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What Does Trumpcare Mean For The Future Health Of The USA?

12/12/2016 12:15 GMT | Updated 13/12/2017 10:12 GMT

Explaining the US health system to UK and European audiences can be a challenge. In the US, access to affordable healthcare is a very emotive subject, attracting strong opinions across the spectrum. With the new President-elect heralding a shake-up for Obamacare - which was introduced to provide greater access to healthcare - emotions are likely to rise higher over coming months as this policy becomes a key area of focus for the new administration.

Unlike the UK, which funds healthcare through taxation and the NHS, most working US citizens get health insurance via their employer as a benefit similar to a company car or gym membership. The problem for US citizens is that their healthcare is expensive. Americans spend twice as much as other OECD countries on healthcare and the number of people without insurance is high.

My research suggests the US health insurance system is important for the overall economy. Some entrepreneurs would not have started a business if it wasn't for Obamacare, as obtaining health insurance as a small firm is particularly expensive. Republicans say Obamacare is a "job killer" due to the increase in taxes needed to implement it yet the overall US unemployment rate is low.

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Trump has said he will "repeal and replace" the Affordable Care Act, more commonly known as Obamacare. Obamacare is an umbrella term used to describe a number of provisions aimed at making health insurance affordable and to reduce the number of uninsured individuals. Trump has indicated he is willing to keep two features of Obamacare: allowing those under 26 to remain on their parent's health insurance and stopping health insurers from preventing people with pre-existing conditions obtaining insurance. The former isn't too costly - as young people rarely get sick - but the latter is, people with pre-existing conditions are likely to use a lot of healthcare which drives up the cost of health insurance for everyone.

A defining feature of Obamacare, the "individual mandate", introduced a fine for people who are not insured in order to increase the number of healthy people who have insurance and hence reduce the cost. Trump promised to repeal this provision due to a belief that no one should have to take up health insurance if they do not want to. Without this provision, however, it is difficult to see how Trump can lower the overall cost of health insurance as people will continue to seek insurance only when sick.

Another main feature of Obamacare resulted in the creation of state health insurance exchanges where Americans could acquire insurance at a subsidised rate (dependent on income level). As a result, 12.7 million people have gained insurance through these exchanges. Trump has indicated he would like to open up competition of these exchanges across state lines in the hope it will reduce prices but if the subsidies are taken away it is unlikely that so many individuals will want to obtain coverage through these exchanges.

The healthcare industry did not make extensive contingency plans for a Trump victory and are also uncertain as to what Trump's reforms are going to be. Uncertainty is unwelcome in any industry and can delay investment decisions until the outlook looks clearer. This may lead to insurers pulling out of the health insurance exchanges altogether due to fear of the market collapsing.

Although Trump has promised to reform Obamacare following discussions with President Obama, reverting on his pledge to repeal it within the first 100 days of his Presidency, the healthcare system will not remain the same. What remains to be seen is the true extent of his reforms and whether the economy and American public benefit from Trumpcare.

By Dr David Chivers, Lecturer in Economics at Durham University Business School