Testifying in Front of the Senate + New Paragon Research on ACA

At 1 p.m. EST today, I will testify before the Senate Committee on Homeland Security and Government Affairs Permanent Subcommittee on Investigations at a hearing titled “Assessing the Damage Done by Obamacare.”

In this newsletter, I discuss a new policy brief on how Obamacare subsidies—especially with Biden’s COVID credits—are unfair to Americans with employer-based insurance, encourage employers to drop coverage, and encourage workers to choose jobs that do not offer health insurance or retire early. I then highlight a new Paragon Pic that shows individual market ACA premiums have grown nearly twice as fast as employer premiums since 2014, and a new Paragon Prognosis by Matt Robinson on misleading polls of public sentiment on the enhanced ACA subsidies, or COVID credits. I conclude with our review of the positive reforms in CMS’s Physician Fee Schedule (PFS) rule.

ACA Subsidies Are Unfair to Americans with Employer-Based Insurance

This morning, Paragon released a new policy brief that I coauthored with John R. Graham on some of the important economic effects of the ACA subsidies, which have been magnified by the COVID credits. Here are the key areas that we discuss in the paper:

• The ACA subsidies create major financial inequities for low- and middle-income Americans, penalizing those who receive health insurance through their employers.
• The ACA subsidies shift the tax code from rewarding work and employer coverage to subsidizing early retirement and non-work while discouraging upward mobility.
• The ACA subsidies create large incentives for employers—particularly those with a high concentration of low- and middle-income employees—to stop offering coverage:
  • Coverage offerings have already dropped by nearly one-third at small firms.
  • State and local governments have dropped retiree health plans by moving retirees into the exchanges.
  • If the COVID credits are made permanent, more employers will drop coverage for employees, and more state and local governments will offload retiree health care expenses onto federal taxpayers.
• The COVID credits exacerbate all the underlying problems with the original subsidies.

The paper includes several figures illustrating how the tax code penalizes Americans who receive employer-based insurance, showing that ACA subsidies—especially the COVID credits—offer far larger benefits than the tax exclusion for employer premiums. The exclusion for employer-based insurance means that a portion of earned compensation is untaxed, while ACA subsidies are an unearned welfare benefit paid for by working taxpayers. The figure below compares the government benefit for a 50-year-old with single coverage in 2026 for three situations: employer-based coverage, the original ACA subsidies, and the ACA subsidies plus the COVID credits.

The chart shows that lower- and middle-income workers gain much larger benefits from exchange coverage than from employer plans—creating a significant penalty for those who receive insurance at work. For example, a worker earning $46,950 (300 percent of FPL) gets a $5,797 premium tax credit (PTC) under current law—or $7,656 with the add-on COVID credits—versus only $2,760 in tax savings from employer coverage. This disadvantage to receiving employer coverage continues up to 400 percent FPL under the original subsidies and 500 percent FPL with the COVID credits.

ACA Premiums Escalating Much Faster than Employer Premiums

In 2014, the first year of Obamacare’s key provisions took effect, individual market premiums jumped nearly 50 percent. Since the law took effect in 2014, premiums for ACA benchmark plans increased 129 percent for a typical 50-year-old enrollee—nearly double the rate of employer-sponsored insurance (68 percent) and more than three times the increase in the consumer price index (39 percent). The ACA’s subsidy and regulatory design have made health insurance more expensive, not less, and its inflationary structure continues to drive up premiums and taxpayer costs.

The Obamacare Subsidy Myth: Misleading the Polls and the Public

Matt Robinson has published a new Paragon Prognosis exposing how misleading polls are distorting the debate over Obamacare’s temporary, COVID-era subsidy expansions. Matt explains that these surveys—often designed to confuse voters about which subsidies are permanent and which are temporary—are being used to justify extending a fiscally reckless pandemic-era policy.

Yet two myths continue to shape public perception. The first is that allowing the enhanced Obamacare subsidies to expire means the end of all ACA subsidies. The second is that these temporary subsidies are overwhelmingly popular with voters. Both myths are fueled by misleading polling and reporting.

In reality, the ACA’s original subsidies are unchanged. Even without the temporary COVID credits, the federal government still pays more than 80 percent of the premium for the average exchange enrollee, and most participants could continue purchasing coverage for under $50 a month. However, many politicians and media outlets have blurred this distinction to make it appear that all assistance will vanish.

Pollsters have reinforced that misconception through push-polling. Misleading questions framed without context—such as implying that all tax credits are expiring—yield inflated results showing supposed support for the subsidies. When the issue is presented accurately, public opinion reverses. A Paragon-commissioned survey by Public Opinion Strategies found that 53 percent of voters favor letting the enhanced subsidies expire, while only 47 percent want to make them permanent. A separate poll by i360 for Americans for Prosperity found even lower support—just 30 percent wanted to extend the COVID-era credits.

The takeaway: Most Americans oppose continuing the temporary subsidies once they understand the actual issue. Mythmaking and misleading polls may serve the interests of those defending Biden-era spending, but the facts and public sentiment tell a very different story.

CMS Finalizes 2026 Physician Fee Schedule & Closes the Skin Substitute Scam

On October 31, the Centers for Medicare and Medicaid Services (CMS) released the final 2026 Physician Fee Schedule (PFS) rule, in which the agency generally finalized its major proposals. Jackson Hammond and I discussed the proposed rule favorably in a comment letter.

Three of the finalized provisions represent meaningful progress: a budget-neutral relative increase to indirect practice expense payments for independent physicians, a budget-neutral new efficiency adjustment to payment calculations, and long-overdue reforms to how skin substitutes are paid for. Regarding the indirect practice expense change, CMS agreed with comments including Paragon’s that noted higher practice expense payments for independent providers are justified, given their higher operating costs compared to hospital-based physicians. This budget-neutral change removes distortions against independent physicians and some of the incentives driving consolidation.

We also supported CMS’s creation of an efficiency adjustment, which reduces payments for services where time with the patient is not a central component. CMS acknowledged concerns Paragon and others raised that its prior time-estimation method had methodological and bias issues and rewarded specialists over general practitioners. The new adjustment should yield a more accurate reflection of modern clinical practice.

Most notably, CMS finalized long-overdue reforms to skin substitute payments, which exploded from $252 million in 2019 to more than $10 billion in 2024—a stunning example of Medicare payment waste. Manufacturers had effectively been able to set their own rates, leading to massive exploitation. CMS’s decision to establish a fixed national rate closes one of the most egregious rates of payment growth in the program’s history.

CMS finalized several provisions we cautioned against—including loosening evidence requirements for additions to the permanent telehealth services list, otherwise expanding telehealth payments without clear benefit, and creating new behavioral health add-ons. Even with those concerns, the final rule marks significant progress toward restoring efficiency, accountability, and integrity in physician payments.