The GOP is not wrong about the need to bring accountability to government programs
I have taken the position that most of the reductions to healthcare in the One Big Beautiful Bill Act (OBBBA) were simply bad policy, but a number of you have asked me about my comments throughout the budget saga that some changes were reasonable. Others have asked why I have been mentioning the conservative Paragon Health Institute quite a bit. Paragon’s cadre of staff and fellows have populated key healthcare positions in the White House and healthcare agencies under Trump 45 and 47. Many of the reductions in the OBBBA came from Paragon positions.
Let me answer the second question first. While I may not agree with everything Paragon trumpets, the think tank has rigorous policy discipline, and you have to respect that. They, too, are an influential player and I would be foolish not to understand their policies. More to the point, as a former state budget director and management secretary, I do believe in accountability of government healthcare programs. Many of the points Paragon makes often go to a lack of accountability in our healthcare system.
My chief complaint about my party is that most Republicans lawmakers have a very narrow view of healthcare policy. They view healthcare as a commodity that is earned usually through work. Many do not view it as reasonable to broadly cover society. But if I am sometimes critical of the GOP for not being in favor of affordable, universal coverage, I also am critical of Democrats’ policies on healthcare. Democrats support universal access but have rarely asked if their policies do or do not promote accountability, real reform, or efficiency in the system.
IRA Part D accountability case study
Here is a recent case in point: the 2022 Medicare Part D changes in the Inflation Reduction Act (IRA). Democrats passed a series of cost-sharing reductions on Part D, largely to score political points in the 2024 election. But from a policy perspective, the changes were horrid. Democrats could ballyhoo around election time that they were saving Medicare beneficiaries on drug costs, but the changes actually have destabilized the standalone Part D program, leading to premium and cost-sharing hikes, benefit reductions, and less choice and access. When Democrats finally realized that their changes would mean huge surges in 2025 premiums just before the 2024 election, they papered together a massive premium subsidy pilot to hide the damage. As usual, the Democrats’ answer was more money, but the damage is done. The Part D changes are a microcosm of Democrats’ overall healthcare approach, where unfettered policy positions ignite massive spending growth to the detriment of long-term stability of the system as a whole.
What OBBBA changes were reasonable
Now back to my views on what policy changes in the OBBA I think make sense. As I have said before, while I might have done things somewhat differently, certain aspects of changes in the OBBBA were by no means unreasonable from an accountability perspective.
- As a former state budget director, I used provider taxes to come up with my state match to leverage federal dollars. But some states have taken such taxes too far. In some states, provider taxes are used to build extremely rich benefit packages and federal reimbursement, creating a huge gulf between progressive and more mainstream states in terms of spending in Medicaid. So, some kind of provider tax reform is justified, although I am not sure the phasedown of the rate was smart policy.
- Many states as well use provider taxes to beef up state Medicaid reimbursement for state directed payments to hospitals and other entities. These payments have ended up reimbursing hospitals well over Medicare rates in some cases. The payments serve as yet another institutional barrier to hospital efficiency. So, reform here too was not unreasonable.
- While the GOP went too far, some of the eligibility and enrollment tightening is desirable in Medicaid and the Exchanges. For example, reforms related to the verification of eligibility are desperately needed to stop fraudulent enrollment and fraud more generally. Under the OBBBA, states will need to obtain enrollee address information using reliable data sources and the federal government must establish a system to share information with states. I oppose efforts to create too many burdens on enrollees and states, but does anyone question whether our qualification systems across social service programs are broken?
- And if GOP administrations have used the 1115 demonstration waiver process to wreak havoc on coverage, Democrats have used it as a piggybank for states to massively expand coverage instead of ensuring true cost-efficiency in experimentation.
- I also do not oppose some limited cost-sharing in expansion groups in Medicaid. This contributes toward the goal of personal responsibility.
- And I also support the GOP’s efforts to test more cost-effective coverage options, such as Direct Primary Care, and individual coverage options, including additional flexibility of Individual Coverage Health Reimbursement Arrangements (ICHRA). I do, however, want to see comprehensive coverage paired with such initiatives.
Another accountability use case
I gave you one example of misguided healthcare policies when I mentioned the Part D changes in the IRA above. Let’s consider one other by asking a question: as much as I supported the premium subsidy enhancements at the time of he pandemic and perhaps some type of extension now, did the government foster huge opportunities for enrollment fraud because subsidies became so generous and corrolary reforms made eligibility and enrollment so liberal? Undoubtedly so, and Paragon has been beating this drum for some time. There are some propsects for extension of the enhanced credits because of impacts in GOP districts if they expire (more on this in a future blog soon), but the possible fraud appears to be the main reason conservative GOP lawmakers are suspicious of an extension.
Paragon has published a detailed review of the enrollment fraud issue and declares many of the folks enrolled are “phantom enrollees.” A few highlights:
- The number of Exchange individual market enrollees with no medical claims more than tripled from 2021 to 2024. Nearly 12 million enrollees had no medical claims during 2024. That is equal to 8 million enrollees on an annualized basis.
- The percentage of individual market enrollees with no claims jumped from fewer than 20% in 2021 to 35% in 2024 —an increase of nearly 80% in three years.
- About 40% of those enrolled in the 94% actuarial value cost-sharing subsidy Silver plans and bronze plans had no medical claims in 2024.
- The rise in phantom enrollees is absent in the small-group market.
- This explosive growth in phantom enrollees matches patterns Paragon has documented for more than a year.
The Centers for Medicare and Medicaid Services (CMS) also released data and sent it to participating health plans that show a surge in members with no claims in the Exchanges as well. Now, the Congressional Budget Office (CBO) is indicating that 2.3 million individuals received premium tax credits improperly by misstating their income. That grew from 1.3 million people who did the same in 2023, according to the CBO.
Now, none of this is definitive by any means, but it certainly lends credence to the argument that a great deal is awry and perhaps the current framework of premium and cost-sharing subsidies, along with the premium subsidy enhancements set to expire this year, certainly play a role.
Investigations are now occurring into the fraudulent enrollment schemes by brokers and agents to garner Exchange commissions.
On a side note, I happen to think that health insurer industry trade group AHIP does itself and all plans a disservice by trying to push back and even denigrate Paragon on its review. The idea that no phantom enrollees exist is plainly wrong. AHIP’s assessment poking holes in Paragon’s no-claims analysis is poorly constructed. Paragon actually does discuss partial year enrollment. AHIP fails to address the root of Paragon’s finding that there was a huge surge in no-claims enrollees. I agree with much of what AHIP says about the benefits of coverage and the implications of the enhanced subsidies’ expiration. But better to have admitted that fraud does exist and lobby for its purging (beyond what was done in the OBBBA) within a broader and more responsible extension. Instead, AHIP touts the traditional insurer line that bigger is always better. In the end, AHIP is endorsing the lack of accountability that permeates government healthcare programs.
Closing thoughts
So, let’s look at our two case studies again. In an effort to reduce cost-sharing for a subset of the senior population, Democrats seriously destabilized a major healthcare program in 2022’s IRA. The premium enhancements in the Exchanges, passed in 2021 during the COVID pandemic and extended the next year by the IRA, appear to have increased fraudulent enrollment because so many more people did not need to pay a premium at all.
In the end, it is hard to question the need for greater accountability in government healthcare programs. In many ways, because the Democrats are tone deaf on this issue, it means the GOP moves even more to the right on coverage issues.
Paragon Phantom Enrollees Review: https://paragoninstitute.org/paragon-prognosis/the-rise-of-phantom-obamacare-enrollees-biden-covid-credits-drive-massive-increase-in-individual-market-enrollees-with-no-medical-claims/
#aca #obamacare #exchanges #marketing #fwa #enrollment
— Marc S. Ryan
