People seek out insurance as a method of pooling risk. Medical expenses can have a devastating impact on family finances. For this reason we turn to those who offer to insure us against those types of financial losses. And since no health care proposal is perfect (and since there are just a few days left before the election) it seems logical to assess the health care plans of both candidates.
After three and one half years, it’s obvious that President Trump has no health care plan. What efforts he has made revolve around making modifications to the Affordable Care Act (ACA). The time frame for signing up for the ACA has been shortened, and information regarding when and how to sign up for insurance has been reduced. In addition, Trump views the elimination of the individual mandate as his most significant achievement. Beyond this, the Trump administration has made no effort to increase the subsidies to those who qualify.
The effect of reducing the time frame and information needed for signing up for health care insurance was to reduce the number of people who could otherwise sign up for the ACA or change an existing plan. The elimination of the individual mandate created a more significant problem, one that economists call adverse selection. This is where those who intend to immediately use the insurance plan have an over riding incentive to purchase it. Thus, people in poor health tend to be the first purchasers of health insurance, with healthy younger individuals being the ones to opt out of purchasing insurance.
With younger and healthier people opting out, the remaining individuals in the pool are more expensive to insure leading to higher premiums. If premium hikes cause the number of insured individuals to further decline, the resulting smaller pool will only accelerate premium increases driving the exchange toward collapse. The results from dropping the individual mandate were predictable.
According to the Census Bureau, adults ages 19 to 34 had the highest uninsured rates of any age group in the United States, according to the 2019 American Community Survey.
People in this age group had an average uninsured rate of 15.6 percent compared to 5.7 percent for those under 19, and 11.3 percent for adults ages 35 to 64, and 0.8 percent for individuals 65 and older in 2019.
If the Trump administration’s efforts to eliminate the ACA via a Supreme Court decision are successful, private insurance will revert to the prior rules of the game which among other things allowed for the exclusion of those with pre-existing conditions. According to a new analysis by the Department of Health and Human Services, 50 to 129 million (19 to 50 percent of) non elderly Americans have some type of pre-existing health condition, meaning that they will be permanently ineligible to obtain insurance. Beyond the problem of adverse selection, eliminating the ACA means that the expanded Medicaid option under the ACA will be eliminated, dealing a potential death blow to many rural hospitals, and eliminating insurance for as many as 225,000 families in Arkansas alone.
Biden’s health care proposal comes with its own limitations. Services that are free tend to be over utilized. To avoid overutilization, insurance plans, including Medicare, come with yearly deductible payments and co-pays. If Biden’s Medicare option contains no deductible payments or co-pays this could be a problem. Deductibles and co-pays need not be overly large to be effective, simply having some “skin in the game” tends to make consumers of any good or service, a better shopper.
Biden’s plan also calls for allowing anyone who likes their private insurance to keep it, while also allowing anyone over 60, who wants to move to Medicare to do so. But this shift to Medicare has problems that will have to be addressed. Private insurance offers hospitals significantly higher reimbursement rates, especially for elective surgeries, which are the bread and butter of hospitals. Even with the ACA, and the expanded Medicaid, we’re seeing a crisis in rural hospitals with many closing due to financial difficulties. If the number of Medicare patients increases relative to private pay patients, the difficulty, rural hospitals’ face will only increase. On the plus side, Biden’s plan calls for increasing market subsidies and increased funding for rural health and mental health services.
While neither candidate’s plan is perfect, Biden’s plan has the potential for improving affordable health care access with minimal disruption to the existing insurance structure. Trump, on the other hand, seems confused about the structure of our system. He criticizes Biden claiming he’s a socialist, while praising the care he received at Walter Reed. Walter Reed is a government hospital, and the staff is government employees, the very definition of socialized medicine.
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