[MUSIC]
>> Bill Whalen: It's Wednesday, August 16, 2023, and welcome back to Matters of Policy and Politics, a Hoover Institution podcast devoted to governance and balance of power here in America and around the world. I'm Bill Whelan. I'm the Hoover Institution's Virginia Hobbes Carpenter distinguished policy fellow in journalism. But I'm not the only Hoover fellow who's podcasting these days.
I recommend you go to our website, which is hoover.org, click on the tab at the top of the homepage, it says commentary. Head over to where it says multimedia and up will come audio podcast. I think there's 16 of them in all. This podcast is actually at the top of the list. That's because we get only the top talent at the Hoover Institution today, being no exception. My guest is Lanhee Chen.
Lan he is the David and Diane Steffe Fellow in American public policy studies at the Hoover Institution and director of domestic policy studies and lecturer in the public policy program at Stanford University. He's a veteran of past Republican presidential efforts and was himself a candidate for public office in 2022. He ran for state comptroller California. He didn't win that race, but he did receive 4,789,345 votes. I think they've done stop counting, Lanhee. So I'm going with that.
Which earned Lanhee the distinction of being the leading Republican vote getter in November of 2022. And those are gonna say, hey, wait a second about Ron DeSantis. Lanhee Chen got 175,000 more votes than Ron DeSantis. Lanhee joins us today to discuss Hoover's choice for all project to revamp America's healthcare system. Lanhee, thanks for coming on the podcast. >> Lanhee J. Chen: It's always great to be with you, Bill. Thank you.
>> Bill Whalen: Question, my friend it's been nine months since you last ran for office. I think people who don't participate in campaigns don't recognize both what a physical toll it puts on a candidate, plus an emotional toll. And if it doesn't work out, you have to kind of figure out what to do next and witness what the 45th president, United States is going through right now. Because so much that stems the fact he could not accept the fact that he lost nine months later, though.
Have you gotten this out of your system? >> Lanhee J. Chen: Well, I've gotten that race out of my system, that's for sure. I tell people I really enjoyed it, actually. There's a lot about running for office as a candidate, particularly in a state like California. As a statewide candidate, you get to see a lot of different things and meet a lot of different people. You wouldn't otherwise if you weren't a candidate.
And I just felt it was really important in the case of my candidacy to get a few things out there in terms of the value of transparency around public finance. And some of the things I don't think we're doing in California and some of the ways that I would hope citizens across the state would want to see things being improved in Sacramento. So I'm glad I did it. Losing is never fun, as you note.
And I think I slept for days on end right after the campaign ended, because you're right, it's an exhausting enterprise. But I'm really glad I did it and learned a lot. And I think you have a much better understanding of the American political system as a result of it. >> Bill Whalen: Now, you're not running it for 2024, but you're still active in the system, right?
>> Lanhee J. Chen: Yeah, we have a political action committee that I use to help some people who I like and advance some policy ideas I feel strongly about. And I'm still very much advising various people here in California and around the country. And so I'm doing my best to stay involved, but also trying to the topic of our conversation today.
Trying to move the needle on some health care reforms that I think are going to be really important for our country and for bringing down the cost of health care and expanding access for more Americans. >> Bill Whalen: So let's get into it. So this is something that you did, along with Hoover policy fellows Tom Church and Danny Heil. Let's begin with a very simple question, Lanhee why this and why now?
>> Lanhee J. Chen: Well, the project actually started even before I went on leave from Hoover for my campaign. We were looking at the field in terms of different healthcare reform ideas. And one of the things I'll just observe is that there is a common refrain that conservatives or believers in market-based reforms to healthcare have not had any reform ideas. And I think that's actually patently untrue if you look at the different ideas and concepts that are out there for health care reform.
I think one of the challenges we have is that there are too many ideas. In some ways, what there isn't is an organizing set of principles or a way to think conceptually about the kinds of reforms that we need to have to our healthcare system. To move it in the direction where markets play a larger role and government plays a smaller role. And I think fundamentally that's what the Affordable Care Act did in opposite what the Affordable Care Act did in 2010.
When it was passed and then fully implemented years later, what it really did was to dramatically expand the role of the federal government in the healthcare system. So when we looked at the landscape for reform and the ways in which we could make the system, again, more market based. What struck us was the lack of, not ideas, but the lack of organizing principles and ways of putting good ideas together.
And we also had some ideas about things we wanted to do to change the system, to improve it as well. So we knew there was an election around the corner, not the 22 election that I ran in, but the 2024 election. And we really wanted to get some of these ideas into the bloodstream so that presidential candidates and candidates for Congress. And people who were thinking about smart reforms for the future would look and say, here's a set of ideas we can stand behind.
And so that was the genesis of the project. The project ran over the course of basically two years. And if you look at our report, which is available on the Hoover website, you'll see that there's a lot of work that's gone into not just putting together some ideas that others have come up with. But original ideas that we put together that we believe, as I said, will improve and enhance the healthcare system.
And then we went one step further, which is we did some economic analysis around what those ideas would do to health care costs and coverage and some other issues. And so put it all together. And we have recently now put out this entire plan and proposal that addresses both the question of how we improve the incentives around the demand for healthcare services. Which is one side of the ledger.
And then on the other side of the ledger, as any good economist would tell you, you have the question of how you expand supply. We look at ways of expanding supply in our healthcare system as well, and reforms that will do both address the demand side equation as well as the supply side equation. And you put it all together, and we think we've got a very compelling set of reforms that if we implemented even some of them, would really move our health care system in a much better direction.
>> Bill Whalen: Lanhee the Hill, it's a Washington based publication, as you know, recently asked the ten leading republican candidates how they'd reduce health costs and improve affordability. Only one of the candidates, that's former congressman, will hurt. He's way back in the back. He's the only one who bothered to respond. I went on to Donald Trump's website, Lanhee, to see what he had in the way of healthcare to offer. And here's what it reads.
Quote, he will stop all Covid mandates and restore medical freedom and surprise medical billing. Increase fairness through price transparency, and further reduce the cost of prescription drugs and health insurance premiums. President Trump will always protect Medicare, Social Security in patients with preexisting conditions. Not exactly the kind of stuff you got into when you're doing Mitt Romney's policy, I would say. I know it's the summertime. I know the field is still kind of taking shape.
I know there's debate coming up next week, which I want to ask you a few questions about later in this podcast. But why the relative silence on health care? >> Lanhee J. Chen: I think Republicans have been uncomfortable, quite frankly, talking about health care since the failure of the repeal and replace effort of Obamacare back in 2017. And this gets to the point I was making earlier, which is, it's not a lack of ideas, but I do think that how Republicans talk about health care.
How they think about health care reform, it's an uncomfortable topic, I think for a lot of people, not for all policymakers or some policymakers. I did an event with Dan Crenshaw, who's a congressman from Texas. We did an event in our Hoover, Washington, DC, office to launch the plan. And he thinks a lot about health care, and he's very proficient in it, so he doesn't have a problem talking about it.
And there are others Bill Cassidy of Louisiana, a senator from Louisiana, is a. Great leader on healthcare issues. My former boss, Mitt Romney, still talks a good amount about healthcare. There's a lot of people who I think do understand it. But in terms of the level of dialogue and the amount of rigor around the conversation, there's definitely some stuff lacking. So, you know, I'm not surprised it hasn't played a bigger role so far in the campaign.
Healthcare is a very challenging policy topic. Once you dig into it, it can be difficult. And I think for better or for worse, progressives have captured some of the high ground around healthcare reform. So many progressives have advocated in favor of a single-payer type solution, Medicare for all.
Another solution they've advocated for is something called a public option, which would put a public health insurance plan in competition with private plans, which my colleagues and I have also done significant research on and demonstrated some of the challenges with those proposals. But they have affirmative ideas and a messaging framework to put around healthcare reform. And in a lot of ways, I think conservatives have lacked that, market advocates have lacked that.
And as a result, many policymakers have been uncomfortable articulating what they would do because they either haven't thought about it or don't feel like there's enough out there to rely on. >> Bill Whalen: Yeah, it seems to be a struggle, at least in the past ten years or so. Republicans were very good at explaining what they didn't like about Obamacare just back in the 1990s.
They were very good at explaining what they didn't like about Hillary Care, very good about talking about Bernie Care, very good talking about AOC Care. But where republicans tend to struggle is, okay, what exactly do you want to do? And I don't know if it's just maybe just a struggle to maybe speak in empathetic terms, or maybe it's a feeling that this is just more of a Democratic owned issue and so we're on the defensive. But there's something off here.
>> Lanhee J. Chen: Yeah, I think it's a combination of all of those factors, and I don't think that there's any single explanation for it. But that's not an excuse because health care continues to be a topic people are worried about. Now, they may not say, hey, I'm worried about insurance coverage, but as a kitchen table issue, as an economic issue, people are concerned about health care costs. They're concerned about particular elements of that.
Prescription drug costs is something that always registers with people. And the fact is that many Americans do not have enough saving to cover a medical emergency, which is a big challenge we face as a country, is you've got lots of people out there who are paycheck to paycheck. And so they don't necessarily have the ability or the wherewithal or the means to save for healthcare expenses. So these are all issues that I think end up complicating the conversation and making it hard.
And Republicans and conservatives just haven't had a great lexicon around this over the last couple of years. >> Bill Whalen: So let's talk about your plan. Let's talk about the Hoover plan. And I'm going to give you the three sort of large principles here, and I want you to fill in the blanks. Principle number one, policymakers should get rid of federal and state regulations that restrict patients' health choices.
>> Lanhee J. Chen: Yeah, so there's a whole set of regulatory provisions that make it more difficult for providers, for example, to provide care. And one example of this is if you look at what nurse practitioners, as an example, are permitted to do in many states, they are restricted from practicing to the top of their training or the top of their license.
And the reason why, obviously, is because there's a cartel that effectively runs licensing in a lot of states that tries to keep out competitive forces that could drive costs down and could drive compensation down. It's a natural economic phenomenon. But one of the things we need to look at is if you've got a medical challenge, sometimes it does require advanced medical care.
And by the way, America is the best place in the world to get that care, the most innovative place in the world to get that care. But there's stuff that's probably doesn't require advanced training in the same way that, let's say, a board certified pediatric oncologist could provide if your kid, for example, splits his chin open, as my son did playing basketball last year, I mean, not a good thing.
But, you know, we took him to the, to the urgent care, and a very nice nurse practitioner was able to stitch him up and, you know, he's healed great. And, and the basic point I would make is that it's not just about who can stitch a cut. It's also about the training, making sure that we are matching the right modality of healthcare. People are getting health care in the right place for what they need.
And part of the challenge now is that a lot of people could be getting a lot more help from people like nurse practitioners, like others who've been trained, certified therapists in some cases, but they can't because the regulatory provisions stand in the way. I'll give you another example, which is telehealth, something that's become very popular during COVID and in the aftermath of that.
There are still regulations that restrict, for example, in some cases, if you get telehealth provided by a doctor outside of your state, in some states in America, that doctor can't get compensated because there's this issue with crossing state lines. So we need to work out things like that. In my mind, some of the regulatory things that stand in the way of ensuring we get access to quality healthcare at more affordable prices.
>> Bill Whalen: And let's put regulations into a more kinda human terms. Explain what it means in terms of higher cost, wait times and so forth. >> Lanhee J. Chen: Well, wait times, there's a lot of academic research out there that suggests, for example, certain regulatory provisions increase the amount of time you've gotta wait to see a physician. And in some cases, that wait.
And this is particularly with application to a program called Medicaid, which is a joint federal state program that's targeted primarily at lower income Americans. There's a lot of evidence that one of the things the Affordable Care Act did was to significantly expand Medicaid. But as a result of that, waiting times for physicians for patients on Medicaid has increased substantially.
And the challenge with that is you don't see a doctor as quickly, you don't get a diagnosis as quickly, you don't get treatment as quickly, and in some cases, that can be life threatening. So that's been a real problem. And we can't address that without addressing this issue I talked about earlier, which is a supply of providers, but also making sure that people are seeking care in the best available places in terms of cost.
It's just quite clear that all of the consumption that we see in our healthcare system, there's a lot of situations where healthcare's being overconsumed, and that in context is raising prices. But it's also the case that in many situations, people are paying for more health care than they actually need to use.
The classic example we have now is if you look at what health insurance plans have to provide, they have to provide a certain set of benefits, and not everybody's going to use all those benefits, but you're going to pay for them because the Affordable Care act requires you to pay for a standard suite of benefits.
Now, what would it be like if we had a healthcare system where people could actually buy coverage they would use and buy coverage that included benefits that they would use and wouldn't be paying for more? Well, what that would do, quite obviously, is it would drive down the cost of health insurance because you're not paying for as many benefits. And so your health insurance is gonna cost as much.
This is just one example of a way in which our system, unfortunately, over the last couple of years, has become much less user friendly. It's become a much more one-size-fits-all. And what we need to do, again, is to get back to a system that is, frankly, more tailored to what people need, and that will drive down costs as a salutary benefit. >> Bill Whalen: Okay, your second guideline, lon, he states should have the freedom to design their own health plans to help cover people of all incomes.
>> Lanhee J. Chen: Yeah, so this is something that actually, the Affordable Care Act had a provision in it that permitted states to essentially design their own healthcare programs. And the great thing about that is, if you think. You think about a state like Alaska. The challenges that are faced by citizens of that state are very different from a state like California or Florida, for example. And it's not just about urban rural mix, it's about healthcare needs.
It's about the ethnic makeup of the population. It's about the nature of how many providers there are. There's all sorts of differences between these states. And so one of the things the ACA did was to say, look, if you can come up with a healthcare program that covers at least as many people as the ACA did in your state, and you can do it as cost effectively and you can ensure the coverage is just as widespread as it would have been under the ACA, you can go off and form your own program.
The challenge is, over the years, the reality is that states have essentially had to ask the federal government over and over again for permission to do this. And it creates a lot of uncertainty because one administration will come in and say, hey, I like that idea, we're gonna bless it. And then another administration comes in with a different political leaning and says, no, we actually don't like it. And then you have to stop implementing this healthcare reform that you've been trying to do.
So what's my view on this? Fundamentally, if a state wants to approach this from the perspective of we wanna do a single payer system in our state, okay? Vermont's a great example, they tried to do this a couple of years ago. Some people in Colorado have tried to do this as a big push in California now to do this.
As much as I disagree with that idea, if a state, if the elected representatives in a state make a decision, that's the way they want to go, and they've got a plan put together and it complies with all these federal requirements, they should be allowed to go and do that.
Now, in the same way, if a state like Georgia, for example, which has tried to come along and do some of what I described earlier, which is create a marketplace with more flexible plans to enhance choices, if they want to do that, they should be allowed to do that, too.
And one of the things that we say in our plan is let's remove the discretion and frankly, the whimsical nature of whether something gets approved or not so that states can go out and do these experiments and we can have true laboratories of democracy. But beyond that, states ought to be allowed to experiment with things like, you got folks on Medicaid, they're lower income, but let's help them build a culture of saving around healthcare.
Let's give them the equivalent of some kind of health savings account that they can fund and they can help them pay for health care. That's a very difficult thing to do now in the context of our healthcare system. So what I'm looking to do and what my co authors and I talk about is how can we enhance the number of choices available, the types of choices available, particularly at the state level, because that's where we think a lot of this innovation can and should happen.
>> Bill Whalen: Give me a state lawn, Heath, that gets that. So it's doing it the right way. And then in your estimation, a state that is struggling and is on the wrong track right now. >> Lanhee J. Chen: Well, yeah, I mentioned Alaska earlier. They've had in place a series of what are called reinsurance programs.
And the concept there is basically that you would have really high risk are people who they know consume a lot of healthcare figuring out really how to get at this issue of paying for their expenses and offsetting those expenses. Because ultimately, what they do is they make healthcare and health insurance more expensive for everyone else. So if you could isolate some of that cost and figure out how to deal with that effectively, that'd be a good thing to do.
Georgia, I mentioned earlier this concept of them trying to do a little bit more around creating marketplaces, healthier marketplaces for health insurance. I think that's very much a good idea. I am concerned about states that are moving in the direction of creating public options or single payer plans. Colorado is a great example of a state where they've tried to move forward with public option, creation.
State of Washington has tried at various points as well and I think what they're discovering is two things. One is it's very difficult to do these programs without significantly tamping down what you pay providers. And as a result, you've got a bunch of doctors and nurses who don't want to participate in the program because they get paid a fraction of what they would be paid either through private insurance or a federal program like Medicare.
So they're discovering that it's very challenging to execute these programs at scale, because of this provider compensation issue. But secondly, the taxpayers are gonna have to foot a lot more the bill than they expected. And so the combination of those two factors make a public option like they're trying to do in Colorado, I think very challenging. But again, if that's what they want to do and they've got a plan for it, they are going to continue executing against it, and we'll see.
And in the reality of how this goes, some states are gonna be successful and some states won't be and that's what this process should be about is figuring out what works and what doesn't. >> Bill Whalen: Isn't interesting, by the way, that Gavin Newsom, the governor of the state that we're in right now, California, he rarely has met a big government idea he has to like, but he will not go to single pair?
>> Lanhee J. Chen: Well, I think, yeah, I mean- >> Bill Whalen: He suggested he might when he first ran in 2018. But every time it's brought up, he just tap dances away from us. >> Lanhee J. Chen: And by the way, notwithstanding the fact that many of his key political supporters, for example, the labor unions.
>> Bill Whalen: Right. >> Lanhee J. Chen: Particularly the government, public employee, labor unions have been very sympathetic to the single payer concept, I think the reason why is twofold. One is political and one is policy. So the policy reason is because it's unsustainable in California. There's just no way to pay for it at the scale that folks have talked about wanting to put it in place.
And then politically, I think for Governor Newsom, I think it presents challenges for him were he to ever run for president. I think frankly, it's very popular with the progressive base. It's probably not gonna be popular with the independent person he needs to win in Wisconsin or Georgia. So I do think there are political explanations as well for why he's avoided a more bigger bear hug as it were of single payer healthcare. >> Bill Whalen: I think you're right.
Let's get back to the Hoover plan, Lonnie, and your third guideline which is fix the federal tax code to promote more affordable healthcare choices. >> Lanhee J. Chen: Yeah, so a lot of people don't realize that our system of healthcare that we have in the US which is a public, private partnership really grew out of a revenue ruling from the Internal Revenue Service in the post-World War II era and what happened after World War II was firms were competing for labor. There were wage controls.
And so they had to figure out, how do we compete for the best labor? And so some employers got together and they wrote a note to the IR's, and they say, hey, if we provide health care benefits, are those going to be taxable income to the employee? And the IR's issued a ruling and said, no, actually, you can provide fringe benefits and the employee doesn't have to pay taxes on them.
And there began the start of this system now that covers 160 million Americans, which is the employer sponsored healthcare system. So we've had this system in place, and over time, it's worked very well so for many Americans, the tax exclusion, as it's called for, employer sponsored health insurance is a very effective way of getting health care to people and getting health insurance to people.
Of course, the challenge with that is when you create a tax benefit like that, it generates certain incentives. And the principal incentive it's generated is people buying more health insurance than they probably need, because it is tax sheltered or tax advantaged. And as a result, that has driven up health insurance premiums, it's driven up health costs. And so we call it, in some ways, the original sin of our health care system. Now, the solution is not to take health care away from people.
You remember President Obama famously promised that if you like your health care plan, you can keep it. When he passed, Obamacare turned out not to be true. And so we really believe that if you look at a system of reforms, you have to look at policy viability as well as political viability.
And so we're not in the business of taking healthcare away from people, but we do think that what you can try to do is to equalize the tax treatment a little bit of healthcare that's purchased by, let's say, people who are small business owners, who buy individually, who buy on healthcare exchanges created by Obamacare. We got to create parity between the tax advantages given to people who get through their employers and people who don't.
So we talk about making all health insurance expenses deductible and what that will do. Do actually, in some ways, is to reduce the dependence on what are essentially our first dollar coverage plans or plans that provide very generous coverage starting from the first dollar, so called Cadillac plans.
You may have heard about this in these very generous health insurance plans, because people become economically indifferent about whether they're spending a dollar on a plan or a dollar on actual healthcare. We want them to be spending the money on actual health care. So if you equalize the tax treatment, then you create an economic incentive for people to spend on health care, rather than just health insurance.
The other proposal we have, which we very much like, is creating a new kind of saving vehicle for healthcare expenses, very similar to what we have with 401s or iras, which are very familiar in the retirement security setting. We propose something called an individual health account, which is basically a tax advantaged healthcare saving vehicle that you can put money into. And the key factor here is that it doesn't come with some of the strings that health savings accounts come with.
Health savings accounts require you to buy a plan with certain restrictions and requirements. Our individual health account doesn't come with those requirements. What it does come with is an interesting feature, which is you can put more money in the lower your health insurance premiums are. In other words, if you're paying less for health insurance, you can put more into this account. If you are paying more for health insurance, you put less into this account. Now, why are we doing that?
Going back to the original point I made, we're trying to equalize, we're trying to make people relatively indifferent between spending on health care expenditures versus on health insurance. And so the individual health account is designed to give people that incentive to spend on health care rather than health insurance. So we love this concept to take off. We've talked to a couple members of Congress about sponsoring legislation to create this individual health accounts.
We're very excited that this is an idea and a concept that our economic modeling shows us will reduce healthcare costs, but also expand healthcare saving. And, as I said earlier, reduce this huge dependence that has developed on health insurance versus health care. >> Bill Whalen: What would be the pushback to the individual health account? How would somebody criticize it?
>> Lanhee J. Chen: Well, I think that the critique is not everybody is what I said earlier, not everybody can save for healthcare, not everybody has the ability to do that. So you can talk about a health savings account or an individual health account, but it's not going to be for everybody.
So one of the features that we propose with this individual health account is actually to be able to link it up with, for example, government provided coverage like via Medicaid, which is the program I mentioned earlier for lower income Americans. There's a subsidy associated with that.
And so what if you took some of that subsidy at the federal and state level and deposited that into an individual health account for a Medicaid beneficiary, then they could take that account and they would spend it on their own healthcare services. But that account could grow over time because we don't want people to be on Medicaid forever, that at some point maybe they are able to get a job and they're able to get employer sponsored health insurance, and then they own that account.
It creates portability and that's one of the things we don't have in our system now. You know how big of a pain it is when you change jobs? I'm sure some of our listeners here have had this experience. They change jobs and they got to change health insurance and maybe change doctors is a pain. There's no portability in our system. The individual health account grants the individual that portability because the individual health account is not owned by your employer.
It's not owned by the government, it's owned by you. And so the benefit to that is you can bring it from employer to employer or life situation to life situation. So the push back against individual health accounts is just that they're not for everybody, but what I would say is we've actually created a mechanism through our policy proposal that makes it more broadly available and more broadly acceptable.
And we think that's a really important factor because that is going to help, as I said, drive up people who have ihas, and hopefully the number and types of people who can have them will continue to increase. >> Bill Whalen: Right, so we're dealing with affordability and availability, but what about cost now? You mentioned regulatory reforms driving down costs, but what else can be done? I'm going to give you an anecdotal story here.
A friend of mine recently came up to Stanford to have an MRI done. In the process of getting the MRI done, she went into basically anaphylactic shock. She had a bad reaction to the diet was done. She then had to go to the Stanford emergency room. They had to pump stuff into her to take her out of the shock. She then was in the emergency room for about six hours. Her bills about $25,000. >> Lanhee J. Chen: Yeah. >> Bill Whalen: She has insurance, she's covered.
But you hear that story and you think, my God, why does it cost so much money? >> Lanhee J. Chen: Well, there's a lot of reasons that those costs have gone where they are. But let me suggest one of the most significant reasons is because we have a system of healthcare where while we are end consumers as individuals, we are not ultimately the most significant payers. In other words, we are not. Of course we pay something for that healthcare.
If were covered by insurance, we'll pay a copayment, well have coinsurance. And we have our premium, we pay, but a lot of the cost is shielded from us. We don't have transparency into what healthcare actually costs.
And if you think about any marketplace, if there is not transparency into how much a good or service costs, and no way to comparison shop, no way to determine relative quality, for example, of those services, you're going to create a black box and prices are going to be driven higher. Imagine if you had to go buy a television, but you had no way of determining how much the television actually cost or which television was better, that would not be a true marketplace.
And so healthcare suffers from the symptoms of a marketplace that is very sick, it's very ill because we don't have transparency into cost. We don't have transparency into quality. We don't have a way of pairings. So the way we need to address this is through some price transparency measures. You had mentioned earlier, Donald Trump's healthcare plan, his campaign healthcare plan, he talks about transparency.
That's actually a really important element of how we address a higher functioning healthcare system in America. And if you look around the world, some of the better healthcare systems in the world that really hold down spending and hold down cost also have a higher level of transparency around pricing and quality than we do in the US.
So this is an area of improvement that we need to seek and figure out a way to create a more transparent, and transparent healthcare system where people can compare costs, and can compare outcomes. >> Bill Whalen: Okay, I'd like to bring up something here. The timing of what you're doing is I think is excellent, Lonnie, because there's a ticking time bomb going on that most Americans don't realize, and that's Medicaid.
Congress ordered states in early 2020 to halt the requirement that Medicaid and RollEase renew coverage each year. To no surprise, population swelled to 93 million people as a result. That's about one in four Americans insured of that program here in California. Lon, he I think it's even larger. Something like 15 Californians on MediCal, about 40% of the state population. Congress ended that protection in April ahead of the COVID public health emergency expiring.
And now, you see states taking people off their case rolls. In Florida, I think they removed about 400,000 people, about 500,000 people removed in Texas. What's gonna happen here, Lonnie? >> Lanhee J. Chen: Well, a lot of the folks who are being removed from Medicaid are being removed because they're not eligible. And what's been found in many cases- >> Bill Whalen: Is that income based or? >> Lanhee J. Chen: It's income based, but also you can't have other insurance.
And as it turns out, some of the people who are on Medicaid have insurance through an employer and they shouldn't be on Medicaid, right? If they're getting insurance through an employer, they're getting it through an employer. So there's been a lot of political to do about Medicaid return. They're called Medicaid redeterminations and there's been a lot of sort of what I think is relatively fact free argument out there about how awful this is.
The reality is this is something that states should be doing. They should be trying to figure out who, who is eligible for the program and who is not. And those who are eligible should be getting the services, and those who are not should not be. What's going to happen, I think is Medicaid Medicaid is a tremendous fiscal challenge for many states. If you look at, I've talked to governors about this, I've talked to people who run state Medicaid agencies.
It is often the single biggest line item on a state budget. And so it's a tremendous amount of money. And the federal government is spending a lot of money on this too. Remember, it's a federal state program. So the feds pump in a certain amount of money, 80% of the coverage gains under the Affordable Care act. So there's been a lot of talk about Obamacare did great, it covered a lot more people. It did, and it did so primarily by putting them on Medicaid.
80% of the coverage gains in the ACA are owing to Medicaid expansion. So the reality is we were always headed for an unsustainable place with this program and were going to be continuing to head for an unsustainable place for this program unless we start to introduce some of the same market incentives that we're trying to introduce with this plan into private markets, into Medicaid as well. And some states are already proactively doing this, trying to put a little bit more management around it.
They're trying to put, in some cases, third parties are providing services and they're being forced to be reactive and responsive to how much healthcare utilization is happening and how much these programs are costing. These are all steps in the right direction. But at the end of the day, these are costs that are going to be borne by taxpayers, and taxpayers are going to have to foot the bill.
In many cases in states, they may see higher taxes because Medicaid is not a sustainable program as it stands. So step one is making sure that the people who are on Medicaid really should be on it. But step two is introducing some more of these market incentives and concepts that are in our plan and others to make the program run more efficiently, but also to make sure that it's streamlined in how it's providing benefits and services.
>> Bill Whalen: Now let's talk about healthcare and the aging population. Keep in mind, this is coming from an aging boomer who is part of the problem and not part of the solution. I was born in 1960. That means that I'm one year older than Barbie. But the last time I checked, Barbie is not draining the healthcare system but old Boomers like me are going to. In 2021, 18% of the US population, excuse me, in 2010, 13% of the US population was age 65 and older. It's now 16%.
It's going to be 20% by 2030. This is my generation, I hate to say Medicare spending, guess what? It doubles over the next 30 years in terms of its relation to size, the economy. Right now, I think Medicare is about 3% of the US GDP, it's going to be 5.5% by 2053. Which takes us into the realm of entitlement reform, which one of these people running for president in 2024 is going to have to address, unless they're a one term president and they dump onto somebody in 2028.
But tell me, what's going to happen with healthcare and the elderly population, something I take very personally. >> Lanhee J. Chen: Yeah, well, Medicare. Medicare is a problem we need to solve in the sense that a lot of people are on it. A lot of people are very happy with it. But the program is not going to be able to continue doing what it's doing if we allow it to continue on. The current trajectory identified some of the challenges around that.
So what's going to happen, there's something called the Hospital Insurance Trust fund and that helps to pay for benefits for Medicare beneficiaries who end up in the hospital? And that trust fund has had assets that have been dwindling for many years and at some point that trust fund will be exhausted. In other words, it will go to zero. And that date, by the way, is not that far away. I think the latest estimates have it sometime in the next eight years or so.
What will happen is when that goes to zero, by statute, by law, the shortfall has to be made up for, essentially by cutting compensation to providers, to doctors. And if you do that, what's going to happen is you're going to have a lot fewer people providing healthcare benefits to a lot more people who need them. Because as you've noted, our population is aging and so a lot more people are going to be demanding healthcare services. So we need to figure out a way to solve this problem.
And as politically attractive as it is for the former president and others to say they're not going to touch Medicare, the reality is we got to start thinking about ways to fix this problem because we cannot leave the seniors up tomorrow in a situation where Medicare is not a sustainable program for them. And this problem, as I said, is not that far away. I'm not talking about people who are in their teens.
I'm talking about people who are probably in their thirties and forties are going to really encounter a program that may not be sustainable, maybe even people in their fifties at this point. And so the challenge that we have is that the politics of this have overrun the reality. The reality is we need to have sustainable, responsible ways of addressing the shortfall. But no one wants to talk about it. No one wants to present ideas for how we can make the program better.
And that to me is a huge miss. And it's frankly demonstrates a lack of responsibility amongst our public officials, Republican and Democrat on both sides. People are unwilling to address this because they think the politics are too dangerous. And the reality is they have to. >> Bill Whalen: So let's play with this for a minute. So I'm going to put you back into the campaign business. I'm going to bump you up the ladder. We're going to go past state constitutional offices in California.
Forget about governor of California. I'm going to put you in the White House, and you're older than Vivek Ramaswamy. What the heck, make you President. >> Lanhee J. Chen: [LAUGH] >> Bill Whalen: President Chen has to address what to do about healthcare reform, what to do about entitlement reform. How does President Chen go about it? I assume he gives a very thoughtful speech about it. But then what is the action item out of the speech? Do you put together a task force, a bipartisan panel?
Do you trust Congress to do it? How do you actually get the ball in motion? >> Lanhee J. Chen: Well, I think some of this is going to be created, some of the urgency will be created by the deadline I've discussed earlier, which is when we're going to see trust fund exhaustion.
If you remember the history of Social Security reform, the last major reform that the program happened when there was trust fund exhaustion during the Reagan years, and President Reagan had Alan Greenspan put together a commission and they were able to come up with reforms that they implemented, by the way, including raising the retirement age, which I know is a crazy concept, but they actually did it as part of that bipartisan set of reforms.
I think that there are ways that this problem can be addressed on the Medicare side. It is a little bit more complex than it is with Social Security because there are many more moving factors in Social Security. There are a finite number of issues that have to be addressed to fix that program with Medicare. Really what it's about is can we begin to introduce market forces into Medicare?
And by the way, we already have this in a program called Medicare Advantage, which is very popular with many seniors. These are private plans that administer Medicare benefits and in many cases provide more benefits than what's in the standard suite of Medicare benefits. But what Medicare Advantage has shown us is that some of these market influences can be very successful in the Medicare program. So it goes to this issue of introducing market forces.
But on the flip side, we also have to figure out how can we make sure that we're compensating the people who provide medical services, not for volume, which is what essentially the program provides for. Now we need to move toward a system where providers are paid for the quality of care they provide, for the performance of whatever care they provide we got to go to pay for.
And our Hoover colleagues, Jay Bhattacharya and Tom McCurdy, have done a lot of research on this and have thought through a lot of the ways in which we can continue to move the ball forward on making sure that we are fixing Medicare so that it's actually paying for results, not just paying for volume. So again, very much in the weeds, right? I think at the presidential level, it's about messaging, that these programs are important.
They need to be made sustainable, and we have to figure out how to do it in a way that doesn't jeopardize current seniors benefits or even near seniors benefits, but may change the program a little bit for people in the future. And that, by the way, was standard Republican fare for many, many years. And nowadays, people don't touch it because they see the political reality of how challenging it is to say, you want to fix and improve a program like Medicare.
So I just think it takes some leadership. And I hope that whoever gets elected in 2024 will be in a position to exercise that leadership, because it is a problem that is rapidly approaching us. >> Bill Whalen: By the way, if you were president, Lanhee, who would you hire as an HHS secretary? No names, but I'm just thinking, just profile for the drop-off. What qualifications would you want? Would you want a doctor? Would you want an experienced DC politician?
What would you- >> Lanhee J. Chen: Yeah, not necessarily a doctor, not necessarily. And I don't think experienced DC politicians the right answer either. I tend to really favor people who've had strong experience at the state level, and because either a governor or even a health secretary from a state, from a big state who'd had to administer a health care program.
Because that's where the rubber really meets the road in our health care system is states having to implement federal dictates, but also their own programs. And so I think people who've had that level and measure of experience are hugely advantaged. And ideally, someone who has had some healthcare experience, I think just grabbing a state official probably is not the right thing. And I say that with, with some sort of nod toward the reality of what President Biden has done.
He picked someone who really didn't have a whole lot of healthcare experience, but was a government official in the state of California, to be the HHS secretary. And so he had the right concept, which is go to the states, but he didn't exactly have the right profile of a person who I would have thought would have been good for that job. So I would look to someone who's actually had some healthcare experience at the state level. I think that's the way to go.
>> Bill Whalen: Yeah, I agree with you. Okay, final question, today is Wednesday the 16th. A week from today, eight Republicans will gather, maybe nine, it depends what Donald Trump does, but at least eight will gather on a stage in Milwaukee. And it'll be the first Republican presidential debate of the season. I'm going to put you now in the role of a moderator. What would you ask them in terms of health care reform?
>> Lanhee J. Chen: I would just ask them very clearly, how do you want to lower health care costs? What do you wanna do to improve access to healthcare? Do you think Obamacare is working? I mean, these are basic questions that we need people to answer. Here's another one. We haven't talked much about this, but one of the things that Joe Biden and Democrats in Congress passed is something called the Inflation Reduction act.
This is the one year anniversary of the Inflation Reduction act this week. And the Inflation Reduction Act includes, for the first time, ever a provision that would allow the federal government to directly negotiate drug prices. This was previously prescription drug prices. This is something that's wildly politically popular, but creates all sorts of policy ramifications and issues. Would a president DeSantis or a President Trump, part two, repeal that part of the IRA?
Would they seek to repeal the federal government's authority to negotiate prescription drug prices? Very politically popular, but very policy problematic. And so those are the kinds of things I'd like to get at, because we don't have to really go deep here. I mean, the reality is, let's just hear what you have in mind for the system, which is this is a hugely important set of issues. And the fact that we're not talking about it, that no one's actually said more about it, is alarming to me.
But I say, I guess, fundamentally kind of unsurprising, given how challenging healthcare is as an issue. >> Bill Whalen: And as somebody who I assume will be watching the debate, listening to the answers, what red flags will you be looking for when it comes to healthcare? >> Lanhee J. Chen: I think repeating this issue that you're never going to touch Medicare and Social Security, I mean, to me, that is a political promise that you just may not be able to keep.
Because we are going to be in a position soon where Medicare is going to have to be addressed. And so those kinds of overly gauzy sort of promises about never touching Medicare, I mean, that, to me, is a red flag. I think somebody who just doesn't wanna talk about healthcare, that's a red flag, right? If you get a question about healthcare and you start talking about Ukraine or you start talking about a different topic, that's worrisome. Now, I've coached lots of candidates in debates.
I participated in a lot of debate prep in my life. And you always teach and talk about the pivot. But this is one area where I, I think you really have to have something to say. And if you don't have anything to say and you'd rather talk about a topic that's totally unrelated, that, to me is a red flag. >> Bill Whalen: Okay, so what next for the Choices for All project?
>> Lanhee J. Chen: Well, we're spending a lot of time talking to members of Congress, to people who will listen to us in the broader thought community, the think tank community, the sort of healthcare policy community. And we're really getting out there with these ideas. And we see this in some ways as a living document, because we think about adding ideas to it. We're open to changing things if it turns out certain elements aren't working the way that we had hoped.
And so we're in the process of continuing to get the ideas out there, continuing to make sure people understand what we want to do. We're continuing to write about it. We've got a couple more pieces coming out in various journals as well as popular publications that talk more about elements of our plan. So we're going to be out there really trying to make sure people understand what we're proposing, why we think it's the right time for it.
And hopefully, as I said earlier, convincing some policymakers to actually carry legislation, to actually begin to implement some of these ideas. That's the exciting part of this, is actually seeing legislative language and actually seeing this potentially passed into law someday. And we're going to keep going at it until we get there. >> Bill Whalen: Well, I hope you and Danny and Tom keep at this. You're doing great work, and I hope your son's chin is healing well.
Our listeners can't see it because this is audio only. But if you looked at my chin right now, you're gonna see a line right there, which is six stitches from playing basketball. >> Lanhee J. Chen: That's exactly where, yeah, it's, I guess it's part of the rite of passage of being a preteen. But no, it's always great to be with you, Bill, and appreciate the time to come on and talk about this really important set of reforms. >> Bill Whalen: Thank you, Lanhee.
You've been listening to Matters of Policy and Politics, a Hoover Institution podcast devoted to governance and balance of power here in America and around the globe. If you've been enjoying this podcast, please don't forget to rate, review, and subscribe to our show. Hoover Institution has Facebook, Instagram, and X feeds. And I have a hard time saying X, I still want to say Twitter, but X, and our X handle is @hoverinst, that's spelled H-O-O-V-E-R-I-N-S-T.
Lanhee Chen is also on X, and his X handle is @lanheechen, no surprise there. You spell that L-A-N-H-E-E-C-H-E-N, @lanheechen. I mentioned our website beginning of the show, that is hoover.org. You find more on the Choices for All project, healthcare reforms for the future there. I also encourage you to sign up for the Hoover Daily Report, which keeps you updated on what Lanhee Chen and his Hoover colleagues are up to. That's emailed to you weekdays.
You can also sign up for Hoover's PodBlast, which delivers the best of our podcasts each month to your inbox. For the Hoover Institution, this is Bill Whalen. We'll be back soon with a new installment of Matters of Policy and Politics. Until then, take care, thanks for listening. >> Speaker 3: This podcast is a production of the Hoover Institution, where we advance ideas that define a free society and improve the human condition.
For more information about our work, or to listen to more of our podcasts or watch our videos, please visit hoover.org dot.