Presidential candidate Mr. Donald J. Trump announced that he would require the government or insurance companies to pay for IVF treatments. While this might address America’s falling birth rates, directing the money to the wrong party would compromise the interests of patients, American workers, and taxpayers.
Since 1978, IVF has helped millions of parents conceive babies. In 1994, a successful delivery through IVF cost at least $44,000. Thanks to technological advancements and market competition, today it costs less than $20,000. In the U.S., public insurance programs and self-funded private plans typically do not cover IVF treatments. Individual and fully-funded private plans do not cover IVF unless mandated by state law.
If Mr. Trump wants to make the government or insurance companies pay for IVF treatments, he faces three options: fund providers, mandate insurance coverage, or fund patients—each with vastly different implications.
Option I: Fund Providers (The Free Covid-19 Test Approach)
The government may pay providers for delivering IVF treatments, similar to the arrangement for “free” Covid-19 at-home tests. This approach would require arbitrary bureaucratic price setting and be subject to its typical drawbacks: the inability to respond to market signals and vulnerability to industry capture, both of which would lead to corporate providers monopolizing the market with little incentive for innovation or quality improvement.
Eventually, patient interests would be compromised because they are not the ones paying—the government is. To achieve better payoffs, providers need to focus more on influencing the regulatory process than on making patients happy.
Option II: Mandate Insurance Coverage (The ACA Approach)
The government may require insurance plans to cover IVF treatments with minimal cost sharing, similar to the essential health benefits mandated by the Affordable Care Act (ACA). This approach would force all beneficiaries to pay for the treatments, inflating premiums for employers and workers.
Importantly, insurance plans, subject to the ACA’s medical loss ratio requirement, often benefit from higher medical spending and thus lack incentives to contain prices. Individual patients, who do not benefit personally and directly from lower prices, also have little motivation to seek low-cost providers. Both factors would put upward pressure on prices, further inflating premiums.
Providers would face rigid payment schemes and spend time and resources on prior authorization, claim submission, and other administrative and compliance tasks associated with insurance—a process that rarely benefits patients or stimulates innovation, often causes physician burnout, and motivates provider consolidation and higher prices.
Option III: Fund Patients (The Defined Contribution Approach)
The government may pay IVF patients a means-tested defined amount, potentially through a tax credit. Patients would choose their provider and pay the agreed upon price. If the government subsidy exceeds the cost, the patient keeps the difference; otherwise, the patient pays the remaining amount by themselves.
Providers would freely set their prices, innovate, and improve quality to attract patients and gain business. The market, consisting of patients who directly benefit from low-cost and high-quality services, is unforgiving to price gougers and low-quality providers, efficiently driving them out.
This approach would leave the government with no ability to set rules that benefit certain providers, and providers with no room for regulatory capture and less incentive for consolidation. Therefore, all providers, whether large or small, must compete by constantly innovating, cutting prices, and delivering what patients actually need and want.
Patients would not worry about network restrictions or other administrative complexities associated with insurance. There would be no insurance-based price discrimination—each provider would have only one price for everyone.
For all products and services, including healthcare, the best way to reduce prices, stimulate innovation, and benefit consumers is through free market competition. Wrong policies, such as funding providers or mandating insurance coverage, will inevitably fail patients.
Mr. Trump, let’s fund patients, not the system.
