Does MA Cost More Than Traditional Medicare?

I lead this week’s newsletter with a new Paragon Prognosis explaining why claims that Medicare Advantage costs more than traditional Medicare rely on flawed assumptions and inaccurate comparisons. I then highlight growing state momentum toward full-day cell phone bans in schools, where the evidence strongly favors bell-to-bell restrictions. A new Paragon PIC shows the growth of Health Savings Accounts. Finally, I cover a House hearing on health care costs and how excessive tax and spending policies, exemplified by a bloated Medicaid program, are driving a population exodus from New York.

Challenging MedPAC’s MA vs FFS Cost Comparison

A recent report from Congress’s Joint Economic Committee (JEC) relies on a 2025 analysis from the Medicare Payment Advisory Commission (MedPAC) to claim that Medicare Advantage (MA) costs 20 percent more per enrollee than traditional Medicare and increases Part B premiums. But MedPAC’s updated 2026 estimate reduces that gap to 14 percent—and even that figure rests on flawed assumptions, outdated data, and apples-to-oranges comparisons. A new Paragon Prognosis by Demetrios Kouzoukas and Jackson Hammond explains five reasons why this estimate is inflated.

1. MedPAC overstates coding intensity. While MA plans have stronger incentives to document diagnoses, CMS has already implemented a revised risk adjustment model (known as v28) to reduce the impact of subjective or aggressively coded conditions. A new CMS analysis suggests coding intensity is lower than MedPAC estimates.
2. MedPAC’s estimate relies heavily on favorable selection—the idea that MA attracts healthier enrollees than their risk scores indicate. But this estimate is highly sensitive to methodology and fails to account for how FFS enrollees may have under-reported risk scores and how plan-driven care management lowers costs in MA.
3. MedPAC ignores spillover effects. As MA enrollment increases, providers adopt more efficient care practices that reduce spending in FFS. Research suggests that higher MA penetration is associated with meaningful reductions in FFS costs, meaning MA may be lowering overall Medicare spending more broadly.
4. MedPAC’s analysis relies on an “A+B” comparison that includes Fee-for-Service (FFS) beneficiaries who are not eligible for MA—particularly those enrolled only in Part A. Because these beneficiaries have lower costs, their inclusion artificially lowers the FFS benchmark and makes MA appear more expensive by comparison.
5. MedPAC’s comparison excludes the federal government’s own administrative costs for running FFS, including spending at CMS and other agencies.

Policymakers should be cautious about relying on MedPAC’s estimates of FFS versus MA costs to justify policy changes. Medicare needs reform to provide better value for enrollees and taxpayers. Paragon has presented a package of MA reforms that would improve the entire Medicare program.

State Actions to Ban Cell Phones During the School Day

States across the country are rapidly moving to restrict cell phone use in schools—and the evidence increasingly supports the strongest approach: a full, bell-to-bell ban, as detailed in Paragon’s recent research paper. When phones remain accessible during lunch or between classes, their distraction lingers, undermining student focus and classroom performance. By contrast, policies that require phones to be stored and inaccessible throughout the entire school day deliver the most meaningful gains, including improved academic outcomes, fewer behavioral issues, and stronger social engagement.

A new Paragon PIC shows state policies on cell phones in schools as of March 24, 2026. Most states place some restrictions on cell phones during the school day, and nearly half have bell-to-bell bans covering at least grades K-8, but only five states have complete, statewide bans—requiring phones to be physically inaccessible throughout the entire school day.

I have strongly endorsed a complete ban, including in a recent Pittsburgh Post-Gazette op-ed. As more legislatures consider action, policymakers should resist half-measures and instead adopt clear, enforceable, bell-to-bell restrictions that restore classrooms as places for learning—not for distraction.

The Growth of Health Savings Accounts

Health Savings Accounts (HSAs) have seen sustained and significant growth over the past 15 years, reflecting increasing demand for consumer-directed health care. The number of HSA accounts has grown from just 6.3 million in 2011 to nearly 40 million in 2025. A new Paragon PIC shows HSA assets have also surged, from $3.4 billion in 2007 to more than $200 billion projected by 2027, with rapid growth in investment balances as long-term savings vehicles for health care needs.

In a 2024 research paper on improving the tax treatment of health care, Follow the Money: How Tax Policy Shapes Health Care, Theo Merkel and I made several recommendations for ways to increase the benefits of HSAs. These recommendations include expanding the number of plans that can be integrated with HSAs and giving ACA enrollees the option to take a portion of their premium subsidy, which goes directly to insurers, as an HSA contribution (the HSA Option).

Energy and Commerce Hearing on Health Care Affordability

Last Wednesday, the House Energy and Commerce Health Care Subcommittee held a hearing on the provider landscape and its role in health care costs and affordability. Chairman Morgan Griffith noted that the increases in provider consolidation, where hospitals are acquiring physician practices, are reducing patient options. Paragon has previously highlighted the need for site-neutral payment reform in Medicare to reduce incentives for consolidation. Medicare pays significantly higher rates in hospital outpatient settings than physician offices, creating a direct financial incentive for hospitals to acquire independent practices simply to bill at the higher rate.

Members also discussed the problems with the significant limits on Medicare paying for services in physician-owned hospitals (POHs). POHs can serve as a pro-competition remedy in many parts of the country, but their growth has stalled because of this Affordable Care Act (ACA) requirement. Congress should undo it.

The hearing also exposed how the 340B program is an active engine of consolidation. With purchases growing to over $81 billion in 2024, the program incentivizes distortionary consolidation because eligible hospitals have unique access to 340B discounts that can be leveraged to acquire physician practices. The 340B program also drives up Medicare expenditures and private sector premiums, contributes to the decline in independent physician practices, and drives a majority of the assistance towards large health systems rather than true safety-net providers.

Leaving New York and Heading to Florida

Last week, New York Gov. Kathy Hochul decried how remote work opportunities have permitted wealthy New Yorkers to be less captive to a Manhattan office and escape to low-tax Florida and Texas. From 2020 to 2025, New York’s population declined by about 3 percent while the population in Florida and Texas increased by nearly 9 percent. While Hochul says that wealthy individuals are needed to fund the state’s social programs, the reality is that much of their taxes are lost to waste, fraud, abuse, and corruption.

New York’s Medicaid program is notoriously corrupt and bloated—with a per-resident cost nearly 80 percent higher than the average in other states. The combined population of Florida and Texas is 35 million people greater than New York’s, but the Empire State spends much more on Medicaid!

A new City Journal piece by Adam Lehodey highlights how New York’s Medicaid program has become a case study in runaway spending, driven by expansive eligibility, weak oversight, and persistent fraud risks. It argues that the program’s growth reflects political incentives and structural distortions—not just isolated abuse—and warns that without reform, these pressures will continue to strain state budgets and undermine Medicaid’s core mission.

The lesson of Americans’ migration patterns: people prefer low-tax states with sensible welfare programs that prioritize the most vulnerable and minimize cronyism and corruption. As two major examples, Florida and Texas both wisely resisted the pressure to adopt the ACA’s Medicaid expansion.