GAO Report Uncovers Extensive Fraud in Obamacare Subsidy Program

The U.S. Government Accountability Office (GAO) has released a detailed report uncovering significant fraud within the Affordable Care Act's (ACA) Advance Premium Tax Credit (APTC) program, which subsidizes health insurance premiums in the Obamacare marketplace. The investigation reveals systemic vulnerabilities that allow fraudulent actors to exploit the program, including the use of fake identities, misappropriated Social Security numbers (SSNs), and deceased individuals' data to unlawfully obtain subsidies. This misuse directly impacts taxpayer funds, with billions of dollars potentially wasted through these fraudulent claims. At the core of these issues is the reliance on self-reported income estimates for subsidy allocation, combined with automatic reenrollment and minimal verification processes. Such structural weaknesses have enabled insurance brokers to benefit financially by encouraging inaccurate income reporting, increasing subsidy payments from the government. Insurers similarly have limited motivation to verify enrollee eligibility, as subsidies are paid on behalf of all applicants, irrespective of eligibility verification. GAO's covert operation in late 2024 demonstrated that 100% of fabricated applicant profiles were approved for subsidized coverage, with 90% retaining coverage into 2025. Notably, the Centers for Medicare & Medicaid Services (CMS) approved numerous applications with falsified or absent documentation. The report also highlights extensive misuse of SSNs, with over 125 policies linked to individual SSNs and tens of thousands of subsidy claims associated with deceased individuals, accounting for millions in improper payments. Moreover, fraudulent activities extend beyond enrollment, encompassing unauthorized insurance plan changes driven by brokers seeking commissions, which compromise patient consent and further abuse subsidy funds. Thousands of complaints to CMS reflect widespread consumer issues related to such unauthorized modifications within a single year. This systemic fraud represents a long-standing regulatory oversight problem, as GAO had issued warnings as early as 2015 concerning susceptibility to fraudulent enrollments and subsidy overlaps. The current expanded premium tax credits, introduced during the pandemic, appear to have intensified these vulnerabilities, amplifying risks of abuse and escalating costs to taxpayers. The consequences of unchecked fraud in the Obamacare marketplace include increasing federal deficits and upward pressure on premiums for legitimate enrollees, undermining trust in federal health programs. Proposed remedies involve enforcing stricter eligibility verification, penalizing brokers and insurers for improper subsidy claims, and enhancing income verification frameworks. An immediate policy consideration involves allowing the temporary enhanced premium tax credits to expire as scheduled at the end of 2025 to reduce financial incentives fostering fraud.