Trump’s Executive Orders Won’t Lower Healthcare Prices, but Deregulation Will

About a year ago, President Trump stated that drug prices were “a burden on the American people” and “one of my [President Trump’s] greatest priorities is to reduce the price of prescription drugs.”

He’s certainly been trying.

In 2018 alone, President Trump implemented an international pricing index to keep foreign drug producers from overcharging U.S. patients, targeted drug rebates between producers and middlemen, and issued Medicare Part D plans more power to negotiate drug prices. He also threatened drug providers (multiple times) not to increase prices – via Twitter. Despite these efforts, the year 2019 began with continued price hikes for hundreds of popular drugs.

But President Trump’s persistent failure has not deterred him. More recently, he turned his attention toward lowering healthcare service prices.

Earlier this week, the president signed an executive order requiring hospitals to publicize their negotiated rates for common procedures. By requiring greater price transparency, he hopes patients can better avoid excessive charges. In his own words, the “lack of price transparency has enriched [healthcare] industry giants greatly.” By “giving that power back to patients,” he believes healthcare costs “will go way, way down.”

But will using the power of the executive branch bring healthcare prices down? Recent events suggest otherwise.

This is the third executive order President Trump has signed intending to reduce healthcare costs. The first, in 2017, was implemented to restructure the health insurance market under the Affordable Care Act to help Americans have more affordable healthcare. His second, in 2018, lengthen short-term healthcare plans. As an article published in Health Affairs notes, health insurance premiums have increased. Other research suggests these and other healthcare-related costs are expected to continue to increase for the foreseeable future despite Trump’s previous executive orders. It is difficult to see why the most recent one will fare any better.

Although executive orders create laws, such measures cannot override the laws of economics. And the laws of economics tell us that deregulation allows for the increased competition which lower consumer (or patient) prices.

Consider the case of the Oklahoma Surgical Center. Nearly 18 years ago, physicians Keith Smith and Steven Lantier began voluntarily displaying prices for their procedures to “start a price war” and undercut their competition. By posting their prices in their office and online, the center was able to attract patients from across the country. Following suit, other hospitals and imaging centers across Oklahoma began posting their prices.

These results are exactly what the President hopes for in passing his most recent executive order. However, they were achieved because Oklahoma places fewer restrictions on physicians’ organizational practices compared to other states. Consequentially, physicians were able to compete easier and offer patients lower prices. And no law forcing them to do so was needed.

We can applaud President Trump for his continued efforts to make healthcare more affordable. However, his previous lack of success strongly indicates more of the same is a step in the wrong direction. Until he and other policymakers embrace healthcare deregulation, little progress will be made.

Raymond J. March is a Research Fellow at the Independent Institute and Assistant Professor of Agribusiness and Applied Economics at North Dakota State University.
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