A WISeR Way to Reduce Medicare Waste + Ending Biden’s COVID Credits

This week’s newsletter begins by defending the new WISeR model from the Centers for Medicare and Medicaid Services (CMS) Innovation Center. I then highlight a new policy brief on problems with Biden’s COVID credits and a new Paragon Pic showing that the government will pay the vast majority of premiums for the vast majority of Obamacare exchange enrollees when Biden’s COVID credits expire at the end of this year. For more information on Paragon’s work on Biden COVID credits, particularly improper and phantom enrollees, check out the webinar we put on last week.

Defending WISeR

Recently, The New York Times criticized a new CMS Innovation Center program aimed at reducing fraud. Contrary to critics’ claims, this program is a targeted demonstration to address a real problem.

The CMS Innovation Center’s Wasteful and Inappropriate Service Reduction (WISeR) demonstration program will test whether AI-powered, human-checked prior authorization and pre-payment review of wasteful, inappropriate, or fraudulent services can reduce spending and improve outcomes in traditional Medicare. The model, which will be tested in six states, aims to protect patients from unnecessary or harmful care, which abounds in Medicare. WISeR is an example of exactly what the Innovation Center should be doing—a demonstration of reforms that are likely to both improve outcomes and lower costs in Medicare.

The WISeR model is targeted to specific services with well-documented abuse. For example, spending on skin substitutes grew 4,000 percent in the past five years, reaching more than $10 billion in 2024, amid widespread abuse and concerns about patient harm. Other selected services typically don’t improve health or pose direct risks to patients when performed unnecessarily. By focusing narrowly on problem areas, the model seeks to reduce costs and improve patient safety without limiting access to appropriate care.

Prior authorization is often criticized, but in a system where patients do not spend their dollars directly, some controls are necessary to prevent unnecessary or harmful services. A recent study found that prior authorization reduced more than two-thirds of non-emergent ambulance rides for Medicare patients traveling to and from dialysis facilities without disrupting care or worsening health outcomes for patients. Accountable Care Organizations rely heavily on prescribing specific standards of treatment like those contained in prior authorization criteria.

CMS data from 2023 show that only 6.4 percent of prior authorization requests in Medicare Advantage were denied initially. Of those denials, under 12 percent were appealed, and more than 80 percent of appeals were approved on reconsideration. Most of the secondary approvals were due to insufficient paperwork filed by the provider initially. These statistics demonstrate that prior authorization is effective at reducing unnecessary services as 88 percent of denials are not appealed and most of the reversals are providers correcting paperwork gaps.

In WISeR, safeguards include excluding inpatient-only and emergency services and keeping documentation requirements identical to those already in traditional Medicare. Additionally, WISeR participants’ prior authorizations will be directly overseen by CMS and decisions will be more transparent.

Companies participating in the model will share in any savings generated by preventing wasteful, abusive, or unnecessary spending. CMS has included safeguards to address concerns that companies may reject necessary care. CMS can penalize improper denials, and participants are paid only for savings net of appeals and resubmissions. In addition, AI will be used to quicken decisions, but humans remain the final decision-makers for denials, and denials can always be appealed. These safeguards are designed to protect patient access to appropriate services while reducing waste and abuse.

Traditional Medicare’s pay-and-chase design leads to widespread fraud, waste, and abuse—which result in higher premiums in Medicare Part B. CMS has a responsibility to ensure that taxpayer dollars are spent only on appropriate care. Targeted models like WISeR align with the Innovation Center’s mission to promote efficiency, higher quality, and improved outcomes in Medicare. Policymakers and the public should view WISeR as an important step toward curbing waste and strengthening Medicare for future generations.

Permitting Biden’s COVID Credits to End as Scheduled

Congress should allow Biden’s temporary COVID credits to expire as scheduled. Enacted during the pandemic, these subsidies expanded Obamacare’s costly structure and fueled fraud and wasteful spending. In a new joint Paragon / Foundation for Government Accountability policy brief, Biden’s COVID Credits Are an Obamacare Expansion That Congress Should Allow to Expire, which I coauthored with Trevor Carlsen, we show that extending these credits would cost taxpayers an additional $450 billion while crowding out employer coverage and worsening deficits and inflation.

This paper builds directly on Paragon’s recent work exposing the consequences of unchecked subsidy growth. New CMS data show nearly 12 million exchange enrollees used no medical services in 2024—triple the number in 2021—evidence of alarming phantom enrollment growth. A policy brief we released last week showed that taxpayers will finance the overwhelming share of premiums for most enrollees when the COVID credits expire.

Earlier this summer, our report on The Greater Obamacare Enrollment Fraud documented that 6.4 million people in 2025 were improperly enrolled in fully subsidized coverage, often unaware they were signed up or already covered elsewhere. We responded to corporate interests’ criticisms about Paragon’s methodology for estimating improper and phantom enrollment in a Prognosis and in a recent newsletter. The Congressional Budget Office released estimates last week, confirming millions of improper enrollees, even with a methodology that focused on only a subset of the entire problem.

Together, these findings reveal a deeply broken system that enriches insurers, wastes taxpayer dollars, crowds out private financing, and leaves millions with unwanted or unused coverage. Congress should let the Biden COVID credits expire and pursue reforms that deliver affordable, patient-driven health care.

Government Share of Obamacare Plan Premiums Will Remain Very High After COVID Credits Expire

Some proponents of extending the COVID credits have wrongly suggested that all Affordable Care Act (ACA) subsidies expire at the end of the year. In reality, when Biden’s COVID credits expire at the end of 2025, the ACA will revert to its original subsidy structure, and taxpayers will still cover most of the premiums for the vast majority of enrollees. Figures 1 and 2 show the government share of premiums once the COVID credits expire, which we discuss further in this week’s Paragon Pic.

Figure 1 shows the government amount for a benchmark plan premium in 2026 for single enrollees at different ages. The solid line shows the government contribution based on household income, while the dashed line represents the total premium. The difference between the dashed line and the solid line is the enrollee’s out-of-pocket premium amount. For example, for a 50-year-old at 150 percent of the federal poverty level (FPL), taxpayers will bear 90 percent of the premium ($9,010 of $9,994).

Nearly three-quarters of exchange enrollees report incomes below 250 percent FPL, so most will continue to have the bulk of their premiums financed by taxpayers even after the COVID credits expire.

Figure 2 shows the same comparison for bronze plans. Bronze plans have lower premiums but higher cost-sharing. Because subsidy amounts do not vary by plan type, taxpayers cover an even larger share when enrollees choose bronze plans. At 200 percent FPL, the government finances the entire cost of a bronze plan for a 50-year-old ($7,675 of $7,675).