Health: Premium Tax Credit Improper Payments (2018-20)
The Centers for Medicare & Medicaid Services and the Internal Revenue Service could save money by strengthening controls over the Premium Tax Credit for health insurance, which cost was about $35 billion for fiscal year 2017.
Year Identified: 2018
Area Number: 20
Area Type: Cost Savings & Revenue Enhancement
11 Total Action(s)
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for verifying compliance with applicable tax filing requirements—including the filing of the federal tax return and the Form 8962, PTC—necessary for individuals to continue to be eligible for advance PTC.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for verifying compliance with applicable tax filing requirements—including the filing of the federal tax return and the Form 8962, PTC—necessary for individuals to continue to be eligible for advance PTC.
As of September 2019, HHS's Centers for Medicare & Medicaid Services (CMS) established a process for verifying taxpayers' compliance with applicable tax filing requirements, as GAO recommended in July 2017. CMS provided documentation of its procedures for verifying whether filers complied with these requirements. This process should help ensure that CMS will terminate advance PTC on a timely basis for ineligible individuals.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for verifying the identities of phone and mail applicants to reasonably assure that ineligible individuals are not enrolled in qualified health plans in the marketplaces or provided advance PTC.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for verifying the identities of phone and mail applicants to reasonably assure that ineligible individuals are not enrolled in qualified health plans in the marketplaces or provided advance PTC.
No executive action taken. The Department of Health and Human Services (HHS) neither agreed nor disagreed with this recommendation. As of December 2021, the Centers for Medicare & Medicaid Services (CMS) had not designed or implemented procedures for verifying the identities of phone and mail applicants, as GAO recommended in July 2017. Regarding verification of filer identity, HHS stated, in response to the draft report, that for individuals starting an application via phone, the call center representatives use individuals' verbal attestations for verifications. HHS stated that for paper applications, individuals must provide names and complete addresses, as well as other information. In addition, HHS stated that individuals must attest that the information they provide on all applications is accurate by signing under penalty of perjury. However, these steps do not involve the verification of an applicant's identity to a third-party source. In August 2018, HHS officials stated that they were exploring alternatives for assessing risk and ensuring integrity of applicant information that is provided to the program and ways to ensure personal information provided by an individual is accurate through a variety of means. After this analysis phase, they plan to assess resource requirements, cost, and operational implications for potential implementation approaches. As of December 2021, HHS indicated that it cannot currently address the recommendation as it has been in the process of developing new policy and guidance, which could significantly change potential solutions or requirements. However, HHS did not provide GAO a timeframe for when it plans to finalize the new policy and guidance. It will be important for HHS to follow through on the establishment of new policy or guidance. Not effectively verifying the identities of individuals applying for health coverage through the mail or over the phone increases the risk of CMS providing advance Premium Tax Credit (PTC) to issuers on behalf of ineligible individuals.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, the Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to assess and document the feasibility and availability of obtaining sufficiently reliable data to verify individuals' residences and lack of minimum essential coverage from nonfederal employers and, if appropriate, design and implement procedures for using such data in its verification processes.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, the Secretary of Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to assess and document the feasibility and availability of obtaining sufficiently reliable data to verify individuals' residences and lack of minimum essential coverage from nonfederal employers and, if appropriate, design and implement procedures for using such data in its verification processes.
As of January 2020, CMS provided documentation to demonstrate that the verification of individuals' residences and lack of minimum essential coverage from nonfederal employers is not feasible, as GAO recommended in July 2017.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for sending notices to nonfederal employers routinely and terminating advance PTC for individuals who have access to minimum essential coverage from their employers.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for sending notices to nonfederal employers routinely and terminating advance PTC for individuals who have access to minimum essential coverage from their employers.
As of November 2018, the Department of Health and Human Services (HHS) had assessed and documented the feasibility of routinely sending notices to nonfederal employers and terminating advance PTC for individuals who have access to minimum essential coverage from their employers. In its analysis, HHS found that the employer notices were of limited utility. Specifically, only the Internal Revenue Service (IRS) can independently determine any liability for an employer shared responsibility payment because only IRS has information on employees' final eligibility for PTC and employers' offers of coverage; this information is not held by CMS. Because of this and the high cost of sending the notices and adjudicating subsequent appeals, HHS decided not to send employer notices. Because CMS appropriately reviewed the effectiveness of employer notices in regard to the recommendation, GAO is closing the recommendation as implemented.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to assess and document the feasibility of approaches for (1) identifying duplicate government-sponsored coverage for individuals receiving Medicaid and Children's Health Insurance Program coverage in federally facilitated marketplace states outside of the states where they attest to residing and (2) periodically verifying individuals' continued eligibility by working with other government agencies to identify changes in life circumstances that affect advance PTC eligibility—such as commencement of duplicate coverage or deaths—that may occur during the plan year and, if appropriate, design and implement these verification processes.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to assess and document the feasibility of approaches for (1) identifying duplicate government-sponsored coverage for individuals receiving Medicaid and Children's Health Insurance Program coverage in federally facilitated marketplace states outside of the states where they attest to residing and (2) periodically verifying individuals' continued eligibility by working with other government agencies to identify changes in life circumstances that affect advance PTC eligibility—such as commencement of duplicate coverage or deaths—that may occur during the plan year and, if appropriate, design and implement these verification processes.
As of January 2020, CMS had assessed and documented the feasibility of terminating advance PTC for duplicate coverage for Medicaid and Children's Health Insurance Program (CHIP), and individuals who are deceased, as GAO recommended in July 2017. In fiscal year 2019, CMS evaluated the feasibility of implementing its periodic data match process to identify duplicate coverage for individuals receiving CHIP benefits outside of the states where the individuals attested to residing. CMS has determined such an expansion of the periodic data match is not feasible due to (1) time needed to conduct such a cross-state match and (2) CMS's belief that the Medicaid and CHIP enrollment match rate for consumers in states where they did not apply would be no higher—and, more likely, much lower—than the current low match rate for within-state data matching. Because CMS appropriately reviewed the feasibility of obtaining Medicaid and CHIP data in these cases, GAO is closing that part of the recommendation as implemented. Related to deceased individuals, CMS began to periodically notify and terminate coverage for actively enrolled consumers that are found to be deceased during the plan year. If implemented effectively, these processes for checking deceased individuals should reduce the risk of CMS of not timely terminating benefits to ineligible individuals.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to assess and document the feasibility of approaches for terminating advance PTC on a timelier basis and, as appropriate, design and implement procedures for improving the timeliness of terminations.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to assess and document the feasibility of approaches for terminating advance PTC on a timelier basis and, as appropriate, design and implement procedures for improving the timeliness of terminations.
As of January 2020, CMS had assessed and documented the feasibility of approaches for terminating advance PTC on a more timely basis, and designed and implemented procedures for improving the timeliness of terminations, as GAO recommended in July 2017. CMS implemented a new process whereby CMS now expires inconsistencies (i.e., applicant-submitted information that does not match information from trusted data sources) on a rolling basis throughout the month. These inconsistencies, when not resolved timely, should lead to terminations of advance PTC.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, we recommend that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services to design and implement procedures for verifying major life changes using documentation submitted by applicants enrolling during special enrollment periods.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, we recommend that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services to design and implement procedures for verifying major life changes using documentation submitted by applicants enrolling during special enrollment periods.
In March 2018, CMS issued standard operating procedures for verifying major life changes using documentation submitted by applicants enrolling during special enrollment periods, as GAO recommended in July 2017. The procedures outline in detail the process for verifying an applicant's eligibility based on documentation submitted to support the qualifying event. If implemented effectively, these procedures should reduce the risk of CMS providing advance PTC to individuals who are not eligible to enroll outside of the annual open enrollment period.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for verifying with Internal Revenue Service (IRS) (1) household incomes, when attested income amounts significantly exceed income amounts reported by IRS or other third-party sources; and (2) family sizes.
To improve annual reporting on Premium Tax Credit (PTC) improper payments, control activities related to eligibility determinations, and calculations of advance PTC, GAO recommends that the Secretary of Health and Human Services direct the Administrator of the Centers for Medicare & Medicaid Services (CMS) to design and implement procedures for verifying with Internal Revenue Service (IRS) (1) household incomes, when attested income amounts significantly exceed income amounts reported by IRS or other third-party sources; and (2) family sizes.
As of May 2019, CMS has established procedures to improve control activities related to income-based eligibility determinations and calculations of advance PTC, as GAO recommended in July 2017. Specifically, CMS creates an annual income inconsistency for consumers if (1) the consumer attests to projected annual income between 100 percent and 400 percent of the federal poverty level; (2) CMS has data from the Internal Revenue Service and Social Security Administration that indicates income is below 100 percent of the federal poverty level; (3) CMS has not assessed or determined whether the consumer has income within the Medicaid or Children's Health Insurance Program eligibility standard; and (4) the consumer's attested projected annual income exceeds the income reflected in the data available from electronic data sources by a reasonable threshold established by the CMS and approved by the Department of Health and Human Services (HHS). If implemented effectively, the process for checking annual income could reduce the risk of CMS providing advance PTC to issuers on behalf of ineligible individuals. HHS also provided documentation that demonstrated that it was not feasible to verify family size. Based on this analysis, GAO agreed with HHS's decision to not develop procedures to verify family sizes.
To comply with improper payments reporting requirements and improve procedures related to processing Premium Tax Credit (PTC) information on tax returns, GAO recommends that the Commissioner of Internal Revenue direct the appropriate officials to assess and document the feasibility of approaches for incorporating information from the marketplaces on individuals who did not demonstrate that they met the eligibility requirements for citizenship or lawful presence in the tax compliance process. If determined feasible, the Internal Revenue Service (IRS) should work with the Department of the Treasury (Treasury) to require marketplaces to periodically provide such information on individuals and use such information to recover advance PTC made for those individuals.
To comply with improper payments reporting requirements and improve procedures related to processing Premium Tax Credit (PTC) information on tax returns, GAO recommends that the Commissioner of Internal Revenue direct the appropriate officials to assess and document the feasibility of approaches for incorporating information from the marketplaces on individuals who did not demonstrate that they met the eligibility requirements for citizenship or lawful presence in the tax compliance process. If determined feasible, the Internal Revenue Service (IRS) should work with the Department of the Treasury (Treasury) to require marketplaces to periodically provide such information on individuals and use such information to recover advance PTC made for those individuals.
No executive action taken. In December 2021, IRS stated that it had no new updates for this recommendation and indicated that program managers plan to resume discussions on this recommendation once the 2021 filing season has completed. The IRS agreed with this recommendation and in December 2018, an IRS official indicated that IRS conducted a detailed review of GAO's July 2017 recommendation. IRS informed GAO that it is internally discussing an alternative way to address the recommendation to prevent Premium Tax Credit (PTC) to noncitizens. The IRS official indicated that IRS is reviewing this alternative with Treasury and the Centers for Medicare & Medicaid Services, but IRS did not provide GAO with a timeframe for its implementation. The lack of effective procedures for verifying citizenship or lawful presence in the tax compliance process increases the risk of IRS providing PTC to ineligible individuals.
To comply with improper payments reporting requirements and improve procedures related to processing Premium Tax Credit (PTC) information on tax returns, GAO recommends that the Commissioner of Internal Revenue direct the appropriate officials to assess whether the Internal Revenue Service (IRS) should require its examiners to verify health care coverage of individuals to determine eligibility for PTC. To do this, IRS should complete its evaluation of the level of noncompliance related to duplicate health insurance coverage. Based on this evaluation and if cost effective, IRS should design and implement formal policies and procedures to routinely identify individuals inappropriately receiving PTC because of their eligibility for or enrollment in health care programs outside of the marketplaces and notify such individuals of their ineligibility for PTC.
To comply with improper payments reporting requirements and improve procedures related to processing Premium Tax Credit (PTC) information on tax returns, GAO recommends that the Commissioner of Internal Revenue direct the appropriate officials to assess whether the Internal Revenue Service (IRS) should require its examiners to verify health care coverage of individuals to determine eligibility for PTC. To do this, IRS should complete its evaluation of the level of noncompliance related to duplicate health insurance coverage. Based on this evaluation and if cost effective, IRS should design and implement formal policies and procedures to routinely identify individuals inappropriately receiving PTC because of their eligibility for or enrollment in health care programs outside of the marketplaces and notify such individuals of their ineligibility for PTC.
As of August 2020, IRS had assessed and documented the feasibility of examiners to verify health care coverage of individuals to determine eligibility for PTC as GAO recommended in July 2017. IRS performed an analysis using tax year 2017 tax returns to determine if it should design and implement formal policies and procedures that would require its examiners to routinely identify individuals inappropriately receiving PTC because of their eligibility for or enrollment in employer sponsored health care programs, and to notify such individuals of their ineligibility for PTC.
IRS indicated that efforts to obtain data necessary to select the most egregious cases took tremendous resources and manual effort by its staff. Based on resources utilized to secure inventory of 2017 tax returns, evaluation, and poor results from its analysis, IRS concluded that performing an additional analysis using tax year 2018 tax returns was not warranted or cost effective. IRS has provided sufficient documentation that demonstrates it has performed a comprehensive analysis supporting its decision to not move forward with additional policies and procedures. Based on this analysis, GAO agreed with IRS's decision to not develop specific procedures to routinely verify duplicate health insurance coverage to determine eligibility for PTC.
To comply with improper payments reporting requirements and improve procedures related to processing Premium Tax Credit (PTC) information on tax returns, GAO recommends that the Commissioner of Internal Revenue direct the appropriate officials to design and implement procedures in the Internal Revenue Manual to regularly notify nonfilers of the requirement to file tax returns in order to continue to receive advance PTC in the future.
To comply with improper payments reporting requirements and improve procedures related to processing Premium Tax Credit (PTC) information on tax returns, GAO recommends that the Commissioner of Internal Revenue direct the appropriate officials to design and implement procedures in the Internal Revenue Manual to regularly notify nonfilers of the requirement to file tax returns in order to continue to receive advance PTC in the future.
As of September 2019, the Internal Revenue Service (IRS) had designed and implemented procedures that will allow for the notification of nonfilers of the requirement to file tax returns, as GAO recommended in July 2017. Specifically, IRS established a process to provide Department of Health and Human Services' Centers for Medicare & Medicaid Services (CMS) the information on those individuals who received advance PTC in the prior coverage year but failed to file a tax return for that coverage year and reconcile the advance PTC. In addition, in fiscal year 2019, CMS provided GAO documentation that it established a process for verifying taxpayers' compliance with applicable tax filing requirements and notifying nonfilers of the requirement to file tax returns in order to continue to receive advance PTC in the future. GAO does not believe it is necessary for IRS to design and implement procedures to carry out responsibilities that are now being handled by CMS. Since CMS has implemented these procedures, GAO determined that its recommendation to IRS has been addressed. By implementing this process, nonfilers will be notified of the requirement to file their tax returns in order to continue to receive advance PTC in the future.
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