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Nonpartisan Watchdog Finds Approving Subsidies for Fake Applicants

July 15, 2015

WASHINGTON, DC — House Ways and Means Committee Chairman Paul Ryan (R-WI), Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-IL), House Energy and Commerce Committee Chairman Fred Upton (R-MI), Senate Finance Committee Chairman Orrin Hatch (R-UT), and Permanent Subcommittee on Investigations (PSI) Chairman Rob Portman (R-OH) today released the second set of results from a Government Accountability Office (GAO) undercover examination of enrollment controls in the Obamacare healthcare exchanges. 

Last year, as part of a “secret shopper” investigation, GAO created 12 fictitious identities to apply for premium subsidies through the federal exchange, also known as the Health Insurance Marketplace (Marketplace), by telephone or online. The GAO found that the federal exchange approved 11 out of 12 telephone and online applications for fictitious applicants. The government paid $2,500 per month or $30,000 per year in credits for insurance policies for these fictitious individuals. Investigators provided fake documents, including Social Security Numbers and proof of income and citizenship, which proved to be no barrier to obtaining taxpayer-funded credits. Investigators found that federal contractors made no effort to authenticate documents applicants provided.

GAO’s updated findings show more of the same: 

All 11 fictitious applicants maintained coverage and subsidies throughout 2014. In one case, GAO received a letter threatening to terminate coverage based on incomplete or inaccurate documentation, but nothing happened—coverage and credits continued.

At the end of 2014, all 11 fictitious applicants were re-enrolled for the next year. The federal exchange did not detect the fact that some of these fake applications contained fabricated documents or that others were missing documents. In fact, some of these applications were approved for coverage and tax credits based solely on the fictitious applicant’s attestations, without any supporting documentation at all. Additionally, the Marketplace sent out incorrect 1095-A tax forms for three of the eleven fictitious applicants.

At the beginning of 2015, coverage continued for all 11 fictitious applicants. Then, six of the 11 applicants received notices that they were being terminated based on their failure to submit information or documentation with a new application. However, GAO had not made any new applications. After calling the Marketplace, GAO was able to have five of the six fictitious applicants reinstated, with greater subsidy amounts.

GAO also found that some official correspondence from the Marketplace was confusing and in some cases made references to impossible events. For example, at least one Marketplace letter referenced a fictitious applicant’s tax return, which did not exist. Another Marketplace letter had conflicting information in different paragraphs.

GAO found that federal contractors continued their practice of accepting documents as true without attempting to verify a document’s authenticity unless there were obvious alterations. The contractors say this policy originated with the Centers for Medicare and Medicaid Services (CMS). A year after GAO made its initial findings, there still appears to be no system in place to catch missing or fabricated documentation. Unsurprisingly, given the absence of a system to detect fraud, CMS reports that its contractors have not referred any instances of fraud.

The Senate Finance Committee will hold a hearing on July 16, 2015, at 10:00 AM with the GAO to further discuss the findings of its report.

Ways and Means Chairman Ryan: “Last year, this committee warned that weaknesses in could put billions of taxpayer dollars at risk, and the GAO undercover review has confirmed our concerns. One year later, this investigation continues to reveal alarming flaws in the Obamacare system. It’s disappointing, but not surprising, that these same problems remain with little or no improvement. GAO’s findings are enlightening not only because they show the administration’s lack of interest in protecting the integrity of these exchange subsidies, but it also provides a window into the experiences of millions of Americans who have struggled to sign up for coverage on”

Ways and Means Oversight Subcommittee Chairman Roskam: “The fact that the Obamacare marketplace is still unable to detect and prevent blatant fraud is something that should outrage every American taxpayer. ‎These disturbing new revelations demonstrate the relative ease with which fake applicants can scam the system. We will continue to work to uncover waste and mismanagement as we fight to fix the broken healthcare system.”

Energy and Commerce Chairman Upton: “It’s been nearly two years since first went live, and yet here we are with a still incomplete back end system and fake enrollees continuing to receive benefits, financed by hardworking families in Michigan and across the country. This has got to stop. The administration spent billions of taxpayer dollars on a system that has yet to deliver on its core promises and worse, continues to waste even more taxpayer dollars because it has yet to be fully functional. The American people deserve better.” 

Finance Committee Chairman Orrin Hatch: “That the administration failed to weed out fake applicants one year later is yet another shocking development that, unfortunately, continues the trend of Obamacare’s gross mismanagement at the expense of hardworking taxpayers. Even worse, as demonstrated by GAO, the administration allowed most of the fictitious enrollees to sign up for subsidies again using false information. Not only does this negligence enhance the likelihood for abuse of taxpayer dollars, but it also calls into question the legitimacy of the health law’s enrollment numbers and challenges the integrity of the website’s security checks. The proof is in the pudding—subsidies can be obtained by using unverifiable information. Sadly, it’s now crystal clear the administration turned a blind eye to fixing a basic component of their ill-conceived law and failed to implement the appropriate safeguards.”

PSI Chairman Portman: “Last year, the Administration assured Congress that the process for determining and verifying eligibility for Obamacare subsidies was working, as required by law.   But GAO has produced powerful evidence that the process has been badly broken from the start.  Obamacare is putting taxpayer dollars at risk and has resulted in unwelcome surprises at tax time for millions of consumers who received subsidies, only to have them partially clawed back by the IRS. That’s why the Permanent Subcommittee on Investigations has been investigating how this bureaucratic mismanagement occurred, how much money has been lost, and what can be done to fix it.  No matter your view on the health care law, I think we should all be able to agree that taxpayers deserve responsible stewardship of this multibillion-dollar program.”