Medicaid Expansion’s Growing Improper Enrollment Crisis

 

Nearly Half of Expansion Enrollees Likely Do Not Meet Eligibility Requirements

This paper examines improper enrollment in the Medicaid expansion under the Affordable Care Act (ACA) in 2024. It builds on Paragon Health Institute’s earlier research, “Ineligible Enrollment in the ACA’s Medicaid Expansion: Evidence, Costs, and Remedies,” which estimated that roughly one in three expansion enrollees—4.9 million people—did not qualify for the program in 2019. With states’ post-COVID eligibility redeterminations now complete, this paper provides the first comprehensive assessment of how improper expansion enrollment has evolved since the pandemic.

Using Census Bureau’s American Community Survey (ACS) data, administrative enrollment data from the Medicaid Budget and Expenditure System (MBES), and per-enrollee spending figures from the Medicaid and CHIP Payment and Access Commission (MACPAC), the paper compares actual enrollment in the expansion group at the state level against estimates of the number of eligible individuals plausibly enrolled. The difference between the two reflects improper enrollment. Improper enrollees include people receiving expansion coverage despite income above the eligibility limit; people failing to meet citizenship, immigration, or residency requirements; and people who are qualified for Medicaid through traditional pathways.

The paper also examines:

• the structural features of Medicaid expansion’s financing—including the 9:1 federal match rate and state financing schemes such as provider taxes—that weaken states’ incentives to ensure proper eligibility determinations;
• the fiscal costs of improper enrollment for the federal government and the states, including the cost-shifting produced when traditional enrollees are misclassified into the expansion group;
• how improper enrollment changed between 2019 and 2024 both nationally and state by state; and
• post-unwinding enrollment trends, which show that expansion enrollment remains far above pre-pandemic levels even as traditional Medicaid enrollment has largely returned to pre-pandemic levels.

What We Found and What It Matters

Improper enrollment in Medicaid expansion is widespread, and it has grown dramatically worse since 2019. Under my central assumption of a 70 percent take-up rate among eligible individuals, I estimate that 9.2 million expansion enrollees—nearly half (46 percent)—were likely ineligible for the program in 2024. That is an 88 percent increase from the 4.9 million improper enrollees I estimated for 2019, when the ineligible share was 33 percent. The finding of substantial improper enrollment is robust to alternative assumptions: Even under an implausible 100 percent take-up rate—a theoretical lower bound—more than a quarter of expansion enrollees (5.2 million people) appear ineligible.

The fiscal consequences are severe. I estimate that improper expansion enrollment cost the federal government approximately $32.9 billion in 2024—about 6 percent of all federal Medicaid spending. California alone accounts for $10.4 billion in federal costs. Using a consistent methodology used in a previous Paragon analysis, I estimate that the federal costs stemming from improper expansion enrollment more than doubled from 2019 to 2024. Because roughly one-third of improper enrollees appear to be individuals who qualify for Medicaid through traditional pathways but were misclassified into the higher-match expansion group, states collectively saved an estimated $6.8 billion — a direct illustration of the perverse incentives built into the program’s financing.

Improper enrollment is a nationwide problem, but a handful of states drive a disproportionate share. California alone accounts for roughly 3.1 million improper enrollees—about one-third of the national total—with an estimated ineligible rate of 62 percent. I also find substantial levels of improper enrollment in New York, Louisiana, Oregon, and Washington. Yet the deterioration is broad-based: Of the 32 states that had expanded Medicaid before 2019, improper enrollment increased in 31, and 36 of the 41 expansion states (including the District of Columbia) show detectable improper enrollment in 2024.

These patterns are consistent with the structural incentives facing states. Because the federal government pays at least 90 percent of expansion costs—far above the roughly 60 percent average match for traditional enrollees—states bear almost none of the cost of improper expansion enrollment while reaping the political—and potentially economic—benefits of higher enrollment and more federal funding. The post-pandemic unwinding illustrates the consequences: By mid-2025, traditional Medicaid enrollment had returned close to pre-pandemic levels, but expansion enrollment remained 21 percent above its January 2020 level. The COVID-era enrollment surge in the expansion group, in other words, never reversed.

Improper enrollment is not a victimless accounting problem. It diverts resources from the vulnerable populations Medicaid was designed to serve—children, pregnant women, the elderly, and people with disabilities—strains the health system, erodes public trust, and imposes tens of billions of dollars in improper costs on federal taxpayers each year.

What We Recommend

Congress and the Trump administration have taken important initial steps through the One Big Beautiful Bill (OBBB) of 2025, which will require six-month eligibility redeterminations for expansion adults beginning in 2027, phase-down provider taxes and state-directed payments beginning in 2028 and impose financial penalties on states with high eligibility-related payment error rates beginning in 2030. These are meaningful guardrails, but their impact depends heavily on state implementation and federal commitments to ongoing oversight—and the estimates in this paper, based on 2024 data, predate these reforms.

Policymakers should go further to remove improper enrollees and stem the flow of new improper enrollees into the program, including taking the following actions:

• Rectifying the central structural flaw in Medicaid financing by reducing the 90 percent federal matching rate for expansion enrollees to the rate states receive for traditional enrollees, ensuring that improper enrollment imposes real costs on state budgets
• Strengthening income verification at enrollment by tightening “reasonable compatibility” thresholds for self-attestation and broadening real-time wage and income data checks
• Eliminating the federal requirement that states conduct passive (
• Extending the Payment Error Rate Measurement (PERM) program by requiring independent, annual eligibility audits in every state, enabling swifter penalties and corrective action

Without structural reform—including, above all, reforms to the financing arrangement that insulates states from the costs of their own eligibility failures—improper enrollment is likely to remain an embedded feature of Medicaid expansion rather than an isolated anomaly.

https://paragoninstitute.org/medicaid/medicaid-expansions-growing-improper-enrollment-crisis-nearly-half-of-expansion-enrollees-likely-do-not-meet-eligibility-requirements/