In one of the latest rounds of government-by-tweet, Donald Trump has once again revealed that he doesn’t have a clue about the markets for health care and health insurance.
“Also, deductibles are so high that it is practically useless,” wrote the president-elect on Wednesday about health insurance policies sold on the Obamacare exchanges. He also complained about “poor coverage” and “massive premium increases.”
Let’s start with those high deductibles. Apparently Trump is unaware that the man he has tapped to dismantle Obamacare, Rep. Tom Price of George, wants to steer us all into such “high deductible” insurance plans, with routine care paid for by patients from individual tax-free health savings accounts.
The reason Price and others like high-deductible policies is simple enough: They lower insurance premiums and give patients a strong financial incentive to consume only the routine care they need and shop around for the best value. But, as Price surely knows, it’s not possible to lower deductibles and lower premiums at the same time.
Trump faces the same dilemma when it comes to “poor coverage,” by which he means the medical services that insurers are required to pay for.
Obamacare required that all health insurance policies cover services such as maternity and newborn care, home health care, mental health services and treatment for drug addiction, birth control, preventive screening, nursing home and well-baby care. The law also prevents policies from setting annual or lifetime limits on how much medical care an insurer must cover. The effect of these mandated benefits was to push up premiums and outlaw the kind of “skinny” insurance policies favored by some cash-constrained consumers and employers.
But Trump cannot make good on his promise to lower premiums with one hand while offering more comprehensive coverage with the other. In any market-driven system, you can’t expect Trump International service at EconoLodge prices.
This kind of fantasy thinking about health care — that we can have lower prices, better care, more choice and no mandates — permeates the Republican critique of Obamacare. To be fair, one reason such a message has resonated is that Democrats and the Obama White House did much the same thing, selling Obamacare as a free lunch for almost everyone. In reality, it involved significant transfers — from the rich to the poor, the healthy to the sick, the young to the old and from medical providers to their patients.
To ensure that everyone could afford health insurance, Obamacare now provides roughly $130 billion annually in premium subsidies and tax credits to working-class households, with another $75 billion to extend Medicaid to those households living just above poverty.
To help pay for those subsidies, the law mandated a roughly $75 billion a year reduction in the fees paid by Medicare fees to doctors and hospitals, while imposing another $30 billion annually in new taxes on the pharmaceutical and medical device industries and employers offering gold-plated insurance policies. Another $35 billion a year comes from extending the Medicare payroll tax to the self-employed and the investment income earned by wealthy investors.
The law also required those who were young and healthy to buy comprehensive insurance, even if they didn’t want it, while paying more for it than they had in the past. It was only those higher premiums that made it possible for insurers to charge less for those who were older and sicker and guarantee them coverage irrespective of pre-existing conditions.
The dilemma now faced by Republicans who would repeal Obamacare is that they can’t provide relief to those who have been required to pay the price for universal coverage — the young, the healthy and the wealthy — without a roughly equal and offsetting toll on the old, the sick and the poor who benefit from this progressive arrangement. Republicans will do their best to disguise this reality under the cloak of liberty, deregulation and consumer choice, but the economic and political trade-offs cannot be avoided.
Of course, there’s a word for all this. It’s called governing.