Paragon Report Exposes Massive Fraud and Phantom Enrollees in Obamacare, Costing Taxpayers Billions

A September report from the Paragon Institute reveals the staggering levels of fraud and waste in Obamacare exchanges, largely driven by Biden-era expanded premium tax credits (i.e. subsidies). The cost on taxpayers is astronomically high — tens of billions of dollars each year — whilst worsening health and coverage outcomes.

According to the report, two categories of enrollees are driving the surge in waste: zero-claim enrollees and improper enrollees.

Improper enrollees are individuals who falsely report their income in order to qualify for fully subsidized Obamacare plans. In 2025, an estimated 6.4 million individuals fell into this category; up from 5 million in the previous year. This means that about 1 in 4 Obamacare participants were improperly enrolled.

The total cost to taxpayers also rose to a shocking $27 billion in 2025 alone, increasing by $7 billion from the year before.

The fraud problem is compounded by the automatic re-enrollment policy propounded by the Biden Administration, which keeps millions of ineligible enrollees on the books. Roughly 45% percent of enrollees were automatically re-enrolled, up from 29% in 2020. The report mentions that much of 2025 fraud originated from this automatic re-enrollment, perpetuating prior years’ improper enrollees.

Further, Paragon notes a growing number of “phantom enrollees” or people who receive taxpayer-funded healthcare but never actually use it. These “zero claim” enrollees incur no medical claims whatsoever, meaning no lab tests, no prescriptions, and no doctors visits.

In 2024, there were 11.7 million zero-claim enrollees, representing about 35% of all Obamacare participants. This number is nearly double the 19% from 2021. Among those in the most heavily subsidized plans, including fully subsidized, the number of zero claim enrollees skyrocketed to 40% from 20% in 2021. In other words, millions of people are signed up for Obamacare plans they don’t use, yet taxpayers continue to foot the bill regardless.

The eruption of phantom coverage and fraud coincide with the expansion of “COVID credits” under President Biden, which temporarily boosted subsidies and removed income verification safeguards. An August Paragon report demonstrates that these policies “drive a massive increase in individual market enrollees with no medical claims,” while allowing for widespread abuse.

The report goes on to expose how the Congressional Budget Office attempted to downplay the issue in estimating that just 2.3 million individuals are improperly enrolled, but Paragon points out that the CBO data excludes 40 states that expanded Medicaid, meaning the true figure would be much higher.

The takeaway is clear: Obamacare has become a breeding ground for waste, fraud, and dependency at the expense of taxpayers. The program does not work to empower patients or reform the healthcare markets, but has devolved into a subsidy machine that funds ever-growing insurance companies, rewards inaccuracy, and discourages accountability.

Lawmakers should allow the expanded Obamacare subsidies to expire this year. After all, they were only meant to be in place during the COVID-19 pandemic. American taxpayers shouldn’t be forced to bankroll a healthcare system built on fraud and abuse.