Conservative think tank has important points for the future of healthcare
In the past few weeks, I have had both a blog series and podcast series on healthcare reform. Now out comes a detailed report by the influential and conservative Paragon Health Institute calling for major healthcare reforms. These include federal funding cuts or reductions in tax allowances impacting all health plan lines of business as well as cuts to providers and programs more broadly.
As I have said before, people should pay attention to what Paragon is saying. The institute’s president was in Trump 45. Many Paragon staffers are in Trump 47. Paragon fellows hold or have held key positions in Trump 47. People pay attention to what Paragon says given its impact on the One Big Beautiful Bill Act (OBBBA). It, too, has influenced various regulatory proposals from the Trump administration, especially regarding improper enrollments and fraud in the Exchanges.
I, too, think it is important for people to pay attention to Paragon as the nation has to come together on healthcare reform. Both sides of the political aisle have good points about what is needed for real reform. Many of you know I am a Republican, but I tend to hail from the center of my party. At the same time, I have sympathy for what more conservative parts of my party say are out-of-control and wrongheaded spending in healthcare. They are not wrong and it points to the growing unaccountability in healthcare. This also drives the very unaffordability that those on the left cry about.
It is in this vein that I thoroughly reviewed Paragon’s reform plan — and in the spirit of compromise those from the left should do so as well. Paragon’s new proposal is well-done and elaborately detailed. What I have concluded overall is that, despite the conservative label Paragon has, the proposals are certainly largely reasonable. It is hard for anyone to disagree with most of what Paragon concludes is needed. I may have some misgivings in certain areas. I am more sympathetic to expanded coverage and more generous subsidies. But there is no denying even in these areas reform is needed.
Major Paragon proposals and my insights/commentary
Cuts to the federal matching rate in Medicaid, especially equalizing matching rates for historic and expansion populations and lowering the floor to 40%. I generally support enhancements at the federal level to encourage states to expand eligibility. I think the current coverage gap should be closed via allowing states to expand to 100% of the federal poverty limit (FPL). I do see Paragon’s point on the inequity of the base and enhanced matching rates but think that would compound major funding crises at the state level and lead to reduced coverage. The same holds true for a major reduction to the floor.
Further cuts to Medicaid provider taxes, state directed payments, and intergovernmental transfers (IGTs). Here I am more sympathetic to Paragon’s points. I do think provider taxes, IGTs, and state directed payments are abused by many states. As a state budget director, I relied on such taxes to raise state match. Some ability to do so is needed. But Paragon has pointed out the gross abuse that has occurred in some states, especially as it relates to state directed payments.
State and Medicaid managed care penalties for fraud or improper billing patterns. Holding both providers and plans accountable for government funds is important. Reasonable audit standards for plans are needed.
Hospital site neutral payments in Medicare and better target various hospital subsidies. Here are Paragon’s most important proposals. We know the institute has played a role in 2025 and now 2026 proposed site neutral expansions. Reforming price in America is key, as I have pointed out in my recent healthcare reform series. Hundreds of billions can be saved in Medicare and in employer coverage (as rates are based on multiples of Medicare). Implementation can be done thoughtfully.
Redesign the 340b program. There is plenty of evidence that hospitals and other 340b entities are not holding true to the purpose of the program. Discounts are not being directed to those in need. Indeed, studies show that prices are on average higher at 340b eligible sites than at others. This is a travesty and the program has ballooned out of control. The administration is attempting to implement reforms.
Reversing the 2022 Part D redesign. The move has destabilized the standalone Part D (PDP) program and to some degree Medicare Advantage (MA). I have written many blogs on the misguided and political nature of the 2022 Part D cost-sharing reductions. They have destabilized both Medicare Advantage and the standalone Part D programs. The changes have meant higher costs for most enrollees.
MA risk adjustment, benchmark, and quality bonus changes to reduce payments. I am less supportive here of some Paragon ideas. I do believe some MA plans have abused the risk adjustment system and reforms are reasonable but should be adequately noticed and prospective. Banning the ability to use diagnoses not captured on submitted encounters is also needed. I do support the continued enhanced benchmarks to encourage MA expansion and stabilization. I think the Stars program should continue to be adaptive for some time. The Centers for Medicare and Medicaid Services’ (CMS) SY 2029 restructure is far more accountable and a transparency dashboard should be added.
Reform Medigap. I am supportive of Paragon’s proposal to bar first-dollar coverage as it drives costs in Medicare.
End automatic re-enrollment into Exchange coverage. I am supportive of some reforms in this arena.
Broker and agent reform in the Exchanges. Such reforms and scrutiny is needed in both the Exchange and MA markets.
Fund cost-sharing reduction subsidies in the Exchanges to save dollars. This is a good idea that would end Silver loading and reduce government costs. Surprisingly, Trump 45 got rid of the appropriation.
Minimum premium payments in the Exchanges and reform Exchange premium tax credits. While I support reasonably robust subsidies to ensure affordability, some of the Paragon reforms are reasonable. I agree with Paragon that everyone should pay something toward coverage and that a lack of a premium has driven improper enrollments and fraud. Paragon has done strong work showing that a quarter of all Exchange enrollments may have been improper in 2026. Paragon argues taxpayers will improperly subsidize the program by nearly $25 billion.
Relax minimum medical loss ratio (MLR) requirements. I have historically supported the minimum MLR requirement as a way of ensuring dollars are spent on medical expense. But there is increasing evidence that the MLR requirement may actually drive costs and premiums and divert plans’ attention away from cost controls. Examination and possible relaxation may be needed, at least in some lines.
Cap the tax exclusion for employer-sponsored health insurance. This is a good proposal. Taxpayers should not subsidize extremely rich plans that are driving healthcare costs. A cap is needed against national average costs.
Fraud recommendations. Paragon has also argued that fraud is rampant throughout healthcare. I have already noted its work on improper Exchange enrollments, provider taxes and state-directed payments, and concerns about other Medicaid and Medicare spending. The Health and Human Services Office of Inspector general is actively reporting alleged fraud in both the payer and provider world.
#medicare #medicaid #exchanges #employercoverage #healthcarereform #healthcare #coverage
— Marc S. Ryan
