Senators query GAO on healthcare.gov scam report

Patient access or program integrity? The question of which need outweighs the other was the theme of a Senate Finance Committee hearing that discussed the erroneous approval of subsidies by healthcare.gov for fake patients.

An investigation by the Government Accountability Office (GAO) found the federal exchange approved 11 of 12 telephone and online applications for fictitious applicants and paid $30,000 in annual insurance credits for the fake patients over a 2-year period. Investigators provided fake documents to the government, including Social Security numbers and proof of income, but encountered no barriers to obtaining taxpayer-funded credits, according to the report released July 15.

The findings are troubling and do not speak well of the management of healthcare.gov, the protection of taxpayer dollars, or the experience of enrollees, Senate Finance Committee Chairman Orrin Hatch (R-Utah) said during a July 16 hearing.

“The GAO’s investigation exposes not only huge gaps in federal exchange program integrity, but also flaws in how the exchange and [Centers for Medicare & Medicaid Services] contractors treat Americans who are trying to file or correct legitimate applications,” Chairman Hatch said during his opening statement. “The fact that GAO encountered mind-boggling levels of incompetence and inefficiency at nearly every turn does not bode well for the experience of your average, honest enrollee.”

CMS officials did not testify at the hearing nor did they respond to requests for comment.

The GAO’s investigation covered the marketplace’s first open-enrollment period from Oct. 1, 2013 to March 31, 2014, as well as follow-on work through 2014 and 2015. As part of its “secret shopper” investigation, GAO created 18 fictitious identities to apply for premium subsidies through the federal exchange by telephone, online, and in-person. The fake applicants were able to get health insurance and subsidies with fictitious information in nearly all cases. For 7 of the 11 fictitious applicants, GAO intentionally did not submit all required documentation to the marketplace, but CMS did not cancel the subsidized coverage.

“While these subsidies, including those granted to GAO’s fictitious applicants, are paid to health care insurers, and not directly to enrolled consumers, they nevertheless represent a benefit to consumers and a cost to the government,” according to the report.

Among the report’s findings:

• Information transmitted to the IRS for 3 of 11 fictitious enrollees, such as coverage periods and subsidy amounts, was incorrect.

• The marketplace automatically reenrolled coverage for all 11 fictitious enrollees for 2015.

• CMS terminated coverage for 6 of the 11 enrollees in 2015, stating that the fictitious enrollees had not provided necessary documentation. On appeal, five were reinstated and awarded higher subsidies.

The GAO tests were designed to identify potential control weaknesses in the market enrollment process and to inform the agency’s ongoing audit of these controls, Seto J. Bagdoyan, GAO director of forensic audits and investigative service, said at the hearing. GAO plans to provide recommendations about control efforts in a forthcoming report.

“A program of this scope and scale is inherently at risk for errors, including in proper payment and fraudulent activities,” Mr. Bagdoyan testified. “Accordingly, it is essential there are effective enrollment controls in place to help narrow the window of opportunities for such risks.”

Mr. Bagoyan noted that in response to the findings, CMS stated that they had limited capacity to respond to attempts at fraud within enrollment, and that officials must balance consumers’ ability to access coverage with program integrity concerns.

Sen Ron Wyden (D-Ore.) stressed the importance of this balance in his opening statement. He largely criticized the report, noting the study analyzed only fictitious cases and none involved a real person who filed taxes or received medical care.

“Part of any smart, ferocious strategy against fraud, on one hand, is drawing a distinction between aggressively going after scammers, and on the other, not harming a law-abiding American who’s made an honest, often technical mistake,” said Sen. Wyden, ranking member of the Finance Committee. “A retiree nearing Medicare age shouldn’t get kicked to the curb because she accidentally submitted an incorrect document. A transgender American shouldn’t lose health coverage after a name change because some forms don’t match. I can’t imagine the Congress wants a system that nixes the health insurance coverage of Americans because of simple issues like those.”

In the GAO report, CMS officials stated that there have been no cases of actual fraudulent marketplace applications or documentation referred to the Justice Department or the U.S. Department of Health & Human Services’ Office of Inspector General. Following the findings, CMS officials said they plan to conduct an assessment of the marketplace’s eligibility determination process, including the application process, and consistency surrounding the resolution process.