Health Policy in 2025: We Must Do Better

Yesterday, Fox Business released an interview with me about Paragon’s proposed reforms to Medicare, Medicaid, and the Affordable Care Act (ACA). The piece highlighted many of Paragon’s most essential proposed policy reforms, including site neutral payments in Medicare, allowing enhanced ACA subsidies to expire after 2025, and ending the Medicaid provider tax safe harbor, while also mentioning Paragon’s work on overall federal spending. I’m especially grateful that I got to share my vision for a better American health system:

There’s many strengths in the American health care system. If you get certain conditions or diseases, you want to get your care in the U.S. – cancer care, for instance. But there are so many inefficiencies…

We really need a different direction in health care policy that’s not focused on just getting people enrolled in the Medicaid program or the Medicaid-like plans in the individual market, and focuses on getting people access to the care they need so they have control.

The main thing we do at Paragon is evaluate how government programs are actually working and develop policies to improve upon the status quo. Paragon’s work is crucial to push back on the powerful special interests who fight to protect their privileges in the status quo as well as a general media bias that favors government-centric policies. Two articles—one from me and one from Theo Merkel—do just this. First, in a National Review article, I examine comments made by Senator J.D. Vance on how we should give people more control over their health coverage and how President Trump improved the ACA. Then I recap an analysis from Theo Merkel that shows that the ACA Medicaid expansion is more expensive than employer plans in many states, a finding that no one expected.

And a quick note: I will be hosting Dr. Marty Makary to discuss his important new book Blind Spots: When Medicine Gets It Wrong, and What It Means for Our Health on October 1st at 11:30 am EDT in the Capitol Visitor Center, which you can register for here.

We Can Improve Obamacare and Give People Better Coverage Options

In a new National Review piece, I discuss how the ACA had produced “an inefficient structure that harms patients with low-quality plans, people with high-cost plans (while disincentivizing healthy behavior), and American families who bear a great tax burden from financing this scheme.” I first wrote about the inefficiencies:

Big insurers and their enablers in the policy community and the media want an outcome in which people who use little, if any, medical care have no choice of lower-cost options and are forced into the single market with very high premiums. Of course, most of these people would never buy this coverage with their own money. Thus, we have the main story of the ACA — massive subsidies to get people into the market, buying an overpriced product for what they need in order to cross-subsidize those who expect to use a lot of medical care. And these subsidies go directly to health insurers, which have enjoyed soaring profits under the ACA. The ACA’s subsidies cost more than $100 billion a year and its Medicaid expansion costs more than that, yet American health has not improved. There are ways to redirect this money in a manner that permits greater health-care freedom and improves coverage for the sick.

We don’t need to drastically overcharge people who expect to use little medical care — but who want financial protection if they get sick or injured — to help people with conditions that would make it difficult or impossible for them to get insurance. You can just directly subsidize the latter set of individuals and avoid broader market distortions. Moreover, health coverage would likely improve because insurers would develop better plans tailored to the sick, such as people with heart disease or cancer. The ACA worsened care for them, with extremely narrow network plans being just about the only option for such people.

Then, I highlight a few examples of how high premiums in the individual market have become:

$42,400 annual premiums for a 60-year-old-couple and $49,400 for a family of five headed by a 50-year-old couple in Morgantown, W. Va. For those families living in Prescott, Ariz., the respective premiums would be $32,800 and $38,100. And these plans have enormous deductibles.

In the piece, I explain the actions that President Trump took to improve the ACA and provide people with more affordable options inside and outside the ACA. When Trump took office, the ACA exchanges were in an adverse selection death spiral in several states. The exchanges were in much better shape when he left office, and he expanded options for people who were made worse off by the ACA. As I wrote in NRO:

Trump expanded consumer protections on alternatives to ACA plans — permitting people to keep short-term plans for up to three years. These plans permitted families to obtain much more affordable coverage that covered far more doctors and hospitals than an ACA plan would. And counter to the fearmongering, the ACA markets improved much more (in terms of lower premiums, insurers offering coverage, and overall number of enrollees) in states that permitted short-term plans compared with states that restricted this coverage. Thus, in the real world, the cries of people reacting to Vance about the ACA market collapsing from giving people more options are not only overblown, but they are likely directionally wrong.

High Cost of Medicaid Expansion

For those of us who have studied expert cost projections, it is a shocking development that the government is spending more on Medicaid expansion enrollees on average than the per-person cost of employer-sponsored insurance (ESI). It turns out that states are extremely inefficient at managing the ACA’s Medicaid expansion, a result of the federal government reimbursing virtually all the state expenditures for these enrollees. My colleague Theo Merkel tackled this issue in a new piece in RealClearHealth:

The law’s authors typically justified [Medicaid expansion] over alternatives (private insurance, Medicare, etc.) by its purported efficiency. In their defense, this is what they were told by most experts. Per ACA chronicler John McDonough:

“The Congressional Budget Office…estimated much higher costs to cover individuals through an exchange rather than Medicaid because the latter pays medical providers much less than private insurers can get away with and because Medicaid administrative costs are much lower.” …

Yet ten years into the law’s implementation, the per enrollee cost of Medicaid expansion is much higher than anticipated – more than 50 percent on average. So much so that it is higher than the average cost of ESI and higher than the cost of ESI in almost 20 states, sometimes by a considerable margin (see chart below).

Theo’s conclusion cautions against further Medicaid expansion.

Supporters of expanding Medicaid even further note that the vast majority of Americans are compassionate and want to ensure a safety net that provides health care for the neediest among us. However, the Medicaid program has largely failed as an effort to improve the health of low-income Americans, and is being exposed as an inefficient way to even mitigate their financial risk. That Medicaid expansion in many states costs more than the private coverage the average American obtains through their employer shows that it has not been an efficient way to expand access to care.

All the best,

Brian Blase
President
Paragon Health Institute