The fight over verification procedures for Obamacare's health insurance subsidies is just one of the many ongoing sub-arguments about implementation of the health law, but it's one that highlights the administration's particular mix of arrogance and ineptitude, as well as the long-term problems with the administration's fix-it-later approach to the health law.
Throughout last year, the Obama administration gave the distinct impression that it was not overly concerned with verifying eligibility for Obamacare's health insurance subsidies. Those subsidies are granted based on household income, with larger subsidies going to those who earn less. The question, then, was how government officials would determine an applicant's income.
Last July, in a holiday-week news dump, The Washington Post suggested an answer when it reported that the administration had written a rule allowing most individuals to self attest projected household income without further verification. In other words, there would be no verification in most instances. As the Post described it, Obamacare would rely on the honor system.
That didn't sit well with some members of Congress. So in September the House, led by Republicans, passed a bill dubbed the No Subsidies Without Verification Act, which would have required the Inspector General (IG) of the Department of Health and Human Services (HHS) to certify that there's a working verification program prior to the payment of subsidies.
Or it would have—if it had passed. But that would have necessitated a presidential sign-off. Instead, the White House threatened a veto of the bill, saying it strongly opposed the legislation because it would delay the payment of subsidies and would impede opening the Marketplaces on October 1st. Besides, the White House argued, the requirement was unnecessary because HHS had already put in place an effective and efficient system for verification of eligibility for premium tax credits.
It was practically an admission that the administration's verification system would not pass the muster of an independent check. If a sufficiently robust system was already being in place, then an independent confirmation shouldn't create a significant delay. It was also implicit confirmation of the low priority that the administration gave to creating a reliable verification system. And it would prove to be false.
Obamacare's exchanges opened in October, and after the initially crippling tech failures were dealt with, people began to sign up for and enroll in subsidized coverage. This year, the administration began making subsidy payments to insurers.
The verification process, however, was stuck in administrative limbo. Last month, the Associated Press and The Washington Post reported that more than a million people who qualified for subsidies had income discrepancies, in which the information provided by the individual did not match records on file. Nearly a million more had discrepancies related to citizenship or immigration status.
The administration had begun the process of sending out requests for more documentation and information from those people, but many weren't responding. Those who did respond were stuck in a long line for processing: The system to automatically enter data from verification documents had not yet been built, meaning that data processors had to type everything in manually.
Contrary to what the White House had asserted in September, the administration had not already put in place an effective and efficient system for verifying subsidy eligibility. The sheer number of inconsistencies—more than two million, counting income, citizenship, and immigration status discrepancies—made it clear that there was no meaningful check on subsidies before they were paid. And the incomplete data-entry system could hardly be described as an effective or efficient method of post-payment check.
To the extent that verification was a priority, it was low on the list, and the administration, after resisting efforts to check their work, had decided to put it off and deal with the problem later.
Well, later is apparently now, and the administration is sending out hundreds of thousands of notices saying that the information they provided does not match other federal records, according to The New York Times. At least some of the automation that was incomplete in May has now come online, but the process is still a mess.
"Even though consumers have sent documents to [document processing contractor] Serco's office in London, Ky., the government cannot always link the documents to applications for coverage filed months earlier," the Times reports. The story also notes that some people remain unable to upload documents electronically. And one source quoted in the article says that people who have already sent in documentation are being asked to send it in again.
Obamacare supporters are downplaying the inconsistencies as minor records mismatches, but the potential for upheaval is significant. What happens, for example, if the people who have been contacted don't send in additional documentation? The letters sent out by HHS warn that they could lose their subsidy, or be dropped from their exchange coverage entirely. We don't know how many people have responded at this point, but last month The Washington Post reported that just a fraction of those contacted had done so. What about those who try and cannot get their documents to upload into the system? And what about the delays caused by the administration's failure to complete the tech systems necessary for timely processing?
It's not clear how this mass of discrepancies gets resolved, but what's obvious is that this is a big bureaucratic mess created by the administration's incompetence, bluster, and refusal to be transparent. They declined independent checks and insisted they had implementation under control, despite contrary evidence, and now it's abundantly clear that they didn't. It's a kick-the-can approach to administration and implementation.
And despite the too-late verification efforts now in the works, it's a big mess that may not be resolved until tax time next year: Those whose received subsidies for which they were not eligible are, at least in theory, supposed to repay the overage on along with their tax bills. How many people might this affect? So far, no one really knows. As always with Obamacare, it's easier to wait to fix problems until later.