Trump's plans to change healthcare

Trump plans to repeal and replace Obamacare. We're going to be hearing about a lot of proposed changes in how government interfaces with our medical care so it's good to know the issues.

Since the 1940's medical benefits from employers have been tax exempt. This amounts to a government subsidy of about $295 billion. Although well intentioned there are several problems with this arrangement. Only those who work for a company which provides insurance get the benefit. Also the subsidy is greater if you have a higher income and therefore pay more taxes.

Although we've all come to think of taking part of our employee compensation as medical insurance rather than wages as a good thing, it's really not that great. As previously discussed paying for things by insurance wastes money and restricts choice. We do want insurance for the big, high risk things but why let your employer pick out what you get? And moving from one job to another is always a medical insurance hassle.

The biggest benefit of getting medical insurance through your job instead of as an individual is that you're part of a pool so that the administrative costs for the insurance company are much less and it's a better arrangement for the occasional employee who comes down with a medical problem.

So we're going to hear about changes to address some of these problems. If the government is going to subsidize medical insurance we should all benefit and the subsidy should be distributed more fairly. You should be able to choose from a wide array of insurance types that fit your individual needs and that belongs to you regardless of your employment status.

But buying medical insurance as an individual in the present system is way too expensive, so other changes will be proposed. Permitting insurance pools other than with employers will be one, including any of the whole host of professional, charitable and small business organizations. And if ever the interstate commerce law should apply to anything it should be to medical insurance so as to bypass all the state insurance coverage mandates.  

Besides all that, cheaper high deductible medical insurance looks a lot better when you're buying your own than when it's part of your benefits. But realistically you're paying the bill both ways, so high deductible insurance linked with a health savings account is the way to go. HSA's are a game changing idea, but the above changes in the insurance market are needed for them to work well. More about that another time.

The last problem is the "pre-existing condition" issue. No one wants to sell insurance to someone whose expenses are going to be more than the premiums. In that case it's not insurance it's charity. Obamacare tried to handle this by transferring the costs to the young healthy people. It didn't work. It's a sticky issue. There are several ideas out there about how to handle it. We'll see what the Trump team comes up with.