Obamacare Fraud Controls Found Severely Lacking

The Fiscal Times
A man looks over the Affordable Care Act signup page on the HealthCare.gov website in New York in this photo illustration
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A man looks over the Affordable Care Act (commonly known as Obamacare) signup page on the HealthCare.gov website in New York in this October 2, 2013 photo illustration. REUTERS/Mike Segar

At the moment there’s no way of knowing whether any significant portion of the millions of people who signed up for health insurance coverage through the Affordable Care Act’s Health Care Exchanges did so fraudulently. But a preliminary report issued by the Government Accountability Office on Wednesday suggests that, for any who did, it would have been pretty easy.

The GAO, at the request of members of Congress, conducted what amounted to a sting operation against various health care exchanges using fraudulent identities to apply for, and receive, health insurance coverage and federal subsidies through the exchanges.

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In testimony before the House Ways and Means Committee’s Oversight panel Wednesday, Seto J. Bagdoyan, the acting director of GAO’s Forensic Audits and Investigative Service, testified that 11 of 12 fraudulent applicants were granted insurance and subsidies, and that most are still receiving them.

According to Bagdoyan’s testimony, the sole fake applicant who did not receive coverage was denied for refusal to provide a Social Security number. Bagdoyan noted that the remaining 11 fraudulent applicants were “directed to submit supporting documents, such as proof of income or citizenship” but that the review process was inconsistent.

Two of the fake applicants submitted similarly fake supporting documentation, which was “verified” by contractors managing the online exchanges. Three submitted nothing at all, and continue to receive the subsidies.

Rep Charles Boustany Jr. (R-LA), the chairman of the Ways and Means Oversight Subcommittee, said the failure of the exchanges to verify that recipients of government subsidies actually deserved them ought to be a non-partisan issue.

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“This is not simply a question of whether one likes the President’s health care law or the way his Administration has gone about implementing it,” he said in a statement prepared for the hearing. “The question is whether the Administration is being a good steward of taxpayer dollars and is putting in place adequate controls to protect those dollars from fraud, waste, and abuse. The history of the health care law’s implementation suggests the answer is no.”

The GAO also tried to test how many people charged with delivering in-person assistance to applicants would actively encourage applicants to misstate their income in order to qualify for a federal subsidy.

The good news is that in 100 percent of the cases in which investigators reached an “assister,” there was no evidence encouraging fraud. The bad news is that the GAO only got through to one assister. Website failures and excessive call volume prevented five out of six attempts to evaluate the assisters from ever getting through.

At this point, it remains unclear just how bad the GAO’s findings really are for the president’s signature domestic policy achievement, primarily because there is no evidence suggesting fraud was widespread.

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If it was, though, it may be a while before anybody knows it.

When it comes to evaluating eligibility for subsidies, Bagdoyan told the subcommittee, the Centers for Medicare and Medicaid Services “must rely on health insurance issuers to self-report enrollment data used to determine how much CMS owes the issuers for the income-based subsidies. Work is underway to implement such a system, according to CMS, but the agency does not have a timeline for completing and deploying it.”

Democrats did not challenge the GAO’s finding, but some, including Rep. Sander Levin of Michigan, asked that the findings be kept in perspective.

“It is important to keep in mind that the motivation for the fraud fabricated as part of the GAO investigation for a real person would be a desire to receive insurance coverage,” he said. “There would be no financial windfall, as any government subsidy goes directly to insurance companies and not to the consumer seeking that insurance. In fact, people committing these frauds would be risking severe fines and possibly jail time.”

He insisted that, eventually, the system would work and that fraudulent enrollees would eventually “be unenrolled from insurance” and “if they have misstated their income, they will have to repay the government for the subsidy that went to their insurance company.”

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