Thanks to all of the issues with our vast and complicated healthcare system, any attempts at reform will require massive amounts of effort, political capital, cooperation from various public and private entities and, likely, luck. So while Donald Trump ran on a platform of "repealing and replacing Obamacare", it might be wise to start with some small changes to the Affordable Care Act (ACA) that could still have large benefits.
I would begin by amending its "essential health benefits" provision which mandates the minimum of what plans in the health care exchanges cover. Besides covering obvious items such as emergency services and hospitalization, the ACA also requires coverage for pregnancy, maternity and newborn care, breastfeeding (including breast pumps), mental health, substance abuse disorders, pediatric services and birth control. This coverage must be bought even if a patient is single, menopausal and/or has no family history of mental health issues. It's the equivalent of making a law that bundes auto insurance with boat insurance and mandates all car drivers purchase both. This coverage unnecessarily adds to the cost of the policy.
Health care consumers would be better served if they had more leeway in terms of what type of plan they want to buy. According to the Urban Institute, almost a million consumers saw their plans cancelled for not complying with the ACA and likely saw hefty premium increases. As premiums for marketplace plans continue to rise (around 25 percent nationally and as high as 116 percent in Arizona), consumers need to have additional options to lower their health insurance bill. Why not give individuals the option of having a health savings account (HSA) coupled with a high deductible health plan that will only cover catastrophes — like all the other insurance plans we buy, such as for our cars and homes?
The Trump administration can also combat the cost of pharmaceuticals by eliminating regulations that are currently hampering efforts to move to value-based contracts between pharmaceutical companies and payers. In these innovative arrangements, the pharmaceutical manufacturer would rebate part or all of the price of a product purchased for patients who don't achieve a certain outcome (such as a pre-specified LDL or HbA1c level). In other words, they only end up making money if the drug actually works. Besides the potential cost savings, another potential benefit would be that pharmaceutical companies would no longer be incentivized to develop and market drugs for broad indications like depression when they know it only works in a small percentage of the population. But some regulatory changes (to the Best Price rule as well as regulations surrounding the Anti-Kickback Statute) would be required to allow this.
Finally, the Trump administration can amend policies that protect expensive biotechnology drugs from generic competition even if there is no patent protection. This includes the 12-year biologic drug exclusivity period, seven-year orphan drug protection, and the difficult and expensive biosimilar pathway to drug approval (which often requires head to head trials). In 2015, the Biotechnology Industry Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA) together spent over $27 million on lobbying, compared to only a bit over $3 million spent by the Generic Pharmaceutical Association (GPhA), so it's no wonder we've ended up with these anti-competitive policies.
Shortening exclusivity periods and eliminating hurdles to biosimilar approval could easily save billions in annual costs.
The ACA does not need to be completely repealed to deliver its promise of affordable health insurance. Some simple and quick tweaks, though unpopular with certain industry groups, could have a broad impact in terms of costs to the consumer and the system as a whole.
Maxim Jacobs is director of healthcare research for Edison Investment Research. He has 15 years experience researching and investing in the health care sector. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.