How IRS Incompetence Can Bring Down Obamacare

Brianna Ehley
The Fiscal Times
October 29, 2013

Get ready for another big blow to the president’s signature healthcare reform law, known as Obamacare.

The Internal Revenue Service—which will be responsible for implementing 46 new tax penalties and verifying millions of dollars in subsidies-- cannot ensure the security of more than 306,000 IT assets worth up to $720 million.

A new report from the Treasury Inspector General for Tax Administration (TIGTA) found the embattled agency does not have proper oversight over its information technology programs, leaving sensitive data at risk.

The auditor said, “The risk of loss, theft, or the inadvertent release of sensitive information can decrease the public’s confidence in the IRS’s ability to monitor and use its resources effectively.”

This is just the latest report from the IRS watchdog uncovering problems with the agency’s oversight and management. Earlier reports show a litany of abuses that have undermined the trust taxpayers have in the agency and wasted millions of dollars. The list of abuses is long and troubling:

• IRS targets Tea Party non-profits by denying 501(c)(4) status.
• House Committee on Oversight and Government Reform accuses the agency of awarding $500 million in questionable contracts to a software company under false pretenses and that an agency employee responsible for overseeing the procurement process had had “improper contact” with the company.
• IRS wastes millions on bizarre training videos
• IRS contractors owe $5.4 million in back taxes
• IRS overpaid low-income tax credit by $132 billion
• IRS defies Obama directive, awards $70 million in bonuses

Soon, the IRS will assume a key role in implementing the president’s health care law—enforcing new tax related provisions —including imposing new taxes on medical devises, overseeing new itemized deductions, issuing new subsidies for eligible taxpayers and imposing penalties on uninsured Americans—all of which will require an elaborate IT effort.

Earlier this year, Alan R. Duncan, Assistant Inspector General for TIGTA said in testimony that the IT and security challenges for the health care law “are considerable” and include the implementation of multiple projects in “a short span of time.”

Under the new law, the IRS will store federal tax data it receives from the Health and Human Services Department as well as the exchanges in a newly created Safeguard Review Program.

But auditors are concerned that “due to the lack of sufficient staffing or funding” the program may not adequately protect the confidential taxpayer data that will be provided to the IRS from the state and federal exchanges, Duncan said.

TIGTA is currently auditing the program and will issue a report on its findings next year.

Similarly, the auditors say the agency’s new fraud prevention and abuse program specifically for the ACA tax returns might not be ready in time to “identify ACA-related fraud” and the agency’s “existing fraud detection systems may not be capable of identifying ACA refund fraud or schemes.”

Still, IRS officials, like Sarah Hall Ingram, who heads the agency’s ACA office, say that the implementation efforts are going smoothly. Ingram’s office was tasked with creating new processes to protect tax information that would be accessed when consumers apply for insurance through the ACA exchanges.

In July, Ingram told Congress, “The portion of the responsibilities the IRS is in charge of is going fine."