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Ex-Trump Advisors Urge New Approach to Health Care Taxes in 2025

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Paragon Health Institute, a leader in health care research and market-based policy proposals, just released Follow the Money: How Tax Policy Shapes Health Care, an in-depth look at ten tax provisions affecting health care and coverage. The paper, authored by Theo Merkel and Brian Blase (two top officials at the White House’s National Economic Council under President Trump), seeks to influence key policy decisions in 2025 and beyond.

This paper serves as a guide for Congress as it will tackle tax reform next year given the expiration of provisions from the Tax Cuts and Jobs Act. In Follow the Money: How Tax Policy Shapes Health Care, Merkel and Blase evaluate the impact of ten health tax provisions and shed light on their history. Most relevant for policymakers are their commitment to a fair and efficient health system and recommendations for reforms that reflect learnings from what did, and did not, work in previous health reform efforts.

Currently, the tax code has provisions that create efficiencies in the health sector and others that lead to waste and significant overutilization of health care services. Merkel and Blase propose Congress:

  • Not advantage health care spending over other types of spending
  • Ensure that direct payment for health care is not disadvantaged relative to third-party payment
  • Expand Americans’ ability to choose the coverage and care that works best for them
  • Reduce both regressive impacts and policy that overly subsidize high-cost regions of the country.

Merkel and Blase recommend that Congress permit additional plan designs that can be linked with health savings accounts and Medicare medical savings accounts given the benefits when people shop for care. They also propose that Congress improve the 2019 individual coverage health reimbursement arrangement (ICHRA) rule to enable employees to use contributions on a broader set of plans.

In tax policies related to the Affordable Care Act (ACA), Merkel and Blase outline numerous problems with the expanded premium tax credit (PTC) that has led to most exchange enrollees having access to fully-subsidized plans and a large amount of wasteful spending. While they do not propose ending the PTC, they recommend that Congress not extend the expanded subsidies after they expire next year and place a limit on how high insurers can inflate subsidy amounts. They further recommend that Congress appropriate the ACA cost-sharing reduction program and permit enrollees to receive their benefit as a deposit in a tax-advantaged health account.

Merkel and Blase’s recommendations do not ignore the largest tax preference—the exclusion of employer-sponsored health insurance premiums from federal taxes. While on a per-enrollee basis the exclusion has a lower budgetary cost than government programs and the PTC, the authors view the tax preference as regressive and inflationary. Congress should only tackle the exclusion in the context of health reform that reduces reliance on public programs or comprehensive tax reform that reduces carve-outs and lowers rates, and they propose capping the exclusion at 125 percent of the national value of employer plans.

Launched in late 2021 by Brian Blase, Paragon Health Institute provides health policy research as well as market-based policy proposals for improved outcomes in the public and private sectors. Journalists and health care analysts can review Paragon’s latest studies and commentary at paragoninstitute.org.

Contact:
Anthony Wojtkowiak
[email protected]
703.527.2734

Paragon President Brian Blase featured on the 2024 STAT Status list