Cutting Coverage Doesn't Cut Costs. It Relocates Them.

This week the Paragon Health Institute handed the administration a number it has been waiting for. Its report, “The Persistent Obamacare Enrollment Fraud,” estimates 6.2 million improper enrollees in 2026 at a cost of roughly $25 billion in improper subsidies. That 6.2 million figure represents nearly 27% of all ACA exchange sign-ups, and the $25 billion is almost a quarter of total projected ACA subsidy spending for the year. ParagonThe Daily Caller

The number traveled fast. Dr. Oz, from the White House press room, claimed that 35% of the people on the ACA rolls may be there fraudulently. His pitch was that this is the friendly kind of housekeeping: “If you care about the ACA, then you’ll want us to take the fraud out.” PagingamericaThe Hill

WHAT “IMPROPER” ACTUALLY MEANS

Here is the part that does not survive contact with the methodology. Paragon did not audit 6.2 million files and find fraud. It defined improper enrollment as the number of people signing up in the lowest income category, the one that receives the highest subsidy, that exceeds the number of potentially eligible people in that category, based on Census data. In other words: more people claimed the 100 to 150 percent poverty level bracket than the Census says should exist there, and the gap gets labeled improper. The Hill

That gap can be many things. It can be brokers enrolling people without consent, which is a real and documented abuse. It can be honest income misestimates by people whose earnings bounce around month to month. It can be stale Census baselines. Paragon’s own adjunct scholar conceded the point directly: not all instances of improper enrollment are necessarily fraudulent. By the time the number reached the podium, that caveat had vanished and “improper” had become “fraud” had become Oz’s “35%.” HubCitySPOKES

Outside experts are blunt about the inference. Insurers, hospitals, and policy experts took issue with Paragon’s methodology, saying the improper enrollments were likely vastly overestimated. PolitiFact

WHAT’S ACTUALLY MOVING THE NUMBERS

There is a real story in the exchanges right now, and it is not fraud. It is price. Expiration of the enhanced premium tax credits is estimated to more than double what subsidized enrollees pay for premiums, a 114% increase, from an average of $888 in 2025 to $1,904 in 2026. A KFF analysis found the average ACA deductible saw its steepest increase in history, growing 37%, from $2,759 in 2025 to $3,786 in 2026, as those credits expired. Enrollment is falling because coverage is getting more expensive, a consequence of policy choices, not phantom sign-ups. KFFPolitiFact

MY TAKE

Strip away the fraud framing and the real question is left standing: why does the administration want fewer people enrolled in Medicaid and the ACA in the first place? The most plausible answer is the simplest one: money. Covering people costs the government money, and both moves, the Medicaid work requirements and the exchange “fraud” cleanup, reduce the number of people the government pays to cover. Call it integrity and it sounds like good governance. Describe what it does and it is a spending cut achieved by shrinking the rolls.

But the spending “saved” does not evaporate. It moves. When millions lose coverage, hospitals and clinics still treat them, in emergency rooms, as uncompensated care, at the most expensive point in the system. Those costs land on healthcare organizations, which respond the way any organization under financial strain does: they raise prices for everyone else, cut services, or close, with rural and safety net providers going first. A coverage cut is never contained to the people who lose coverage. It raises the cost and lowers the availability of care for the insured too. Everybody pays.

And here is the part that should give the cost cutters pause: shrinking the rolls hurts the for profit side of healthcare just as much. A large share of private, for profit healthcare (hospital systems, the insurers running Medicare Advantage and Medicaid managed care, the device makers, the drug companies) is funded, directly or indirectly, by government dollars flowing through covered patients. Take the patients off the rolls and you take that money out of the system, and it was propping up the profitable parts too. This is not a transfer from government to the private market. It is a contraction of both.

So if the goal is genuinely to spend less on healthcare, a goal I would not dismiss, there is a smarter place to aim. The government is the single largest payer of healthcare in the country, overwhelmingly through Medicare. That is enormous leverage, and it is almost never used on the part of the system where costs are truly out of control: the medical supply chain. Drugs and therapeutics. Devices. The prices Medicare pays for them. That is where the real money lives, and lowering it removes cost from the system without removing a single person from coverage.

You can spend less by paying a fair price for an overpriced drug or device, or you can spend less by throwing people off their insurance and letting the cost reappear somewhere worse. Only one of those actually reduces what care costs. The other just relocates it, onto patients, onto providers, and eventually onto all of us.