Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The health-care goals President Donald Trump mentioned in his address to a joint session of Congress Tuesday night were a high-water mark for policy specificity from this president. But that mark was a low bar.

The lack of detail was still glaring, and Trump either skirted the alligators lurking in the morass of Affordable Care Act repeal and replacement, or just poked them with a long stick. The process remains as chaotic as ever. That's a threat to health insurers who focus narrowly on government programs. It may also hurt those who don't. 

Divergent
Some insurers have fared better than others since Trump's election, but a messy ACA fight could impact all of them
Source: Bloomberg

A draft of a possible Republican plan for ACA replacement, leaked last week, is splitting the GOP into factions. Some governors don't like the plan because it could leave too many people uncovered. More conservative members of the party, meanwhile, find it too generous because it offers refundable tax credits, even if those are less generous than the ACA's.

The GOP strategy, according to The Wall Street Journal, is to bet hardliners won't ultimately vote against a repeal -- a game of legislative chicken with more than 20 million ACA-insured lives at stake. 

Trump didn't do much to resolve this stalemate with his address. Trump expressed support for tax credits, but still appears to differ with House leadership on other key points. The four biggest insurance-related goals outlined in the speech are vague and riddled with massive political and policy difficulties.

  • Trump pledged to protect people with pre-existing conditions, without explaining how. The draft GOP plan does away with both the individual mandate -- which helps cover the costs of insuring such people -- and would let insurers charge such people more if they don't maintain continuous health-insurance coverage.
  • Trump wasn't clear about what kind of tax credits he supports. The draft GOP plan increases such subsidies based on age, rather than the ACA's income-based scale. Trump's Health and Human Services Secretary, Tom Price, has supported this idea. But it would be a huge transfer of taxpayer money from older and poorer Americans to those who are wealthier and younger, according to a Kaiser Family Foundation analysis. That will make it even harder to get any help from Democrats or moderate Republicans. Trump also didn't address wholesale conservative opposition to the idea of refundable credits. 
    Shifting the Burden
    A leaked draft bill suggests the GOP's ACA replacement would substantially favor the wealthy at the expense of older and poorer Americans
    Source: Kaiser Family Foundation
    Low/middle/high incomes are $20,000/$40,000/$100,000

     

  • On Medicaid, Trump wants to give governors "the resources and flexibility they need ... to make sure no one is left out." That sounds conspicuously unlike the GOP plan which repeals the ACA's Medicaid expansion, leaving out large numbers of people. 
  • Trump also suggested letting Americans buy insurance across state lines, saying this will bring down costs. The GOP loves this proposal because it sounds free-markety, but there's little evidence it would actually cut costs, and it could have other negative consequences.

The speech also avoided the rather important question of how to pay for these efforts. A solution proposed by some in House leadership is to cap the tax break people and employers get for employer-provided health insurance. This proposal was anathema to the GOP when it was made part of the ACA. Now it may be massively expanded under the GOP plan.

Such a cap would still be widely controversial. It could substantially shake up the employer-focused commercial insurance market. So would a repeal of the ACA's employer mandate and expansion of tax credits for individual coverage. 

Meanwhile, insurers who participate in Medicaid still have to worry Trump will end up moving toward the House on capping grants and repealing the expansion.

Appetite For Disruption
Large parts of the health insurance market could be disrupted by a GOP effort to repeal and replace the ACA
Source: Bloomberg Intelligence

No one will be immune from the market disruption and policy chaos that has only just begun. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Trump also mentioned other unspecified cost-saving legal reforms and tackling drug prices, to be discussed in future columns.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net