GAO confirms large-scale, systemic fraud risk in expanded Obamacare subsidies

House Ways and Means Committee Chairman Jason Smith, R-Mo., said the report “is the smoking gun that shows how this broken system, shielded by Democrat policies, has led to the federal government shoveling tens of billions of tax dollars to insurance companies through identity fraud and caused health care costs to skyrocket for all Americans.”

Most notably, CMS’s identity proofing measures performed abysmally, with 90%-100% failure rates for GAO’s fictitious applicants.

In 2024, GAO created four fictitious applicants to obtain insurance coverage with Advance Premium Tax Credit through the ACA Marketplace. Despite all four applicants failing the online identity verification step, the Marketplace cleared their applications once they provided false identification documents.

Moreover, insurance brokers who assisted two of the fictitious applicants helped them successfully submit invalid social security numbers.

Although the Marketplace is also supposed to verify citizenship status and income, GAO’s applicants “either were not requested to provide the federal Marketplace with documentation or generally did not provide what was requested,” yet were cleared for subsidized coverage.

“In one case, we received a notice from the federal Marketplace that it confirmed the applicant’s estimated income based on documentation we submitted. However, we did not submit documentation to confirm the applicant’s income,” GAO revealed.

GAO’s retesting this past year produced essentially the same results, with 18 of the 20 fictitious applicants obtaining APTC-subsidized insurance through the Marketplace in 2025. As of September 2025, “coverage for 18 fictitious enrollees remained active,” GAO reports, costing over $10,000 per month altogether.

“While these fictitious enrollees are not generalizable to the universe of enrollees, they can suggest weaknesses in enrollment controls,” the report noted.

CMS has largely failed to implement better antifraud strategies since GAO identified fraud risks in a 2018 analysis, and has even paused certain antifraud controls. For instance, CMS only ends coverage if a deceased person is of a single-member household. For enrollees in multiple-member households, CMS does not end coverage unless households report the changes to the Marketplace themselves.

The GAO report galvanized Republican lawmakers, who for the most part have rejected Democratic demands to extend the enhanced subsidies, which will revert to pre-pandemic levels on Dec. 31.

“Democrats have the audacity to demand Republicans extend these fraud-ridden subsidies,” House Budget Chairman Jodey Arrington, R-Texas, said. “There is absolutely no justification for perpetuating these subsidies or the failed government-controlled Obamacare system Democrats are artificially propping up.”