Fraudulent applications for Obamacare subsidies succeeding, audit finds

In the audit, 18 applications were filed by employees of the Government Accountability Office, and 11 went through. That comes on the heels of two conflicting court rulings about the Obamacare subsidies Tuesday.

J. Scott Applewhite
Rep. Dave Camp (R) of Michigan, shown in this June 20, 2014, photo, was one of several House Republicans who urged the Government Accountability Office to investigate potential fraud within the Affordable Care Act.

An audit by the Government Accountability Office (GAO) released Wednesday lent political ammunition to congressional Republicans, finding that it was relatively easy to defraud the application process for health insurance subsidies under the Affordable Care Act (ACA).

During the audit, 12 GAO employees filed 18 applications using fabricated identities. Eleven of the applications succeeded, scoring an average benefit of $2,500 monthly.

Republican leaders have pointed to the findings as proof that the ACA is a bureaucratic waste, while defenders of the ACA have noted that – while the program needs tweaking – various eligibility checks did deter GAO workers at multiple points in the investigation.

“We are seeing a trend with Obamacare information systems: Under every rock, there is incompetence, waste, and the potential for fraud,” House Ways and Means Committee chairman Dave Camp (R) of Michigan told NBC News. “Now, we learn that in many cases, the exchange is unable to screen out fake identities or documents.”

During the investigation, employees attempted six online applications, six by phone, and six in-person examinations. Of the six phone applications, five went through successfully, while one was rejected when the applicant refused to provide a Social Security number.

All the online applications were caught by eligibility checks. However, all six were eventually approved after the applicants contacted the ACA’s call center.

Five of the in-person applications were not processed, as GAO officials were unable to get help. The other one was rejected when an ACA worker correctly said that the applicant’s stated income was too high for a subsidy.

“We will examine this report carefully and will work with GAO to identify additional strategies to strengthen our verification processes,” Aaron Albright, a spokesman for the Centers for Medicare & Medicaid Services, told The Associated Press.

While GOP leaders have described the ACA as ripe territory for fraudsters in light of the audit, in reality it may be hard to reap profits from the program, as the subsidies go directly to insurance companies rather than to individuals. Also, the certification process for ACA subsidy applications is still being constructed, ACA spokespeople note – and in the meantime, false applicants risk heavy fines and prosecution for perjury.

“As the GAO notes in its interim report, the steps we take to ensure that individuals and families get the premium support and coverage they deserve, and that no one receives a benefit they shouldn't, are ongoing and have not concluded,” Kevin Griffis, a spokesman for the Department of Health and Human Services, told NBC News.

The recent investigation comes as federal courts have been considering the subsidies as well. On Tuesday, the federal appeals court for the District of Columbia ruled that the federal government could not provide subsidies to residents of the 34 states that have not set up their own health-care exchanges. This development could scratch a key purpose of the ACA – namely, making health insurance affordable for low- and middle-income Americans.

That ruling is not a death knell for the law, however: The appeals court stayed its ruling pending an appeal by the Obama administration, and on the same day, the Fourth Circuit Court of Appeals in Richmond, Va., upheld the exact provision that the other court struck down.

But these recent developments have been enough for House Republicans to condemn the ACA as a bureaucratic and legal nightmare.

“Obamacare is a mess,” Rep. Charles Boustany (R) of Louisiana said in a statement. “No wonder hard-working Americans are fed up with a government that spends too much on broken programs that aren't doing the job they're intended to. We can and must do better.”

The Obama administration, for its part, has insisted on the legality of the subsidies, siding with the Fourth Circuit and saying that the challenge relied on a “tortured” interpretation of the law.

“You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health-care costs, regardless of whether it was state officials or federal officials who were running the marketplace,” White House spokesman Josh Earnest said Tuesday. “I think that is a pretty clear intent of the congressional law.”

The recent GAO probe into the ACA stems from a request that House Republicans made before the health-care exchanges opened in the fall. Among the Republicans who asked the GAO to look into potentially fraudulent applications were Representatives Camp and Boustany.

 This report includes material from The Associated Press.

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