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In Fraud They Trust: Obama Administration’s Obamacare Failures Cost Taxpayers Millions

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

A new report from the Office of Inspector General (OIG) at the Department of Health and Human Services (HHS) reveals in 2014, the year the Obamacare health insurance exchanges first opened, there was a significant lack of oversight of tax-credit payments sent to insurers, leading many to question how much of the $11 billion of taxpayer money paid to insurers in 2014 was fraudulent.


One of the most important parts of the Affordable Care Act (ACA) legislation was the creation of taxpayer-funded credits that would theoretically help offset the cost of paying for health care for millions of Americans who couldn’t afford to pay for health insurance on their own and weren’t receiving adequate insurance through an employer.

Although most tax credits are applied at the end of a tax year, Obamacare health insurance credits are sent automatically to health insurance companies when qualified Americans sign up for a policy through an Obamacare exchange. This is a necessary feature in ACA, because if qualified individuals or families had to pay the full cost of health insurance up front, many would be unable to make the required health insurance payments each month.

According to HHS’s Office of Inspector General, in 2014 there weren’t any solid mechanisms in place to ensure the subsidy payments made to health insurance companies were legally made. As The Wall Street Journal reported on January 6, 2016, “the [Centers for Medicare and Medicaid Services, which is responsible for overseeing ACA,] couldn’t verify the payments to insurers were only for consumers who had paid their premiums.”

Without having any way to verify subsidy payments were properly made, it was virtually impossible for the Centers for Medicare and Medicaid Services (CMS) to prevent fraud and waste, two problems that have plagued Obamacare since it was first implemented.


Kristina Ribali, senior coalitions director for the Foundation for Government Accountability (FGA), reported for The Blaze an investigation in July 2015 revealed “defrauding Obamacare was still very easy.”

“With a fake name and fake documents, the investigators were able to receive both insurance coverage and taxpayer subsidies, a year after they proved the first time that this fraud was achievable,” wrote Ribali.

Ribali also recounted in her article how nearly $350 million in Obamacare tax credits had been overpaid by the Internal Revenue Service (IRS) by early 2015, and Ribali reported back in August 2015 the ACA made it virtually impossible to retrieve the lost cash.

What is disturbing is not that another massive government-created social program is irresponsible with taxpayer money—a problem present in virtually every federal program—it’s that the Obama administration was well aware of these problems at least as early as 2013 and chose to move forward knowing millions of dollars were likely going to be wasted or stolen.

In December 2013, Rachael Bade and Lauren French reported for Politico, “[T]he [IRS] may not yet have a system in place to stop tax cheats seeking to underestimate their incomes and fraudulently cash in on health subsidies.”


Bade and French quote directly from a Treasury Department report on the possibility of fraud, “The ACA Program has not yet completed a fraud mitigation strategy. It is important for the IRS to thoroughly consider fraud threats and risks that could impact new ACA systems.”

Unfortunately for taxpayers, the necessary changes made to the “ACA systems” didn’t take place until it was too late. Only now are automated systems being put into place that may prevent a significant amount of fraud and waste.

While it’s impossible to know how much money was wasted and how much of the taxpayer subsidies paid to insurance companies in 2014 were legitimate, it’s important to note in 2014 HHS found 1.2 million people who signed up for health insurance in an Obamacare exchange had, as FoxNews.com reported in August 2014, “inconsistencies in their applications.”

FoxNews.com also reported the Kaiser Family Foundation (KFF) claimed 85 percent of Obamacare applicants were considered eligible for some sort of taxpayer subsidy, which KFF estimated would cost “about $10 billion in subsidies in [2014].” Now that we know the total cost actually reached $11 billion, it’s necessary to ask, “Where did the rest of the money go?”

It’s impossible to say how much of the $1 billion difference between KFF’s report in 2014 and the actual costs revealed in 2015 is the result of fraud, mismanagement, improper payments, waste, or just mistakes made by KFF and other groups calculating costs. There simply weren’t any mechanisms in place to prevent or identify the waste—the result of decisions made by the Obama administration. What we do know, however, is that, at the very least, hundreds of millions of dollars were wasted, that fraud was possible and did occur, and that the Obama administration moved forward with the Obamacare system knowing in 2013 it had no way of protecting taxpayers’ money.


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