By Elizabeth O'Brien
Big changes may be coming to healthcare in the Trump administration, affecting everything from drug prices to insurance.
The president-elect will take office looking for cuts to the federal budget, and healthcare is a big target. Medicare, Medicaid, the Children's Health Insurance Program, and Affordable Care Act premium subsidies together accounted for nearly a quarter of the 2023 budget, or $1.6 trillion, according to the Center on Budget and Policy Priorities.
Plenty of uncertainty remains, but here is how a Trump administration and a Republican-led Congress could affect some of these major programs:
Medicaid
For possible cuts, Medicaid is in the crosshairs more than Medicare, experts say. Project 2025 -- the blueprint for a future Republican administration created by the Heritage Foundation, a conservative think tank -- proposes cuts to Medicaid, which in addition to providing health insurance to low-income Americans also covers long-term care for enrollees who meet strict income and asset criteria that vary by state. Many middle-class people eventually qualify by exhausting their savings on long-term care needs or by protecting their assets with an attorney's help.
By contrast, Medicare doesn't pay for routine, non-rehabilitative help with daily activities like bathing or dressing, whether at home or in a care facility. Trump's campaign materials said the candidate would prioritize at-home care but didn't provide details.
Medicare
It's still unclear how Medicare may change, but Trump's nominee to run the Centers for Medicare and Medicaid Services -- celebrity doctor and TV personality Mehmet Oz -- suggests it won't be business as usual. If confirmed, Oz will help shape the future of Medicare, the health insurance program that enrolls some 67 million older and disabled Americans.
While Trump's administration may seek cost savings in Medicare, observers say Congress is unlikely to repeal the $2,000 out-of-pocket cap on covered drug costs that is set to take effect next year as part of the Inflation Reduction Act. Lawmakers are also unlikely to completely roll back Medicare's new powers to negotiate select drug prices. However, it is possible that a Trump administration could weaken these initiatives, experts say.
Perhaps the biggest changes could involve Medicare Advantage plans, privately run alternatives to traditional Medicare that now enroll more than half of all beneficiaries.
In recent years, the Advantage program has been squeezed by rising costs and falling revenue. A Republican administration is more likely than a Democratic one to increase the rates the government pays to Advantage plans, says Chris Meekins, healthcare policy analyst at Raymond James. Medicare Advantage stocks like Humana have rallied since the election on expectations of a more favorable regulatory climate under Trump.
Increased revenue to plans will likely translate into benefit improvements, Meekins says. While Medicare Advantage and traditional Medicare must provide the same core services under the law, Advantage plans often offer extras like free gym memberships and limited dental benefits.
Some Advantage plans have had to curtail their supplemental benefits for 2025. Any subsequent improvements wouldn't take effect until 2026 at the earliest, since plan design for next year is already set. While nice to have, extras like gym memberships are less important in choosing your plan than access to doctors and out-of-pocket costs.
One big change that has been floated is to make Medicare Advantage the default option for new people entering the program. The proposal appeared in Project 2025. On the campaign trail, Trump distanced himself from the project, although some of his recent cabinet picks have ties to the document.
It's unclear if there would be a widespread appetite for making Medicare Advantage the default, or even what legislative or rule-making process might be required to make that happen, experts tell Barron's. Traditional, fee-for-service Medicare still works well for many, and nudging people into an alternative might prove unpopular, says Sean Creighton, managing director at Avalere, a healthcare consulting firm.
In the past, Oz has supported the idea of universal health coverage for Americans under Medicare Advantage. While such a big policy change would be a heavy lift to implement in a closely divided Congress, the position hints at Oz's views and priorities.
Affordable Care Act
About 21 million Americans are enrolled in individual or family plans bought through Affordable Care Act marketplaces. They have benefited in recent years by enhanced premium subsidies originally passed as part of the American Rescue Plan of 2021.
That improvement lowered the cost of insurance for those already receiving government premium subsidies and expanded eligibility to people whose higher incomes previously disqualified them from the assistance.
The enhanced subsidies reduce net premium costs by 44% on average, according to health policy nonprofit KFF. Without them, more people would drop coverage and become uninsured, experts say.
The subsidy enhancements are set to expire at the end of next year, and some predict Congress will let them sunset to reap the cost savings.
Write to Elizabeth O'Brien at elizabeth.obrien@barrons.com
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(END) Dow Jones Newswires
November 22, 2024 21:30 ET (02:30 GMT)
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