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An Update on the ACA and FDA

President at Paragon Health Institute
Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.

In today’s newsletter, I discuss former President Trump’s comments about problems with the Affordable Care Act, recap my recent appearance on C-SPAN’s Washington Journal, and highlight a new Paragon report, Unwise and Unauthorized: FDA Regulation of Laboratory Developed Tests, by Dr. Joel Zinberg.

Examining the Affordable Care Act

Former President Trump made news this weekend with this social media post: “The cost of Obamacare is out of control, plus, it’s not good Healthcare. I’m seriously looking at alternatives.” The post linked to a Wall Street Journal editorial on how the Affordable Care Act has increased health care consolidation, which in turn decreased competition and increased costs.

On Friday, I appeared on C-SPAN’s Washington Journal to discuss recent Paragon research on the ACA. This research includes two recent releases: The Shortcomings of the ACA Exchanges: Far Less Enrollment at a Much Higher Cost by health actuaries Daniel Cruz and Greg Fann, and my new Health Affairs blog, CBO Report Highlights Need for Change Of Direction in Health Policy.

Trump raises valid concerns with the ACA, and he’s right that the law needs reform. In Shortcomings, Cruz and Fann compare the following: the projections for the individual market when the law passed, and the reality. The individual market is only about half as large as projected, and the taxpayer cost per new private market enrollee was a staggering $36,798 in 2021.

The average premium for a family of four with parents aged 45 is about $21,000 for a plan with a $5,000 deductible that often excludes the best providers in a region. In fact, the first two C-SPAN callers (one in Texas and one in South Carolina) have ACA plans and complained about the lack of providers who take their coverage.

Cruz and Fann detail that the uptick in exchange enrollment is due to enormous government subsidies. These subsidies inflate premiums by giving insurers significant pricing power as nearly the entire premium increases over time are paid by taxpayers.

At the end of the interview, I discussed policy reforms, including:

  1. Helping small businesses offer coverage through Association Health Plans and individual coverage health reimbursement arrangements,
  2. Expanding alternatives to the ACA that permit people to spend their own money on coverage that works best for them, and
  3. Directing more of the government subsidies for lower-income people to them instead of funneling the money through health insurers.

All of these alternatives would be an improvement over the status quo, which is failing too many families and taxpayers.

FDA’s Misguided Proposal to Regulate Laboratory-Developed Tests

Dr. Joel Zinberg, who directs Paragon’s Public Health and American Well-Being Initiative, analyzed the legality and wisdom of FDA’s proposed rule to regulate laboratory-developed tests (LDTs) as medical devices. While FDA has long claimed authority to regulate LDTs—tests that are designed, manufactured, and used within a single laboratory—it has almost never done so. Joel argues that FDA likely lacks the statutory authority to regulate LDTs and that allowing FDA regulation would be unnecessary and unwise.

LDTs are more like medical services (which FDA may not regulate) than medical devices (which FDA has authority to and does regulate). The Federal Food, Drug, and Cosmetic Act makes no mention of regulating laboratories, laboratory tests, or laboratory testing services. Recent Supreme Court precedent clarifies that an agency may not presume authority to regulate an area of significant economic activity unless Congress clearly provided such authority.

Exempting LDTs from FDA oversight allows specialized labs the flexibility needed to rapidly create new tests for rare diseases and emergency situations where there may be no FDA-approved test. FDA regulation of LDTs could curb innovation important to combat emerging infectious diseases. COVID-19 illustrates the point. Early in the pandemic, FDA decided to require emergency use authorizations for LDTs that academic labs had available to diagnose COVID-19. As a result, no reliable tests were available during February 2020.

FDA’s proposal appears to be a spur to Congress to enact legislation giving it clear authority to regulate LDTs, such as the VALID Act. Congress should resist such pressure. The current approach of regulating LDTs through the Clinical Laboratory Improvement Amendments of 1988 works reasonably well and is more flexible than FDA regulation would be. Moreover, it is unlikely FDA can clear the thousands of existing LDTs and review new LDTs. Congress must ensure that any proposal purporting to improve LDT regulation actually improves public health and facilitates the development of life-saving innovation.

Giving Tuesday

Finally, as it is Giving Tuesday, I would be most grateful to you for considering an investment in Paragon today. We rely on gifts from foundations and individuals like you to support our work, and as a 501(c)(3) your contribution to Paragon is tax deductible.

Together we can develop the next phase of research and analysis to understand how government health programs are actually working, to develop policies that empower patients and reform government programs, and to educate policymakers and the public.

Join me in supporting this critical work here.

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