[Senate Hearing 114-277]
[From the U.S. Government Publishing Office]
S. Hrg. 114-277
REVIEWING
HEALTHCARE.GOV
CONTROLS
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
JULY 16, 2015
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
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COMMITTEE ON FINANCE
ORRIN G. HATCH, Utah, Chairman
CHUCK GRASSLEY, Iowa RON WYDEN, Oregon
MIKE CRAPO, Idaho CHARLES E. SCHUMER, New York
PAT ROBERTS, Kansas DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming MARIA CANTWELL, Washington
JOHN CORNYN, Texas BILL NELSON, Florida
JOHN THUNE, South Dakota ROBERT MENENDEZ, New Jersey
RICHARD BURR, North Carolina THOMAS R. CARPER, Delaware
JOHNNY ISAKSON, Georgia BENJAMIN L. CARDIN, Maryland
ROB PORTMAN, Ohio SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania MICHAEL F. BENNET, Colorado
DANIEL COATS, Indiana ROBERT P. CASEY, Jr., Pennsylvania
DEAN HELLER, Nevada MARK R. WARNER, Virginia
TIM SCOTT, South Carolina
Chris Campbell, Staff Director
Joshua Sheinkman, Democratic Staff Director
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman,
Committee on Finance........................................... 1
Wyden, Hon. Ron, a U.S. Senator from Oregon...................... 3
WITNESS
Bagdoyan, Seto J., Director, Forensic Audits and Investigative
Service,
Government Accountability Office, Washington, DC............... 4
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Bagdoyan, Seto J.:
Testimony.................................................... 4
Prepared statement........................................... 21
Grassley, Hon. Chuck:
Prepared statement........................................... 41
Hatch, Hon. Orrin G.:
Opening statement............................................ 1
Prepared statement........................................... 42
Wyden, Hon. Ron:
Opening statement............................................ 3
Prepared statement........................................... 43
(iii)
REVIEWING HEALTHCARE.GOV CONTROLS
----------
THURSDAY, JULY 16, 2015
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:02
a.m., in room SD-215, Dirksen Senate Office Building, Hon.
Orrin G. Hatch (chairman of the committee) presiding.
Present: Senators Grassley, Crapo, Thune, Burr, Portman,
Toomey, Coats, Heller, Scott, Wyden, Cantwell, Brown, Bennet,
and Casey.
Also present: Republican Staff: Chris Campbell, Staff
Director; Kimberly Brandt, Chief Healthcare Investigative
Counsel; Christine Brudevold, Detailee; and Jill Wright,
Detailee. Democratic Staff: Joshua Sheinkman, Staff Director;
Michael Evans, General Counsel; Elizabeth Jurinka, Chief Health
Advisor; David Berick, Chief Investigator; and Juan Machado,
Professional Staff Member.
OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
UTAH, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
Good morning, everybody. Today's hearing will address
controls at the HealthCare.gov website. Specifically, the
committee will hear from the Director of Audit Services at the
Government Accountability Office, Seto Bagdoyan.
Director Bagdoyan's team has led an undercover ``secret
shopper'' investigation to test the Internet controls of
HealthCare.gov and to review the Centers for Medicare and
Medicaid Services' handling of this program. This investigation
was designed to determine the degree to which the
administration's Federal health insurance exchange can protect
against fraudulent applications, what happens when applicants
provide false information and documentation, and whether the
controls are successful in dealing with irregularities once
they are found.
Perhaps I should say ``spoiler alert'' before this next
part. Today, Director Bagdoyan will explain how the Federal
exchange failed spectacularly on virtually all relevant
accounts tested by GAO.
For this investigation, GAO created fictitious identities
to apply for premium tax subsidies through the Federal health
insurance exchange. We learned last year that 11 out of 12 fake
applications were approved, and CMS accepted fabricated
documentation with these applications without attempting to
verify its authenticity and enrolled fake applicants while
handing out thousands of dollars in premium tax subsidies.
Now, a year later, GAO has reported that nothing has
changed and that, if anything, there are more problems. Worst
of all, the administration has known about these problems for
over a year now and has apparently not taken the necessary
steps to rectify them. While CMS says that it is balancing
consumer access to the system with program integrity concerns,
I think it is pretty clear just what is going on here.
Since the Federal exchange was first implemented, success
has been measured by the number of applicants who have signed
up for insurance. Indeed, last year when the administration
reached its initial enrollment goal, critics of the law were
told that we had been wrong all along and that the law was,
despite all the evidence to the contrary, working just fine.
However, with these findings from GAO, it seems obvious, at
least to me, that the administration has been preoccupied with
signing up as many applicants as possible, ignoring potential
fraud and integrity issues along the way.
Now, supporters of Obamacare often insist that it is ``the
law of the land'' and that Congress should work to improve
rather than repeal it. On the first point, these proponents are
unfortunately correct. For the foreseeable future, the so-
called Affordable Care Act is the law of the land. On the
second point, Republicans in Congress continue to work toward
repeal of the misguided law and its expensive mandates,
regulations, penalties, and taxes, and replacement of it with
patient-centered reforms that put patients, rather than
Washington bureaucrats, in charge of their health care
decisions.
However, needless to say, that day will not come until
there is a President who shares our goal. So until then,
Obamacare will remain in place. In the meantime, Congress has
an obligation to exercise rigorous oversight of the
implementation of the law and to work to protect both
beneficiaries and taxpayers from its negative consequences.
That is what today's hearing is about. We are here today to
get an account of how things are working on the Federal health
insurance exchange, and, once again, what we have heard thus
far is not reassuring and does not speak well for CMS's
management of HealthCare.gov, the protection of taxpayer
dollars, or the experience of enrollees.
The GAO's investigation exposes not only huge gaps in
Federal exchange program integrity, but also flaws in how the
exchange and CMS contractors treat Americans who are trying to
file or correct legitimate applications. Time after time, the
GAO team sent information to the exchange for verification,
only to have it ignored or have the exchange respond as if
something entirely different had been sent in.
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. I
look forward to today's hearing and what I hope will be a good
discussion on program integrity at HealthCare.gov.
Before I conclude, I want to note that, even though this
GAO investigation was requested by this committee, CMS was less
than cooperative. Indeed, throughout the entire endeavor,
officials at CMS appeared to be dragging their feet, blowing
past deadlines and good-faith attempts to carry out this
important work.
Put simply, when Congress asks GAO to conduct an inquiry,
no Federal agency should stand in the way of that work. By
delaying the GAO and hampering their efforts, CMS has also
delayed this committee's work and hampered our efforts. This is
unacceptable, and unfortunately, despite promises of increased
transparency and cooperation from agencies throughout this
administration, this type of stonewalling of legitimate
oversight efforts is far, far too common.
Acting CMS Administrator Andy Slavitt, who is now the
President's nominee to run the agency, was personally involved
in this process. As the committee considers his nomination, I
look forward to asking Mr. Slavitt about this investigation and
why CMS has been interfering with our oversight efforts. Of
course, that will all have to wait for another day and another
time.
[The prepared statement of Chairman Hatch appears in the
appendix.]
The Chairman. Today we have our hands full as we hear
testimony about this important GAO investigation. So with that,
I will turn it over to our ranking member, Senator Wyden, for
his opening remarks.
OPENING STATEMENT OF HON. RON WYDEN,
A U.S. SENATOR FROM OREGON
Senator Wyden. Thank you very much, Mr. Chairman.
On this side of the aisle, we do not take a back seat to
anybody in fighting fraud and protecting taxpayer dollars. One
dollar ripped off is one dollar too many. But let us be very
clear this morning. The report up for discussion today is not
about any real-world fraud. The study looks at a dozen
fictitious cases, and not one of them was a real person who
filed taxes or got medical services. No fast-buck fraudster got
a government check sent to their bank account.
Moreover, the government auditors acknowledge today, and I
want to quote here, their work ``cannot be generalized to the
full population of applicants or enrollees.'' None of the
fictitious characters in this study stepped foot in a hospital
or a doctor's office. The fact is, when you actually show up
for medical services, it is a lot harder to fake your way into
receiving taxpayer-subsidized care.
Often, before any services are delivered, providers ask for
a photo ID with an insurance card. If you have stolen an
identity, there is probably a medical history belonging to
somebody else that ought to set off alarm bells. If you are a
real person signing up in the insurance marketplace, you have
to attest, under penalty of perjury, that the information you
provide is correct. If you falsify the application, you face
the prospect of a fine of up to $250,000.
Another major anti-fraud check went untested in this study:
that is, squaring up tax returns with the information from your
insurance application. The Government Accountability Office
testimony today calls it ``a key element of back-end
controls.''
If your tax return and personal information do not match,
the gambit is up. But the study before us today ignores that
anti-fraud check. It only looks at a part of the picture when
it comes to stopping fraud.
As I noted at the beginning, there are always methods of
strengthening any program and rooting out the fraudsters and
the rip-off artists. Part of any smart, ferocious strategy
against fraud, on one hand, is drawing a distinction between
aggressively going after the rip-off artists and, on the other,
not harming a law-
abiding American who has made an honest, and often technical,
mistake.
A retiree nearing Medicare age should not get kicked to the
curb because he or she accidentally submitted an incorrect
document. A transgender American should not lose health
coverage after a name change because some forms do not match. I
cannot imagine that anyone in the Congress or on this committee
wants a system that nixes the health insurance coverage of
Americans because of those kinds of issues.
I will wrap up by saying that a recent Gallup report stated
that the rate of Americans without health insurance is now the
lowest that they have ever measured. This is the first Finance
Committee hearing on health care since the Supreme Court's
landmark decision that upheld the law that made that possible.
The fact is, the Affordable Care Act has extended health
care coverage to more than 16 million real people who use their
insurance coverage to see real doctors. Now at some point down
the road, the GAO is expected to complete their report. At that
time, let us work on a bipartisan basis to draw conclusions
about how this committee can work together to improve American
health care.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator. I appreciate it.
[The prepared statement of Senator Wyden appears in the
appendix.]
The Chairman. Our witness today is Seto Bagdoyan, who is
Director of Audit Services in GAO's Forensic Audits and
Investigative Service mission team. During his GAO career, Mr.
Bagdoyan has served in a variety of positions, including as
Legislative Advisor in the Office of Congressional Relations,
and as Assistant Director for Homeland Security and Justice. He
has also served on congressional details with the Senate
Finance Committee and the House Committee on Homeland Security.
In his private-sector career, Mr. Bagdoyan has held a
number of senior positions in consultancies, most recently
focusing on political risk and homeland security. He earned a
BA degree in international relations and economics at Claremont
McKenna College and an MBA in strategy from Pepperdine
University.
We welcome you to the committee, and we are interested in
your statement here today.
STATEMENT OF SETO J. BAGDOYAN, DIRECTOR, FORENSIC AUDITS AND
INVESTIGATIVE SERVICE, GOVERNMENT ACCOUNTABILITY OFFICE,
WASHINGTON, DC
Mr. Bagdoyan. Thank you, Mr. Chairman.
Chairman Hatch, Ranking Member Wyden, and members of the
committee, I am pleased to be here today to discuss the final
results of GAO's undercover tests assessing the enrollment
controls of the Federal marketplace set up under the Affordable
Care Act of 2010.
As you mentioned, we reported our preliminary results
during testimony in July of 2014. We performed 18 undercover
tests, 12 of which involved phone or online applications. Our
tests were designed specifically to identify indicators of
potential control weaknesses in the marketplace's enrollment
process, specifically for plan year 2014, and to inform our
ongoing forensic audit of these controls.
I would note that our test, while illustrative as Ranking
Member Wyden mentioned, cannot be generalized to the population
of applicants or enrollees. Further, we shared details of our
observations with CMS during the course of our test to seek its
responses to the issues we raised.
In this regard, CMS officials stated that they had limited
capacity to respond to attempts at fraud and they must balance
consumers' ability to access coverage with program integrity
concerns. Without providing details on how and when, these
officials stated that they intend to assess the marketplace's
eligibility determination process.
In terms of context, health coverage offered through the
marketplace is a significant expenditure for the Federal
Government. Current levels of coverage involve several million
enrollees, about 85 percent of whom are estimated to be
receiving subsidies. CBO pegs subsidy costs for fiscal year
2015 at $28 billion and a total of about $850 billion for
fiscal years 2016 to 2025.
A program of this scope and scale is inherently at risk for
errors, including improper payments and fraudulent activity.
Accordingly, it is essential that there are effective
enrollment controls in place to help narrow the window of
opportunity for such risks, hence the importance of our
undercover tests.
With this as backdrop, I will now discuss some of our
test's principle results. The marketplace approved subsidized
coverage for 11 of our 12 fictitious applicants. These
applicants obtained about $30,000 in total annual advanced
premium tax credits, plus eligibility for lower costs at time
of service.
For 7 of the 11 applicants, we intentionally did not submit
all required verification documentation to the marketplace, but
it did not cancel coverage or reduce or eliminate subsidies for
these applicants. I would note that while subsidies, including
those granted to our applicants, are not provided directly to
enrollees, they nevertheless represent a financial benefit to
consumers and a cost to the government.
As part of its verification process, the marketplace did
not accurately record all inconsistencies which occur when
applicant information does not match information available from
marketplace verification sources. Also, the marketplace
resolved inconsistencies from our fictitious applications based
on fabricated documentation we submitted. Further, the
marketplace did not terminate any coverage for several types of
inconsistencies, including Social Security data.
We found errors in information reported by the marketplace
for tax filing purposes for 3 of our 11 enrollees, such as
incorrect coverage periods or subsidy amounts. Under the ACA,
filing a Federal income tax return is a key control element
designed to ensure that premium subsidies granted at time of
application are appropriate based on reported applicant
earnings during the coverage year.
The marketplace automatically re-enrolled coverage for all
11 applicants for plan year 2015. Later, based on what it said
were new applications our enrollees had filed but which we had
not actually made, the marketplace terminated coverage for 6 of
the 11 enrollees, saying they had not provided necessary
documentation. However, for 5 of the 6 terminations, we
subsequently obtained reinstatements, including increases in
monthly subsidies averaging about 10 percent.
In closing, our test results highlight the need for CMS to
have in place effective controls to help reduce the risks for
potential improper payments and fraud, otherwise there is
potential for such risks to be imbedded early in a major new
benefits program. We plan to include initial recommendations
regarding controls in a forthcoming report.
Mr. Chairman, this concludes my statement. I look forward
to the committee's questions.
The Chairman. Thank you, sir.
[The prepared statement of Mr. Bagdoyan appears in the
appendix.]
The Chairman. It has come to my attention that GAO had
difficulty obtaining plan year 2015 enrollment and related data
from CMS, data that would allow GAO to conduct a full analysis
of what really happened to enrollees from 2014.
Now, this would have been helpful to GAO in providing
explanations for things like those who were supposed to get
dropped for failing to provide documents, to clear
inconsistencies, among other things. Can you provide us with
more detail about the difficulties GAO had in obtaining that
information from CMS? I expect GAO to have the most recent and
relevant data to inform its analysis, and expect that CMS would
work with you and the committee to make that happen.
Any information you can provide as to the problems
experienced and what the committee can do to help address them
would be very helpful to us in the committee now.
Mr. Bagdoyan. Thank you for your question, Mr. Chairman. I
will just lay out, in a general sense, our experience in
obtaining data. But in the beginning, I would like to establish
a context in terms of--as I mentioned earlier, the reason why
we did our undercover testing was to flag indicators of
potential control weaknesses, and, at the same time, we had
designed our forensic audit, which would have relied on the
enrollee database, to map out what we were finding in the
control environment against the actual enrollees that I believe
Ranking Member Wyden mentioned earlier.
That said, we began our informal meetings and consultations
with CMS in April of 2014. We requested various data sets. We
had some success obtaining some information in meetings over
time. Then when we focused on the enrollee database, we
submitted a written letter requesting that database in August
of 2014, and then we subsequently engaged in additional
discussions with CMS officials as they expressed some concerns
about what we were asking, what we planned to do with the data,
as well as how the data would be safeguarded.
Upon subsequent discussions through the early part of 2015,
we submitted another letter to the current Acting
Administrator, Mr. Slavitt, in April of 2015. As of a couple of
days ago, we have been in contact with CMS, which advised that
we should expect the data sometime next week, which is very
good news for us, for our ability to continue the work.
We look forward to obtaining the data and seeing whether it
is actually what we asked for, and then conducting additional
tests to determine whether the data is actually usable for our
purposes. I apologize for the long story, but that gives you a
context of where we have been.
The Chairman. Sure. That is fine. I understand that the
marketplace invoked this so-called ``good faith exemption'' for
plan year 2014 in not pursuing applicants who did not submit
all of the requested documentation to reconcile inconsistencies
between information they provided during the enrollment process
and that available to the marketplace through government
sources.
Could you describe what the good faith exemption is all
about, whether it has any basis in the Affordable Care Act or
its implementing regulations, and the impact, if any, of its
invocation on program controls and integrity?
Mr. Bagdoyan. Sure. The good faith provision is basically
an interpretation by CMS of certain provisions in the statute
itself and in its implementing regulations. Essentially, under
this implementation, CMS deemed that as long as an enrollee or
an applicant submits at least one document to support their
application, they would have engaged in a good faith effort to
meet the documentary request and accordingly remain a
participant in their coverage.
In terms of whether this has an impact on the controls, it
is essentially one of the back-end controls--the document
verification process, that is--and, depending on your point of
view of whether that is adequate if someone is asked for seven
documents and they only submit one document, that can create a
control gap and raise questions about their eligibility for
participation.
The Chairman. Well, thank you.
Senator Wyden, my time is up.
Senator Wyden. Thank you very much, Mr. Chairman.
Mr. Bagdoyan, my time is short, so I would like you to give
me ``yes'' or ``no'' answers to four questions.
Mr. Bagdoyan. Sure.
Senator Wyden. Mr. Bagdoyan, as of this morning, can you
generalize from the 11 fictitious cases what the fraud rate
would be for the more than 10 million real Americans who
actually receive health care coverage under the law, yes or no?
Mr. Bagdoyan. Not as of this morning.
Senator Wyden. Mr. Bagdoyan, you said in your testimony
that tax returns are a ``key element of back-end controls. It's
a major check that would shut down the fraudsters.'' As of this
morning, did you file tax returns for any of these individuals,
yes or no?
Mr. Bagdoyan. We did not.
Senator Wyden. Mr. Bagdoyan, as of this morning, have you
uncovered any real individuals who fraudulently obtained health
coverage using GAO's techniques, yes or no?
Mr. Bagdoyan. No.
Senator Wyden. Mr. Bagdoyan, as of this morning, have you
provided HHS with the fictitious identities from your inquiries
so that they can address the problems that you say exist, yes
or no?
Mr. Bagdoyan. We have not.
Senator Wyden. Mr. Bagdoyan and colleagues, I have reviewed
this very carefully. Given the answers that we have just heard,
it is clear to me that the auditors have much more work to do
before the committee can draw useful conclusions on this
matter.
On this point with respect to the claims that the agency
has not been responsive to the request for enrollment data, I
very much respect the fact that Federal agencies need to be
responsive to requests from Congress and the GAO for
information. However, I also want to take note of the fact that
these enrollment records contain personally identifiable
information on more than 10 million Americans. Loss of their
personally identifiable information is already becoming a
nightmare for millions of Americans.
Now, it is my understanding that the agency, CMS, and the
auditors have worked out an agreement on how this information,
(1) can be turned over to GAO and protected, and I think that
is good; and (2) it is my understanding that the agency has
turned over some 30,000 pages of documents to my colleague,
Senator Portman, for his committee.
So this notion that the government, the agency--in
particular, CMS--is just spending its day, morning, noon, and
night trying to stonewall the release of this information, I
think, is not accurate, given the facts that I have just cited.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Grassley, you are next.
Senator Grassley. In deference to my colleagues, and there
are a lot here who want to ask you questions--and of course
that is because we have our pending six votes this morning--I
am going to ask just one of three questions, and I am going to
put the lead-in up to my questions in the record.
[The prepared statement of Senator Grassley appears in the
appendix.]
Senator Grassley. You presented CMS with potential flaws.
The flaws, as I understand what you said, did not get fixed. So
my question is very simple: in your work with CMS, do you
believe that CMS's attitude is, enroll people first and worry
about eligibility later, if at all?
Mr. Bagdoyan. Well, from where we stand currently, the CMS
explanation has been that they have to balance the ease of
access to coverage with program integrity controls. Based on
our under-cover work, I would say that there are gaps in these
controls that have yet to be addressed. We continue to look at
it through our forensic work, but as of now I think the balance
would probably favor access over program integrity.
Senator Grassley. Yes. I yield back.
Mr. Bagdoyan. As we stand today, Senator. As we stand
today.
Senator Grassley. Thank you. I yield back my time.
The Chairman. Thank you.
Senator Thune?
Senator Thune. Thank you, Mr. Chairman. Thanks for holding
the hearing. I think it is important--you were talking about
taxpayer dollars here--that we make sure that we are doing
everything to see that they are spent wisely and well.
Mr. Bagdoyan, in your testimony you highlight that
marketplaces are required by law to verify application
information, yet it appears from your investigation and
subsequent interactions with CMS that the buck stops with no
one, especially since the very contractors hired to verify
these documents are not required to detect fraud.
So it begs the question of whether you are currently aware
of any effective front- or back-end fraud detection program in
use by the administration?
Mr. Bagdoyan. Again, I would couch my response to you,
Senator Thune, in terms of our ongoing work. The forensic part
of our work should be able to give us a good idea of what the
controls are. We will take what we have learned from the
undercover tests, map that out against the forensic audit, and
then apply appropriate criteria, such as the internal control
standards of the Federal Government, as well as a forthcoming
GAO framework to manage fraud risk. Then we will be able to
have a more comprehensive view of what the control environment
is like.
Senator Thune. All right.
Mr. Bagdoyan. It is premature for me to make a judgment
like that.
Senator Thune. You are not currently aware today, though,
absent having completed your investigation, of any fraud
detection program?
Mr. Bagdoyan. Based on our work to date, I am not aware of
that.
Senator Thune. Additionally, has the administration
provided you with any rationale as to why they would enter into
contracts that do not require the contractors to have fraud
detection capabilities?
Mr. Bagdoyan. As best as I can tell, the arrangement with a
contractor is to process documents that are submitted in
support of applications. The contractor confirmed with us that
they are not required to detect fraud. That would be a whole
different transaction at greater cost.
Senator Thune. So you said your work is ongoing.
Mr. Bagdoyan. Yes.
Senator Thune. But does GAO have any recommendations for
how to improve the document verification process to actually
sort out fraud as opposed to just accepting documents?
Mr. Bagdoyan. Sure. As I mentioned in my opening statement,
we are working on a forthcoming report sometime in the fall
time frame where we hope to have some initial recommendations,
and those recommendations might indeed cover the matter that
you mentioned.
Senator Thune. All right. But you do not now have any hard,
fast information?
Mr. Bagdoyan. Not right now. But as I mentioned earlier, we
did speak with CMS officials about things that we were
encountering. We had discussions about their view of that, and
we continue to have those discussions and await some
explanations in that regard.
Senator Thune. My understanding is, from your work, that
several of the fictitious applications were approved and
subsequently reapproved without ever submitting documentation
to the marketplace. How can this be?
Mr. Bagdoyan. Well----
Senator Thune. How can the marketplace continue disbursing
taxpayer dollars without receiving any documentation in
response to its request?
Mr. Bagdoyan. Well, we were automatically re-enrolled
without any action on our part for all 11 applicants, and then
subsequently we found out that 6 of them, as I mentioned in my
statement, had been indeed dropped from coverage because they
had not submitted any documents in response to that. Then to
carry that one step further, acting again as typical consumers,
we sought to restore our coverage, and we were successful five
out of six times.
Senator Thune. Yes. All right.
Mr. Chairman, I would just simply say that these, I think,
are really troubling results, 11 out of 12. I would say to the
Senator from Oregon, I mean, I think that we need to drill down
and get to the bottom of this. I do not think you can discount
or write off this kind of research and report.
You couple that with, in June, the HHS OIG report revealed
that the administration could not verify whether nearly $3
billion in subsidies was properly disbursed to insurance
companies during the first 4 months of 2014. These are
significant failures in this system. They need to be addressed.
I appreciate the hearing here, Mr. Chairman, and I hope that we
can continue this dialogue with you, Mr. Bagdoyan, as you
continue your work to determine how to stop this sort of waste
of taxpayer dollars in the future.
Thank you, Mr. Chairman.
The Chairman. We are going to turn to Senator Wyden for a
question, and after that will be Senator Portman.
Senator Wyden. Mr. Chairman, I am not even going to ask a
question. I just want to respond to my colleague, because he
knows I am always willing to work with him, always willing to
work in a bipartisan way. But let us review what has just
happened. I asked Mr. Bagdoyan about whether he uncovered any
real individuals who fraudulently obtained health coverage
using these techniques. He answered ``no.''
During the two previous enrollment periods, the agency
rescinded a quarter of a million individuals' health insurance
because they were not able to validate their documents. So we
have to work together, there is no question here.
I am willing to look at all the ramifications of these 11
applicants, but let us do it in a bipartisan way, and let us do
it when we actually have some recommendations. Once again, Mr.
Bagdoyan said he does not have any recommendations to give us.
The Chairman. Well, I want to announce we are doing it in a
bipartisan way. I do not think we can ignore some of this
testimony.
Senator Portman?
Senator Portman. Thank you, Mr. Chairman. Mr. Bagdoyan,
thank you for your help on this and your work with us on the
PSI Subcommittee looking into the same thing.
My friend, the ranking member, talked about how HHS has
been responsive. You have indicated they have not been
responsive in providing information. Since you mentioned that I
have gotten 30,000 pages of documents, I will tell you only
2,000 of those pages are responsive to anything we asked about,
and we are still getting delay, delay, delay.
All we are asking for right now is just a schedule to
submit documents. If we have time, I would like to hear your
response to that, but I know from talking to your folks that
you have the same frustration.
With regard to this issue, there is clearly a policy
problem here, not just the fact that 11 of 12 of these
fictitious people got through and were automatically re-upped,
and then when some were kicked out of the system, five out of
six were brought back in after a phone call to HHS when they
should not have been.
So, clearly we have a problem here. But I think the
statistical example of 12 might not be as significant as what
you found out in terms of policy, so let me ask you a couple of
questions about that. Your statement mentions that GAO failed
an initial identity-proofing step in the application process.
In other words, your people were fictitious so they could not
get through the online application process.
Mr. Bagdoyan. That is right.
Senator Portman. But GAO was able to proceed past this step
after calling HHS. Can you describe what GAO did to verify the
identity for these applications and why that is significant?
Mr. Bagdoyan. Well, as I mentioned earlier, we were able to
obtain coverage by essentially following the system's own
instructions. We failed the initial online test; we contacted
the contractor who does the identity proofing, and they could
not clear it; then they instructed us to call the marketplace,
which we did; and then, based on self-attestation of
information, we obtained coverage.
Senator Portman. So it was a phone call after getting
denied twice, and through the self-attestation, people got back
in. So, I mean, this is a policy issue. This is not, again,
just a statistical quirk that somehow your people snuck in.
This is an HHS policy.
Mr. Bagdoyan. Yes. We would view that, Senator, as at least
an indicator of a control gap. I know it is a technical, nerdy
kind of thing to say but----
Senator Portman. Yes. Clearly a control gap. Self-
attestation is a policy that they have. By a phone call, even
though you get rejected, rejected, you can get in just by a
self-attestation.
Mr. Bagdoyan. That is correct.
Senator Portman. With no proof.
As another example, you noted that, in all 11 cases, GAO
was asked to submit documents that showed eligibility for
subsidies. In some cases, GAO submitted only some of the
required documents but was nonetheless able to continue to
receive coverage and subsidies. That was because of the so-
called good faith exemption.
Could you describe that rule--again, it is a policy--and
why it enabled GAO to receive coverage and subsidies, even when
it submitted only some of the required documents, and the legal
basis that HHS used in implementing it?
Mr. Bagdoyan. Right. In terms of the legal basis, Senator
Portman, we are awaiting a response from CMS, and our attorneys
have been in touch with their attorneys, have had some
discussions. So, we are trying to get some clarity on that.
So, under the good faith exemption or provision, whatever
the term of art is, essentially the applicant is compliant with
their obligation to submit documents as long as they submit one
out of the however many they have been asked to submit.
Senator Portman. So again, your results indicate, as these
applications show, that this is not a result of a statistical
quirk that you found, it is the result of HHS policy being
implemented as planned. I think anybody who cares about the
Affordable Care Act should be concerned about this policy,
because it allows people to continue receiving subsidies
without HHS making a serious attempt to verify eligibility. So
I know we should do more research into this--we are looking
forward to your report--but these are policy issues that are
being applied today as we talk.
Finally, your statement notes that this investigation was
conducted with limited back-stopping. Can you describe what
back-stopping is and why limited back-stopping is important?
Mr. Bagdoyan. Sure. Limited back-stopping essentially
involves the extent to which we employ investigative
techniques. This was pretty much--I do not want to speak for my
colleague, Director McElrath, who runs the investigative side
of things, but basically it was a pretty simple thing to do
using commonly available software, materials, and other
approaches.
Senator Portman. So in sum, you did not have any inside
information that you used about how the ACA works or does not
work. You came at it just as any consumer would----
Mr. Bagdoyan. Right.
Senator Portman [continuing]. Which makes your results,
again, more troubling than they might otherwise be. I think
these are really important aspects to your report, and I think
from a legislative perspective, an oversight perspective, it
makes this much more serious.
The final thing I will say is, the amount of confusion this
is causing people who legitimately are trying to get a subsidy
is unbelievable. H&R Block says two-thirds of people are either
having their tax refunds cut or getting a tax bill.
IRS has told me that half of the people this year are in
that situation. So this is not just about verification flaws.
As you have said, the lack of controls and this lack of balance
between accessibility, pushing people to get enrollment numbers
up, versus the verification, is also causing a lot of confusion
for consumers.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Scott?
Senator Scott. Thank you, Mr. Chairman.
Good morning.
Mr. Bagdoyan. Good morning, Senator.
Senator Scott. I have a quick question for you: did you
look for any real people who attempted to deceive the system?
Mr. Bagdoyan. Good question. We did not, as I mentioned
earlier.
Senator Scott. Thank you.
Is it your job to figure out the number of fraudulent
accounts receiving subsidies and health care coverage on
HealthCare.gov?
Mr. Bagdoyan. Not at this stage of our work.
Senator Scott. All right.
Of the 50,000 taxpayers who filed returns based on
inaccurate subsidy data, how many of those did you review?
Mr. Bagdoyan. None.
Senator Scott. Because you are not the IRS?
Mr. Bagdoyan. That is correct.
Senator Scott. All right.
There is no doubt that HealthCare.gov, in 2013, was a
disaster, a $400-million website that became synonymous with
failure. We had a constituent in South Carolina who was trying
to figure out how to get his information off the website that
was used erroneously. We could not get a response from CMS. We
finally had a committee hearing and Administrator Tavenner was
there, and we were able to get some information and help solve
that problem.
One of the things that concerns me the most about the
challenges that we face is that, when you combine the
subsidies, including the Medicaid subsidies, we are talking
about $1.7 trillion of subsidies. In the year 2025, we will
have about 31 million Americans still without coverage.
Perhaps, after billions and billions of dollars of subsidies
that have been received by people who do not deserve them, it
may indicate why we will still have 31 million Americans
without insurance.
My question to you is, outside of your investigation, how
easy is it for most consumers to falsify their information in
order to receive higher subsidies, based on your fictitious
individuals?
Mr. Bagdoyan. Well, as I mentioned earlier in response to
Senator Portman, it was relatively straightforward for us. I
certainly cannot project that to the typical consumer, but
there is a lot of information out there available for people
who are committed to performing fraudulent activities.
Senator Scott. It appears to me that there seems to be
almost a perverse incentive for relaxed accountability as it
relates to internal controls because it seems to have led, and
will continue to lead, towards higher enrollments. Thoughts?
Mr. Bagdoyan. I would take you to my opening statement
regarding the balance between access and control. It appears,
based on our limited results from our undercover tests, that
the balance is more towards access than control. Our work
continues. We will have more definitive views on that in the
future.
Senator Scott. Said in fewer words, if it is tilted more
towards access than controls, the chances are pretty high that
someone will be able to get on, as you did with 11 fictitious
individuals, and get coverage even if they were doing it at
home on HealthCare.gov versus the GAO doing it. Basically the
same result. Is there anything that would lead to a different
conclusion, from your experience so far?
Mr. Bagdoyan. Well, I think the forensic audit that we will
conduct on the entire population will give us a complete
picture of what happened, whether there were additional red
flags that we need to follow up on. But at this point I cannot
really project one way or the other.
Senator Scott. I would appreciate a follow-up of that
information in writing, then. That would be wonderful. Thank
you.
I would say to my colleagues that the reality of it is,
what happens when you have individuals receiving subsidies that
they have not earned, do not have a right to, when it is $1.7
trillion over the next 8 or 9 years, what that results in in
South Carolina, what we have seen this past year, is between a
31-percent and as high on some plans as a 50-percent increase
in premiums. That is astounding. It is ridiculous. It is
unaffordable.
As those premiums continue to climb, what we have also seen
is your deductibles get higher, more expensive. Your out-of-
pocket expenses are higher, more expensive. The number of
facilities, whether it is hospitals or doctors, that are
available to use that access card continues to dwindle down,
and down, and down. I am not sure what good access is if you
have a card when there is not a health care provider on the
other side.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Coats?
Senator Coats. Thank you, Mr. Chairman.
I am not surprised with anything I have heard here this
morning. I go to the Senate floor once a week to share with my
colleagues proven waste, fraud, and abuse in any number of
ways, in any number of agencies.
We have a bloated, bureaucratic, dysfunctional government
that tries to do--with real intent, good intent--more than it
can handle. Thank God for GAO and for the nonpartisan work that
you do to help us point out ways in which we can help a
struggling taxpayer not have to pay so much money in to
Washington to fund something that does not work.
So I really appreciate your being here; I appreciate your
candidness. How we can take this for anything other than the
canary in the mine, saying, hey, there is a problem here, let
us get after it, I just don't know. What really is discouraging
is, and I would like you to give me a little more detail on
this, you take these findings to CMS, and CMS basically gives
you a stall: we are waiting for the attorneys to respond.
CMS should say, ``Thank you, thank you, you have pointed
out some weaknesses here that we were not aware of. We want to
be efficient. Actually, we want to implement the President's
program, we want to sign up more people.'' I mean, they are
obviously following that mandate. ``This will help us because,
if this becomes public, the public is going to say it is just
one more example of another government bloated, bureaucratic
inefficiency, ineffectiveness, preventing people who need the
insurance from getting the insurance, giving insurance to
people who do not qualify, and it is fraudulent.''
I hear that, ``Well, we have to go through all this process
and so forth before we even implement things.'' They should not
have to wait for you for recommendations. You have told them:
here is the problem.
I would think they would say, ``Thank you. We are going to
go after this right now and try to fix some of these things.''
You have pointed out something that obviously, sure, it is
fictitious, but I mean, if this is not an alarm bell in terms
of dysfunction, I do not know what is.
So can you describe a little bit more your efforts with CMS
to get them to say, ``Thank you, yes, we see the weaknesses
here, and we are going to take steps to go forward,'' instead
of some process that is going to go through the legal system
and through the bureaucratic system that is going to take
months, if not years, while more and more waste and fraud just
continues.
Mr. Bagdoyan. Sure. Thank you for your question, Senator
Coats. Our exchanges with CMS have been fruitful at times, and
we have gotten their attention on some of the key issues that--
--
Senator Coats. But what about this issue?
Mr. Bagdoyan. Which one is that?
Senator Coats. What you are presenting here. I wrote this
down. You said you went to CMS and alerted them to the problem,
and you are waiting for their response.
Mr. Bagdoyan. Well, that actually refers to the good faith
exemption. We are waiting for their legal analysis, for their
basis----
Senator Coats. Yes. Yes. Yes. We hear this all the time.
Mr. Bagdoyan. Yes. They are working through the document
verification process.
Senator Coats. Yes.
Mr. Bagdoyan. So that is just one matter. There are----
Senator Coats. Well, did it ring any alarm bells over at
CMS? Did anybody say, ``Wow, thanks so much for bringing this
to our attention; we need to plug these holes right away''?
Mr. Bagdoyan. I do not know whether ``thank you'' was used,
but they are aware of the problems that we flagged.
Senator Coats. But they did not just say, well, this is
fictitious, so therefore what you are presenting us here is
worthless?
Mr. Bagdoyan. No, I cannot say that that is what they said.
Senator Coats. Well, I am happy to hear that. I could point
out waste of the day, waste of the hour, or waste of the
minute, thanks to GAO and other investigative agencies that
have pointed out that we have a dysfunctional government and we
are wasting taxpayer dollars faster than we can send them to
Washington.
Mr. Chairman, thank you.
The Chairman. Thank you, Senator.
Senator Burr, you are next.
Senator Burr. Thank you, Mr. Chairman. Let me say thank you
to you and all the folks at GAO for the great work that you do
and for the difficult task that you are asked to do.
According to your testimony, people applying for coverage
are required to attest that the documents they are providing
are not false. CMS officials say that contractors processing
these documents are not required to verify that these documents
are authentic, and that the contractor is not equipped to
identify fraud.
CMS has also stated that there is no indication of
meaningful levels of fraud. Do you think CMS made this
statement because nobody is monitoring the enrollment process
in a meaningful way to detect the fraud that is clearly
occurring in the cases of fake GOA enrollees?
Mr. Bagdoyan. Yes. I think the statement from CMS is based
on the fact that the contractor itself has not reported any
fraud. But as you pointed out, they are not tasked with looking
for fraud. That is not in their work order, that is not----
Senator Burr. So it is not dissimilar to the question that
Senator Wyden asked you: how many people did you find? You had
not been asked to go look, therefore you did not find any,
right?
Mr. Bagdoyan. At this stage, that is correct. But once we
move over to the forensic look at the entire enrollee database,
then that might yield different results.
Senator Burr. Mr. Bagdoyan, who is ultimately in charge of
ensuring enrollment program integrity? Is it the CMS
Administrator? Is it the CMS Deputy Administrator? Is it the
Chief Information Officer? Who is actually the one on the hook
for ensuring that fraud is not occurring within the enrollment
process?
Mr. Bagdoyan. Sure. As a general proposition, I would say
that the tone at the top is important, whether it is the
Administrator who is responsible for CMS and his or her staff.
It is leadership that sets the controls in place, ensures that
they are working as intended, monitors their effectiveness, and
then responds to any changes in the environment that may
necessitate adjustments or changes.
Senator Burr. Senator Wyden came to an interesting
conclusion, that what you have testified on really is not valid
because none of the individual enrollees filed an income tax
return, therefore you did not allow the system as designed to
catch that they should not be there.
Mr. Bagdoyan. Yes.
Senator Burr. Well, your own testimony says that, in
correspondence between the applicant and the marketplace, on
four of the individuals, the marketplace's correspondence to
the applicant referred to their filed tax returns. In other
words, the marketplace basically said four of your applicants
filed income tax returns and that is what we make our judgment
on, when in fact none of them filed tax returns.
Mr. Bagdoyan. That is correct.
Senator Burr. And you stated that in your testimony.
So let me just say to my colleagues, what is my take-away
here? Not only do we have policy deficiencies, but we certainly
have indications of incompetence or intent to ignore the law.
That should be the concern of this committee, it should be the
concern of the American people, and I hope that GAO will
continue with the instructions from the chair to look deeply
into this. Thank you for your work.
Mr. Bagdoyan. Thank you, Senator.
The Chairman. Thank you, Senator.
Senator Casey?
Senator Casey. Mr. Chairman, thanks very much.
I want to say first to Mr. Bagdoyan that, in my experience
as an elected official in Pennsylvania, one of the most
significant parts of that time as a public official was as the
State Auditor General. It is an elected position. I was elected
to two terms, so I spent 8 years doing it. I have some sense,
even though I was overseeing a group of auditors or
investigators, of the difficulty of your work and a good sense
of the reaction you get when your work is completed. I respect
and appreciate what you do; it is difficult.
Mr. Bagdoyan. Thank you.
Senator Casey. I want to ask you one question, more just to
make sure the record is clear, and then I want to get into more
of the specific health care issues. I want to make sure I have
this right. Based upon your testimony, is it possible to make
generalizations about the full population of applicants in the
marketplace?
Mr. Bagdoyan. No, it is not, and that was not the intent of
our undercover tests.
Senator Casey. I want to say, just preliminarily, we know,
those of us who voted for the Affordable Care Act, that there
are issues we have to correct. It is not perfect legislation,
nor is any legislation of that complexity and impact on health
care and our economy. A number of us have voted for, already,
improvements to the law.
I think what is indisputable, though, in addition to the
fact that it is not perfect, is that there has been a
substantial benefit conferred upon a lot of Americans that
would not have it otherwise. I am not saying this for your
benefit, really, just for the record: 16.4 million people
gained health insurance coverage in the time since 2010.
In Pennsylvania, for example, 472,697 Pennsylvanians
selected plans or were automatically re-enrolled through the
health insurance marketplace. About 81 percent of
Pennsylvanians who selected health insurance plans were
determined eligible for financial assistance. There are lots of
examples of individuals----
Two individuals from southeastern Pennsylvania, Jenny and
David, are self-employed, have two sons in college. Jenny is a
breast cancer survivor, worried about being denied health
insurance because of her pre-existing condition. They were
spending over $10,000 a year on health insurance. Thanks to
their ACA plan purchased through HealthCare.gov, they now are
spending about $3,000 per year, so the savings helps them on
college costs. So that is just by way of background.
But I want to ask you a specific question about your work.
Do you think there are additional checks that can be imposed
upon the system, so to speak, that could help identify fraud,
which the GAO did not test?
Mr. Bagdoyan. Sure. Thank you for your question. That would
be part, a major part, of our focus for the ongoing work. As I
mentioned earlier in response to another Senator's question, we
will be applying a set of appropriate benchmarks to how we map
out the current process with information that we obtained from
our undercover work. The forensic work will inform that and go
in tandem.
Once we apply those criteria, we will be able to identify
how to best respond to them: what are their risk assessments,
their implementation of specific controls for specific parts of
the enrollment process? That will be key, but that work is
ongoing, so I cannot really say one way or the other which way
it will go with the recommendations.
Senator Casey. And part of that is, I guess--and I know
this is always difficult in an auditing context--when you have
a mandate but you also have limited resources, you cannot audit
or review every transaction or every part of the system. So you
do sometimes have to make a determination based upon risk: what
is a higher risk, what is a----
Mr. Bagdoyan. Sure. You prioritize where you attack first
in terms of control gaps. Sure.
Senator Casey. I want to ask you too to what extent you
believe the IRS has the capacity to identify fraudulent, so-
called advance premium tax credit or APTC claims? Do you have
any sense of that?
Mr. Bagdoyan. I do not. That is not part of our scope in
this ongoing work, but I believe there are other mission teams
within GAO that are taking a look at that. I do not know the
specific aspects, but I believe IRS capacity and capability is
part of that work.
Senator Casey. Well, we are grateful for your work. It is
difficult, but it is essential. We want to make sure that we
get this right over time. One of the ways to inform how we do
our work in terms of legislative change or corrections is to
have information from GAO and other sources. So we appreciate
your work. Thank you.
Mr. Bagdoyan. Thank you, Senator.
The Chairman. Senator Wyden would like to make a comment.
Senator Wyden. One last ``yes'' or ``no'' question, Mr.
Bagdoyan. Is it correct that CMS asked for these 11 fictitious
cases and GAO did not give them to the agency?
Mr. Bagdoyan. That is correct.
Senator Wyden. I would again say, colleagues, it is pretty
hard to evaluate something you are not told about. You
certainly cannot fix something you do not know about. By the
way, on Senator Burr's question, you could have gotten an
answer to it if you had actually been able to get information
about these 11 fictitious cases. And by the way, my staff asked
for the information about these 11 fictitious cases.
So to me the message here--and Chairman Hatch knows that I
am interested in working with him in a bipartisan way. I think
I am about as bipartisan on health care as anybody in the
Senate. I just think that, without these recommendations--and
we have been told they are not ready to go--this is premature.
At some point, I believe GAO, because I have worked with
them often in the past and admire their professionalism, will
give us some recommendations. Then we can work in a bipartisan
way. But I hope that people following this will recognize that,
as of this morning, the Government Accountability Office has
not uncovered any instances of real people committing fraud as
part of this inquiry. I think that is the important take-away
of this morning.
Thank you, Mr. Chairman.
The Chairman. Thanks.
Mr. Bagdoyan, it is true that your job is to look for
fraud. Your job is to look for misconceptions. Your job is to
look for things that are wrong, or out of whack, or whatever
you want to call it, and that is what you are doing, right?
Mr. Bagdoyan. That is correct, Senator.
The Chairman. And you have done it honestly, right?
Mr. Bagdoyan. Yes.
The Chairman. And you are disturbed by the fact that these
discrepancies exist, even though it has been a limited
investigation. Is that right?
Mr. Bagdoyan. Well, we do have concerns about the red flags
we have detected in terms of the control environment.
The Chairman. Well, you are expressing those concerns here
today. I have concerns too. A lot of people on our side do not
believe that Obamacare is ever going to work and that it is
just going to continue to take us downhill with more and more
costs, more and more expenses, and more and more fraud. This is
not the only instance of fraud either, is it?
Mr. Bagdoyan. Well, I cannot comment on that.
The Chairman. All right.
Mr. Bagdoyan. That is out of our scope. But if I may, Mr.
Chairman, try to explain our decision to decline----
The Chairman. What I do not want is, I do not want people
just slapping this off like this is not important. It is very
important----
Mr. Bagdoyan. Right. I would like to, if I may, again----
The Chairman [continuing]. And I want you to tell us why it
is so very important.
Mr. Bagdoyan. It is important in terms of getting the
responses that we need as our work is ongoing. I would
respectfully ask that I might explain why we declined to
provide the identities of our 11 applicants.
The Chairman. Sure. I would like you to explain that.
Mr. Bagdoyan. It is fully consistent with GAO policy,
protocols, and practice that we do not divulge any information
related to our sources, methods, and investigative techniques
to any entity so that we protect those for future use. So that
is our perspective on that issue.
The Chairman. Well, why is that? I mean, why can you not
divulge----
Mr. Bagdoyan. Well, we cannot because we have the sources
and methods that I mentioned that need to stay confidential,
that are in general use by GAO in certain circumstances. So
revealing those would basically give up the ghost.
The Chairman. Well, my understanding, through my service in
the Senate, is that the GAO does a very good job of trying to
get to the bottom of problems in our society. I think you are a
good illustration of that effort by GAO.
Now, this does not mean that you are going to cease trying
to find fraud and mismanagement and so forth in the future,
does it?
Mr. Bagdoyan. Well, this work is ongoing.
The Chairman. Right.
Mr. Bagdoyan. I think we are in it for the long term.
The Chairman. And we will probably have you back again so
that we can figure out, what is our job up here? What can we
do? We cannot just dismiss these type of things; we have to do
something about them. Hopefully we can do that with your help.
Mr. Bagdoyan. Thank you.
The Chairman. With that, we will recess until further
notice.
[Whereupon, at 11:05 a.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
Prepared Statement of Seto J. Bagdoyan, Director, Forensic Audits and
Investigative Service, Government Accountability Office
gao highlights
Why GAO Did This Study
PPACA provides for the establishment of health-insurance exchanges,
or marketplaces, where consumers can compare and select private health-
insurance plans. The act also expands the availability of subsidized
health-care coverage. The Congressional Budget Office estimates the
cost of subsidies and related spending under the act at $28 billion for
fiscal year 2015. PPACA requires verification of applicant information
to determine eligibility for enrollment or subsidies.
GAO was asked to examine controls for application and enrollment
for coverage through the federal Marketplace. This testimony describes
(1) the results of GAO's undercover testing of the Marketplace's
eligibility and enrollment controls, including opportunities for
potential enrollment fraud, for the act's first open-enrollment period;
and (2) additional undercover testing in which GAO sought in-person
application assistance.
This statement is based on GAO undercover testing of the
Marketplace application, enrollment, and eligibility-verification
controls using 18 fictitious identities. GAO submitted or attempted to
submit applications through the Marketplace in several states by
telephone, online, and in-person. Details of the target areas are not
disclosed, to protect GAO's undercover identities. GAO's tests were
intended to identify potential control issues and inform possible
further work. The results, while illustrative, cannot be generalized to
the full population of applicants or enrollees. GAO provided details to
CMS for comment, and made technical changes as appropriate.
_______________________________________________________________________
patient protection and affordable care act
Observations on 18 Undercover Tests of Enrollment Controls for Health-
Care Coverage and Consumer Subsidies Provided Under the Act
What GAO Found
To assess the enrollment controls of the federal Health Insurance
Marketplace (Marketplace), GAO performed 18 undercover tests, 12 of
which focused on phone or online applications. During these tests, the
Marketplace approved subsidized coverage under the Patient Protection
and Affordable Care Act (PPACA) for 11 of the 12 fictitious GAO
applicants for 2014. The GAO applicants obtained a total of about
$30,000 in annual advance premium tax credits, plus eligibility for
lower costs due at time of service. For 7 of the 11 successful
fictitious applicants, GAO intentionally did not submit all required
verification documentation to the Marketplace, but the Marketplace did
not cancel subsidized coverage for these applicants. 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. GAO's undercover testing, while illustrative, cannot be
generalized to the population of all applicants or enrollees. GAO
shared details of its observations with the Centers for Medicare and
Medicaid Services (CMS) during the course of its testing, to seek
agency responses to the issues raised. Other observations included the
following:
The Marketplace did not accurately record all inconsistencies.
Inconsistencies occur when applicant information does not match
information available from Marketplace verification sources.
Also, the Marketplace resolved inconsistencies from GAO's
fictitious applications based on fictitious documentation that
GAO submitted. Overall, according to CMS officials, the
Marketplace did not terminate any coverage for several types of
inconsistencies, including Social Security data or
incarceration status.
Under PPACA, filing a federal income-tax return is a key control
element, designed to ensure that premium subsidies granted at
time of application are appropriate based on reported applicant
earnings during the coverage year. GAO, however, found errors
in information reported by the Marketplace for tax filing
purposes for 3 of its 11 fictitious enrollees, such as
incorrect coverage periods and subsidy amounts.
The Marketplace automatically reenrolled coverage for all 11
fictitious enrollees for 2015. Later, based on what it said
were new applications GAO's fictional enrollees had filed--but
which GAO did not itself make--the Marketplace terminated
coverage for 6 of the 11 enrollees, saying the fictitious
enrollees had not provided necessary documentation. However,
for five of the six terminations, GAO subsequently obtained
reinstatements, including increases in premium tax-credit
subsidies.
For an additional six applicants, GAO sought to test the extent to
which, if any, in-person assisters would encourage applicants to
misstate income in order to qualify for income-based subsidies during
coverage year 2014. However, GAO was unable to obtain in-person
assistance in 5 of the 6 undercover attempts. For example, an assister
told GAO that it only provided help for those applying for Medicaid and
not health-care insurance applications. Representatives of these
organizations acknowledged the issues GAO raised in handling of the
inquiries. CMS officials said that their experience from the first
open-enrollment period helped improve training for the 2015 enrollment
period.
_______________________________________________________________________
Chairman Hatch, Ranking Member Wyden, and Members of the Committee:
I am pleased to be here today to discuss enrollment for health-care
coverage obtained through the federal health-insurance exchange
established under the Patient Protection and Affordable Care Act
(PPACA),\1\ and in particular, to discuss results of our undercover
testing of eligibility and enrollment controls for the 2014 coverage
year.\2\ We presented preliminary results in July 2014.\3\ Among other
things, PPACA provides subsidies to those eligible to purchase private
health-insurance plans who meet certain income and other requirements,
and with those subsidies and other costs, represents a significant,
long-term fiscal commitment for the federal government. According to
the Congressional Budget Office, the estimated cost of subsidies and
related spending under the act is $28 billion for fiscal year 2015,
rising to $103 billion for fiscal year 2025, and totaling $849 billion
for fiscal years 2016-2025. While subsidies under the act are not paid
directly to enrollees, participants nevertheless benefit through
reduced monthly premiums or lower costs due at time of service, such as
copayments. Because subsidy costs are contingent on who obtains
coverage, enrollment controls that help ensure only qualified
applicants are approved for coverage with subsidies are a key factor in
determining federal expenditures under the act.\4\
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\1\ Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010), as amended
by the Health Care and Education Reconciliation Act of 2010 (HCERA),
Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010). In this testimony,
references to PPACA include any amendments made by HCERA.
\2\ Specifically, our review covered the first open-enrollment
period, from October 1, 2013 to March 31, 2014, as well as follow-on
work through 2014 and into 2015 after close of the open-enrollment
period.
\3\ GAO, Patient Protection and Affordable Care Act: Preliminary
Results of Undercover Testing of Enrollment Controls for Health-Care
Coverage and Consumer Subsidies Provided Under the Act, GAO-14-705T
(Washington, D.C.: July 23, 2014).
\4\ According to Department of Health and Human Services' (HHS)
Centers for Medicare & Medicaid Services (CMS) data, about 11.7 million
people selected or were automatically reenrolled into a 2015 health
insurance plan under the act. A high fraction of those enrollees--87
percent, in states using the HealthCare.gov system--qualified for the
premium tax-credit subsidy provided by the act, which is described
later in this statement.
PPACA, signed into law on March 23, 2010, expands the availability
of subsidized health-care coverage, and provides for the establishment
of health-insurance exchanges, or marketplaces, to assist consumers in
comparing and selecting among insurance plans offered by participating
private issuers of health-care coverage.\5\ Under PPACA, states may
elect to operate their own health-care exchanges, or may rely on the
federally facilitated exchange, known to the public as HealthCare.gov.
These marketplaces were intended to provide a single point of access
for individuals to enroll in private health plans, apply for income-
based subsidies to offset the cost of these plans--which are paid
directly to health-insurance issuers--and, as applicable, obtain an
eligibility determination for other health coverage programs, such as
Medicaid or the Children's Health Insurance Program. The Department of
Health and Human Services' (HHS) Centers for Medicare and Medicaid
Services (CMS) is responsible for overseeing the establishment of these
online marketplaces, and the agency maintains the federally facilitated
exchange. At the time we began the work described in this statement,
CMS was operating HealthCare.gov, also known as the Health Insurance
Marketplace (Marketplace) in about two-thirds of the states.\6\
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\5\ Specifically, the act required, by January 1, 2014, the
establishment of health-insurance exchanges in all states. In states
not electing to operate their own exchanges, the federal government was
required to operate an exchange.
\6\ Specifically, in 34 states, the federal government operated
individual exchanges. Two states operated their own exchanges, but
applicants applied through HealthCare.gov. As of March 2015, the number
of states had grown to 37, according to HHS's Office of the Assistant
Secretary for Planning and Evaluation, with the Marketplace accounting
for 76 percent (8.8 million) of consumers' plan selections.
To be eligible to enroll in a qualified health plan offered through
a marketplace, an individual must be a U.S. citizen or national, or
otherwise lawfully present in the United States; reside in the
marketplace service area; and not be incarcerated (unless incarcerated
while awaiting disposition of charges). Marketplaces, in turn, are
required by law to verify application information to determine
eligibility for enrollment and, if applicable, determine eligibility
for the income-based subsidies.\7\ These verification steps include
validating an applicant's Social Security number, if one is provided;
\8\ verifying citizenship, status as a national, or lawful presence
with the Social Security Administration (SSA) or the Department of
Homeland Security (DHS); and verifying household income and family size
against tax-return data from the Internal Revenue Service (IRS), as
well as data on Social Security benefits from the SSA.
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\7\ 42 U.S.C. Sec. 18081(c); 45 C.F.R. Sec. Sec. 155.310, 155.315,
155.320.
\8\ An exchange must require an applicant who has a Social Security
number to provide the number. 42 U.S.C. Sec. 18081(b)(2) and 45 CFR
Sec. 155.310(a)(3)(i).
My statement today presents results and analysis from work
originally requested by a number of congressional requesters.\9\
Specifically, today's statement (1) describes the final results of our
undercover testing of the federal Marketplace's application,
enrollment, and eligibility verification controls, including
opportunities for potential enrollment fraud, for the act's first open-
enrollment period ending March 31, 2014; and (2) describes additional
undercover testing in which we sought in-
person consumer assistance for federal Marketplace applications. Our
control testing began in January 2014 and concluded in April 2015.
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\9\ Our original requesters were: in the U.S. Senate, the then-
ranking member of the Committee on Homeland Security and Government
Affairs and the then-ranking member of the Committee on Finance; and in
the U.S. House of Representatives, the then-chairman of the Committee
on Ways and Means and the then-chairman of the Committee on Ways and
Means, Subcommittee on Oversight.
Our July 2014 testimony, which described the results of our work up
to that time, focused on application for, and approval of, coverage for
fictitious applicants.\10\ My statement today extends that work to the
post-application process, including our maintenance of the fictitious
applicant identities throughout 2014 and into 2015, payment of
subsidized premiums on policies we obtained, and the Marketplace's
verification process for applicant documentation. Thus, taken together,
our two statements now cover the entire process of first obtaining, and
then continuing, coverage for our fictitious applicants, from early
2014 into 2015.
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\10\ GAO-14-705T.
To perform our undercover testing of the Marketplace application,
enrollment, and eligibility-verification process, we created 18
fictitious identities for the purpose of making applications for
individual health-care coverage by telephone, online, and in-
person.\11\ Because the federal government, at the time of our review,
operated a marketplace on behalf of the state in about two-thirds of
the states, we focused our work on those states. We selected three of
these states for our undercover applications, and further selected
target areas within each state.\12\ To maintain independence in our
testing, we created our applicant scenarios without knowledge of
specific control procedures, if any, that CMS or other federal agencies
may use in accepting or processing applications. We thus did not create
the scenarios with intent to focus on a particular control or
procedure.\13\ The results obtained using our limited number of
fictional applicants are illustrative and represent our experience with
applications in the three states we selected. They cannot, however, be
generalized to the overall population of all applicants or enrollees.
In particular, our tests were intended to identify potential control
issues and inform possible further work. We shared details of our work
with CMS during the course of our testing, to seek agency responses to
the issues we raised. We also provided details prior to this hearing,
and made technical changes as appropriate.
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\11\ For all our applicant scenarios, we sought to act as an
ordinary consumer would in attempting to make a successful application.
For example, if, during online applications, we were directed to make
phone calls to complete the process, we acted as instructed.
\12\ We based the state selections on factors including range of
population size, mixture of population living in rural versus urban
areas, and number of people qualifying for income-based subsidies under
the act. We selected target areas within each state based on factors
including community size. To preserve confidentiality of our
applications, we do not disclose here the number or locations of our
target areas. We generally selected our states and target areas to
reflect a range of characteristics.
\13\ We were aware of general eligibility requirements, however,
from public sources such as websites.
For 12 of the 18 applicant scenarios, we chose to test controls for
verifications related to the identity or citizenship/immigration status
of the applicant.\14\ This approach allowed us to test similar
scenarios across different states. We made half of these applications
online and half by phone. In these tests, we also stated income at a
level eligible to obtain both types of income-based subsidies available
under PPACA--a premium tax credit and cost-sharing reduction.\15\ Our
tests included fictitious applicants who provided invalid Social
Security identities, noncitizens claiming to be lawfully present in the
United States, and applicants who did not provide Social Security
numbers. As appropriate, in our applications for coverage and
subsidies, we used publicly available information to construct our
scenarios. We also used publicly available hardware, software, and
materials to produce counterfeit or fictitious documents, which we
submitted, as appropriate for our testing, when instructed to do so. We
then observed the outcomes of the document submissions, such as any
approvals received or requests to provide additional supporting
documentation. We began this control testing in January 2014 and
concluded it in April 2015. We also obtained data from CMS on applicant
submission of required verification documentation. These data listed
document submission status as of April 2015 for the act's first open-
enrollment period, including for our undercover applications.
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\14\ As noted earlier, to be eligible to enroll in a qualified
health plan offered through a marketplace, an individual must be a U.S.
citizen or national, or otherwise lawfully present in the United
States; reside in the marketplace service area; and not be incarcerated
(unless incarcerated while awaiting disposition of charges).
Marketplaces, in turn, are required by law to verify application
information to determine eligibility for enrollment and, if applicable,
determine eligibility for the income-based subsidies.
\15\ To qualify for these income-based subsidies, an individual
must be eligible to enroll in marketplace coverage; meet income
requirements; and not be eligible for coverage under a qualifying plan
or program, such as affordable employer-sponsored coverage, Medicaid,
or the Children's Health Insurance Program. Cost-sharing reduction
(CSR) is a discount that lowers the amount consumers pay for out-of-
pocket charges for deductibles, coinsurance, and copayments. Because
the benefit realized through the CSR subsidy can vary according to
medical services used, the value to consumers of such subsidies can
likewise vary.
For the remaining 6 of our 18 applicant scenarios to examine
enrollment through the Marketplace, we sought to test only income-
verification controls. We randomly selected three ``Navigator'' and
three non-Navigator in-person assisters in our target areas.\16\ For
half of these 6 applications, our applicant planned to state income
slightly above the maximum amount allowable for income-based subsidies,
while for the others, our applicant planned to state income slightly
below the range eligible for these subsidies. We sought to determine
the extent to which, if any, in-person assisters might encourage our
undercover applicants to misstate income in order to qualify for either
of the income-based PPACA subsidies. We chose to limit our review of
those providing in-person assistance to the extent we encountered these
assisters as part of our enrollment control testing. A full examination
of in-person assistance, including issues other than eligibility and
enrollment, was beyond the scope of our work. Overall, our review
covered the act's first open-enrollment period, from October 1, 2013 to
March 31, 2014, as well as follow-on work through 2014 and into 2015
after close of the open-enrollment period.
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\16\ For the 2014 coverage year, CMS awarded $67 million in grants
for ``Navigators,'' which are individuals or organizations that are to
provide, without charge, impartial health-insurance information to
consumers, and to help them complete eligibility and enrollment forms.
In addition, such aid is also to be available from other in-person
assisters (``non-Navigators'') who generally perform the same functions
as Navigators, but are funded through separate grants or contracts.
Navigators and non-Navigator assisters must complete comprehensive
training, according to CMS. Through the HealthCare.gov website, CMS
published a state-by-state list of where in-person assistance can be
obtained.
We plan to issue a final report, with recommendations, on our
undercover eligibility- and enrollment-controls testing. We are
conducting our audit work in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence we obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives. We conducted our related investigative work in accordance
with investigative standards prescribed by the Council of the
Inspectors General on Integrity and Efficiency.
the federal marketplace approved subsidized coverage for 11 of 12
fictitious applicants in 2014, with coverage continuing into 2015
We Obtained Coverage for 11 of 12 Fictitious Applicants by Using the
Telephone
Application Process and Bypassing Online Identity Verification
As we described in our July 2014 testimony, the federal Marketplace
approved subsidized coverage for 11 of 12 fictitious applicants who
initially applied online or by telephone. For the 11 approved
applications, we paid the required premiums to put health-insurance
policies into force. We obtained the advance premium tax credit (APTC)
in all cases, totaling about $2,500 monthly or about $30,000 annually
for all 11 applicants. After receiving these premium subsidies, our 11
fictitious applicants paid premiums at a total annual rate of about
$12,000. We also obtained eligibility for cost-sharing reduction (CSR)
subsidies.\17\ The APTC and CSR subsidies are not paid directly to
enrolled consumers; instead, the federal government pays them to
issuers of health-care policies on consumers' behalf. However, they
represent a benefit to consumers--and a cost to the government--by
reducing out-of-pocket costs for medical coverage.\18\ To receive
advance payment of the premium tax credit, applicants agree they will
file a tax return for the coverage year, and must indicate they
understand that the premium tax credits paid in advance are subject to
reconciliation on their federal tax return.
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\17\ Because the benefit realized through the CSR subsidy can vary
according to medical services used, the value to consumers of such
subsidies can likewise vary.
\18\ Even if not obtaining subsidies, applicants can also benefit
if they obtain coverage for which they would otherwise not qualify,
such as by not being a U.S. citizen or national, or lawfully present in
the United States.
As we also reported in July 2014, for each of our 6 online
applications (among the group of 12 applications made online and by
phone), we failed to clear a required identity-checking step, and thus
could not complete the process online. For online applications, the
Marketplace employs a process known as ``identity proofing'' to verify
an applicant's identity.\19\ It does so by using personal and financial
history on file with a credit reporting agency contracted by the
Marketplace. The Marketplace generates questions, based on information
on file with the contractor, that only the applicant is believed likely
to know.\20\ If an applicant's identity cannot be verified online,
applicants are directed to call the credit reporting agency for
assistance.\21\ If the credit reporting agency then cannot verify
identity, applicants are typically told to contact the federal
Marketplace or their state-based exchange, credit-reporting agency
officials told us.
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\19\ According to CMS, the purpose of identity proofing is to
prevent someone from creating an account and applying for health
coverage based on someone else's identity and without their knowledge.
Although intended to counter such identity theft involving others,
identity proofing thus also serves as an enrollment control for those
applying online.
\20\ According to executives of the contractor that performs the
identity proofing, about 78 percent of applicants overall that have
attempted identity proofing online for the 2014 and 2015 application
cycles were successful, across the federal Marketplace and state
exchanges combined. The contractor officials said that the 78 percent
success rate is marginally lower than the general success rate for
identity-proofing services the contractor provides. This lower rate,
the contractor told us, is likely due to the health-care exchange
population being less likely to have an ``electronic footprint'' upon
which identity proofing is based. The contractor executives said that
the remaining 22 percent did not necessarily fail the identity
proofing. In many cases, the contractor was not able to locate the
applicant in its records, or the applicant did not respond to the
questions for identity verification.
\21\ According to the contractor, about 560,000 telephone inquiries
were made to the contractor from October 2013 to April 1, 2015, after
applicants did not pass the online identity proofing. In about 35
percent of those cases, identity could be verified.
We subsequently were able to obtain coverage for all six of these
applications that we began online by completing them by phone. By
following instructions to make telephone contact with the Marketplace,
we circumvented the initial identity-
proofing control that had stopped our online applications. When we
later asked CMS officials about this difference between online and
telephone applications, they told us that unlike with online
applications, the Marketplace allows phone applications to be made on
the basis of verbal attestations by applicants, given under penalty of
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perjury, who are directed to provide supporting documentation.
For our 6 phone applications, we successfully completed the
application process, with the exception of one applicant who declined
to provide a Social Security number and was not allowed to proceed.\22\
After being approved for coverage, we received enrollment material from
insurers for each of our 11 successful fictitious applicants. Appendix
I summarizes outcomes for all 12 of our phone and online
applications.\23\
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\22\ As shown in app. I, three of our applicants did not provide
Social Security numbers. While one of them was not allowed to proceed,
the other two were allowed to complete applications. Our purported
rationale for not providing the numbers was concern about personal
privacy.
\23\ We shared with CMS details on our successfully obtaining
coverage, during the course of our review, in March 2015.
The Marketplace is required to seek post-approval documentation in
the case of certain application ``inconsistencies.'' Inconsistencies
occur in instances in which information an applicant has provided does
not match information contained in data sources that the Marketplace
uses for eligibility verification at time of application, or such
information is not available. For example, an applicant might state
income at a particular amount, but his or her federal tax return lists
a different amount, or the applicant has no tax return on file.
Likewise, the applicant may provide a Social Security number, but it
does not match information on file with the SSA. If there is such an
application inconsistency, the Marketplace is to determine eligibility
using attestations of the applicant, and ensure that subsidies are
provided on behalf of the applicant, if he or she is eligible to
receive them, while the inconsistency is being resolved using ``back-
end'' controls. Thus, the Marketplace was required to approve
eligibility to enroll in health-care coverage and to receive subsidies
for each of our 11 fictitious applicants while the inconsistencies were
being addressed.\24\ At the time of our July 2014 testimony, we had
begun to receive notifications from the Marketplace on the outcomes of
our fictitious document submissions. As discussed later in this
statement, we continued to receive additional notices about our
applicants through 2014 and into 2015.
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\24\ According to CMS officials, the federal Marketplace makes
eligibility determinations. Private insurers, also called ``issuers,''
provide coverage.
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Federal Marketplace Communications With Our 11 Successful Fictitious
Enrollees About Their Applications Were Unclear or Incomplete
In all 11 cases in which we obtained coverage, the Marketplace
directed us, either orally or in writing, to send supporting
documentation. However, the Marketplace did not always provide clear
and complete communications. As a result, during our testing, we did
not always know the current status of our applications or specific
documents required in support of them. Examples include the following:
Unclear correspondence. Rather than stating a message directly,
correspondence instead was conditional or nonspecific, stating
the applicant may be affected by something, and then leaving it
to the applicant to parse through details to see if they were
indeed affected.
Inaccurate guidance. The Marketplace directed 8 of our 11
successful applicants to submit additional documentation to
prove citizenship and identity--but an accompanying list of
suitable documents that could be sent in response consisted of
items for proving income.
Lack of Marketplace notice on document submissions. In five cases,
we did not receive any indication on whether information sent
in response to Marketplace directives was acceptable. As a
result, we had to call the Marketplace to obtain status
information. According to CMS, after documents are processed,
consumers will receive a written notice.
Lack of written notice. In one case, the Marketplace did not
provide us with any written correspondence directing we submit
additional documentation. The Marketplace only requested
documentation for the initial enrollment during our phone
application for coverage. According to the Marketplace,
applicants are to receive written notice of documentation
required.\25\
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\25\ We shared with CMS details on communication issues we
encountered, during the course of our review, in March 2015.
CMS officials told us they are working to improve communication
with consumers, and will make improvements in consumer notices.
According to the officials, they are soliciting feedback from consumer
advocates, call-center representatives, and application assisters to
improve such communications. According to the officials, CMS has
already made significant improvements that include adding a complete
list of acceptable documents to resolve citizenship and immigration
status inconsistencies, and consolidating warning notices to include
all inconsistency issues. CMS is currently working on further
improvements in notices, including those for eligibility and instances
of insufficient documentation, according to the officials.
Our 11 Fictitious Enrollees Maintained Subsidized Coverage Throughout
2014, Even Though We Sent Fictitious Documents, or No
Documents, to Resolve Application Inconsistencies
As part of our testing, and in response to Marketplace directives,
we provided follow-up documentation, albeit fictitious.\26\ Overall, as
shown in appendix II, we varied what we submitted by application--
providing all, none, or only some of the material we were told to
send--in order to test controls and note any differences in outcomes.
Among the 11 applications for which we were directed to send
documentation, we submitted
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\26\ Any documentation we supplied was, like our initial
applications, fictitious, having been fabricated by us using
commercially available hardware, software, and materials.
all requested documentation for four applications,
partial documentation for four applications, and
no documentation for the remaining three applications.
Although our documentation was fictitious, and in some cases we
submitted none, or only some, of the documentation we were directed to
send, we retained our coverage for all 11 applicants through the end of
the 2014 coverage year. As described earlier, APTC subsidies our
applicants received totaled about $30,000 annually, and further
financial benefit would have been available through CSR subsidies if we
had obtained qualifying medical services. Following our document
submissions, the Marketplace told us, either in writing or in response
to phone calls, that the required documentation for all our approved
applicants had been received and was satisfactory. In one case, when we
called the Marketplace to inquire about the status of our documentation
submission--but where we had not actually submitted any documents--a
representative told our applicant that documents had been reviewed and
processed, and, ``There is nothing else to do at this time.'' Figure 1
shows a portion of a call in which a Marketplace representative said
our documentation was complete, even though we did not submit any
documents.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
For one applicant, the Marketplace did subsequently state in a
November 2014 letter that we would lose our subsidies, beginning in
December 2014. However, there was no follow-up communication regarding
the loss of our subsidies, and the subsidies were not terminated in
December 2014.
On the basis of applicant data we obtained from CMS, the
Marketplace cleared inconsistencies for some of our 11 fictitious
applications in instances where we submitted bogus documents.\27\
Appendix III contains a summary of our document requests and
submissions. We also noted instances where the Marketplace either did
not accurately capture all inconsistencies, or resolved inconsistencies
based on suspect documentation, including the following:
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\27\ The inconsistency data we obtained listed status as of April
2015 for all inconsistencies generated during the first open-enrollment
period, including those for our undercover applications. For this
statement, we examined only inconsistency information for our
applications, but we plan to make a broader analysis as part of ongoing
work.
Did not capture all inconsistencies. For 3 of the 11 applicants,
while the Marketplace at the outset directed our applicants to
provide documentation of citizenship/immigration status, the
CMS applicant data we later received for these applicants do
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not reflect inconsistencies for the items initially identified.
Disqualifying income. For 2 of the 11 applicants, we reported
income substantially higher than the amount we initially stated
on our applications, and at levels that should have
disqualified our applications from receiving subsidies.
However, according to the CMS data, the Marketplace resolved
our income inconsistencies and, as noted, our APTC and CSR
subsidies for both applicants continued.
In addition to having fictitious documentation approved, two of our
applicants also received notices in early 2015 acknowledging receipt of
documents recently submitted, when we had not sent any such documents.
We do not know why we received these notices.
The CMS Document-Verification Process Is Not Designed to Identify
Fraudulent Applications
We found that the CMS document-processing contractor is not
required to seek to detect fraud.\28\ It is only required to inspect
for documents that have obviously been altered. According to contractor
executives we spoke with, the contractor personnel involved in the
document-verification process are not trained as fraud experts and do
not perform antifraud duties. In particular, the executives told us,
the contractor does not certify the authenticity of submitted
documents, does not engage in fraud detection, and does not undertake
investigative activities. In the contractor's standard operating
procedures for its work for CMS, document-review workers are directed
to ``determine if the document image is legible and appears unaltered
by visually inspecting it.'' Further, according to the contractor, it
is not equipped to attempt to identify fraud, and does not have the
means to judge whether documents submitted might be fraudulent.
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\28\ Fraud involves obtaining something of value through willful
misrepresentation. Whether conduct is in fact fraudulent is a
determination to be made through the judicial or other adjudicative
system. For information generally on fraud controls, see GAO,
Individual Disaster Assistance Programs: Framework for Fraud
Prevention, Detection, and Prosecution, GAO-06-954T (Washington, D.C.:
July 12, 2006).
CMS officials told us there have been no cases of fraudulent
applications or documentation referred to the U.S. Department of
Justice or the HHS Office of Inspector General, because its document-
processing contractor has not identified any fraud cases to CMS.
However, as noted earlier, the contractor is not required to detect
fraud, nor is it equipped to do so. According to the CMS officials,
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there has been ``no indication of a meaningful level of fraud.''
According to CMS officials, it would not be practical to have
applicants show original documents at time of application. With the
HealthCare.gov website, the agency decided to move away from in-person
authentication, in order to avoid burden on consumers, the officials
told us. They also said in-person presentation of documentation is not
possible in the current structure, as there are insufficient resources
to establish a system to do so.
Overall, according to CMS officials, the agency has limited ability
to respond to attempts at fraud. They told us CMS must balance
consumers' ability to ``effectively and efficiently'' select
Marketplace coverage with ``program-integrity concerns.'' CMS places a
strong emphasis on program integrity and builds program integrity
features into all aspects of implementation of the law, according to
CMS officials. In any case, the CMS officials said the design of the
program does not allow for direct consumer profit from fraud, because
APTC and CSR subsidies are paid to policy issuers, not consumers. We
note, however, that even so, the subsidies nevertheless can produce
direct financial benefits to consumers. For example, if consumers elect
to receive the premium tax credit in advance, that lowers the cost of
monthly coverage. A consumer could also receive the advance premium tax
credit and not file a federal tax return, as required to ensure proper
treatment of the credit. Likewise, CSR subsidies mean smaller out-of-
pocket expenses when obtaining medical services. Accordingly, although
subsidies may be paid directly to issuers, they still result in a cost
to the government and a benefit to enrollees.
CMS officials told us the agency plans to conduct an assessment of
the Marketplace's eligibility determination process, including the
application process and the inconsistency resolution process. They did
not provide a firm date for completion, saying the review would depend
on obtaining IRS information for use as a reference.
Four of Our 11 Applicants Continued to Receive Subsidized Coverage for
2014,
Likely Because CMS Waived Documentation Requirements
According to the applicant data we obtained from CMS, most of our
applications had unresolved inconsistencies--indicating either that the
Marketplace did not receive requested documentation or the
documentation was not satisfactory. Specifically, as shown in appendix
III, the CMS data indicate that, as of April 2015, 7 of our 11
applications had at least one inconsistency that remained unresolved.
Because we did not disclose the specific identities of our
fictitious applicants, CMS officials said they could not explain our
findings on handling of inconsistencies for our applications.\29\
However, in general, they said our subsidized policies may have
remained in effect during 2014 because CMS waived certain document
filing requirements. Specifically, CMS directed its document contractor
not to terminate policies or subsidies if an applicant submitted any
documentation to the Marketplace. That is, if an applicant submitted at
least one document, whether it resolved an inconsistency or not, that
would be deemed sufficient so that the Marketplace would not terminate
either the policy or subsidies of the applicant, even if other
documentation had initially been required.\30\ For example, for one of
our applicants, the Marketplace requested citizenship, income, and
identity documents, but our applicant submitted only identity
information. Under the CMS directive, the applicant's policy and
subsidies continued through 2014 because our applicant submitted at
least one document to the Marketplace, but not all documents required.
Thus, in the case of our four applicants that submitted partial
documentation to the Marketplace, we likely were relieved of the
obligation for submitting all documents for the 2014 plan year.
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\29\ GAO's standard practice is to not disclose identifiers
associated with undercover identities and operatives, in order to
protect use of this sensitive investigative technique, which can yield
results not obtainable through other means.
\30\ For example, in the case of an income inconsistency,
contractor procedures stated there will not be action taken ``if the
consumer or anyone in the household has sent any supporting document .
. . regardless of the relevance of the document to the Annual Income
inconsistency.'' For instance, there will be no action on the income
issue ``if the consumer or household member has sent a document
relating to immigration, even though that document cannot be used to
resolve the Annual Income inconsistency.'' relieved of the obligation
for submitting all documents for the 2014 plan year.
For the 2014 plan year, PPACA authorized CMS to extend the period
for applicants to resolve inconsistencies unrelated to citizenship or
lawful presence.\31\ Additionally, regulations state that CMS may
extend the period for an applicant to resolve any type of inconsistency
when the applicant demonstrates a ``good faith effort'' to submit
documentation.\32\ CMS officials told us they relied upon these
authorities to make a policy decision to broadly extend the period for
resolving all types of inconsistencies in 2014. Under the policy, the
officials told us, the submission of a single document served as
evidence of a good faith effort by the applicant to resolve all
inconsistencies, and therefore extended the resolution period through
the end of 2014.\33\ As such, CMS did not terminate any applicant who
``demonstrated a good faith effort'' in 2014. The officials told us
that CMS is enforcing the full submission requirement for 2015, and
that any good-faith extensions granted in 2015 would be decided on a
case-by-case basis and be limited in length. All consumers, regardless
of whether they benefitted from the good-faith effort extension in
2014, will still be subject to deadlines for filing sufficient
documentation, they said. In particular, according to the officials,
those who made a good-faith effort by submitting documentation, but
failed to clear their inconsistencies in 2014, were among the first
terminations in 2015, which they said took place in February and early
March. We are continuing to seek further information from CMS officials
on their good-faith effort policy, as well as any 2015 terminations, as
part of ongoing work.
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\31\ 42 U.S.C. Sec. 18081(e)(4)(A).
\32\ 45 CFR Sec. 155.315(f)(3).
\33\ We did not find any public announcement of CMS's decision to
apply the good-faith provision.
Although the good-faith effort policy could explain the handling of
some of our applications, CMS officials could not provide a general
explanation for the three applications for which we submitted no
documentation but our subsidized coverage remained. However, based on
our examination of applicant files at the CMS document contractor, this
could be due to an error in the CMS enrollment system. Specifically, we
found instances in which records we reviewed showed that applicants had
not enrolled in a plan, when they actually had done so. Contractor
officials told us that in such cases, they did not terminate the plans
or subsidies because the applicants were shown as not enrolled. We plan
to address this issue of tracking of inconsistencies in our ongoing
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work.
Also included among the unresolved inconsistencies for our
applicants were four for Social Security numbers. According to CMS
officials, inconsistencies for Social Security numbers occur when an
applicant's name, date of birth, and Social Security number cannot be
validated in an automated check with SSA. The officials told us that
systems capability has not allowed CMS's document contractor to make
terminations for such inconsistencies. They also said the agency has
done no analysis of the fiscal effect of not making such terminations.
We plan to address this issue in ongoing work.\34\ In addition, CMS
officials told us that although it checks applicants or enrollees
against SSA's Death Master File, it currently does not have the systems
capability to change coverage if a death is indicated. Instead, the
officials told us, the Marketplace has established a self-reporting
procedure for individuals to report a consumer's death in order to
remove the consumer from coverage. The number of reported deaths from
SSA is ``very minimal,'' according to CMS officials.
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\34\ CMS officials also told us the agency did not pursue
terminations for inconsistencies involving American Indian status and
presence of employer-sponsored or minimum essential coverage. For
incarceration status (incarcerated individuals are generally not
eligible for coverage), CMS officials said the agency accepted
applicant attestations after determining that the SSA prisoner database
was unreliable.
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The Marketplace Automatically Reenrolled Coverage for All 11 Fictitious
Applicants for 2015
The coverage we obtained for our 11 fictitious applicants contained
an automatic reenrollment feature--both insurers and the Marketplace
notified us that if we took no action, we would automatically be
enrolled in the new coverage year (2015).\35\ In all 11 of our cases,
we took no action and our coverage was automatically reenrolled in
January 2015. We continued to make premium payments, in order to
demonstrate continuation of subsidized coverage, which meant continuing
costs for the federal government. Appendix IV summarizes our automatic
reenrollments.
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\35\ Under a CMS policy adopted in September 2014 for the 2015
coverage year, generally, if consumers do nothing, they will be
automatically enrolled in the same plan with the same premium tax
credit and other financial assistance. Consumers whose 2013 tax return
indicates they had very high income, or who did not give the
Marketplace permission to check updated tax information for annual
eligibility redetermination purposes, were to be automatically enrolled
but without financial assistance if they do not return to
HealthCare.gov. CMS said this process provides continuity of coverage
and safeguards public funds. See
http://cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2014-Fact-
sheets-items/2014-09-02.html?DLPage=1&DLSort=0&DLSortDir=descending,
accessed July 8, 2015.
Although we obtained automatic reenrollments, we found
communications from the Marketplace leading up to the end of 2014 to be
---------------------------------------------------------------------------
contradictory or erroneous. Examples include the following:
As noted earlier, our applicants were notified they would
automatically be reenrolled for the new coverage year. But most
of the applicants also received, to varying degrees, notices to
reapply or to take some type of action. For example, we
received notices stating: ``Official Notice: Your 2015
application is ready,'' ``Action Needed: Your 2015 health
coverage,'' and ``Follow these steps to re-
enroll by December 15.'' The message and frequency of these
notices could create uncertainty among applicants who believed
they need not take any action to remain enrolled.
In correspondence to our applicants, the Marketplace referred to
things that could not have happened. In four cases in the
latter part of 2014, Marketplace correspondence referred to the
filing of federal tax returns of our applicants, even though
our applicants never filed a tax return.
In four cases, our enrollees received notices directing them to
send additional information in order to continue coverage,
saying they could lose coverage if they did not--but the
deadline for submission was a date that had passed months
earlier. For example, one enrollee received such a notice in
December 2014, advising that coverage might be lost six months
earlier, in June 2014.
As mentioned previously, CMS officials told us they are working to
improve communication with consumers, and will make improvements in
consumer notices.
CMS Provided Inaccurate Tax Information for 3 of 11 Fictitious
Applicants
Under PPACA, an applicant's filing of a federal income-tax return
is a key element of back-end controls. When applicants apply for
coverage, they report family size and the amount of projected income.
Based, in part, on that information, the Marketplace will calculate the
maximum allowable amount of advance premium tax credit. An applicant
can then decide if he or she wants all, some, or none of the estimated
credit paid in advance, in the form of payment to the applicant's
insurer that reduces the applicant's monthly premium payment.
If an applicant chooses to have all or some of his or her credit
paid in advance, the applicant is required to ``reconcile'' on his or
her federal tax return the amount of advance payments the government
sent to the applicant's insurer on the applicant's behalf with the tax
credit for which the applicant qualifies based on actual reported
income and family size.\36\
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\36\ To receive advance payment of the tax credit at time of
application, applicants must pledge to file a tax return. The actual
premium tax credit for the year will differ from the advance tax credit
amount calculated by the Marketplace if family size and income as
estimated at the time of application are different from family size and
household income reported on the tax return. If the actual allowable
credit is less than the advance payments, the difference, subject to
certain caps, will be subtracted from the applicant's refund or added
to the applicant's balance due. On the other hand, if the allowable
credit is more than the advance payments, the difference is added to
the refund or subtracted from the balance due.
To facilitate this reconciliation process, the Marketplace sends
enrollees Form 1095-A, which reports, among other things, the amount of
advance premium tax credit paid on behalf of the enrollee. This
information is necessary for enrollees to complete their tax returns.
The accuracy of information reported on this form, then, is important
for determining an applicant's tax liability, and ultimately,
---------------------------------------------------------------------------
government revenues.
We found errors with the information reported on 1095-A forms for 3
of our 11 fictitious applicants.\37\ In two cases, we received multiple
forms containing different information for the same applicant. In all
three cases, the forms did not accurately reflect the number of months
of coverage, thus misstating the advance premium tax credits received.
In one of the cases, for instance, the form did not include a couple of
months of advance premium tax credit that was received and, as a
result, understated the advance premium tax credit received by more
than $600. Appendix V shows complete results for tax forms we received.
Because we did not provide CMS with detailed information about the
specific cases, CMS officials said they could not conduct research and
explain why these errors occurred. In general, CMS officials told us
the agency made quality checks on tax information before mailings to
consumers.\38\
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\37\ The errors we encountered were of a different type than those
announced by CMS in February 2015, when the agency said about 800,000
tax filers had received Forms 1095-A that listed incorrect benchmark
plan premium amounts. For details, see
http://blog.cms.gov/2015/02/20/what-consumers-need-to-know-about-
corrected-form-1095-as/ accessed on June 30, 2015.
\38\ We shared with CMS details on errors in our applicants' 1095-A
forms, during the course of our review, in March 2015.
During our testing work, we also identified that unlike advance
premium tax credits, CSR subsidies are not subject to a recapture
process such as reconciliation on the taxpayer's federal income-tax
return. In discussions with CMS and IRS officials, we found that the
federal government has not established a process to identify and
recover the value of CSR subsidies that have been provided to our
fictitious enrollees improperly. These subsidies increase government
costs; and, according to IRS, excess CSR payments, if not recovered by
CMS, would be taxable income to the individual for whom the payment was
made. We are continuing to seek information from CMS on any efforts to
recover costs associated with subsidy reductions or eliminations due to
unresolved inconsistencies.
The Marketplace Later Terminated Subsidized Coverage for 6 of Our 11
Applicants in Early 2015, but We Restored Coverage for 5 of
These Applicants--With Larger Subsidies
In December 2014, the Marketplace sent notifications to 5 of our 11
applicants, indicating that we had filed new applications for
subsidized coverage. In four of these notices, the Marketplace stated
our subsidies or coverage, or both, would be terminated if we failed to
provide supporting documentation. However, we had not filed any such
applications, nor, as described earlier, had we sought any
redetermination of subsidies. Because each of our fictitious applicants
earlier received either written or verbal assurances from the
Marketplace that documentation had been received and no further action
was necessary, we did not respond to these requests to submit
supporting documentation.
A few months later, the Marketplace terminated coverage or
subsidies for six applicants, including four applicants who had
received notice of new applications in December 2014, and two
applicants who had not received notice of a new application. The
termination notices cited failure to respond to requests to submit
documentation in support of what were claimed to be the new
applications we submitted. Our remaining five applicants continued
receiving subsidized coverage without interruption.\39\ Following the
termination notices, we elected to pursue continued coverage for the
six cases as part of our testing, even though we had not filed the
claimed new applications. Each of our six fictitious applicants that
lost coverage or subsidies made phone inquiries to the Marketplace for
an explanation of the terminations. In three of these inquiries, the
Marketplace representatives told our applicants that they were required
to file a new application or supporting documentation each year.
However, as described earlier, notifications we received earlier from
the Marketplace and insurers told us that no actions were needed to
automatically reenroll in our plans other than to continue to pay
premiums. In addition, as noted, other applicants did not receive
notices of new applications being filed.\40\ We are continuing to seek
from CMS information on this treatment of our applicants.\41\
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\39\ We shared with CMS details of our purported new applications,
during the course of our review, in May 2015.
\40\ Although our other applicants did not receive notices of new
applications being filed, CMS officials told us that each year, a new
application for the upcoming coverage year is created for those who
have coverage through the Marketplace. To lessen consumer burden, the
Marketplace pre-populates a new application using existing information,
they said. According to the officials, CMS encourages applicants who
wish to continue Marketplace coverage to update their application
information during open-enrollment and decide what coverage they will
need for the next year. If applicants do not contact the Marketplace to
choose coverage by December 15th, the Marketplace will automatically
re-enroll them in their current plan or a similar one, the CMS
officials told us.
\41\ For the general situation for reenrollment, see Centers for
Medicare and Medicaid Services, Bulletin #14: Guidance for Issuers on
2015 Reenrollment in the Federally-facilitated Marketplace (FFM),
available at https://www.cms.gov/CCIIO/Resources/Regulations-and-
Guidance/Downloads/Bulletin14_Reenrollment_120114.pdf, accessed July 2,
2015.
Next, for each of these six fictitious applicants, we requested in
Marketplace phone conversations reinstatement of coverage or subsidies.
For five of the six applicants, the Marketplace approved reinstatement
of subsidized coverage, while in the process also increasing total
premium tax credit subsidies for all these applicants combined by a
total of more than $1,000 annually.\42\ For the sixth applicant, a
Marketplace representative said a caseworker must evaluate our
situation. We were told we could not speak with the caseworker, and it
could take the caseworker up to 30 days to resolve the issue. This
applicant's case was still pending at the time we concluded our
undercover activity in April 2015. Appendix VI summarizes outcomes for
the unknown applications and terminations that followed for six of our
applicants.
---------------------------------------------------------------------------
\42\ In seeking restoration of coverage, we did not request any
change in subsidies. The Marketplace provided us with new subsidy
amounts in approving our restored coverage. According to CMS officials,
factors that could affect subsidy amounts include use of updated
federal poverty level income information; a change in plans available
in the market, which affects calculation of subsidies; and a consumer
aging. We did not make premium payments for these five applicants
following reinstatement because the reinstatements occurred at the end
of our undercover testing period.
For three of the five applicants for whom we obtained reinstatement
of subsidized coverage, we had open inconsistencies related to
citizenship/immigration status remaining from our initial applications
for 2014, according to CMS data. For each of these three applications,
we had never submitted any citizenship or immigration documentation to
the Marketplace for resolution. Nonetheless, we had subsidized coverage
restored. We are continuing to seek from CMS any information on whether
procedures allow repeated applications as a way to avoid document-
filing requirements.
We Were Unable To Obtain In-Person Assistance in Five of Six Undercover
Attempts To Test Income-Verification Controls, and Application
Assisters Subsequently Acknowledged Errors
As described earlier, CMS has awarded grants for ``Navigators,''
which are to provide free, impartial health-insurance information to
consumers. In addition, such aid is also to be available from other in-
person assisters (``non-Navigators'') who generally perform the same
functions as Navigators, but are funded through separate grants or
contracts.
As described in our July 2014 statement, in addition to the 12
online and telephone applications, we also attempted an additional 6
in-person applications, seeking to test income-verification controls
only.\43\ During our testing, we visited one in-person assister and
obtained information on whether our stated income would qualify for
subsidy. In that case, as shown in Figure 2, a Navigator correctly told
us that our income would not qualify for subsidy. However, for the
remaining five in-person applications, we were unable to obtain such
assistance. We encountered a variety of situations that prevented us
from testing our planned scenarios.\44\ We later returned to the
locations, seeking explanations on why we could not obtain the
advertised assistance, which are also shown in figure 2.\45\
Representatives of these organizations generally acknowledged the
issues we raised in handling of our application inquiries.
---------------------------------------------------------------------------
\43\ In these in-person applications, our planned approach was to
discuss concerns about policy costs and to inquire whether there were
ways to reduce the expenses, such as through income-based PPACA
subsidies.
\44\ For these six in-person applications, we randomly chose three
Navigators and three non-Navigators in the target areas of our selected
states. For the in-person applications, because our sole interest was
any potential advice on reducing policy costs, we did not seek or
obtain policies, as we did with our phone and online applications.
\45\ These subsequent visits were not undercover, and we identified
ourselves as being with GAO.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
We shared these results with CMS officials, who said they could not
comment on the specifics of our cases without knowing details of our
undercover applications. CMS officials said Navigators are required to
accept all applicants, even if an organization's mission is to work
with specific populations. If Navigators cannot provide timely help
themselves, they must refer applicants to someone who can give
assistance. CMS officials also said that they can terminate grant
agreements, among other enforcement actions, if Navigators do not
comply with terms of their awards. They cited as an example a
corrective action taken in March 2015 against a Navigator grantee
operating in several states for not providing the full range of
activities it promised. CMS officials stressed to us Navigator training
and experience from the first open-enrollment period helped improve
training for the second enrollment period ending in February 2015. As
noted earlier, our review of in-person assistance was limited to the
extent we encountered Navigators and non-Navigators as part of our
enrollment control testing. A full examination of in-person assistance
---------------------------------------------------------------------------
was beyond the scope of our work.
CMS officials told us there is no formal policy or specific
guidance for situations such as the one we encountered in a case
described in figure 2, in which an applicant is asked if he or she
wishes to perform a service, such as volunteering for union activities,
at the time the applicant seeks assistance. Still, CMS officials said
Navigators would be discouraged from such activities while applicants
seek help.
CMS officials told us it is reasonable for consumers to think that
if an assister is listed on the federal website as providing help--as
were the assisters we selected--that assistance should be available as
indicated. CMS officials told us the agency recognizes challenges with
its online tool to find local assistance, and has been working to make
changes. We are continuing to seek written documentation on these
planned improvements.
Chairman Hatch, Ranking Member Wyden, and Members of the Committee,
this concludes my statement. I would be pleased to respond to any
questions that you may have.
gao contact and staff acknowledgments
GAO Contacts
For questions about this statement, please contact Seto J. Bagdoyan
at (202) 512-6722 or [email protected]. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this statement.
Staff Acknowledgements
Individuals making key contributions to this statement, or our 2014
statement reporting preliminary results, include: Matthew Valenta and
Gary Bianchi, Assistant Directors; Maurice Belding; Mariana Calderon;
Marcus Corbin; Carrie Davidson; Paul Desaulniers; Colin Fallon; Suellen
Foth; Sandra George; Robert Graves; Barbara Lewis; Maria McMullen;
James Murphy; George Ogilvie; Shelley Rao; Ramon Rodriguez; Christopher
H. Schmitt; Julie Spetz; Helina Wong; and Elizabeth Wood.
appendix i: undercover application results
Figure 3 summarizes outcomes for all 12 of the undercover phone and
online applications we made for coverage to the Health Insurance
Marketplace (Marketplace) under the Patient Protection and Affordable
Care Act, as part of our testing of eligibility and enrollment
controls.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
appendix ii: fictitious applicant documentation submitted
Figure 4 shows, by application, the documentation we submitted in
support of the 11 undercover applications that were successful. As part
of our eligibility- and
enrollment-controls testing, we varied what we submitted by
application--providing all, none, or only some of the material we were
told to send.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
appendix iii: marketplace consideration of documentation submitted
Figure 5 shows, by application, a summary of our document requests
and submissions, with Marketplace communications on adequacy of the
submissions, for the 11 undercover applications that were successful.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
a CMS officials said that any ID documents requested and
submitted are reported under the citizenship status inconsistency. They
said this is because ID information is not a distinct inconsistency,
and that any such information is used as part of evaluating citizenship
inconsistencies. As a result, CMS-reported status of inconsistencies,
as shown in the table, does not include a separate item for ID status.
We note, however, that Marketplace representatives specifically cited
ID documents to our applicants, and that CMS online information, as
well as letters sent to applicants, likewise refer to ID or documents
that can be submitted to resolve an ID issue.
b Although GAO applicants were not specifically
requested at time of application to provide confirmation of Social
Security number, data obtained from CMS listed separately a Social
Security number inconsistency.
c CMS data did not show an inconsistency for this
category.
d Indicates case where GAO submitted income at a level
substantially higher than the amount initially stated on fictitious
applications, and at levels making the applicant ineligible for income-
based subsidies.
e Notwithstanding the status as reported by CMS, the
applicant continued to receive coverage and subsidies.
appendix iv: automatic reenrollments
Figure 6 summarizes automatic reenrollment activity at the end of
the 2014 coverage year for the 11 undercover applications that were
successful.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
appendix v: accuracy of tax forms received
Figure 7 summarizes receipt of Forms 1095-A, for reconciliation of
advance premium tax credits received, for the 11 undercover
applications that were successful.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
appendix vi: restoration of subsidized coverage
Figure 8 summarizes outcomes for the six applicants for whom the
Marketplace terminated subsidies or coverage in early 2015. Prior to
termination, four of these applicants had received notices of new
applications filed, although we did not file any such applications.
Following notice of the terminations, we restored subsidized coverage
in five of six cases, with one case pending at the time we concluded
our undercover activity.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
Prepared Statement of Hon. Chuck Grassley,
a U.S. Senator From Iowa
GAO conducted an undercover operation to sign up fictitious
individuals in Obamacare's marketplaces to try to determine if
fictitious individuals could actually acquire Federal subsidies. A July
2014 GAO report concluded that the answer is ``yes.''
GAO created 12 fake applicants, and, for 11 of 12 applications
which were made by phone and online using fictitious identities, GAO
obtained subsidized coverage. For three of the 12 applications, GAO did
not submit any documents requested of them by CMS and yet still
received subsidized coverage.
CMS has been aware of this issue since July 2014. Even so, the 11
fake applicants were automatically re-enrolled. In 2015, coverage
continued for all applicants until six were terminated for unclear
reasons. However, GAO was able to reinstate five of the six with
greater subsidy amounts.
In addition, the administration has spent $120 million on
``navigators'' to help people to sign up. Five out of six applicants
did not receive any help from the navigators.
The undercover GAO operation illustrates, yet again, that the
Federal Government--and Obamacare in particular--is not working in the
people's best interest.
It is apparent that the Federal Government is not meeting the
requirements of Federal law. For example, GAO provided false
documentation, partial documentation, and sometimes no documentation to
enroll in marketplaces. In response, CMS told GAO that the documents
were satisfactory, and 10 out of 11 fictitious applicants continue to
receive taxpayer subsidies.
The GAO report noted that document processing contractors are not
required to authenticate documentation. Marketplaces are required by
law to verify applications to determine eligibility, not only for
enrollment but also for subsidies. And CMS is allowing promises to take
the place of paperwork.
This GAO report documented systemic failures that leave the
taxpayer on the hook for an even bigger bill.
______
Prepared Statement of Hon. Orrin G. Hatch,
a U.S. Senator From Utah
WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah)
today delivered the following opening statement at a Committee hearing
examining problems with HealthCare.gov enrollment controls:
Good morning.
Today's hearing will address controls at the HealthCare.gov
website.
Specifically, the committee will hear from the Director of Audit
Services at the Government Accountability Office, Seto Bagdoyan.
Director Bagdoyan's team has led an undercover ``secret shopper''
investigation to test the internal controls of HealthCare.gov and to
review the Centers for Medicare & Medicaid Services' handling of this
program.
This investigation was designed to determine the degree to which
the administration's federal health insurance exchange can protect
against fraudulent applications, what happens when applicants provide
false information and documentation, and whether the controls are
successful in dealing with irregularities once they are found.
Perhaps I should say ``spoiler alert'' before this next part.
Today, Director Bagdoyan will explain how the federal exchange failed
spectacularly on virtually all relevant accounts tested by GAO.
For this investigation, GAO created fictitious identities to apply
for premium tax subsidies through the federal health insurance
exchange. We learned last year that 11 out of 12 fake applications were
approved. CMS accepted fabricated documentation with these applications
without attempting to verify its authenticity and enrolled fake
applicants while handing out thousands of dollars in premium tax
subsidies.
Now, a year later, GAO has reported that nothing has changed and
that, if anything, there are more problems.
Worst of all, the administration has known about these problems for
over a year now and has apparently not taken the necessary steps to
rectify them. While CMS says that it is balancing consumer access to
the system with program integrity concerns, I think it's pretty clear
just what's going on here.
Since the federal exchange was first implemented, success has been
measured by the number of applicants who have signed up for insurance.
Indeed, last year, when the administration reached its initial
enrollment goal, critics of the law were told that we had been wrong
all along and that the law was, despite all the evidence to the
contrary, working just fine.
However, with these findings from GAO, it seems obvious, at least
to me, that the administration has been preoccupied with signing up as
many applicants as possible, ignoring potential fraud and integrity
issues along the way.
Now, supporters of Obamacare often insist that it is ``the law of
the land,'' and that Congress should work to improve, rather than
repeal it.
On the first point, these proponents are, unfortunately, correct.
For the foreseeable future, the so-called Affordable Care Act is the
law of the land.
On the second point, Republicans in Congress continue to work
toward repeal of the misguided law and its expensive mandates,
regulations, penalties, and taxes, and replacement of it with patient-
centered reforms that put patients, rather than Washington bureaucrats,
in charge of their health care decisions.
However, needless to say, that day will not come until there is a
President who shares our goal.
So until then, Obamacare will remain in place. In the meantime,
Congress has an obligation to exercise rigorous oversight of the
implementation of the law and to work to protect both beneficiaries and
taxpayers from its negative consequences.
That's what today's hearing is about.
We're here today to get an account of how things are working on the
federal health insurance exchange. And, once again, what we've heard
thus far is not reassuring and does not speak well for CMS's management
of HealthCare.gov, the protection of taxpayer dollars, or the
experience of enrollees.
The GAO's investigation exposes not only huge gaps in federal
exchange program integrity, but also flaws in how the exchange and CMS
contractors treat Americans who are trying to file or correct
legitimate applications.
Time after time, the GAO team sent information to the exchange for
verification only to have it ignored, or have the exchange respond as
if something entirely different had been sent in. 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.
I look forward to today's hearing and what I hope will be a good
discussion on program integrity of HealthCare.gov.
Before I conclude, I want to note that, even though this GAO
investigation was requested by this committee, CMS was less than
cooperative. Indeed, throughout the entire endeavor, officials at CMS
appeared to be dragging their feet, blowing past deadlines and good-
faith attempts to carry out this important work.
Put simply, when Congress asks GAO to conduct an inquiry, no
federal agency should stand in the way of that work. By delaying the
GAO and hampering their efforts, CMS has also delayed this committee's
work and hampered our efforts.
This is unacceptable. And, unfortunately, despite promises of
increased transparency and cooperation from agencies throughout this
administration, this type of stonewalling of legitimate oversight
efforts is far, far too common.
Acting CMS Administrator Andy Slavitt, who is now the President's
nominee to run the agency, was personally involved in this process. As
the committee considers his nomination, I look forward to asking Mr.
Slavitt about this investigation and why CMS has been interfering with
our oversight efforts.
Of course, that will all have to wait for another day and another
time. Today, we have our hands full as we hear testimony about this
important GAO investigation.
______
Prepared Statement of Hon. Ron Wyden,
a U.S. Senator From Oregon
Let me begin my remarks by saying that on this side of the aisle,
we don't take a back seat to anybody in fighting fraud and protecting
taxpayer dollars. One dollar ripped off is one dollar too many. But
let's be perfectly clear about one thing: the report up for discussion
today is not about any real-world fraud.
This study looks at a dozen fictitious cases--and not one of them
was a real person who filed taxes or got medical services. No fast-buck
fraudster got a government check sent to their bank account. Moreover,
the government auditors acknowledge today that their work, quote,
``cannot be generalized to the full population of applicants or
enrollees.''
None of the fictitious characters in this study stepped foot in a
hospital or a doctor's office. And the fact is, when you actually show
up for medical services, it's a lot harder to fake your way into
receiving taxpayer-subsidized care. Often before any services are
delivered, providers ask for a photo I.D. with an insurance card. And
if you've stolen an identity, there's probably a medical history
belonging to somebody else that should set off alarm bells.
If you're a real person signing up in the insurance marketplace,
you have to attest under penalty of perjury that the information you
provide is correct. And if you falsify the application, you face the
prospect of a fine of up to $250,000.
Another big anti-fraud check went untested in this study. That is,
squaring up tax returns with the information from your insurance
application. The GAO's testimony today calls it a, quote, ``key element
of back-end controls.'' If your tax return and personal info don't
match, the gambit's up. But the study before us today ignores that
anti-fraud check. It looks at only part of the picture when it comes to
stopping fraud.
As I said at the beginning, there are always methods of
strengthening any program and rooting out fraudsters and rip-off
artists. 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 has
made an honest, often technical mistake.
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.
A recent Gallup report stated that the rate of Americans without
health insurance is the lowest they've ever measured. This is the first
Finance Committee hearing on health care since the Supreme Court's
landmark decision upholding the law that made that possible. The fact
is, the Affordable Care Act has extended health care coverage to more
than 16 million real people who use their insurance to see real
doctors. At some point down the road, GAO is expected to complete their
report. At that time, let's work responsibly to draw conclusions on a
bipartisan basis about how the committee can work to improve American
health care.
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