A new study has put a staggering number on a problem that health policy researchers have long suspected but rarely quantified: roughly 9.2 million people enrolled in Medicaid's expansion program (nearly half of all expansion enrollees) likely do not meet the program's eligibility requirements.
The federal cost of that improper enrollment reached $32.9 billion in 2024 alone, according to research published by the Paragon Health Institute.
For insurance brokers and benefits advisors navigating employer coverage decisions, the implications extend well beyond federal budget debates. The integrity of Medicaid's enrollment rolls directly shapes the risk pools and take-up assumptions that underpin private market pricing — and that's a problem the industry can no longer afford to overlook.
Liam Sigaud, an economist at the Paragon Health Institute in Washington, D.C., and the study's author, told Insurance Business America how the crisis developed, why it persists, and what benefits professionals should know right now.
The roots of the enrollment crisis trace back to the structure of Medicaid expansion financing under the Affordable Care Act (ACA) — and to an incentive structure that has consistently rewarded inaction.
"States are responsible for policing the Medicaid rolls, but the federal government pays at least 90 percent of the costs of expansion enrollees, so states bear almost none of the cost when ineligible people receive benefits," Sigaud said. "The COVID-era continuous coverage requirement blocked eligibility checks entirely from March 2020 to May 2023. The subsequent unwinding never fully corrected the problem."
The numbers back that up. As of June 2025, expansion enrollment remained 21 percent above pre-pandemic levels while traditional Medicaid had returned close to baseline. Improper enrollment nearly doubled over that period, from 4.9 million in 2019 to 9.2 million in 2024.
The accountability gap has broader consequences. A Massachusetts lawsuit against UnitedHealthcare over alleged improper Medicaid payments underscores how financial misalignment across the program continues to attract legal scrutiny.
About one-third of ineligible expansion enrollees would actually qualify for Medicaid through other pathways but states are deliberately placing them in the expansion category to draw a higher federal match.
"The federal match for expansion enrollees is roughly 30 percentage points higher than the approximately 60 percent average for traditional enrollees. Therefore, a state can save thousands of dollars per person per year simply by classifying someone as an expansion adult rather than a traditional beneficiary,” Sigaud said.
California illustrates how far this can go. Sigaud's research shows the state accounted for 3.1 million improper enrollees and more than $10 billion in federal costs in 2024, with an improper enrollment rate of 62 percent — up sharply from 45 percent in 2019.
"In part, California has a large number of improper enrollees simply because it has such a large Medicaid population to begin with," Sigaud said. "But it also had an exceptionally high improper enrollment rate in 2024. Another reason the problem is concentrated in California is that it receives a 50 percent federal match for traditional enrollees, which is lower than most other states. The lower the federal match for traditional enrollees, the stronger the incentive to misclassify people into the expansion group to capitalize on the 90 percent federal match."
For benefits professionals, the practical impact is a far noisier signal from Medicaid eligibility data than the market has traditionally assumed.
"Medicaid eligibility rules are, unfortunately, a much noisier signal of who is actually on the program than you might expect," Sigaud said. "That distorts the risk pools and take-up assumptions the private market relies on to make decisions about benefits packages, prices, and more. Millions of improper enrollees on Medicaid likely have incomes above 138 percent of the federal poverty level or have access to affordable employer coverage, meaning they are people the employer market would otherwise be serving."
Brokers and advisors building coverage strategies around Medicaid as a defined population boundary are working from a map that no longer matches the territory.
There is also the question of duplicative enrollment — employees simultaneously covered by both Medicaid and employer-sponsored insurance.
"Health policy researchers are just beginning to grapple with the scale of duplicative enrollment in Medicaid and employer-sponsored insurance," Sigaud said. "State Medicaid agencies often lack visibility into enrollees' private health coverage, so it's important for employees with duplicative enrollment to inform their state Medicaid agency and report their employer-sponsored coverage. In most cases, the employer-sponsored plan should be the primary payer for health services, with Medicaid acting as supplemental coverage. But specific rules vary by state."
For advisors who suspect a client's employee may be in this position, the guidance is to flag the overlap and direct the employee to clarify their coverage status with their state agency, in line with federal Medicaid coordination of benefits guidance from the Centers for Medicare & Medicaid Services.
The One Big Beautiful Bill introduced some targeted reforms, but Sigaud argues they fall short of what's needed.
"The OBBB instituted some helpful reforms, like six-month redeterminations for expansion adults and error-rate penalties for states," he said. "But I argue that the core problem is the 90 percent federal match tied to expansion enrollees. As long as states have no meaningful financial stake, they won't have much incentive to take eligibility rules seriously."
Equalizing the federal match between expansion and traditional enrollees has some congressional support — former President Obama once endorsed a version of the idea — but faces formidable political resistance. Governors and state legislators of both parties have little appetite to surrender what amounts to near-free federal funding.
The human cost is equally stark.
"The traditional Medicaid population — children, pregnant women, the elderly, and people with disabilities — is who the program was built for, and improper enrollees crowd them out," Sigaud said. "Research has documented longer waits for appointments, reduced health spending on low-income children, and worse emergency care access tied to Medicaid expansion. I'd also argue that ignoring improper enrollment on this scale corrodes public trust in our institutions."
The takeaway is not to wait for Washington to resolve this. Understanding that Medicaid's enrollment data is materially less reliable than it once was and building that uncertainty into coverage planning is now part of the job.
