This space has previously reported on the fraud associated with Obamacare, particularly the enhanced Exchange subsidies passed in 2021 that Democrats want to extend. In recent weeks, the Congressional Budget Office (CBO) has now admitted that the law’s subsidy structure encourages enrollees to lie about their income.
These reports come on top of the fact that passing a subsidy extension could expand funding for abortion-related travel, in ways that undermine state pro-life protections. It’s all enough to make one wonder why Republican “leaders” are making noises about extending the enhanced subsidies before their expiration on December 31.
Impact of Skewed Incentives
Prior studies by the Paragon Health Institute have examined the incentives created by the Exchange subsidy regime to falsify income estimates. (Disclosure: While I have done work for Paragon, I had no involvement with this particular report, and am writing this article on my own behalf.)
Those incentives work in two ways: On the one hand, enrollees with income below the poverty level have an incentive to inflate their income up to the poverty level, because otherwise they will not qualify for subsidies at all. (This dynamic largely applies in the 10 red states that have not expanded Medicaid, because enrollees with below-poverty income levels in expansion states would qualify for Medicaid expansion.) On the other hand, enrollees with higher incomes — say, between two and four times the poverty level — have an incentive to understate their income, to qualify for the richest subsidies.
Paragon concluded that, in 2025, there are approximately 6.4 million people with incomes just above the poverty level with potentially fraudulent enrollment, either for over- or under-stating their income. In its estimation, these enrollees led to approximately $27.1 billion in estimated taxpayer losses due to Exchange fraud.
Budget Office Estimates
As part of its responses to questions from congressional Republicans, CBO recently revealed for the first time that it, too, believes enrollees are lying about their income to qualify for Obamacare subsidies:
Estimating the number of people who have improperly received subsidies for marketplace [i.e., Exchange] coverage is difficult. The agency has, however, specifically estimated that 1.3 million marketplace enrollees improperly claimed the premium tax credit [i.e., subsidies] via intentional overstatement of income for 2023; 2.3 million enrollees did so for 2025.
The budget agency went on to explain that it could calculate this improper enrollment “because it appears in enrollment data as an unusual concentration of enrollees reporting income just above” the poverty level.
For instance, CBO noted that the number of people reporting income between 100 percent and 105 percent of the poverty level in non-expansion states was 2.6 times the number of people reporting income between 105 percent and 110 percent of the poverty level. CBO also cited tax reporting data indicating that, in 2023, a large number (39 percent) of enrollees claiming the richest subsidies — which are calculated based on expected income — ultimately reported actual income below the poverty level.
These and other data points CBO cited all confirmed that enrollees who otherwise would not qualify for subsidies at all had overstated their income to receive taxpayer-subsidized insurance. However, CBO did not explore another element of the Paragon report, regarding households with higher incomes who understated their income to qualify for the richest subsidies.
Impact in the Tens of Billions
Likewise, the budget office did not assign a specific number or cost associated with the estimated 2.3 million enrollees it believes are improperly enrolled in 2025. However, prior work can put a range on the potential impact to taxpayers.
In its most recent baseline estimates of federal health insurance subsidies, CBO assumes an average per-enrollee subsidy of $6,056 in 2025 — a total of $129 billion in Exchange subsidies divided by 21.3 million subsidized enrollees. Applying this per-enrollee subsidy to 2.3 million enrollees improperly claiming subsidies this year equals potential fraud of $13.9 billion.
By contrast, Paragon in its paper utilized an average subsidy for a 45-year-old with income just above poverty of $6,732, or roughly ten percent higher than the CBO per-enrollee subsidy for all income levels. Applying this per-enrollee subsidy to 2.3 million enrollees improperly claiming subsidies this year equals potential fraud of $15.5 billion.
These estimates have their limitations. For instance, CBO calculates subsidy spending by fiscal year, and enrollment by calendar year, so the per-enrollee subsidy amount I calculated above for 2025 is by definition imprecise. But they give the sense of the magnitude of the fraud problem caused by the Exchange subsidies — likely north of $10 billion this year alone.
Why Extend Fraud?
Of course, findings like these from Congress’s official non-partisan scorekeeper would leave most ordinary Americans wondering why on earth anyone in Congress, let alone Republicans purportedly devoted to reducing government spending, would want to perpetuate such a fraud-plagued program. When it comes to extending the enhanced Obamacare subsidies, lawmakers should follow Nancy Reagan’s famous advice and “Just say no.”