Government Watchdog: IRS Already Making Obamacare Errors


In the wake of a Tea Party targeting scandal, the Internal Revenue Service’s role in implementing the Affordable Care Act’s key provision — the health insurance exchanges — was recently put under close examination. Aside from the Department of Health and Human Services, the IRS is the most important government agency responsible for the implementation of the Affordable Care Act: It is charged with overseeing the law’s required purchase of health coverage, as it will verify whether millions of Americans are in compliance.

The IRS will also track individuals’ private health information in order to distribute tax credits to eligible individuals who purchase coverage under a qualified health plan through one of the exchanges. In total, there are 47 different Obamacare provisions that require involvement from the IRS.

News that the IRS supposedly singled out conservative groups for special examination when they applied for tax-exempt status during the 2012 election cycle prompted many Republican legislators to ask how the agency can be trusted to administer Obamacare. “There is a lack of trust already, to begin with,” Republican Rep. Diane Black of Tennessee argued at a hearing in May. “People don’t have a lot of confidence, and now we’re about to give them an unprecedented amount of authority to get information that is highly personal.”

The fact that Obamacare implementation means tax hikes also displeased GOP lawmakers and supporters. “Obamacare taxes most people with health insurance, and most people without health insurance. Likewise, the law taxes many employers who provide health insurance, and most employers who don’t provide health insurance,” wrote Jim DeMint, president of the Heritage Foundation, in a article posted to the conservative think tank’s website earlier this year.

The IRS is no longer the central focus of opponents of the Affordable Care Act. With the opening of the insurance exchanges slated for October 1, the issue is not so much how Obamacare will harm America but how to prevent the implementation of the health care law. On Friday, Republicans in the House of Representatives pushed through a temporary spending bill by a party-line vote of 230 to 189 that would fund the federal government for the upcoming fiscal year only if discretionary spending for the Affordable Care Act is eliminated.

Both President Obama and Democrats in the Senate, where the party has a majority, have made clear that the legislation would not progress any further than the House of Representatives, which makes the possibility of a government shutdown likely unless someone gives up.

The idea is that without funding, various agencies like the IRS will not be able to complete the tasks necessary for the exchanges to function properly. But what policy experts want to remind Republicans pushing for the defunding of Obamacare is that cutting off funds in a government shutdown would not stop funding for the implementation of the health care reform. “A shutdown per se doesn’t stop the Affordable Care Act,” Doug Holtz-Eakin, a former director of the Congressional Budget Office who now leads the American Action Forum, an advocacy group opposed to the health law, told Bloomberg.

The Affordable Care Act relies primarily on mandatory spending, not appropriations, meaning government inaction will not prevent the exchanges from being operational — the massive computer system will still connect federal agencies, from the Internal Revenue Service to the Department of Homeland Security, to determine whether customers are eligible for coverage and if they qualify for federal subsidies to make coverage more affordable. “None of these agencies will in their entirety shut down, and their computer infrastructure is a pretty essential thing,” Holtz-Eakin said to Bloomberg.

However, a recent revelation from a government watchdog may put the IRS’s funding under the microscope of congressional Republicans and provide yet another reason for the party to push onward with efforts to defund the health care reform. The Treasury Inspector General for Tax Administration said in an audit that the IRS failed to account for some of the agency’s spending to implement the law. Federal agencies like the IRS are legally required to report spending so that an accurate measure of the full cost of government programs can be made.

In describing the impact on taxpayers, the report noted that the “IRS has a significant role in implementation of the Affordable Care Act with responsibility to implement and oversee the numerous tax law changes.” During the 2010 and 2012 fiscal year, the IRS reported that the cost of implementing the law amounted to $488 million. That expense was paid for by the Health Insurance Reform Implementation Fund, or HIRIF, administered by the Department of Health and Human Services.

Because implementation of Obamacare “remains an ongoing effort, it is critical that the IRS has complete and reliable information regarding all costs associated with the implementation in order to effectively manage taxpayer funds,” according to the audit. But the agency has not kept complete and reliable records. The IRS did not report $67 million in costs the agency incurred for employees who were working on implementation from 2010 through 2012, the report said.

“Funding related to direct labor were sometimes inaccurate and not always substantiated by reliable supporting documentation,” the report said. The Treasury Inspector General recommended that the agency improve its record-keeping, and the IRS has said the problems have been fixed. “The IRS ensured that ACA funds were accurately tracked,” and the funds from the HIRIF were appropriately spent, the agency said in a statement seen by Reuters.

The Treasury Inspector General said the IRS expects to have spent $360 million on Obamacare implementation by the time the current fiscal year ends on September 30, and the Obama administration’s fiscal 2014 budget requested $440 million for the IRS to administer the law’s tax provisions, which are numerous. According to the nonpartisan Congressional Budget Office, the bill will raise $1 trillion in revenues from 2013 to 2022 thanks to the no fewer than 18 tax increases on which it is dependent.

Unless Congress appropriates more money for the IRS to implement those provisions, the agency will have to dip into its operating budget. However, Republicans are not only looking to cut out Obamacare spending but cut the IRS budget by 24 percent, as well.

Follow Meghan on Twitter @MFoley_WSCS

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