Obamacare’s premium tax credit is plagued with fraud, Congress’ chief watchdog said Wednesday, erecting new hurdles for Democrats who have made expanding the program a red line — and even forced a government shutdown over the issue.
Investigators at the Government Accountability Office said they filed bogus applications for the Advance Premium Tax Credit, most of which were approved, with people receiving benefits last year and this year.
In one application, investigators included fake proof of citizenship, which was accepted as legitimate proof by the government.
The investigators also identified tens of thousands of cases where benefits were being paid to Social Security numbers that the agency said belonged to people it thought were dead.
And investigators found tens of thousands of other numbers that were double-dipping, claiming more than 365 days’ worth of benefits in a single year.
In one case, a single number was used for more than 125 claims, worth more than 71 years of health coverage in 2023 alone.
Rep. Jodey Arrington, chairman of the House Budget Committee, called GAO’s work a “bombshell” that undercuts Democrats’ demands to expand Obamacare subsidies.
“It was Democrats who shut the government down for a record 43 days with the demand of making this program permanent at a cost to taxpayers of over $400 billion,” the Texas Republican said. “Now, Democrats have the audacity to demand Republicans extend these fraud-ridden subsidies.”
The premium tax credit is part of the 2010 Affordable Care Act. It helps subsidize the cost of health coverage on Obamacare’s marketplace exchanges, where those who don’t have insurance through their jobs or through a government program such as Medicaid can go to buy plans.
The credit can be taken as an advance, which means the government pays insurers every month, reducing the beneficiary’s monthly bill and easing his or her burden of having to claim a reimbursement on annual tax returns.
During the pandemic, Congress expanded the tax credit, boosting the income ceiling and making the subsidy more generous. That expansion expires at the end of this year.
Democrats had refused to approve legislation funding the government into fiscal 2026, which began Oct. 1, unless it also extended the pandemic-era expanded credit. Republicans resisted, leading to the longest government shutdown in U.S. history.
It ended last month when some Democrats relented, letting the government reopen while preserving the tax credit fight.
“There is absolutely no justification for perpetuating these subsidies or the failed government-controlled Obamacare system Democrats are artificially propping up,” Mr. Arrington said Wednesday.
Democrats say that unless the pandemic subsidies are extended, millions of Americans will see their insurance bills soar next year.
They are also pushing for a rollback of changes to eligibility for Medicaid that Republicans included in President Trump’s Big Beautiful Bill budget law in July.
Republicans, though, said Wednesday’s report suggests rot at the core of the current Obamacare-based setup.
“Rather than simply rubber-stamp more bad spending and failed policies, we must take action to prevent further harm,” said Rep. Jason Smith, chairman of the Ways and Means Committee.
GAO investigators, in the new report, said fraud has long been a problem with the advance tax credit. They pointed to a 2016 report that found exchanges, some run by states and others by the federal government, approved bogus applications.
Investigators took another stab last year and this year, filing more fabricated applications — and most of them were approved.
In plan year 2024, all four fictitious applications were receiving subsidized coverage through a federally run marketplace.
And 18 of 20 fictitious applications filed for plan year 2025 were still getting coverage as of this September.
In some cases, the investigator had to use bogus documents to back up their claims — and those documents were accepted. That included one case in 2024 where the GAO submitted fake proof of citizenship and it was “verified.”
In other cases, the government never even requested documents to prove eligibility.
In one of the 2024 cases, the government said it approved an applicant’s estimated income based on documentation submitted with the application. But the GAO never submitted any documentation.
“Such weaknesses in appropriately generating and resolving data matching inconsistencies may allow ineligible applicants to receive subsidized insurance coverage,” the GAO said.
For plan year 2025, the GAO submitted 20 fake applications. All but one were initially approved, and since then, only one was canceled after failing to provide the requested verification documents.
Eighteen others remained active and combined to collect more than $10,000 a month in bogus payments.
The Advance Premium Tax Credit totaled nearly $124 billion in government spending in 2024.
The GAO said it cannot estimate how much of that is going to fraudulent applications since its covert testing is not generalizable to the overall population of people collecting payments.
