The Morning After

In this morning’s newsletter, I start by recapping the scant health policy discussion in last night’s presidential debate, provide some perspective on the growth and variation in Obamacare plan premiums, reference a new Paragon 101—on the 340B Program, and have a personal reflection on September 11th.

Health Policy In the Debate

As 10:30 approached last night, I thought this would be an extremely short section, but eventually, there was a question for both President Trump and Vice President Harris on health policy. Harris demurred when asked about her previous support for a $44 trillion Medicare for All proposal that would outlaw private coverage, pivoting to the Affordable Care Act (ACA). She has supported large additional subsidies to health insurers to induce higher exchange enrollment with a greater taxpayer share of the cost.

President Trump was asked about his position on the ACA, where he argued that it does not provide good health care, that he inherited a mess when he took office in early 2017, and that his administration ran Obamacare well. As someone who was in the White House from 2017 to 2019 working on health policy, President Trump did inherit an ACA market with rapidly rising premiums and insurers withdrawing from markets leaving many enrollees with choices of plans from only one or two insurers. His policies helped stabilize that market while opening options for small businesses to offer more affordable coverage (association health plans and individual coverage health reimbursement arrangements) and middle-income families to buy less regulated and more affordable coverage.

ACA enrollment has increased in recent years due to much higher subsidies to insurers and from the Biden administration’s failure to verify applicant income for the subsidies. This has led to large-scale fraudulent enrollment and spending, which Paragon has estimated at between 4-5 million people and $15-$26 billion just this year alone. Moreover, new studies document how most ACA plans have extremely narrow networks as few doctors or hospitals accept the coverage with the quality markedly worsening over time.

There was a very brief mention of other health care subjects, but a main takeaway is that the moderators did not spend a single minute asking about the deteriorating U.S. fiscal position, and massive budget deficits that contribute to inflation and which are driven in large part by federal health care programs. The significant fiscal challenges presented by Medicare, Medicaid, and the ACA were ignored throughout the evening—a disservice to the American people who need to learn about rapidly increasing federal debt and whether the candidates have any plan to deal with it.

Growth and Variation in ACA Premiums

This week’s Paragon Pic demonstrates the growth in ACA benchmark premiums for single coverage from 2014 to 2024 by state and the variation across the country. Overall, benchmark premiums increased 75 percent between 2014 and 2024—more than 60 percent higher than the premium growth in employer plans during this time. The figure makes clear that premium growth has been very uneven across the country (a high of 201 percent in West Virginia to a low of 16 percent in New Hampshire) and that 2024 state benchmark premiums varied significantly.

The benchmark plan is the second-lowest-cost silver exchange plan and largely determines federal subsidies. The subsidies are structured so that the benchmark premium cannot exceed a certain amount of household income with higher subsidies for lower-income enrollees. Since benchmark premiums vary so dramatically across the country, so do subsidies. The contrast between neighboring states New Hampshire and Vermont makes this clear. Federal taxpayers are bearing a much greater cost for exchange enrollees in Vermont—largely because Vermont does not permit insurers to charge younger enrollees lower premiums than older enrollees, which significantly raises overall premiums (particularly premiums for younger and middle-aged enrollees).

There are numerous problems with the subsidies particularly after they were significantly increased by Congress through 2025, including that they lead to massive amounts of inefficient and fraudulent spending (as previous Paragon research has documented). One problem is a huge disparity that provides greater subsidy benefits in states that have higher premiums. In Follow the Money, Theo Merkel and I discussed this problem, recommending that Congress cap the benchmark premium at 125 percent of the national average for purposes of the subsidy calculation. From our paper:

[T]he design of the actual credit is also inherently inflationary, as it is tied to premiums of a benchmark plan and caps an eligible enrollee’s premium contribution as a percentage of income. This means that, as premiums of that benchmark plan go up, taxpayers foot the bill. In areas where there is little or no insurer competition, this is especially problematic, as it effectively puts control of the subsidy amount to the insurer—the ultimate recipient of the subsidy.

These downsides should be mitigated by instituting a cap on the benchmark plan used to calculate the PTC amount. The cap should be a percentage of the national average with some flexibility for geographic variation in the cost of care. A benchmark cap at 125 percent of the national average should provide more restraint and would be a marked improvement over the status quo.

A 101 on 340B

Paragon published a new 101-style brief by Jackson Hammond today on the 340B Drug Pricing Program. The brief reviews the program and how it has failed to live up to its original intent to “stretch scarce federal resources as far as possible,” instead increasing drug prices and provider consolidation. Jackson highlights the program’s explosive growth and lack of transparency.

The total value of 340B discounts exceeded $52 billion in 2022. Participating covered entities (CEs) – hospitals and federal health grantees – actualize this value when payers (including Medicare) reimburse for drugs at standard rates rather than the discounted price. There is also evidence that CEs are using the program’s opaqueness to hide illegal duplicate discounts on the same drug from both Medicaid and the 340B Program. These practices eat into “scarce federal resources” and are made worse as the number of CEs and their associated pharmacies has exploded from under 2,800 in 2005 to over 47,000 in 2024.

Jackson discusses how rather than pass these savings on to patients or reinvest earnings in indigent populations, CEs often end services in poorer communities and purchase practices in wealthier ones to maximize payments. Jackson recommends that Congress put in place transparency requirements to ensure taxpayer dollars are protected and CEs use these savings to benefit patients.

On September 11th

Finally, on a personal note, it’s worth remembering that today is the 23rd anniversary of the terrible attack on September 11th. I’m reflecting on my friend and high school tennis partner, First Lt. Michael Cleary, who was inspired by the events of that day to join the Army. As a Platoon Leader, he was killed in action in Iraq in 2005, just two months before he was set to be married. Just this week, Mike’s devoted father, U.S. Army Veteran, and man of deep faith, Jack Cleary, a steadfast member of the community in Dallas, Pennsylvania where I grew up, passed away, joining Mike in heaven. Mike and Jack are examples of what is best about our country, and motivation to continue to pursue policies to make the United States a freer and better country.

All the best,

Brian Blase
President
Paragon Health Institute