Report: Obamacare Premium Subsidies Will Need Fraud Protection

Yesterday the Treasury Inspector General for Tax Administration released a report on the need to strengthen anti-fraud protection in the system that will deliver Obamacare’s premium subsidies. Roughly, the problem is that subsidies are dependent on income, and the IRS is struggling to build a system that protects against people underestimating their income in order to receive higher subsidies.

This is one of the problems inherent in means-tested benefits. People expect to receive the benefits immediately if they are in need, but we only rigorously collect income data on tax day. The result is that we have to take people’s word for it with respect to their income – but even if they’re honest, you can expect a lot of people to mistakenly enter the wrong data and unwittingly defraud the system. The IRS will need a way to identify mistaken payments and claw them back in order to administer the subsidies as intended.