Great news: IRS hasn’t got sufficient anti-fraud protection on ObamaCare systems

posted at 8:01 am on December 4, 2013 by Ed Morrissey

If you liked the security holes in the basic Healthcare.gov system that has experts warning consumers to stay away from the web portal, you’ll love what the IRS will have when their ObamaCare system goes on line. Politico reports that the Inspector General warned in July the IRS that its tax-credit disbursement system was at risk for fraud, and that the agency hadn’t even completed a fraud-mitigation plan:

The Internal Revenue Service has successfully finished testing systems to accurately calculate tax credits under Obamacare but needs to improve its controls to avoid problems with fraud as the agency begins doling out the credits in 2014, an inspector general report said Tuesday.

The Treasury inspector general for tax administration said in a report that IRS software has a system to verify tax credit calculations before it issues them to health insurers, but it said the agency may not yet have a system in place to stop tax cheats seeking to underestimate their incomes and fraudulently cash in on health subsidies.

“The ACA Program has not yet completed a fraud mitigation strategy,” the report said. “It is important for the IRS to thoroughly consider fraud threats and risks that could impact new ACA systems.”

One would think that the IRS would already know that.  They’re not exactly shy when it comes to pursuing fraud in any other context, after all. When Politico asked this week about the report, the IRS replied — we’re working on it. The White House didn’t bother to provide a response:

The IRS said it was addressing the issues identified in the TIGTA audit, which was completed in July. The White House referred questions to the IRS.

Sen. Orrin Hatch has blasted the IRS part of the system as a “fraudster’s dream come true.”  The plan is to pay the credits and then verify the information later, a necessity because of the failure to develop the online systems for ObamaCare on time, and that means the IRS and HHS will spend lots of time trying to catch up to the checks. Hatch also argues that the nature of the law itself lends itself to fraud:

Sen. Orrin Hatch (R-Utah), the top Republican on the Senate Finance Committee, described the subsidies as a “fraudsters dream come true.”

“The very nature of these credits — pay first, verify a person’s income later — will lead to potentially hundreds of billions of dollars of improper payments and could put millions of American’s personal information at risk,” Hatch said in a statement.

Hatch also suggested the IRS cannot fully address the vulnerabilities of the refund system because the problems are “deeply rooted in the law itself, referring to the health legislation. ”I fear the IRS will never be fully capable of ensuring that these refundable tax credits got to those who are truly eligible,” he said.

By the way, this isn’t actually a new story. It’s just that the media has noticed it now. Both Hatch and Sen. Tom Coburn warned about this TIGTA audit a month ago:

On the heels of a new Treasury Inspector General for Tax Administration (TIGTA) report that found the Internal Revenue Service (IRS) has failed to reduce improper Earned Income Tax Credit (EITC) payments, Finance Committee Ranking Member Orrin Hatch (R-Utah) and Homeland Security and Governmental Affairs Ranking Member Tom Coburn (R-Okla.) today pressed the IRS for additional answers on how the agency will manage ObamaCare’s premium subsidies, complex tax credits designed to defray the cost of purchasing health insurance, based on household income.

In a letter to Principal Deputy Commissioner Daniel Werfel, the Senators questioned whether the IRS was equipped to process the subsidies which are both advanceable and refundable – meaning pay out first and verify later – and asked for details on the policies that are in place to curb improper payments to taxpayers.

“This [TIGTA] audit raises serious concerns about the IRS’s unwillingness or inability to successfully prevent billions of taxpayer dollars being wasted on erroneous tax credit claims. We are particularly worried about these findings, given the IRS’s role generally as the primary agency administering a range of credits and specifically in overseeing and implementing the premium tax credits under the Patient Protection and Affordable Care Act (PPACA),” wrote the Senators. “Similar to the EITC, the Affordable Care Act offers refundable tax credits for certain eligible individuals. However, we believe that a range of provisions in federal law, regulations, and administrative practices actually leave the health care overhaul even more seriously susceptible to fraud or abuse than the EITC program already is.”

So the IRS has had at least a month’s warning that Congress had noticed the security gaps on their side of ObamaCare, and their answer now is still we’re working on it. After seeing the security gaps go live on the HHS side of the online infrastructure, does anyone have any confidence at all that the IRS will do any better?


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REPEAL.

22044 on December 4, 2013 at 8:05 AM

Pay first verify later

Cripe are we in bizarro world?

cmsinaz on December 4, 2013 at 8:07 AM

I hope things are better with your family Ed.

celtic warrior on December 4, 2013 at 8:10 AM

http://therightscoop.com/um-obama-admin-announces-they-will-let-insurers-guestimate-how-much-govt-owes-for-obamacare/

Did anyone catch this last night? Not only are Obama and the Dems using the “honor system” to hand out subsidies to people, but now they’re applying the same thing to insurance companies. So basically in order to prop up this joke of a law, they’re issuing a massive blank check on behalf of the taxpayers to maintain the little support Obamacare has left.

Doughboy on December 4, 2013 at 8:11 AM

So how many government people,
in on the scam,
to get free money from Uncle Sam?

albill on December 4, 2013 at 8:12 AM

Nothing an EO declaring it fixed won’t take care of.

Gatsu on December 4, 2013 at 8:12 AM

Unstinkingbelievable doughboy

cmsinaz on December 4, 2013 at 8:12 AM

Hatch also argues that the nature of the law itself lends itself to fraud

The law is a fraud and its passage was a fraud. Now criminals will defraud the fraud.

forest on December 4, 2013 at 8:14 AM

Nice little personal information you got there.

yoda on December 4, 2013 at 8:16 AM

I signed the bill but have not read it

Thank you, voters for your praise of my due diligence!

Obamatrix on December 4, 2013 at 8:16 AM

I hope things are better with your family Ed.

celtic warrior on December 4, 2013 at 8:10 AM

Thank you. Unfortunately, it’s not. We’re flying to California today to deal with my sister-in-law’s terminal illness. Thank you for the kind thoughts, though.

Ed Morrissey on December 4, 2013 at 8:17 AM

Ed Morrissey on December 4, 2013 at 8:17 AM

Sorry to hear that. Going through the same with my father-in-law. Prayers for you and yours.

Chris of Rights on December 4, 2013 at 8:20 AM

Given that we have a regime that is fine with fraud in campaign donations and actual voting, fraud with Obamacare is a feature, not a bug.

rbj on December 4, 2013 at 8:20 AM

Thank you. Unfortunately, it’s not. We’re flying to California today to deal with my sister-in-law’s terminal illness. Thank you for the kind thoughts, though.

Ed Morrissey on December 4, 2013 at 8:17 AM

Praying for your family, Ed.

kcewa on December 4, 2013 at 8:21 AM

Thank you. Unfortunately, it’s not. We’re flying to California today to deal with my sister-in-law’s terminal illness. Thank you for the kind thoughts, though.

Ed Morrissey on December 4, 2013 at 8:17 AM

Ouch. Condolences to everyone. Thoughts and prayers on their way.

rbj on December 4, 2013 at 8:22 AM

ObysmalCare is intended to destroy the middle class, to seize sectors of the economy for the federal government, and to create chaos a la Cloward-Piven.

http://washingtonexaminer.com/obamacare-highlights-barack-obamas-inverse-genius/article/2540114?custom_click=rss

onlineanalyst on December 4, 2013 at 8:23 AM

Prayers coming your way Ed

cmsinaz on December 4, 2013 at 8:25 AM

Thanks for the update, Ed.

22044 on December 4, 2013 at 8:26 AM

And despite the security issues on the HHS and IRS portions of Obamacare, the filthy lazy shiftless idiot will be out there this afternoon at a “youth summit” demanding that young people sign up for insurance they do not need for the good of the collective.

Put another way, it is a right now that bar sluts like Sandra Fluke never ever have to pay for birth control.

Happy Nomad on December 4, 2013 at 8:26 AM

Ed as we say at mass,’may the peace and love of the Lord Jesus Christ be with you’.

celtic warrior on December 4, 2013 at 8:26 AM

So basically in order to prop up this joke of a law, they’re issuing a massive blank check on behalf of the taxpayers to maintain the little support Obamacare has left.

Doughboy on December 4, 2013 at 8:11 AM

I guess after piling on nearly $7 trillion in new debt, and handing out billions and billions of taxpayer dollars to all sorts of cronies/supporters (e.g., the auto unions, the “green” scam companies, the billions in food stamps and other welfare benefits to legally-ineligible-to receive-such-benefits illegal aliens, etc.), Obama figures “what difference, at this point, does it make?”

We’re so screwed.

AZCoyote on December 4, 2013 at 8:32 AM

Prayers coming your way Ed

cmsinaz on December 4, 2013 at 8:25 AM

…and…then some!

KOOLAID2 on December 4, 2013 at 8:34 AM

Doughboy on December 4, 2013 at 8:11 AM

If you did this in a private corporation…

It’s completely lawless now, feral, rogue, pick your adjective, they’ve run out of halfway sane methods to tackle the monster they created and have decided that anything and everything is now an option.

Bishop on December 4, 2013 at 8:41 AM

It’s completely lawless now, feral, rogue, pick your adjective, they’ve run out of halfway sane methods to tackle the monster they created and have decided that anything and everything is now an option.

Bishop on December 4, 2013 at 8:41 AM

Yeah, Obamacare is now under Dodge City rules.

Happy Nomad on December 4, 2013 at 8:43 AM

Yeah, Obamacare is now under Dodge City rules.

Happy Nomad on December 4, 2013 at 8:43 AM

When a sitting President tells private companies that they can issue health insurance policies that do not comply with Federal law, just to try and save face, we as a country are in very serious trouble.

Johnnyreb on December 4, 2013 at 8:48 AM

Oh, Ed, I’m so sorry for your family…you will be in our prayers.

Proverbs 3:5-6.

herm2416 on December 4, 2013 at 8:49 AM

After seeing the security gaps go live on the HHS side of the online infrastructure, does anyone have any confidence at all that the IRS will do any better?

And yet, as bad as all of that is, it’s still just another squirrel, a distraction from the main/real problem, which is the law itself. Implementation problems are fixable, the ACA isn’t. And this one won’t get the traction that the web problems have, because it’s not going to be right in people’s faces (the media will see to that, as well).

I’m pretty sure that Barky’s handlers realize this, and know that if they get the website “fixed” (i.e. fewer visible errors, or at least less bad press) before they’ve bled too much street cred, the sheeple will turn their attention back to more important things, like watching the Kardashians.

bofh on December 4, 2013 at 8:54 AM

Related – the IRS currently isn’t renewing taxpayer preparer ID numbers even though they claim the process is now open.

Steve Eggleston on December 4, 2013 at 9:45 AM

Let me be clear.

If you like your identity, you can keep your identity.

2klbofun on December 4, 2013 at 9:54 AM

I guess that’s the deal for taxpayers now — open yourself up to identity theft or pay a penalty.

Aitch748 on December 4, 2013 at 9:57 AM

If any business was run this way, they’d soon find themselves in court facing charges of criminal negligence.

GarandFan on December 4, 2013 at 10:29 AM

Private sector velocity.

antipc on December 4, 2013 at 10:33 AM

Besides incompetence at running businesses, can we add incompetence at managing software projects to our description of the Democratic Party?

thuja on December 4, 2013 at 10:42 AM

If you like your identity, log on to Healthcare.gov. Some hacker out there might like it too.

savage24 on December 4, 2013 at 11:34 AM

It’s Obama’s take on Reagan’s policy, Trust But Verify. Obama’s is: Trust But Spread the Wealth Around.

ghostwalker1 on December 4, 2013 at 6:04 PM

Big business, toothless government – Stolen Identity Refund Fraud

“The self-proclaimed first lady of tax-refund fraud is Rashia Wilson (posing with the loot on her Facebook page, above) who, along with her eager associates, claimed bogus rebates of more than $11m.”

“In another state (it won’t say which) LexisNexis helped uncover a group that had set up a “virtual apartment block” of post boxes in a shopping mall and used it to claim $16m of refunds for dead people from other states. The money, claimed in amounts below $10,000 so as not to trigger anti-money-laundering filters, disappeared to Russia.”

“the agency might have sent out 1.5m potentially fraudulent refunds in 2011, including 655 to a single address in Lithuania.”

“The filters caught one woman who was claiming food stamps in all 50 states.”

http://www.economist.com/news/united-states/21590912-cleverer-use-data-and-investigative-collaboration-can-help-cut-fraud-sirfs-up

Viator on December 4, 2013 at 6:09 PM