ACA Income Verification Comes Under GOP Spotlight at W&M Hearing

Today, the Ways and Means Subcommittees on Oversight and Health held a joint hearing to examine the implementation of the Affordable Care Act’s (ACA) income and insurance verification systems. Buoyed by recent reports that roughly 1.2 million Exchange enrollees filed applications with questionable income data, Republicans on the Committee chastised the administration for failing to complete the income and eligibility verification system ahead of the website launch. Further, Oversight Subcommittee Chairman Charles Boustany (R-LA) estimated that the federal government might pay up to $220 billion in improper payments over the next ten years due to incorrect subsidy calculations.

But Democrats on the Committee said the GOP’s complaints are simply a case of ACA-induced intransigence, suggesting that the issue of income verification is being “blown out of proportion,” and is generally due to consumers providing data that is more up to date than what the federal government has on record. Rep. Jim McDermott (D-WA), ranking member on the Health Subcommittee, said that although there have been “inconsistencies” in the verification process, “only a fraction actually impact anyone’s tax credits. In fact, many inconsistencies relate to applications that were never even completed.”

Several Republican members said that the ACA was poorly designed, and as an unintended consequence, could cost some consumers “thousands of dollars” for incorrectly paid tax subsidies. To administer these subsidies accurately, the federal government requires precise information about income, family status, the availability of employer-sponsored insurance, and other eligibility information. Health Subcommittee Chairman Kevin Brady (R-TX) was critical of the administration for not having the eligibility verification system completed—now 8 months after the start of open enrollment—and added that Secretary Sebelius dubiously certified to Congress that the verification system was working. Nonetheless, he argued, the government has begun to pay out billions of dollars in potentially incorrect premium subsidies to insurers.

Committee Democrats, on the other hand, said that Republicans were attacking the ACA’s subsidy verification systems to make a “partisan political point,” even though the impact of any errors is likely to be isolated. “This hearing is just another attempt to bash the ACA and play politics,” Rep. Linda Sanchez (D-CA) said. Mr. Ron Pollack, Executive Director of Families USA, testified that the Centers for Medicare and Medicaid Services (CMS) is likely to reconcile the majority of the income “inconsistencies,” as the information people record on their applications is generally more accurate and up-to-date than the information that marketplaces find in the data hub. Further, Rep. McDermott pointed out that such inconsistencies are quite common in means tested programs such as Medicaid and CHIP. He said that only a small fraction of people eligible for subsidies might have to pay some amount back to the government.

Meanwhile, Republicans argued that supporters of the health law are understating the potential cost of improper payments. Chairman Boustany explained that while the average rate of improper payments across the federal government is 4.35 percent, the rate of improper payments for the Earned Income Tax Credit—which, like premium subsides is paid based on income calculations—is approximately 22 percent. Chairman Boustany concluded that if premium subsidies are administered with the same degree of accuracy as the Earned Income Tax Credit, the federal government would pay $220 billion in improper payments over ten years. And Dr. Douglas Holtz-Eakin, President of the American Action Forum, testified that the error rate for Exchange subsidies could potentially be even higher than the Earned Income Tax Credit because the insurance subsidy calculations include additional data points.

While Republicans and their appointed witnesses surmised that most of the overpaid subsidy funds would never be seen again, Rep. McDermott argued that the ACA reconciliation provisions are designed to correct any payment inaccuracies. Mr. Pollack said that Congress should consider providing more protective caps on reconciliation to disregard both inconsistencies that were resolved within a few months and those that reflect minor mistakes in an employer coverage tool. But Dr. Holtz-Eakin emphasized that the government does not have a good track record of tracking down overpayments, saying that “we haven’t proven we can do ‘pay and chase’ effectively.” Ms. Katie Mahoney, Executive Director of Health Policy at the U.S. Chamber of Commerce, noted that it will be difficult for IRS officials to identify people who improperly received subsidies – employees and their families are not supposed to qualify for tax credits if their employer offers “affordable” health coverage that is affordable for the worker, but employers are not yet required to report who obtained coverage through the workplace.

If you are interested in a comprehensive summary of today’s hearing, please contact Shea McCarthy (smccarthy@thornrun.com).