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Trump HRA, Drug Pricing Proposals Confound Expectations

Analysis  |  By John Commins  
   October 26, 2018

A president who rails against the ACA and champions free markets now calls for expanding Obamacare's marketplace coverage and government controls on drug prices. Go figure!

With midterm elections looming, the Trump administration has provided another interesting week for healthcare policy.

Consider this:

  • On Tuesday, the same administration that has done as much as it could to undermine the individual health insurance markets created under the Affordable Care Act unveiled a new proposal that could send 7.5 million people into those plans.
  • On Thursday, President Donald Trump floated an idea to link Medicare Part B prescription drug prices to the prices paid by other developed nations, most of which have some sort of single-payer, government-run, national health plan.

The proposals have left observers and stakeholders either scratching their heads or dismissing the initiatives as a pre-election stunt to provide cover for Republicans who polls show are getting pummeled on healthcare.

"For decades, other countries have rigged the system so that American patients are charged much more—and in some cases much, much more—for the exact same drug," Trump said Thursday, after floating the Part B pricing initiative, which would not take effect until 2020.

"In other words, Americans pay more so that others can pay less. It's wrong. It's unfair," said Trump, sounding more like Sen. Bernie Sanders, I-VT than a conservative Republican.

Trump launched the proposal just as Health and Human Services issued a report showing that the price of 27 of the most expensive physician-administered drugs is 80% higher in the U.S. than it is in other wealthy nations.

PhRMA was not amused.

"The administration is imposing foreign price controls from countries with socialized healthcare systems that deny their citizens access and discourage innovation," PhRMA President and CEO Stephen J. Ubl said in a media release.

"Americans have access to cancer medicines on average about two years earlier than in developed countries like in the United Kingdom, Germany and France," Ubl said.

Republican leaders in Congress mostly said nothing. Senate Minority Leader Chuck Schumer, D-NY, dismissed the proposal and said it stands in stark contrast to the administration's efforts to kneecap the Affordable Care Act.

"It's hard to take the Trump administration and Republicans seriously about reducing healthcare costs for seniors two weeks before the election when they have repeatedly advocated for and implemented policies that strip away protections for people with pre-existing conditions and lead to increased health care costs for millions of Americans, Schumer told The New York Times.

HRA Proposal Protects Workers

Trump's HRA expansion proposal—which has been months in the making—didn't generate much attention in the media, even though the proposal could send about 7.5 million people away from employer-sponsored coverage and into individual Marketplace plans.

When the president announced earlier this year that the HRAs program would get an overhaul, critics had raised concerns that employers would send their sickest employees to the marketplace, undermining them with adverse selection.

It appears that robust protections for workers were baked into the proposed rule.

"I'm having a hard time understanding it," John Barkett, who served in the Obama administration's Office of Health Reform, says of the Trump administration's proposal to expand Health Reimbursement Arrangements. 

"What leapt off the page for me after reading the proposal was how much they cared about protecting the individual market from adverse selection," he says. "They were very concerned about putting this rule out in a way that wouldn't let employers send their sickest workers into the individual marketplace."

Barkett notes that the proposal requires employers to offer HRAs or traditional group coverage.

"You can't do both," says Barkett, now senior director of policy affairs at Willis Towers Watson. "If they wanted to create a way for employers to keep their sickest people on their own plan and send other employees out to the individual market, they wouldn't have put that requirement."

The Treasury Department's estimates that average premiums will change by less than 1% as a result of the projected 7.5 million people transition to the individual market under the new HRA.

"Adding 7.5 million people and having no change effectively in premiums shows that they don't necessarily agree with the idea that the sickest people only are going to be the ones who are going into it," Barkett says.

The Prospects

Trump's Part B proposal got a lot of attention in the mainstream media, but it's not clear how much enthusiasm it will generate after the elections. The silent response to the proposal from Republicans was deafening. Efforts by the Obama administration to lower drug prices were quashed in 2016.

Even if the proposal goes nowhere, Rick Weissenstein of Cowen Washington Research Group in a note to clients called it "politically shrewd."

"The timing, less than two weeks before the mid-term elections clearly gives him the high ground on a topic that is as populist as they come," Weissenstein said, according to Politico. "It also puts the Dems on the defensive on an issue they have used to hammer Republicans for years."

Barkett says the HRA proposal may not be see the sort of blistering partisan opposition that other Trump Administration healthcare reforms have faced, in part because there are components of the proposal that appeal to Democrats and Republicans.

"This is not an issue that falls neatly into ideological storylines," he says. "It would give the Affordable Care Act side of the House more lives the individual market and not necessarily just sick people. It would give the conservative healthcare side policies that they've been pushing for a long time, like flexibility, portability, and competition."

“Other countries have rigged the system so that American patients are charged much more—and in some cases much, much more—for the exact same drug. It's wrong. It's unfair,”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


Trump proposals seen by some as a 'shrewd' pre-election distraction.

Government intervention in drug pricing contradicts Republican free market principles.

HRA proposed reforms would expand the Marketplace plans that Trump has worked to undermine.

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