Trump is Making Our Sick Healthcare System Worse
In July 2024, I posted an article entitled “Our Sick Healthcare System” in which I pointed out that our healthcare system is rated poorly in comparison to those of most other developed nations despite the fact that the quality of healthcare provided in the U.S. exceeds that of all other nations. Its low standing is essentially attributable to the fact that healthcare costs in the U.S. are more than twice those of other nations and 28% of Americans are not able to obtain the healthcare services they need. In addition, prescription drugs costs in the U.S. are two to four times higher than in other developed nations.
In that article, I pointed out a number of root causes of those deficiencies including the following: (1) in the U.S. maintaining one’s health is considered a personal, and not a public, responsibility; (2) healthcare in the U.S. is largely financed through over 1,000 private and public insurance programs; (3) our healthcare system is essentially a “sick care” system in the sense that healthcare professionals focus almost exclusively on curing the sick and devote little effort to preventing health problems; and (4) medical providers perform numerous unnecessary services both out of a fear of ruinous medical malpractice claims and in an effort to maximize medical insurance reimbursements. Although all of these issues have been apparent for over three decades, our federal government has done little to address them.
Past Efforts to Improve Healthcare
During the Clinton administration, Hilary Clinton tried to create a national healthcare system similar to those created in almost all other developed nations. That effort never even reached the Congress as it was staunchly opposed by (a) the medical profession which opposed government control of its services, (b) the medical insurance industry which viewed it as a threat to its very existence, and (c) the pharmaceutical manufacturers who rightly feared that negotiating drug prices with the federal government would decimate their obscenely high profit margins. Each of these groups employed their respective armies of political lobbyists to defeat Mrs. Clinton’s proposal which could have greatly alleviated many of the problems that continue to plague our nation.
Some success was achieved during the Obama administration which passed the Affordable Care Act. That act created a government funded program to subsidize the purchase of health insurance. It enabled over 25 million previously uninsured Americans to purchase medical insurance coverage. It also prohibited private insurance companies from disclaiming medical claims based upon “pre-existing conditions.” Because of the untimely death of Senator Ted Kennedy, one of the ACA’s principal sponsors, the ACA did not include a “public option” under which the federal government itself would be empowered to offer health insurance.
The Obama administration’s inability to muster the necessary votes in the Senate include “a public option” provision was a major setback as the administrative costs of federal health insurance plans (Medicare and Medicaid) are 1.3% and 3.9%, respectively, of total program expenditures as compared to an average of 17% of the combined administrative costs and profits of private healthcare insurers. Thus, had the “public option” been included in the ACA, private medical insurers would have quickly been forced out of business, eliminating easily the largest source of waste in the nation’s healthcare system.
During the remainder of Obama’s presidency, House Republicans passed no fewer than 60 bills seeking to hamstring or wholly repeal the ACA. They were never even considered by the Senate. Then, during President Trump’s first term in office, when he enjoyed a majority in both houses of Congress, he tried to repeal the ACA, an effort which was ultimately foiled by Senator McCain who cast the deciding vote against repeal. Although Trump claimed that he planned to replace the ACA with a better health plan, he never presented any such plan. Indeed, almost eight years later he admitted that he only had “a concept of a plan.” Still during his first term President Trump was able to implement six separate initiatives all of which weakened the ACA. The bottom line is that Trump and the Republican Party are against the federal government’s use of taxpayer money to enable the nation’s poor to obtain their necessary medical services.
Actions of the Current Trump Administration
Trump’s primary objective during his current administration was to pass his “One Big Beautiful Bill” which, among other things, extended his 2017 tax legislation which heavily favors the nation’s wealthiest citizens. This was, and continues to be, a very unpopular piece of legislation because in addition to channeling the nation’s wealth into the hands of its wealthiest citizens, it increases the nation’s outstanding indebtedness and severely cuts a number of public welfare programs including an estimated $91 billion (or slightly more than a 10% cut) in the annual budget of the Medicaid program which funds the medical costs of 72 million lower income and disabled Americans. Another feature of this legislation is further cuts to the monies the government can dispense under the Affordable Care Act to subsidize the purchase of private healthcare insurance as well as federally funded nutrition programs designed to insure that school children receive a minimum amount of nourishment.
Another attack on the nation’s healthcare which is being condoned by the Trump administration is the efforts of the nation’s private healthcare insurers to take over the Medicare system. That plan is being pursued in a clandestine manner by the nation’s private healthcare insurers who are now offering “Medicare Advantage” plans. Those plans effectively wrap-around the Medicare insurance which the federal government provides to its senior citizens. Those who purchase Medicare Advantage plans ostensibly get the benefits provided by Parts A & B of the Medicare program plus coverage for other healthcare issues such as dental care and prescription drug coverage for which the purchaser pays an additional premium. These plans have been heavily advertised and now represent 54% of the senior citizen healthcare insurance market.
The key to the Medicare Advantage programs is that the Medicare recipients sign over their rights to receive Medicare benefits to their private insurer which assumes the responsibility for paying their healthcare bills. This is an invitation to numerous forms of mischief and has two major economic problems to encourage that mischief.
First, the Medicare Program itself is no longer fiscally sound because the number of workers paying into that Program is decreasing in relationship to the number of Medicare recipients, a problem primarily the result of the average age of Americans has increased from 70 to over 80. This means that the percentage of Americans eligible to participate in the Medicare Program are at least three times the percentage who were eligible when the Medicare Program was initiated. Stated another way, when the program was initiated there were 167 workers contributing to the program’s trust fund for every retiree receiving benefits. By contrast, today that ratio has dropped to 3 to 1. Accordingly, unless the government significantly changes the amount and sources of funding for the Medicare Program, it will soon become insolvent; i.e. it will be taking in less than it annually pays out.
One should ask what these private insurers are going to do when that happens. Is our government going to bail out the nation’s private health insurance companies like it bailed out the nation’s banks in 2008 when their reckless behavior got them into trouble? My best guess is that they will petition the federal government to find a way to pour more money into the program.
The second economic problem is that the Medicare Program operates with minimal administrative costs (roughly 1.3% of program total expenditures) as contrasted with over 17% of the administrative and profit costs absorbed by private healthcare insurers. While those private healthcare insurers offering Medicare Advantage plans try to cut their program’s costs by limiting which medical providers its enrollees may utilize and negotiating down what they are willing to pay for medical services, 15+% is a very big cost differential to overcome. The bottom line is that these programs may be preordained economic train wrecks and will inevitably lead to higher healthcare costs, if not total a total financial collapses, leaving their insureds unable to afford healthcare services.
The Trump administration’s efforts to deport undocumented aliens is also having an adverse impact on the nation’s healthcare system. This is because roughly 3% of the nation’s healthcare workers are undocumented aliens. Although they principally serve as personal attendants for infirmed individuals they nevertheless perform important services and the loss of these workers will cause a noticeable increase in total healthcare costs. These actions also have secondary effects as an estimated 25% of U.S. active physicians have international medical degrees. Even the loss of a relatively small percentage of these individuals could have a material impact on our nation’s healthcare system.
The Trump administration has also launched attacks on a number of the nation’s leading educational institution where health-related research is performed. This has resulted in their loss of an estimated $18 billion in annual medical research funds. This, in turn, has caused scores of medical research projects to be discontinued and hundreds of medical researcher to leave the U.S. Not unexpectedly, a number of other countries, such as France and China, have opened their arms to receive our displaced medical researchers and to provide funding for their research efforts. The result may well be that our nation may lose its lead in achieving advancements in medical technology.
Perhaps the most important achievement of President Trump during his first term in office was the rapid development of Covid-19 vaccines. This was achieved in less than nine months, as compared to four years which had been how long it had taken to previously develop a vaccine. Not only were these vaccines developed in record time, but they were extraordinarily effective. Surprisingly, President Trump turned his back on this notable achievement when he discovered that his base did not like the idea of being forced to be vaccinated to protect the lives of the elderly and others who were more vulnerable to the Covid virus.
Perhaps in an effort to restore his relationship with his political followers, he appointed Robert F. Kennedy, Jr., an avowed opponent of vaccines, to serve as his Secretary of Health and Human Services. Not unexpectedly, Kennedy has cut 10,000 (or roughly 25%) of his Department’s employees and drastically limited the scope of work being performed by the CDC and NIH, two of the world’s premiere public health agencies. He has also drastically limited research on the development of new vaccines. For a more complete listing of the destruction that has taken place within the Department of Health and Human Services see a recent report published by the NIH. Perhaps the only good thing Kennedy has done is to emphasize the importance of preventive health measures although it’s still not clear whether this is a good faith effort to improve the health of Americans or simply a public relations effort similar the “WIN” (Whip Inflation Now) button campaign initiated by President Ford to reduce the rise of inflation during the late 1970s.
Although the cost of prescription drugs only represents roughly 11% of our nation’s healthcare expenditures, it is perhaps the most shameful facet of our healthcare system. My article entitled “The Prescription Drug Scam” discusses the unholy alliance that exists among our nation’s largest pharmaceutical companies, prescription drug insurers and the pharmacy benefit managers which keep the price of prescription drugs in the U.S. on average 2.78 times higher than the same drugs cost in other developed nations.
While President Trump campaigned during his 2024 presidential campaign on the promise that he would reduce drug costs, he has done little to implement that promise. Perhaps his major initiative to reduce drug costs has been to impose a 15% tariff on all drug imports from the European Union and a 10% tariff of drugs imported from other countries. This was ostensibly intended to encourage U.S. pharmaceutical companies to cease their practice of manufacturing their products in offshore tax havens (like Ireland and Bermuda), a practice which not only reduces their labor costs, but more importantly their income tax obligations.
The Biden administration had tried to address this problem by enacting an amendment to the Internal Revenue Code which imposed a 15% minimum tax on the earnings of U. S. corporations with annual income exceeding $1 billion. While this greatly reduced one of the incentives for off-shoring of the manufacture of prescription drugs, it did little to alter that practice.
The problem of combatting the off-shoring of drug manufacturing is complicated by the fact that large pharmaceutical companies only partially manufacture their products abroad. Specifically, they produce the active ingredients abroad and complete the manufacturing process in the U.S. This creates the problem of allocating where the profit is actually being earned which is initially determined by the U.S. parent corporation which sets the price that it will pay to its off-shore subsidiary for the latter’s efforts. The final pricing is generally the result of a negotiation with the IRS whose budget for conducting such negotiations has been significantly cut by the Trump administration. As a result, U.S. pharmaceutical companies have continued to maintain their offshore production facilities.
Trump’s tactic of imposing tariffs on imported drugs is also likely to prove ineffective in both reducing drug prices and causing U.S. drug companies to produce their products in the U.S. First, it must be appreciated that tariffs are paid by the importer; and, more often than not, the increased costs resulting from the tariffs will likely be passed on to those who actually consume the drugs. That’s because U.S. drug companies enjoy patent protection on their products leaving them essentially free to price their drugs as they please. This is particularly true if the U.S. manufacturer’s principal competition is a foreign drug manufacturer whose products will carry the full burden of the tariffs. Thus, while the U.S. Treasury will benefit from the tariff payments, the tariffs are not likely to cause U.S. drug manufacturers to reshore their manufacturing operations or to cause foreign drug companies to move their manufacturing operations to the U.S. where taxes and labor costs are higher.
Despite Republican opposition to funding healthcare with federal tax revenues, President Biden was able to enact the Inflation Reduction Act which reduced the costs of pharmaceuticals in three ways. First, it reduced the cost of insulin from $400 per month to $35.00 per month. It also increased the amount that the ACA would pay toward the cost of private health insurance. Lastly, it empowered the Medicare program, starting in 2026, to negotiate the price of ten prescription drugs. Even this last improvement was of minimal initial impact because 9 or the 10 drugs selected to becoming subject to negotiation would be off-patent by 2026. This meant that they would be subject to generic competition which has traditionally driven the prices of prescription pharmaceuticals down to roughly 10% of the prices charged immediately before they lost their patent protection. It should be noted that Trump’s budget bill included a number of significant changes to the ACA, all of which significantly reduced federal and state funding for healthcare.
Still another way that President Trump has endangered our healthcare system is his actions in virtually eliminating the USAID program. One of his principal blunders during his first presidency was to eliminate the nation’s early warning system for infectious diseases and the meticulously devised plan for combatting epidemics devised by the administrations of George W. Bush and Barack Obama. To make matters even worse he rejected the WHO’s offer to supply the U.S. with Covid test kits. These actions left the U.S. ill-prepared to address the Covid pandemic when it arrived on January 2020. He compounded these errors by denying the severity of the Covid pandemic for over two months giving it an opportunity to be firmly implanted within the U.S population before his administration even began to take action to impair its spread. The bottom line is that the U.S. had one of the worst records in combatting the disease and it has been estimated that the U.S. suffered as many as 400,000 unnecessary deaths.
Among the first action of the current Trump administration was to suspend all operations of the USAID, an agency of the federal government which, among other thing, works to stop the spread of infectious diseases abroad. Although this was only a temporary suspension’s of the agency work, USAID lost many of its key employees in the process, thereby greatly reducing its effectiveness. Similarly, the Trump administration caused the U.S. to drop out of the World Health Organization (for the second time), complaining that the U.S. was paying more than its fair share of the WHO’s expenditures. While that may well be true, it’s nevertheless important to understand that the U.S. is the center of the Earth’s economy and entertains individuals from almost every nation making it a likely target of every infectious disease developed in foreign countries. In that sense the U.S. benefits from actions taken all around the world to stop the spread of infectious diseases. Indeed, expenditures to prevent the spread of diseases is far more efficient than those expended to cure sick patients.
Trump’s Motivations
There is no doubt that President Trump’s primary motivation was to extend his 2017 tax cuts, revealing once again that, despite the nation’s obscene level of indebtedness, he has no inhibitions about reducing the tax obligations of wealthy individuals who fund the political campaigns of Republican politicians and his own personal agenda. By contrast, he has displayed a strong aversion to spending the federal government’s tax revenues for the benefit of those at the bottom of the nation’s income scale and was motivated to make spending cuts to offset his tax cuts.
If, as he has professed, he was looking to eliminate fraud, waste and abuse within the federal government, he should have started his cost-cutting quest with Department of Defense which has an almost $1 trillion annual budget. More importantly, the Government Accountability Office has concluded that the DOD lacks a robust fraud risk management program. Instead, he began with the USAID, the annual budget of which is $35 billion. It would thus appear that he was looking to cut spending that would seemingly have little impact on the lives of his donors and more vocal supporters.
It also appears that he chose to target the nation’s healthcare system because, outside of the DOD and Social Security, healthcare spending represents the largest items in the federal budget. Like all health insurance programs, “improper payments” made by the Medicaid program involve significant amounts. In the case of the Medicaid Program “improper payments” have been estimated to be roughly 5% of the Program’s $860 billion annual expenditures.” Although this is a significant amount, almost three-quarters of the payments deemed to be “improper” are neither the result of fraud, waste or abuse, but rather because they were made on the basis of insufficient data. It is indeed “ironic” (for want of a more accusatory term) that, rather than increasing the number of Program offices that assist Program beneficiaries in filing Medicaid claims, the Trump administration has chosen to actually increase the amount of data required to be submitted by Medicaid beneficiaries and has reduced the number of Program offices assisting Medicaid beneficiaries. This is not a plan to mitigate a problem, but rather one to make it worse in order to justify a significant cut in the federal budget.
In addition, many of the spending cuts made during the initial months of his current term were overly sweeping in order to buy time off the debt-ceiling clock so as to give the Congress time to enact his budget bill which included a provision raising the nation’s debt ceiling by $4 trillion. This largely explains why he chose Elon Musk (known for cutting jobs and functions first, and assessing the results later) to implement this strategy. At the very least this was a dangerous strategy because, like Humpty Dumpty, a government agency that has been ravaged cannot be quickly (or even easily) restored to its original effectiveness.
Trump’s current love affair with tariffs also seems to fit into this same pattern. His tariffs were seemingly intended to provide the U.S. government with additional income to delay the date when it would run up against the debt ceiling and have to shut down its operations. In April, he announced his intention to impose tariffs on U.S. imports from roughly sixty nations and invited those nations to negotiate the parameters of his proposed tariffs. When their responses were minimal he first deferred the effective date of his proposed tariffs; and when that didn’t generate a significant response, he simply chose to impose them. When few nations threatened to retaliate in kind, he decided to accept their silence and collect roughly $20 billion/month in tariff revenues largely unconcerned that these revenues are essentially a highly regressive form of taxation. Thus, Trump’s infatuation with tariffs will impose economic hardships of those at the low end of the nation’s income scale leaving adequate healthcare further beyond their economic means.