Obamacare Subsidy Fraud Could Cost Taxpayers $250 Billion

The CR/Debt limit fight left Republicans with nothing but a trivial change to Obamacare’s income verification process.  While it was the only thing conservatives were able to get from Obamacare in the debt ceiling fight, it would be a mistake to think the language in the bill will truly combat fraud and abuse when the health care subsidies start getting doled out.

In another Friday news dump this summer, the Obama Administration announced it would not be able to verify the incomes of enrolees applying for subsidies in the health care law until 2015. These subsidies are supposed to be the "carrot" that entices the uninsured to buy health care – based on a person's income, they will be given a certain amount of money to go towards their insurance premiums.  

Without verifying the amount of income someone is reporting, however, the system is ripe for abuse; an individual could lie about their income to qualify for a large subsidy without ever having to prove they are in fact earning the reported amount.  This summer, the House passed legislation requiring HHS to set up an income verification system before subsidies could be issued.  

This bill, however, was not what we ended up with in the debt deal this week.  Under the debt agreement, HHS Secretary Sebelius must report to Congress by Jan. 1 explaining what measures are in place to verify enrollees’ income.  The Inspector General then has six months to determine how effective the measures have been.  That’s it.  That’s the grand bargain Americans are regrettably forced to swallow.

Taxpayer-funded subsidies will begin going out in January, with only a “statistically significant” amount of red flags actually being audited.  If as many people lie about their income when enrolling in Obamacare as they do when applying for the earned-income tax credit, $250 billion in fraudulent subsidies will be paid out over the next decade.  And what’s more atrocious is that lawmakers put a cap on how much the federal government could recoup from an individual who received a larger subsidy than they should have, a $43 billion dollar price tag for taxpayers.

The proper checks have not been put in place to prevent abuse of the system, and taxpayers will have limited redress against those who are dishonest about their income.  The income verification provision of the debt deal is a farce and needs to be overhauled.  Obamacare’s reliance on the honor system is more than indefensibly bad policy—it’s theft from the American people.