Based on the Congressional Budget Office’s (CBO) most recent projections, federal spending on Medicaid and Obamacare subsidies from 2026 to 2034 is now expected to be $1.7 trillion – or one quarter —higher than what CBO projected when President Biden took office. Importantly, this period excludes Biden’s COVID credits—enhanced Obamacare subsidies that also exploded fraud and waste in the program—since those expire after 2025.
The main driver of this massive spending increase is a set of Biden administration policies that prioritized enrollment at any cost in both the exchanges and in Medicaid expansion. In the exchanges, these policies weakened program integrity measures, stopped income verification for many enrollees, and essentially opened a year-round enrollment period. New Paragon research estimates improper exchange enrollment was 5.0 million people in 2024 and 6.4 million people in 2025. Based on CBO’s assessment, it will take a few years for the fraud to work its way out of the system.
The biggest winners from these policies were health insurers, who reaped massive profits from the flood of subsidies and improper enrollment, and unscrupulous brokers, who earn a commission for each month a person they signed up remains enrolled.
Medicaid increased much more than projected for two primary reasons. First, the Biden administration maintained the COVID public health emergency for much longer than expected—leaving a legacy of higher enrollment in the program. Second, the Biden administration took several actions that made it more difficult for states to remove ineligible enrollees. And third, the Biden administration exacerbated state Medicaid money laundering techniques, leading to a substantial increase in corporate welfare in the program.
The One Big Beautiful Bill takes several steps to reverse the Biden administration’s enrollment-at-any-cost polices, including by reinstituting commonsense eligibility reviews for both the exchanges and Medicaid expansion. The OBBB would also address state Medicaid money laundering schemes and reduce corporate welfare in the program. All these changes, however, would reduce 2026 to 2034 projected spending by about two-thirds of the Biden surge. At the end of the budget window, projected federal spending on Medicaid and Obamacare subsidies would be about what it was when Biden took office.
