Obamacare Has Granted 1 Million Incorrect Health Insurance Subsidies



There are still huge technical problems yet to be resolved with Obamacare.

For example, the vast majority of people who gained private coverage through Obamacare are being subsidized through the law's system of health insurance tax credits. But about a million of those subsidies are wrong, either too high or too low—it's unclear how many fall on which side—according to The Washington Post. 

The law's subsidies are doled out based annual income, and people who apply for coverage are responsible for submitting income data in order to prove eligibility for the subsidies. The problem is that a million or so people have entered incomes that differ substantially from what the Internal Revenue Service (IRS) has on file.

Normally this would be reconciled through a follow-up auditing process; when the system identifies people whose submitted incomes don't match IRS records, those people are asked to send in further paperwork as proof. But only "a fraction" of those people have responded, according to the Post. And even when they have provided additional documentation, it doesn't matter.

The federal computer system at the heart of the insurance marketplace cannot match this proof with the application because that capability has yet to be built, according to the three individuals," the report says.

So piles of unprocessed "proof" documents are sitting in a federal contractor's Kentucky office, and the government continues to pay insurance subsidies that may be too generous or too meager. 

Fun fact: That contractor happens to be Serco, the data entry company which has a $1.2 billion deal under the health law, and which recently generated some negative attention when an anonymous employee said that there was almost no work to do at the company's processing centers. 

Another fun fact: The back end system that processes and verifies the subsidies was originally supposed to be completed when the exchanges opened last October. Then, when the exchanges launched with so many problems, officials pushed back the opening to early 2014 so they could concentrate on fixing the consumer-facing end of the system.

It's May, and the back end is still far from complete. Federal health officials won't provide reporters with timelines indicating when they expect it to be complete. And insurers participating in the law have been told to be prepared to continue using the current, manual workaround system until at least September

The Obama administration doesn't really want to talk about any of this, because they promised this wouldn't be a problem. Or, as the Post puts it, "members of the Obama administration are sensitive because they promised congressional Republicans during budget negotiations last year that a thorough income-verification system would be in place." So far, that obviously isn't the case. 

And it won't be for at least several more months. Work will proceed by hand, but income discrepancies won't be up for review until this summer. That's because the administration has another million applications with a different problem: questions about the applicant's citizenship. Those issues will be dealt with first. Even that doesn't fully capture the extent of the application glitches. "Of the roughly 8 million Americans who signed up for coverage this year under the health-care law," the Post says, "about 5.5 million are in the federal insurance exchange. And according to the internal documents, more than half of them — about 3 million people — have an application containing at least one kind of inconsistency." This isn't a small problem, and it likely won't be going away soon. 

NEXT: Debate Over Obamacare Is Still Not Over, Americans Say

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Good enough for government work.

  2. Really lit the troll beacon on this one…

    1. The trolls tired themselves out this weekend. Hopefully.

      Tulpa was here under 2 different handles.

      1. I always wonder why they do that. We’re libertarians: you can shoot your ignorant mouth off under your real name in our book. You figure they do it to make it seem like they have someone who agrees with them?

        1. That’s exactly why they do it.

  3. Several. More. Months. To. Fix. What do they have, just one guy working on this? Or is it like the cartoons where two guys are “working” and one is emptying the tub while the other one tries to fill it?

    1. A team of monekys working around the clock.

      Eventually they will get it right, but no one will know, because who’s going to dig through piles of monkey product for quality control?

      1. Did someones says monkeys?

        “It was the best of times, it was the blurts of times.”

        1. blurst.

            1. Looks like a squirrel to me.



      … so far.

      1. I don’t see what the big deal is. Success was redefined as getting people to sign up.

        People signed up.

        Oh, so how there are complaints about broken this and that? Too late: success has been declared.

        Oh, and RACIST!

  5. Say what you will about National Socialism, at least the trains to the death camps ran on time.

  6. Pauly Krugnuts: Health Care Confidential
    ..I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system’s success provides a helpful corrective to anti-government ideology. For the government doesn’t just pay the bills in this system — it runs the hospitals and clinics.

    No, I’m not talking about some faraway country. The system in question is our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate….

    …The secret of its success is the fact that it’s a universal, integrated system. Because it covers all veterans, the system doesn’t need to employ legions of administrative staff to check patients’ coverage and demand payment from their insurance companies. Because it covers all aspects of medical care, it has been able to take the lead in electronic record-keeping and other innovations that reduce costs, ensure effective treatment and help prevent medical errors.

    Moreover, the V.H.A., as Phillip Longman put it in The Washington Monthly, ”has nearly a lifetime relationship with its patients.” As a result, it ”actually has an incentive to invest in prevention and more effective disease management. …

    1. …For the lesson of the V.H.A.’s success story — that a government agency can deliver better care at lower cost than the private sector — runs completely counter to the pro-privatization, anti-government conventional wisdom that dominates today’s Washington….

      1. I love it when a columnist at arguably the most famous newspaper in the world, who’s on TV multiple times a year, and lauded as undeniably correct about everything because he won a nobel prize in something, begins telling us about the secrets we’re not hearing about because they’re part of the anti-government conventional wisdom of Washington.

        The saddest part is that failing veteran’s care is a black eye to democrats and republicans. Democrats, because it’s clearly an example of the kind of healthcare nobody wants, and republicans, because it’s a failure to deliver on a promise made for military service.

        When you don’t know about it’s blazing success, you should begin to wonder why you’re not hearing more about it. And the answer probably doesn’t make the government look good.

    2. Good find.

    3. I’ll just leave this here in case Krugnuts swings by. Maybe it’ll help alleviate some of his confusion.

    4. “And farsighted thinkers are already suggesting that the Veterans Health Administration, not President Bush’s unrealistic vision of a system in which people go “comparative shopping” for medical care the way they do when buying tile (his example, not mine), represents the true future of American health care.” (Krugman’s conclusion)
      The president might be madder than hell, but in the end it’s going to be LEGEND… wait for it…

  7. I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system’s success provides a helpful corrective to anti-government ideology. For the government doesn’t just pay the bills in this system — it runs the hospitals and clinics.

    It’s not called a “belief system” for nothing.

    1. I asked my foaming-at-the-mouth liberal mother if she would trust a supermajority of republicans with this power. She said no but she doesn’t have to worry about that because they’ll never get majority again.

      When I describe her as a “foaming-at-the-mouth liberal” that isn’t hyperbole. All you have to do is say the word bush and she flies into a rage and literally starts spewing spit as she rages.

      It goes beyond belief, it’s closer to insanity.

      1. I got the niece like that. Holes in her walls mark the times someone demonstrated that liberalism isn’t working.

      2. Ouch…better watch out for I could be easily labeled both a “foaming-at-the-mouth-liberal” and a “foaming-at-the-mouth-conservative” for I have been enraged by both parties and unfortunately in some instances on identical topics for the same identical reasons. Speaking of the Patriot Act……

  8. Sneakers quote, Suderman? Too good for Hackers references?

  9. This is something I predicted a year ago, to the skepticism of my lefty friends. The back end of healthcare.gov is hugely complicated, in part because it has to link existing databases from the IRS, Social Security, HHS, Homeland Security, 50 state Medicaid systems, all the health insurers, and probably some I’ve forgotten.

    Far smaller IT projects have simply failed (about half of similarly huge ones fail). There is a good chance this will never be completed. And remember, this is now only handling individual policies. As some state exchanges fail, and with the coming wave of employers dropping coverage, it will only get worse.

    1. Totally agree. I can’t imagine why anyone would put their information into a system with such a bad front end. Anyone who knows anything about IT has to realize that the front end is typically far better than the back end. I’m excited to see what happens when Obamavictims get their Obamabills from their Obamagovernmentidiots next year. Pass the popcorn.

      1. Why would you even give your friends this amount of power over you when it’s pretty much guaranteed your enemies will control it in the very near future.

        Your mistake is to think that this is about logic, common sense or self preservation.

  10. my friend’s mother makes $61 every hour on the internet . She has been laid off for 8 months but last month her income was $17227 just working on the internet for a few hours. visit site………..

  11. Did they promise the verification system would work?

    1. It seems like they pretty much promised anything and everything in order to get it passed.

  12. OK, you guys, push on the left upright toward the north! You’re going to have to do better if you want the goal posts to keep up with the news; now let’s see dome EFFORT!

  13. This isn’t really that hard. And I would know as I’m an ex provider. Return all routine to fee for service. They tried that in Oklahoma and reduced costs by 80% for most services. But that means the days of the professional parasite on welfare getting unlimited healthcare for free are over. They have to pay too. That means they don’t get to come in every other day because of their back pain and obesity due to their lethargic lifestyle. And that is most of the welfare recipients. Not all–but most. Medicaid is draining the entire system. So they have to pay as well. And for the truly needy and disabled there are charity organizations. And most of us will take pro bono. What we shouldn’t take is the professional parasite living off of our taxes because they are lazy. Then you have catastrophic insurance for injury and illness. Reduced rates across state lines because few would use it like few use car insurance. Break your arm–pay the deductible like car insurance and you’re covered. Or if you have cancer. But that means the welfare group has to pay too. Again–they no longer get it all for free. And that is the problem. The Progressive doesn’t want to say let’s make it fair. ACA wants one man to pay more so another pays less–or not at all. And this plan may result in the predicted collapse I write about–based on this little thing called history.

    Charles Hurst. Author of THE SECOND FALL. An offbeat story of Armageddon. And creator of THE RUNNINGWOLF EZINE

  14. The boot heel of Obama is invisible when it burns his ass. For the rest of us the boot heel of opportunity is generally all that is required to go forth and produce . . . For us and our family. Is this lapse in government thoroughness an opportunity to scam all the people paying for the vast over reach of Obama’s regime? Let’s hope not

  15. Start working at home with Google. It’s a great work at home opportunity. Just work for few hours. I earn up to $500 a week. I can’t believe how easy it was once I tried it out. http://www.Fox81.com

  16. Health law brought many problems for the society but it should be implemented more careful. Many people hardly can make their ends meet, they often use cash advance loans via Internet in US to survive and health care is a big burden for them.

  17. sounds good, hope it works well.

Please to post comments

Comments are closed.