Legislation & Regulation

A Seer of Trump’s Coming Parses Repeal and Replace

Diana Furchtgott-Roth, adviser to three Republican presidents, gives her take on the dismantling of the ACA and what may come after.

Richard Mark Kirkner
Contributing Editor

Because Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, a free-market think tank, confidently predicted back in October what few people saw coming—Donald Trump’s electoral victory—I thought it just might be a good idea to listen to her now.

“I think it’s likely that Donald Trump will win the election,” Furchtgott-Roth told reporters at a Center for Health Care Journalism online panel just days before the election. That against-the-grain prediction and her market-based ideas for replacing the ACA stuck with me after the election. The Oxford-trained economist had been an unpaid adviser to Trump’s campaign and previously held a variety of economic advisory roles in the administrations of Ronald Reagan and both Presidents Bush, including chief of staff to George W. Bush’s Council of Economic Advisers.

As the Congressional Republicans set to work to dismantle the ACA, it seems like Furchtgott-Roth is someone worth listening to.

Accurate prediction

Diana Furchtgott-Roth

Return the power to regulate health insurance to the states, says Diana Furchtgott-Roth of the Manhattan Institute.

But first, I wanted to know: How did she predict with such confidence that Trump would win? “My thought that Trump was going to win was basically based on an analysis of the polls,” she says. “The polls that showed that Hillary Clinton was a substantial amount ahead assumed a larger Democrat turnout than Republican by about 10 percentage points, and the polls that showed them even, such as Rasmussen, assumed about a 3 percentage point greater turnout for Democrats than Republicans. That didn’t seem realistic to me because the turnout in the primaries was so much higher for Republicans and lower for Democrats.

“People in Washington and New York and on the West Coast are in a bubble,” she says. “For example, when I went to Nashville, Tenn., people told me, ‘Oh, it’s going to be a landslide for Trump.’ But when you’re in New York, everyone you know is voting for Hillary, so you’re inclined to say it’s going to be a landslide for Hillary.” Advantage Nashville.

Cold feet

A few days before our conversation, Congressional Republicans held a retreat in Philadelphia, where a number of them agonized over repealing the ACA and coming up with a viable alternative. The tenacity House Republicans exhibited in voting to repeal more than 50 times during the Obama years seems to have waned in the early days of Trump’s term.

But Furchtgott-Roth isn’t worried that repeal and replace won’t happen. “I really pity politicians who run in 2018 on the basis that they voted to keep Obamacare the way it is,” she says. (Remember, she made the right call in 2016.) “Premiums rose 25% to 30% on average this year. They’re going to rise the same amount next year. This year enrollment declined, and people want an alternative.” Some of the decline, say the ACA defenders, is because the Trump administration cutback on ads encouraging people to sign up.

It doesn’t look like the repeal and replace legislation is going to get enacted during Trump’s first 100 days in office. Furchtgott-Roth says that was to be expected: “Even tax bills usually are not signed until the August or September after the new president gets in office.”

As a preemptive strike to repeal and replace, the administration has a few tricks up its sleeve. “You might remember that just after the Affordable Care Act was passed, the Obama administration issued many waivers for small health insurance plans that were going to have to go out of business because they didn’t meet the minimum coverage standards,” she says. “These were plans that people generally liked and they wanted to keep. So the first step is the executive order issued by President Trump on January 20, allowing companies ‘greater flexibility’ in issuing different kinds of plans.”

In the longer term, the full ACA repeal wouldn’t kick in until 2018 or later with a phase-in of the replacement. One model could follow what Furchtgott-Roth and Galen Institute president Grace-Marie Turner laid out in a 2015 New York Times op-ed as a stop-gap for people who might have lost insurance had the Supreme Court struck down the ACA two years ago in King v. Burwell: issue state block grants equivalent to the sum of all the ACA subsidies that its residents receive. States could use those funds to provide premium assistance, called “health checks,” functioning like food stamps or Section 8 housing vouchers. “We would give people the resources to go and choose their own health insurance because that does not impede competition in the market,” she says.

One of the features of the ACA that Furchtgott-Roth and other critics cite as its chief flaw is the mandate for benefits like no lifetime caps and coverage for specific services like mental health, which they say drive up the cost of insurance. Her idea is to create “a very active market, even though it’s not mandated,” she says. “But right now when the government comes in and says you can only offer one kind of plan, it has to be unlimited lifetime coverage, it has to include maternity leave, maternity care, pediatric dental care even if you don’t have any children, then that just drives the price up.” And, she says, return the power to regulate health insurance coverage back to the states.

Other post-ACA elements

Furchtgott-Roth laid out some post-ACA ideas for covering people with pre-existing conditions. She talks about two groups of people: Those with medical conditions who maintain continuous insurance coverage and those who don’t buy insurance until they get sick. The former could go into state-run high-risk pools, as American Enterprise Institute fellow James Capretta has proposed—“so we take these people off the private health insurance rolls,” says Furchtgott-Roth, keeping costs down for everyone else. Outside the high-risk pools, everyone would be guaranteed continuous coverage even if they do get sick—as long as they don’t let their coverage lapse. And here’s where the workaround to the individual mandate comes in: “So even though one is not requiring people to sign up for health insurance, they have the incentive to sign up because they basically get a discounted automatic rate if they have continuous coverage,” Furchtgott-Roth says.

In a way, she says this is a situation Congressional Republicans could’ve taken control of but haven’t—yet. “It’s clear that the Republicans, when they were in power previously, should have done something about insurance plans that drop people when they develop illnesses and it shouldn’t have been left to wait,” she says. Another potential post-ACA cornerstone reform Republicans should’ve done more with, she says, are health savings accounts.

The build-out of the replace part of repeal and replace will require other elements to squeeze costs out of the system. Furchtgott-Roth was encouraged by Trump’s meeting with pharmaceutical executives where he seemed to back off the idea of negotiating drug prices and more fully embraced regulatory reform to help curtail costs. “He promised that he will try to do something to speed drug approval, and I would say that’s a better way than negotiating,” she says.

Another piece of the puzzle that Furchtgott-Roth wants put in place is malpractice reform, which would take place at the state level. And how about letting insurers sell policies across state lines? It would enlarge the pool of people who are covered, therefore work toward reducing the cost of insurance, she says: “I don’t see anything wrong with it.” But Furchtgott-Roth questions the practical effect for the millions of Americans in HMOs and other health plans that depend on strong local networks of providers.

She uses Amazon to explain what could happen with health insurance once unshackled from the ACA. “Basically if you let individual insurance companies compete and people choose and states put in place what they think is best for their own residents, the solutions will generate themselves,” Furchtgott-Roth says. “Twenty years ago, we wouldn’t have been able to imagine Amazon Prime. We cannot now imagine what the best plans will look like, but I can assure you, people will want preventive care.”

Now that we’re in this new world of repeal and replace and Trump—a world Furchtgott-Roth predicted four months ago—we may want to heed her words.