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Paragon Health Institute

Health Reform Menu

Urgency of the Problem

  • There are only two areas of the federal budget growing as a percentage of the economy: 1) net interest payments on the debt and 2) federal health care programs
  • To protect against soaring deficits, debt, inflation, and interest rates, policymakers must reduce federal health care spending by at least $1.7T over the next decade, or about 7.5% of the projected baseline of $23T in federal health program spending.

Do Not Make the Fiscal Problems Worse

  • Congress must permit the enhanced Obamacare subsidies to expire after 2025. They have produced significant fraudulent and wasteful spending and erode better quality employer-based coverage. Extending them would cost nearly $400B.

Repeal Expensive Biden Rules

  • Biden issued numerous ill-conceived regulations that expand federal spending and crowd out employer coverage. For example, it finalized rules requiring minimum nursing home staffing despite labor shortages, preventing states from checking and enforcing Medicaid eligibility requirements, and funneling additional Obamacare subsidies to insurers, including for illegal aliens and potentially fraudulent enrollees. Congress could repeal those rules and save at least $300B.

Affordable Care Act and Employer Coverage

  • CSR Appropriation and the HSA Option
    • Appropriating the Cost-Sharing Reduction (CSR) subsidy program would significantly reduce Obamacare’s benchmark premium and the linked premium tax credits (PTCs).
    • The HSA option would give lower-income Obamacare enrollees the option to take the CSR subsidy as an HSA deposit that they would control.
    • The combination of the CSR appropriation & the HSA option would reduce deficits by $20B.
  • Capping premiums for ACA benchmark plans used to calculate PTCs at 125% of the national average would limit the inflationary effect of these subsidies.
  • Capping the tax exclusion for employer-sponsored insurance from federal income and payroll taxes to 125% of the national average plan cost would reduce premiums and help wage growth. It would save over $500B.
  • Increasing the amount of PTCs returned to the government if excess PTC was provided to the insurer during the year, saving an estimated $50B.
*All cost estimates are over a decade

Medicaid Reforms

  • End federal discrimination against traditional Medicaid enrollees (children, pregnant women, people with disabilities, and seniors) by equalizing the federal reimbursement rates of state spending on all Medicaid enrollees through phasing down the 90% reimbursement rate for able-bodied working-age adults. Paragon has a proposal that would save an estimated $530B, reduce Medicaid enrollment by 9 million people and expand private coverage by 6 million people.
  • Require able-bodied, working-age Medicaid enrollees to engage in employment, training, or community service, saving an estimated $120B.
  • Crack down on Medicaid financing scams by reducing the provider tax safe harbor threshold, which permit states to use tax revenues from providers to artificially inflate federal Medicaid expenditures. The current threshold is 6%. CBO projects lowering it to 5% would save $50B with savings of $120B if reduced to 4%.
  • Cap Medicaid supplemental payments, including state-directed payments, to providers at 100% of Medicare rates. This would save $100s of billions.
  • Limit all non-benefit costs to a maximum of 12% of annual Medicaid benefit expenditures. Apply a standard 50% federal match to non-benefit costs. Paragon estimates that a cap of 12% would have savings of $130B. CBO estimates that a 50% federal match for non-benefit costs would save $70B.
  • Increase the share of Medicaid spending that must come from the state general revenue from 40% to 50% and require that higher percentage apply to every enrollment category.
  • Reduce Medicaid favoritism toward rich states by lowering the floor of the federal medical assistance percentage from 50% to 45%. Paragon estimates this proposal would save about $60B.
  • End the late Medicaid expansion boost, a provision that provides a temporary increase in the federal Medicaid reimbursement for non-expansion states that choose to expand, saving more than $10B.
  • Require 1115 waivers to meet a strict budget neutrality test, saving billions.
  • Move DC’s FMAP floor from 70% to 50%, saving close to $10B.

Medicare

  • Rescind the Biden administration’s proposed rule to extend Medicare coverage of anti-obesity drugs to treat obesity, saving about $20B.
  • Require Medicare 402 demos to be budget neutral, potentially saving billions.
  • Reduce Part B payments for drugs acquired through the 340B program to reflect its discounts, saving nearly $80B.
  • Limit first-dollar coverage of cost-sharing by Medigap plans, saving nearly $120B.
  • Enact site neutral payments in hospital outpatient departments, saving an estimated
    $160B and removing a major incentive for provider consolidation.
  • Restructure payments to hospitals for uncompensated care, saving $140B.
  • Improve Medicare Advantage’s efficiency and quality, saving at least $200B.