Testimony Before the United States House of Representatives 
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
 
   
Fraud, Waste, and Abuse Under the Affordable Care Act  
 
 
  Testimony of:   
 
  Vicki L. Robinson    
  Senior Counselor for Policy   
Office of Inspector General  
Department of Health and Human Services 
 
 
 
 
January 31, 2017 
2:00 p.m. 
Rayburn House Office Building, Room 2154 
 
 
 
 
 
   
 
Testimony of:  
Vicki L. Robinson 
Senior Counselor for Policy 
Office of Inspector General, U.S. Department of Health and Human Services  
______________________________________________________________________________ 
 
Good afternoon, Chairman Jordan, Ranking Member Krishnamoorthi, and other distinguished 
Members of the Subcommittee.  I am Vicki Robinson, Senior Counselor for Policy in the Office 
of Inspector General (OIG), U.S. Department of Health and Human Services (HHS or the 
Department).  Thank you for the opportunity to appear before you today to discuss findings and 
recommendations from OIGs oversight of the Federal and State-based marketplaces established 
under the Patient Protection and Affordable Care Act (ACA).   
Created by statute in 1976, OIG remains a nonpartisan body of evaluators, auditors, and 
investigators deployed across the Nation to help assess and protect the integrity of Federal health 
and human services programs enacted by Congress.  We are committed to working with our 
stakeholders to protect taxpayer-funded programs and patients from fraud, waste, and abuse and 
to promote efficient and effective program operations.  We focus on prevention, detection, and 
enforcement to fight fraud, waste, and abuse; promote quality, safety, and value; and foster 
sound financial stewardship of HHS programs.  When we identify misconduct, we take 
appropriate enforcement action and make recommendations to address vulnerabilities and 
improve Department programs and operations.   
 
OIGs Oversight of ACA Marketplaces 
ACA established health insurance exchanges (commonly referred to as marketplaces) to allow 
individuals and small businesses to shop for health insurance in all 50 States and the District of 
Columbia.  States could choose to operate their own State marketplace or the Department would 
operate a Federal marketplace for residents of States without a State marketplace.  ACA 
provided funding assistance, known as establishment grants, to States for planning and 
establishing their own marketplaces.  In addition, ACA provided funding to assist eligible 
consumers.  This assistance consists of subsidies in the form of tax credits and cost-sharing 
reductions.  ACA also provided funding for health insurance issuers in the form of premium 
stabilization programs, such as the reinsurance and risk adjustment programs.  The marketplaces 
presented complex regulatory, operational, and technological challenges for the Department and 
for States.  
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
1 
   
Beginning in 2012, OIG identified implementation, operation, and oversight of the health 
insurance marketplaces as among the most significant management challenges facing the 
Department.  Our marketplace oversight work has focused on key program integrity questions, 
including:  
  Are taxpayer funds being expended correctly for their intended purposes?  
  Are the right people getting the right benefits? 
  Is the Department managing and administering the marketplace programs effectively and 
efficiently?  
Since 2013, we have issued 38 audits and evaluations regarding the Federal and State-based 
marketplaces and related programs.1  In addition to this oversight work, OIG has established 
relationships with its law enforcement partners to investigate fraud and closely monitor activities 
and concerns.  We work with the Department to help identify potential fraud and ensure that 
allegations of fraud are investigated appropriately.   
Today, I will summarize findings and recommendations from our oversight work with respect to 
payment accuracy, eligibility determinations, and the Departments management of the Federal 
marketplace.  My testimony will highlight challenges and lessons learned that can inform the 
Department and policymakers as they consider HHS programs going forward. 
 
OIGs Findings and Recommendations 
OIGs work identified several challenges that potentially hampered the operation of the 
marketplaces.  These challenges generally fall into three categories:  insufficient payment 
controls that could lead to wasteful spending, vulnerabilities in ensuring accurate eligibility 
determinations at the Federal and State-based marketplaces, and challenges for Departmental 
management.  For example, we found weaknesses in the Centers for Medicare & 
Medicaid Services (CMS) financial management systems as well as deficiencies in States 
management of establishment grants.  In addition, CMSs contract monitoring and administration 
needed improvement.  Finally, OIG identified broader lessons through our review of CMSs 
development and administration of HealthCare.gov (the website consumers use to access the 
Federal marketplace), including the poor launch and subsequent improvement of the site.  OIG 
has recommended various improvements to address these challenges and vulnerabilities.  
                                                           
1 A complete list of OIG reports related to ACA is on OIGs website at http://oig.hhs.gov/reports-and-
publications/aca/. 
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
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Insufficient Payment Controls That Could Lead to Wasteful Spending   
Ensuring sound expenditure of taxpayer funds for financial assistance payments and other 
marketplace purposes posed a substantial management challenge.  OIG identified deficiencies 
that put Federal funds at risk of being misused or wasted due to ineffective internal controls in 
the financial management systems at both the Federal and State-based marketplaces.   
For example, OIG identified the following deficiencies in CMSs financial management systems 
related to advance premium tax credits (APTC) and cost-sharing reductions made available 
under ACA:  
  CMS lacked controls to ensure that financial assistance payments were correctly 
calculated.  Specifically, CMS had limited ability to ensure that payments were made 
accurately to health insurance issuers because CMS obtained payment data from issuers 
on an aggregate basis, rather than by enrollee.  As a result, CMS could not verify the 
accuracy of the nearly $2.8 billion it authorized for financial assistance payments for the 
first four months of 2014.  We recommended that CMS implement computerized systems 
for the Federal and State-based marketplaces to maintain individual enrollee and payment 
information.  
 
  CMS lacked controls to ensure effectively that APTC payments were made only for 
enrollees who paid their monthly premiums.  CMS relied on health insurance issuers to 
verify that enrollees paid their monthly premiums to the issuers.  CMS did not obtain 
APTC payment information from the issuers on an enrollee-by-enrollee basis and thus 
could not verify whether individual enrollees had paid premiums.  We recommended that 
CMS establish policies and procedures to ensure that APTC payments are made only on 
behalf of enrollees who have paid their premiums.    
OIG identified establishment grants awarded to State-based marketplaces as a risk for potential 
misspent funds because of the complex requirements related to implementation and the potential 
overlap with other programs.  OIG has issued seven reports that review establishment grants.  
The following deficiencies were identified in these reports:  
  Four of the State-based marketplaces misallocated costs between establishment grant 
funding designated for marketplaces and funding for other programs that shared 
marketplace systems, such as Medicaid.  We found that this misallocation occurred 
because these States used outdated or flawed information when better data were 
available.  Generally, States allocated more costs to the establishment grant than they 
should have under Federal grant rules.  For example, one State misallocated $28.4 million 
in costs to the establishment grant.  A portion of those costs may be claimed through the 
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
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States Medicaid program, which would require the State to pay for a percentage of those 
costs using State funds.  We recommended that States refund misallocated costs, update 
or amend cost allocation methodologies to make use of better data, and develop written 
policies to ensure that costs are allocated appropriately. 
 
  In our most recent report, the State-based marketplace charged the establishment grant 
for $4.5 million in unallowable costs, including prepaid operational expenses.  OIG found 
that costs were unallowable because the marketplace used establishment grant funds to 
pay for operational support and maintenance services provided after December 31, 2014.  
Establishment grant funds were not available for such purposes after this date.  In 
addition, the marketplace had other deficiencies, resulting in an additional $5.2 million 
not being expended in accordance with Federal requirements.  We recommended that the 
marketplace refund $9.7 million and develop, finalize, and implement policies and 
procedures to ensure that it expends Federal grant funds in accordance with applicable 
requirements.  
OIG also identified a risk related to insufficient CMS guidance regarding the particular types of 
operational costs that State-based marketplaces could charge against an establishment grant.  We 
were concerned that, absent better guidance, States might incorrectly charge the establishment 
grant funds for prohibited costs, such as rent, software maintenance, telecommunications, and 
utilities.  To help prevent potential waste of establishment grant funds, we issued an alert to 
CMS.  As a result, CMS published updated guidance to clarify which costs States could not 
charge against the grants. 
 
Vulnerabilities in Ensuring Accurate Eligibility Determinations 
Accurate eligibility determinations ensure that only qualifying consumers can enroll in qualified 
health plans and receive financial assistance.  OIG found vulnerabilities in CMSs eligibility 
verification and enrollment processes, as well as CMSs resolution of data inconsistencies.  In 
three separate reviews of the Federal marketplace, OIG identified deficiencies related to the 
Federal marketplaces internal controls, including the following:   
  Social Security numbers were not always validated with the Social Security 
Administration. 
  Citizenship was not always verified in accordance with Federal requirements.  
  Household income was not always verified properly. 
  Inconsistencies between applicants self-attested information and data received through 
the Federal data hub or from other data sources related to certain eligibility requirements, 
most commonly citizenship and income, were not resolved properly.  
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
4 
   
These deficiencies may have limited the Federal marketplaces ability to prevent inaccurate or 
fraudulent information from being used to determine eligibility of applicants.   
OIG also reviewed internal controls on eligibility determinations at seven State-based 
marketplaces.  We determined that certain internal controls were effective at the State-based 
marketplaces.  However, we found that most of the State-based marketplaces had some 
ineffective internal controls for ensuring that individuals were enrolled in a qualified health plan 
in accordance with Federal requirements.  Common deficiencies we identified included:  
  Six State-based marketplaces did not always use existing data sources to verify whether 
applicants were eligible for health insurance through an employer or through other 
sources, such as Medicare or the Federal Employees Health Benefits Program.  
  Four State-based marketplaces did not always properly verify annual household income. 
  Seven State-based marketplaces did not always resolve inconsistencies or notify 
applicants of inconsistencies.  
  Four State-based marketplaces did not always properly maintain data or accurate records. 
We recommended that both the Federal and State-based marketplaces improve their internal 
controls and redetermine eligibility for the applicants in our sample whose eligibility 
verifications did not meet Federal requirements. 
 
Challenges That Impede Effective Department Management   
Effective Department management and administration are critical to meeting program objectives 
and providing sound stewardship of Federal resources.  OIG conducted several reviews focused 
on CMSs management of marketplace programs.  For example, we examined CMS acquisition 
planning and procurement of contracts to implement the Federal marketplace.  CMS awarded  
60 contracts across 33 companies to support the development and operation of the Federal 
marketplace.  We identified vulnerabilities and offered recommendations related to contract 
monitoring and administration of payments for contracts related to the marketplaces.  For 
example, we found: 
  CMS did not always manage and oversee contractor performance in accordance with 
Federal requirements and contract terms.  For example, CMS was unable to identify 
contractor delays and performance issues in all instances and was unable to identify when 
a contractor incurred $ 28 million in unauthorized costs that increased the cost of the 
contract.  OIG recommended that CMS direct its acquisition personnel to refrain from 
authorizing additional work on contracts, absent proper approval and funding.  In 
response, CMS updated its internal guidance to delineate clearly that only the contracting 
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
5 
   
officer could make changes to the terms and conditions of a contract or direct a contractor 
to perform work or make deliveries not specifically required under the contract. 
 
  CMS did not accurately identify all obligations and expenditures for six contracts we 
reviewed related to the Federal marketplace.  CMS recorded $24.3 million of obligations 
and $22.9 million of expenditures, but it did not identify them as being related to the 
Federal marketplace.  Consequently, CMS was unable to account accurately for and 
report to interested stakeholders the amount spent on the development, implementation, 
and operation of the Federal marketplace.  We recommended that CMS include all 
relevant contract costs when it identifies total obligations and expenditures related to the 
design, development, and operation of the Federal marketplace. 
 
  CMS missed the opportunity to plan for a lead systems integrator to coordinate the efforts 
of multiple contractors for the Federal marketplace.  CMS did not identify a systems 
integrator until after the October 2013 launch of the Federal marketplace.  The many 
companies that were awarded Federal marketplace contracts had individual tasks to 
support the implementation of the Federal marketplace.  Yet there was no single point of 
contact with responsibility for integrating contractors efforts and communicating the 
common project goals to all companies. 
OIG also examined CMSs overall management and administration of HealthCare.gov.  In 2016, 
OIG published a case study detailing the implementation of the website and identifying 
organizational factors that contributed to the websites poor launch and subsequent improvement.  
This work highlights lessons that can inform not just the management and administration of the 
marketplaces, but also other complex Department programs and operations now and in the 
future.  These lessons learned will become increasingly important as Government programs 
become more dependent on the effective intersection of policy, technology, and management.   
In the case study, OIG found that HHS and CMS made many avoidable missteps in developing 
HealthCare.gov that contributed to the poor website launch.  For example: 
  Lack of clear project leadership led to fragmentation and poor coordination, causing 
delays in making policy decisions and confusion about goals and objectives. 
  Mismanagement of information technology contracts resulted in inefficient use of 
resources, problematic technological decisions, and limited oversight of contractor 
performance. 
  Poor communication, particularly between policy and technical staff, hampered efforts to 
identify and correct problems, leading to a compressed timeframe for completing the 
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
6 
   
website build and a failure to recognize the magnitude of problems as the project 
deteriorated.   
Following the poor launch, CMS changed its management approach to improve operations, 
including:  
  hiring a systems integrator to coordinate the work of multiple contractors, simplify 
processes, and increase accountability;  
  integrating the policy and technical teams of employed and contracted staff into a single, 
badgeless team that fosters innovation, problem solving, and communication; and 
  practicing what CMS officials called ruthless prioritization of tasks to target the most 
urgent needs and align goals with available resources.   
These strategies led to broader organizational changes focused on leadership, a deeper 
integration of policy and technology, and more active communication among partners, such as 
other Federal agencies, States, contractors, and insurers.   
 
Conclusion 
OIG is committed to fighting fraud, waste, and abuse in HHS programs and promoting their 
economy, efficiency, and effectiveness.  OIGs marketplace oversight work highlights challenges 
and lessons learned with respect to payment systems, eligibility determinations, and management 
and administration of complex programs.  Ensuring program integrity requires vigilance and 
sustained focus on preventing problems from occurring in the first place, detecting problems 
promptly when they occur, and rapidly remediating detected problems through investigations, 
enforcement, and corrective actions.  Program integrity is central to OIGs mission and should be 
a priority for current and future HHS programs.      
Thank you, again, for inviting me to speak with the Committee today to discuss our oversight of 
ACA marketplaces.   
 
 
Testimony Before the United States House of Representatives  
Committee on Oversight and Government Reform 
Subcommittee on Health Care, Benefits, and Administrative Rules 
 
January 31, 2017 
7