Obamacare’s Festering Fraud Wound
On June 25, 2015, President Obama made a bold proclamation regarding his signature healthcare law: “As the dust has settled, there can be no doubt that this law is working.” He doubled down by adding that it “is working exactly as it’s supposed to.” President Obama’s comments that day illustrate his continued unwillingness to accept the consequences of his healthcare takeover. Ever since the Affordable Care Act (Obamacare) became law, he has ignored the panoply of problems that plague the law and the wasteful government agencies it empowered.
Perhaps the most pernicious deficiency of Obamacare is fraud. The law requires verification of applicant data for federal subsidies. The Centers for Medicare and Medicaid Services (CMS) use a $55 million data hub to cross-reference information and ensure its authenticity. But, a February 24, 2016 Government Accountability Office (GAO) report exposed the “passive” approach that the federal healthcare exchange (Marketplace) takes when doing basic follow-up on inconsistencies. The report found that, “although the data hub plays a key role in the eligibility and enrollment process, CMS does not, according to agency officials, track or analyze aggregate outcomes of data hub queries.” Furthermore, GAO concluded, “CMS did not have an effective process for resolving inconsistencies for individual applicants.”
The results of this lack of analysis should make taxpayers shudder. GAO found that in 2014, 431,000 applications with $1.7 billion in subsidies still had unresolved inconsistencies. CMS failed to resolve Social Security number inconsistencies for about 35,000 applications totaling $154 million in subsidies and incarceration inconsistencies for about 22,000 applications worth $68 million. Unbelievably, the contractor that CMS relies upon to detect and stop fraud is not required by the agency to possess any fraud detection capabilities.
This is type of fraud is not a new problem. In 2014, the GAO began a “secret shopper” investigation designed to test whether or not the Marketplace was able to detect and prevent falsified applications from being accepted in three states. The results were jarring. Out of the 12 fictitious identities that applied for taxpayer subsidies, 11 were approved, which translates to a 91 percent failure rate. Over the course of 2014, the government paid out $30,000 to these fake individuals. Investigators were able to obtain subsidies even though they provided false proof of income, documentation of citizenship, and Social Security numbers. The Marketplace made zero effort to validate any information.
On July 15, 2015, 10 days before President Obama championed the law’s brilliance, GAO released a report to update and expand on the “applicants.” All 11 were re-enrolled in 2015 for another year. Six of the 11 were briefly terminated, but only because they failed to submit a new application. GAO investigators simply called the Marketplace, and five of the six cancelled applicants were reinstated, with even higher premium subsidies than they had in 2014.
House Energy and Commerce Committee Chair Fred Upton (R-Mich.) highlighted the most damning indictment of all saying, “perhaps the most unsettling is that while HHS agrees there are many vulnerabilities, the agency has no urgency or plan to fix these critical errors.” Health and Human Services (HHS) Secretary Sylvia Burwell paid lip service to the fraud problem, saying, “with regard to the issue of making sure the right people are getting any taxpayer subsidy, we take it very seriously.”
It’s hard to believe Secretary Burwell because HHS and CMS have received a litany of warning signs for at least a year. A December 2015 report from the HHS Office of Inspector General (OIG) found that, “CMS had not yet established computer systems to enable marketplaces to share confirmed enrollment data,” and it could not verify whether advance premium tax credit payments were only going to those that actually paid their premiums.
A September 1, 2015 report by the Treasury Inspector General for Tax Administration (TIGTA) revealed that Obamacare exchanges were unable to send accurate tax data to the IRS. An August 2015 HHS OIG report discovered that the Obamacare website, Healthcare.gov, failed to verify the citizenship of new enrollees. Yet another HHS OIG report on June 16, 2015 found that at least $2.8 billion worth of Obamacare subsides were paid out without verification during the previous year. And finally, a report by TIGTA on May 21, 2015 revealed that no tests were performed on the IT verification software until a week before filing season began.
The fact that no adequate system yet exists to prevent rampant fraud is evidence that President Obama’s government-based healthcare system does not come even close to working as he claims. On the contrary, it is proof positive that this law and the system it ushered in are fatally flawed. The only viable solution is to replace it with a market-based system that appropriately safeguards taxpayer dollars.
