Fraud scrutiny clouds Schumer’s Obamacare credit push after his Pentagon ‘luxury’ spending jab

Senate Minority Leader Chuck Schumer’s push to revive expired enhanced Obamacare tax credits by contrasting their cost with Pentagon spending is colliding with fresh scrutiny of the Affordable Care Act, as policy experts warn the program is riddled with improper enrollments, fraud vulnerabilities and rising taxpayer costs.

"We need to reform the ACA, not throw more taxpayer money at it," Brian Blase, president of the health policy research group Paragon Health Institute, said. He added that "government subsidies don’t make the coverage more affordable. They make it more expensive overall because you have to consider the taxpayer amount."

Blase spoke to Fox News Digital this month after Schumer made a viral swipe at Department of War Secretary Pete Hegseth for spending $93.4 billion in the final month of the last fiscal year, including millions of dollars in luxury foods, such as king crab, for the troops. 

The New York Democrat seized on the Pentagon spending figure to make a political point that the same amount could cover extending enhanced ACA tax credits for three years, even though defense funds are not directly fungible with Obamacare subsidies.

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"Hegseth spent $93 billion in one month – roughly the cost of extending the ACA tax credits for THREE YEARS.     But instead of lowering American’s healthcare costs, Hegseth used millions of taxpayer dollars on fruit baskets, Herman Miller recliners, ice cream machines, Alaskan King Crabs, and a Steinway & Sons grand piano," Schumer posted to X last week. 

Blase argued that the ACA is fraught with improper and "phantom" enrollees on top of proven fraud for which the Department of Justice has secured convictions, and that more funding was not the answer. The ACA’s premium subsidies are financed by the federal government, and advance payments of those tax credits are made on eligible enrollees’ behalf directly to insurers to reduce monthly premiums. 

A lot of Democrats have "conflated" the issue of extending enhanced ACA subsidies, but the "original Obamacare subsidies remain in place, and they are very generous," Blase said, noting that those original subsidies are permanent and in place by statute and that the enhanced subsidies are merely a costly bonus.

The enhanced subsidies, introduced during the COVID-19 pandemic, made some marketplace plans free for certain low-income enrollees. Paragon Health estimated that more than 6.4 million enrollees may have reported incomes low enough to qualify even though many likely earned more.

"That’s significant improper enrollment," Blase said.

About 23 million people enrolled in healthcare plans in the ACA marketplace for 2026, but an estimated 3 to 4 million enrollees are likely "phantom enrollees," Paragon Health found, describing them as those who are either fictitious or do not know they are enrolled in a plan. Blase said "unscrupulous" brokers and agents, who are incentivized to enroll people in healthcare plans, can enroll them without their consent.

Using data released by the Centers for Medicare & Medicaid Services last year, Paragon Health found that from 2021 to 2024, a growing number of ACA enrollees never used their health plans. In 2024, 35% never used their coverage.

Blase said that figure was suspicious, noting that "in a normal health insurance market, there’s about 15% of people that don’t use their health insurance in a given year."

Democrats and Republicans were locked in a standoff last year over extending the ACA subsidies, a fight that helped fuel a six-week government shutdown. Democrats have cited sharp rises in premium costs for individuals as they continue to push to extend the credits. 

Blase said that even without the enrollment problems, the program is massively burdensome to taxpayers because insurers perpetually raise their premium costs.

"For the typical enrollee, the government is paying 80% of the premium. For lower income enrollees, the government is paying more than the premium," Blase said, adding that the "taxpayer share of the premium continues to grow on autopilot."

He added that the average person has health insurance through their employer.

"So they’re actually harmed because they get no relief, and they have to pay higher taxes so we can send money directly to health insurance companies, and the money that we send directly to health insurance companies just leads them to increase premiums, and it just increases their profits," Blase said.

On top of improper enrollment and the broader taxpayer burden, the DOJ has ramped up its efforts to combat fraud in the ACA marketplace in recent years and focused on unauthorized enrollment schemes.

DOJ prosecutors secured high-profile 20-year prison sentences for two insurance executives in February after they were convicted by a jury of orchestrating a $233 million ACA fraud scheme by enrolling vulnerable people without their knowledge.

A review by the Government Accountability Office found fraud risks persist in the ACA's advance tax credit program. In undercover testing for 2025, the ACA marketplace approved coverage for most of GAO's made-up applicants, and the watchdog found that 18 of 20 fictitious enrollees remained actively covered as of September 2025 and received more than $10,000 a month in subsidies. The report also flagged broader vulnerabilities, including tens of thousands of Social Security numbers used for multiple enrollments.

Schumer's jab to reallocate the Pentagon's end-of-year spending comes as defense spending is historically modest compared to past decades, representing a small fraction of the United States' gross domestic product at 3.7%, according to an analysis by the Federal Reserve Bank of St. Louis. Extending the controversial ACA tax credits would also come as the growing national debt is set to eclipse about $39 trillion this month. 

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White House spokesman Kush Desai called Schumer's remarks a "vapid PR stunt" in a statement to Fox News Digital.

"If Chuck Schumer really cared about healthcare affordability, he would drop the vapid PR stunts and spend his time working with the Administration and Republicans to pass President Trump’s Great Healthcare Plan to lower premiums and slash drug prices," Desai said.

Schumer's office did not respond to Fox News Digital's request for comment on Blase's remarks.

Social media users swiftly panned Schumer for the X post last week, accusing him of cherry-picking a politically convenient moment to care about spending, lambasting him for not supporting high-quality meals for military members and pointing out that Schumer was silent when the Biden administration had similar expenses. 

The Pentagon's September costs nearly mirrored the $79 billion Defense Secretary Lloyd Austin spent in September 2024. Spending at the end of the fiscal year has been notoriously high across administrations as agencies face pressure to "use it or lose it" to justify the next year's budget.

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After uncovering millions of dollars in misuse of federal funds in Minnesota, the Trump administration also established a new National Fraud Enforcement Division within the DOJ this year as part of a "whole-of-government" crackdown on welfare fraud nationwide. This division is set to target Minnesota’s and other states’ social service programs in search of fraud.