Debate Over ACA Subsidies Intensifies Amid Fraud Allegations

As discussions in Congress continue regarding the extension of enhanced subsidies under the Affordable Care Act (ACA), allegations of fraud in the health insurance marketplace have emerged as a significant point of contention. Senate Republicans have cited a December 3 report from the U.S. Government Accountability Office (GAO) to argue against extending these subsidies, which are set to expire at the end of the year. Approximately 22 million individuals, or 92% of ACA enrollees, currently benefit from these subsidies, which significantly lower their insurance premiums.

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Senate Democrats have proposed extending the enhanced ACA subsidies for an additional three years, emphasizing that without them, average insurance premiums for recipients could more than double in 2026. Conversely, Republicans have suggested allowing the subsidies to expire and replacing them with payments of up to $1,500 for consumers with health savings accounts. House Speaker Mike Johnson has indicated that he will not call for a vote on the extension, making the expiration of the subsidies likely.

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The GAO's report highlighted various instances of fraud, including the approval of fictitious applications for ACA subsidies. In 2024, the GAO submitted four fake applications, all of which were approved, resulting in $2,350 per month in subsidies. In 2025, 18 out of 20 fictitious applications were approved, totaling over $10,000 per month in subsidies. The report noted weaknesses in enrollment controls but cautioned that these findings should not be generalized to the entire ACA enrollee population.

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Critics of the Republican stance, including health policy experts, argue that the reported fraud is not as extensive as suggested. Michael Gusmano, a professor at Lehigh University, stated that the fraud figures represent a trivial portion of the overall subsidy recipients, with instances of deceased individuals receiving subsidies amounting to just 0.4% of all Social Security numbers that received a premium tax credit in 2023. Gusmano and others advocate for improving the ACA's security measures rather than allowing the subsidies to lapse.

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Senate Majority Leader John Thune characterized the fraud as "rampant," while other Republican lawmakers emphasized that a competitive marketplace cannot exist amid such fraud. In contrast, health policy experts argue that the financial consequences of not extending the subsidies far outweigh the losses attributed to fraud. Nick Fabrizio, a health policy expert, suggested that any extension of the subsidies should be accompanied by reforms to address fraud and control healthcare costs.

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If the enhanced ACA subsidies expire, the average out-of-pocket premium payments for recipients could rise to approximately $1,900 in 2026, up from nearly $900 in 2025. The Urban Institute estimates that about 4.8 million individuals may lose their health coverage next year if the subsidies are not extended. The ongoing debate in Congress will determine the future of these subsidies and their impact on millions of Americans.

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• “It's not small, but the GAO report does not indicate that this is an outlier when compared to fraud in other federal programs,” — Kaye Pestaina, Director of KFF's Program on Patient and Consumer Protection

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• “The idea that you get down to zero in terms of any kind of problem with any system, if we applied that to any program, public or private, they'd all have to shut down,” — Michael Gusmano, Professor of Health Policy at Lehigh University

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• “We will never have a competitive marketplace when that marketplace is riddled with fraud,” — Sen. Bill Hagerty, R-Tenn.

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