Trump Administration Announces New Actions to Combat Health Care Fraud

Yesterday, the Trump administration announced a significant set of commonsense actions aimed at reducing fraudulent enrollment in the Affordable Care Act (ACA) exchanges. The Centers for Medicare and Medicaid Services (CMS) announced that it had canceled approximately 315,000 unauthorized enrollments covering 760,000 phantom enrollees and expects to recover roughly $2.2 billion in federal premium subsidies associated with those enrollments. CMS also announced additional enforcement actions against agents and brokers and established new safeguards intended to prevent unauthorized enrollment in the future. I appeared on C-SPAN’s Washington Journal this morning to discuss this action.

Today’s newsletter starts by explaining what CMS did and putting the importance of its actions in the context of Paragon’s research on the magnitude of improper and phantom ACA enrollment. I then highlight Paragon’s new comment letter on a CMS rule implementing the Medicaid provider tax reforms contained in the One Big Beautiful Bill (OBBB) and a new Paragon Prognosis discussing the falling child uninsured rate in the latest Census Bureau data on health insurance coverage.

Promoting ACA Enrollment Integrity

CMS’s recent effort to remove phantom enrollees was another commonsense step to advance good governance and program integrity. The agency’s actions will protect resources for those who need them and save taxpayers billions.

Here is a summary.

First, CMS identified enrollees who were likely phantoms using four criteria:

1. The application was submitted by an agent or broker without a Social Security number or immigration number for the applicant;
2. The enrollee paid nothing toward the premium because the federal subsidy covered the entire amount;
3. The enrollee had no medical claims; and
4. The insurer had no record of actual contact with the enrollee.

Second, for applicants meeting those four criteria, CMS required insurers to send notices through two different modes of communication, providing the enrollee with an opportunity to respond. Insurers had significant incentives to get in touch with these applicants because they were receiving subsidies to cover the full premium.

Third, if there was no response, the enrollment was deemed unauthorized and canceled.

Importantly, CMS has put in place a safeguard if any of the enrollees removed are legitimate: The enrollee can contact the federal exchange, provide verified identifying information, and have their coverage reinstated.

To be clear, most of the fraud and improper enrollment is perpetrated by corrupt agents and brokers. But it is enabled by Obamacare subsidies so large that they produce “free” plans for applicants claiming low incomes, while the resulting improper enrollment financially benefits large health insurance companies.

CMS also took commonsense actions to suspend corrupt agents and brokers, terminating hundreds and issuing a temporary moratorium on new registrations for the 2027 plan year for agents and brokers without an active 2026 exchange agreement. According to CMS, improper enrollment rates were much higher for new agents and brokers who came to the market in 2026 than for existing agents and brokers.

The agency is also requiring verifiable Social Security numbers or immigration-document numbers on broker-assisted applications for non-newborn applicants; preventing brokers from attaching themselves to applications consumers are completing independently; and requiring electronic consumer authorization before a broker can act on a consumer’s application or enrollment.

Paragon has documented widespread improper enrollment in the Obamacare exchanges since the summer of 2024 when we published The Great Obamacare Enrollment Fraud, which identified enrollment levels among people reporting income between 100 and 150 percent of the federal poverty level that substantially exceeded estimates of the potentially eligible population in many states. Our latest analysis, The Persistent Obamacare Enrollment Fraud, estimates that approximately 6.2 million 2026 exchange sign-ups improperly claimed eligibility in the 100-to-150-percent-of-poverty category, representing about 27 percent of total exchange sign-ups.

We also documented the rise of phantom Obamacare enrollees during the Biden administration. In 2024, 35 percent of individual-market enrollees had no medical claims during their enrollment period, up substantially from 2021 and more than twice the rate in a normal health insurance market.

For millions of enrollees who were unaware they had coverage—or who were simply fake—insurers collected premiums financed entirely by taxpayers and then paid monthly commissions to the agents or brokers responsible for the enrollments. And the incentives appear to have affected how fraud was carried out: fraudulent applications averaged about 2.4 people, compared with roughly 1.4 people on typical applications. Since broker commissions are generally paid per member per month, a corrupt broker who created a fake applicant had a financial incentive to add fake dependents as well. This is all unconscionable. We should not have government policies that make it so easy for fraudsters to game the system, hurt the most vulnerable, and rip off taxpayers.

Fraud and improper enrollment are not victimless. Improper enrollment wastes billions of taxpayer dollars, harms people who are enrolled without their knowledge, and undermines a program that is supposed to help people who legitimately need assistance obtaining health coverage. Paragon has highlighted public accounts and media reports from across the United States detailing the immense emotional, physical, financial, and logistical burden faced by victims of ACA fraud in Victims of Biden’s Enrollment-At-Any-Cost Exchange Strategy.

Medicaid Provider Tax Reform

This week, Paragon submitted a comment letter on CMS’s proposed provider tax rule. The proposal implements provisions of the OBBB that phase down the permissible hold-harmless threshold for certain Medicaid provider taxes.

States have increasingly used provider taxes to finance their share of Medicaid spending to draw additional federal Medicaid matching funds without a commensurate increase in their own net spending. States use these financing schemes to make large corporate welfare payments to politically powerful institutions through state-directed payments.

In our comment letter, we discuss research showing that provider taxes can increase prices for commercially insured patients and that only a small share of SDP spending goes to inpatient rural hospitals. Although we support several elements of CMS’s proposed rule, we recommend a few changes designed to limit the ability of states to restructure taxes to circumvent the new statutory limits.

New Census Data on Children’s Health Coverage

A new Paragon Prognosis by Liam Sigaud examines recent claims that declining Medicaid and Children’s Health Insurance Program (CHIP) enrollment would cause an increase in the number of uninsured children. Those claims have focused heavily on administrative Medicaid and CHIP enrollment data. But falling Medicaid enrollment does not necessarily mean that children are becoming uninsured. Children can transition from Medicaid or CHIP into employer-sponsored or other private coverage, and Medicaid enrollment remained elevated after the pandemic-era continuous-coverage requirement ended.

New Census Bureau data provide a broader picture. According to the 2025 Current Population Survey Annual Social and Economic Supplement, the estimated uninsured rate among children decreased from 6.1 percent in 2024 to 5.8 percent in 2025. Public coverage declined slightly, but the survey showed an increase in private coverage that more than offset that decline. In absolute terms, the estimated number of uninsured children declined by approximately 226,000. Among children below the federal poverty level, the estimated uninsured rate declined from 10.3 percent to 9.0 percent.