The Democrats' generous subsidies for insurance coverage purchased through Obamacare's exchanges can be described as many things: an irresponsible use of public money, a gift to the insurance industry, and a transparent means of trying to buy the support of patients.
A new study from the Paragon Health Institute reveals that they're also an invitation to fraud. As many as five million people receive free, taxpayer-funded marketplace coverage even though they're not eligible for such largesse.
It's far from clear how many of these patients are deliberately misleading the government and how many are merely in error.
Regardless, taxpayers should not have to acquiesce to such graft.
Today's beefed-up premium tax credits were first enacted in 2021 as part of the American Rescue Plan Act and later renewed through the end of 2025 under the Inflation Reduction Act.
The enhanced subsidies result in effectively free exchange coverage for all Americans earning between 100% and 150% of the federal poverty level — or between $31,200 and $46,800 for a family of four in 2024.
Enrollees have to devote a steadily greater percentage of their income toward premiums until they reach 400% of the poverty level — $124,800 for a family of four — at which point and beyond their premiums are capped at 8.5% of income.
By insulating people from the actual cost of coverage, the subsidies have given insurers license to raise premiums without being punished in the marketplace.
They've also imposed the equivalent of an income tax on many Americans, since a raise in one's pay can now lead to a decrease in subsidies — and thus an increase in the real cost of coverage.
And then there's the subsidies' structure, which has proven susceptible to fraud.
Since exchange coverage became free in 2022 for those earning between 100% and 150% of the federal poverty level, the share of federal marketplace enrollees who report income in this range has shot up from around 40% to over 50%.
This alone is hardly evidence of underhanded behavior.
What should certainly raise eyebrows is the astounding number of these enrollees who claim to fall in this income category but in fact earn more.
In nine states, "the number of people who enrolled in a plan with zero premium and very low cost-sharing plans exceeded the number of eligible adults in that income range," according to the authors of the Paragon paper, Brian Blase and Drew Gonshorowski.
In Georgia, Mississippi, and South Carolina, more than twice as many patients are enrolled in zero-dollar plans than are likely eligible.
And in Florida, the ratio of zero-dollar enrollees to those genuinely eligible is four-to-one.
It's possible that many of these people misestimated how much they would earn in the coming year when signing up for a subsidized exchange plan.
Others may have decided to misrepresent their incomes in order to secure free coverage.
Still others might have no idea that they're fraudulently claiming subsidized coverage. There's evidence that rogue agents and brokers are signing people up for exchange plans without their consent.
They get a commission, the insurer collects a taxpayer-funded premium, and the beneficiary has no idea.
There's a significant incentive for people to misestimate their income.
They're supposed to pay additional taxes if their incomes end up being higher than they told the government when they enrolled.
But there are caps on what they have to pay back.
So there are many scenarios in which a person could end up claiming much more in subsidies than he or she ends up owing in additional tax.
The cost of fraudulent Obamacare enrollment could be as high as $20 billion this year alone, Blase and Gonshorowski estimate.
Biden's enhanced subsidies always had an aura of being less than savory.
They are, at base, a means of bribing Americans to sign up for health plans they wouldn't have purchased with their own money.
To protect taxpayers, they must expire as scheduled at the end of next year.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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