In a recent interview, U.S. Senator J.D. Vance offered a glimpse into Donald Trump’s evolving health care agenda, underscoring the former president’s belief in promoting more choice within the health-care system. Rather than imposing a “one-size-fits-all approach,” Vance explained, Trump would push for reforms allowing more flexibility in health insurance, suggesting that people shouldn’t all be lumped into the same insurance pools. Instead, different health conditions could be treated separately, creating specialized plans that would drive both cost efficiency and quality care.
This comment, however, quickly provoked a wave of criticism from left-wing pundits and political figures, who argue that such reforms would unravel the protections established by the Affordable Care Act (ACA), better known as Obamacare. Critics like Jonathan Chait, Josh Barro, and Nobel laureate Paul Krugman have warned that Trump’s proposals could reintroduce pre-existing conditions discrimination and favor the healthy at the expense of the sick. Their concerns echo broader liberal fears that dismantling elements of the ACA could restore a system where insurers could effectively cherry-pick their customer base, making health care inaccessible to those who need it most.
Yet, beneath this political polarization lies a deeper, ongoing debate about the effectiveness of the current health care system. Proponents of reform argue that Obamacare, while having provided coverage to millions of uninsured Americans, has introduced its own set of problems. As this article will explore, Trump’s vision—endorsed by Vance—proposes reforms that may address some of these flaws, notably the way insurance companies operate in the marketplace, particularly for those with chronic or severe health conditions.
The Critics Speak Out: Fear of Discrimination and Reverting to the Past
The left-leaning response to Vance’s comments was swift. New York magazine’s Jonathan Chait argued that under Trump’s plan, insurers would once again be free to charge people with pre-existing conditions exorbitant rates, a practice that Obamacare sought to eliminate. Josh Barro, a political commentator and former economist, similarly warned that Trump’s ideas would lead to a market where insurers would “charge less to the healthy and more (much more) to the sick.”
Paul Krugman, in a New York Times column, went further, insisting that Trump’s proposals would bring back the “bad old days” of pre-Obamacare insurance, where sick people were frequently denied coverage, or if offered insurance, were given plans that excluded treatments for the very conditions they suffered from.
These critics, however, may be misunderstanding the real issue, or at least failing to address the deeper systemic problems that have emerged since the implementation of Obamacare. While the ACA prevented insurers from discriminating based on health conditions, it also incentivized them to structure their business in ways that could indirectly disadvantage the very patients the law was intended to protect. To understand why this is happening, we need to look closely at how health insurance markets operate today.
The Reality of Obamacare: Coverage Doesn’t Guarantee Care
Obamacare made it illegal for insurers to deny coverage to people with pre-existing conditions, but it did not eliminate the financial incentives for insurance companies to cater to healthier individuals. By requiring insurers to sell policies at the same price to both healthy and sick individuals (community rating), the ACA created an environment where insurers actively sought to attract lower-cost enrollees (the healthy) and discourage higher-cost ones (the sick).
Insurance companies, facing pressure to keep premiums low while complying with ACA regulations, have adopted strategies to minimize their exposure to costly patients. For instance, insurers often design benefit packages that offer limited coverage for high-cost treatments or restrict access to top-tier specialists and hospitals. The use of narrow networks—plans that limit which doctors and hospitals patients can see—has become common in many ACA exchange plans. This means that while people with chronic conditions may be able to buy insurance, they may struggle to find the care they need within the confines of their plan.
As a result, Obamacare has changed the problem, not solved it. Prior to the ACA, some patients couldn’t get insurance; today, they may have insurance, but they face enormous out-of-pocket costs or limited access to care. For individuals with significant health problems, like cancer or heart disease, this can be a devastating tradeoff.
A New Path Forward: Risk Adjustment and Market-Based Reform
So what’s the solution to these challenges? Vance and Trump believe it lies in reforming how insurance companies are compensated for taking on high-risk patients. Almost everyone who buys private health insurance today is already receiving a government subsidy, either through tax benefits for employer-sponsored insurance or tax credits for plans bought on the ACA exchanges. But these subsidies are applied in ways that don’t take into account individual health needs.
In an ideal system, the government’s contribution toward health insurance premiums would vary based on health status. This would ensure that the total amount the insurer receives—both from the individual and the government—reflects the true expected cost of that person’s care. This approach would make the healthy and the sick equally attractive to insurers, removing the financial incentive to cherry-pick healthier enrollees and under-serve the sick.
This model already exists in one form within the U.S. health care system: Medicare Advantage. Under Medicare Advantage, the government adjusts premium payments to reflect the health status of each enrollee. Plans that take on sicker patients receive higher payments, meaning insurers are rewarded—not penalized—when they cover individuals with significant medical needs.
The Success of Medicare Advantage: A Blueprint for Reform?
Medicare Advantage now covers more than half of all Medicare beneficiaries. Its risk-adjustment model is one of the most advanced in the world and serves as a working example of how the kind of reform Vance and Trump advocate for might work on a broader scale. Insurers receive risk-adjusted premiums based on the health status of enrollees, and enrollees pay the same premium regardless of their individual health conditions. Moreover, Medicare Advantage allows insurers to offer specialized plans, such as those designed for diabetics or patients with heart disease, allowing for more focused and cost-effective care.
Importantly, Medicare Advantage plans can adjust to changes in a patient’s health. If a doctor diagnoses a patient with a condition like cancer, the insurer can report this to Medicare and receive higher payments to cover the increased cost of care. This creates an incentive for insurers to detect and treat health problems early, rather than delaying care or limiting access to treatments.
Laurence Kotlikoff, a Boston University professor, and others have argued that this model could be adapted for the broader insurance market, including the ACA exchanges. By applying a similar risk-adjusted approach to the individual market, we could create a system where insurers are no longer incentivized to avoid the sick and would instead compete on the quality of care they provide.
Reforming the ACA: More Choice, Better Outcomes
The current individual health insurance market is largely beneficial for the healthy but punishing for those with significant medical needs. While ACA exchange plans can be nearly free for people with average incomes and no health issues, out-of-pocket costs for those who need frequent or expensive care are staggering. In 2023, the out-of-pocket maximum for an individual is $9,450, and double that for a family. This financial burden is unique to the ACA exchanges and represents the highest penalty for illness within the U.S. health care system.
Moreover, the narrow networks in exchange plans often exclude top-tier medical providers. Patients who need specialized care may find that the best hospitals or doctors for their condition are out-of-network, meaning the plan covers nothing. This is in stark contrast to employer-sponsored plans, which tend to have broader networks and lower out-of-pocket costs.
If risk-adjusted premiums were introduced, patients could move outside the confines of the ACA exchange and purchase a wider variety of plans, including short-term or health-sharing plans, without fear of being penalized for pre-existing conditions. In a fully free-market health insurance system, the healthy and sick alike could access plans tailored to their needs without the distorting effects of one-size-fits-all regulations.
Vance’s comments about health care reform should be seen in the broader context of a growing movement toward market-based solutions that aim to increase choice, lower costs, and improve care for patients with chronic illnesses. While critics may worry that this approach will return the U.S. to a pre-Obamacare era, proponents argue that reforms inspired by programs like Medicare Advantage could offer a path toward a more equitable and efficient system.
If fully implemented, such reforms would allow for more flexible, patient-centered insurance markets, reduce out-of-pocket costs for the sick, and encourage insurers to compete on the quality of care. In doing so, Trump and Vance’s vision for health care reform could offer a way forward for a system that many agree is in need of significant change. What remains clear is that the debate over the future of health care in the U.S. is far from over, and the challenge will be balancing innovation with protection for those who need it most.
