Campaign Health Care Proposals: Is The Middle Path Best? by Knowledge@Wharton
Campaign Health Care Proposals — Finding Middle Ground
The outlook for health care in the U.S. is sharply divided as the country heads for a presidential election in November. Hillary Clinton, the Democratic Party nominee, favors increased state control over health care that would go much further than the 2010 Affordable Care Act (ACA, dubbed Obamacare) that stressed improved access and reduced costs. Donald Trump, the Republican Party nominee, wants reduced federal government control and more power to state regulators, free competition among insurers across states and the ability to import drugs from Canada and other countries.
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“[Trump] has done a very good job getting out in front of this [health care] issue” with some of his proposals, said Stephen Hunt, physician and director of the Penn Image-Guided Interventions Laboratory at Penn Medicine. He pointed to a seven-point plan on Trump’s campaign website. His first call is to “completely repeal Obamacare.” Next, he wants to modify existing law to promote the sale of health insurance across state lines in order to encourage competition and decrease insurance costs. He also wants to allow individuals to fully deduct insurance premium payments from their tax returns.
Under Trump’s plan, individuals would also be allowed to make tax-free contributions to their health savings accounts and gift them to their heirs. He has pushed for price transparency, which is also a plan of the Democratic Party, Hunt noted. Other Trump proposals include states being allowed to manage Medicaid programs with block-grants, instead of them being federally administered, and the removal of barriers to selling imported drugs so as to allow consumers more choices.
Scott Harrington, professor of health care management department at Wharton, is critical of Trump’s proposals. He noted that they are outlined in a few hundred words on one page and described them as “necessarily very vague.” He added that being too specific would mean the party could get “nailed on” those proposals.
According to Harrington, Trump’s proposal to encourage health insurers to offer policies across states could lead to problems when an insurer that is licensed in one state fails to abide by the rules and regulations in other states. Also, this proposal “is inconsistent with the Republicans’ notion of letting the states decide how to regulate as opposed to the federal government,” he added. Insurers today could freely get licensed in multiple states, he noted. “But the key issue is to what extent they would be able to get licensed in one state and avoid regulations in other states that drive up the costs of coverage. Trump’s plan is silent on that.”
“If we do things to restrict drug companies’ ability to price for innovative compounds, we are going to get less investment in innovation.” –Scott Harrington
Trump’s proposals are “good in theory” but may not work in practice, according to Saurabh Jha, professor of radiology the Hospital at the University of Pennsylvania. For one, he was critical of the proposal to allow individuals to transfer their health savings accounts (HSAs) to their heirs. He pictured how such transfers might work: “You’re going for a jog and you tell your son, ‘Son, I’m not running for my life; I’m running for your life,” he said. Also, he said HSAs only work in certain qualified health plans.
Hunt, Harrington and Jha discussed the health care proposals of the two parties on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
The Clinton Prescription
Harrington contrasted Trump’s proposals with those of Clinton. “The Democrats propose more government regulation of health care, even going beyond Obamacare, with greater centralization by the central government,” he noted. “Republicans are the opposite – they want less regulation and more control with the states.”
Harrington noted two big changes to the current regime that Clinton advocates. “Clinton wants a federal government public option for the health care exchanges under Obamacare where you would now have the federal government writing policies directly,” he said. “That would be a significant change and greatly expand the federal government’s reach and control of insurance markets.” Another “fundamental change” would be brought about by her proposal to allow people to go into Medicare at age 55, compared to the current eligibility of 65 years or older. “That would expand the federal government’s role in providing health care.”
Hunt said that although he is a Hillary Clinton supporter, he is not happy with her policy proposals on health care. “She is lagging behind in getting out there with some of the same proposals that have resonance with the American public,” he said.
Finding Common Ground
According to Hunt, many of Trump’s proposals “will find resonance across the aisle with both Republicans and Democrats and very strongly with independents.” Jha also sensed a way to blend the best proposals from the two camps. “There are some things that we could do with the ACA without necessarily repealing it,” he said.
“[Clinton] is lagging behind in getting out there with some of the same proposals that have resonance with the American public.” –Stephen Hunt
Hunt noted that Trump wrote in his 2000 book The America We Deserve that he is a conservative on most issues but a liberal on health care. Trump had said that it was “unacceptable” that 42 million Americans were uninsured at the time, and called for “universal health care” as the solution.
The FEHB Alternative
Hunt said that Trump’s plan of universal health care revolved around “an equivalent for the single payer plan that is affordable, well administered and provides freedom of choice.” In that vein, Trump had noted that such an alternative already exists in the Federal Employees Health Benefits (FEHB) program.
According to Hunt, the FEHB allows nearly 300 private insurance companies to compete. “[The FEHB program] is what you will see [the country] arriving at as a political compromise under a Republican presidency,” he said. The FEHB program has proven to be competitive and “it works,” he added.
Harrington noted that neither Trump nor his advisors are talking of the FEHB program, and that the book in question is about 16 years old now. He said it would be “stunning” if Trump endorses the FEHB program, “but this is not on the agenda at all right now.” Jha agreed that what Trump said 16 years ago may not be applicable now.
Walking the Talk
“Trump’s ethos will be competition,” said Jha as he visualized the emerging health care landscape, but he saw imponderables there as well. “The question is: What can you compete [with] in health care and how do you compete? …Until we establish a framework for that, the costs or the savings of that competition won’t be realized.”
According to Jha, the Trump team has to flesh out its case for competition and recognize the tradeoffs it would entail. He noted that insurers compete by trying to enroll the healthiest patients, he said. Competition in medical devices and pharmaceuticals happens by expanding the pool of supplies, “or Walmartizing pharma — getting [products] from India.”
“The push towards access cannot be achieved without the reciprocal muscle on the costs, whether that is done by the market or by the government.” –Saurabh Jha
However, if drug imports are permitted, they will come with some tradeoffs, he said. “You have to allow people with their health savings account [and] with other deductibles to actually cross the border into Canada and be able to buy a drug there. That’s what competition means,” he noted. “You have also to take the risk that comes with importing drugs from India and other places.”
Jha had issues with Trump’s push for price transparency as well. He said that doesn’t work as it does with other products. “When you are having a heart attack, you’re not going to put a bid on Priceline. You’re going to go straight to the hospital,” he pointed out. “Health care is inelastic, and prices are the highest when you are the most ill. You take whatever you get.”
However, Jha said that “with government muscle,” providers could be prevented from “charging outrageous bills.” Preventing price gouging at hospitals “is not deserting free-market principles,” he noted. “One issue that we gloss over in all of this debate is if we reduce costs, we indirectly improve access. The push towards access cannot be achieved without the reciprocal muscle on the costs, whether that is done by the market or by the government.”
Hunt said advocates of Obamacare couldn’t achieve both controlled costs and expanded access at the same time, and so decided to focus on access. “The next president is going to be charged with controlling costs,” he added. “In the end, that is going to mean decreased innovation because you will have less money going towards research at pharmaceutical companies.”
Harrington agreed that the issue of drug prices and innovation is thorny. “If we do things to restrict drug companies’ ability to price for innovative compounds, we are going to get less investment in innovation,” he noted. In sum, he said the next president “would be better off trying to massage Obamacare” and trying to forge a health care policy that brings the best of both worlds.