Trump on Obamacare
By David Henderson
Many people say they are humbled when others bestow honors on them. I’ve never understood that. When I get honors, I feel proud, if I think I deserve them. I get humbled when I make mistakes.
I’ve consistently made one mistake with regard to Donald Trump: I’ve underestimated him. Very early on, I thought he had no chance to win the Republican nomination. (Although I did win what I regarded as easy money by betting Tim Kane that Trump would not pull out before Jeb Bush did.) Second, I thought he would lose the general election to Hillary Clinton. I did not predict anything close to a landslide for Hillary. But I did predict that it would be a decisive win, that he would win fewer than 240 electoral votes, and that the networks would announce it at 8:01 p.m. PST.
In the days ahead, I’ll give my comments about what to expect from a Trump presidency. But they will be very tentative. I don’t think anyone knows, maybe not even Trump. I’ll also give my thoughts on some other election outcomes, here in California (two of which I was involved in) and elsewhere.
But for now, I want to address an issue that Trump has already made some statements about: repealing Obamacare. Here’s what Wall Street Journal reporters Monica Langley and Gerard Baker wrote after an interview with Trump:
Mr. Trump said he favors keeping the prohibition against insurers denying coverage because of patients’ existing conditions, and a provision that allows parents to provide years of additional coverage for children on their insurance policies.
The BBC mistakenly referred to these as “the two pillars of the bill.” Only one of them–the prohibition against denying coverage–is a key provision. The coverage for “children,” that is, people up to age 26, is a small part of Obamacare.
As I’ve written on Econlog before, there are two key provisions of health-insurance regulation that destroy health insurance as health insurance: the combination of guarantee issue and community rating. Either one of them on its own does not destroy insurance. Together they do, by taking the insurance out of insurance. With guaranteed issue alone, the part of Obamacare that Trump says he wants to keep, health insurance could still function as insurance. Insurers could say, “Sure, we’ll insure you even though you have cancer. That will be $50,000 a year.” That is what would happen if he didn’t keep community rating. With community rating–that is, people being charged the same regardless of risk–insurance could still be insurance. Insurers could charge everyone the same but simply deny coverage to those who are too high-risk.
So it’s guaranteed issue that Trump says he wants to keep; he has not addressed community rating. My fear, though, is that he meant he wants to keep both and that possibly he, or the reporters, didn’t see the clear distinction. Both provisions are, unfortunately, enormously popular, with Republicans and Democrats. They’re also popular with the general public. One data point: a self-employed guy I know who buys health insurance for him and his wife now pays approximately twice what he paid before Obamacare and it’s for worse coverage. When I explained to him that it was due to these two provisions, he responded that he likes both provisions but he wants to pay less.
By the way, more recently, Megan McArdle has written an excellent piece on this.