Health economist Austin Frakt, PhD, of Boston University, weighs in on Ben Carson’s healthcare plan to repeal the Affordable Care Act, implement personal savings accounts for all citizens, and reform Medicare and Medicaid.
Published Online: December 11, 2015
On Wednesday, Republican presidential hopeful Ben Carson, MD, released his plan
for the future of healthcare in the United States. The plan repealed the Affordable Care Act, outlined a move for all citizens to have tax-sheltered personal savings accounts, and reformed Medicare and Medicaid.
Health economist Austin Frakt, PhD, of Boston University, and an editorial board member of The American Journal of Managed Care
), weighed in on Dr Carson’s healthcare plan.
This plan largely hinges on Health Empowerment Accounts (HEAs)—essentially Health Savings Accounts (HSAs) —paired with high-deductible health coverage. What could be the concern for low-income individuals? Would this set-up exacerbate health disparities?
Austin Frakt, PhD:
Dr Carson's plan calls for HEAs paired with high-deductible health plans for all Americans, including those eligible for Medicaid. Yet, Medicaid would be turned into a block grant program, with fixed federal aid to states. Under the plan, states must use those fixed dollars to seed HEAs for Medicaid beneficiaries. What would happen in a recession, when Medicaid enrollment expands and state budgets are strained? It's very likely in that circumstance that less HEA seed funding would be available for the poorest Americans.
I also wonder what poor Americans will do if they get sick before they have had time to build up sufficient HEA funds to cover their deductibles. If they have a costly, chronic illness that could be a persistent problem for some.
: In addition, the plan overhauls Medicare and would slowly increase the eligibility age to 70 years. What is the feasibility of this proposal considering there has been strong opposition to such a proposal in the past?
If the past is any guide, this is not a politically viable aspect of Dr Carson's plan. Putting that aside, it also won't save very much money. In 2013, the CBO scored a less ambitious plan
to raise the Medicare eligibility age to 67 years. They estimated this would save about $3 billion per year, or about one-half of 1% of total Medicare spending. To rough approximation, Dr Carson's plan might save about twice that, or around 1% of Medicare spending.
But, that's just federal spending. It ignores state Medicaid spending. (Recall, that would be capped by a block grant under Dr. Carson’s plan, which is an additional problem: what happens as more of the healthcare costs of poor, elderly Americans are shifted out of Medicare and into Medicaid?) It ignores additional employer spending on retirement plans. It ignores higher premiums to others as high-cost, elderly Americans stay in private plans. It ignores additional out-of-pocket costs for 65- to 70-year-olds no longer on Medicare.
When you add up all those other costs, as the Kaiser Family Foundation did
, they dwarf what the federal government could save. In other words, raising the Medicare age only "saves" money if by "save" you mean "ignore how much more it costs," which is a lot.
Lastly, in general looking at the plan outline, there is not a lot of specific details and no cost estimates for the plans. As an economist looking at it, what is your reaction to the plan as it has been presented?
The plan's overriding goal is to shift toward defined contributions for Medicare and Medicaid and to greater personal responsibility for the cost of health care in the individual market. But many details are missing. For instance, the plan is silent about the group market. As we provide less federal support for poor and elderly Americans, would employees continue to receive health benefits exempt from taxation? That exemption amounts to a massive subsidy of working Americans, and it benefits higher-income workers more than lower-income ones. This is neither economically efficient nor equitable.