Roughly one in four people enrolled through Affordable Care Act exchanges in 2025 may not qualify for the taxpayer-funded subsidies they received, according to a new analysis from the Paragon Health Institute. The conservative health policy group estimates the number at 6.2 million enrollees, and pegs the potential cost to taxpayers at up to $25 billion this year alone.
The estimate, drawn from federal enrollment data and Census Bureau figures, lands at a moment when the government's own watchdogs have already sounded alarms about persistent fraud in the ACA marketplace. It also arrives as the Trump administration moves to tighten eligibility rules and strengthen oversight of a program that has ballooned in enrollment over the past several years.
Brian Blase, a former Trump economic adviser who leads Paragon, told The Washington Post that the problem extends well beyond a few bad actors gaming the system:
"Obamacare enrollment over the last few years has been inflated by improper and phantom enrollees, and those enrollees are expensive to the taxpayer."
Phantom enrollees. That phrase deserves to sit with readers for a moment. It means people who may not exist, or who never asked for coverage, are drawing subsidies from the federal treasury.
Paragon's 6.2 million figure is not the only estimate pointing to a serious problem. A Centers for Medicare & Medicaid Services spokesman told The Washington Post that CMS itself estimated up to 4.4 million enrollments in 2024 may have been improper. Even the lower government estimate represents a staggering volume of questionable sign-ups flowing through a system that routes billions in premium subsidies to insurance companies each year.
The gap between the two numbers, Paragon's 6.2 million for 2025 and CMS's 4.4 million for 2024, raises its own questions. Did the problem grow? Did Paragon cast a wider net? The methodology behind each estimate is not fully detailed. But the direction of both figures points the same way: millions of enrollees may be receiving coverage they do not qualify for, and taxpayers are footing the bill.
Blase pointed to Florida and Texas as states where the problem may be especially severe. His reasoning is straightforward. Those states did not expand Medicaid under the ACA, which creates a perverse incentive structure for people near the income threshold.
"The problem is more severe in states that did not expand Medicaid, because in those states there's incentives to overestimate income and claim a subsidy."
In other words, people who might otherwise qualify for Medicaid in an expansion state instead inflate their reported income to land in the subsidy zone on the ACA exchange. The system, as designed, rewards the maneuver.
The Government Accountability Office did not merely flag theoretical risks. In a December report, the nonpartisan congressional watchdog warned that the ACA marketplace faces persistent fraud vulnerabilities. And the GAO backed up that warning with an undercover test that should trouble anyone who cares about how federal dollars are spent.
"For example, we were able to get subsidized insurance for fake enrollees."
Fake enrollees. Created by federal investigators. Approved for subsidized coverage. That is not a hypothetical risk assessment. That is the system failing a basic integrity check, one conducted by the government's own auditors.
The GAO's findings echo a broader pattern of Obamacare-era programs hemorrhaging taxpayer money with insufficient accountability. The ACA created an enormous new infrastructure for distributing federal health care dollars, and oversight has struggled to keep pace with the scale of spending.
Not all of the improper enrollments appear to involve people deliberately gaming the system. Jason Levitis of the Urban Institute testified before the Senate Finance Committee that a separate category of fraud involves brokers acting without consumers' knowledge or consent.
"There is clear evidence that, in 2024, rogue brokers improperly enrolled or switched the enrollment of a few hundred thousand people without their permission."
Levitis's estimate of "a few hundred thousand" is far smaller than the millions flagged by either Paragon or CMS. But the rogue-broker problem adds a different dimension to the fraud picture. These are not phantom enrollees or people fudging their income. These are real people whose coverage was manipulated by third parties, presumably to generate commissions or other financial rewards for the brokers involved.
The existence of multiple fraud vectors, phantom enrollees, income misrepresentation, and rogue broker manipulation, suggests a system with vulnerabilities at nearly every point of entry. Each problem demands a different fix, and the ACA marketplace has been slow to implement any of them.
Health care fraud is hardly confined to the ACA exchanges. Federal investigators have been cracking down on home health and hospice providers suspected of bilking taxpayers through fraudulent billing, a parallel front in the same war on waste.
CMS Administrator Mehmet Oz has signaled that the administration takes the problem seriously. In an April interview with Blase, Oz praised Paragon's "pioneering work" examining ACA fraud and abuse. He also offered a blunt assessment of the scale of the challenge facing regulators.
"I like using a scalpel, but there are some times you have to use a meat cleaver because the whole system is in such shock that you need to be able to fix it."
The Trump administration has moved to tighten eligibility rules and strengthen program oversight, though the specific measures have not been fully detailed. A White House fraud task force is expected to examine ACA enrollment practices as part of a broader effort to safeguard taxpayer dollars.
Blase credited the administration's early steps. "The Trump administration has come in and is trying to clean up some of the obvious stuff," he said.
The fraud task force's work on ACA enrollment would add to an already active enforcement agenda. Federal investigators have also suspended hundreds of health care providers in Los Angeles over suspected fraud totaling hundreds of millions of dollars.
The potential price tag, $25 billion in a single year, puts the ACA enrollment fraud problem in a category that demands sustained attention, not a single news cycle. For context, that figure exceeds the annual budgets of multiple federal agencies. It dwarfs the amounts recovered in most federal fraud investigations.
And the money does not simply vanish into the ether. It flows to insurance companies in the form of premium subsidies for people who may not qualify. Every improper enrollment means a subsidy check the Treasury did not owe. Multiply that across millions of enrollees and multiple years, and the cumulative cost to taxpayers becomes enormous.
The broader landscape of health care fraud reinforces the point. In California, authorities recently arrested five people in an alleged $267 million hospice fraud ring that billed for phantom patients, the same kind of fabricated beneficiaries that appear to plague the ACA exchanges.
President Donald Trump has long criticized Obamacare. The Paragon report and the GAO's findings give that criticism a concrete, dollar-denominated foundation. The question now is whether the administration's tightened rules and fraud task force can close the gaps that allowed millions of questionable enrollments to accumulate in the first place.
Several important questions hang over this story. Paragon's methodology, specifically how it used Census Bureau income data to identify ineligible enrollees, has not been fully disclosed. The same is true of CMS's own estimate of 4.4 million improper enrollments. Without transparency on how each number was calculated, outside observers cannot fully evaluate the precision of either figure.
The specific eligibility rules the Trump administration has moved to tighten have not been publicly detailed. Nor has the White House fraud task force laid out a concrete plan for examining ACA enrollment practices. Announcements of intent are welcome. Results will matter more.
Meanwhile, the broader financial instability of the ACA exchanges, including the looming expiration of enhanced subsidies, adds urgency to the cleanup. If the subsidy structure changes and millions of questionable enrollees remain on the books, the fiscal exposure only grows.
CMS acknowledged the concerns. The GAO proved the system can be fooled. Paragon put a number on the scale of the problem. Now someone has to actually fix it.
When the government's own auditors can sign up fake people for taxpayer-funded health insurance and nobody catches it, the word for that isn't a policy disagreement. It's a breakdown, and taxpayers deserve better than to keep writing the checks while Washington argues about the paperwork.
