The Patriot Post® · Trump's HRAs, Price Transparency Driving Health Care Improvements
Our current health care payment system is a bastardized amalgam of bad policy begetting worse policy; a slowly evolving mess rooted in the FDR-signed Stabilization Act of 1942, which froze wages and salaries for workers, forcing America’s employers to find another way to attract the best talent. They did that by taking advantage of a loophole in the law that allowed “insurance and pension benefits” to grow “in a reasonable amount.” And thus was employer-based health insurance born.
As could be easily predicted, this created a host of problems, but by the time the law was changed, the practice had taken root. Over the years the problems have grown, only to have the “solutions” created by Congress make things worse.
Obama used the rising costs of health care as an excuse to push for his quasi-socialist plan for health insurance, which he considered a stepping stone to a fully socialized “single-payer” (i.e., government-run and controlled) health system.
Under the “Affordable” Care Act, premiums more than doubled in the first four years, leaving millions of Americans with unaffordable premiums and deductibles. National health spending jumped from 16.3% of GDP to 17.9% (estimated to hit 19.4% by 2027), and per capita spending on health care jumped $2,841 per year.
And now, $586 billion later, more than twice as many Americans are concerned about health care than before ObamaCare was passed. But for Democrats this was a feature, not a bug. They wanted the private system to collapse so they could justify fully socialized health care in America.
On Sunday, President Donald Trump announced the roll-out of a new health care plan in the next two months, and though the specific language is not yet available, the initial provisions are very promising.
The first provision is the release of a final rule on HRAs (Health Reimbursement Accounts) that will significantly increase choice for employees. Employers can make tax-free contributions (with no statutory limits) to accounts for employees, who can then use the funds to pay for out-of-pocket costs not covered by traditional insurance, but to also pay for premiums for private insurance.
This will have a dramatic effect on the insurance market, giving millions of currently uninsured Americans an affordable coverage option. It is estimated that within first five years, as many as 800,000 small businesses (most with less than 20 employees) will sponsor HRAs for their employees, funding coverage for more than 11 million workers.
This option also addresses two major issues in the health system; namely, the lack of portability in health insurance and coverage for pre-existing conditions. The latter is largely a result of the former.
HRAs provide portability in health care plans, because you would take your insurance with you from one employer to the next. It closes that gap in coverage that insurers use to justify denying payment for care.
This will also create new suppliers in the health insurance market to meet demand. Currently, 81% of small businesses (> 200 employees) and 42% of larger firms only offer one health plan. A single plan is no choice at all; you accept it or you go without coverage.
By ending the discriminatory tax treatment which favors employer-based plans and penalizes individual plans, employees will not feel pressured to stay at a job they hate simply because of the health insurance benefits. As a result, health care options will increase, employment mobility will increase, and prices will fall.
The Trump administration has also included built-in mechanisms that prevent employers from treating classes of employees differently, or insuring healthy employees while dumping older, sicker employees onto the ObamaCare plans.
Another step taken by President Trump may pay even greater dividends in the long run.
As early as next week, President Trump is expected to issue an executive order requiring pricing transparency throughout the health care industry. Industry providers of all sorts will be required to publish costs for services, medicines, etc.
It’s hard to overestimate what a game-changer this could be.
Today, it is impossible to determine actual costs, with pricing being significantly higher for the same service depending on the insurer, group plan, geographical location, etc. For example, a 2011 study found that a lower-limb MRI in New York was 12 times higher in New York than in Baltimore, and that pricing even varied 900% within the same city (Miami).
While still a long way from a true free market in health care, President Trump is taking steps that make significant strides in that direction.
Now Congress must do its job and finally address the mess it created 77 years ago, and which it has only made worse since. It is time for a true free market in health care, and President Trump is taking the lead.
Editor’s note: Foster Friess, a friend of The Patriot Post, has for years led the charge toward requiring just the kind of price transparency Trump is mulling. He also knows it’s an uphill battle, thanks to entrenched hospitals and other systematic apparatuses.