Did Obamacare Enrollees Game the System on the Taxpayer’s Dime?

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Early in the Obamacare enrollment saga, policy experts cautioned that the government’s official signup figure could not be seamlessly equated to the total number of Americans covered by policies purchased through the insurance exchanges set up under the Affordable Care Act.

That warning has proved to be correct, at least to a degree. Government documents provided to The Associated Press by the Department of Health and Human Services show that millions of enrollees entered incorrect data on their applications. Errors in income and citizenship status — which impact an enrollee’s eligibility for subsidized insurance coverage and, more broadly, participation in the exchanges — mean that total enrollments could drop slightly. To be clear, in some cases, the errors may be simply due to the fact that the information enrollees provided is more up-to-date than what is contained in official records, meaning that inconsistent data will cause only very few individuals to lose coverage, as government officials told reporters. The administration expects that the problems will be resolved by summer.

Already, a system has been put in place to “turn off” benefits for ineligible enrollees, the officials said. In the event that an enrollee underestimated annual income — and as a result received too generous a subsidy, which comes in the form of a tax credit — could owe the Internal Revenue Service money next year.

“The Marketplace checked to see that consumers are who they said they were, matching Social Security numbers, income and tribal status, among a host of other data points — all to ensure that folks are eligible for coverage and, in many cases, entitled to financial assistance to help them afford their plan … But, while most information the applicant provided lined up, sometimes a name or data point didn’t match up right away with existing records,” Centers for Medicare & Medicaid Services spokeswoman Julie Bataille wrote in a recent blog post.  “For example, a consumer might have recently changed jobs, but the latest IRS tax return data and other data available to the Marketplace didn’t reflect that change in income,” Bataille added. “In such cases, the law requires us to double and triple check this data in another way.”

Still, even if the situation is easily resolved, the fact that the paperwork 2.2 million enrollees — or more than one in every four that signed up for private health coverage through the system — contains seriously enough inconsistencies that coverage could be canceled or subsidies need to be repaid suggest there was a serious failing in the system. That is the argument Republican lawmakers have made. “A 25 percent error rate is simply unacceptable when it comes to proper use of scarce taxpayer dollars. Even worse, today’s announcement once again illustrates how the President’s bloated health care law has left American families and taxpayers in financial limbo,” said Senator Orrin Hatch of Utah, the ranking  Republican on the Senate Finance Committee, said in a press release.

Several lawmakers — including Hatch and Minority Leader Mitch McConnell — sent a letter to the Department of Health and Human Services inspector general last week, asking that the enrollment discrepancies be carefully investigated. “We have long been concerned that Obamacare, with its complex eligibility process and access to enormous taxpayer resources, presents a grave risk for improper, inaccurate, and even fraudulent payments,” it read. “Those concerns were further heightened last summer when the Department of Health and Human Services (HHS) issued regulations that would permit individuals to self-attest to their eligibility for subsidies under certain circumstances.” The regulations to which the letter referred were announced by the Obama administration last July, and loosened the federal government’s oversight of what applicants say they earn. At the time, critics argued that widespread fraud would follow, while other analysts claimed the simplified verification would streamline an already clunky and complex government data hub, otherwise known as online insurance exchanges.

Lawmakers who were concerned by the delay of income verification pushed for the passage of legislation that required the Secretary of the Department of Health and Human Services, which at the time was Kathleen Sebelius, to certify that the exchanges would verify that all applicants for tax credits and cost-sharing subsidies were actually eligible for that assistance. In a letter dated January 1, 2014, Sebelius agreed to the certification and detailed a number of measures that had been crafted to protect the taxpayer. That statute also required the agency’s Inspector General to compile a report evaluating the effectiveness of those safeguards to prevent manipulations of the insurance exchange system, due by July 1.

But testimony from the Treasury Inspector General for Tax Administration suggests that many systems needed to verify income and citizenship were not built. In an April 30 testimony before the Senate Appropriations Committee, the Inspector General expressed concern that “the potential for refund fraud and related schemes could increase as a result of processing ACA [Affordable Care Act] Premium Tax Credits unless the IRS builds, implements, updates, and embeds ACA predictive analytical fraud models into its tax filing process.” That plan includes two new systems  to lower tax refund risk that are currently under development.

The letter authored by Hatch, McConnell, and Republican Tom Coburn of Oklahoma drew attention to that evidence, and cited a recent report from The Washington Post. On May 16, the publication wrote that “the government may be paying incorrect subsidies to more than 1 million Americans for their health plans in the new federal insurance marketplace,” largely because “the federal computer system at the heart of the insurance marketplace cannot match this proof with the application because that capability has yet to be built.” That article pointed to internal documents specifying that there were 4 million discrepancies between material submitted by applications and information on file with various government agencies, and of those discrepancies, between 1.1 million and 1.5 million were due to income disparities.

“These reports call into serious question the veracity of Secretary’s certification that Exchanges will accurately verify an applicant’s eligibility for subsidies before they were issued,” concluded the senators. “It seems highly unlikely that the Secretary could accurately certify that systems were in place to verify the accuracy of applicant information, when in fact these systems had not been fully developed, tested, and deployed.” The lawmakers wrote they would “strongly encourage” the HHS Inspector General to carefully review both the media reports and the testimony of the Treasury Inspector General when evaluating the effectiveness of the safeguards Sebelius certified. “Whatever one’s opinion of Obamacare, the American public deserves to know that their tax dollars are allocated appropriately and that public officials take their responsibility to accurately and faithfully apply the laws enacted by Congress seriously,” the lawmakers added.

The release of the key government document — a seven-page slide presentation — was prompted by several congressional investigations into the discrepancies, The Associated Press reported.

Ensuring that only eligible applicants receive marketplace insurance and subsidies is now the main priority of Sylvia Mathews Burwell, who the Senate confirmed to serve as HHS secretary this week, replacing Sebelius. As an HHS official told The Post, Burwill is scheduled to take over after she is sworn in on Monday. Aside from rectifying the data discrepancies, her many Obamacare-related tasks include overseeing the substantial improvements on HealthCare.gov — the computer system running the federally-facilitated insurance exchange — that need to be completed. Some important pieces of the website are still not working or built, including systems to manage enrollment records, enable the direct enrollment of qualifying individuals for Medicaid, and allow the online enrollment of small businesses. Burwell will also guide the implementation of the employer mandate, a provision that requires larger employers to offer health benefits to their workers. It has been delayed twice by the Obama administration.

Enrollment numbers have long been the preoccupation of the Obamacare analysis, and the data discrepancies add an additional twist to the story. Just as it is not surprising that conservative lawmakers are pointing to the new issues as more reason to replace the Affordable Care Act, it should come as a surprise that this issue arose. The question is whether the data discrepancies should be described as a minor glitch, of the sort President Barack Obama predicted when defending the law last year, or if they should been seen as evidence the reform is too flawed to function.

These problems beget the question: how well is the reform working? Now, the answer to that question is complex and should be the topic of an entire article. However, recent surveys provide a cursory summary. Gallup data continues to show the uninsurance rate is dropping. The Affordable Care Act has lowered the national uninsured rate from last year’s high of 18 percent to 13.4 percent, a decrease that represents about 10 million newly insured individuals. But as Wall St. Cheat Sheet wrote last week, that growing newly insured population has not translated into a jump in support for the law.

Several thousand interviews conducted by Gallup between May 21 and 25 revealed that “as of yet, there is no sign that Americans think the new healthcare law is having a net positive effect on their healthcare situations.” The majority of Americans reported that the Affordable Care Act has done little to change their “personal situations” since the research firm first started asking the question in 2012. But still, since the reform’s cornerstone provision — the online insurance marketplaces — launched last October, public sentiment has gradually grown stronger. The number of respondents who say the law has had a positive effect, 14 percent, is within one percentage point of a record high. Yet, public opinion has turned increasingly negative as well; those Americans who say the law has had a harmful effect, 24 percent is also within one point of being the highest negative measure recorded. Predictably, public opinion is guided by political affiliation and insurance status.

This data both shows how politically charged the Affordable Care Act remains and suggests that the Republican-led movement to repeal, defund, or otherwise dismantle the health care reform law may still have some political capital.

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