Expert says Medicaid, Medicare reform is critical and can save $2.1 trillion

Expenses Federal Health Programs As America's aging population has caused health care costs to soar in recent years, health policy experts have called for reform of programs such as Medicare and Medicaid, as well as Obamacare.

Paragon Health Institute, a think tank that specializes in health care market-based policy proposals and research, has outlined a series of strategies and policies to reform federal health care programs that make up a large portion of the federal budget. Medicare, Medicaid, and the Affordable Care Act program known as Obamacare are projected to grow from about a quarter of federal noninterest spending to about 40 percent, creating significant budgetary pressures.

In an interview with FOX Business, Paragon President Dr. Brian Blades said health care policy is “the most important domestic policy area” given the share of health care spending in household budgets and the federal budget. Paragon released a report The 12 reforms would save an estimated $2.1 trillion over 10 years.

“The U.S. health care system has many strengths — if you have a certain condition or illness, you want to get treatment in the U.S., for example cancer treatment — but there are so many inefficiencies and so much of our attention in health policy is focused on things that aren't very important to health,” Blades said.

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“Typically, the left's policy has been to get more people to buy health insurance, mainly Medicaid or Medicaid-like health insurance, but that doesn't improve health outcomes. So we spend a ton of money, we enrich the health care industry, but life expectancy in the United States has fallen three years in a row since the ACA was enacted,” he explained.

The proposal in the Paragon report that would generate the most savings is eliminating the 50% Federal Medicaid Percentage Amendment (FMAP) floor that applies to Medicaid services provided to enrollees who are ineligible under the ACA. The FMAP tends to send more federal Medicaid funds to wealthier states because those states have the money to expand their larger Medicaid programs. According to 2022 Congressional Budget Office (CBO) estimates, eliminating the 50% floor would save $667 billion over 10 years.

Removing the Medicaid provider tax safe harbor would eliminate an exception to the federal requirement that states collect the same tax rate from the same types of providers, regardless of the number of Medicaid patients they serve. The 2022 CBO estimated that this policy would save $526 billion over 10 years.

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Paragon called for facility neutrality in Medicare reimbursements, which it said would save more than $220 billion over 10 years. (Rolf Wennenbernd/Photo Alliance via Getty Images) / Getty Images)

“We really need a different direction in health policy that's not just focused on getting people into Medicaid programs or Medicaid-like plans on the individual market, but focused on making sure people have access to the health care they need and that they have control over it,” Blades said.

Paragon also seeks neutrality for the series of sites. Medicare ReformUnder current policy, Medicare payments for physician office visits are 60% less than hospital outpatient departments (HOPDs), creating an incentive for hospitals to acquire independent physician offices and convert them into HOPDs in order to receive higher payments.

A location-neutral reimbursement system would eliminate these incentives by paying the same amount regardless of where the procedure is performed, and three policy adjustments to achieve this would save $220 billion over 10 years, according to a 2020 estimate by the Office of Management and Budget (OMB).

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Paragon's 12 reforms are expected to save about $2.1 trillion over 10 years. (Harald Tittel/Photo Alliance via Getty Images) / Getty Images)

Another idea proposed by Paragon would be to adopt a different inflation measurement, called the Chained Consumer Price Index, for mandatory health care programs such as Medicare and Medicaid, which the CBO estimates for 2022 would save $256 billion.

Expanding health insurance subsidies in the pandemic era Affordable Care ActThe Affordable Care Act, also known as Obamacare, is set to expire at the end of 2025. The increased subsidies would cost $25 billion a year, according to the CBO, and, given other provisions expiring next year, will become a key health care policy issue in what is expected to be a key debate over federal tax and spending policy.

“The key to these subsidy expansions is that the federal government will pay the full cost for participants who claim their income is within certain thresholds, and the federal government is not checking whether participants actually have the income they declare,” Blades said.

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“We believe these subsidy expansions are wasteful and deceptive, and that Congress should allow them to expire after 2025,” Blades said, calling it his “top health policy recommendation priority” for next year, noting that Paragon estimates there will be 4 million to 5 million more enrollees in the expanded plans this year.