Based on the Congressional Budget Office’s (CBO) most recent projections, baseline federal spending on Medicaid and Obamacare subsidies from 2025 to 2034 increased by $1.9 trillion—or 25 percent.
The One Big Beautiful Bill (OBBB) would significantly reduce waste, fraud, and abuse in these two programs. Contrary to what critics say, it does not cut spending. Rather, it would slow the rate of growth in these programs by largely reversing the Biden-era spending spree.
The OBBB includes a $50 billion fund for rural health care providers. Including the rural health fund, Medicaid and Obamacare spending through 2034 will be $703 billion—almost ten percent—more than forecast in 2021. As shown in first figure, the OBBB would not reduce Medicaid and Obamacare subsidy spending to the pre-Biden baseline levels until 2032.
This estimate includes interactions between health provisions in the bill. Although CBO does not specify these interactions, we expect most of the interactions are attributable to Medicaid, which is much larger than Obamacare.
Including the interactions estimated by CBO, as well as the new rural health provider fund, Medicaid spending will be $450 billion higher—7 percent higher—over the 2025 to 2034 period than CBO forecast in 2021. Obamacare spending will be $317 billion higher—a whopping 44 percent higher—than CBO forecast in 2021. (The Obamacare figure has a kink in the baseline in 2034 showing a unique payback from New York, which has accumulated an excessive reserve in its Basic Health Program, which CBO expects it will remit to the federal government that year.) The OBBB’s significant reductions in fraud, waste, and abuse do not counter all Biden-era changes that increased Obamacare spending.
The main driver of the Biden spending increase is a set of 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 three 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. This led to a substantial increase in corporate welfare in the program, most notably escalating revenues through the provider tax scam so states could reward hospitals and insurers with excessive Medicaid rates through state-directed payments.
The OBBB takes several steps to reverse the Biden administration’s enrollment-at-any-cost policies, including by reinstituting commonsense eligibility reviews for both the exchanges and Medicaid expansion while adding a community engagement requirement for able-bodied, working-age adults enrolled through Obamacare’s Medicaid expansion. The OBBB would also limit state Medicaid money laundering schemes and reduce corporate welfare in the program. All these changes would still leave projected Medicaid and Obamacare subsidy spending one-third higher from 2025-2034 than CBO projected at the start of the Biden administration.
