Donald Trump on Health Care

How Will Trump's New Plan to Replace Obamacare Affect You?

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On May 3, 2017, the House of Representatives passed the American Health Care Act. The Senate immediately began working on its version of the bill. The Senate must wait until the Congressional Budget Office releases its analysis of the economic impact of the AHCA before proceeding. That means it will take at least until August before it goes back to the House. Congress must reconcile the two bills before it can go to President Trump for signature.

(Source: "Senate Republicans Start Health Care Push With Missteps," CNN, May 10, 2017.)

The AHCA would allow states to waive several rules of the Affordable Care Act for individual and small-group insurance plans.  The State must prove that one of the following three conditions were met. The waiver would either: 1) lower rates, 2) increase the number of insured people, or 3) advance "the public interest of the state."

Which ACA rules could be waived? First, the rule that insurance firms must charge the same price to every person of the same age, regardless of health. That rule protected people with pre-existing conditions. The ACA made insurance companies charge the same rate for those with pre-existing conditions as they did for healthy people. In states that waive the rule, chronic disease sufferers would pay much higher rates.

States could set up a high-risk pool to cover them. That will make insurance more expensive for those with pre-existing conditions.

To offset some of this cost, the AHCA would appropriate $138 billion over 10 years for the states to subsidize those in the high-risk pool.

States could also waive the requirement that companies offer 10 essential health benefits. Each state would define its own list of essential benefits. Once an illness is removed from the list, insurance companies can reinstate annual and lifetime limits.

Only essential health benefits are protected by Obamacares ban on annual and lifetime limits, and caps enrollees' out-of-pocket spending. (Source: "A New G.O.P Health Proposal Evokes the Old Days," The New York Times, April 20, 2017. "White House Officials Push Revised Health Bill," The New York Times," April 20, 2017.)

That could potentially affect people outside of the state. That's because employer health plans can choose the benefits from any state. It's possible that every company insurance plan will default to the state with the least coverage. (Source: "Little-noted Provision of GOP Health Bill Could Alter Employer Plans," The Wall Street Journal, May 4, 2017.)

The Republicans never had the 60-vote majority in the Senate to completely 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. If the AHCA does not add to the debt over the next 100 years, it only needs a 51-vote majority to pass. If the CBO finds it does add to the debt, the bill will need the 60-vote majority to pass.

 

The AHCA does not remove many non-budgetary elements of Obamacare. These include lifetime and annual limits on coverage and limits on annual out-of-pocket costs.

President Trump had backed the bill on March 6 to replace Obamacare. The Freedom Caucus opposed the first version of the AHCA because it didn't cut costs enough. House Republicans pulled the bill on March 24, 2017. Congressional Republicans had negotiated amendments on April 20, 2017. (Source: "Budget Reconciliation Explained," Vox, November 23, 2017.)

11 Components

In addition to the amendment, the plan has these 11 elements. First, 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. This ACA provision was very popular with families and with the insurance companies.

2. Those with pre-existing conditions could still get insurance. Companies still can't withhold insurance from people who are sick. The federal government will pay $100 billion over 10 years to a Patient and State Stability Fund. States can 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 help 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. That means people who don't have insurance in 2017 won't have to pay the penalty. The CBO estimates that 14 million people will 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 is a penalty for reapplying for coverage after being without it for more than 63 days. The insurance company can add 30 percent to premiums for a year when someone re-enrolls. That's to discourage people from dropping their insurance to apply only when they become sick.

Removing the mandate will increase health insurance costs overall. The CBO estimated that premiums will be 15-20 percent higher in 2018 and 2019. That's because insurance companies will raise them to make up for the premiums they lose when healthy people drop coverage. 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 won't solve the problem. A healthy person who lets their insurance lapse will 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 don't provide health insurance. Many employees will lose coverage as employers opt out. They'll find that individual insurance costs much more than company-sponsored plans. The tax on "Cadillac" insurance plans has been postponed until 2026. (Source: "Assessing the Impact of the House GOP Health Bill," The Wall Street Journal, April 5, 2017.)

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

The bill repeals 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 cost $460 billion in revenue over 10 years.  

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

The plan’s backers never explain how their plan won'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 provides 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

A family can receive up to $14,000 a year. The credits start to phase out for individuals who earn $75,000 or more and households that earn $150,000 or more. The subsidy is not based on the cost of plans. As insurance costs rise, the subsidy remains the same. That means it does not take into account the higher cost of living in states such as Hawaii and Alaska. (Source: "What’s in the AHCA: The Major Provisions of the Republican Health Bill," The New York Times, May 4, 2017. "Analysis: GOP Plan to Cost Obamacare Enrollees $1,542 More a Year," Vox, March 7, 2017.)

It also means the cost of individual plans will increase 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 pushes 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 cannot use tax credits to pay for abortions. Low-income families will lose additional ACA subsidies that pay for out-of-pocket costs. (Sources: "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. Removing the mandate will provide 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 and equipment for chronic diseases. The mandate increased premium costs for most people because their plans provide more services. 

9. Replace limits on premiums for older people. Under the ACA, premiums for older people can't be more than three times the cost for younger people. The AHCA allows 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 means the federal government will stop sharing a percentage cost of Medicaid. Instead, it will give each state a fixed amount. In return, states can design their own Medicaid benefits. The fixed block grants won't pay for as many people as the ACA's percentage federal coverage.  

In 2020 under the AHCA, states can no longer sign up new adults to the expanded Medicaid program. Many conservative Republicans think expanded Medicaid should be eliminated immediately. The CBO estimated that would prevent seven to 10 million people from getting insurance by 2024. That would save $880 billion over 10 years. (Sources:  "What’s in the AHCA: The Major Provisions of the Republican Health Bill," The New York Times, May 4, 2017. "Ten Million to Lose Insurance Under GOP's Obamacare Replacement Plan, S&P Says," NBC, March 7, 2017.)

Under the AHCA, insurance companies will 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 oppose 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 strips Medicaid and Title X reimbursement for Planned Parenthood health care services for a year. These federal funds are never used for abortions. But Republicans are concerned that the organization uses the funds for research they oppose.

This action would increase 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.)

How the AHCA Would Affect You

The CBO estimated the original plan would reduce 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 remained in place. (Source: "CBO: Latest House GOP Health Care Bill," Washington Post, March 23, 2017.)

That may no longer be the case with the amended version's subsidies. The CBO has not had a chance to score the amended version. It may have time to do that while the bill goes through the Senate.

If the plan passes, you will be affected immediately if you are in one of the states that received a waiver. Only those with individual or small group plans would be affected. 

You will have 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 lower your costs, but may also reduce coverage, 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 passes, the AHCA wouldn't affect 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.) 

Some people who get plans from their employers may also be affected. That's because the ACA allows employers to choose a coverage plan from any state in the union. That didn't matter when the ACA mandated all plans to have the same benefits. But if some states have less benefits, then employers may legally select those states' benefits to cut costs. (Source: "GOP Health Bill Jeopardizes Out-of-Pocket Caps in Employer Plans," The Wall Street Journal, May 4, 2017.)

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).

Can Trump Weaken the ACA Without Replacing It?

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. (Source: "By Picking Tom Price to Lead HHS, Trumps Shows He Is Serious About Dismantling Obamacare," Vox, November 28, 2016.) 

Price can weaken ACA requirements. He vowed to weaken the rule that health insurance companies must provide all of the 10 essential benefits. Price can also relax requirements that insurers cover some preventive services, such as contraception. 

Price can require that Medicaid recipients must get a job. 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 HHS 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.)

Lobbyists for health insurance companies and pharmaceutical companies don't want to see many of the changes proposed. For example, 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.

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