Donald Trump this week put forth a few health policy proposals that go beyond replacing Obamacare with “something terrific,” his stance of the past few months. But not very far beyond.
On Monday evening, Trump said he supports allowing Medicare to negotiate drug prices, an idea typically supported by Democrats. He also said insurers should be able sell across state lines, a staple of conservative thinkers.
He did not offer much detail on either policy, but that isn’t unusual for him or many of his presidential rivals.
There may be another reason. Both policy ideas, while popular, don’t get fleshed out, even by their long-time supporters, because they immediately run into problems.
Medicare Drug Price Negotiations
Trump told a crowd at a campaign event that Medicare could “save $300 billion” a year by getting discounts, because the government program is the largest purchaser of prescription drugs.
“We don’t do it. Why? Because of the drug companies,” Trump said.
Allowing the federal government to negotiate with drug companies to get lower Medicare prices is viewed favorably by 93 percent of Democrats, 83 percent of independents, and 74 percent of Republicans, according to an August Kaiser Family Foundation poll.
This is a common pitch as a solution to rising drug costs, albeit by Democrats. But without more detail, it’s hard to know what impact it would have. Certainly, $300 billion a year in savings is a stretch.
Even without the details, some question the proposal’s effectiveness at lowering taxpayer costs or drug prices. The Congressional Budget Office has not scored previous proposals as saving any money, removing a key incentive for pushing such legislation through Congress.
“In the past, CBO has not been willing to assign savings to these proposals,” said Tricia Neuman, a senior vice president of the Kaiser Family Foundation. “A question moving forward is whether the proposal could be modified in a way that would produce score-able savings, potentially by focusing on unique, high-priced specialty drugs.”
“So far, drug negotiation proposals have been described in fairly general terms, but with drug costs now emerging as a serious concern, we may see more concrete proposals in the future,” she added.
In a 2007 letter to Sen. Ron Wyden (D-Ore.), CBO wrote that federal negotiations limited to select drugs could produce savings, but the impact on Medicare’s overall drug spending “would likely be limited.”
Critics say it flat out won’t work.
The Medicare prescription drug benefit is currently offered by private insurers, and these insurers negotiate prices with drug companies. Medicare is prohibited from interfering in those negotiations. Trump and other advocates are proposing to allow the federal government to replace or join private insurers at the bargaining table with drug manufacturers.
Hillary Clinton and Bernie Sanders have endorsed the idea as part of their plans to lower drug prices. President Obama is also supportive of allowing the secretary of Health and Human Services to negotiate drug prices under Medicare for biologics and high-cost drugs, as laid out in last year’s presidential budget.
But some health experts aren’t convinced the government could get better prices than private insurers. “I am skeptical that Medicare would do a better job than the health plans that are currently responsible for negotiating these prices,” said Dan Mendelson, CEO of Avalere Health, an independent consulting firm. “I don’t think we’re at the point in the evolution in our policy where the government would take a really heavy hand and impose a price.”
Selling Insurance Across State Lines
Trump is siding with many members of the Republican Party by saying insurers should be able to sell across state lines. It’s a popular conservative idea, embraced by free-market and pro-growth politicians. It is also something the House GOP conference has coalesced around as it begins crafting an Obamacare alternative.
But if it actually were to happen, an entirely new set of regulations would need to be crafted. “To actually implement the idea would require a new federal bureaucracy,” said William Pierce, a former HHS spokesman in George W. Bush’s administration.
Health insurance is primarily regulated at the state level. A plan is approved to sell insurance in a particular state, and the insurer can then negotiate with health care providers to create networks and set reimbursement rates.
Proponents argue that allowing insurers to negotiate across state lines would lower premiums. But if other systemic changes weren’t also put in place, Pierce said, those lower premiums would disappear. This is because all other costs would be higher in the absence of the state-by-state provider networks and negotiated rates. What’s more, plans could lack consumer protections that states primarily control. The government would have to set up a new way to regulate them.
Additionally, states that have stricter regulations would likely find their rules becoming harder to enforce because insurers would simply begin selling in states with less regulation. “It would make it very hard for more regulatory states to maintain mandated benefits and other insurance rules that may protect consumers but drive up premiums,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation.
Insurers Oppose Both Ideas
Trump’s health policies may be popular with voters and even some lawmakers. But both ideas have a common opponent — insurers.
“We oppose selling across state lines. Doing so would likely result in a one-size-fits-all model of coverage that reduces choices for consumers and slows progress on improvements to care delivery,” said Clare Krusing, a spokeswoman for America’s Health Insurance Plans.
Insurers worry that plans sold across multiple states could include “fairly prescriptive requirements” that “would make it a challenge to maintain a competitive marketplace for plans and consumers,” Krusing said.
AHIP also opposes allowing Medicare to negotiate with drugmakers, a somewhat rare point of agreement within the pharmaceutical industry.
“Medicare negotiation on drug prices is the absolute wrong way to address soaring prescription drug costs. The research is clear that this blunt approach to price negotiation fails to generate cost-savings or value for patients and the health system as a whole,” Krusing said. “Instead, policymakers should focus on proposals that promote greater price transparency and improved competition among drug companies to improve the affordability of these medications for consumers.”