MFN, Stopping Additional Insurer Subsidies, More Medicaid Fraud, and RSC Proposals

On January 15, President Trump released The Great Healthcare Plan, a blueprint that lays out his three main health policy priorities: 1) implementing most-favored-nation (MFN) pharmaceutical pricing, 2) empowering patients, not insurers and middlemen, and 3) ensuring Americans have access to upfront, real health care prices. Today’s newsletter begins with a brief discussion of the plan. For more of Paragon’s reaction, see our statement issued last week.

In today’s newsletter, I also cover recent Paragon work on the new dietary guidelines, Paragon PICs showing significant areas of overspending in New York and Minnesota’s Medicaid programs, an op-ed from economists Kosali Simon and Tony LoSassothat makes the case that extending COVID-era Affordable Care Act (ACA) subsidy bonuses is inconsistent with making health care more affordable, and perspective on the budget proposal and reconciliation blueprint released by the House Republican Study Committee.

Paragon has been featured on many prominent outlets discussing our work in the past two weeks, including CSPAN’s Washington Journal, Fox News, Newt Gingrich’s podcast, the Larry Kudlow radio show, and Real America’s Voice.

MFN and Empowering Patients, Not Middlemen

The top item in The Great Healthcare Plan is a call for Congress to codify the MFN deals that the Trump administration has reached with 16 pharmaceutical companies. Under these deals, pharmaceutical companies have agreed to price new drugs in the United States at no more than the lowest price they accept in a defined set of other developed countries. These deals generally include a prospective MFN design for new drugs in the commercial market and a retrospective MFN design for existing Medicaid drugs.

This approach is intended to address the massive disparity between U.S. prices for brand drugs and those in other developed countries. Paragon has written about how prospective MFN agreements would reduce U.S. prices to align them with other developed countries and mitigate global free-riding off American research and development investments while preserving incentives for pharmaceutical innovation. The Medicaid deals, while retrospective, will likely not impact pharmaceutical research and development as much because Medicaid already pays very low prices for drugs.

In his plan, the president also takes a firm line against sending additional taxpayer money to health insurance companies. We have written repeatedly about the problems with the COVID-era ACA subsidy bonuses. Empowering patients rather than insurers and middlemen is vital to reorient the system to meet patient needs instead of boosting insurer and middlemen power.

The Great Healthcare Plan would appropriate the ACA’s cost-sharing reduction program to lower premiums for the most common plan by more than 10 percent and reduce market distortions—a policy we endorsed. Consistent with the president’s policy direction, Paragon’s HSA option remains the best-developed policy for efficiently redirecting subsidies from insurers to patients.

Two other policies in The Great Healthcare Plan are worth mentioning. First, the plan proposes moving more drugs to over-the-counter status, which would lower costs for consumers, increase ease of access, and reduce unnecessary physician visits—eliminating unnecessary patient expenses. It also proposes reforms to pharmacy benefit managers (PBMs)—the subject of a Paragon 101 released last week.

New Dietary Guidance

A new Prognosis by Elle Minarik and Katherine Hall reviews the new dietary guidance released earlier this month by the Departments of Health and Human Services and Agriculture.Elle and Katherine write that the new guidelines mark a clear break from decades of federal nutrition advice that prioritized carbohydrates and low-fat foods. The new guidance advises Americans to center their diets around protein and whole foods, explicitly warning against ultra-processed foods and added sugars. The framework reflects growing evidence that diets high in refined carbohydrates and industrially processed foods are closely associated with obesity, diabetes, and other chronic diseases—conditions that now affect most American adults.

Unlike the old food pyramid and the MyPlate model, the new guidelines elevate protein and healthy fats while demoting grains to a secondary role. They recommend significantly higher protein intake, endorse full-fat dairy and whole-food fat sources, and draw a clear distinction between natural fats and highly processed substitutes. The guidelines also take their strongest stance yet against ultra-processed foods, linking them to poor gut health and metabolic dysfunction.

These changes matter far beyond individual dietary choices. If implemented consistently, the new guidelines could help reverse long-standing policy defaults that have steered Americans toward processed foods—and better align federal nutrition policy with modern science and metabolic health.

Minnesota’s Extremely High Medicaid Expansion Spending

A new Paragon PIC shows that Minnesota’s Medicaid expansion per-enrollee spending in 2023 was 51 percent higher than the U.S. average. Although part of this reflects broader benefits in the state’s package, it aligns with the broader pattern of weak oversight and recent “industrial-scale” fraud uncovered in Minnesota by federal prosecutors. Under the ACA’s 90 percent federal match for expansion adults, states bear just a small share of the cost, reducing incentives to police improper billing and abuse. Minnesota has proposed increasing payments for ACA expansion enrollees by 26 percent this year—meaning federal taxpayers are financing nearly all of the cost resulting from Minnesota’s negligent stewardship of its program.

New York Excessive Home-Health Aides Indicative of Waste, Fraud, and Abuse

Another new Paragon PIC shows that New York’s per-capita home-health aide workforce is three times the national average—314 aides per 10,000 residents versus 105 in other states. Nearly all these aides bill Medicaid. Strikingly, nearly 7 percent of all New Yorkers employed in nonfarm jobs now work as home-health or personal care aides. Many of these aides are relatives of Medicaid beneficiaries, often paid through self-directed home-and-community-based services. While family caregiving can be appropriate, paying relatives at this scale—combined with weak verification of hours and services delivered—creates a profound risk of fraud, waste, and abuse.

Subsidies Are Not Health Care Reform

A recent Newsweek piece by two respected health economists—Kosali Simon of Indiana University and Tony LoSasso of the University of Wisconsin—underscores a point policymakers too often overlook:subsidies are not health care reform. Specifically, they write that expanded ACA subsidies may shield some consumers from rising premiums, but they do nothing to reduce the underlying cost of health care.

Simon and LoSasso explain that larger subsidies mask price increases and weaken pressure on insurers and providers to compete on cost. When premiums rise, policymakers respond by increasing taxpayer subsidies rather than addressing the root causes—provider consolidation, opaque pricing, and payment systems that reward volume and inefficiency. This dynamic fuels a cycle in which higher prices justify higher subsidies, further disconnecting consumers from the true cost of coverage and shifting risk onto federal taxpayers.

Most importantly, they warn that expanded subsidies delay needed structural reforms, such as excessive hospital prices and inefficient benefit design. Achieving meaningful reform requires policymakers to stop responding to rising costs with larger subsidies that entrench the underlying problems.

RSC Advances Patient-Centered Health Reforms

The Republican Study Committee released two sets of proposals on patient-centered health policy reforms that closely align with Paragon’s work.

The RSC Budget: Restoring America’s Golden Age rightly prioritizes Medicaid reform by ending discrimination against the most vulnerable—children, seniors, the disabled, and pregnant women—by equalizing federal financing and reversing the ACA’s incentives that favor able-bodied adults and wealthy states. These reforms mirror Paragon’s long-standing Medicaid financing recommendations.

The Making the American Dream Affordable Again Reconciliation 2.0 proposals contain several important market-based reforms. Among the proposals: reforming the existing ACA subsidy structure so that money flows directly into the hands of patients (similar to the HSA option), appropriating cost-sharing reductions to lower premiums by roughly 11 percent, encouraging price transparency, and building on health coverage options President Trump expanded in his first term, including individual coverage health reimbursement arrangements (ICHRAs), short-term health plans, and association health plans.