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HSA Option, Lame Duck, Medicaid Expansion

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.

Before getting into policy developments, Paragon turned one year old on November 16. It’s been a year of tremendous growth for us as we have built an amazing team of policy experts, advisors, and supporters.  

Outside the state of Florida, the midterm results were not the red wave that many were projecting. However, Washington’s policymaking structure will change with Republicans taking a narrow majority in the House of Representatives in the next Congress. While much attention turns to the make-up, leadership, and agenda of the 118th Congress, there is still a significant work left for the now lame-duck 117th Congress.

Today’s newsletter starts with Paragon’s policy brief on what the lame-duck Congress should and should not do. The newsletter also contains information about Paragon’s updated reportThe HSA Option: Allowing Low-Income Americans to Use a Portion of Their ACA Subsidy as a Health Savings Account Contribution. The updated report includes 2023 plan information and analysis from Milliman on the distributional effects of the proposal. Finally, the newsletter contains information about the problems with the Biden administration’s Medicaid agenda, which perpetuates dependence on welfare and exacerbates wasteful spending.

The Lame-Duck Policy Agenda

A new policy brief by Drew Keyes and Joe Albanese contains recommendations for the lame-duck Congress. Here are three of their main points, which focus on avoiding irresponsible spending increases and policies pushed by special interests that have not been properly vetted.

1) Any COVID-related funding must be tied to a clear and prompt end to the public health emergency (PHE). Doing so would allow states to responsibly manage their Medicaid rolls (discussed more below), preserving the program for those who most need it. Allowing the expiration of the unnecessary 20% add-on payment for COVID-19 inpatients would likewise reduce unnecessary government spending.

2) Congress should not threaten patients and taxpayers by increasing Medicare spending and worsening the program’s long-term solvency. The 2022 Medicare Trustees Report has continued to sound the alarm on the impending insolvency of the Hospital Insurance Trust Fund in 2028. If industry pressure forces Congress to raise short-term Medicare spending by negating the sequester or increasing the physician fee schedule, that spending should be offset. Moreover, as the strains of the pandemic upon health care providers and suppliers have largely dissipated, so has the justification for Congress using the pandemic as a rationale for boosting the health care industry.

3) The lame-duck Congress should not legislate on complex issues such as pandemic response and mental health. Current proposals have not been properly vetted and have not gone through regular order, and action in this area should wait until the next Congress. Any policy riders attached to larger spending bills should be focused on key issues facing Americans right now, such as the expiration of the temporary scheduling order for fentanyl. 

The HSA Option

One of Paragon’s policy proposals is a major reform of an Affordable Care Act (ACA) subsidy program. Our proposal would permit lower-income exchange enrollees to take a portion of the government subsidy that now goes to health insurers as a health savings account (HSA) deposit instead. This proposal would significantly expand consumer control over their health care, permitting them maximum flexibility for how to use the government subsidy. 

Paragon’s updated report—which I coauthored with Dean Clancy, Andrew Lautz, and Roy Ramthun—now contains 2023 plan information and a distributional analysis from the actuarial firm Milliman. Giving lower-­income exchange enrollees an additional way to use their ACA subsidy expands Americans’ welfare since some enrollees would prefer an HSA deposit over the reduction of their plans’ cost-­sharing components. 
Nearly seven-in-ten enrollees with income below 200% of the FPL would benefit from selecting the HSA option, with an average financial benefit of around $1,500 over the year. More than three-quarters of enrollees with income between 200% and 250% of the FPL benefit from selecting the HSA option, with a smaller average yearly benefit between $500 and $600. 
Importantly, the HSA funds could be used for a broader set of health ser­vices than what a health plan typically covers, help ease ­family cash flow, accumulate year ­after year, and better prepare the HSA owner to pay for health care expenses in retirement.

Biden Administration’s Medicaid Expansion Agenda

In September, President Biden declared that the pandemic over, but his administration continues to extend the official PHE. Doing so means the government—especially the Medicaid program—is much larger than it should be and continues to add inflationary pressures to the American economy. 

Dr. Joel Zinberg, the director of Paragon’s Public Health and American Well-Being Initiative, has had two recent New York Post pieces on the harmful Biden administration Medicaid policies. On November 13, Joel discussed the decision to extend the PHE. From Joel’s piece:

This has nothing to do with any emergency — it is to allow the administration to extend pandemic-era policies that expand the welfare state. … Extending the emergency is aimed at keeping as many people as possible dependent on Medicaid — the federal-state health program that covers more than 1 in 4 Americans — even though large and growing numbers of beneficiaries are ineligible.
Enrollment has risen to unprecedented levels, due in large part to the March 2020 Families First Coronavirus Response Act’s continuous-coverage requirement, which prohibits state Medicaid agencies from disenrolling ineligible beneficiaries while the public health emergency lasts. …

On October 31, Joel wrote an op-ed with Gary Alexander, the director of Paragon’s Medicaid and Health Safety Net Reform Initiative, about another misguided welfare expansion—Medicaid payments for housing, food, air conditioning, and furniture. From their piece: 

The latest front in the Biden administration’s crusade to bypass the congressional appropriations process and expand the welfare state comes in the form of the medicalization of everyday life through Medicaid coverage of “health-related social needs.”

The Centers for Medicare and Medicaid Services recently approved three section 1115 demonstration initiatives that allow Oregon, Massachusetts and Arizona to use Medicaid funds to pay nonmedical expenses such as housing supports (rent, relocation expenses, furniture), meals, air conditioning and air purifiers “during climate emergencies” and transportation services. …

Of course, once Medicaid spending can be used for housing and food, there’s no logical stopping point. Clothing, heating fuel, gasoline, phones and computers could all arguably be linked to Medicaid recipients’ health and well-being.

And since states pay on average only one-third of the cost, they have a tremendous incentive to include all kinds of good and services, particularly ones previously provided with state-only dollars, under the Medicaid umbrella. Expect a slew of waiver applications with an ever-expanding list of health-related “social needs” to cover.

Section 1115 waivers are supposed to be budget neutral, meaning federal spending under the waiver cannot exceed what it would have been without the waiver. But, as the Government Accountability Office has noted, CMS budget-neutrality determinations are lax, “lack transparency” and often increase federal financial liability. And new, more flexible CMS policies allow purported savings from previous waiver cycles to offset federal spending for new waivers. …

Congress should ask why the administration is unilaterally subverting a medical-welfare program to cover nonmedical services that Congress has already funded. Expanding Medicaid to cover health-related social needs is a bad policy, and it’s one that Congress, not executive-branch bureaucrats, should decide.

As Paragon moves into its second year of operation, we pledge to continue to perform top-notch and timely analysis of government health policies and programs while developing patient-driven reforms. 

All the best,
Brian Blase
Paragon Health Institute

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