Patient Protection and Affordable Care Act:

CMS Should Act to Strengthen Enrollment Controls and Manage Fraud Risk

GAO-16-29: Published: Feb 23, 2016. Publicly Released: Feb 24, 2016.

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What GAO Found

The Patient Protection and Affordable Care Act (PPACA) requires applicant information be verified to determine eligibility for enrollment or income-based subsidies. To implement this verification process, the Centers for Medicare & Medicaid Services (CMS) created an electronic system called the “data services hub” (data hub), which, among other things, provides a single link to federal sources, such as the Internal Revenue Service and the Social Security Administration, to verify consumer application information. Although the data hub plays a key role in the eligibility and enrollment process, CMS does not, according to agency officials, track or analyze aggregate outcomes of data hub queries—either the extent to which a responding agency delivers information responsive to a request, or whether an agency reports that information was not available. In not doing so, CMS foregoes information that could suggest potential program issues or potential vulnerabilities to fraud, as well as information that might be useful for enhancing program management. In addition, PPACA also establishes a process to resolve “inconsistencies”—instances where individual applicant information does not match information from marketplace data sources. GAO found CMS did not have an effective process for resolving inconsistencies for individual applicants for the federal Health Insurance Marketplace (Marketplace). For example, according to GAO analysis of CMS data, about 431,000 applications from the 2014 enrollment period, with about $1.7 billion in associated subsidies for 2014, still had unresolved inconsistencies as of April 2015—several months after close of the coverage year. In addition, CMS did not resolve Social Security number inconsistencies for about 35,000 applications (with about $154 million in associated subsidies) or incarceration inconsistencies for about 22,000 applications (with about $68 million in associated subsidies). With unresolved inconsistencies, CMS is at risk of granting eligibility to, and making subsidy payments on behalf of, individuals who are ineligible to enroll in qualified health plans. In addition, according to the Internal Revenue Service, accurate Social Security numbers are vital for income tax compliance and reconciliation of advance premium tax credits that can lower enrollee costs.

During undercover testing, the federal Marketplace approved subsidized coverage under the act for 11 of 12 fictitious GAO phone or online applicants for 2014. The GAO applicants obtained a total of about $30,000 in annual advance premium tax credits, plus eligibility for lower costs at time of service. The fictitious enrollees maintained subsidized coverage throughout 2014, even though GAO sent fictitious documents, or no documents, to resolve application inconsistencies. While the subsidies, including those granted to GAO's fictitious applicants, are paid to health-care insurers, and not directly to enrolled consumers, they nevertheless represent a benefit to consumers and a cost to the government. GAO found CMS relies upon a contractor charged with document processing to report possible instances of fraud, even though CMS does not require the contractor to have any fraud detection capabilities. CMS has not performed a comprehensive fraud risk assessment—a recommended best practice—of the PPACA enrollment and eligibility process. Until such an assessment is done, CMS is unlikely to know whether existing control activities are suitably designed and implemented to reduce inherent fraud risk to an acceptable level.

Why GAO Did This Study

PPACA provides for the establishment of health-insurance marketplaces where consumers can select private health-insurance plans. The Congressional Budget Office estimates the cost of subsidies and related spending under PPACA at $37 billion for fiscal year 2015. GAO was asked to examine the enrollment process and verification controls of the federal Marketplace. For the act's first open-enrollment period ending in March 2014, this report (1) examines the extent to which applicant information is verified through an electronic system, and the extent to which the federal Marketplace resolved “inconsistencies” where applicant information does not match information from federal data sources and (2) describes, by means of undercover testing and related work, potential vulnerabilities to fraud in the federal Marketplace's application, enrollment, and eligibility verification processes. GAO analyzed 2014 data from the Marketplace and federal agencies, interviewed CMS officials, and conducted undercover testing. To perform the undercover testing, GAO submitted or attempted to submit 12 fictitious Marketplace applications. The undercover results, while illustrative, cannot be generalized to the full population of enrollees.

What GAO Recommends

GAO makes eight recommendations, including that CMS consider analyzing outcomes of the verification system, take steps to resolve inconsistencies, and conduct a risk assessment of the potential for fraud in Marketplace applications. The Department of Health and Human Services concurred with GAO's recommendations.

For more information, contact Seto J. Bagdoyan at (202) 512-6722 or bagdoyans@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Priority recommendation

    Comments: In May 2019, HHS provided us with a study it performed in response to our recommendation. The study contained broad-scale statistical analyses of the data-matching performance of the data services Hub used in the application process for health care coverage established under PPACA; qualitative discussion of the results of the analyses; and actions implemented to improve the data-matching process. We reviewed the study and concluded it was responsive to our recommendation. By undertaking this study, CMS has taken steps to improve the applicant data-matching process as described in our report. These steps should lead to improved data-matching capability, which should in turn enhance program efficiency and help ensure that applicants meet program eligibility requirements.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to conduct a comprehensive feasibility study on actions that CMS can take to monitor and analyze, both quantitatively and qualitatively, the extent to which data hub queries provide requested or relevant applicant verification information, for the purpose of improving the data-matching process and reducing the number of applicant inconsistencies; and for those actions identified as feasible, create a written plan and schedule for implementing them.

    Agency Affected: Department of Health and Human Services

  2. Status: Open

    Priority recommendation

    Comments: In April 2016, HHS reported it considers this recommendation closed because it expanded the use of analytics to analyze the value of premium tax credit and CSR subsidies that are eliminated or adjusted for 2015 actions at the policy level, and that CMS continues to analyze the data to develop future operations changes. In May 2016, we requested documentation of these actions, including (1) information produced using the capability described; (2) ways in which this information is being used for analysis for purposes such as program operations, monitoring, risk assessment, or fraud cleaning; and (3) a description of the future operational changes contemplated based on the analyses done. However, as of December 2018, HHS officials had not provided GAO with evidence that the agency had implemented this recommendation. We will continue to monitor the agency's progress in this area.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to track the value of advance premium tax credit and cost-sharing reduction (CSR) subsidies that are terminated or adjusted for failure to resolve application inconsistencies, and use this information to inform assessments of program risk and performance. (See related recommendation 7.)

    Agency Affected: Department of Health and Human Services

  3. Status: Open

    Comments: As of December 2018, CMS officials said the Department of Health and Human Services (HHS) had received a legal opinion from the U.S. Attorney General regarding validity of CSR payments, which prompted the agency to halt the payments as of October 2017. CMS officials said that if the recommendation were to be implemented, it would amount to creating new rules and a process for a program feature that no longer exists. However, in January 2019, HHS indicated that the administration supports a legislative solution that would appropriate CSR payments, and GAO continues to monitor for relevant legislative action. If funding becomes available to restore CSR payments, then implementing this recommendation would aid CMS in reducing improper payments.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to, in the case of CSR subsidies that are terminated or adjusted for failure to resolve application inconsistencies, consider and document, in conjunction with other agencies as relevant, whether it would be feasible to create a mechanism to recapture those costs, including whether additional statutory authority would be required to do so; and for actions determined to be feasible and reasonable, create a written plan and schedule for implementing them.

    Agency Affected: Department of Health and Human Services

  4. Status: Open

    Priority recommendation

    Comments: In April 2016, HHS reported that it considered this recommendation open and was working on implementing functionality for updating consumers' Social Security numbers (SSN) and their eligibility based on the correct SSN. HHS reported that is it targeting deployment of the SSN update functionality in 2017. However, as of December 2018, HHS officials had not provided GAO with evidence that the agency had implemented this recommendation. We will continue to monitor the agency's progress in this area.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to identify and implement procedures to resolve Social Security number inconsistencies where the Marketplace is unable to verify Social Security numbers or applicants do not provide them.

    Agency Affected: Department of Health and Human Services

  5. Status: Open

    Priority recommendation

    Comments: In April 2016, HHS reported it considers this recommendation closed because in 2015, it made the determination to no longer require application filers to submit documentation regarding incarceration status. We were aware of that determination, but the recommendation was to reevaluate use of PUPS from the specific standpoint of using the data as it was intended to be used as in indicator of further research and then draw a conclusion on the use of the data. In May 2016, we requested documentation demonstrating that in the period since we made this recommendation, CMS has undertaken the reevaluation in the fashion that we indicated. As of December 2018, HHS officials had not provided GAO with evidence that the agency had implemented this recommendation. We will continue to monitor the agency's progress in this area.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to reevaluate CMS's use of Prisoner Update Processing System (PUPS) incarceration data and make a determination to either (a) use the PUPS data, among other things, as an indicator of further research required in individual cases, and to develop an effective process to clear incarceration inconsistencies or terminate coverage, or (b) if no suitable process can be identified to verify incarceration status, accept applicant attestation on status in all cases, unless the attestation is not reasonably compatible with other information that may indicate incarceration, and forego the inconsistency process.

    Agency Affected: Department of Health and Human Services

  6. Status: Open

    Priority recommendation

    Comments: In April 2016, HHS reported that since May 2015, call center representatives have received daily updates on the status of eligibility documentation. HHS reported that it is working to provide call center representatives with real-time data. HHS reported it considers this February 2016 recommendation to be closed. In May 2016, GAO noted that its February 2016 recommendation was focused on providing such real-time capability and requested (1) confirmation that call center representatives currently have on-demand, real-time access to up-to-date, application-level document status; and documentation showing development and implementation of this capability; or (2) a written plan and schedule for providing this capability as recommended. However, as of December 2018, HHS officials had not provided GAO with evidence that the agency has implemented this recommendation. We will continue to monitor the agency's progress in this area.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to create a written plan and schedule for providing Marketplace call center representatives with access to information on the current status of eligibility documents submitted to CMS's documents processing contractor.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Implemented

    Priority recommendation

    Comments: In December 2018, CMS officials told GAO they had completed the fraud risk assessment of the Marketplace application process, based on GAO's Fraud Risk Framework. GAO reviewed documentation submitted by the agency, and concurred. By conducting a fraud risk assessment, CMS is better equipped to know whether existing control activities are suitably designed and implemented to reduce inherent fraud risk to an acceptable level. The action also helps to lower the risk of improperly providing benefits and to reduce reputational risks to the program that could arise through perceptions that program integrity is not a priority.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to conduct a fraud risk assessment, consistent with best practices provided in GAO's framework for managing fraud risks in federal programs, of the potential for fraud in the process of applying for qualified health plans through the federal Marketplace.

    Agency Affected: Department of Health and Human Services

  8. Status: Open

    Priority recommendation

    Comments: In April 2016, HHS reported it considers this recommendation closed because CMS prepares an annual Marketplace and Related Programs Cycle Memo to fulfill reporting requirements for internal control. The Memo describes all significant eligibility and enrollment policy and process changes, including new internal key controls associated with these changes, and the 2015 Memo was released in September 2015. In May 2016, we notified HHS that its actions do not close the recommendation. Information contained in the Memos is after-the-fact and while useful, does not meet the full range of documentation contemplated by our recommendation, especially development and analysis of changes prior to implementation. As of December 2018, HHS officials had not provided GAO with evidence that the agency has implemented this recommendation. We will continue to monitor the agency's progress in this area.

    Recommendation: To better oversee the efficacy of PPACA's enrollment control process; to better monitor costs, risk, and program performance; to assist with tax compliance; to strengthen the eligibility determination process; to provide applicants with improved customer service and up-to-date information about submission of eligibility documentation; and to better document agency activities, the Secretary of Health and Human Services should direct the Acting Administrator of CMS to fully document prior to implementation, and have readily available for inspection thereafter, any significant decision on qualified health plan enrollment and eligibility matters, with such documentation to include details such as policy objectives, supporting analysis, scope, and expected costs and effects.

    Agency Affected: Department of Health and Human Services

 

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