Replying to the AHA, Medicaid Work Requirement Implementation, and Trump’s Price Transparency Efforts

Today’s newsletter begins with our reply to the American Hospital Association’s critique of The Hospital Cost Crisis and recaps our virtual event on this paper. I then discuss a new op-ed that Chris Medrano and I authored in The Federalist on why CMS must verify eligibility information for Medicaid work requirement exemptions. I discussed this op-ed on The Scott Jennings Show on Tuesday. The newsletter also highlights a Paragon PIC on the share of Obamacare Medicaid expansion enrollees by state, a Prognosis on the Trump administration’s health care price transparency efforts, and a call for research examining the effects of smartphones and social media on child and young adult well-being.

Our Reply to the American Hospital Association

Following the release of Paragon’s paper The Hospital Cost Crisis: How Government Policies Drive Consolidation, Undermine Competition, and Fuel Soaring Prices, the American Hospital Association (AHA) issued a blog with four critiques. Our response explains why the AHA’s arguments largely avoid the central issue: government rules, payment distortions, and excessive subsidies have fueled rising hospital prices, consolidation, and weak productivity growth for years.

Hospital prices have increased dramatically over the past two decades, while productivity growth has lagged far behind the broader economy. The reason is straightforward. Current payment systems frequently reward higher spending rather than efficiency, while opaque pricing structures and favorable regulations shield hospitals from the competitive forces that drive productivity improvements in other industries.

The AHA continues to argue that Medicare and Medicaid underpay hospitals, but that argument ignores the enormous volume of supplemental subsidies hospitals receive outside standard payment systems. State-directed payments alone exceeded $150 billion in 2025 and increasingly push effective Medicaid reimbursement rates above Medicare levels in many states. Hospitals also benefit from disproportionate share hospital payments, 340B revenues, tax advantages, uncompensated care pools, and numerous additional subsidy streams.

The current system overwhelmingly favors large and politically connected hospital systems while contributing to consolidation and rising prices across the health sector. Rural hospitals are routinely invoked as political cover to protect expensive subsidies that disproportionately benefit wealthy urban systems.

Recapping Our Event on The Hospital Cost Crisis

Last Thursday, Paragon hosted a virtual event to discuss our Hospital Cost Crisis paper. John R. Graham walked viewers through the major points of the foundational paper, including the “graph the hospitals don’t want you to see.”

John emphasized that hospital price inflation remains central to America’s health cost crisis: “There are challenges with insurers, with drug makers, with pharmacy benefit managers… We can fix all those problems, but until we fix hospital price inflation, we will not get to the center of the health cost crisis….” He highlighted the striking productivity gap: while overall U.S. economic productivity has risen 78 percent since the early 1990s, hospital productivity has remained essentially flat. And he debunked the myth that hospitals are perpetually losing money.

John was then joined by David W. Johnson, CEO of 4sight Health and author of The Coming Healthcare Revolution. David echoed John’s message that hospitals have few incentives for efficiency, pointing to low utilization of operating rooms and resistance to productivity improvements. He explained that excessive health care spending crowds out wages, investment, and other societal priorities.

I then had a brief conversation with Al Hubbard, former director of the White House National Economic Council. Al shared lessons from Indiana, where he is leading a campaign to force major hospital systems to lower prices to the national average. Al argued that “the best charity hospitals can provide is the lowest possible prices.”

We discussed needed reforms, including Medicare site-neutral payments, robust price transparency with real negotiated rates, targeted reforms to subsidies that currently fuel consolidation, and consumer-focused tools like reference pricing and shared savings to restore market discipline and reduce costs.

Medicaid Work Requirements Need Real Enforcement

In The Federalist on May 26, Chris Medrano and I explain why Medicaid work requirements will only succeed if states and the federal government are willing to verify eligibility and enforce the rules. Right now, some states are considering skipping verification and letting applicants check a box to get exemptions. The op-ed explains how the Biden administration took this approach with the ACA. I went on The Scott Jennings Show on Tuesday to discuss the problems with Medicaid and the importance of the work requirements.

Medicaid was originally created to serve society’s most vulnerable Americans—pregnant women, children, seniors, and people with disabilities. Obamacare dramatically expanded the program to millions of able-bodied, working-age adults. The federal financing structure behind the Obamacare expansion created enormous incentives to maximize enrollment. For every $1 states spend on expansion adults, the federal government contributes $9—roughly seven times the federal match for traditional Medicaid enrollees. Nearly every incentive in the system pushes toward increasing enrollment regardless of eligibility integrity. Insurers benefit from higher revenues, brokers receive larger commissions, and enrollees gain “free” coverage.

A new Paragon PIC highlights states with the greatest potential for Obamacare expansion program integrity concerns and identifies where large numbers of Medicaid enrollees may have been improperly classified as expansion adults to secure enhanced federal reimbursement. The PIC shows the share of all Medicaid enrollees who are Obamacare expansion enrollees, by state.

The One Big Beautiful Bill (OBBB) prioritized work over welfare for able-bodied adults enrolled through Obamacare expansion. The OBBB requires those without dependents under age 14 to work, participate in job training, pursue education, or volunteer as a condition of enrollment—a reform that more than 80 percent of Americans agree with.

This brings us back to the importance of verification. President Reagan famously said, “Trust, but verify.” The Biden administration abandoned that principle by allowing self-attestation for ACA eligibility, contributing to widespread fraud and improper enrollment that cost taxpayers tens of billions of dollars. If states similarly rely on self-attestation and weak verification systems for Medicaid work requirements, the reforms will fail to preserve resources for the truly vulnerable.

Trump Administration Advancing Health Care Price Transparency

American patients routinely receive care without knowing the price beforehand, employers often have little visibility into what they are actually paying for services, and opaque pricing arrangements have insulated hospitals, insurers, and pharmacy benefit managers from meaningful competition. Katherine Hall and Elle Minarik have a new Prognosis summarizing the steps that the Trump administration has taken to expand the availability of price information.

They describe a series of executive and administrative actions designed to force disclosure of actual prices across hospitals, insurers, and prescription drug markets. President Trump’s 2025 executive orders directed federal agencies to strengthen enforcement of existing transparency requirements and ensure that pricing data is standardized, accurate, and usable. The Biden administration allowed hospitals to post placeholder values instead of actual negotiated rates, leaving consumers and employers with data that were often functionally useless. The Trump administration has since tightened reporting standards, clarified compliance requirements, and finalized rules requiring hospitals to disclose more meaningful payment information.

The Trump administration has proposed reforms that would reduce duplicative and unusable insurer data files while increasing visibility into PBM compensation arrangements, rebates, and fees that contribute to rising prescription drug costs.

As Katherine and Elle explain, transparency is not an end in itself. The larger goal is to create a functioning health care market where patients and employers can compare prices, demand value, and place downward pressure on costs. Combined with reforms that give consumers more direct control over health care spending, these transparency efforts could help drive a more efficient health sector.

Call for Additional Research

Following our recent research paper assessing the benefits of limiting or banning cell phones in schools, we are issuing a call for further research on smartphones, digital devices, and ways to improve child and young adult health, focus, learning, and educational outcomes. As concerns continue to grow about declining mental health, diminished attention spans, classroom disruption, and the broader effects of social media and digital technology on children and adolescents, rigorous research is urgently needed to inform policymakers, educators, and parents. The initiative seeks proposals examining both the harms associated with excessive digital technology use and policy solutions that promote healthier learning environments and children’s and young adult development.