Explaining the Rise of Phantom ACA Patients

The problem isn’t real people with coverage they don’t use—it’s fraudulent sign-ups who never should have been subsidized.

Letter to The WSJ. 

"Profs. Amy Finkelstein and Matthew Notowidigdo miss the point: Poor public policy led to large numbers of phantom ObamaCare enrollees, not legitimate enrollees who use no healthcare services (“The Necessity of ObamaCare,” Letters, Aug. 20). The problem isn’t real people with coverage they don’t use—it’s fraudulent sign-ups who never should have been subsidized.

President Biden’s Covid credits, which made many plans fully taxpayer-subsidized, created perverse incentives. Bad actors rushed to maximize commissions by enrolling people regardless of eligibility. That led to fraudulent enrollment, with some unaware they were signed up and others covered elsewhere.

Using conservative assumptions, Paragon estimates that 6.4 million people who weren’t eligible were enrolled in a fully subsidized plan in 2025. Centers for Medicare and Medicaid Services data show the consequence: a spike in enrollees with no healthcare claims.

Thirty-five percent of exchange enrollees in 2024 had no medical claims, nearly double the pre-Covid share. More striking, 40% of those in fully subsidized plans with minimal cost-sharing didn’t use their plans to see a doctor or fill a prescription. This isn’t government subsidizing people with coverage who used no care. It’s government subsidizing millions of enrollees who don’t exist in the market. Insurers likely collected more than $40 billion in subsidies for nearly 12 million enrollees without a single claim in 2024—triple the pre-Biden levels.

Health insurance finances nearly all medical spending, including routine visits and prescriptions. In 2023, 85% of privately insured adults used their coverage to pay for care. The large and growing numbers of exchange enrollees using no healthcare is another reason to suspect mass phantom enrollment.

The scale of improper and phantom enrollment shows that Mr. Biden’s Covid credits inflated enrollment statistics, drained tens of billions from taxpayers, entrenched a costly regulatory structure and enriched insurers and enrollment middlemen. Congress should let them expire after 2025.

Brian Blase

Paragon Health Institute"