Trump’s health care vision is impossible

Health savings accounts and tax credits won’t benefit the Americans who need coverage most.

President Donald Trump gestures towards democrats while addressing a joint session of Congress on Capitol Hill in Washington, Tuesday, Feb. 28, 2017. CREDIT: AP/Pablo Martinez Monsivais
President Donald Trump gestures towards democrats while addressing a joint session of Congress on Capitol Hill in Washington, Tuesday, Feb. 28, 2017. CREDIT: AP/Pablo Martinez Monsivais

During a Tuesday night speech to a joint session of Congress, President Donald Trump made a lot of promises regarding health coverage but offered no feasible plan for how to make those promises a reality.

Trump essentially said he would keep the most popular parts of the Affordable Care Act (ACA)—such as coverage of preexisting conditions — but not the controversial parts, such as the individual mandate.

“Mandating every American to buy government-approved health insurance was never the right solution for America,” said Trump. “The way to make health insurance available to everyone is to lower the cost of health insurance, and that is what we will do.”

But experts say there’s no good way to scrap the individual mandate while maintaining protections for people with preexisting conditions. The mandate balances risk pools by incentivizing healthy people to buy insurance; without a mix of healthier and sicker enrollees, people drop out of the insurance market and premiums rise.

This could trigger what health experts call a “death spiral.” As costs continue to rise, more low-risk enrollees drop out of the plan, driving premiums even higher, and eventually no one can afford health care, causing the system to collapse.

This means that if Republicans wanted to get rid of the mandate and cover people with preexisting conditions they would have to let premiums and deductibles increase for all Americans. There are also issues with repealing taxes that fund ACA coverage expansions, according to the Center for Budget and Policy Priorities. Eliminating those taxes would kill a source of funding for “the subsidies needed to enable millions of people to afford coverage,” according to a CBPP analysis published on Tuesday.

Many Republicans have suggested that Health Savings Accounts would allow Americans to purchase coverage, and Trump echoed their claims last night.

“Secondly, we should help Americans purchase their own coverage, through the use of tax credits and expanded Health Savings Accounts — but it must be the plan they want, not the plan forced on them by the Government,” he said.

The problem is that HSAs don’t serve a wide swath of Americans, said Aviva Aron-Dine, senior fellow and senior counselor at the Center on Budget and Policy Priorities.

“It works for people who can save money and belong to high-income tax brackets, but that does not describe people who would lose coverage in a repeal,” Aron-Dine said. “It’s almost irrelevant.”

The tax credits that Trump mentioned would not benefit most Americans, either. Tax credits under the ACA are higher for people with lower incomes; if you have an income over 400 percent of poverty level, you don’t receive a credit. But proposals for replacements don’t match the credit to income levels. They also don’t vary with location, as the ACA tax credits did.

According to a recent Kaiser Family Foundation report, which is based on the Congressional Budget Office data, the average credit received by marketplace enrollees would be 41 percent lower under one House replacement proposal than under the ACA in 2022. Over time, these disparities would grow.

This would also feed into the problem of a death spiral, Aron-Dine said.

“Most people are shielded from premium increases now, but that wouldn’t be the case with a flat tax,” said Aron-Dine.

Millions of people would lose coverage after an ACA repeal. In January, the Congressional Budget Office examined a scenario in which Congress immediately eliminated the individual and employer mandates, repealed the ACA Medicaid expansion after two years, and kept many of the consumer protections and market reforms — including coverage of those with pre-existing conditions. The CBO predicted that 18 million people would lose insurance within the first year and that premiums for people buying coverage on their own would increase by 20 to 25 percent.

The CBO also predicted that as many as 32 million Americans would lose insurance by 2026.