The Obama administration’s delayed implementation of key parts of the Affordable Care Act is opening up the government to fraud while demonstrating the law’s fundamental flaws and the administration’s incompetent leadership, healthcare experts say.
The Obama administration delayed two key parts of the law last week. They announced on July 2 that employers would not be required to provide insurance to their employees for one year, until Jan. 1, 2015.
The Department of Health and Human Services (HHS) announced July 5 that the states setting up their own health insurance “exchanges” would not be required to verify either the income of those seeking federal subsidies or whether those individuals receive insurance through their employment.
“This is a sure sign of administrative incompetence,” said James Capretta, a healthcare expert at the Ethics and Public Policy Center.
“They’ve had three years to put this thing into implementation, and its turned into a complete fiasco,” Capretta said.
The employer mandate required businesses with more than 50 employees to provide them with health insurance or pay a fine. The administration has waived the mandate because of onerous reporting requirements on businesses.
However, in a chain-reaction effect, this waiver deprives states running their own health insurance exchanges of crucial information. Only individuals without employer-based coverage are eligible for subsidies to purchase insurance from the exchanges. By delaying the employer mandate, states will be denied information about which applicants have employer-based coverage.
The administration’s solution, provided in Friday’s regulation, was to also waive the requirement that states determine who is actually receiving insurance from work and who is not. Instead, those applying for the subsidy will simply have to say that they are not getting insurance from work.
Friday’s announcement came in the form of a 600-page final regulation for the law’s implementation with the waivers buried over halfway though the document.
“In 2014, applicants can more or less be deemed eligible for subsidies in the state-run exchanges if they say they are eligible,” noted Yuval Levin, editor of National Affairs, in an article on Sunday.
The Obama administration also delayed the requirement that states verify the income of those applying for the subsidy, even though the subsidy is based on the applicant’s income.
The income verification requirement is being delayed because the federal “data hub” that was supposed to hold all the necessary financial information will not be ready in time for the opening of the state exchanges on Oct. 1, said Ed Haislmaier, a fellow at the Heritage Foundation.
Levin and Thomas Miller, a fellow at the American Enterprise Institute, both noted another, more sinister possibility for the waiver, though: an attempt by the administration to increase total enrollment in the state exchanges by encouraging fraudulent enrollment.
Other experts also noted how the waivers put the exchanges’ integrity at risk.
“This is opening up a whole can of worms for fraud,” said Sally Pipes, president of the Pacific Research Institute.
She predicted that people would lie about their income in order to receive a bigger subsidy.
Capretta echoed Pipes’ concern and pointed to the Earned Income Tax Credit (EITC) as a parallel example of a federal program susceptible to fraud.
The EITC is a federal credit based on income that is administered through the tax code. A Treasury inspector general report from earlier this year found that the IRS paid out about $15.2 billion in improper payments through the EITC in 2011. And the IRS has administrative procedures in place to cut down on fraud, Capretta said, while the new Obamacare exchange subsidy does not have any.
“The bias will be toward overpaying, of course,” Capretta said.
If enough people do not enroll in the exchanges, there will not be sufficient money to cover the sick who enroll.
The administration has asked the NBA and NFL to push the new healthcare exchanges with their fans.
Friday’s regulation requires the state governments to do random tests to determine if those receiving the subsidies are accurately reporting their income—but this precaution is not sufficient to assuage experts’ concerns.
This chain reaction of waivers is a result of the law’s construction, said Miller.
“This is a ripple—when you pull one thread loose from the intertwined ball of enforcement, it has other implications,” Miller said.
Each of the waived parts of the law is “somewhat essential,” Miller said, in that they act as a “patch job or repair of something else.”
However, “the only essential thing they have to retain is the ability to move taxpayer money out the door to people,” he said.
These hitches do not bode well for the law’s future, the experts predicted.
“You don’t really do these things unless you know you’re in trouble,” Miller said. He predicted that other things could break down soon.
Pipes predicted that the individual mandate could also be delayed.
“I just don’t see how [the state exchanges] can be ready by Oct. 1 for enrollment,” she said.
She also noted that the costs for Obamacare are rising. The Congressional Budget Office originally said the law would cost $940 billion over 10 years, but then revised their prediction to $1.8 trillion from 2013 to 2022. Pipes predicted that the costs would be even higher.
The delays could also complicate tax filing for many lower-income individuals who receive the subsidies, Haislmaier contended, especially since their income typically fluctuates over the course of a year.
Rep. Fred Upton (R., Mich.), chairman of the House Energy and Commerce Committee that is overseeing the law, assailed the administration for the delays.
“This law is so far off the rails that the administration is now disregarding entire sections of the statute,” he said. “There are a lot of questions that need to be answered, from the cost to the added confusion.”
“The shoes are dropping one at a time,” Miller said.