“The Potential for Massively Expensive Fraud, or Even Massively Expensive Confusion, Is Just Enormous”
That’s from Yuval Levin, via Megan McArdle, on why the numbers are likely to be wrong when people self-report their income to the health insurance exchanges in order to get subsidies. What happens when the subsidies are later discovered to have been too large? Levin explains –
[The IRS] can only recover payments by reducing people’s income-tax refunds (which not all people have of course)…
The original statute limited the amount that could be clawed back to just $400 [for any person with an income under 400% of poverty]. Then…Congress increased that amount and made it a graduated amount based on income, so it now ranges from $600 to a maximum of $3,500 for a family (half that for an individual).
CBO projects that the AVERAGE subsidy in the exchange would be worth $5,290. So the amount they’re able to claw back from people who have incomes below 400% of poverty but receive subsidies they shouldn’t (because they report a lower income than they have, falsely claim not to have been offered qualifying coverage by an employer, or report a higher income than they actually have in order to receive subsidies instead of Medicaid coverage) is likely in most cases to be significantly lower than the amount of excess payments.
So why was the health reform law written this way? Answer below the fold.
In Massachusetts, people with subsidized insurance are in plans that look like Medicaid Plus and they are approved through the Medicaid office. That would have been an impossible sell in Washington, where everyone from the president on down had spent several years implying that everyone was going to get a standard Blue Cross plan. As Megan explains –
For obvious reasons, the Obama administration did not want to tell folks that if they needed subsidies, they would be given access to a handful of HMOs. Nor that they would go onto the exchanges and be told to print out a paper application they could send to their state’s Medicaid office. That law would never have passed Congress, or the public.
Also, on the claw backs the law had to –
promise that the IRS would not be emptying out peoples’ bank accounts in order to reclaim excessive subsidies.
It all just seems to be getting messier and messier.
Yeah, people trying to use the system will inevitably happen here. It happens all the time with other welfare programs where the government never really took the time to limit them to people in real need. It should always be the case of last resort and one should pass many hurdles in order to prove real need. Sadly this is far from the case and people take advantage of this.
It is interesting how different Washington D.C. is from everywhere else in the country and we have to rely on the people there to tell everyone else what to do.
I’ve wondered about this. The Dept. of Health and Human Services recently announced it will allow applicants to use the honor system when applying for an exchange plan. This means someone who was not offered affordable family coverage at work could go to the exchange, claim no access to an employee health plan, and underestimate their income to get approved for a huge subsidy they’re not entitled to. If they get caught, they only have to give back a small portion of the subsidy they received in error.
“AVERAGE subsidy in the exchange would be worth $5,290. So the amount they’re able to claw back from people who have incomes below 400% of poverty but receive subsidies they shouldn’t … is likely in most cases to be significantly lower than the amount of excess payments.”
Looks like it needs a better enforcement mechanism.
With hindsight, it would have been better to pass it with bipartisan consideration instead of obstruction and force.
Never going to happen– see immigration enforcement. The Left calculated long ago that they can buys the votes of the untapped lower classes (who historically, have had very low voting participation) with promises of government goodies and basically turn a blind eye to fraud and abuse of any sort among this group of potential constituents. Dems like to keep things loosely goosey for that reason.
The CBO does predict that the number of uninsured non-elderly will wall from 55 million in 2013 to 31 million in 2023
“promise that the IRS would not be emptying out peoples’ bank accounts in order to reclaim excessive subsidies.”
– Can we really trust a promise made by the IRS?
Better question, can we really trust the government?
Interesting in relation to what Krugman said about limiting choice. Something about single payer with less choice translates into better health? Sounds like this is the assumption that they are all operating on.