Inspector General Questions Accuracy of $2.8 Billion in Obamacare Subsidies

The Centers for Medicare and Medicaid Services’ internal controls did not effectively ensure the accuracy of nearly $2.8 billion in financial assistance payments to insurance companies under the Affordable Care Act during the first four months that the payments were made, according to a new government report.

The report, from the Department of Health and Human Services’ Office of Inspector General, found that CMS’s reliance on health insurance issuer attestations did not ensure that advance cost-sharing reduction payment rates identified as outliers were appropriate. CMS did not have systems in place to ensure that the financial assistance payments were made on behalf of confirmed enrollees and in the correct amounts.

CMS also did not have systems in place for state marketplaces to submit enrollee eligibility data for financial assistance payments, according to the report. In addition, the report found that CMS did not always follow its own guidance for calculating advance CSR payments and does not plan to perform a timely reconciliation of these payments.

The internal control deficiencies that the Inspector General identified limited CMS’s ability to make accurate payments to qualified health plan issuers. On the basis of sample results, the report concluded that CMS’s system of internal controls could not ensure that CMS correctly made financial assistance payments during the period January through April 2014. Without effective internal controls for ensuring that financial assistance payments are calculated and applied correctly, the report found that a significant amount of federal funds are at risk.

The report recommended that CMS correct these internal control deficiencies by requiring its Office of the Actuary to review and validate qualified health plan issuers’ actuarial support for index rates that CMS identifies as outliers, implementing computerized systems to maintain confirmed enrollee and payment information so that CMS does not have to rely on QHP issuers’ attestations in calculating payments, implementing a computerized system so state marketplaces can submit enrollee eligibility data, following its guidance for calculating estimated advance cost-sharing reduction payments, and developing interim reconciliation procedures to address potentially inappropriate CSR payments.

In written comments on the draft report, CMS concurred with three of the recommendations. CMS generally agreed with the other two recommendations but indicated that they are no longer applicable because of regulatory action.

“CMS takes the stewardship of tax dollars seriously and implemented a series of payment and process controls to assist in making manual financial assistance payments accurately to issuers,” wrote CMS acting administrator Andrew M. Slavitt in response to the report.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, and Senate Judiciary Committee Chairman Chuck Grassley, R-Iowa, sent a letter Wednesday to Slavitt raising questions about how CMS issues the Advanced Premium Tax Credit to insurance companies under the Affordable Care Act following the release of the report.

“If these types of results continue it foreshadows a substantial programmatic vulnerability leading to untold billions in fraud, waste and abuse,” they wrote.  “We have been concerned about vulnerabilities related to internal controls at CMS due to the ACA – this is yet another in a long line of problems which have occurred since the ACA’s initial implementation.”