Every few years, political talking points resurface claiming that the Affordable Care Act (ACA), commonly known as Obamacare, is riddled with fraud and waste. It’s an easy narrative because “government program” and “fraud” tend to get paired together in headlines. But when you look at the data, the reality is clear: fraud tied directly to ACA marketplace plans is small—minuscule, in fact—compared to the massive levels of fraud occurring in other parts of the U.S. healthcare system.
If we want to have an honest conversation about waste, abuse, and inefficiency in healthcare, we shouldn’t point fingers at the ACA. We should look at where fraud is truly happening—and costing taxpayers, insurers, and patients billions.
Where the real fraud is happening
1. Medicare and Medicaid fraud dwarfs ACA marketplace issues
Medicare and Medicaid—programs that existed long before the ACA—are among the biggest targets for criminal fraud. Billing scams, phantom providers, fake medical equipment, and kickback schemes have cost taxpayers tens of billions of dollars annually. The Justice Department routinely announces takedowns involving hundreds of millions in fraudulent claims.
This isn’t a failure of “government-run healthcare.” It’s a byproduct of a massive, complex system where criminals know how to exploit loopholes. But it’s a reminder that if you’re looking for large-scale fraud, the ACA is not where you’ll find it.
2. Private insurance fraud is a huge—and often unreported—problem
Fraud isn’t just a government issue. In fact, private insurers lose more money to fraud and abuse than ACA marketplaces ever have.
Common schemes include:
- Providers billing for services never performed
- Upcoding (billing for a more expensive service than what was actually delivered)
- Unnecessary testing or procedures
- Fraudulent claims pushed by organized fraud rings
These losses get passed directly to employers and consumers in the form of higher premiums and higher deductibles.
3. Pharmacy benefit managers (PBMs) and prescription drug schemes
The prescription drug system—with its opaque contracts, spread pricing, and rebate games—is one of the least transparent parts of healthcare. Billions are lost not to “fraud” in the traditional sense but to manipulative pricing practices that would be unacceptable in any other industry.
Comparing that to minimal ACA marketplace fraud is not even apples-to-oranges—it’s apples to orchards.
4. Provider-level fraud is far more costly than consumer-level fraud
People sometimes point to the idea that consumers “lie about income” to get lower ACA subsidies. Not only is that rare, but the financial impact is tiny compared to provider-level fraud. A single fraudulent medical clinic can steal more in a month than individual ACA enrollees would in a decade.
Most ACA subsidy discrepancies are minor, usually resolved during tax filing, and often accidental.
Why ACA marketplace fraud is low
Several structural reasons keep fraud in the ACA marketplaces relatively small:
- Income verification is automated through IRS and employer databases.
- Identity checks are built into the enrollment process.
- Insurers—not the government—administer the plans and payments.
- Tax reconciliation ensures any subsidy misstatements are corrected annually.
This is a far more secure system than many realize.
Why the myth persists
The narrative that “Obamacare is full of fraud” is politically convenient, but it simply isn’t accurate. It thrives because:
- It fits a preexisting belief some people have about government programs
- It distracts from the real culprits driving healthcare costs
- It’s easier to attack the ACA than to confront entrenched industry interests
But serious people looking at serious data know the truth: ACA marketplace fraud is one of the smallest slices of healthcare waste in the U.S. system.
The real conversation we should be having
Instead of obsessing over exaggerated claims of ACA fraud, we should be addressing:
- Runaway drug pricing
- Billing abuse in hospitals
- Wasteful testing
- Questionable PBM practices
- Upcoding and unnecessary care
- Insurance middlemen creating administrative bloat
These are the real cost drivers—not a small number of ACA subsidy disputes.
Let’s focus on real problems, not political myths
If we want a more affordable healthcare system, we need to target the areas where fraud is actually rampant. ACA marketplace fraud is barely a rounding error compared to the billions lost elsewhere.
The U.S. healthcare system is sick—but the ACA isn’t the disease. It’s time to direct our attention to the parts of the system that are truly bleeding money.
