The Reality of Medicare for All, Fixing the No Surprises Act, and Medicare’s Long Reach

This week’s newsletter highlights Joel Zinberg’s new Wall Street Journal op-ed on the enormous financial and access costs of Medicare for All. I also discuss my new Washington Post op-ed with Jackson Hammond on the costly problems with the No Surprises Act’s federal arbitration system. The newsletter then reviews three new studies that examine Medicare’s influence on private hospital prices, Medicare Advantage hospital payments, and site-neutral Medicare payment reforms.

We have also been active with virtual events in October. At last week’s event (available here), experts examined differences between Medicare Advantage and Medicaid managed care and structural inefficiencies in Medicaid managed care. Next week, Paragon will host a discussion with policy, business, and medical leaders on reforming the No Surprises Act. Register here.

The Financial and Access Costs of Medicare for All

Back on the Paragon team after his 19-month stint in the White House, Joel Zinberg is back in The Wall Street Journal with a new op-ed, “Medicare for All” Isn’t Medicare as We Know It. Joel explains why Medicare for All would be fundamentally different from the Medicare program seniors know today, eliminating private insurance options and replacing the existing system with a government-run monopoly.

A recent KFF poll found that two-thirds of Americans support Medicare for All, but support drops sharply when respondents learn about its consequences. Only 52 percent were in favor when told that private insurance would be eliminated, 35 percent when told it could require most Americans to pay higher taxes, and just 24 percent when told it could lead to delays in medical tests and treatments.

The financial costs would be enormous. A recent White House Council of Economic Advisers report projects that Medicare for All would increase the federal budget deficit by approximately $47 trillion over 10 years. But the costs extend well beyond higher taxes, interest rates, and inflation. Medicare for All would reduce provider reimbursement rates while eliminating patient cost-sharing, simultaneously discouraging the supply of medical services and increasing demand. The likely result would be longer waits and reduced access to care.

Joel warns about the experiences of Canada, which forbids private insurance for services covered by the centrally financed system, and Britain, the most famous single-payer health system in the world. Canadians waited an average of nearly 29 weeks between primary care referral and treatment and are far more likely to report problems with access than Americans. Just 21 percent of Britons reported satisfaction with their National Health Service in a 2024 survey. Six in 10 Britons were “very” or “quite” dissatisfied in 2024, the highest level of dissatisfaction with the NHS since the survey began in 1983.

The No Surprises Act’s Arbitration System Is Driving Up Health Care Costs

Last week, The Washington Post published a piece from Jackson Hammond and me explaining how the No Surprises Act’s federal arbitration system has become a major driver of higher health care costs. Unless these perverse incentives are addressed, the damage will almost certainly grow.

Jackson and Katherine Hall’s report finds that nearly 2.6 million disputes were filed in 2025—115 times the volume federal agencies initially projected. Providers win roughly 85 percent of disputes, and the median arbitration award is about four times the median in-network payment rate. These excessive awards increase costs directly and give providers leverage to demand higher in-network rates, ultimately raising premiums for employers and families.

The incentives are deeply flawed. Providers benefit from remaining out of network when arbitration produces payments substantially above negotiated rates. Arbitrators also face incentives to favor providers, who initiate nearly all disputes and effectively choose which arbitration entities receive their business.

We recommend removing elective services from federal arbitration and strengthening price and network transparency requirements. For emergency services, where patients cannot meaningfully choose providers, we propose limiting awards to reasonable, market-informed amounts. Additional reforms should address arbitrator incentives, eligibility determinations, and insurer payment delays.

New Research Reveals Medicare’s Outsized Influence on Private Hospital Prices

Employer-sponsored insurance (ESI) plans pay hospitals substantially more than Medicare—about 254 percent of Medicare rates in 2022, according to a RAND study. New academic research commissioned by Paragon finds that ESI and Medicare pay extraordinarily similar relative prices across inpatient hospital services. This adds to the body of work showing that Medicare’s influence on hospital pricing, and likely on the allocation of health care resources, extends far beyond the program itself.

A new Paragon-commissioned working paper published by the Center for Advancing Health Policy through Research (CAHPR) at the Brown University School of Public Health, authored by Jonathan Ketcham, Ge Bai, and Christopher Whaley, examines how closely commercial insurers’ hospital payments track Medicare’s payment structure. The researchers analyzed 2022 claims data for 763 Medicare Severity Diagnosis-Related Groups (MS-DRGs), the categories Medicare uses to establish payments for inpatient hospital services.

The researchers found a 0.93 rank correlation between Medicare and commercial insurers’ payment rankings across inpatient services. A high correlation is expected; for example, complex services tend to be expensive under either payment system, while routine services tend to be less expensive. Nevertheless, a 0.93 correlation is striking, and relatively few services occupy substantially different positions in the two payment hierarchies.

Relative prices matter because they help determine where resources flow. When one service is reimbursed more generously than another, investment, personnel, and capacity tend to shift toward the higher-reimbursed service. The study therefore raises an important question about the extent to which Medicare’s administratively determined relative prices influence resource allocation beyond Medicare itself.

There are some notable exceptions. Commercial payments rank lower than Medicare for certain obstetric, neonatal, and mental and behavioral health services, and higher for certain cancer-related services. Examining these exceptions could help identify where Medicare’s relative payment rates may be misaligned.

Medicare’s relative payment rates are established administratively rather than through competitive market pricing, using a complicated set of formulas determined by Congress and informed by data collected and analyzed through various government mechanisms. This process is subject to intense political lobbying. If commercial insurers largely preserve those relative prices, Medicare’s relative valuations could influence investment and service delivery across a much larger share of the health care system.

Earlier research by Jeffrey Clemens, Joshua Gottlieb, and Tímea Laura Molnár found that one large private insurer frequently benchmarked physician payments to Medicare but selectively departed from those prices when the benefits justified doing so. The new study extends this line of research to inpatient hospital services.

Medicare Advantage Hospital Prices Remain Close to Traditional Medicare

New research from Matthew Fiedler and Samuel Peterson at the Brookings Institution finds that Medicare Advantage (MA) plans pay hospitals rates close to traditional Medicare for inpatient and outpatient services. This is less notable than the similarity between ESI and Medicare relative prices. Medicare-participating providers generally must accept original Medicare rates as payment in full for covered out-of-network services furnished to MA enrollees, which limits hospitals’ leverage to negotiate higher rates with MA plans. This feature helps keep MA hospital prices near traditional Medicare rates, although Medicare’s relative and geographic payment distortions can also carry over into MA.

The authors also find little evidence that greater MA market penetration materially changes the relationship between MA and traditional Medicare hospital prices. That finding suggests the statutory out-of-network payment framework remains an important anchor even in markets where MA covers a larger share of Medicare beneficiaries.

New Research Reinforces the Case for Site-Neutral Payments

A new study in JAMA Health Forum examines alternative approaches to site-neutral Medicare payments. In designing site-neutral payments, policymakers must choose between benchmarks such as the Physician Fee Schedule (PFS) rate (or the ambulatory surgical center rate where appropriate) and a discounted hospital outpatient payment rate. The researchers estimate that paying hospital outpatient departments 40 percent of current outpatient rates would save Medicare and beneficiaries $6.6 billion across 57 selected service groups, while paying rates based on the PFS would save $6.5 billion. Although aggregate savings would be similar, the approaches would produce substantially different payment changes for many services.

These findings reinforce Paragon’s recent research showing that Medicare’s hospital outpatient payment advantage increased from 109 percent in 2011 to 247 percent in 2026. Paragon has recommended using the rate Medicare pays for the same service in the lowest-cost setting, rather than applying a uniform discount to hospital outpatient rates. This approach eliminates the payment advantage associated with providing the same service in a higher-cost setting, rather than preserving a portion of that advantage through an across-the-board discount. In our August 2026 comment letter to CMS, Jackson Hammond and I urged broader site-neutral reforms to reduce unnecessary spending and government-created incentives for hospital consolidation.