Trump’s healthcare reform plan: Breakthrough or mirage?

Trump appears to be on the right track with his new healthcare plan, which would replace Obamacare. But he will have to fine tune it to meet more of its stated goals.

Donald Trump Rally, NH. Courtesy Donald Trump, Facebook page

WASHINGTON, March 7, 2016 — Republican presidential candidate Donald Trump has just released his health care plan. While many of his ideas make sense, he seems to have missed a couple of key points. After careful evaluation of this plan, its shortcomings may cause many Americans to move their support away from Trump.

Trump’s plan lists seven points. The first is to ask Congress to completely repeal the Affordable Care Act (ACA). Congress has already passed a repeal bill, but it was vetoed by President Obama. Assuming Trump wins and the Republicans maintain control of Congress, the ACA should be repealed along with the individual mandate. Trump says, “No person should be required to buy insurance unless he or she wants to.”

Second, Trump understands the importance of the free market and how competition tends to reduce cost and improve quality while providing adequate profit for providers. He wants to remove restrictions concerning where health insurance companies are permitted to sell their products, observing that “By allowing full competition in this market, insurance costs will go down and consumer satisfaction will go up.”

Third, Trump will make health insurance premiums fully tax-deductible for individuals in the same way that business is allowed to deduct the premiums it pays for its employees.

Fourth, he will permit people to take advantage of tax-free Health Savings Accounts, which can be used to pay medical expenses for any member of the extended family. In this way people would put pressure on other family members to maintain a healthy lifestyle to avoid costly treatment. Republicans have been pushing this concept for many years.

Fifth, to encourage efficient operation of competitive markets, Trump will require complete transparency in pricing by all health care providers.

Sixth, he will send Medicaid funds to the states in the form of block grants so states can establish their own Medicaid plans. This makes sense because each state has different portions of the population requiring Medicaid and different views on offering Medicaid. “The state governments know their people best and can manage the administration of Medicaid far better without federal overhead.”

And last, Trump will remove barriers to entry into the pharmaceutical market, which will encourage more competition and bring down drug prices. While this idea makes sense, there could be problems with it.

Prescription drugs are often very expensive. This is mostly because the FDA requires clinical proof that a drug does work and that drug companies find every possible side effect before allowing a drug to be sold. While this makes sense to insure consumer safety, it significantly adds to the cost and reduces the number of drugs that actually reach the market.

Drug companies tell us that it costs hundreds of millions of dollars and up to 10 years to bring a new drug to market in this country. They say that only one in 10 newly discovered drugs actually reaches the market. In order to recover these costs, the price of the successful drugs must be set very high. Since drug companies do not make abnormally high profit as measured by the return on their equity, bringing down the cost without sacrificing safety will likely prove challenging.

The other problem with Trump’s plan is that it does not specify how the uninsured will actually be covered. The implication is that each state will set its own policy so that some states will provide health insurance to all citizens while other states may choose not to do so. In theory, people could choose to live in a state where the health care requirements suits their needs.

President Obama says that the primary goal of the ACA was to provide health insurance to all Americans.  Prior to the passage of the ACA about 45 million Americans did not have coverage. Today more than 27 million still do not have coverage, although Obama is pushing to reduce the number of uninsured.

Of course, the real problems with the ACA for hundreds of millions of Americans is that premiums have skyrocketed, deductibles are rapidly rising, doctor access has been limited, hospital access has been limited and the quality of healthcare services seems to be declining, since millions of Americans now have health insurance while there has not been a proportionate increase in the number of health care providers.

Trump appears to be on the right track with his plan. But he will have to fine tune it to meet more of its stated goals, which include making health insurance available to the vast majority of Americans, as well as reduced healthcare costs, improved healthcare quality and a genuinely effective  way to deal with the uninsured.

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