Undercover GAO Investigation Exposes the Ease of Obamacare Fraud

No one spends a dollar better than the person who earned it. That adage reveals the crux of massive fraud and improper payments that plague federal health insurance programs and drive up costs for taxpayers.

According to a report from the Government Accountability Office, more than 95% of the fictitious applications the GAO created and attempted to enroll in Obamacare were approved and enrolled, with insurance companies receiving thousands of taxpayers’ dollars per month on behalf of those fake enrollees. 

The details of the GAO report reveal the utter negligence and perverse incentives that result when the federal government puts taxpayers’ money up for grabs for people who didn’t earn it.

That includes the agents and brokers who receive commissions from insurance companies when they enroll individuals—real or fake—into federal marketplace health plans. Most Obamacare enrollments are assisted by an agent or broker.

And it includes the insurance companies that can receive upward of $10,000 per year of taxpayers’ money for every individual—real or fake—enrolled in their plans.

For instance, out of four fake applicants GAO sought to enroll in 2024, two were initially flagged by the system’s automatic identity checks, but later cleared after submitting fictitious identification documents, including fake citizenship documents.

In the other two cases, in which GAO worked with brokers to enroll fake applicants, the system the brokers used initially flagged the applicants’ Social Security numbers as unverified. But after the GAO’s fake applicants authorized their brokers to work toward enrollment on their behalf, “Both brokers worked with the Marketplace Call Center—without the applicants—to successfully submit the applications with invalid SSNs.”

The GAO noted of its false enrollment attempts that, “We either were not requested to provide the federal Marketplace with documentation or generally did not provide what was requested, yet our four fictitious applicants received subsidized coverage … ”

Sometimes, Obamacare’s fraud detection systems not only failed to detect fraud but manufactured false verifications. As the GAO noted, “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.”

In other cases, the most basic checks are ignored. Social Security numbers provide a unique identifier, both to prevent fake enrollment through stolen Social Security numbers, and to ensure the accuracy of Obamacare payments based on income that is linked to Social Security numbers.

Yet, when GAO examined the reconciliation of income data from tax records to Social Security numbers, it could not identify evidence of such reconciliation for 32%, or $21 billion, of all tax credits paid in 2023.

Moreover, while an applicant’s Social Security number should serve as a basic check to make sure that the same individual—or fake Social Security number or stolen identity—isn’t enrolled more than once, the GAO nevertheless found more than 29,000 Social Security numbers that received more than 365 days of plan coverage in 2023 and more than 66,000 Social Security numbers that were similarly enrolled more than once in 2024.

In the most egregious example, one Social Security number “was used to receive subsidized insurance coverage for over 26,000 days (over 71 years of coverage) across over 125 insurance policies” in a single year.

The GAO also identified over 7,000 instances in which the Social Security numbers of individuals enrolled in Obamacare in 2023 were for individuals who were identified in the Social Security Administration’s death files with reported death dates prior to their enrollment applications. Payments were nevertheless made to brokers and health insurance companies for these dead Obamacare enrollees.

In addition to fake and fraudulent enrollments, the GAO report also noted that brokers often act illegally to make changes to an individual’s insurance plan—typically changes that will result in payment from an insurance company to the broker—without their consent.

The GAO identified at least 160,000 applicants (1.5% of relevant applicants) that likely had unauthorized changes made to their plans in 2024. This aligns with a Centers for Medicare & Medicaid Services statement noting that it received more than 90,000 complaints in the first eight months of 2024 from individuals who had their Obamacare plans changed without their consent.

Unfortunately, fraud, abuse, and improper payments are not contained to Obamacare—they are rampant across the federal government and have been growing exponentially alongside the massive expansion in federal spending.

Last year alone, the federal government identified $162 billion in improper payments among the programs that it examined. But that’s a massive understatement as the government often fails to properly audit programs. For example, Brian Blase and I found that Medicaid’s reported improper payments are half their more realistic total of $1.1 trillion over the past decade.

There is plenty that lawmakers can and should do to protect the integrity of taxpayer spending. That includes not extending what were supposed to be temporary COVID-19 subsidies that have exploded in costs and further subsidized insurance companies’ profits.

And it ultimately requires right-sizing the federal government because the more opportunities fraudsters have to steal taxpayers’ money, the more they will take.

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