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9 Ways for Trump to Break the Health Care Monopoly

Now that the new administration is planning to replace Obamacare, an expert suggests innovations included in the new health care bill. The new administration under President Trump has promised significant changes to address the issues in health care once in office. Yet two months after taking his oath, he still doesn’t have the detailed plan and outline to repeal and replace the Obamacare or the Affordable Care Act that most critics say is not really affordable.

In his speech last February, President Trump only laid out the five key principles his administration is working on to “save Americans from [the] imploding Obamacare disaster.”

“I am…calling on this Congress to repeal and replace Obamacare with reforms that expand choice, increase access, lower costs, and at the same time, provide better health care,” said Trump in his first speech to the Congress. He also said that Obama care’s mandate to give all Americans health insurance “was never the right choice for America.”

He mentioned the following principles that the new bill will encompass to replace Obamacare:

  • Ensure that all citizens with pre-existing health conditions shall be assured with health insurance. All who are presently enrolled in health-care exchanges shall have a stable transition to the new one the congress is brewing up.
  • Give tax credits and expanded health savings accounts to people who can buy their own coverage. The design or their coverage plans shall also be flexible.
  • Provide states with flexibility and resources for their Medicaid programs to ensure that “no one is left out,” especially the poorest of the population.
  • Make legal reforms to defend patients and doctors from “unnecessary costs” that is responsible for boosting insurance costs under the Obamacare program. At the same time, the cost of drugs should be brought down.
  • Create a national insurance marketplace to let insurers peddle health plans across the country.

But to an expert on healthcare and economic laws, this is not enough. A bill must be made to bust the monopoly in health markets which is the primary reason behind overpriced healthcare cost across the country. The new bill that President Trump should support is a bill that can encourage new ways of providing health services and coverage to the larger American population.

In the article, How Trumpism Can Bust the Medical Trust, Clark Havighurst, a law professor at Duke University suggests the need to launch a “populist war” against health monopolies to encourage competition between health businesses and provide patients with various choices.

Here are some of Havighurst’s suggestions on how President Trump should reform the health care system in the country.

  1. Recognize that monopoly in the health care system is prevalent. According to studies, hospital mergers all around the country have been one of the causes of rising hospital cost being passed on to consumers, insurance companies, employers and the government. This consolidation, otherwise known as a monopoly, not just raises the price of the hospital and medical service costs but also eliminates jobs, decrease access, and lowers the quality of services for patients. Since the Affordable Care Act (ACA) was enacted, hospital consolidation increased by 70 percent.  In 2014 alone, 95 hospital mergers happened in the country. The ACA gave incentives to health providers under Accountable Care organizations (ACOs) which prevented regulators from meddling with hospital mergers.

    For example, Aetna is buying off its rival company Humana. In San Francisco, there are only three hospital chains. Physicians and doctors, who are usually independent professionals, are now being turned into employees. In 2015, one out of four specialists is now hospital employees. This consolidation of market power in the hands of one health care provider or hospital in addition to decreasing competition is simply monopoly.

    Without the meaningful competition that encourages providers to innovate for their consumers, health care monopoly results in an even higher cost of health care and lower quality of service.
    A study published in 2015 proved that health care costs for those who are privately insured varied differently all over the country. For some regions, the cost of the same health service is more expensive than in other states. The research pinpointed this to the hospital monopolies in some regions that have a sole market power to jack up prices without losing their customers. In these monopoly markets, prices for health care services are fifteen percent higher than in regions with four or more hospitals.

  2. Health care reform should apply a populist approach. During the height of populism in the first part of the 20th century, the people’s anger wasn’t geared towards political elites, (unlike today) but at massive monopolies also called “trusts”.   Corporate trusts abused their market powers by engaging in anticompetitive practices in the past. This led to the enactment of the Sherman Antitrust Act in 1890. For years, trust-busting campaigns, which started during Theodore Roosevelt’s term, has been promoting healthy competition among private businesses by encouraging them to serve the public. But more than a century after the law monopoly capitalism still flourishes in America. Even its citizens’ health care is being monopolized by medical businesses.

    “If today’s populists are equally serious about protecting ordinary people, they should declare war against monopoly in health care markets,” says Havighurst. According to him, hospitals, health systems, and physician groups have more power to exploit the public because they can charge high prices freely and without accountability. “Although health insurers negotiate prices with multiple providers, the bargaining is never done service by service,” says Havighurst. “Rather, the negotiations are over large bundles of unrelated services.” Hospitals with monopoly can even charge $30 dollars for an aspirin, without the customer even knowing it as most bills are covered under a package paid by their employer (or so they think). For populists, this scheme redistributes the “wealth from ordinary people to an already privileged class of doctors and hospital administrators.” It is the ordinary people who suffer from this system. Employer-paid premiums which is believed to be shouldered by the company are often deducted from the employees’ salaries directly or indirectly. Havighurst believes this is where populism should come in place. Exposing the monopoly of these hospitals and pushing for transparency in the pricing of care services can bring about change to the system that benefits not the larger people but the few health industry elites.

  3. Health Care monopoly victimize the ordinary people. Every year, America is spending up to a half trillion dollars on healthcare alone than the rest of the world. But what most people don’t know is that this excessive spending comes out of the pocket of premium payers without their knowledge.

    According to Havighurst, this problem can be traced back to the tax subsidy, which removed the value of health coverage from “taxable income from payroll and income taxes”. Usually, employers take on the responsibility of shopping for health coverage of their employees. However, in reality, employers do not aim to purchase quality and efficient health coverage with protection against financial risks. Instead, they are only interested in the tax loophole.

    Any economist would know that the true payer of these costs is not the employers but the employees. The hidden costs are derived from lesser take-home pay and other benefits, but employees think their employer pays.
    “..Middle- and lower-income employees regularly bear the unjustifiably high and uncontrolled costs of health coverage designed principally to accommodate the values and economic interests of the healthcare industry and other elites,” says Havighurst in his article.

  4. Give incentives to economize insurance. Havighurst thinks if the new President really cares about the interest of the “forgotten men and women of our country,” he should be open to new ideas when it comes to the health care of all Americans. The first thing he suggests the president should do is to make a bill that will provide all consumers with incentives to spend less when looking for insurance. For instance, employer-paid premiums should be considered taxable incomes and there should be “refundable tax credit” which can only be spent on health insurance. This credit should be adjustable and big enough to cover those without Medicaid coverage. Havighurst thinks that this can deem the individual mandate under Obamacare useless.
  5. Inform people on how much health care truly costs. Consumers should know what they’re paying for so they will have a choice and make ways in which they can economize while shopping for health care coverage. This knowledge will provide health care consumers with a wide range of purchasing options. This will prevent them from buying ludicrously expensive coverage.
  6. Finance “one-time-only buy-in”. Anyone with a preexisting condition should be guaranteed by a “one-time only buy in” coverage. This can easily be renewed and can hinder insurers from picking only customers they consider “good risks”. At the same time, patients cannot fool the system with coverage upgrades once a fatal illness attacks.
  7. Populist’s legislation should build user-friendly marketplaces. The new law that the president should think about should follow the steps of the “health alliances” based on Hilary Clinton’s reform in 1993. Non-profit organizations and employers should build an alliance that will evaluate and approve health insurance plans based on geographic areas. These alliances are immune from medical interests, therefore, creating an efficient and fair market for health coverage.

    “The idea is to have some entity–employer, private or possibly a public sponsor–set up a menu of choices for people and give them a lot of information about each choice,” suggests Havighurst. These set of choices may range from the very basic to the extravagantly expensive coverage, where people can decide for themselves which coverage suits them and taking into account their ability to pay and their history of medical conditions. Lower income people should be subsidized as well to make sure that even they could get good quality coverage. If they want more expensive coverage, they’d have to pay out of their pockets.

    This way, people can get more out of their salaries and still be protected by good health coverage. “Give them a whopping tax credit if they’re covered in some way, not related to how much they spend,” adds Havighurst. “Then they have a real incentive to go out shopping for lower-cost coverage, and the industry and insurers have strong incentives to find cheaper ways of giving people the basic things they need.”

  8. Make Innovative contracts with insurance subscribers. Currently, patients with insurance are entitled by their contracts to all necessary medical services and are guaranteed with inadequately defined standard of care. “[Some contracts use] vague terms [which] require courts to refer to medical opinion and tends to hold that all patients must receive any service- no matter how costly- having some chance of yielding a medical benefit,” says Havighurst.

    Contracts should clearly specify services that the patients are entitled to. This, in turn, will create a room for serious economizing within the margins of acceptable medical practice.”
    However, these contracts won’t be palatable to consumers if they do not have the financial basis to consider them.  But when this kind of contract is in place, “clinical practice guidelines can be modified to define the rights of patients who have accepted some degree of cost consciousness in their future care.”

  9. Strong Antitrust enforcement should be implemented. Although Havighurst thinks that a market by market trust busting enforcement is too vast and unpractical for the current political climate, in his research on Provider Monopoly in Healthcare, he suggests a vigorous antitrust enforcement to “mitigate the harms of monopolize provider market power.” This regulatory initiative may change the hospital’s anticompetitive contracts between providers and payers. “By enabling competing health plans to bypass, or foster new competitors for, local monopolists, such antitrust or regulatory actions could promote price competition where it is currently lacking,” suggests Havighurst.

    Carl Havighurst is a law professor emeritus at Duke University who specializes in antitrust law, healthcare law and policy, and economic regulation. He is the lead author of “Who Pays? Who Benefits? The Unfairness in American Health Care” and “The Provider Monopoly in Health Care”

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