Donald Trump on Health Care

How Trump Is Dismantling Obamacare

Trump Signature
On October 12, 2017, Trump signed an executive order on health care. Photo by J. Scott Applewhite - Pool/Getty Images

The Senate included a repeal of the Obamacare tax on those who don't get health insurance in its tax reform plan. The CBO estimated 13 million people would drop coverage as a result. The federal government would no longer have to pay the health insurance subsidies of the people who would drop coverage. That would save it $338 billion. On the other hand, health care costs will rise because fewer people will get preventive care.

 

Trump's Executive Order Weakening Obamacare

On October 12, 2017, President Trump signed an executive order to modify Obamacare in five ways. These changes won't go into effect until 2018.

First, the order directs the Secretary of Labor to expand access to association health plans. These are policies made available to trade groups, small businesses, and other associations. People on association health plans can purchase policies in other states. 

The order fulfills a campaign promise to allow health insurance companies to sell policies across state lines. Each state has specific regulations. That makes it expensive for national insurance companies to operate in different states. As a result, five companies service half the insured population. Trump maintains that the increased competition would reduce these companies' monopoly power and lower costs. 

But the executive order might do the opposite.

The big companies are the only ones with the clout to operate across state lines under current policy. If it becomes even easier for them to do so, they would raise prices. Even more frightening is that the new policies wouldn't be regulated. The administration would exempt association plans from the Affordable Care Act's rules and state licenses.

As a result, the plans wouldn't have to offer the ACA's 10 essential benefits. They could reimpose lifetime and annual limits. They could charge more to those with pre-existing conditions. Without regulations, these plans would look like they did in the early 1990s. They left 398,000 people with $123 million in unpaid claims.

If this rule took effect, it would make the insurance offered on the exchanges unaffordable. Healthy people would flock to the lower-cost association plans that offer fewer benefits. The ACA-compliant plans would be stuck with the sickest people. That's like asking auto insurance companies to insure only those who have been in car accidents. This would force insurance companies to raise rates or drop out of the exchanges. 

The order could also affect those with company-sponsored plans. The ACA allows employers to choose a coverage plan from any state. That didn't matter when the ACA mandated all plans to have the same benefits. But employers might flock to the new plans with fewer benefits because they cost less.

Second, Trump’s executive order requests the Labor Secretary to ease restrictions on short-term health plans. Under Obamacare, these policies could last no longer than three months.

Trump wants them to last up to 12 months. 

Third, the order requests the Labor Secretary to allow employers to use pretax dollars for “health reimbursement arrangements.” These help workers pay for any medical expenses. Under Obamacare, they could only pay for health policies that met its rules.

Fourth, the order commissions a study to find ways to limit consolidation within the insurance and hospital industries.

Fifth, it directs agencies to find additional means to increase competition and choice in health care. 

Alexander- Murray Plan

On October 12, 2017, President Trump stopped reimbursing insurers who waived deductibles and copayments for low-income customers. His administration blamed Congress for not appropriating the funds. On October 17, 2017, Senators Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., announced a bipartisan deal to save Obamacare from this latest attack.

 Trump had asked for a bipartisan deal and initially supported it. But the next day, he backed away from it. On November 16, several senators urged him to support it to offset premium increases in his tax reform plan. On November 28, Trump promised instead to reinstate the subsidies to get their votes for the tax plan. 

The Alexander-Murray deal would have continued the subsidies until 2019. It tried to restore $106 million to promote the health insurance exchanges. States would have “more flexibility in the variety of choices they can give to consumers." Insurers could offer catastrophic plans to those 30 or older. It loosens the requirements for states to receive 1332 waivers. It requires insurance policies to cover Obamacare's 10 essential benefits without raising prices for those with pre-existing conditions.

Once Trump stopped the reimbursements, insurance companies said they must raise customers' premiums by 20 percent. Some major insurers signaled possible pullbacks. They included Cigna, Health Care Service, Molina Healthcare, Highmark Health, and Independence Blue Cross. They all agreed to stay in the exchanges. But half of U.S. counties now only have one insurer. Another 30 percent only have two. 

To keep them in the exchanges, states had to approve rate increases. For example, Kentucky, Mississippi, and Virginia approved a 25 percent rate increase. The ACA subsidies would cover those increases for many people. But that adds to the deficit. The Congressional Budget Office estimates it will cost the government at least $194 billion over the next 10 years. 

Other Trump Efforts to Weaken the ACA 

On September 22, 2017, the Trump administration announced it would close the health insurance exchanges on the first day of open enrollment, November 1, 2017. It would shut down the exchanges from midnight to noon every Sunday during open enrollment except for December 10, 2017. He's cut funding and personnel needed to help people enroll. The administration has also posted negative messages about the ACA on YouTube and Twitter. 

Trump directed the Internal Revenue Service to allow people to slide by if they don't get insurance. On October 20, the IRS issued a statement that it will uphold tax laws, despite the president’s order.

The Centers for Medicare and Medicaid Services will approve state waivers that implement work requirement for recipients. The exceptions are pregnant women, children, the disabled, and seniors. In 2015, 59 percent of Medicaid enrollees worked. The rest were disabled, caring for a sick relative, or in school.

Expansion of Medicaid lowers health care costs for everyone. That's because it helps recipients receive preventive care or treatment for chronic diseases. They can treat health conditions before they create a crisis. Without Medicaid, the crises send them to emergency rooms that must treat everyone.

In his first 100 days, President Trump signed an executive order to "ease the burden" of Obamacare. It directs agencies to do what they can within the existing law to lift the ACA regulations. 

How Trump's Actions Affect You

If you're healthy, Trump’s actions could lower your costs. First, you’d no longer have to pay a penalty under Trump’s tax reform plan. Second, you could purchase a short-term or association plan that costs less but doesn’t offer all 10 ACA benefits. If you became sick, you might exceed the plan's annual or lifetime limit. Then you'd have to buy Obamacare insurance for a much higher price.

If you have a chronic illness, your costs would rise. That's because you'd have to rely on the ACA plans on the exchanges. As healthy customers leave those plans, the companies will raise prices to remain profitable.

National health care costs would rise at a faster rate than under Obamacare. With the ACA, costs rise around 5 percent a year. In 2014, they increased 5.3 percent. In 2015, they rose 5.8 percent. In 2007, they rose 6.5 percent. From 2000 to 2004, health care costs rose 7 percent each year. Obamacare helped more people receive low-cost preventive care before they needed high-cost emergency room care. 

Trump's plan could also add to the debt. As the ACA costs rise, so would the cost of subsidies. That increases the deficit and debt.

What a Congressional Plan to Repeal Obamacare Would Look Like

Republican Congressional leaders tried to pass several plans to replace Obamacare in 2017. If they tried again in 2018, the plan would have some of these components.

March-May 2017: The first attempt was the American Health Care Act. The House passed it on May 4, 2017. It included many elements not part of any Senate bills. It provided a flat tax credit based on age, not income. This subsidy is not based on the cost of plans, so it would raise costs for many.

The plan included a Patient and State Stability Fund that would help lower premiums by 20 percent after 2026. It would have cost the federal government $100 billion over 10 years. States had the option to use the fund to create high-risk poolsThis would mean higher costs for people with pre-existing conditions.

The House bill would have allowed states to waive several rules of the ACA under certain conditions. In the states that chose waiver rules, chronic disease sufferers would pay much higher rates.

It funded Medicare through a fixed block grant. This is a strategy Speaker Paul Ryan has advocated for years. It cut funding for Planned Parenthood and Obamacare taxes. The loss of Obamacare funding would add $460 billion to the debt over 10 years.

The plan’s backers never explained how their plan wouldn’t add to the debt. That was one reason many conservatives were opposed to it. It passed the House, but has yet to result in a successful Senate bill.

June-July 2017: Based on the House’s American Health Care Act, House Majority Leader Mitch McConnell championed the first Senate version of Trumpcare. The Better Care Reconciliation Act allowed states to decide whether to keep all 10 essential health benefits. That would have allowed companies to charge more for those with pre-existing conditions.

The plan penalized those who dropped their insurance then reapplied for coverage within 63 days. It saves insurance companies some money by discouraging people from only getting insurance when sick. But it wouldn’t stop healthy people from letting their coverage lapse, increasing costs for everyone and especially the sick. 

This plan would have cut Medicaid spending starting in 2020. It would have reduced Obamacare tax credits and subsidies. The CBO estimated that the cuts to the subsidies and Medicaid would prevent 22 million people from getting insurance. That would reduce the debt by $321 billion over 10 years. 

The Senate plan would allow companies to charge seniors five times as much as younger Americans, up from three times as much. The plan would strip Medicaid and Title X reimbursement for Planned Parenthood health care services for a year. Even though these federal funds are never used for abortions, Republicans are concerned the organization uses the funds for research they oppose. This action would increase Medicaid costs. It could increase the number of women seeking abortions because they never received the prenatal care offered by Planned Parenthood.

The plan would eliminate the tax on those who don't buy insurance. The CBO estimated that premiums would be 15 to 20 percent higher in 2018 and 2019. It would also remove the tax on companies that don't provide health insurance. Many employees will lose coverage once employers aren’t forced to provide it.

The Senate bill increased maximum allowable contributions to Health Savings Accounts. HSAs are only available for those with high-deductible insurance plans. This doesn't help people who can't afford to set aside income in the HSA. It would allow everyone to purchase catastrophic health insurance. The ACA only allowed people to buy these plans up to age 30. They don’t cover preventative services but are inexpensive.

Trump had asked Congress to replace the ACA before September 30, 2017. That's the last day Senate Republicans could pass the bill with just a 51-vote majority. They attempted to pass four bills, but they never got the votes.

The Senate needed a 60-vote majority to completely repeal the ACA. Democrats would never repeal an act they created. Instead, Senate Republicans had to use a budget reconciliation bill to dismantle the spending and revenue portions of the ACA. They could only use it on a bill that didn't add to the debt over the next 10 years.

On July 18, 2017, McConnell realized he couldn't get enough Republican votes to pass the Better Care Act. But President Trump put pressure on Republican holdouts. They agreed to at least allow the bill to move forward for discussion. 

July 2017: The Senate’s "skinny repeal" would have repealed ACA's mandate that individuals must buy insurance. It didn't require companies to provide insurance benefits. It would have repealed the tax on medical device manufacturers. It would have defunded Planned Parenthood, the Prevention and Public Health Fund, and the Community Health Center Fund.

The CBO found it would leave 16 million people without insurance. It also warned that the bill would have increased premiums by 20 percent per year. That's because health insurance companies would lose revenue. 

On July 28, 2017, Senator John McCain, R-Ariz., cast the deciding vote against the "skinny bill." He disapproved of the process and urged a return to bipartisan lawmaking. 

September 2017: Senators Lindsey Graham, R-S.C., and Bill Cassidy, R-La., championed the most recent failed bill. The Graham-Cassidy bill would have converted Obamacare's federal Medicaid funding and insurance subsidies to state block grants. It left it up to the states to design their own health care programs with the funds.

The fixed block grants wouldn't have paid for as many Americans as the ACA's percentage federal coverage. But it would benefit some states while disadvantaging others.

The bill allowed states to require that Medicaid recipients have a job unless they were seniors, children, disabled, or pregnant. It cut off Medicaid funding by 2027.

The bill delighted states’ rights advocates. It could have lowered health care costs, as insurance companies would only have to comply with state regulations. Trump believes block grants would make state funding more efficient. It also means that Medicaid would compete with other state priorities. That's what led to the failure of community mental health centers under deinstitutionalization.

But many states’ Medicaid directors warned that they are not equipped create a program in the bill’s two-year time frame with the block grants’ insufficient funds.

Graham-Cassidy eliminated the tax on those who don't buy insurance retroactive to 2016. The CBO estimates that 14 million people will drop their insurance coverage.

On September 22, 2017, Senator McCain blocked the Graham-Cassidy bill. He said there wasn’t enough information about how the bill would affect people because it was rushed through to meet the deadline. 

How an Obamacare Repeal Would Affect You

Republicans may relaunch efforts to repeal and replace Obamacare plans in 2018. If so, they need to submit their proposals to the states by May for any changes to occur by January 2019. The states have the final approval since they are responsible for implementation.

If a repeal occurred, the cost of individual plans would increase for most people. A Commonwealth Fund and Rand Corporation study found that an average policy would rise from $3,200 to $4,700 if Obamacare was repealed. 

These Congressional plans would lower your costs if:

  • You own a small business. You’d no longer have to pay a penalty if you don’t provide insurance.
  • You own a medical devices company or a tanning salon. You’d no longer have to pay Obamacare taxes.
  • Trump's plan would affect you even more if you are in one of the states that reduce the 10 essential benefits. It would lower your costs if you are healthy or you are young.

They would increase your costs if:

  • You have a chronic disease.
  • You are older. The Congressional plans allow insurance companies to charge seniors five times what they charge younger people. Obamacare limited that to three times. Your costs would skyrocket if you are a senior who loses Medicaid coverage under the plan. Many seniors need Medicaid to cover the out-of-pocket Medicare costs.
  • You become pregnant. Many states would drop this from the essential benefits.
  • You need an abortion. The plans prohibit insurance companies sold on the exchanges from covering abortion services.
  • Your company only provided coverage because the ACA mandated it.
  • You are one of the 22 million people who received subsidies or the Medicaid expansion.
  • You use mental and behavioral health services, including drug rehab. The House plan includes $2 billion to pay states for drug treatment. That's not enough to offset the cuts to Medicaid and insurance companies who drop coverage for these services.
  • You decide to reapply for health insurance after a lapse of 61 days. You'd have to pay a 30 percent premium increase.
  • You are a Planned Parenthood patient. The Senate plan defunds the organization for one year.

Background

Major hospital groups oppose the Republicans' plans. They know their emergency room costs will increase if preventive care under expanded Medicaid is withdrawn. The health insurance lobby, America's Health Insurance Plans, opposes any reductions to Medicaid financing. The ACA's expansion brought them many new customers. 

The health insurance industry will file lawsuits against any plan they don't support. The industry played a significant role in forming Obamacare. For example, it was responsible for the individual mandate. The insurance companies wouldn't insure those who are sick unless the government mandated that the healthy are also covered.

Trump Promises No Longer in Current Plans

In March 2017, Trump announced he wanted to allow Medicare to negotiate lower prescription drug prices with pharmaceutical companies. To do this, Congress would have had to amend the act that established Medicare Part D. It prohibited Medicare from negotiating. Drug companies said they needed that protection to provide funds for research and development of new cures. The CBO found that Medicare wouldn't save much more by negotiating. That's because health insurance companies already do a lot of negotiation.

In the past, Trump has mentioned the following four ideas, but they are not in any current congressional plans.

1. Keep existing Medicare and Social Security benefits intact. These benefits are part of the mandatory budget. They were created by prior Acts of Congress and cannot be changed by a president. It would not solve the problem of rising health care costs. 

2. Offer a universal “market-based” plan. Trump originally wanted to provide a range of choices similar to the Federal Employees Health Benefits Program. In 2016, he suggested expanding Medicare. That's what was in Obama's original health care reform plan. Many are opposed to universal coverage, especially if they see it as a sign of socialism. That was one reason for the failure of Hillarycare.

3. Require health care providers to post prices for their services. That allows people to shop for the best value. The competition should drive prices down. 

4. Allow consumers to purchase drugs overseas. The competition should drive down drug prices.

Other Trump Policies

Immigration |  Jobs Growth | NAFTA | National Debt

To understand the ACA better, see my book, The Ultimate Obamacare Handbook.