Wednesday, May 11, 2016

Trump's 7 point healthcare plan is actually just as stupid as everything else he says

Donald Trump's healthcare plan has started to make the rounds.  People are impressed!  It seems simple.  It seems to make sense.  It gives hope to those who hate Democrats but are disheartened by Trump's stated policies to ban Muslims from the US, build an ineffective wall to keep out Hispanics, torture prisoners, and commit war crimes by targeting the families of suspected terrorists.  I am actually no fan of the ACA, but Trump's healthcare plan is far, far more dumb than most people realize- like almost everything else he does and says.

Here is his 7 point plan:

  1. Completely repeal Obamacare. Our elected representatives must eliminate the individual mandate. No person should be required to buy insurance unless he or she wants to.
  2. Modify existing law that inhibits the sale of health insurance across state lines. As long as the plan purchased complies with state requirements, any vendor ought to be able to offer insurance in any state. By allowing full competition in this market, insurance costs will go down and consumer satisfaction will go up.
  3. Allow individuals to fully deduct health insurance premium payments from their tax returns under the current tax system. Businesses are allowed to take these deductions so why wouldn’t Congress allow individuals the same exemptions? As we allow the free market to provide insurance coverage opportunities to companies and individuals, we must also make sure that no one slips through the cracks simply because they cannot afford insurance. We must review basic options for Medicaid and work with states to ensure that those who want healthcare coverage can have it.
  4. Allow individuals to use Health Savings Accounts (HSAs). Contributions into HSAs should be tax-free and should be allowed to accumulate. These accounts would become part of the estate of the individual and could be passed on to heirs without fear of any death penalty. These plans should be particularly attractive to young people who are healthy and can afford high-deductible insurance plans. These funds can be used by any member of a family without penalty. The flexibility and security provided by HSAs will be of great benefit to all who participate.
  5. Require price transparency from all healthcare providers, especially doctors and healthcare organizations like clinics and hospitals. Individuals should be able to shop to find the best prices for procedures, exams or any other medical-related procedure.
  6. Block-grant Medicaid to the states. Nearly every state already offers benefits beyond what is required in the current Medicaid structure. The state governments know their people best and can manage the administration of Medicaid far better without federal overhead. States will have the incentives to seek out and eliminate fraud, waste and abuse to preserve our precious resources.
  7. Remove barriers to entry into free markets for drug providers that offer safe, reliable and cheaper products. Congress will need the courage to step away from the special interests and do what is right for America. Though the pharmaceutical industry is in the private sector, drug companies provide a public service. Allowing consumers access to imported, safe and dependable drugs from overseas will bring more options to consumers.

So, let's go point by point:

1) Repealing the much-maligned individual mandate.  

Here's the problem: the mandate on individuals was one of two mandates which were inextricably linked.  In exchange for all people, especially the healthy ones being mandated to buy insurance, the insurance companies would be mandated to offer insurance to everyone regardless of how sick they are- the pre-existing condition problem.  Think of it this way: suppose a 35 year old woman just got diagnosed with breast cancer.  She quits or loses her job, and needs to buy insurance.  Why would any company sell insurance to a woman who will need millions of dollars of drugs, testing, and surgery?  Guess what, THEY DIDN'T.  All pre-ACA individual plans were effectively health pre-payment plans.  Insurance companies would even freely cancel the plans of anyone who got seriously sick- obviating the very point of insurance.  So, when Trump is saying he'd get rid of the mandate, what he's saying is that no individual will be able to buy real insurance.

Unless: he means that he would just repeal the individual mandate but NOT the pre-existing condition mandate, which would likely bankrupt the health insurance industry.  Why?  Because now the incentives are reversed.  If a person is healthy, do they need insurance?  No- and if they get sick, since pre-existing conditions can't be held against them, insurance companies would have to sign them up.  So, why would anyone buy insurance until/unless they get sick?  They wouldn't- thus crashing the entire system as only people requiring hundreds of thousands of dollars of care would sign up for the plans.

2) "Allowing" companies to sell insurance across state lines.

Companies already sell across state lines.  United Healthcare insures 70 million people throughout the country.  What Trump's plan would do is let United Healthcare sell to everyone while only complying with the rules set by one state- the state in which United Healthcare is based.  Each state has different rules for insurance companies: how many doctors does the insurance company need to have in network?  How far away can they be?  What kind of services does the company have to offer?  If companies are allowed to just follow the rules of one state, they will flock to the state with the weakest rules.  In fact, in an especially small state, they may offer massive incentives (relocation of headquarters with associated tax revenue and jobs) to that small state in exchange for being allowed to basically write the laws.  This happened to the credit card industry and South Dakota, and is a bad idea.

And this ignores the reality that the biggest problem with selling insurance across state lines is simply logistical- a company in Minnesota signing up thousands of doctors and hospitals and clinics in Florida costs money, time, and administration- about as much as, say, buying a company that already does it.  Which is what all these companies that do sell across state lines have been doing.  This is not a policy that allows the free market- this is a policy that effectively destroys local regulation of health insurance.

3) Allowing individuals to deduct health insurance costs from their tax returns like businesses do.

Seems like a good idea on the surface- but let's go back to point 1.  Why would an insurance company sell to anyone who is sick?  And why would they let that person keep their insurance if they get sick?  They wouldn't, and they didn't.  That's the real reason why employer based plans were and are so good- because even if an employee or their family got sick, their insurance company can't just walk away.  They have the other 10,000 or however many employees of the company to worry about.  And of course, there's the minor point that giving tax deductions to people doesn't really work all that well if people are so poor that they don't pay much in taxes- unlike the direct cash subsidies that are part of the ACA to help poor people buy insurance.

4) Health savings accounts

Health Savings accounts are an okay idea.  The downside is, HSAs encourage people to avoid healthcare.  After all, less healthcare used = more money in the bank for anyone with an HSA.  In addition, the median income in the US is about $50,000 for a household.  As of 2015, 62% of Americans have less than $1000 in savings.  Let's say someone has a heart attack, survives, but needs a Left Ventricular Assist device.  That'll be $150,000 for the device alone, which can double when you count all the care and monitoring around the device that is needed.  In short, any disease that is expensive enough to really be catastrophic will almost certainly wipe out an HSA in short order.  But again- having an HSA may very well reduce yearly insurance rates.  But by themselves, HSAs are not nearly enough to tackle the healthcare problem.

5) Price transparency

Everyone seems to love this idea.  No one knows what a hospital bill means, and no doctor ever seems to know how much anything costs.

Problem is, there is a reason for that.  If you go to the ER with chest pain, the diagnosis could be anything from a muscle strain (treated with $5 Motrin) to a massive MI (1 month ICU stay, $10,000 cardiac catheterization, maybe a $150,000 LVAD device).  If you injure your knee and need an MRI, will you know if a 1.5 Tesla MRI at $600 is a better deal than a 3 Tesla MRI at $800? Should you pay for a general radiologist to read it, or a MSK-specialist radiologist, or do you not need one to read it at all because the orthopaedic surgeon will just take a look themselves?  Consumers have no idea how to approach these extremely complex decisions, and the prices that are quoted are near-meaningless.  The best part?  In the absence of any way to compare two different providers, consumers may pick the more expensive one because they think it means better care- something called the Whole Foods effect.

Now, this is not to say that price transparency is necessarily a bad goal.  A reasonable rule may be requiring flat pricing and price transparency for some elective procedures ONLY, with the hospital charging one fee and absorbing the most common risks.  Elective hernia repairs, skin lesion excisions, and knee and hip replacements seem like good candidates, with some success for programs thus far.

6) Block granting Medicaid

This seems like an age-old variation on the local control vs. federal provision of benefits debate.  But here's the twist: health is so important to so many people that the incentives created by a block-granting system could wind up hurting everyone.  Here's how.

Suppose Congress does block-grant the program.  Mississippi, facing a massive budget shortfall, decides to focus their Medicaid dollars on statins and anti-obesity programs.  Not an unreasonable decision since they have some of the highest rates in the country.  What do they cut?  On the chopping block may well be coverage for the latest HIV medications.  To be sure, older, cheaper medications are covered, but newer medications which are necessary for some long-term survivors who have generated resistant strains and for some because of side effects are not.  And, HIV is still largely though not entirely a disease of injection drug users and gay men- two groups who are neither popular nor politically powerful in Mississippi.

So, what do injection drug users and gay men who have HIV that is unresponsive to older drugs do?  They pop across the border to Alabama.  Or Arkansas.  Or any other nearby state.  These states see their expenditures on HIV medications soar- now what do they have a massive incentive to do?  Cut their HIV medication benefits so that these expensive patients will go elsewhere!

In short, it will become a race to the bottom for Medicaid.  States will have a massive incentive to worsen the quality of care that they provide, since it will save them money.  Incidentally, the fact that this is also an incentive for insurance companies under the ACA/Obamacare exchanges is why I do not particularly support that program either.

Just as an aside- I went to medical school in California, which is one of only a handful of states that will pay for long-term routine dialysis for undocumented immigrant patients- and I personally met multiple undocumented immigrant patients from states across the country who were told to get on a bus to California because it was the only way they could get this care.  In California, the lobby for undocumented immigrants happens to be politically powerful- and thus this benefit is unlikely to be affected.  But you can still see the incentive that this creates.

7) Pharmaceutical drug importation

This is something that almost makes sense.  In fact, if "remove barriers to entry" meant dealing with the absurdity of pharmaceutical patents, it would be a great idea.  But Trump actually wants to to gut the Food and Drug Administration's (FDA) protections by importing drugs from other countries.  There are many things wrong with the US Pharmaceutical system- but the FDA still stands as a shining example of a powerful and effective protector of the people.  A single FDA employee- Dr. Francis Oldham Kelsey, MD, refused to authorize Thalidomide due to concerns about it's effects in pregnant women.  While dozens of countries in Western Europe and Canada suffered from tens of thousands of disabled children, the US was spared.

And once again, the details matter- if Trump authorized imports only from "safe" countries like Canada and the UK, pharmaceutical companies may well start jacking up the prices in those countries in order to save their US market share and prices.  And if we start importing from India and other countries with far less reliable inspection regimes, we face a very real risk to our pharmaceutical quality and supply, over and above those we already face as illustrated by several recent scandals in the pharmaceutical industry over Indian companies falsifying data for submission to the FDA for approval.

The better approach to this problem is to drastically reduce patent lengths or to start directly regulating drug prices.

Overall, Trump's plan seems attractive because it seems like common sense.  It also seems to accord with a libertarian stand-point, which many people including myself are sympathetic to.  But the policy implications of each of his proposals are very, very dire upon deeper review.