November 11, 2016

Trump Care Will It Work...

 A recent survey by Healthcare Finance magazine show the perils and anxiety of a new President tinkering with the health care system that the country was just starting to get a handle on albeit with flaws, comments range from. “Doing away with some of ACA provisions that will be a disaster for women's health, behavioral health, the disabled and those with pre-existing conditions," a senior clinical business analyst said”. "Healthcare quality will also decline if the federal standards are removed. It will be a total disaster."

Other respondents added that a Trump presidency would set the U.S. healthcare system back in time.

"Due to the lack of his understanding healthcare, he will push the system backward by at least 25 years," a retired healthcare administrator noted. "Patient care will suffer and provider fraud will increase because of poor documentation."

 Let’s look at his plan and see if it is all doom and gloom. First his plan has two major components. First, it would fully repeal the Affordable Care Act (“Obamacare”) and replace it with several new policies. Second, it would turn Medicaid into a “block grant” program. By the Committee for a Responsible Federal Budget estimates, President-elect Trump’s plan to repeal and replace Obamacare would cost roughly $330 billion over ten years including estimates of faster economic growth, and $550 billion under conventional scoring.


The largest component of this estimate comes from the “repeal.” The campaign website proposes to “completely repeal Obamacare,” which they assume to mean repealing the Affordable Care Act’s regulations, subsidies, Medicaid expansion, Medicare savings, and tax increases. Although repealing the coverage provisions would save about $1.1 trillion, based on Congressional Budget Office (CBO) estimates (adjusted for recent legislation and changes in the budget window), repealing the legislation’s tax increases and Medicare cuts would cost a combined $1.6 trillion. In total, this means repeal would cost $480 billion – or $260 billion including the economic benefits of repeal.

President-elect Trump’s plan to replace Obamacare would entail further costs. Most significantly, President-elect Trump would create a tax deduction for individuals buying their own health insurance. This would equalize the tax treatment between individually-purchased and employer-provided health insurance, but at a cost of roughly $100 billion over ten years. The cost of these policies would partially be offset by savings from expanding prescription drug importation and re-importation and allowing people to purchase insurance across state lines. Policies to require price transparency and promote health savings accounts will likely have small effects in opposite directions, roughly canceling each other out.1 As a result, the replacement plan would cost $70 billion.

The total cost of President-elect Trump’s repeal and replace health care plan would be $330 billion over a decade under dynamic scoring and $550 billion under conventional scoring. Those numbers would be smaller (and the direction could differ) if he retained some of the Medicare cuts and/or tax increases from Obamacare. Note that this analysis does not include President-elect Trump’s call to negotiate aggressively for Medicare drugs, a policy that is not listed on his website. He has previously claimed that $300 billion a year could be saved through negotiation, a claim the Committee for a Responsible Federal Budget rated as false because Medicare will only spend an average of $111 billion each year on prescription drugs. Based on previous estimates by CBO, actual savings would likely be small or negligible.

The Coverage Impact of Repealing and Replacing Obamacare

According to (CBO) The Congressional Budget Office, about 27 million Americans will lack health insurance coverage in 2018. Repealing Obamacare would increase that number by 22 million, whereas President-elect Trump’s replacement plan would only increase coverage by 1.1 million. In other words, the plan would increase the number of uninsured individuals by about 21 million and only cover about 5 percent of individuals that would lose coverage from Obamacare repeal.


The 1.1 million of gained coverage comes from the policies to allow insurance companies to sell across state lines, which would increase coverage by 400,000, and the deduction for individual health insurance, which would increase coverage by 700,000. (Estimates from CBO) Other elements of Mr. Trump’s replacement plan might reduce costs but would not significantly impact coverage.

Block Granting Medicaid

In addition to repealing and replacing Obamacare, Mr. Trump proposes to transform Medicaid into a block grant to the states. Effectively, this means replacing the current system where the federal government pays for a portion of state Medicaid costs (based on a matching rate) with a system where the federal government gives each state a fixed allotment of dollars each year.

Not surprisingly, the amount of money this proposal would save (or cost) depends entirely on the size of that allotment, and how much it grows each year. For example, block grants could be designed to maintain current projected spending levels, or they could be designed to save hundreds of billions of dollars (this year’s FY 2017 House budget resolution assumed over $1 trillion in Medicaid savings). However, President-elect Trump transition team has not provided any information on the size of their proposed block grants, making it impossible to score any savings.

If President-elect Trump intends to generate aggressive savings from block granting Medicaid, it could more than pay for the cost of repealing and replacing Obamacare – though perhaps at the cost of a further reduction in coverage.

President-elect Trump’s plan to repeal and replace Obamacare – based on the details available – would both add to the deficit and significantly reduce coverage. Meanwhile, his plan to block grant Medicaid could generate significant savings; however, insufficient details are available to estimate if there are any and how much. What is clear is the uncertainty and that is no good for the industry, insurers or patient care.