Last week during President Donald Trump’s State of the Union address, he proposed cutting out payers and giving Americans cash to buy their healthcare directly.
“I want to stop all payments to big health insurance companies and instead give that money directly to people so they can buy their own healthcare, which will be better healthcare at a much lower cost,” he declared.
This sounds great, but the reality is far more complicated than simply handing people cash, according to Ali Diab, an economist and the CEO of employer health benefit plan administration platform Collective Health.
Diab noted that Americans pay far more for the same drugs, procedures and hospital stays than people in other developed countries. To him, this well-known fact comes down to opaque pricing models and abuses of market power from a handful of large insurers.
These few companies — UnitedHealthcare, Aetna, Elevance Health and Cigna — wield enormous power and keep their pricing hidden, which allows costs to inflate egregiously. This way, consumers and employers typically don’t know what services actually cost or what payers negotiated with providers.
“Regulators have been, in my opinion, totally asleep at the wheel, letting the three or four of the biggest health insurance companies buy the three or four biggest pharmacy benefit managers,” Diab added.
He said Trump’s proposal doesn’t tackle the core problem: unless payers’ practices are curbed, the prices of healthcare services and drugs will remain exorbitant.
And putting cash in people’s pockets doesn’t address the issue everyone faces when serious medical expenses hit. Most Americans couldn’t afford even a $1,000 unexpected medical bill, so some form of insurance risk pooling is essential, Diab pointed out. The way healthcare is priced in the U.S., giving people money to buy healthcare would expose them to catastrophic costs and leave them to navigate an already complex system on their own.
“Consumerism works when people understand what they’re paying for and why. And I think the bigger problem in healthcare is that people don’t understand what things cost and why,” Diab remarked.
He also noted that about half of Americans receive health coverage through their employer, a system rooted in post-World War II tax policy that makes employer benefits tax-advantaged. Unless the tax code changes dramatically, that structure will likely remain the dominant model.
For Diab, Trump’s comment missed the bigger picture — which is that the real problem isn’t who holds the money, but how healthcare prices are set. And until that changes, giving people cash won’t make care more affordable.
Photo: twomeows, Getty Images
