IRS Fraud Detection System Inadequate, Treasury Audit Finds
The Internal Revenue Service's fraud detection system is inadequately equipped to identify and prevent schemes related to the issuance of federal tax subsidies through the Affordable Care Act's health insurance exchanges, according to a new audit report by Treasury Inspector General for Tax Administration J. Russell George, the AP/Sacramento Bee reports.
The tax subsidies are intended to help low- and moderate-income U.S. residents purchase coverage through the insurance marketplaces (Ohlemacher, AP/Sacramento Bee, 12/4).
According to George, the IRS --which is responsible for more than 40 new tax provisions under the ACA -- is not able to handle instances where subsidies are incorrectly issued (O'Donnell, CQ Roll Call, 12/3).
He added that the agency has "long-term limitations of its existing fraud detection system," including an "inability to keep pace with increasing levels of fraud" (AP/Sacramento Bee, 12/4). In addition, the agency's ability to protect consumers' private information is inadequate and "corrective actions" are necessary, George wrote.
Obama Administration Responds
In response, White House press secretary Jay Carney said, "The IRS aggressively safeguards our information systems and combats tax fraud. Our efforts to protect the integrity of our [ACA] programs are no exception." IRS acting Commissioner Danny Werfel said the agency "has a strong, effective system in place for administering the premium tax credit" (Temple-West, Reuters, 12/3).
According to the AP/Bee, most problems with federal tax subsidies will not be visible until taxpayers file their 2014 tax returns in the spring of 2015 (AP/Sacramento Bee, 12/4).
George included seven recommendations to address the issues, six of which the IRS has agreed to implement, according to CQ Roll Call. IRS did not agree to develop "an action plan for the failed security tests" to enhance cybersecurity, according to the report.
However, IRS officials said they are in the process of developing two new systems to address fraud.
Sen. Hatch Responds
In a statement responding to the TIGTA report, Senate Finance Committee ranking member Orrin Hatch (R-Utah) wrote, "The Obamacare premium subsidies are a fraudster's dream come true." He said "the problems with these tax credits are deeply rooted in the law itself."
Hatch added, "As TIGTA found ... the very nature of these credits -- pay first, verify a person's income later -- will lead to potentially hundreds of billions of dollars of improper payments and could put millions of Americans' personal information at risk" (CQ Roll Call, 12/3).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.