Obamacare Officials May Have Cost Taxpayers $1 Billion

Justin Haskins Heartland Institute
Published January 13, 2016

Consumer Power Report #489
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A new report from the Office of Inspector General (OIG) at the Department of Health and Human Services (HHS) reveals in 2014, the year the Obamacare health insurance exchanges first opened, there was a significant lack of oversight of tax-credit payments sent to insurers, leading many to question how much of the $11 billion of taxpayer money paid to insurers in 2014 was fraudulent.

One of the most important parts of the Affordable Care Act (ACA) legislation was the creation of taxpayer-funded credits that would theoretically help offset the cost of paying for health care for millions of Americans who couldn’t afford to pay for health insurance on their own and weren’t receiving adequate insurance through an employer.

Although most tax credits are applied at the end of a tax year, Obamacare health insurance credits are sent automatically to health insurance companies when qualified Americans sign up for a policy through an Obamacare exchange. This is a necessary feature in ACA, because if qualified individuals or families had to pay the full cost of health insurance up front, many would be unable to make the required health insurance payments each month.

According to HHS’s Office of Inspector General, in 2014 there weren’t any solid mechanisms in place to ensure the subsidy payments made to health insurance companies were legally made. As The Wall Street Journal reported on January 6, 2016, “the [Centers for Medicare and Medicaid Services, which is responsible for overseeing ACA,] couldn’t verify the payments to insurers were only for consumers who had paid their premiums.”

With no way to verify subsidy payments were properly made, it was virtually impossible for the Centers for Medicare and Medicaid Services (CMS) to prevent fraud and waste, two problems that have plagued Obamacare since it was first implemented.

Kristina Ribali, senior coalitions director for the Foundation for Government Accountability (FGA), reported for The Blaze an investigation in July 2015 revealed “defrauding Obamacare was still very easy.”

“With a fake name and fake documents, the investigators were able to receive both insurance coverage and taxpayer subsidies, a year after they proved the first time that this fraud was achievable,” wrote Ribali.

Ribali also recounted in her article how nearly $350 million in Obamacare tax credits had been overpaid by the Internal Revenue Service (IRS) by early 2015, and Ribali reported back in August 2015 ACA made it virtually impossible to retrieve the lost cash.

What is disturbing is not that another massive government-created social program is irresponsible with taxpayer money – a problem present in virtually every federal program – it’s that the Obama administration was well aware of these problems at least as early as 2013 and chose to move forward knowing millions were likely going to be wasted or stolen.

In December 2013, Rachael Bade and Lauren French reported for Politico, “[T]he [IRS] may not yet have a system in place to stop tax cheats seeking to underestimate their incomes and fraudulently cash in on health subsidies.”

Bade and French quote directly from a Treasury Department report on the possibility of fraud, “The ACA Program has not yet completed a fraud mitigation strategy. It is important for the IRS to thoroughly consider fraud threats and risks that could impact new ACA systems.”

Unfortunately for taxpayers, the necessary changes made to the “ACA systems” didn’t take place until it was too late. Only now are automated systems being put into place that will prevent a significant amount of fraud and waste.

While it’s impossible to know how much money was wasted and how much of the taxpayer subsidies paid to insurance companies in 2014 was legitimate, it’s important to note in 2014 HHS found 1.2 million people who signed up for health insurance in an Obamacare exchange had, as FoxNews.com reported in August 2014, “inconsistencies in their applications.”

FoxNews.com also reported the Kaiser Family Foundation (KFF) claimed 85 percent of Obamacare applicants were considered eligible for some sort of taxpayer subsidy, which KFF estimated would cost “about $10 billion in subsidies in [2014].” Now that we know the total cost actually reached $11 billion, it’s necessary to ask, “Where did the rest of the money go?”

It’s impossible to say whether the $1 billion difference between KFF’s report in 2014 and the actual costs revealed in 2015 is the result of fraud, mismanagement, improper payments, waste, or just mistakes made by KFF and other groups calculating costs. There simply weren’t any mechanisms in place to prevent or identify the waste. We do know, however, that at the very least hundreds of millions of dollars were wasted, that fraud was possible and did occur, and that the Obama administration moved forward with the Obamacare system knowing in 2013 it had no way of protecting taxpayers’ money.

FGA reports 5 to 25 percent of state welfare spending is fraudulent or wasted, which is why FGA launched its “Stop the Scam” program (STS) to help states fight the fraud the federal government is unwilling or unable to control. STS “embraces advances in technology and e-verify software to allow states to verify applicants are truly eligible for welfare benefits, monitor welfare enrollees to ensure they are still eligible to receive benefits, and prosecute welfare fraudsters who steal from taxpayers.”

According to FGA, STS has saved $350 million annually in Illinois and $300 million in Pennsylvania in that state’s first year implementing the program.

“State lawmakers have a duty to protect scarce taxpayer resources and verify that those receiving Medicaid benefits are in fact actually eligible,” Ribali told Consumer Power Report in an interview. “By adopting our bi-partisan Stop the Scam initiative, states can use enhanced technology to verify applicants, monitor welfare enrollees, and prosecute scammers who rob from taxpayers.

“It’s a proven program, that if adopted nationwide could save taxpayers as much as $8 billion annually,” Ribali said.

The decision to move forward with the Obamacare exchanges without proper safeguards in place is reminiscent of the Obama administration’s decision to open the Healthcare.gov website even though it knew the site was woefully unprepared to begin its operations. In the end, politics was more important than preparedness and protecting Americans’ hard-earned cash.

It’s time states do what the Obamacare administration is unable or unwilling to do: enact programs similar to FGA’s Stop the Scam initiative to ensure taxpayer money is being spent responsibly.

If you’re interested in learning more about the Foundation for Government Accountability’s Stop the Scam program, visit FGA’s website: http://thefga.org/solutions/welfare-reform/stop-fraud/.

— Justin Haskins



The federal government has recommended South Carolina repeal requirements that health facilities get state permission for many kinds of construction and expansion, backing up something Gov. Nikki Haley has sought for years.

In a letter and attached statement to Haley, who sought officials’ opinion in November, the Department of Justice and the Federal Trade Commission wrote that laws requiring something known as a certificate of need impede competition and make such projects more expensive.

South Carolina’s certificate of need program nearly died in 2013 when Haley vetoed its $2 million in funding, saying then that such decisions were best left to the open market. The program was resurrected a year later when, after a lawsuit from hospitals, the S.C. Supreme Court ruled it couldn’t be eliminated unless lawmakers directly voted to kill it.

SOURCE: By Meg Kinnard, Associated Press


Hillary Clinton attacked Bernie Sanders’ health care plan during a campaign stop in northeast Iowa on Monday, as the race for the Democratic nomination here continues to tighten.

“We had enough of a fight just to get to the Affordable Care Act,” she said. “I don’t want to rip it up and start over, but I sure don’t want to turn over health care to Republican governors, for heaven’s sake.”

Sanders, who was campaigning 140 miles away in Perry, has proposed a “Medicare for all,” universal healthcare system that he says is long overdue in the United States. Clinton, who says she wants to improve the Affordable Care Act by bringing out of pocket costs down, called his plan a “risky deal.”

“It could hurt more than help American families,” she said.

SOURCE: By Hannah Fraser-Chanpong, CBS News”>


A subcommittee of a state task force recommended Monday continuing with a state-run health insurance exchange like MNsure for now, rather than transferring Minnesotans to the national exchange called HealthCare.gov

Moving to the federal website would be costly and wouldn’t work with the state’s MinnesotaCare insurance program, said a report endorsed by the 11-person subcommittee of the state task force on health care finance.

Plus, by moving to HealthCare.gov, the state would lose control over its network of health insurance navigators that help people enroll in coverage, according to the report.

“The committee overwhelmingly voted not to move to HealthCare.gov at this point,” said chairwoman Lynn Blewett, who is a health care researcher at the University of Minnesota.

The recommendations will be taken up Friday by the full Health Care Financing Task Force, which the Legislature created last May. The task force will decide what changes in Minnesota’s insurance marketplace get proposed to the Legislature this year.

Early last year, Republicans in the state House proposed a switch to the federal website in response to continued struggles with MNsure, which Minnesota launched in 2013 to implement the federal Affordable Care Act.

SOURCE: By Christopher Snowbeck, Minneapolis Star Tribune


Kentucky’s new Republican administration is moving forward with plans to shut down the state’s health insurance exchange, becoming the first state to cut ties with one of the key pieces of President Barack Obama’s signature healthcare law because of a political promise.

Gov. Matt Bevin notified federal officials in a letter dated Dec. 30 that the state exchange will cease operations “as soon as is practicable.” That will be at least a year from now, according to federal law. It will not affect health plans sold for 2016.

Kentucky is one of 14 states that run their own state health insurance exchanges. More than 100,000 people have used Kentucky’s exchange, dubbed kynect, to purchase private health insurance plans with the help of a federal subsidy since it was implemented in 2013.

SOURCE: Associated Press