For virtually every American, health care is one of the largest monthly expenses. This is due in part because the U.S. healthcare system is among the most expensive and complex sectors of the economy, consuming a growing share of family budgets and federal spending. Brian Blase argues that the core problem is not a lack of government involvement, but too much of it—distorting incentives, restricting supply, and enabling massive levels of fraud across federal programs.
Blase is the president and founder of the Paragon Institute, a healthcare policy think tank focused on market-based reforms. He analyzes government healthcare programs and proposes alternatives to reduce costs and improve patient outcomes. He testifies before Congress and conducts research on Medicaid and broad healthcare system inefficiencies.
Blase says the system has been neglected by the free-market policy community despite its importance. “It’s the most important area of domestic policy,” he says. “We don’t have anything close to resembling a free market for health care,” he says, pointing to price controls, subsidies, and regulations that allocate resources sometimes based on political power rather than patient needs.
The system, he says, distorts both supply and demand. Government subsidies increase demand while regulations restrict supply, producing predictable results. “If you inflate demand… and restrict supply, you get higher prices,” Blase says. He points to a single portion of the system as an example. “Since the turn of the century, hospital prices have risen three times faster than inflation,” he says, noting that hospitals account for roughly 40 percent of healthcare spending.
Blase distinguishes between health, healthcare, and health insurance, arguing that current policies conflate these separate elements. “A lot of health insurance in the U.S. is really the prepayment of medical expenses,” he says, describing a system where routine care is routed through third-party payers. That approach, he argues, is inefficient and limits consumer control.
In congressional testimony, Blase opposed extending enhanced Obamacare subsidies, arguing they worsen affordability rather than improve it. “I don’t think the way to make health care more affordable is for more government spending,” he says. Instead, he supports deregulation and expanded consumer choice, including broader access to health savings accounts and catastrophic insurance options.
Blase points to unintended consequences from past reforms as evidence. Medicaid expansion under the Affordable Care Act was intended to shift patients toward primary care and reduce emergency room use. “The theory was exactly wrong,” he says. Medicaid recipients, he argues, became more likely to use emergency rooms for non-emergent care, raising costs and straining capacity.
Workforce shortages further complicate the system. Blase identifies Medicare’s payment structure as a major factor skewing incentives toward specialists over primary care physicians, or general practitioners. “Specialists have much more political power than GPs,” he says, arguing that government pricing distorts career choices. He supports expanding roles for nurse practitioners and physician assistants, along with easing barriers for foreign-trained doctors.
Prescription drug pricing presents another complex challenge. Blase notes that most medications Americans use are generics, which benefit from competition and relatively low prices. The real debate is over brand-name drugs. He supports a “prospective most favored nation” approach, where U.S. prices would align with those in other developed countries after launch. “It will lead to an equilibrium where prices come down in the U.S.,” he says, while ensuring other countries “pay their fair share for global R&D.”
Blase’s most striking claims focus on fraud within federal healthcare programs. He estimates that Medicaid, now a roughly $1 trillion annual program, loses enormous sums to misuse. “Easy, 20% of it… $200 billion a year, is waste, fraud,” he says.
One abuse involves what he describes as “legalized money laundering.” States impose so-called provider taxes on hospitals, recycle the funds, and then claim federal reimbursement on what are essentially accounting maneuvers. “That’s an accounting fiction,” he says, which leads to states drawing down additional federal dollars without real new spending.
At the same time, expanded subsidies under the Affordable Care Act made some plans effectively free for enrollees, creating incentives for misreporting income. “It’s much easier to enroll someone if they pay zero,” Blase says. He estimates that millions of enrollees claim incomes that qualify them for full subsidies despite not meeting those thresholds.
The results, he argues, are widespread abuse and inefficiency. “Forty percent of enrollees… didn’t use their health plan a single time,” he says, suggesting that many were enrolled without meaningful engagement. He estimates the cost of this problem at roughly $30 billion annually.
Blase believes that most inefficiencies stem from structural incentives rather than isolated bad actors. States maximize federal funding, hospitals benefit from the flow of dollars, and insurers and brokers profit from enrollment volumes. Taxpayers bear the cost.
“Resources are allocated based on political power rather than the ability to best meet patient needs,” he says.
Addressing healthcare costs, in his view, requires reversing the worst incentives. Without structural reform, Blase argues, higher spending and inefficiency will continue to define the system.
