Erroneous Subsidies for Obamacare Coverage Nothing New for Feds, Who Make $100 Billion in Mistakes Per Year

Yesterday Peter Suderman reported that about 1
million people who have signed up for Obamacare have gotten
inaccurate subsidies
for their coverage:

The law’s subsidies are doled out based annual income, and
people who apply for coverage are responsible for submitting income
data in order to prove eligibility for the subsidies. The problem
is that a million or so people have entered incomes that differ
substantially from what the Internal Revenue Service (IRS) has on
file.

Normally this would be reconciled through a follow-up auditing
process; when the system identifies people whose submitted incomes
don’t match IRS records, those people are asked to send in further
paperwork as proof. But only “a fraction” of those people have
responded, according to
[The Washington] Post. And even when
they have provided additional documentation, it doesn’t matter.

It doesn’t matter because the government isn’t following up on
the mismatches. It will be interesting to see how many people
mistakenly claim they don’t smoke, either (smoking is the one
activity—it’s not a pre-existing condition precisely—that will
increase your premiums).

But as Reason columnist and Mercatus Center economist
Veronique de Rugy and her Mercatus colleague Jason J. Fichtner have
pointed out, erroneous payments by the federal government are
nothing new. Programs such as the Earned Income Tax Rate (EITC),
the school lunch program, Medicare Advantage, and unemployment
insurance all have improper payment rates in the double digits.

Based on data from the Office of Management and Budget (OMB), de
Rugy and Fichtner note that “over
$100 billion in taxpayer funds were improperly spent in 2012,”
the latest year for which numbers are fully available. Some
programs (such as Social Security) have low error rates but
nonetheless fork over huge amounts in mistaken payments. Social
Security’s Retirement, Survivors, and Disability Insurance (RSDI),
explain the Mercatus analysts, has an error rate of just 0.4
percent but still sent out $3.2 billion in improper payments.

Other programs

not only have a high improper payment amount but also a
relatively high improper payment rate. The $12.6 billion in
misspent EITC outlays represents a substantial portion, 22.7
percent, of total EITC spending—suggesting that the EITC is prone
to fraud, waste, and abuse. As the chart displays, Medicare
Advantage (Part C), Unemployment Insurance (UI), and Supplemental
Security Income (SSI) face problems similar to the EITC, with
anywhere approximately from one in nine to one in eleven dollars in
these programs being disbursed improperly.

Read more here. Below is a chart showing error rates. We can
look forward to future charts that will include Obamacare
subsidies, for which most people on the individual insurance market
qualify.