Why You Shouldn't Trust the Administration When It Says It Will Fix Obamacare

Ongoing fraud vulnerabilities reveal the administration's inability to address the health law's persistent problems.



As Obamacare's struggles have become more apparent in recent weeks and months, the administration has taken an increasingly defensive tone about the law.

Following news that major health insurers were scaling back their participation in the law's exchanges, President Obama met with insurers and thanked them for sticking with the law, noting in a letter that the exchange business had "growing pains and opportunities for improvement." Responding to widespread reports that premiums are set to spike for coverage bought in the health law's exchanges, Health and Human Services (HHS) Sec. Sylvia Burwell delicately wrote in a CNN op-ed that the administration does "expect 2017 to be a transition year for the Marketplace"—an implicit admission that premiums would rise substantially—but also promised that officials were working to improve the law, and suggested that the transition (i.e. premium spikes) would only be a temporary, one-time occurence. The Centers for Medicare and Medicaid Services (CMS) made an unusual early release of proposed regulations designed to quell some insurer complaints about the law.

The administration's intended message from all of this activity is clear enough: Yes, there's some turbulence, but much of it is temporary, and we're working to resolve any problems it might have.

These promises ring almost entirely hollow, because the administration has a long history of downplaying problems with the law, and promising fixes that never arrive.

Indeed, if you want to understand why you shouldn't trust the Obama administration when it says it plans to fix Obamacare's problems, just look at the latest Government Accountability Office report on the law's vulnerability to fraud.

The government watchdog released a report this week warning that Obamacare is vulnerable to fraud. In an undercover operation, agency submitted fake applications for coverage during 2015 and 2016, almost all of which were successful in obtaining subsidies, although in some cases the initial applications were initially rejected. Notably, four of the 2015 applications used Social Security numbers that have never been issues, and four of the 2016 applications used fake application information that had been approved in 2014—but did not come with tax-return data that is now supposed to be required for applicants who previously received a subsidy. All of those applications were approved. The entire damning GAO report, which delves into the details of the operation and its results, is worth reading in full.

The news here is not that Obamacare's exchanges are not confirming the eligibility of applicants and are thus vulnerable to fraud. The news is that Obamacare's exchanges are still not confirming the eligibility of applicants and are thus vulnerable to fraud—despite years of warning from multiple government watchdogs that this was a problem, and years of promises from the Obama administration that these issues would be resolved.

As early as September of 2013—before the law's exchanges even went online—the Internal Revenue Service Inspector General could be found sounding the alarm that the tax agency was unprepared to combat fraud in the exchanges, warning that "a fraud mitigation strategy is not in place to guide Affordable Care Act systems development, testing, initial deployment, and long-term operations."

The GAO, meanwhile, has been running undercover operations testing the law's effectiveness at verifying eligibility for subsidies for years. This isn't the first time the agency has noted the law's vulnerability to fraud, or even the second. It is at least the fourth time the agency has issued such a warning.

The first came in July of 2014, in the form of congressional testimony reporting that GAO investigators had successfully applied for subsidies using false information. The following summer, the GAO once again released the results of undercover testing, showing that not only were 11 of its initial counterfeit applications re-enrolled for a second year, some of them received even larger subsidies the second time around. In February of this year, the GAO released another report finding that the CMS, the government agency that administers the health care law, relied on a document processing company to report instances of fraud—even though CMS "does not require the contractor to have any fraud detection capabilities." The government had "assumed a passive approach to identifying and preventing fraud," the GAO said at the time.

Throughout all of this, the Obama administration has always promised that it would work to resolve the problem. We "will work with GAO to identify additional strategies to strengthen our verification processes during this first year of the Affordable Care Act," a CMS spokesperson said in response to the July 2014 testimony. "With regard to the issue of making sure the right people are getting any taxpayer subsidy, we take it very seriously," Health and Human Services Sec. Sylvia Burwell said in February, when the GAO labeled administration fraud prevention efforts "passive."

The consistency of the GAO's reports over the last several years suggests that the administration does not take the issue very seriously at all. It's not clear the administration ever did. Its initial position was that fraud would not be a problem, because an adequate verification system was already in place. On January 1, 2014, the first day in which coverage bought under the law became active, then-HHS Sec. Kathleen Sebelius submitted a letter personally certifying that the exchanges "have implemented numerous systems and processes to carry out these verifications" and would "[verify] application information provided by the consumer when making an eligibility determination."

That was more than two and a half years ago. It's clear now that either some of those systems were never put in place at all, or that the verification systems that have been implemented do not fully work (or both). As for Sebelius, either she did not know that the verification systems were inadequate, or she did know, but said otherwise.

This is not a one-time story. It is illustrative of the administration's approach to the law's failures. The Obama administration has continued to tout the promise of the health law's Accountable Care Organizations to reform the delivery of health care even as half of its model hospital systems have dropped out of the program. The ACO drop-outs include Dartmouth College, which helped devise the idea. Administration officials said they were looking into options to address the financial struggles of the non-profit insurers created using government backed loans under the law, but the co-ops have continued to struggle and fail. Now just seven of the original 23 remain active. The administration has attempted to reassure the public that premiums would remain relatively affordable this year, despite evidence that premiums will rise even for those who shop carefully and are willing to switch plans.

Over and over again, the administration has promised that the law will not fail, that it is not failing, that any problems are not as bad as they seem, or that fixes are on the way. Instead, the law's problems have persisted or grown worse. There's little reason to trust that the administration's latest round of reassurances will result in anything different.