Replacing Obamacare: Trump’s health insurance plan
With all the more violent news going on, you may have missed the fact that the administration has unveiled a proposal to replace Obamacare.
Some key elements:
The Great Healthcare Plan calls for codifying the Trump Administration’s Most-Favored-Nation deals to get Americans the same low prices for prescription drugs that people in other countries pay. …
The Great Healthcare Plan makes more verified safe pharmaceutical drugs available for over-the-counter purchase. …
The Great Healthcare Plan stops sending big insurance companies billions in extra taxpayer-funded subsidy payments and instead send that money directly to eligible Americans to allow them to buy the health insurance of their choice.
The Great Healthcare Plan funds a cost-sharing reduction program for healthcare plans which would save taxpayers at least $36 billion and reduce the most common Obamacare plan premiums by over 10% according to the Congressional Budget Office.
The Great Healthcare Plan will end the kickbacks paid by pharmacy benefit managers (PBMs) to the large brokerage middlemen that deceptively raise the cost of health insurance.
Would Congress pass this? And would it actually help the situation? I’ve long been pessimistic about solutions to the problem of high health care costs (plus rampant fraud, apparently). But that doesn’t mean a switch from Obamacare couldn’t make things at least somewhat better. I don’t have the economics chops to figure out whether this would help, and at the moment I can’t find an analysis I trust. If you have one, please put a link in the comments.
This Reuters article (a news outlet hardly sympatico with Trump) mentions the following criticism:
Critics say replacing subsidies with direct payments could force lower-income Americans to shift toward less comprehensive plans sold outside of former President Barack Obama’s signature Affordable Care Act. That law sought to put all Americans – both healthy and sick – in one marketplace to keep premiums down.
Yes, that was the stated idea. But premiums haven’t been kept down.
Ending cross state border restrictions would do a hell of a lot good. Unfortunately that’s not listed in this plan
@Leah:Ending cross state border restrictions would do a hell of a lot good.
I’ve never seen why, and it’s not as simple as “ending a restriction”. Insurance is regulated at the state level. Congress would have to take that away and replace it with Federal regulations, firstly. Health insurance companies negotiate with provider networks, which don’t always cross state borders. They price their premiums according to those negotiations and the demographic profile of their customers in that state and the regulatory environment of their state. If you tried to wave a wand and eliminate the “cross border restriction” all the premiums would have to change, and what’s cheap in one state right now would not even exist. Every insurance company would price on a national basis. People in different state might all pay the same price but it wouldn’t necessarily be cheaper.
Will the Democrats actually argue against people paying less for prescription drugs?
I looked through the announcement. If it actually changes anything in a materially negative way for health insurance companies or health insurance providers, it is not getting through Congress. I have my doubts that it actually would change anything.
Health care in this country is almost all third-party payments, with fourth and fifth parties as “stakeholders”. That’s why it’s hard to change. Nobody is paying for anything themselves on something that they themselves want, everything is Other People’s Money spent on Other People and very, very heavily regulated by completely unaccountable bureaucrats who work closely with health insurance and healthcare providers.
My employer chooses my insurance company and pays most of my insurance premium. My insurance company negotiates with providers for the services they are going to do for me and pay on my behalf. The providers get paid from the state and Federal governments directly and sometimes city or county governments as well in addition to what they are paid for services. The governments tell everybody in great detail How to Do It and how much everyone can be paid and what they must pay for. I have taxes taken out that pays for some stuff, I have a deductible, and I pay part of my premiums.
For Medicaid and Medicare this looks a little different in terms of who pays what for whom but it’s the same idea. However, health care providers charge Medicaid and Medicare much less than private health insurance and so force my health insurance to subsidize Medicaid and Medicare. In addition my taxes fund Medicaid and Medicare, neither of which I qualify for, and the people getting those things have never paid in their share of what those things spend on them, for different reasons–in Medicaid because it covers poor people and sick people who don’t work, and Medicare because the healthy people who now use it take way more out than they ever could have put in, because they live longer and much more is done for them and it’s much more expensive than in the days when they were paying in. (When I qualify for Medicare, if it exists, I too will take out more than I ever put in.)
What Trump is announcing is a nibbling around the edges, guaranteed to go nowhere in Congress if one big stakeholder doesn’t like it. What Congress might do is pass something that they CALL Trump’s plan but has all kinds of goodies and carveouts that negate any benefit.
If I’m cynical about this it’s because I’ve spent too much of my working life in or adjacent to health care and health insurance.
Milton Friedman recommended 26 years ago that we replace the extant patchwork of public and private plans with government-financed insurance which kicks in over a high deductible and then supplement that with medical savings accounts. It would allow something akin to a price system in mundane medical care to operate below the deductible and their might be some efficiencies from that. It would also allow for government finance of medical care and long term care to be limited to a fixed percentage of total personal income flow. Also, employers would be relieved fo the responsibility for providing medical insurance to their employees and insurance would be portable. This, in turn, would reduce labor market sclerosis and hiring inhibitions. The trouble is, when you make opaque costs transparent, it bothers people. Shouldn’t but it does.
@Art Deco:Milton Friedman recommended 26 years ago that we replace the extant patchwork of public and private plans with government-financed insurance which kicks in over a high deductible and then supplement that with medical savings accounts.
Yeah, belling the cat is a great idea. There’s lots of great ideas. Lots of them are obviously better and simpler than what we have. It’s not the lack of ideas that’s the issue. It never has been. Plenty of great ideas have been proposed, implemented, and abandoned because some stakeholder lost out by it. Many of them you probably never heard of, it’s inside baseball. Nobody likes how it is, everybody has been trying to change it, nobody gets anywhere.
The great ideas, any of them, will never be implemented unless the system as it is now spectacularly fails. More band-aids get slapped on and the can gets kicked down the road a bit, and think tanks and economists and actuaries design ever more advanced cat bells. To mix metaphors.
The main problem is people who don’t need comprehensive coverage are forced into it by Obamacare.
I’m in late 50s, good health, no meds. I need something for if I’m hit by a bus, high deductible. I already pay out of pocket each year for comprehensive blood work and marker scan, so like car insurance I just need major collision, not ongoing maintenance. Not allowed. My coverage pays for “10 essential health benefits” I don’t need, including maternity care and pediatric dental. As my AI says:
‘ you can’t “drop” or exclude pediatric dental or maternity coverage from an ACA Marketplace plan (including catastrophic), even if you don’t have kids, aren’t married, and have no plans for pregnancy. These are part of the required essential health benefits (EHBs) that every qualified health plan must cover as a package.’
Basically a hidden tax, but people complain about “health insurance cost” without realizing they’re having to pay for stuff they don’t need.
Trump seems to believe that you can shop for health insurance the way you do fora car. That it’s a competitive market. No true. The ACA policies are offered by twelve companies in WA. Should be an adequate supply. But what has happened in the last twenty-five years is that health care providers have created small geographic monopolies that patients in their areas are confined to. In Everett, we have the Everett Clinic system and Providence-Swedish as our choices for providers. Very few individual doctors in private practice anymore. So those relying on the ACA for their insurance must go with plans accepted by these two providers.
Similarly, employers in the area (Boeing is the dominant one) must choose from a limited menu of insurance plans accepted by the health providers or self-insure.
Back when I was still working, my airline self-insured but had an insurance company handle the claims.
Our coverage involved a 20% co-pay on just about everything. So, your asked what the price was before agreeing to any medical procedure.
In 1975 I needed spinal surgery for a protruding disk.
I interviewed five different surgeons, all in private practice, before choosing my surgeon. The operation and hospitalization (5 days) cost $2200. My share was $440.
My salary at the time was $1500/month. So, the cost of the surgery was manageable
A similar surgery today would run $200,000 or more with a 20% co-pay being $40,000 +. A price not manageable except for very high paid workers.
It shows how much the cost of healthcare has increased. Far more than average wages or salaries. I attribute it to the monopolistic trend among healthcare providers, and the effects of the EMTALA law passed in 1984.
I know it’s unrealistic to go back to doctors operating private practices, but things were less expensive when there was more competition, IMO.
The GOP plan will not accomplish much, unless it actually puts enough money in the hands of ACA users to help pay the actual premiums. In one case I know of, the premium is increasing from $450/mo. to $1200/mo. That’s quite a jump.
Premiums certainly haven’t been kept down. My self-employed son in Colorado is over 30 so not eligible for Colorado’s catastrophic plan, and his gross income is too high for any subsidies. His only choice is a comprehensive plan that would cost him about $15,000 a year, with an additional $15,000 deductible. Ridiculous. He is young and healthy, so unless there is a catastrophe, he will never exceed the deductible.He might as well throw the premiums out the window. Basically they are making him pay comprehensive prices for catastrophic coverage; he pays for everything anyway. I like Art Deco’s suggestion, but right, it would never pass.
@J. J.But what has happened in the last twenty-five years is that health care providers have created small geographic monopolies that patients in their areas are confined to.
This is kind of state dependent, Washington is like the North Korea of health care, a hermit kingdom with relatively little out of state presence.
You might be gratified to know that The Everett Clinic was purchased by Optum United though and is no longer locally owned and is known as Optum Care.
Providence Health and Services covers five Western states, New Mexico, Texas, and Hyderabad in India.
the effects of the EMTALA law passed in 1984.
Many orders of magnitude too small. The sickest 5% of people account for 50% of the healthcare spending. Emergency rooms are small percentage of total spending. EMTALA doesn’t help, but one look at a few hospital income statements (often they are public) will tell you how small care due to EMTALA is.
@Mrs Whatsit:His only choice is a comprehensive plan that would cost him about $15,000 a year, with an additional $15,000 deductible.
It is increasingly no better for people on employer-funded insurance. My share of my family coverage is $12,000 with a $14,000 deductible.
If your son is young and healthy without dependents, paying out of pocket and forgoing health insurance might make more financial sense. As for accidents, there’s accident insurance.
The whole med insurance thing is a mystery to me, especially after my experience this past year. I get a monthly statement from United Health (medicare advantage) of the charges and payments. Typically, the provider charges a huge amount and is then paid an amount substantially less, and I still end up paying zero, and our premiums still same.
Here’s the numbers: total charges by the providers for my entire ordeal was $1.4million; total paid to the providers was $675,000. Seems a big game to me.
The stated purpose of Obamacare was indeed to lower premiums. The actual purpose was to fail utterly and force us into creating an American NHS, where everbody’s healthcare is subservient not to insurance companies who can be sued for negligence, but to federal bureaucrats who effectively can’t.
I think President Trump would take on the Insurance cartels if he had the support of the Republicans in congress.
Without that, we will only be tinkering on the margins.
But there is a second front that has been opened up– MAHA. A serious effort to reduce obesity could decrease the nation’s healthcare bill substantially.
I’m not proposing eating healthier, just not eating so much. Not supersizing everything we consume.
@physicsguy:Typically, the provider charges a huge amount and is then paid an amount substantially less, and I still end up paying zero, and our premiums still same.
Here’s the numbers: total charges by the providers for my entire ordeal was $1.4million; total paid to the providers was $675,000. Seems a big game to me.
Billed charges are very rarely paid by anybody. They’re not exactly a meaningless number, but hospitals have to report their cost to charge ratio and it’s usually 30% – 40%–in other words hospitals bill on average 2.5 to 3 times their actual expenses, so they clearly never intend to collect that billed charge money in their normal operations.
United contracted with that provider to pay some % of Medicare rates, probably not 100% but more, maybe something like 105% of Medicare. CMS sets Medicare rates. The ratio you are seeing for billed charges to Medicare is not unusual but varies by service. My employer-provided insurance might pay up to 2 times what United paid for Medicare Advantage, but it’s not easy to compare except if the services are exactly the same. In addition I would have a $7000 deductible, and my premium went up 12% from last year to this year.
Plenty of great ideas have been proposed, implemented, and abandoned because some stakeholder lost out by it.
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The blame for that lies with legislators. They’re not automatons. Various parties simply pretend they are.
@Art Deco:The blame for that lies with legislators.
I’ll say. From time to time they throw a huge monkey wrench into the works, to get a headline that says they solved a problem, and then it turns into a disaster over the next five years as all the players adjust to it. See also “Affordable Care Act”. Then they meddle again to correct for the thing they broke before and then that breaks something else.
@Brian E:A serious effort to reduce obesity could decrease the nation’s healthcare bill substantially.
Twenty years from now maybe. There’s three problems with this as a solution:
a) End-of-life care. Everybody dies, and almost everybody dies of being very sick. Non-obese people die later of something else, could be cancer or whatever, but the last six months of life is where a lot of the money goes. About 10% of total health care spending is on end of life care, but 10% of people don’t die every year. Math is a harsh mistress.
b) Money spent on health care now is largely spent on people who are sick now. Money spent on obesity now is largely spent on people who are obese now. Getting to be not obese takes time, doesn’t work for everybody, and doesn’t immediately cancel out the effects of having been obese.
c) Pensions 401ks and Social Security and whatnot would have to support people for more years, and eventually they’re going to hit their last six months no matter how much longer they live. End-of-life care plus extra years of life has to be paid for and it’s not obvious that it would be less than what it is now.
“Yes, that was the stated idea. But premiums haven’t been kept down.”
No, that was the sales pitch. Premiums will go down when we tax the rich out of existence, followed by eliminating the entire military and ICE of course. The Ministry of Information will enforce compliance’. All for the greater good as handed down by our betters.
Niketas C., it wouldn’t take 20 years to receive a benefit, IMO. Some of the benefits would be experienced almost immediately.
I posed this scenario to Grok: “If the US established a policy that rewarded citizens with a personal payment for BMI under 26% and it took the country 5 years for 70% of the population to reach that target. how many years would it take to begin reducing national healthcare costs. what would be the initial savings and the effect in 15 years.”
Regardless, it could be the next step in the MAHA movement.
@Brian E: Without getting into the quality of Grok’s modeling, and the complete neglect of the cost to reduce the entire obese population assuming we had any idea at all how to do it, and taking that number at face value: $1.7 trillion over 15 years. But current health care spending is more than $4 trillion over 1 year.
So that’s a 3% reduction in health care costs achieved by waving a magic wand. Which is fine, but health care costs have been increasing 3% every year. Over 15 years, starting at $4 trillion increasing 3% annually, that’s $74 trillion and Grok is thinking the magic wand could save $1.7 trillion. (You will look in vain for the effect of the ACA on that graph, incidentally.)
Any real program to do this, assuming it could be invented, would have costs as well as benefits and would have to be based on sound modeling. It would not be distinguishable from noise, I’m afraid.
That said, everyone who is obese, it would be in their best interest not to be. We just can’t expect miraculous savings as a result.
Niketas C., touchet. I used the word substantially.
Since we’re not likely to remake the health care industry, for a variety of political reasons, if we can make some savings here and some there, we should do it.
@Brian E: if we can make some savings here and some there, we should do it.
I don’t disagree with that, but at the rate it’s going it will break before it can be fixed or even controlled.
Regardless, people should do for themselves what they need to do to be healthier. So many don’t–I certainly don’t do all I could do, arguably I’m not even getting the low-hanging fruit. That’s a revealed preference.
Niketas C., will it break about the same time the imaginary SS lockbox runs out of imaginary money?
Both SS and Medicare need to be means tested. That used to get Democrats hackles up when I suggested they’re essentially welfare, but both programs are a form of welfare, as they’re now administered.
@Brian E:will it break about the same time the imaginary SS lockbox runs out of imaginary money?
You got me, but there’s lots of ways SS could be fixed in the sense of not paying out more than it takes in. It cannot be fixed in the sense of “enough productive people in the economy to provide goods and services to people who don’t produce any.” As the population pyramid inverts, eventually the working fraction cannot support the non-working fraction out if its production without suffering a decline in its consumption.
Imagine that in 1940 the government used to assign one old person to every 12 families family to feed, clothe, and shelter. Imagine that in 2090 they assign two, or three, to every single family. That’s what SS really is if you cut out the dance done with taxes and checks. Doesn’t matter what the mechanism is, fully funded SS, 401ks, gold buried in the yard, whatever. Money can’t buy what is not produced.
If these trends continue, 100% of those who work will be working in health care taking care of old and sick people, and fewer than half of people will work at all. Since that obviously can’t really happen, obviously the trend can’t continue, therefore something will break it. We probably won’t like what it is.
Brian E on January 16, 2026 at 8:35 pm:
“Both SS and Medicare need to be means tested.”
But means tested how? Or against what metric?
I suggest it has to be based on income during your working life, rather than your income during retirement.
If you saved and invested for retirement and for your elder healthcare, you should not have to subsidize someone who did not, but put their decent income stream into buying new cars every two years and taking lavish vacations or other lifestyle expenses.
As it is, after paying regular tax rates on the 85% fraction of our SS income, plus taking out our Medicare premiums, we net about 40% of the nominally received (and COLA adjusted) SS amount. Fortunately we don’t really need that income so we gift the bulk of what is left to the kids and grandkids so they have a cushion for when the system collapses and the government comes looking at taxing their income to fix the mess. And luckily SS does not fall under the added 3.8% factor for net investment income tax (NIIT) passed as part of the Obamacare hoax [at least not yet!!].
@ NC: “We probably won’t like what it is.”
This led me to visualize a campaign of bill board signs across the country showing:
Reality Is Not Optional [in 3 ft high letters]
(Source: blogger LG, 2022)
We Probably Won’t Like What It Is [in 3 ft high letters]
(Source: blogger NC, 2026)
@R2L:If you saved and invested for retirement and for your elder healthcare, you should not have to subsidize someone who did not, but put their decent income stream into buying new cars every two years and taking lavish vacations or other lifestyle expenses.
This is essentially an argument for no Social Security and letting people keep their money. I’d go for that.
But like I said, the population pyramid is inverting, so moot.
“Both SS and Medicare need to be means tested.”
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No, they do not. The programs would be more actuarially sound if you did the following:
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(a) Stop awarding disability benefits to people for ‘anxiety disorders’ and ‘mood disorders’. Critics of the disability program have also suggested some procedural modifications.
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(b) Institute cohort-specific retirement ages. The age for a given cohort would float during the course of the subject’s work life, then freeze when said cohort reached age 55. The utility of this is that you can arrange for the ratio of beneficiaries to workers to bounce around a set point.
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(c) Maintain expenditures on Medicaid and Medicare at a roughly fixed % of total personal income flow by instituting a deductible and adjusting annually.
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It might also help if you financed Medicaid as follows:
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(i) A distribution to the states and territories of a value which is a formulaically determined % of total personal income flow. The distribution to each state or territory would be positively correlated with population and inversely correlated with per capita personal income therein.
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(ii) a flat tax on total personal income set to finance long term care (in conjunction with a portion of the federal grant).
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(iii) a flat tax on the income you have below a certain level which resolves to a capitation if your income exceeds that level. The capitation would be a function of nominal personal income per capita in your state and would be adjusted annually. This tax would provide a portion of the financing of regular medical care for the impecunious, the rest being provided by a share of the federal grant and premiums paid by those who sign up.
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(iv) a flat tax on any income you have in excess of a certain threshold. The threshold would be a function of the population of your household. This tax would be assessed by the state retrospectively. The levy rate would be stiff but pro-rated according to the proportion of the year you were on the Medicaid rolls. This can replace the formal means test for Medicaid.
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Posit the deductible for Medicaid financing of long term care would be (as it is now) contingent on your attachable assets and income and not a fixed dollar value. That for financing medical care would have a fixed dollar value (adjustable annually) and possibly co-pays as well.
This is essentially an argument for no Social Security and letting people keep their money. I’d go for that.
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Ayn Rand took her bloody Social Security benefits.
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When Congress enacted Social Security in 1935, the ratio of members voting for the legislation to the sum of those voting against or not voting was 5.8 to 1. Two thirds of the Republican opposition favored the legislation. A prominent dissenter was James Wadsworth; IIRC his complaints were practical, not normative.
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No, we do not have an inverted population pyramid.
@Art Deco:No, we do not have an inverted population pyramid.
What I said was the population pyramid is inverting. Critical difference there.
Simple matter of applying the actuarial tables to the population pyramid today.
It is in the process of inverting now and will be inverted in the future unless demographics quickly and radically change. Filling in with immigrants who don’t assimilate would change that quickly and radically, but brings other problems. Much higher TFR would change that but not quickly.
Ayn Rand took her bloody Social Security benefits.
Did she and her husband pay taxes? That part isn’t optional, as I recall. If they paid taxes, and already in it against their will, why should they have forgone the benefits?
I’d give up my benefits, if I’ll ever be offered them, if I got all my payroll taxes back with interest, which I won’t because the money was already spent on people who got their benefits.
When Congress enacted Social Security in 1935…
In 1935, a 25 year old male had only a 63% of surviving to age 65. In 2025, a 25 year old male is estimated to have an 84% of surviving to age 68.
In 1965, when that 25 year old from 1935 was retirement age, there were 4 people working to pay his benefits. In 2068, when the 25 year old from 2025 is retirement age, there will be an inverted population pyramid. 20% of the population will be 70+, only 59% of the population will be of working age, and at at typical labor force participation rates fewer than 40% of the total population could be assumed to actually work. Consequently for every retiree 70 and above, about 2 people or fewer would be working to support him. And those same people of course supporting children as well.
Brian E: Both SS and Medicare need to be means tested. That used to get Democrats hackles up when I suggested they’re essentially welfare, but both programs are a form of welfare, as they’re now administered.
Brian, this isn’t just economics. When the gov’t taxed me for them, the gov’t told me that social security and medicare were an annuity and a medical insurance program. I saw that to be the case for my parents, and so I trusted the gov’t. These programs are a big fraction of my relationship w/ the gov’t. Breaking them would break a big fraction of my remaining trust in the government.
“You might be gratified to know that The Everett Clinic was purchased by Optum United though and is no longer locally owned and is known as Optum Care.
Providence Health and Services covers five Western states, New Mexico, Texas, and Hyderabad in India.” –
Niketas C.
I’m all too aware of that. My issue is that in this area we cannot doctor shop or choose our own doctors. Even if we could go to Seattle now, the health organizations will assign us a doctor. There is little choice – no competition. True of every specialty. I have a lot of skin cancer – I’ve been assigned to a dermatologist that I don’t really care for. I’d like to change but cannot.
We can no longer drive on the freeways, so we’re confined to the local area for medical care. And we are forced by these monopolies to take what they give us.
And speaking of Optum, the new owner of Everett Clinic. I never had an issue with billing before they took over. Three times in the last year I have had to wrangle with them over the fact that they fouled up the way they submitted a bill to Tricare for Life, resulting in Tricare rejecting the bill.
Creating these medical bureaucracies has driven doctors out of private practice decreasing choice and competition. Only the bureaucracies have benefitted from this.
Brian E, thank you very much for the post on BMI and Medicare. It inspired an very productive discussion with preplexity.ai / google gemini.
In 1935, a 25 year old male had only a 63% of surviving to age 65. In 2025, a 25 year old male is estimated to have an 84% of surviving to age 68.
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People live longer. The adjustment is to raise payroll tax levies and increase the retirement age. Unlike Europe, we’re not seeing long term decline in the size of annual birth cohorts.
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