So is this the best they can do?
The basic problem is that healthcare costs are hugely skewed. Ten percent of the population accounts for more
than 60% of total spending, and just 1% accounts for 20% of spending. Most
people have relatively low healthcare costs. The trick with healthcare is
paying for small number of people who do have high costs.
Individual Choice, Cherry-Picking the Pool, and Screwing
Cancer Survivors
There is one story they could envision, which would make it
much easier for insurers to skew their pool. The Affordable Care Act (ACA)
restricted what sort of plans could be offered in the exchanges in order to
limit the ability for insurers to avoid high-cost individuals.
It would be possible to relax these restrictions to allow insurers to cherry pick their enrollees. For example, they could offer high-deductible plans, say $15,000 in payments, before any coverage kicked in.
No person with a serious health condition would buy this sort of plan since they know they would be paying at least $15,000 a year in medical expenses, and then a substantial fraction of everything above this amount, in addition to the premium itself.
On the other hand, a low-cost plan with $15,000 deductible might look pretty good to someone in good health, whose medical expenses usually don’t run beyond the cost of annual checkup.
The Real Source of High Costs
We do pay way too much for healthcare in the United States, but it
is not because of Obamacare. We pay twice as much for our drugs, medical
equipment, and doctors as people in other wealthy countries. These high
payments persist because they are supported by powerful lobbies.
Some of us had hope that the Trump administration might take some steps to reduce these prices, especially in the case of drugs, since RFK, Jr. had railed against corruption in the pharmaceutical industry.
Unfortunately, his tirades were limited to an
evidence-free crusade against long-proven vaccines, which are not
even a major source of profit for the industry.
Donald
Trump talked about reducing drug prices 1,500%
(really), but this mostly amounted to getting his name on a drug discount
website for a small group of patients. We were spending 6.4% more on drugs in September of this year
than in the same month in 2024. (September is the most recent month for which
data are available.)
Trump has shown no interest in doing anything to lower the
cost of medical equipment. And he has said nothing about lowering doctors’
fees, although some reshuffling of the Medicare reimbursement
schedules may reduce overpayments to specialists and better pay for family
practitioners. His immigration policies
are going the wrong way here, making it even more difficult for foreign-trained
medical students and doctors to practice here.
And there are the insurers themselves, which gobble up close
to 25% of the money they pay out to providers in the form of administrative
costs and profits. A recent study found
that If we add in the cost imposed by insurers on hospitals, doctors’ offices,
and other providers, they take up close to a third of healthcare expenses.
Trump has shown no interest in reining in the insurance
industry apart from his silly talking point about giving people money directly
to… wait, wait, buy their own unregulated insurance. That will do nothing to
reduce the money flowing into the industry’s pockets.
The Republican healthcare plan is a rerun of the bluff and lie strategy they have been doing for more than 15 years. Given the right-wing control of much of the media, it could work for them politically. The tragic part of the story is that millions could end up without the healthcare they need.
The Republicans can look like the great promoters of
individual choice by allowing insurers to market these high-deductible plans.
The problem is that healthy people will all gravitate to high-deductible plans,
leaving only the people with serious health issues—the 10%—to buy plans with
more modest deductibles.
These plans will then be ridiculously expensive since
insurers are not going to insure people at a loss. If they have a pool with
four or five times the average per person healthcare costs, they will charge a
premium that is four five times the average cost, plus a margin for
administrative costs and profits. This means that cancer survivors, people with
heart disease, and other serious health conditions will be screwed, given the
option of ridiculously expensive insurance or none at all.
Been There, Done That
The most painful part of this story is that we have all been
around the block many times on this story. Unless Trump and the Republicans are
extremely ignorant, which can never be ruled out, they are simply lying and
hope that the media will
let them get away with it. They have no brilliant plan to lower healthcare
costs. They are simply proposing a scheme that will lower premiums for healthy
people by screwing the ones who need healthcare most.
It amounts to lowering costs by not providing care. It’s
like reducing the cost of food by not letting people eat. But if the point of a
healthcare system is to provide people with the healthcare they need, the
Republican proposals are nonstarters.
As a practical matter, contrary to what the Republicans and
the media say, healthcare cost growth did slow sharply after Obamacare passed.
That may not have been entirely due to Obamacare, but that is the reality. Too
bad the Democratic consultants tell Democratic politicians not to talk about
it.
Dean
Baker is the co-founder and the senior economist of the Center for
Economic and Policy Research (CEPR). He is the author of several books,
including "Getting Back to Full Employment: A Better bargain for Working
People," "The End of Loser Liberalism: Making Markets
Progressive," "The United States Since 1980," "Social
Security: The Phony Crisis" (with Mark Weisbrot), and "The
Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and
Get Richer." He also has a blog, "Beat the Press," where he discusses
the media's coverage of economic issues.
