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GAO Bogus exchange applications resulted in coverage

Bogus exchange applications resulted in coverage, GAO says


By Paul Demko
Posted: July 23, 2014 - 3:00 pm ET
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A day after federal appellate courts issued conflicting rulings about whether individuals who obtain coverage through the federal exchange are eligible for subsidies, a House subcommittee heard about another aspect of health insurance subsidies, namely that it's apparently easy to obtain them under false pretenses.

Government investigators were able to fraudulently obtain subsidized insurance coverage through the federal exchange in 11 of 12 instances when applying online or over the phone, according to a report by the Government Accountability Office (PDF). In addition, when government investigators sought in-person assistance from outreach workers, they were turned away without receiving enrollment help in five out of six cases.

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At a hearing Wednesday before the House Ways and Means Committee's Subcommittee on Oversight, Seto Bagdoyan, acting director of the GAO's forensic audits and investigative service, did caution that the investigation is not complete and that the preliminary results shouldn't be used to draw conclusions about the 8 million applications filed through the state and federal exchanges.

But Republicans seized on the problems identified as fresh evidence that Obamacare is an administrative mess that could cost the government tens of millions of dollars in fraudulent claims.

“This is not simply a question of whether one likes the president's healthcare law or the way his administration has gone about implementing it,” Rep. Charles Boustany (R-La.), chairman of the oversight subcommittee, said at 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.”

Democrats countered that even if individuals are submitting incorrect information they won't be benefiting financially. Federal subsidies are sent directly to insurers providing coverage, they argued, ignoring perhaps that consumers who may have lied about their income to obtain them would be paying lower premiums and thus saving money that way. They also pointed out that individuals submitting false information could face significant civil penalties, and even criminal prosecution, if they are caught.

“It's just another attempt, I think, to try and smear the Affordable Care Act,” Joseph Crowley (D-NY) said at the hearing. “All the doomsday predictions haven't come true.”

Roughly 85% of individuals who enrolled in coverage through HealthCare.gov were eligible for subsidies.

The GAO also found that the CMS has no way of identifying which exchange customers among the more than 8 million individuals who have signed up for coverage have actually paid their first premiums. Insurers provide that information to the CMS, but the agency has not created a system to process the data. That means there's no way of knowing exactly how many individuals have actually obtained coverage through the government-run marketplaces.

The 11 individuals who were able to obtain coverage with erroneous information or fraudulent documents are still insured, according to GAO. The total subsidies amount to about $30,000 annually. In the other instance, the person was correctly told that their income was too high to qualify for subsidized coverage.

The GAO investigation was launched at the behest of Boustany and three other Republican legislators and will continue. Bagdoyan indicated, for example, that GAO hasn't yet looked at the Internal Revenue Service's efforts to confirm income data submitted through the exchanges.

“Our work is very active,” Bagdoyan said. “We're receiving new information as we speak from CMS.”

Follow Paul Demko on Twitter: @MHpdemko


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