Medicaid fraud in blue states has dominated headlines recently, but the problem is not new. From its earliest reviews of Obamacare enrollment controls, the Government Accountability Office found that President Barack Obama’s Affordable Care Act was highly susceptible to fraud. President Joe Biden made fraud easier and more lucrative with his COVID-19 subsidy bonuses, and fraud has since exploded, especially in red states that did not build their own online marketplaces. President Donald Trump has taken steps to roll back Obamacare fraud, but a new report from Paragon Health Institute shows the problem is persistent and more should be done.
Unlike Medicaid fraud, where supposed providers of Medicaid services defraud the government, Obamacare fraud is driven by health insurance brokers. They use online advertisements and purchased consumer data to obtain a minimum of information needed to sign up a real person for health insurance through an online exchange. The brokers fill in income and age information on the applications to game the system so the applicant qualifies for an insurance policy with no monthly premium.
Taxpayer dollars then go directly to health insurance companies through Affordable Care Act subsidies. The brokers get paid $20 to $30 per enrollee per month for each month the enrollee stays on the plan. The applicants often don’t know they were used because they are not billed for a premium. It is treated as a victimless crime, but taxpayers are stuck paying billions of dollars to health insurance companies for fictional care.
Before COVID, 15% of subsidized Affordable Care Act plans on health care exchanges required no monthly premium. But after Biden’s subsidies, the percentage grew to 40%, vastly expanding the number of people who could be fraudulently signed up for zero-cost plans.
According to Paragon, 6.2 million people are fraudulently enrolled in Obamacare plans. Health insurance companies collect $25 billion a year to cover them, accounting for about a quarter of all Affordable Care Act subsidy spending.
The Obamacare fraud problem is especially acute in the red states without online marketplaces that rely on Healthcare.gov. State-based exchanges have more direct control over eligibility, broker oversight, and consumer protection, while Healthcare.gov has weak verification and little oversight. Many red states also did not expand Medicaid, which creates a stronger incentive to inflate the incomes of people below the poverty line so they can qualify for exchange subsidies. In Florida, for example, Paragon estimates that more than half of Obamacare enrollees are fraudulently enrolled.
The Biden-era Obamacare subsidies thankfully expired in January, but automatic enrollment means millions of fraudulent accounts still receive monthly subsidy payments from the federal government. The Trump administration has taken initial steps, including removing people simultaneously enrolled in Medicaid and subsidized exchange coverage, as well as those who failed to file tax returns, to reconcile prior advance subsidy payments.
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More should be done, including strengthening eligibility verification and identity authentication on Healthcare.gov and tightening automatic re-enrollment procedures by requiring periodic eligibility re-verification. Most importantly, Congress should establish a meaningful minimum premium payment, such as $20 per month.
Requiring everyone to have skin in the game, especially those whose names are being used to defraud taxpayers, is essential to restoring fairness, accountability, and integrity to the system.