Catching Up on Key Policy Developments

Today’s newsletter summarizes a recent appearance by a Paragon expert on a C-SPAN health policy roundtable, and discusses Vice President Harris’s home care proposal, CBO’s projections for the budgetary costs of Medicare covering GLP-1s for weight loss, and the large decline in Medicare Advantage star ratings.

Paragon’s Joel Zinberg on C-SPAN

On Monday, October 14, Dr. Joel Zinberg participated in a health policy roundtable on C-SPAN’s Washington Journal. Joel focused on maximizing patients’ ability to choose the care that is best for them and improving the system through free market competition as opposed to growing government rules and spending.

Joel exposed the critical failings of the Affordable Care Act (ACA) that have been compounded by expanded subsidies in the Biden administration, including the ACA’s widespread fraud (estimated at $15-26 billion this year), skyrocketing premiums, narrow networks, and a negligible impact on Americans’ health. Citing previous Paragon research, Joel explained millions of people are improperly enrolling in the ACA exchanges, costing tens of billions in subsidies paid directly to insurers and pushing spending to unsustainable levels.

Joel contested that the ACA is “under attack” and defended efforts to reduce fraud and prohibit government subsidies to wealthy Americans as sensible reforms to improve the ACA. He referenced Paragon’s paper to permit low-income enrollees to take a portion of their subsidy as a health savings account contribution which they would control.

The discussion also addressed the growing burden and unsustainable expense of Medicaid and the Medicaid expansion which discriminates against low-income children, pregnant women, seniors, and people with disabilities. Referring to Paragon’s research, Joel advocated for ending this discrimination by reducing the federal government’s 90 percent reimbursement for working-age adults and equalizing it with the reimbursement percentage for traditional Medicaid enrollees. He also referenced broader reforms that would address a financing structure that is unsustainable long-term and that disproportionately benefits wealthier states.

Joel warned that the Inflation Reduction Act (IRA)’s price controls stifle innovation by pushing pharmaceutical companies to cut research and development, ultimately leading to fewer new treatments for patients. Joel also noted the IRA’s impact on spiking Part D premiums, leading to a taxpayer bailout of insurers from flawed Biden-Harris policies.

Joel also foreshadowed a forthcoming Paragon project that evaluates the effect of health insurance on health. While the ACA and subsequent ACA expansion efforts have focused entirely on expanding the number of people receiving government-sponsored insurance through the exchanges or Medicaid—whether or not the people are truly eligible—Joel found that the evidence indicates that insurance coverage has little or no impact on health. Other factors, especially peoples’ health behaviors, are far more important in determining health.

Harris Home Care Plan: Not a Real Solution

Vice-President Harris has a vague proposal that would have Medicare pay for long-term services received at home. The Brookings Institution estimates that such proposals would cost $40 billion a year. Michael Cannon, director of Cato Institute’s health policy studies, wrote that “it is difficult to overstate the irresponsibility, corruption, and insanity of this proposal” given the massive federal deficits and general inefficiencies in Medicare.

In a new Prognosis piece, Paragon’s long-term care expert Steve Moses strongly criticizes Harris’s proposal. Steve explains how most of our long-term care (LTC) problems result from well-intentioned but misguided Medicaid policy that makes it too easy to gain access to the program. Steve explains that “by allowing middle class and affluent people to qualify while preserving their wealth, Medicaid desensitized the public to LTC risk, leaving them unprepared, uninsured, and without the resources to pay for professional LTC when they need it. That’s how the federal government became overwhelmed by LTC costs and unpaid family members ended up carrying so much of the care burden.”

Steve recommends unleashing private financing into LTC to fix these problems by eliminating the huge asset exemptions that permit people to enroll in Medicaid. Steve’s last paragraph contends:

Promising Americans relief from the dysfunctional LTC system that government has created may attract votes. But more government money and regulation will only exacerbate the problems those measures have already caused. The system and the people it tries to help will slip deeper into dependency and insolvency. In the end, the best policy solution is to protect public LTC programs for the truly needy while those with means are responsible for their own LTC risk and are not able to be artificially impoverished by their heirs for inheritance preservation. Government can help by encouraging early LTC planning and by enabling consumers to access their retirement savings, home equity, and life insurance early to cover their predictable LTC risk. Unfortunately, the Harris plan would do the opposite.

Cost of Covering GLP-1s

On October 8, the Congressional Budget Office (CBO) released a report on the potential federal cost if Medicare decides to cover anti-obesity medications (AOMs) for weight loss, including the much-discussed class of glucagon-like peptide 1’s (GLP-1s). Jackson Hammond’s new Prognosis summarizes the CBO report and cautions Congress about adding Medicare coverage of GLP-1s for weight loss.

CBO projects that net federal spending would increase $35.5 billion between 2026 and 2034 and would continue to increase through 2044 if Medicare covers GLP-1s for weight loss. Those net costs include $38.8 billion in direct costs of covering AOMs as well as $3.4 billion in savings from improved health. CBO expects that costs would be accrued in Medicare Part D, while fairly minimal offsets from improved health would accrue in Parts A and B.

CBO admits to a lot of uncertainty in these estimates, including utilization of GLP-1s (particularly given adverse side effects), the effects of future price competition from brands and generics, and an unclear correlation between weight loss and federal health savings. GLP-1s hold promise for weight reduction, but the high expense should give policymakers pause to consider the full value of GLP-1s before adding such a cost to the federal budget.

A Decline in MA Star Ratings

On October 10, the Centers for Medicare and Medicaid Services (CMS) released its Medicare Advantage (MA) and Medicare Part D star ratings for 2025. As this week’s Paragon Pic (below) shows, MA prescription drug (MA-PD) plans next year will have lower star ratings on average and fewer enrollees will be in highly rated plans. Average star ratings peaked at 4.37 in 2022 and declined to 3.92 in 2025, while the share of enrollees in a plan with 4 or more stars fell from 90 to 62 percent.

Star ratings are intended to measure overall quality of coverage, but this decline doesn’t necessarily mean MA coverage will get worse next year. Technical changes to how CMS calculates star ratings are likely a bigger factor. Star ratings peaked in 2022 and began to fall after COVID-19 protections expired in 2023. Starting in 2024, CMS changed how it treats outliers when calculating the threshold between each star rating, called “cut points.” Rising cut points will make it harder for plans to earn more stars.

Furthermore, although star ratings purportedly reflect the quality of Medicare coverage, experts have questioned their usefulness. Quality bonuses are also rising in cost and distort plans’ business practices by focusing them on government performance metrics rather than direct accountability to enrollees. For this reason, Paragon recommends eliminating quality bonuses alongside other policies to improve MA while achieving reasonable taxpayer savings.

All the best,

Brian Blase
President
Paragon Health Institute