President Donald Trump has reopened the healthcare debate with a mix of ideas that do not align. He has pledged to “terminate” Obamacare, then signaled openness to extending ACA subsidies, then endorsed personal freedom accounts that would send money directly to individuals.
These proposals represent very different diagnoses of what is wrong with American health care. No serious reform effort can point in contradictory directions.
But this problem extends far beyond Trump.
Republicans have offered inconsistent signals, with some now willing to extend ACA subsidies again despite a decade of arguing – correctly – that these subsidies inflate premiums and entrench insurer dominance. Others want to preserve zero premium plans that simply shift costs onto taxpayers. Free-market analysts have warned that subsidy “compromises” are simply Obamacare under a new name.
Yet Democrats offer no better path.
Their answer to rising premiums and shrinking networks is the same solution they apply to every public-policy problem: more government. When their policies increase costs, they respond with even larger subsidies.
When regulation distorts markets, they impose more regulation. And when the system falters under its own weight, they insist the only answer is to socialize even more of it.
That approach has produced a decade of escalating prices and fewer choices, and expanding the model would only magnify the failures.
Trump’s strongest idea is his call to direct funds to individuals instead of insurers.
Washington has spent decades funneling billions into insurance companies, insulating them from risk and pushing the financial burden onto families. Giving consumers control over those dollars would force insurers to compete for business and bring price discipline into a system that has lacked it for half a century.
From an economic standpoint, incentive alignment is essential. Markets work when consumers – not administrators – drive demand and determine value.
But this idea cannot coexist with expanding subsidies. Increasing the size and scope of federal subsidies reinforces the very system that blocks market forces. You cannot fix a failing entitlement by enlarging it. Nor can you create competition when the government continues to dictate coverage rules, distort risk pools, and protect the largest incumbents.
Republicans and Democrats alike fall into this government-knows-best trap when they mistake subsidies for reform.
Americans now bear roughly $2 trillion in annual healthcare regulatory and transaction costs by governments, an economic burden that inflates prices long before care reaches the patient.
Regulation reduces competition, deters new entrants, and forces providers into costly compliance exercises that displace actual care. No reform effort will succeed until this regulatory weight is dramatically reduced.
Real reform requires structural change rooted in basic economics. Americans need broad, flexible personal accounts they manage directly. Policymakers must address the 70-year-old employer-sponsored insurance tax exclusion, which I analyze with Dr. Deane Waldman in our Empower Patients work.
This tax distortion hides the true cost of care, prevents families from choosing the plans they want, and undermines competition across the system. A genuine market cannot function on top of a tax regime designed in the 1940s.
Reform must also expand access to direct primary care, telehealth, and interstate competition while rolling back federal and state mandates that limit options and inflate premiums. These changes would open the door to innovation, lower prices, and restore patient-doctor relationships.
Neither party will achieve this outcome by preserving the architecture of Obamacare or doubling down on government control. Democrats promise more subsidies and more centralization. Republicans risk drifting into the same trap by entertaining policies that reinforce federal dominance. Both approaches will lead to higher costs, fewer choices, and deeper dysfunction.
Trump’s instinct to expand patient control is a valuable starting point. His support for expanding subsidies moves in the opposite direction. The same is true for Democrats who insist that the answer to every failure is to give government even more power.
If America wants a functioning healthcare system, it must choose a path grounded in ownership, transparency, and competition supported by regulatory restraint. This is the only framework capable of lowering costs and increasing access without bankrupting taxpayers. Anything less guarantees more of the same.
