Vice President JD Vance recently announced that the Trump administration would end subsidy payments for 760,000 fraudulent health insurance enrollments made through the federally administered Affordable Care Act exchanges, saving taxpayers $2.2 billion a year. Now Democrats are attacking Vance for taking healthcare away from deserving Americans and raising healthcare costs for everyone else.
But there is no evidence Vance’s anti-fraud efforts have deprived anyone of healthcare, and to the extent insurance premiums will increase because of them, that is an indictment of Obamacare, not the Trump administration. If anything, the Trump administration should turn its focus to states and force them to perform the same anti-fraud procedures the Trump administration just applied to the federal exchanges.
From their very inception, the Affordable Care Act health insurance exchanges have been a magnet for fraud and abuse. Just a few short years after the exchanges first opened in 2013, the Government Accountability Office released a report finding that investigators were able to create fictitious enrollments, causing thousands of taxpayer dollars to be sent directly to insurance companies for health insurance that was never provided.
The scam works like this: health insurance brokers use stolen or fake Social Security numbers to sign fictitious people up for insurance. If the fake applicant has just the right income level, their premium is subsidized entirely by taxpayers, so health insurance companies have no reason to bill them. The brokers then get a fee from health insurance companies for every new applicant they enroll.
In a sense, it’s a victimless crime. The broker gets a fee, insurance companies get a monthly check from the government for an enrollee who will never file a claim, and insurers can then lower premiums for everyone else. Except there is a victim here: taxpayers. We are all stuck paying the bill for fraudulent broker fees and inflated insurance company profits that have to be paid for through either higher taxes or more government borrowing, which leads to inflation.
ACA fraud was only made worse during COVID-19 when Democrats boosted the exchange subsidy payments, meaning a wider band of income levels could have their monthly premiums covered entirely by taxpayers. Before COVID, about 15% of ACA exchange plans paid no premium. After the COVID bonus, the number of no-premium subsidy recipients skyrocketed to more than 40%. This created a huge opportunity for fraud. Vance’s efforts are now reversing that.
Before an enrollment was canceled, the Centers for Medicare and Medicaid Services confirmed that it met four criteria: an agent or broker had submitted the application without a Social Security number or immigration number; federal subsidies covered the entire premium; the enrollee had no medical claims; and the insurer had no record of contact with the enrollee. The agency then required the insurer to send notices through two different communication methods, giving the enrollee an opportunity to respond. Only after receiving no response was the enrollment deemed unauthorized and canceled. Legitimate enrollees could still have their coverage reinstated by contacting the federal exchange and providing verified identifying information.
Seems like a common-sense anti-fraud policy, no?
But of course, Democrats are calling foul. Former Biden administration officials say they “absolutely foresee that totally legitimate enrollments are going to get cut off here.” But none have yet been identified.
The insurance companies themselves are also complaining, noting that disenrolling those who make no medical claims would inevitably increase average medical costs for those who remain covered, meaning insurance companies would have to raise premiums on the remaining real enrollees to make up the difference.
This may be true, but it only demonstrates why the entire ACA model was flawed to begin with. Obamacare funnels taxpayer money to insurance companies while insulating consumers from the true cost of coverage. Expanding subsidies hides those costs rather than reducing them, rewarding insurers and brokers for enrolling more people without ensuring taxpayers get value for their money. Reform should instead expand competition and give patients greater control over their healthcare dollars. A system that needs payments for fictitious patients to keep premiums affordable needs fundamental reform.
A BIPARTISAN DEAL TO GET AMERICA BUILDING AGAIN
At a bare minimum, what should happen is that Vance’s successful anti-fraud efforts at the federal level be carried to the states as well. The purge of fraudulent ACA enrollments was conducted only in those states with federally administered exchanges. State-based exchanges such as those in California, New York, and Illinois still have thousands of fraudulent accounts receiving subsidies. That must end. As well as all the Medicaid fraud going on in those blue states as well.
Fighting fraud alone will not balance federal or state budgets. But leaders who protect taxpayers from abuse can earn the trust needed to confront harder fiscal choices. Americans are more likely to accept difficult reforms when those asking for sacrifice first demonstrate that the government spends their money honestly and responsibly.