Obamacare subsidies: a scandal in the making

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When it comes to Obamacare subsidies, the government has to do some backtracking[1]. The administration is apparently going back and contacting hundreds of thousands of applicants who received Obamacare subsidies, but for whatever reason, submitted information that conflicts with government records. It could be as many as 2 million people.

Government notices have been going out since June 1 telling applicants they have 90 days to “follow up as soon as possible and provide more documents to make sure the marketplace has the correct information.”

So far this year the federal government has doled out $4.7 billion in health care subsidies. That number is expected to rise to $900 billion in the next decade. During the open enrollment period between October 2013 and April 2014, 8 out of ten applicants were eligible for subsidies, including income tax credits.

Thanks in no small part to the massive complexity of the Obamacare law, there are several reasons why discrepancies may exist. It could be as simple as a data-entry error or a Healthcare.gov glitch. It could be out-of-date government records. There’s also the fact that it’s difficult for Serco workers –the government contractor hired to handle applications – to match documents in their office with those in the government database. It could also be fraud.

Whatever the cause, investigating discrepancies is sure to turn into a bureaucratic nightmare. Consumers whose applications have been flagged could face one of two outcomes: lose coverage and owe the IRS a huge fine on Tax Day, or keep coverage but haggle with government agents over government records and supporting documents.

The Health and Human Services Inspector General is expected[2] to deliver a report later this summer on how well the administration is preventing fraud and inaccurate payments to ineligible subsidy recipients. We’re going to go out on a limb and predict a grim prognosis. Government subsidy programs are rife with fraud. And if past is prologue when it comes to the implementation of Obamacare, we expect the While House to have another Obamacare scandal on its hands.