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Health Care Reform: Now It’s Our Turn

November 1, 2017

Quarterly Performance Report Fourth Quarter, 2017

One year after the election of President Donald Trump, we’ve seen many changes, many of them good and in so many areas, except on health care.

The American people elected a Congress and a president who promised to repeal the Affordable Care Act, a.k.a. Obamacare. After the election, Trump went right to work to keep his campaign promise. But 12 long months later, it’s pretty clear Congress won’t keep its end of the election bargain.

There’s an old saying attributed to Alexander Graham Bell: When one door closes, another door opens. Congress may have slammed shut the door on the “repeal and replace” of Obamacare, but it opened many doors for health care reform.

What Trump’s HHS Can Do

The Affordable Care Act gives massive discretion to the Secretary of Health and Human Services (HHS). Former Kansas Gov. Kathleen Sebelius, HHS Secretary at the time Obamacare was first implemented, misused that discretion to impose new federal mandates, expand Medicaid rolls, shut down high-risk pools, limit high-deductible options, and reward politically connected businesses and labor unions.

In sharp contrast to his predecessor, Trump’s first HHS Secretary, Dr. Tom Price, promised to use that same discretion to roll back many Obama-era regulations and replace them with health care options to encourage consumer-directed health care, empower low-income Americans with work requirements, and restore the role states have historically played in health care.

Secretary Price wrote to all 50 state governors promising them unprecedented flexibility to replace top-down Obamacare and Medicaid programs with patient-centered, free market-oriented health care solutions. By using a legal process within both the Obamacare and Medicaid laws, Price encouraged states to apply for ‘waivers’ allowing them to deviate from the one-size-fits-all federal model.

What States Can Do

Trump’s HHS set the stage for real, state-led health care solutions. Sadly though, very few states have taken Secretary Price up on his waiver offer. Some governors and legislators may be waiting for Congress to repeal and replace Obamacare. Others may have simply given up promoting free-market ideas in the health care after so many years of unimpeded intrusion by Washington. And others simply may not believe a federal agency really is open to reducing their own power.

But it is time for states to return to this arena. Now it’s our turn!

Here at Heartland we have reviewed the law. We have sat down and visited with members of Congress, HHS policymakers, governors and state legislators. We are working with leading experts in this area. Here is what we discovered.

States can apply for and receive waivers to implement free-market Medicaid reforms. HHS is practically begging for requests that impose work requirement on the millions of able-bodied adults on Medicaid, similar to the widely successful 1996 welfare reform. It will consider Medicaid block grants, defined-contribution payments, Medicaid health saving accounts (HSAs), and direct primary care initiatives. The Medicaid waiver door is wide open.

Using waivers to reform Obamacare is more difficult, but HHS is opening avenues for reform there too. Obamacare waivers take legislative, rather than solely gubernatorial approval so state legislators need to start now to formulate legislation and approve waiver requests. They can restart high-risk or reinsurance pools, expand general population HSAs, waive Obamacare penalties for individuals and businesses, and remove community ratings and guaranteed renewal.

Through the Medicaid and Obamacare waiver doors, states can roll back decades of government control of our health care decisions. They also can implement other parts of a consumer-driven health care agenda that Heartland and other free-market advocacy groups have been writing about and promoting for decades.

The Prescription Drugs Door

Heartland has identified another policy door President Trump could open wide: making new prescription drugs available sooner, less expensive, and safe.

Prescription drugs are the fastest growing segment of America’s health care budget. Just fifteen years ago, we were spending about $125 billion on pharmaceuticals, and now the cost is closer to $325 billion. For the last year of available data, drug spending increased at nearly three times the rate of all other health care expenditures. Within Medicaid, the increase was a staggering 24.3%.

Smart drug expenditures can reduce overall spending on health care by reducing the need for other health care spending, such as hospitalization. They can also reduce unnecessary pain and suffering and time away from work, and extend life. No one doubts that the future of health care includes increasing the share of total spending devoted to prescription drugs.

But the high and rising prescription drug prices of recent years are not sustainable, and the good news is that they are not inevitable. A principal driver of rising prices is the Food and Drug Administration (FDA), which uses an antiquated trial and review process from the 1960s to approve new drugs. Experimental drugs may languish in the approval process for a decade or longer. Direct outlays to get a single new drug from lab to patients can top $1 billion.

Some promising new drugs are abandoned because of the cost and length of the FDA process. Some breakthrough drugs are available in other countries but not here, forcing Americans to travel abroad for treatment. As a result of the FDA roadblock, the U.S. is losing its position as the preeminent country for life-saving treatment.

President Trump has appointed as head of the FDA Dr. Scott Gottlieb, a scholar who has written extensively about the need for FDA reforms. As Commissioner, Dr. Gottlieb announced that the current drug approval system is on an unsustainable path, and America needs to do something now to make the entire process less costly and more efficient.

We believe the answer Commission Gottlieb is looking for lies outside the FDA. Why not create a path around FDA for people who want and need faster access to prescription drugs?

Let people choose which path they want to take: through FDA, which limits their choices to drugs that have gone through “gold standard” trials for efficacy for a decade or longer, or a free-to-choose track that goes around FDA, giving patients who choose it access to new drugs after only two or three years in the pipeline, drugs that have completed safety trials but are still in efficacy trials.

The Heartland Institute has worked with Bartley Madden to produce a detailed presentation of such a plan, called Free to Choose Medicine (FTCM). We have model legislation and have introduced the idea to scores of policy experts.

We are hopeful that key Washington leaders, including President Trump himself, realize the key to affordable prescription drugs lies in replacing the old top-down-government-knows-best approach with free-market principles with one goal: improving the lives of all Americans.

Conclusion

It would have been nice if Congress had repealed and replaced Obamacare with a free-market alternative. It would have been tremendous if Congress recognized that patients and their health care providers should be in charge, not government bureaucrats. Alas, that did not happen.

Congress’ failure opens doors to exciting new opportunities for health care reform. We can free states from Medicaid and Obamacare dictates via robust waivers, implement state-level reforms that reduce the cost of health care, and speed up access to potentially life-saving new drugs.

Simply put, we can and must rejuvenate and transform America’s health care system. The doors are wide open. Your financial support is needed if these projects are to be undertaken and successful. I hope you will join us.

Article Tags
Health Care
Author
Tim Huelskamp is the president of The Heartland Institute.
thuelskamp@heartland.org @CongHuelskamp

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