Study: 62% of California’s Medicaid Expansion Enrollees Likely Ineligible, Costing Taxpayers Over $10 Billion

A new analysis (see below) from the Paragon Health Institute finds that nearly half of Affordable Care Act Medicaid expansion enrollees in 2024—approximately 9.2 million people—were likely ineligible under federal rules, imposing a net federal cost of $32.9 billion that year. 

California accounted for a disproportionate share: an estimated 3.1 million improper enrollees, or 62 percent of the state’s expansion population, at a federal cost of $10.4 billion. 

The report, “Medicaid Expansion’s Growing Improper Enrollment Crisis,” authored by adjunct scholar Liam Sigaud, estimates the ineligible share at 46 percent of the 20.2 million expansion enrollees under a central assumption of 70 percent take-up among those who qualify. That represents an 88 percent increase from the 4.9 million improper enrollees (33 percent) estimated for 2019. Even under a more conservative full take-up assumption, the national figure remains 5.2 million.

California’s rate stands out sharply. Other high-burden states include New York (about 1.01 million improper enrollees), Louisiana, Oregon, and Washington. Improper enrollment rose in 31 of the 32 states that expanded Medicaid before 2019. Expansion enrollment remained roughly 21 percent above pre-pandemic levels into mid-2025, even as traditional Medicaid rolls returned closer to earlier baselines.

The analysis compares American Community Survey estimates of the eligible population—non-elderly adults at or below 138 percent of the federal poverty level, excluding certain groups—with actual Medicaid enrollment data. Key drivers include the COVID-19 continuous coverage requirement that blocked routine redeterminations from 2020 to 2023, followed by incomplete post-pandemic eligibility reviews.

Structural incentives also play a central role: the 90 percent federal matching rate for expansion enrollees (versus roughly 60 percent for traditional Medicaid) reduces states’ motivation for rigorous verification and encourages misclassification of beneficiaries into the higher-match category. Improper enrollees include individuals whose incomes exceed limits, those who fail citizenship, immigration, or residency requirements, and others ineligible for any Medicaid coverage. 

Federal audits in California and other states have previously documented elevated error rates consistent with these findings. The results arrive as Capitol Hill prepares to examine program oversight this week. 

California Globe has previously reported on the rapid growth of Medi-Cal under Governor Gavin Newsom, including the ACA adult expansion and later state-funded extensions of coverage to undocumented immigrants that pushed total enrollment toward 15 million and overall program costs into the hundreds of billions, bringing the program to the brink of insolvency. 

Those expansions, combined with reliance on provider taxes and other financing mechanisms, have drawn repeated scrutiny for shifting costs onto federal taxpayers and straining eligibility controls. Recent federal deferrals of Medicaid payments to California amid fraud concerns in hospice, prescription billing, and other areas have further highlighted vulnerabilities in the system.

Paragon notes that states overall saved an estimated $6.8 billion in 2024 through misclassifications, with California realizing about $2.5 billion in such savings, while the federal government absorbed the net cost. The report recommends equalizing federal matching rates, strengthening real-time income verification, ending passive renewals, and expanding independent eligibility audits. 

The data underscore a persistent flaw in the ACA’s Medicaid expansion: generous federal subsidies paired with state administration have produced high enrollment volumes alongside significant verification shortfalls. For California, the findings quantify the price of prioritizing rapid growth over verification—leaving federal taxpayers covering coverage for millions who did not meet the rules.