With open enrollment for the healthcare overhaul set to begin in less than three months, Obama administration officials faced tough questioning Wednesday from Republican lawmakers about the security of personal health information and the potential for fraud in the new insurance marketplaces.
An estimated 7 million people are expected to use the new online insurance exchanges to purchase health insurance next year when coverage becomes mandatory under the Affordable care Act's individual mandate.
Exchange users will submit their personal information – including income, family size, immigration status, Social Security number and other data – which determines whether they receive a tax credit to help pay for coverage.
Since the Internal Revenue Service will help verify the data and handle parts of the law that impact taxes, the agency must develop new computer technology and data-sharing systems so it can quickly determine eligibility for the tax credits and the amounts they should receive.
In testimony on Wednesday before a joint hearing involving subcommittees of both the House Oversight and Government Reform, and Homeland Security committees, a key Treasury Department official said that unless the IRS develops the necessary technology on time, his agency "is concerned that the potential for refund fraud and related schemes could increase" as result of processing the health care law's premium tax credits.
Alan Duncan, assistant inspector general for security and information technology with the Treasury Inspector General for Tax Administration, said his department has found that the work to meet the law's requirements was on schedule and that the IRS was managing technology risks.
But he said that his department "remains concerned about the protection of confidential taxpayer data that will be provided to the state and federal exchanges."
Rep. Patrick Meehan, R-Pa., chairman of the Cybersecurity, Infrastructure Protection and Security Technologies Subcommittee, echoed those sentiments, saying he had "grave concerns about the ability to establish sufficient security in this massive, unprecedented network" by October 1 when open enrollment begins.
"I fear that our government is about to embark on an overwhelming task that will at best carry an unfathomable price tag, and at worst place targets on every American who enters the exchange," he said.
Duncan's department is auditing the IRS's work on systems related to the tax credit applications and will issue a final report before open enrollment on the exchanges begin in October.
Daniel Werfel, IRS principal deputy commissioner, testified that his agency would have the necessary systems up and running on time. He said tax credits will be sent directly to insurance companies rather than individual applicants, which could reduce the likelihood of fraud.
The IRS has requested an additional $440 million to implement the health care law; $306 million of that would go for new information technology to transmit income information, tax credits and other data.
But House Republicans have proposed cutting the IRS budget by 24 percent next year, which would not only hurt the agency's ability to carry out their duties related to the healthcare law, but significantly curtail other IRS functions, like collections enforcement and customer service.
"All of our mission-critical activities would be severely impacted," Werfel said.
Relations between the IRS and congressional Republicans have been frosty since it was revealed that the agency targeted conservative tea party organizations for investigation of their tax-exempt status. The official who headed the IRS office responsible for those tax-exempt groups from 2009 to 2012, Sarah Hall Ingram, was asked to testify at Tuesday's hearing because she now heads the agency's Affordable care Act office.
But Werfel and another IRS official appeared instead because Werfel said they had more technical expertise than Hall, even though he has only been at the IRS for two months. The situation sparked a confrontation Tuesday between Werfel and Rep. Jim Jordan, R-Ohio, who questioned the IRS official's decision to block Ingram from testifying.
"You've been here all of 63 days," Jordan told Werfel. "She's been here 31 years, since 1982. In fact, she's the central figure in two of the biggest stories in the country, the IRS targeting and the implementation of Obamacare."
The Department of Health and Human Services is also developing a $394 million federal data services hub that will route requests from the exchanges' eligibility systems to existing federal and state databases.
Testing on the hub will be completed in August. The hub will not store any personal medical information, said Marilyn Tavenner, administrator for the Centers for Medicare & Medicaid Services at the human services department.
By Tony Pugh
McClatchy Washington Bureau