The Coming Battle, Trump’s EOs, and More

In today’s newsletter, I highlight the importance of the coming health policy battle and discuss policies that would empower patients and reform government programs. Then, I discuss the effect of several of President Trump’s actions, which have rescinded executive orders from President Biden, and this week’s Paragon Pic, which shows that one-quarter of private health insurance spending comes directly from taxpayers.

The Coming Battle

Federal health care programs often deliver poor results, with massive expenditures that do little, if any, good for people’s health. Government policies have directly contributed to a health sector that enriches powerful interests and allows politicians to falsely claim victory on important societal challenges by spending taxpayer money, often at the expense of hard-working American families.

Put simply: government policies and regulations result in inefficient and distortionary spending and the over-subsidization of hospitals, insurers, and others. And because of sophisticated Medicaid money laundering schemes, states are paying a much lower percentage of the Medicaid bill than they ever have before. Overall, the over-subsidization leads to higher private and government health care costs. Responsible policymakers looking at these massive costs and federal budget deficits are rightly motivated to reform these programs.

However, the health care special interests’ empire will strike back. Too many entities like hospitals and insurers have gotten lazy from industry-friendly government regulations and attendant subsidies. This favoritism toward the status quo results in too little vigorous competition and harms innovators looking to improve quality and lower costs. Protected and favored industries no longer need to become as cost-efficient or continuously innovate to turn a profit. Rather they can follow the model of other special interests, like unions, and devote massive amounts of money to lobbying efforts to restrict competitive forces they face and to deliver additional federal largess into their coffers. Politicians eager to take credit for solving problems with other people’s money are happy to join these interests and block reform efforts.

As these programs make us poorer, Americans collectively are not getting healthier. It’s time for policymakers to stop pouring more taxpayer money into old and ineffective public policies that achieve such disappointing results. Policymakers will need to have the courage to confront these large and powerful groups and the temptation to throw money at problems. They should instead take steps to improve American health policy and create a more dynamic health sector that promotes Americans’ overall well-being.

When I worked at the National Economic Council, I led the development of a comprehensive report on how to reform America’s health care sector through expanded choice and competition and less regulation so American innovation could flourish. Paragon has put out a roadmap for how to empower patients and reform broken and costly government programs, including by:

• Ending the wasteful enhanced Affordable Care Act (ACA) subsidies, appropriating the cost-sharing reduction (CSR) program to lower premiums, and permitting enrollees to use a portion of their CSR subsidy as a health savings account deposit so they control the money rather than the health insurer.
• Ending the ACA’s discrimination against the most vulnerable by lowering the federal Medicaid reimbursement for able-bodied working-age adults until it reaches the rate for traditional enrollees like children and people with disabilities.
• Enacting bipartisan reforms to make Medicare more efficient, lower seniors’ costs, and enhance the solvency of the program with site-neutral payments and Medicare Advantage improvements.
• Reducing Medicaid money laundering techniques.
• Enhancing price transparency by building on the Trump administration’s rules.
• Reforming the tax treatment of health insurance and health care.
• Improving the regulatory process.

Trump Rescinding Biden EOs and Issuing His Own

In his first week in office, President Trump rescinded many executive orders (EOs) from former President Biden and issued a set of his own orders. Concerning health policy, President Trump rescinded Biden EOs related to the Affordable Care Act (ACA) and Medicaid as well as drug pricing. The Biden ACA and Medicaid EO eventually led to several regulatory actions that prioritized program enrollment over program integrity. These regulatory actions led to massive numbers of people enrolled in government health programs, tens of billions of dollars of higher federal subsidies to health insurers, and significant fraud. The drug pricing EO led to the development of Centers for Medicare and Medicaid Innovation (CMMI) models.

Rescinding these two EOs does signal a different approach from the numerous failures of the Biden administration’s health care policies. However, counter to some public reporting, President Trump’s recissions of these Biden EOs do not change any existing rules or executive branch actions.

To reverse these Biden regulatory actions, the Trump administration would need to engage in its own agency actions. Furthermore, the recissions do not require the agency to take any particular actions but instead provide flexibility for the agency to consider new or modified approaches to the relevant issues. So, for example, it is factually incorrect to state that the recission of these EOs ended any particular drug pricing program. Instead, the impact of revoking these EOs will not be known until we see what the agencies do as a result of being unbound from the Biden EOs and how they approach these issues.

Other new Trump EOs related to health care include the Ending Radical and Wasteful Government DEI Programs and Preferencing EO which directs agencies to terminate government DEI offices and programs; the Withdrawing the United States from the World Health Organization EO which announces the president’s intent to withdraw from the WHO; the Enforcing the Hyde Amendment EO which reaffirms U.S. policy not to use federal tax dollars to fund or promote elective abortion; and the Reinstating Service Members Discharged Under the Military’s COVID-19 Vaccination Mandate EO which directs agencies to reinstate service members removed from the military for declining a COVID-19 vaccine as well as provide them with back pay.

Taxpayers Pay 25% of “Private” Health Insurance Spending

This week’s Paragon Pic (below) demonstrates that over one-quarter of “private” health insurance is actually paid for by the government as the primary sponsor.

All levels of government are significant employers that offer health benefits. This share of “private” health insurance has come down in the last decade, from 23 percent of private health insurance spending to 19 percent. However, ACA subsidies, which cover most of the premium for exchange enrollees, have more than offset this decline.

In 2023, ACA subsidies accounted for 6 percent of “private” health insurance. When added to government-provided health benefits to their employees, government funding accounts for 25 percent of “private” health insurance. And, of course, government policy—particularly the tax exclusion for employer-provided health insurance—influences almost all the remaining three-quarters.

All the best,

Brian Blase
President
Paragon Health Institute