Healthcare’s Forecast for 2017

posted by David W. Johnson on December 13, 2016 - 12:36pm

President-Elect Donald Trump ran his campaign on a promise to repeal and replace Obamacare. His recent appointment of Rep. Tom Price, author of the “Empowering Patients First Act”[1], as HHS secretary indicates that he is serious.[2] Price's proposal is a market-based approach that reduces government spending, narrows the range of care that insurers are mandated to cover, offsets premium increases for older, sicker patients with tax credits, caps the employer-tax exclusion, and reverses Medicaid expansion. 

While the full implications of "repeal and replace" remain to be worked out, the Trump administration has an opportunity to foster a dynamic healthcare market aligned with patient and customer needs.

Where Process Trumps Outcomes: The Stage Has Been Set

The current U.S. healthcare system is centrally-administered, complex and runs on reimbursement formularies that have not changed in the past 50 years. This has given private market incumbents the opportunity to exploit the system for their own economic benefit. Patients navigate a system of artificial economics that optimizes revenue, drains resources and curtails national productivity at the expense of health and well-being.

For the first time since 2009, the U.S. will have a unified government with all three branches of government under one party’s control. Under a Trump administration and unified Republican Congress, there is potential for significant U.S. healthcare reform legislation.

The Republican Party agrees that serious legislative measures need to be taken to ensure lower premiums and more choice for consumers. There is an opportunity for a new plan to see that healthcare pricing and regularity policies facilitate better resource allocation.

Until We Know More

In the short-run, before the new HHS secretary proposes and implements major legislative changes, we can expect to see healthcare expenditures run at higher levels than inflation and consume a greater percentage of GDP as incumbents continue to pursue historically successful business practices that optimize revenue. This, of course, creates opportunities for new market entrants to offer more value in the form of lower-cost, consumer-oriented solutions.

Over time, these twin forces of incumbent pursuit of perverse incentives built into the current reimbursement system and new business models responding to market demands for better, cheaper and more convenient options will shape healthcare’s supply-demand relationships. In the long run, market-driven reform trumps inefficiency, but not without an epic fight.

In this sense, healthcare reform distills to a debate about government’s role in healthcare provision. The battle will be waged in both the marketplace and legislative chambers.

Conclusion: Employ Raging Pragmatism to Fix American Healthcare

America does not need to spend 18% of its economy to provide superior healthcare to everyone in the country. Perverse payment incentives have created a fragmented, cruel and bloated system that harms far too many Americans. Despite massive investment in healthcare, Americans are sicker than ever. More of the same will drain national resources, stifle innovation, accelerate income inequality, and curtail national productivity. A centrist and pragmatic approach offers the best opportunity to deliver better healthcare for less money and free up enormous resources to fund other pressing needs and invest in more productive industries.

During his campaign, President-Elect Trump made big promises to deliver better care to all Americans. All Americans wants better, cheaper, more convenient and compassionate healthcare. As he oversees legislative changes to the ACA, Populist Donald Trump should heed those concerns and take into account how healthcare touches the lives of every individual and community while also ensuring that outcomes matter, customers count and value rules.