by Saurabh Jha
This is relatively easy to answer when it comes to health policy. Just ask what people want. Seniors don't want Medicare rescinded. Even the most ardent free market fundamentalist group, the Tea Party, want Medicare benefits; as one of their ranks warned Obama, without a trace of irony, “Government, hands off my Medicare.”
Trump will protect Medicare. Even raising the eligibility age for Medicare is off the cards as far as he is concerned. He has promised that no one will be left dying on the streets. That people no longer die on streets, but in hospitals, because emergency rooms must treat patients regardless of their ability to pay, is irrelevant. The point is that Mr. Trump knows that the public values healthcare. And Trumpcare will show that Trump cares.
But it gets complicated. Yes, the public wants top notch healthcare for themselves. No, the public don't want to die on the streets. Yes, the public wants the government to look after them. The problem is that the public doesn't really want to pay for these services. Not much at least.
How will Trump manage these contradictory desires? Trump recently released his healthcare manifesto. Here are its Seven Pillars:
- Repeal Obamacare
- Allow purchase of insurance across state lines
- Allow people to deduct insurance from taxes
- Expand Health Savings Accounts (HSAs)
- Require price transparency for medical goods and services
- Block-grant for Medicaid to the States
- More free market for pharma
Trump's first test will be repealing Obamacare. It is clear Mr. Trump doesn't like Obamacare. He says about Obamacare that “people have had to suffer under the incredible economic burden.” What will he do about people with pre-existing conditions who insurers must cover by law thanks to Obamacare? Will we return to the days when insurers can turn down patients based on their risk, or yank the premium so high that they cannot afford insurance?
Trump wants to take care of everyone. To fund a system which takes care of everyone, without the insurance market imploding, he must a) raise taxes and/ or b) make people buy insurance. Raising taxes is not part of #MakeAmericaGreatAgain. And he says “no person should be required to buy insurance unless he or she wants to.” So Trump is on a sticky wicket with his first pillar, repealing Obamacare.
Trump wants a more market-driven system to lower costs and raise quality. He will let people buy insurance across state lines, so long as it complies with state laws, which sort of defeats the point of buying in another state. It's like being able to buy stuff tax free from Delaware only if I pay the taxes I would have had to pay anyway in Pennsylvania.
It is important not to dismiss an idea just because it has come from Donald Trump. His idea of expanding health savings accounts (HSAs) is not new and has been proposed by economists such as John Goodman. HSAs encourage people to be thrifty with healthcare expenditure, which can lead people to do two things: skip necessary care and skip unnecessary care. Will there be a net saving? It depends on the necessity of the care skipped, and the cost of the unnecessary care skipped.
Trump wants people to be able to pass HSAs to their children. This is an interesting twist. Theoretically, this would motivate people to be healthy so that more funds are available for their children. You can imagine a father saying to his son as he is going for his daily jog “son I'm running for your life, not mine.” But the flip side is that people will skip necessary treatment in their twilight, for fear of depriving their children of a financially secure future. Neither of these scenarios may occur, but you get the gist. For every positive in health policy, there's an equal and opposite negative.
HSAs won't last long if they get decimated by high hospital charges. Hospitals are known for their mark-ups, which are so feral that they make price gouging water in the Sahara desert seem a noble endeavor. Obamacare has been able to do precious little to control these charges. Trump says he will demand price transparency from providers. Once people know the prices of medical goods they can shop for the best care, and competition will drive the prices down and quality up.
Price transparency is one of those policy suggestions that sounds so good that you have to ask why we haven't had it yet. There are caveats with price transparency. Optimism must be tempered. For instance, if you're having a heart attack there isn't much time to google prices. There is so much in the care bundle to consider, such as price of stent to open the coronary artery, blood thinner to keep the stent opened, saline, oxygen and many more, that it would be difficult to meaningfully shop for best deal for “heart attack care” while your heart muscle is slowly melting, and fluid is filling your lungs, making it difficult for you to breathe. Suffice to say that when it matters the most, when the charges are the highest, which is when you are acutely and seriously unwell, price transparency is rather useless. When you're dying you will call the ambulance, not place a bid on Priceline.
It will be difficult for the market to control the prices, even if Trump injects a dose of genuine capitalism in healthcare. That is unless the market rations care based on ability to pay, which happens in countries like India which has a robust free market healthcare. Healthcare is not a right in India. The rich get the best care and the poor get the worst care. This is rationing by price. I doubt Americans will put up with explicit rationing of healthcare.
Here's my advice to Mr. Trump. Have an adult conversation with your supporters. Tell them some home truths. It costs to make people live longer. Let no economist tell you otherwise. This is why smokers are a bargain for a healthcare system. As medicine gets better at diagnosing and treating diseases, healthcare gets more, not less, expensive, because there are new diseases to treat. Equality costs. Fairness costs. Safety costs. Being prepared for potential epidemics such as Ebola costs. New drugs cost. New discoveries cost.
The market can reduce costs by rationing care by ability to pay. The government can reduce costs by refusing to pay for certain medical services. Ask your supporters, the American people, not just what they want but how much they are willing to pay for what they want. Then design Trumpcare.