Trump Administration Tackling Biden’s Exchange Fraud + Medicaid Spending Blowout

On Monday, the Trump Administration proposed a rule aimed at improving the integrity of the Affordable Care Act (ACA) exchanges, an important step to both curb rampant fraud and lower premiums. I lead today’s newsletter with a discussion of this proposed rule.

I then move to another program that Biden irresponsibly managed—Medicaid. Under his administration, federal Medicaid spending soared. The ten-year baseline increased more than $1.2 trillion. Thus, even if Congress can reform Medicaid to hit its $800 billion savings target, federal Medicaid spending over the next decade would still be 6.5 percent higher than what the Congressional Budget Office projected when Biden came to office.

I also highlight an important op-ed on New York’s bloated and corrupt Medicaid program and review the health care items in the House-passed Continuing Resolution. Today’s newsletter is longer than normal because of the tremendous amount of important news this week.

ACA Program Integrity and Premium Reduction Proposed Rule

On Monday, CMS released its 2025 Marketplace Integrity and Affordability Proposed Rule. It would reduce rampant fraud in the ACA exchanges and lower premiums. The proposed rule includes citations to three Paragon research papers.

In the proposed rule, CMS acknowledges the soundness of Paragon’s methodology in The Great Obamacare Enrollment Fraud and adapts a highly similar methodology for its own estimates on improper enrollment. Paragon estimated there are between four and five million improper enrollees in the exchanges, which cost $15-$26 billion just in 2024. Many enrollees were signed up without their consent, were tricked into enrollment, or had unscrupulous brokers switch their plans without their knowledge.

This proposed rule represents a common-sense cleanup of the Biden administration’s policy of higher enrollment at any cost. The proposed rule includes several provisions that would undo Biden policies that led to improper enrollment, a phrase it uses 118 times. Its key provisions include:

Requiring documentation when income data doesn’t match – This rule would end Biden’s “self-attestation” policy and reinstate the requirement for applicants to provide documentation if the exchanges can’t verify their income information using government data sources. In 2021, the Biden administration acknowledged this verification takes an average of 45 minutes to complete.

Rationalizing enrollment periods – This rule would reverse harmful Biden enrollment policies that enabled widespread improper enrollment and encouraged people to wait until they were sick to sign up for coverage.

As a reminder, the ACA originally restricted enrollment to certain periods because it requires insurers to offer coverage to any applicant without the ability to charge people more if they need medical care. If people can sign up for insurance at any time, they may wait until they get sick to buy insurance, which raises premiums for everyone else. That’s why special enrollment periods (SEPs) were designed for situations when people experience significant life events that require them to change coverage. By loosening enrollment standards, the Biden administration may have incentivized people to wait until they were sick to enroll, which CMS believes increased premiums.

This rule would move the ACA’s open enrollment period to November 1 through December 15, consistent with the period in President Trump’s first term and the enrollment period proposed by President Obama before he left office. This is also roughly the same length of time as the Medicare Advantage open enrollment period.

The rule would also remove a SEP for individuals claiming between 100 and 150 percent of the poverty line. Given the inflationary enhanced subsidies and the Biden administration’s decision to accept self-attested information rather than verification, this SEP caused significant fraud.

This rule has several other policies that would help ensure that people receive the financial assistance that they qualify for and would reduce opportunities for unscrupulous brokers and agents to manipulate applications to generate more enrollments. Later this month, Paragon will release a brief on all the key components of the rule as well as opportunities to improve it.

Biden’s Medicaid Blowout — $1.24 Trillion Surge

A loyal reader pointed out that the Biden Medicaid blowout was even worse than what I shared a few weeks ago. He pointed me to the January 2025 baseline. He was right. CBO now projects federal Medicaid spending to be $1.243 trillion higher over the next decade (2026-2035) relative to its 2021 baseline.

This clearly shows how out of whack federal Medicaid spending became during the Biden administration—a result of his policies that made it more difficult for states to remove ineligible enrollees and that exacerbated state Medicaid money laundering tactics. As a result, there has been a significant cost shift for financing Medicaid from the states to the federal government. In fact, the federal share of Medicaid increased from 60 percent in 2008 to 72 percent in 2023. And, as we showed in a recent policy brief, Medicaid improper payments were $1.1 trillion over the past decade.

The second figure illustrates an $800 billion reduction in federal Medicaid spending relative to the 2025 baseline. This figure provides important perspective on the hysteria that many are raising about large Medicaid “cuts.” If Congress were to make $800 billion in federal Medicaid savings, total federal Medicaid spending would still be $443 billion above CBO’s 2021 projections over the 2026-2035 period.

Congress and the Trump administration must reduce the rampant waste, fraud, and abuse in the Medicaid program; restore its primary focus to serving children, pregnant women, and the disabled and not the current structure that advantages able-bodied, working-age, childless adults; and confront states’ growing use of money laundering to maximize federal Medicaid funds.

New York’s Out of Control Medicaid Program

Writing in the New York Post on March 7, the Empire Center’s Bill Hammond discussed New York’s Medicaid spending explosion during the Biden administration, with substantial payoffs to the politically-connected. He also shows that the levels of reforms sought by congressional Republicans would still leave spending well above where it was just a few years ago.

From Hammond:

[N]either [Kathy Hochul] nor the Legislature have shown any stomach for prudent fiscal management of this massive and vitally important program.

To the contrary, they have made New York a poster child for why Medicaid reform is necessary in Washington.

In her four budget cycles since taking over as governor, Hochul has jacked up the state share of Medicaid by 59% — at a time when the economy was growing, unemployment was low and poverty was stable or declining.

The expansion was largely about politics — a fledgling governor building alliances with the politically influential health-care industry. …

Although Medicaid’s original and most important mission is providing care for the disabled and indigent, less and less of its budget is spent directly on patients. Billions each year are devoted to open-ended operating subsidies for chronically money-losing hospitals, which have lost patients to their competitors but failed to adjust the size of their facilities and staffing.

The state has further used Medicaid to pay off political allies. Over the past decade, a quarter-billion dollars have flowed to an “advanced training initiative” ostensibly meant to improve care in nursing homes. Instead, the money ended up subsidizing health coverage for members of 1199 SEIU, a politically influential health-care union.

The state also doles out discretionary grants for “distressed providers” — including $29 million that went to Somos Community Care, a Bronx medical group whose executives and affiliates had donated $400,000 to Hochul’s 2022 campaign.

Contrary to the traditional purpose of the program, a majority of New York’s recipients today are non-disabled and live above the poverty line. Total enrollment far exceeds the Census Bureau’s estimate of the state’s income-eligible population, suggesting that millions may have too much income to qualify.

Health Care Items in the CR

Last December, Congress passed a Continuing Resolution (CR) that funded the government through Friday, March 14.  Yesterday, the House of Representatives passed a new CR that would fund the government and extend several health policies through the end of September that are set to expire. These policies include continued add-on payments for hospitals that see a high percentage of Medicare patients and those with low inpatient case volumes. The resolution would continue Medicare telehealth flexibilities and the Hospital at Home demonstration project first introduced during the COVID-19 pandemic. Additionally, it overrides the impending Disproportionate Share Hospital payment cuts originally mandated by the Affordable Care Act. One editorial comment: the DSH cut override is terrible policy given that Medicaid and ACA spending has exploded.

The CR extends mandatory funding for several public health programs including community health centers, the National Health Service Corps student loan repayment program, and the Special Diabetes Program which directs additional resources to Type 1 diabetes research. The cost of the health provisions included in the CR would be offset with a two-month extension of the Medicare sequester through the first 10 months of Fiscal Year 2032.  The resolution now moves to the Senate, where it will require 60 votes to pass—necessitating some Democratic support.

All the best,

Brian Blase
President
Paragon Health Institute