1. Keep existing Medicare and Social Security benefits intact. These benefits were created by prior Acts of Congress and cannot be changed by a president. These two programs cost $1.565 trillion, or 38 percent of total spending. Social Security is self-funded until 2035. Medicare is only 53 percent self-funded. Keeping benefits intact does not solve the problem of rising health care costs. For more, see Mandatory Budget

2. Offer a universal “market-based” plan. Trump originally wanted to provide a range of choices similar to the Federal Employees Health Benefits Program. He proposed this in his 2000 book, The America We Deserve. In 2016, he suggested expanding Medicare. Ironically, that's what was in Obama's original health care reform plan. Congress rejected it for a plan that relied on health insurance companies. Trump might find that Congress still doesn't want universal coverage. Neither do most Americans, who are worried that it's a sign of socialism. That was one reason for the failure of Hillarycare. (Source: "Donald Trump on Health Care," OnTheIssues.org, 2016.)

3. Require health care providers to post prices for their services. That allows people to shop for the best value. The competition should drive prices down. 

4. Allow consumers to purchase drugs overseas. That will drive down drug prices. (Sources: "Healthcare Reform," DonaldJTrump.com. "Donald Trump Hates Obamacare," Forbes, July 31, 2015.)

Other Trump Policies