Obama Administration Discards Reporting Requirements in Obamacare

by Hans Bader on July 9, 2013

in Healthcare, Politics as Usual, Regulation, Zeitgeist

The Obama administration has illegally discarded the reporting requirements mandated by the 2010 healthcare law, which were designed to prevent countless billions of dollars in fraud by claimants seeking reimbursement for healthcare expenses in Obamacare’s state health-insurance exchanges. Eligible participants in the exchanges can commonly claim thousands of dollars in federal subsidies for participating them. The reporting requirements, which require that exchanges verify participants’ income and health insurance status, were designed to ensure that such people do not defraud the taxpayers by seeking subsidies even though they already have employer-provided health coverage, or have an income high enough that they do not qualify for any subsidy.

Now, the subsidies will be available to people who lie about whether they are eligible. The Wall Street Journal calls them “Obamacare’s Liar Subsidies”: “Remember ‘liar loans,’ the low- or no-documentation mortgages that took borrowers at their word without checking pay stubs or W-2s? ObamaCare is now on the same honor system, with taxpayers in tow.”

The Washington Examiner‘s Philip Klein observes:

In a regulation released Friday and flagged by Washington Post reporters Sarah Kliff and Sandhya Somashekhar, the administration will now rely on self-reported data. You read that correctly. A man who earns $50,000 per year and gets insurance through his employer could log on to the new government website and say he earns $20,000 and gets no insurance through his employer, and the government would not even attempt to confirm that the information is accurate before forking over generous taxpayer subsidies. It’s a recipe for rampant fraud, which is already widespread in Medicare and Medicaid.

According to the rule as reported by Kliff and Somashekhar, “The exchange may accept the applicant’s attestation regarding enrollment in eligible employer-sponsored plan … without further verification” and “the Exchange may accept the attestation of projected annual household income without further verification.”

The authors’ note that if anybody is caught lying, that they would be subject to a $25,000 fine and forced to repay any excess subsidies they received. But just like a waiter who under-reports cash tips, it likely won’t be very hard to get away with lying on Obamacare forms.

With this news coming after the employer mandate delay announcement, the Obama administration has now openly conceded that it is in way over its head when it comes to implementing this unworkable law. Thus, the new strategy is to simply set up a mechanism to feed taxpayer subsidies to as many Americans as possible so that even if Obamacare is a complete train wreck, it will make enough people dependent on government to make repeal politically impossible. Republicans should seize on this immediately, and force the administration to defend a policy that would open the floodgates to fraud.

Getting rid of the reporting requirements may reduce the workload of bureaucrats, but it will eventually result in much higher costs due to fraud, costs that the government apparently doesn’t care about. As the Examiner’s Conn Carroll notes, “now that Obamacare is law, liberals no longer need to fool Americans into thinking we can expand health insurance to almost 40 million Americans without adding to the deficit,” the way they did with their bogus argument that Obamacare would not increase the budget deficit by one penny.

This is not the only aspect of the healthcare law that has proved problematic. Earlier, “the Obama administration announced on Tuesday it is going to delay the implementation of the employer mandate, a major aspect of President Obama’s health care law initially set to go into effect on Jan. 1, by a year.” The Examiner’s Philip Klein writes,

the purpose of imposing a $2,000 (or $3,000) penalty per worker on businesses with over 50 employees which did not offer acceptable health coverage was to discourage businesses from dropping coverage in response to the health care law and dumping their workers on new government-run exchanges. But absent that penalty, will more businesses now be motivated to drop their current coverage?  Also, the delay is said to be one year, but if business lobbyists were successful in convincing the Obama administration to delay it for a year, will it actually ever go into effect? Congress routinely votes to delay scheduled cuts in physician payments under Medicare. Will this be the same sort of policy, that exists on paper, but never gets implemented?  Politically, the decision smacks of the Obama administration wanting to defer the impact of the law on businesses during the 2014 midterm election year, avoiding headlines about businesses cutting staff levels or reducing worker hours to get around the mandate. But it could also be politically dangerous, by reinforcing the idea that the law is a looming train wreck.

The economically harmful nature of the employer mandate is now conceded even by liberals with close ties to the White House, like The Washington Post‘s Ezra Klein. “Ezra Klein is now calling for a repeal of the very same employer mandate that he once said was ‘the key’ to Obamacare.” Political commentator Timothy P. Carney says that the Obama administration always knew that Obamacare’s employer mandate would not work well, and cynically put it into the Obamacare law out of “political posturing and corporatist collusion.” Conn Carroll says it was put into the law to game the CBO and get it to provide an artificially low estimate of Obamacare’s enormous cost to taxpayers. (Obamacare’s costs were also artificially concealed by including only six years of costs, but 10 years of revenues, for its costs in its first decade, which is what left-leaning “fact-checkers” ignore when they claim that Obamacare does not add much to the deficit.)

The Heritage Foundation says that “the Administration’s position [suspending the employer mandate] raises more questions than it answers:

  • If the employer mandate will prove so devastating to businesses that it can’t be enforced in 2014—following three years of implementation work—why should it be enforced at all?
  • Will delaying implementation of the employer mandate encourage more firms to drop coverage entirely and dump their workers on to Exchanges, raising the cost of taxpayer-funded subsidies by trillions?
  • What about individuals who can’t afford to buy health insurance, yet will be forced to do so under Obamacare? Will they get an exemption from enforcement as well?”

Even some unions that once championed Obamacare have turned against it as it makes employee healthcare coverage unaffordable and threatens to wipe out or impose new taxes on their existing health plans. Obamacare is thwarting job creation and medical innovation. Some employers have stopped hiring due to it, while others are replacing full-time employees with part-timers. Obamacare caused layoffs in the medical device industry through what even liberal Sen. Al Franken (D-Minn.) conceded was a “job-killing tax” that will “impair American competitiveness in the medical device field.” In future years, Obamacare will cut employment by an additional 800,000 because of work disincentives and sudden income-based cutoffs in access to benefits.

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