Another Reason to Dislike Obamacare: Fraud Rates Costing Taxpayers As Much As $25B a Year

Remember back nearly two decades when the Affordable Care Act, also known as Obamacare, was meant to expand coverage and lower costs? Guess what it ended up doing instead? Far from delivering on its promises, premiums and deductibles remained high, insurer competition was weakened, and Congress continues to spend money. 

As if those shortcomings weren't enough, a new study from the Paragon Health Institute suggests Obamacare may suffer from another serious problem: large-scale enrollment fraud and improper subsidy payments.

The Paragon Institute estimates that approximately 6.2 million people enrolled in Obamacare may be improperly receiving subsidized insurance, which accounts for can account for as much as one-quarter of total exchange enrollment. In fiscal terms, the report argues this could translate into as much as $20–25 billion in annual improper federal subsidy spending, depending on assumptions about eligibility verification and income reporting accuracy.

These issues are not coincidental; they are structural. First, eligibility for subsidies is heavily dependent on self-reported income, which is often based on projections as opposed to verified real-time earnings. This creates natural friction between reported income at the time of enrollment and actual income over the course of the year, especially for workers with variable earnings, gig income, or fluctuating hours.

Second, the system relies on delayed verification and post-enrollment reconciliation instead of strict upfront screening. This means discrepancies may not be corrected until after coverage has already been granted and subsidies disbursed.

Third, the growth of third-party brokers and automated enrollment platforms has increased the number of intermediaries involved in sign-ups. While many operate legitimately, the report argues that commission-based compensation tied to enrollment volume can weaken incentives for careful eligibility verification.

Finally, automatic re-enrollment mechanisms can allow previously enrolled individuals to remain in coverage even if their eligibility status has changed and was never fully rechecked.

This gets into a debate about how estimates of improper ACA enrollment vary widely depending on how “error” is defined and how aggressively small discrepancies are extrapolated across the full exchange population. Federal auditors like the Centers for Medicare & Medicaid Services and the Government Accountability Office generally focus on confirmed, verifiable errors, which tend to produce lower, single-digit to low-teens estimates.

Higher-end estimates, on the other hand, attempt to capture what those same processes are likely to miss when eligibility is based on self-reporting, delayed verification, and automatic renewal. Put simply, the lower estimates only measure what the system catches and acts as a low-bound estimate. The higher estimate is more plausible because it attempts to measure the full scale of eligibility drift.

Enrollment is frequently cited as evidence of the Obamacare’s success, but it is an incomplete metric. It captures participation in the system, not the accuracy or stability of that participation. In a framework built on self-reported eligibility, delayed verification, and automatic renewal, enrollment can rise even as underlying errors persist. The Paragon Institute’s findings highlight how large those gaps may be at scale.

The latest evidence on enrollment and subsidy error does not stand alone. It reinforces a longer pattern of structural problems that have followed the ACA since its inception, much like I pointed out in my 2017 piece listing 15 reasons we should all dislike Obamacare. Whether it is fraud rates, higher premiums, or fewer options, this latest Paragon Health report is a sobering reminder of why Obamacare should never have existed in the first place and how the American people are still paying for this boondoggle.

Illinois Finds Yet Another Ineffective Way to Raise Revenue by Implementing a Social Media Tax

Illinois' spending problems are nothing new, but how the Illinois General Assembly handles it is. Earlier this month, Illinois passed a new social media tax to help fund its proposed $56 billion budget. Platforms with 100,000 to 500,000 "Illinois users" will have to pay $0.10 per user each month; platforms with 500,000 to 1 million "shall pay $40,000, plus $0.25 per month" per user; and platforms with over 1 million users will pay $165,000, plus $0.50 per user, each month on the number of users over 1 million. 

Aside from dealing with budgetary issues, some view this tax as paying "its fair share." Some might view this as a fair and just tax. In practice, this is a complex, legally fraught tax that will cause all sorts of headache. 

Let's start with the first problem, one addressed by the Tax Foundation: no one seems to know what exactly is being taxed. For starters, what is a user? Is a user a person or an account? If a person has multiple accounts on the same social media platform, does each account constitute a separate user, or is the person one user? 

Then there is the question of whether someone with accounts on multiple platforms is taxed separately. What about who constitutes as an Illinois user? What happens if you are visiting from outside of Illinois temporarily? And what constitutes an Illinois user from whom a platform collects data? When lawmakers cannot clearly explain what is being taxed, businesses cannot reliably comply and taxpayers cannot hold government accountable.

Traditionally, governments have imposed special taxes on products that they regard as socially undesirable. Cigarettes have long been subject to punitive taxes. More recently, politicians have advocated taxes on sugary drinks, unhealthy foods, and other products they believe people consume too much of.

Instead of taxing economic activity neutrally, Illinois has singled out a particular industry for unique taxation. The state is effectively saying that because social media companies are viewed as problematic, they should bear additional financial burdens.

This approach suffers from the same flaw that afflicts most sin taxes. It substitutes political judgments for sound tax policy. Whether one believes social media has positive or negative effects is beside the point. Tax systems should raise revenue in the least distortive manner possible. They should not be designed to reward favored industries and punish disfavored ones.

One of the most troubling aspects of the social media tax debate is how quickly constitutional concerns are dismissed. Many people dislike social media companies, but constitutional protections do not vanish simply because the target lacks public sympathy.

The First Amendment issue is particularly significant. Social media platforms have become central venues for political discussion, news dissemination, and public debate. When government imposes a special tax on a particular category of communications platform, courts may reasonably ask whether the state is burdening speech-related activity in a manner that raises constitutional concerns.

The tax also raises questions under the Commerce Clause. Social media companies serve users across state lines, and internet activity rarely respects geographic boundaries. If Illinois can impose a unique tax based on user activity within the state, other states may adopt competing systems that subject the same activity to multiple layers of taxation.

Illinois’ social media tax is not really about social media. It is about a state government that has become structurally dependent on finding new revenue sources to support an ever-expanding set of spending commitments.

The problem is not that Illinois lacks creativity in taxation. The problem is that it rarely shows restraint in spending. When budgets become tight, the solution is rarely reform or prioritization. Instead, lawmakers turn to new, narrowly targeted taxes that are politically easier to justify than broader fiscal discipline. Matters end up being even worse when the tax is poorly defined and designed.

That pattern has consequences. Targeted taxes on unpopular industries may be politically convenient, but they do little to address the underlying fiscal imbalance. Worse, they risk creating a tax system that is increasingly fragmented, unstable, and vulnerable to legal challenge.

Social media companies may be unpopular today, just as smoking, fatty foods, and sodas have been in other political moments. But fiscal policy built on shifting political fashions is not a substitute for structural reform. Illinois does not need more inventive taxes. It requires a serious conversation about the scale and scope of government itself.

Social Security’s 2032 Cliff: The Countdown That Congress Would Prefer to Ignore

Social Security is an insolvent and unsustainable retirement program. That much I wrote about last year during Social Security's 90th anniversary. It has become that much more apparent with the latest Trustees Report that was released earlier this week. The big finding from that report is that the retirement benefits, under the Old-Age and Survivors Insurance (OASI), is set to expire at the end of 2032. This is one year sooner than was projected last year. 

Why was this deadline accelerated? To quote the Peter G. Peterson Foundation, "Legislation includes the January 2025 passage of the Social Security Fairness Act that repealed the Windfall Elimination Provision and the Government Pension Offset, and the July 2025 One Big Beautiful Bill Act that expanded the income tax deduction for seniors. The former legislation increases program outlays, while the latter decreases revenues." 

What does this mean once the Trust Fund is depleted? All beneficiaries regardless of age, income, or need will see their benefits slashed by 22 percent. This decrease in benefits is to allow Social Security to keep going for the next 75 years. But here's the thing: even after the depletion of the Trust Fund, "Social Security will still spend more than it earns in payroll tax revenue. Over the next decade, Social Security will spend $3.8 trillion more than it collects, which is 2.7 percent of taxable payroll or 0.9 percent of GDP." 

Additionally, lower fertility and lower immigration are both contributing to Social Security's deteriorating state. The Cato Institute argues that the Social Security Administration is being overly optimistic on their fertility rate assumptions, which creates rosier financial projections for Social Security.

The Trustees Report reinforces a familiar but uncomfortable reality: Social Security’s imbalance is no longer marginal. Even after the Trust Fund is depleted, the program is projected to spend trillions more than it collects over the following decade.

What makes this particularly consequential is that the system does not gradually adjust as insolvency approaches. It waits, then it cuts. That design choice means policymakers are not managing a slow-moving problem. They are managing a countdown. 

In that sense, the choice facing policymakers is not whether Social Security will change, but whether change will be deliberate or forced. And the window for choosing the former is closing.

When Housing Meets Immigration: Is the Swiss Referendum Capping Its Population Asking the Wrong Question?

Next week, Swiss voters are going to head to the ballot box to decide whether to cap the Swiss population at 10 million by 2050. Supporters of immigration caps can often be presented as Far Right, fearful, and parochial. I have felt this way in a U.S. context. But then I have to remind myself that the U.S. and Switzerland have two different contexts. Switzerland does not even have the integration issues that many of its European neighbors have. This is in part that Switzerland is able to integrate its immigrants better because they mainly come from countries like France, Italy, and Germany. Although the primer on the initiative lists Islamic culture as a reason, the main reasons for the Swiss ballot is a combination of housing and infrastructure strain.

In 2014, I expressed concerns about a similar Swiss referendum for a quota on immigration. Switzerland's immigration quota was a self-defeating policy because immigration is driven by labor demand and it is empirically shown to strengthen employment and economic performance. Less immigration means less economic output and less revenue. 

But I keep coming back to the housing component. In the United States, J.D. Vance wrongfully blamed housing affordability on immigrants. In the U.S. case, it is true that immigrants consume housing, but they also disproportionately build housing, so much so that stifling off the construction labor with strict immigration policy makes matters worse. I cannot help but think that something similar is going on here. It seems like Switzerland is trying to solve a housing problem with immigration policy. 

On the one hand, Zurich has made strides by boosting housing supply by 9 percent with upzoning. On the other hand, only land inside designated "building zones' can be developed, and done so over a 15-year demand rule (Swiss Spatial Planning Act [RPG], Article 15). The RPG also has agricultural zoning laws that further limit sprawl (Art. 16) to construct more housing. On top of that, each canton has their own zoning regulations and permitting rules that get in the way of housing construction. 

The Swiss case against immigration is not reactionary restrictionism. Switzerland faces housing and infrastructure strains. At the same time, Swiss housing scarcity is not occurring in a vacuum. The land use restrictions, zoning regulations, and permitting laws fundamentally limit Switzerland's housing supply. If this referendum passes, Switzerland will be treating a housing supply problem as a population problem, and will be doing so to its own detriment. 

The Retirement of the RCP8.5: Why Apocalyptic Modeling Should Not Dictate Climate Change Policy

While I was on vacation in Portugal last month, I really made sure I wasn't paying attention to politics or the media circus. One of those moments that I missed around that time was this post from President Trump:

It was in reference to some recent news about climate change modeling. In its 2014 Intergovernmental Panel on Climate Change (IPCC) report, the United Nations prepared four main scenarios. The gloomiest of these scenarios was the RCP8.5 scenario. 

In late April of this year, the IPCC retired the RCP8.5 scenario as a plausible future emissions pathway. There are those who believe, including the authors of the IPCC paper, that this is being scrapped because there has been enough progress with climate change policy intervention to merit its retirement. I did not buy in 2018 that the RCP8.5 scenario was plausible back then. 

American Enterprise Institute scholar Roger Pielke, Jr. and Competitive Enterprise Institute scholar Marlo Lewis Jr. explain why the scenario was never plausible to begin with. For one, coal production would have had to implausibly increase by 900 percent and become the predominant form of energy, which is peculiar given that coal was already declining as a form of energy in the 2010s. The RCP8.5 also assumed that the population would reach 12 billion, which is a far cry from the 10.2 billion that is projected. And the idea that low-income countries would stay considerably poorer than other countries? Then there are the assumptions of unabated fossil fuel use and no negative emissions technologies. 

The problem here was not mere theoretical modeling for its own sake. As this article from Carbon Brief details, RCP8.5 was treated as a "business as usual" and likely outcome when it came to climate change policy and activism. At best, it was meant to be an upper-bound, highly improbable stress test. When such scenarios are used as a baseline, they exaggerate projections of future warming and damages. 

This exaggeration leads to a form of policy overcorrection, and results in regulatory and fiscal responses that are larger, faster, and more intrusive than would be justified if a more accurate model were being used. That is how we get such policies as emission standards for electric vehicles, gas stove bans, carbon capture & sequestration mandates, and energy efficiency standards.

Trying to prevent a scenario that is essentially not going to happen is a waste of money, time, and resources. If we are basing policy on false assumptions, it means that we cannot begin to understand the costs and benefits of each policy decision. As we learned during the COVID pandemic, a miscalibration at that scale is a form of harm in which the cure is worse than the disease. Retiring RCP8.5 is a "better late than never" moment, but this whole debate acts as a reminder that we should let skepticism be at the helm of energy and climate policy instead of hyperbole and alarmism. 

Portugal's Economic Recovery Looks Real, But So Do the Warning Signs of Another Crisis

Last week, I went on a lovely trip to Portugal. I went cycling and surfing. I tried the extreme sport of coasteering for the first time. I got to try pastel de nata, bacalhau, and frango piri-piri. Being there for a week, I got notice the way things work, from public transportation and work ethic to housing and health care. 

Then you learn things like Portugal needed a €78 billion bailout during the eurozone crisis last decade. In response, Portugal was able to reduce its deficit spending and close the gap on its bond spreads with fiscal restraint. The Organization of Economic Co-operation and Development (OECD) recently called Portugal's fiscal performance "among the strongest in the OECD and the Euro Area in the past few years." Continued debt reduction, disciplined budgets, strong nominal GDP growth all help explain why both Fitch's and Standard & Poor's have a positive outlook for Portugal. 

These are certainly reasons to be hopeful. Yet there are some concerns about the Portuguese economy:

• Portugal has a birth rate of 1.4, which is well below the replacement rate of 2.1. 
• Portugal is the third country in Europe with the lowest proportion of young people, which makes it more difficult to pay for social programs and to keep the economy growing with a stable labor force. 
• A study from the University of Lisbon reminds us that brain drain is compounding these effects. Up to 40 percent of Portugal's graduates emigrate to other countries.
• A recent report from the European Commission found that Portugal has the most overvalued housing prices, which makes it that much more difficult for everyday Portuguese citizens to afford housing.
• If the conflict in the Middle East is prolonged, it could weaken economic growth and exacerbate inflation for Portugal. 

Portugal does not fit neatly into an optimistic or pessimistic narrative. On the one hand, Portugal has made impressive fiscal strides since requiring a bailout just over a decade ago. Compared to some larger European economies, Portugal's fiscal trajectory actually looks relatively disciplined. 

On the other hand, strong tourism, balanced budgets, and improved credit ratings do not solve deeper structural problems. Low birth rates, emigration of educated workers, and housing affordability issues could create significant economic pressures in the years ahead. Portugal seems to have escaped one crisis while gradually wading into another one. 

Trump's Golden Dome Is More Costly Than Simply Not Striking Gold

There is something alluring about the idea of a "Golden Dome": a single, encompassing shield that can render a nation like the United States untouchable. Missile defense systems have long made that psychological appeal that enough technology can be a security risk and neutralize all potential risks. Similar to Reagan's "Star Wars" initiative, the result is a cycle of ambition, technical constraints, and spiraling costs. The question is whether Trump's Golden Dome is a sincere military strategy or a political blunder wrapped in a security blanket. 

Trump's recent "Golden Dome" proposal is a multilayered missile defense system intended to shield the U.S. from ballistic, hypersonic, cruise, and potentially space-launched missiles. The most controversial part of this proposal is thinking about missile defense from space because it would place interceptors in orbit. The idea is to technologically be at the cutting edge while expanding the strategic military scope of the United States.

There are a few reasons to question the proposal, one of them being technological feasibility. As the Cato Institute points out in its Golden Dome analysis, this proposal is based on Israel's Iron Dome. Israel only has to worry about covering 8,500 square miles, as opposed to the U.S.' 3.8 million square miles. Also, ballistic missiles are much more difficult to intercept than short-ranged missiles, which is noteworthy because the U.S. would be more likely to be attacked by long-range missiles. 

Furthermore, this report from the American Physical Society details how defending a country even from a few ballistic missiles is a challenge due to timing and geometry limits, as well as the ability for a defense system to discriminate the warhead from the rest of the "threat cloud." Once a missile is launched, a defender only has minutes to track, detect, and intercept the missile. Even under highly simplified scenarios, reliability drops quickly as the number of missiles increases. The challenge is developing a system at scale.

Even if proponents were to bypass the physical limitations, there is the issue of the price tag. According to a recent report from the Congressional Budget Office (CBO), this system will cost $1.2 trillion over a 20-year period, an amount significantly higher than Trump's estimated $175 billion. In terms of composition, up to $540 billion of that $1.2 trillion is due to the deployment and operation of the space-based interceptors.

The price tag also begs the question about opportunity cost. A trillion-dollar-plus commitment to missile defense necessarily crowds out other investments, including conventional force readiness, cyber defense, or a call towards greater fiscal restraint from the government more generally. This goes beyond the actual price tag. It is a question of whether such a large investment is justifiable given other priorities. 

Aside from the costs, a core issue that such a system might actually provoke adversaries to escalate their military behavior. As the Cato Institute argues, the U.S. upping its interception architecture could incentivize other countries to expand missile inventories, more sophisticated decoys, or systems that would be designed to saturate and overwhelm the U.S.' missile system.

We already have seen this escalatory spiral take place. The situation between the U.S. and the USSR became so destabilizing during the Cold War that they needed to create the Anti-Ballistic Missile Treaty of 1972. Similarly, MERV development and Reagan's Star Wars initiative also escalated tensions rather than de-escalating. History "dealt" with these issues through arms control agreements and strategic stabilization to counter the escalatory nature of enhanced defense systems. 

The Golden Dome tries to soothe people by promising the promise that enough technology can help avoid all risk. However, such promises provide a false sense that we can avoid all risk, much like during the COVID pandemic. The truth is that the Golden Dome cannot override the physical limitations, the absurdly high costs, and the escalation dynamics. A golden dome may project strength, but projection is not the same thing as protection of the American people.