Healthcare was a top concern in the 2018 Midterm Elections for American voters. Not only does access to effective and affordable healthcare affect a person’s quality of life and longevity, it impacts their financial health. A series of illnesses or a single illness requiring expensive, prolonged treatments can quickly exhaust the personal assets of most above average to below average income individuals and families. While the inability of the sick to work and the personal costs associated with recovery alone can devastate a personal budget, a lack of insurance or a lack of adequate coverage can leave patients with bills that few can afford to pay. The Trump Administration has responded by taking aim at the Affordable Care Act, informally known as Obamacare. After failing to repeal Obamacare as promised, Trump has sought to undermine the economics of reform effort and ease regulations. In his latest move, the President is restructuring Obamacare in a very Republican way, thus transforming it into Trumpcare. The question is whether or not Trumpcare will be better.
In essence, the Trump Administration is attempting to shift control of the health insurance markets setup under the Affordable Care Act to State governments. Trump wants to give States greater flexible to decide how health insurance markets are regulated. This in itself is not a bad thing. More local governments tend to better represent the interests of residents and better understand the needs of their jurisdiction. Where the Federal government must create policies geared toward the needs of the entire country, States have the capacity to tailor policies to the specific needs of their communities, residents, and economies. Since the health insurance needs of State residents and economic conditions of States vary so widely, it can make sense to give State governments greater control. This is why States could apply for waivers to develop alternative marketplace proposals under the Obama Administration as long as they complied with four “guardrail” conditions. State proposals would have to ensure the same level of comprehensive and affordable coverage. In addition, proposals could not result in fewer people enrolling in health insurance plans nor increase costs to taxpayers.
Today, the Trump Administration is pushing States to adopt four waiver concepts. Collectively, these waiver concepts serve as a healthcare policy road map for States and the Trump Administration’s vision for healthcare reform. In a very Trump fashion, Trumpcare is simply giving others room to come up with better ideas. Obamacare did, of course, evolve out of Massachusetts’ “Romneycare.” These waiver concepts include Account-Based Subsidies, State-Specific Premium Assistance, Adjusted Plan Options, and Risk Stabilization Strategies. Under Account-Based Subsidies, States would be able to redirect subsidies provided to taxpayer into accounts that could be used to pay premiums or other healthcare related expenses. Funded by waiving the Premium Tax Credit under section 36B of the Internal Revenue or the small business health care tax credit under section 45R, these accounts would offer consumers more choice, but potentially transform the funding mechanisms of health insurance into a sort of individual “block grant” that might not fully pay for adequate coverage or the needs of those most in need. It would also likely benefit those with multiple health insurance plans, such as family members who provide each other with overlapping coverage, or overly generous employer-sponsored healthcare benefits. At the very least, it would leave those who rely on their health insurance to cover the bulk of their costs with more liabilities.
A State-Specific Premium Assistance waiver would allow States to convert the Premium Tax Credit into a subsidy program that helps make health insurance more affordable to the poor into a subsidy program that makes a State’s health insurance market more favorable to consumers. Instead of giving subsidies to those who cannot afford premiums, for example, States would be allowed to give subsides to healthier, younger people in order to attract them. Although this would help stabilize markets and increase access to those who might be able to forgo coverage, it could also deprive those who need coverage of the subsidies they need to buy insurance. It would also cultivate a greater reliance on government subsidies and government-sponsored health insurance, i.e. socialism. An Adjusted Plan Options waiver would allow States to use subsides to fund health insurance plans that do not meet the standards created by Obamacare. This might help reduce upfront costs, but it will assuredly return to the US to the pre-Obamacare days when preconditions and lifetime coverage caps allowed insurers to deny patients the care they needed. A Risk Stabilization Strategies waiver would allegedly provide greater flexibility to implement reinsurance programs or high-risk pools, which could be helpful.
For its part, the Obama Administration’s four guardrails provided States with very specific standards, yet placed so few limitations on what States could do with waivers that the Obama Administration had already given States the flexibility they needed. The difference between the Obama Administration and the Trump Administration is that the Trump Administration is probably more likely to be more liberal with waivers. If the waiver proposals submitted truly do fulfill the Obama Administration’s four guardrails, they may well prove to be useful experiments. Unfortunately, it is difficult to imagine States can actually fulfill the four guardrails and act on the Trump Administration’s waiver concepts. Because details can be cherry-picked and numbers tweaked, the Trump Administration might be inclined to encourage States to provide best-case scenarios that appear to uphold the four guardrails. The Trump Administration has already been caught doing this with the value of Saudi arms sales and the benefits of 2017 Republican tax cuts on average income Americans. Consequently, the most likely scenario involves States failing to come up with policies that fulfill the four guardrails of Obamacare and the Trump Administration trying to “fudge the numbers” in order to get results. The four guardrails create standards that ensure health insurance policies actually give consumers a product with value. Saving cots by circumventing them will not offer any benefits to consumers. Trumpcare is, therefore, unlikely to be an improvement over Obamacare.
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