Obamacare Honor System Invites Fraud: History Guarantees It

Everybody thought the biggest news last week about Obamacare was the delay in the employer mandate by one year. It was another blow to the unpopular law that President Obama considers to be his crowning achievement.

Not to be outdone by that news, the Obama administration on Friday (of course!) released the following bombshell:

On Friday, Sarah Kliff and Sandhya Somashekhar of the Washington Post discovered that the Obama administration had buried in the Federal Register the announcement that the government won’t be able to verify whether or not applicants for Obamacare’s insurance exchange subsidies are actually qualified for the aid, in the 16 states that are setting up their own exchanges. Instead, until at least 2015, these states will be able to “accept the applicant’s attestation [regarding eligibility] without further verification.”

You know what that means, right? Now we know the answer. The government is going with what Kliff and Somashekhar call “the honor system.”

“We have concluded that the…proposed rule is not feasible for implementation for the first year of operations,” say the Centers for Medicare and Medicaid Services. “The exchange may accept the applicant’s attestation regarding enrollment in an eligible employer-sponsored plan…without further verification, instead of following the procedure in §155.320(d)(3)(iii).”

And it’s not just there. The feds will also allow people to gain means-tested subsidized coverage on the exchanges without having to…test their means.

“For income verification, for the first year of operations, we are providing Exchanges with temporarily expanded discretion to accept an attestation of projected annual household income without further verification.”

In short, this is a disaster waiting to happen. Such an “honor” system will be ripe for fraud, and people will undoubtedly try to take advantage of it.

No magic 8 ball is needed to determine if abuse of the “honor” system will happen. There are decades full of examples of people ripping off the government. It would take all day to document every area of fraud associated with the federal government, but here are just a few examples:

Medicare Fraud – It comes with a steep price:

In a May 2012 report, FBI Special Agent David Welker said, “The United States spends more than $2.5 trillion on health care annually, and rough estimates indicate that anywhere from 3% to 10% of all health care expenditures are attributed to fraud.”


If you do Welker’s math, the annual cost of fraud ranges from $75 billion to $250 billion. That’s a lot of our hard-earned retirement money.

Medicare fraud is so common that the government has set up websites to help explain to people how to spot it if they see it and what to do about it.

Fraud is so rampant in Medicare/Medicaid that it’s created a thriving business – companies that specialize in investigating Medicare fraud. Need a job? There’s plenty.

Social Security Fraud – It’s largely related not to SS payments for seniors, but rather SSDI or Supplemental Security Disability Income:

Fraud could be a major reason that the number of people enrolled in Social Security Disability Insurance (SSDI) has risen so dramatically over the past 10 years, according to two letters written by the House Oversight and Government Reform Committee.

The number of enrollees in the program grew by almost 60 percent between 2003 and 2012, from 5.58 million to 8.82 million people, the March 11 letter to acting commissioner of the Social Security Administration Carolyn Colvin says. This rate of growth is twice what the previous decade experienced.

The increase is not likely coming from people who actually need the care, the letter contends. Fraudulent enrollment and improper payments are pushing up the numbers.

The letter, signed by Committee Chairman Darrell Issa (R., Calif.) and two subcommittee chairmen, points out “significant management problems that lead to misspending within the program.”

The letter says many ineligible people are receiving benefits, citing a 2010 Government Accountability Office report.

How much does all of that fraud cost? Hard to say for sure, but it is in the “billions.”

The study also determined that the Social Security Administration (SSA) failed to establish that claimants were properly screened to certify that they satisfied metrics in the Social Security Administration’s (SSA) medical “Listing of Impairments” to meet eligibility requirements qualifying them for the DI program. The Inspector General’s office identified billions in fraud. The Senate study implies many billions more in abuses. Much of the ongoing program cheating comes from those who continue to collect disability payments but are stealthily employed on the side.

Other types of government fraud:

Housing Subsidies

Student Aid

Farm Subsidies

According to Darrell Issa, the federal government lost $261 billion in 2012. That doesn’t even include improper payments (not fraud, but payments still made because of mistakes) totaling $108 billion.

Paul Ryan has called for the CBO to provide a new cost estimate of Obamacare due to the delayed employer mandate. I suspect there will be more calls for the scoring to be done again in light of this latest development.

The country is already losing over a quarter of a trillion dollars a year due to fraud. The Obamacare “honor system” is only going to make it worse. It’s guaranteed.