Today’s Managing Health Care Costs Number is 20 million
Source: New York Times
Donald Trump, who played the classic Rolling Stone song at many of his rallies, has a problem.
He’s promised to repeal the Affordable Care Act “on day one.” With the ACA will go the individual mandate to obtain health insurance, as well as federal subsidies for exchange insurance purchase for those earning under 400% of the federal poverty limit (FPL).
But Donald Trump is not against every element of the ACA.
Mr. Trump said he favors keeping the prohibition against insurers denying coverage because of patients’ existing conditions, and a provision that allows parents to provide years of additional coverage for children on their insurance policies.
“I like those very much,” Mr. Trump said. Source: Wall Street Journal
But there are elements of the ACA that Trump has said “Yeah, I like that.” This includes insurance reforms – like mandating “guarantee offer,” where insurers cannot refuse insurance to those with a preexisting illness, and prohibiting higher premiums for those at higher risk.
Health insurance is basically healthy people transferring wealth to sick people, so they can transfer the wealth to the medical delivery system. The reason why the exchange plans have increased their premiums is not so much that health care is costing too much (although it does). It’s because not enough healthy people have enrolled.
Here is what we now do under the Affordable Care Act to try to be sure that the exchanges have enough healthy enrollees.
1) Individual mandate with an income tax penalty for those who don’t purchase insurance
2) Federal subsidies for those under 400% of FPL. Without these subsidies, only those who would be high risk would be likely to sign up
3) Additional federal subsidies to cap out of pocket expenses for those under 400% of FPL who purchase a silver plan. This makes the plan more actuarially valuable – a better deal – so again, helps convince more healthy people to enroll
4) Risk adjustment (which expires in 2017) –so that health plans which attract higher than average risk would receive payments from a fee levied on health plans that recruited those with lower than average risk
5) Advertising and marketing to encourage enrollment
States which tried to mandate guarantee issue without mandates and subsidies found the premium costs were so high that they enrolled few members – classic “insurance death spiral” where each year the population gets less healthy and the cost goes up. Margot Sanger-Katz showed what happened when this was tried in New York; there were similar results in Massachusetts (see figure above.). Below I’ve reproduced a slide from Kaiser Family Foundation showing how most health care costs are distributed among a small population – hence the need to attract a lot of healthy people into an insurance plan.
So – Trump can’t have insurance reforms without something to draw a healthy population into the exchange plans.
The question is whether 20 million who have insurance through the Affordable Care Act can get what they need.
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