Fox News and The Wall Street Journal stoked fears that a delay in the verification systems of health care reform would lead to fraud, while ignoring the fact that the government will conduct audits before implementing a stronger verification system and will heavily fine individuals who misrepresent their eligibility.
The Washington Post reported on July 5 that until 2015, the federal government will not require 16 states and the District of Columbia -- which are running their own health insurance marketplaces -- to verify whether an individual accurately reported that they currently do not receive affordable health insurance from their employer and are eligible for health care benefits under the new law. These benefits include tax subsidies for Americans who earn less than 400 percent of the poverty line and some additional Medicaid coverage.
On the July 8 edition of Fox & Friends, co-host Steve Doocy claimed the government “is not going to be able to verify whether or not you have the right income standards so they're going to trust people. What could possibly go wrong?” Fox News host Bret Baier, who was a guest on the program, further claimed the government was “not going to check to see if anybody qualifies to receive benefits” and suggested the move would lead to misspent funds, saying “you could see taxpayer dollars going out the window.” Co-host Gretchen Carlson agreed the program would be “rife with fraud,” while Doocy suggested this system would result in “a quarter of a trillion dollars” of fraud:
DOOCY: If you're just going to trust people to tell the truth, how is that going to work out when it comes to fraudsters if you look at the Earned Income Tax Credits. Right now, they say that about 25 percent of the people who get them don't deserve them. They should not be applying for them. But they get them. So if you use that same metric, you could probably lose, over 10 years, a quarter of a trillion dollars to fraud on this program.
The claim that this delay could result in fraudulent spending echoed a July 7 Wall Street Journal editorial, which claimed that “millions of individuals [could] decide they're eligible for the subsidies,” resulting in “as much as $250 billion in improper payments in its first decade.”
But the Post explained that this system will not last a decade, and includes safeguards against fraud. The full verification system is only delayed until 2015, and until then the government will conduct an audit of a statistically significant sample of consumers who appear to be underreporting their income. Anyone found lying will face a penalty of as much as $25,000, and be forced to pay back the extra subsidies. The Post also noted that this honor system for health care reflects the one used by the Internal Revenue Service:
It is not unprecedented for the government to use the honor system in situations in which it collects data on millions of individuals, said Timothy S. Jost, a law professor at Washington and Lee University in Lexington, Va., and a consumer advocate. For example, people are expected to report their cash tips to the Internal Revenue Service as income.
“An awful lot of the economy is a cash economy,” he said. “If we had to verify every statement that was made to the IRS, our economy would collapse.”
In addition, lying on the exchange form carries with it a penalty of as much as $25,000. An individual who fibbed on his income would also have to pay back the extra subsidies when filing a tax return for 2014.
As for the states that are not running their own health insurance marketplaces, the Post reported that the federal government will also conduct audits in those states.