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94–428 2016

HEARING ON THE INTEGRITY OF THE 

AFFORDABLE CARE ACT’S PREMIUM TAX CREDIT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

July 23, 2014 

SERIAL 113–OS10 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan,Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

ALLYSON SCHWARTZ, Pennsylvania 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON HUMAN RESOURCES 

CHARLES W. BOUSTANY, JR., Louisiana, Chairman 

DIANE BLACK, Tennessee 

LYNN JENKINS, Kansas 

KENNY MARCHANT, Texas 

TOM REED, New York 

ERIK PAULSEN, Minnesota 

MIKE KELLY, Pennsylvania 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 


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C O N T E N T S 

Page 

Advisory of July 23, 2014 announcing the hearing ............................................... 2 

WITNESSES 

Seto Bagdoyan Acting Director, Audit Services, Forensic Audits and Investigative Service, Government Accountability Office, Testimony ...................... 11 


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(1) 

HEARING ON THE INTEGRITY OF THE 

AFFORDABLE CARE ACT’S PREMIUM TAX 

CREDIT 

WEDNESDAY, JULY 23, 2014 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, DC. 

The subcommittee met, pursuant to call, at 10:30 a.m., in Room 

1100, Longworth House Office Building, the Honorable Charles 

Boustany [chairman of the subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

Boustany Announces Hearing on the Integrity of 

the Affordable Care Act’s Premium Tax Credit 

1100 Longworth House Office Building at 10:30 AM 

Washington, Jul 16, 2014 

Congressman Charles Boustany, Jr. MD (R–LA), Chairman of the Committee on 

Ways and Means Subcommittee on Oversight, today announced that the Subcommittee will hold a hearing on the integrity of the administration of the Affordable Care Act’s Premium Tax Credit. The hearing will take place on Wednesday, July 23, 2014, in Room 1100 of the Longworth House Office Building, 

beginning at 10:30 A.M. 

The Government Accountability Office (GAO) will be the only witness at the hearing. In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

The Affordable Care Act (ACA) created tax credits and cost sharing subsidies for 

certain individuals purchasing health insurance through insurance exchanges. To 

ensure that payments only benefit those eligible and are made in the correct 

amount, the Federal Government must verify a number of pieces of information, including, identity of the applicant, date of birth, Social Security Number, income, 

lawful presence in the country, and other data. As the Congressional Budget Office 

projects that the Federal Government will distribute over $1 trillion in subsidies 

over the next decade, it is critical that adequate measures are in place to protect 

taxpayers. The hearing will explore the integrity of the premium tax credit 

verification system, and whether it is vulnerable to fraud, waste, and abuse. 

In announcing the hearing, Chairman Boustany said, ‘‘In recent years this Subcommittee has examined fraud, waste, and abuse in the execution of existing programs, such as the Earned Income Tax Credit. We know that the 

Federal Government wastes tens of billions of dollars each year in improper payments—what we don’t know is how much more will be wasted 

under ObamaCare’s new federal subsidies. We look forward to hearing 

from GAO and examining what is happening now that the subsidies are 

going out the door.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the Federal Government’s ability protect premium tax 

credits from fraud, waste, and abuse. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit written comments for the hearing record must follow the appropriate link on the hearing page 

of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the 

hearing for which you would like to submit, and click on the link entitled, ‘‘Click 

here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word 

document, in compliance with the formatting requirements listed below, by the 

close of business on August 6, 2014. Finally, please note that due to the change 

in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries 

to all House Office Buildings. For questions, or if you encounter technical problems, 

please call (202) 225–3625 or (202) 225–5522. 


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FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov/

f 

. 

Chairman BOUSTANY. This hearing will come to order. Good 

morning and welcome to this morning’s hearing on the integrity of 

insurance premium subsidies under the healthcare law. 

Last month, this subcommittee and the Subcommittee on Health 

held a hearing that showed the administration’s failure to implement effective eligibility verification systems would result in billions of the dollars in improper payments going out the door and 

unexpected tax debts for families across America. 

This morning, we turn to the question of whether the Federal exchange has sufficient controls in place to verify income and identity 

verification, including Social Security numbers, names and other 

information. On September 12th of last year, Chairman Camp, 

Senators Tom Coburn, Orrin Hatch and I wrote to Comptroller 

General Gene Dodaro asking that the Government Accountability 

Office conduct testing to determine whether the administration had 

in place appropriate internal controls to prevent fraud and abuse 

in health insurance exchanges. We asked that they do this through 

the GAO’s forensic audits and investigative service, a team of forensic audit and investigative professionals who conduct special investigations and fraud assessments. 

To test these internal controls, GAO went undercover, created 18 

fictitious identities to apply for insurance subsidies online, over the 

phone and in person. When GAO applied for premium subsidies online or over the phone with fictitious names, Social Security numbers and documents, it succeeded over 91 percent of the time. 

When GAO went to seek help from taxpayer-funded assisters, five 

teams out of six, they were turned away or unable to find help. 


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When GAO sent in fake documents to support their applications, Federal contractors accepted those

When GAO sent in fake documents to support their applications, Federal contractors accepted those

When GAO sent in fake documents to support their applications, 

Federal contractors accepted those documents. Sadly, this is not 

terribly surprising, but it is really disturbing. 

Time and again the administration has chosen to either ignore 

the law, or when it does implement the law, it does so with a level 

of incompetence. The administration decided the employer mandate 

would harm its political and electoral interests, so it delayed the 

mandate. The administration found that the words of the law 

would prevent it from implementing Federal subsidies in a way it 

preferred, it ignored the law, and as the D.C. Circuit ruled yesterday, when the administration sought to implement Federal exchange—implement the Federal exchange and created 

healthcare.gov, the Web site crashed spectacularly. So when the 

administration began issuing billions of dollars in subsidies, we 

found that it did so without regard to protecting those taxpayer 

dollars from improper payments. 

This is not simply a question of whether one likes the President’s 

health law or the way this administration has gone about implementing it. The question really is whether the administration is 

being a good steward of taxpayer dollars and putting in place adequate controls to protect those dollars from fraud, waste and abuse. 

This is about whether these subsidies are actually going to those 

who really need them and who have—who qualify them—qualify 

for them appropriately. The history of the healthcare law’s implementation suggests that the answer has been no. 

Today we hear from Seto Bagdoyan, the acting director of the Forensic Audits and Investigative Service on GAO’s preliminary findings in this matter. I want to thank him and GAO for this work. 

And look forward to your testimony, Mr. Bagdoyan, and also look 

forward to continuing to work with you on this issue. 

Now I would—I am very pleased to yield to the distinguished 

ranking member from Georgia, Mr. Lewis, for the purposes of an 

opening statement. 

Mr. LEWIS. Thank you for holding today’s hearing, Mr. Chairman. I would like also to thank our witness for being here today. 

Thank you for being here, sir. 

Mr. BAGDOYAN. My pleasure. 

Mr. LEWIS. Let me begin by highlighting a simple and an important fact. The Affordable Care Act works. Last week, multiple 

reports from Gallup, the Commonwealth Fund and the Urban Institute provided Congress with a truth that cannot be denied, explained away or disputed. Today more Americans have health insurance than they did 1 year ago. 

Many of my colleagues on the other side of the aisle said that 

no one would sign up for the Affordable Care Act; instead, 8 million 

people enrolled. There were claims that part of the law were too 

expensive, but last month HHS reported the average cost was only 

$82 per month for those receiving tax credits. 

Let me highlight some more indisputable ACA successes. Today, 

more than 17 million children with pre-existing conditions can no 

longer be denied coverage, 3.1 million adults can be covered on 


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their parents’ plan until age 26, and 105 million Americans will no 

longer face bankruptcy because insurance companies will stop paying their medical bills. That is what the ACA did and we should be proud of this work. 

ing their medical bills. That is what the ACA did and we should be proud of this work. 

ing their medical bills. That is what the ACA did and we should 

be proud of this work. 

Despite constant attack, the prediction of disaster has simply 

failed to come true. Instead, the door to healthcare has opened for 

millions of Americans. 

Mr. Chairman, I would like to ask unanimous consent to insert 

two articles into the record. One is from Politico, entitled, ‘‘The 

Verdict is in: Obamacare Lowers Uninsured.’’ The second is from 

the New York Times, entitled, ‘‘Obamacare Fails to Fail.’’ 

Thank you, Mr. Chairman. 

Chairman BOUSTANY. Without objection, they will be entered 

into the record. 

[The information follows: Rep. John Lewis 1, Rep. John Lewis 2] 


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f 

Mr. LEWIS. It is clear that it makes no sense to continue attacks 

to the fund and destroy the healthcare law. There should be no fear 

in a good faith, bipartisan effort to make the ACA stronger and 

better for future generations. This is why I look forward to the testimony of the GAO about ways to make commonsense improvements to the ACA. In fact, there are actions we can take right now 

to find and fight waste, fraud and abuse. For example, Congress 

can provide adequate funding for the IRS and HHS enforcement 

systems so that all taxpayers will be protected. We have an opportunity to be proactive and not rea


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systems so that all taxpayers will be protected. We have an opportunity to be proactive and not rea

systems so that all taxpayers will be protected. We have an opportunity to be proactive and not reactive. 

One thing is crystal clear, one thing is crystal clear: It is time 

for political stunts and baseless fear tactics to end. Success cannot 

and must not be dismantled. We will not go back to a time when 

Americans did not have access to affordable healthcare insurance. 

We will not destroy the ACA. I hope that all of my colleagues on 

both sides of the aisle will come together to strengthen and improve the historic benefits and protection of the ACA. It is time to 

move forward and do what is right, what is just, what is fair and 

what is responsible. 

Again, thank you, Mr. Chairman, and I yield back my time. 

Chairman BOUSTANY. Thank you, Mr. Lewis. 

Chairman BOUSTANY. Now it is my pleasure to welcome our 

witness, Mr. Seto Bagdoyan, acting director of Forensic Audits and 

Investigative Services at the Government Accountability Office. 

Thank you, sir. We really appreciate your time today. We appreciate the effort that you have put into this, along with your staff. 

The subcommittee has received your written statement. It will be 

made part of our formal hearing record. As is customary, you will 

have 5 minutes to give your oral remarks, and then we will open 

up for questions. 

Sir, you may begin. 

f 

STATEMENT OF SETO BAGDOYAN, ACTING DIRECTOR, AUDIT 

SERVICES, FORENSIC AUDITS AND INVESTIGATIVE SERVICE, 

GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C. 

Mr. BAGDOYAN. Chairman Boustany, Ranking Member Lewis 

and Members of the Subcommittee, I am pleased to be here today 

to discuss at a high level preliminary observations from the undercover component of GAO’s ongoing review of the Federal healthcare 

Marketplace to test its enrollment controls. This review is at the 

request of this subcommittee, as the chairman mentioned, and others in Congress. 

In terms of preliminary results, Mr. Chairman, we used fictitious 

identities, false information and forged documents, as well as instructions from the Marketplace itself, to circumvent its front and 

back end controls. 

Accordingly, we obtained actual coverage for which we are paying 

premiums, the government is paying premium tax credits on our 

behalf directly to insurers totaling about $2,500 a month, or about 

$30,000 a year. 

At the outset, I would note that, one, observations are subject to 

change as we obtain and analyze additional information; two, enrollment test results can’t be projected to the entire universe of applicants; and three, since our work is ongoing and involves the use 

of certain investigative techniques, I am precluded from discussing 

many details about this and future work in this setting. 

That said, the results in the two main components of our undercover work are as follows: First, in 12 fictitious applications, which 


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were made by phone and online, we tested the Marketplace’s frontend controls for verifying an applicant’s identity or citizenship or 

immigration status. Marketplace applications require attestations that information provided is neit

immigration status. Marketplace applications require attestations that information provided is neit

immigration status. Marketplace applications require attestations 

that information provided is neither false nor untrue. The applications also stated income at a level to qualify for income-based subsidies to offset premium costs for tax credits and reduce expenses, 

such as co-pays. 

For 11 of the 12 applications, we obtained subsidized coverage. 

For the 12th application, the Marketplace did not allow us to proceed, because the applicant declined to provide a Social Security 

number as part of our test. 

In terms of back-end controls, the healthcare law requires the 

Marketplace to provide eligibility while any identified inconsistencies between information submitted by the applicant and what 

resides in government databases is being resolved through submission and verification of supplementary documentation. For each of 

the 11 approved applications, we were directed to submit supporting documents, such as proof of income or citizenship, but we 

found the document submission and review process to be inconsistent regarding similar applications. As of July of this year, we 

had received notification that some of the forged documentations 

submitted for two applicants had been verified, thus clearing the 

back-end controls for these three documents. 

According to CMS and its document processing contractor, this 

contractor is not required to look for or detect fraud and accepts 

documents as authentic unless they are obvious alterations. We 

continue to receive subsidized coverage for all 11 successful applications, including those where we did not provide any of the requested supporting documents. 

Second, in six other fictitious applications, we attempted to test 

the extent to which, if any, in-person assisters would encourage our 

applicants to misstate income in order to qualify for income-based 

subsidies. However, we were unable to obtain in-person assistance 

in five of six attempts. For example, one in-person assister said 

that he does not provide assistance—he provides assistance only 

after people already have an application in progress. The assister 

was not able to help us, because the healthcare.gov Web site was 

down at the time, and he did not respond to several follow-up 

phone calls. One in-person assister correctly advised the applicant 

that he—that the stated income would not qualify for subsidy. 

Collectively, our undercover and audit work to date has highlighted key areas of inquiry about the Marketplace’s controls, 

which we plan to pursue in depth during our remaining work. 

Mr. Chairman, this concludes my remarks. I look forward to the 

subcommittee’s questions. 

Chairman BOUSTANY. Thank you, Mr. Bagdoyan. 

[The prepared statement of Mr. Bagdoyan follows:] 


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Chairman BOUSTANY. I want to thank you and your team for 

this first look at what appears to be a pretty significant problem 

with process and implementation with regard to these subsidies. 

And these findings, although preliminary, are quite troubling. 

Eleven out of 12 applications with false identities were approved 

and are receiving subsidies. Applications that falsified citizenship 

information were also approved. And then, on the back end, five 

out of six navigators and assisters are failing to help taxpayers. 

Federal contractors seem unable to uncover fraudulent documents. 

CMS is either unaware or unable to screen out fraudulent applications nationwide with regard to premiums and subsidies. 


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This is all very troubling, and I am glad you are going to continue taking a more in depth look at this, because we look forward 

to revisiting the issue, but from your work so far, you know, in 

your official capacity, but also as an American citizen, are you really worried, are you really concerned about the total lack of effective 

controls that might result in significant fraud and more improper 

payments in this system as it stands? 

Mr. BAGDOYAN. Thank you for your question, Mr. Chairman. 

I would speak only on my—in my official capacity, of course, in 

this setting, but as I mentioned earlier, our investigative work and 

our audit work thus far has identified certain areas of concern that 

we plan to pursue as our work unfolds, as well as areas, such as 

the database of applicants itself, which will be at the core of our 

work. 

So I would say in summary that what we have so far is a number of questions that are fundamental regarding the effectiveness 

of controls, especially at the front end, where the preventative controls are paramount, as well as the back end, where traditionally 

they are relatively less effective, where you have a situation of a 

pay and chase, as we discussed earlier. So we are absolutely committed to focusing on controls in this regard. 

Chairman BOUSTANY. And we know that if we have—if we fall 

back into a pay-and-chase situation, it is very difficult to recover 

those dollars. Is that correct? 

Mr. BAGDOYAN. Well, according to GAO’s fraud prevention 

framework, back-end controls are relatively less effective than 

strong preventative controls, so I would just respond in that context. 

Chairman BOUSTANY. Thank you. And your work also included 

interesting findings regarding two contractors and numerous grant 

recipients. One concerned a contractor hired to resolve identity 

verification and a second concerned a contractor hired to process 

paperwork that is unable to verify whether the document is actually authentic. Another finding concerned navigators and other assisters who were unable or unwilling to help your undercover applicants despite the fact that they had received tens of millions of dollars in Federal grants. 

Again, I know this is still a preliminary finding, but can you describe in greater detail GAO’s experience with these groups? 

What—you know, what are we—what is your recommendation at 

this point, or do you have one, to correct these problems? This is 

troubling, because a lot of money has gone out the door in the form 

of grants to these—you know, these navigators. I have deep concerns about this. 

Mr. BAGDOYAN. Certainly. In all three instances, we have had 

an initial touch with these entities, so it would be premature to 

reach a judgment about effectiveness or not or certainly what needs 

to be done about them, but in terms of the contractor who was— 

who has been tasked with verifying identity, they did attempt to 

assist us during the call process after we were directed by the online system to do so. And when they were unable to verify our identity, they suggested that we call the call center, and as my statement alludes to, we were able to get coverage that way. 


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Regarding the contractor who is tasked with verifying documentation at the back end, there is no provision to look for fraud 

in the contract itself. And we confirmed this with CMS officials as 

well as the contractor officials at our site visit in their facility in 

Kentucky, so—— 

And then in terms of the navigators, again, it is a—it is an initial 

contact, and one person made the correct call on our application 

scenario, but the other five, for various reasons, were unable or unwilling to assist us. 

Chairman BOUSTANY. Okay. Do you have any more—can you 

shed any more light on why they were unable or—— 

Mr. BAGDOYAN. In one instance, one assister said they didn’t 

have sufficient training to do so. Another one said we needed to 

make an appointment, because we essentially were a walk-in at 

that—in that case and—but would not pick up the phone to make 

an appointment. And another two instances, I believe, there might 

have been a willingness to do so, but the Web site itself was unavailable at the time. 

Chairman BOUSTANY. Okay. Well, I appreciate that. This subcommittee and the Ways and Means Committee as a whole is taking our oversight function very, very seriously. We know this is a 

first look. We appreciate the work you have done, and we know 

this work is ongoing, and so we will look forward to revisiting these 

issues as you get more data and hopefully get to a point where you 

can make some specific recommendations to us. 

I have to say, the initial findings are deeply troubling to me. We 

know we are dealing with fraud and abuse in a number of other 

areas where tax credits and especially refundable tax credits are 

being utilized, which undermines the integrity of these programs 

and the intent of the programs to help those who really need help. 

And I think we are at a point now, clearly, we are at a point where 

this—these kinds of situations are intolerable. Whether you are a 

Republican or a Democrat, we cannot tolerate this level of fraud, 

abuse, taxpayer waste, and we need to root these things out, so we 

will look forward to continuing to work with you on these issues. 

Thank you. 

I will now yield to my friend, Mr. Lewis. 

Mr. LEWIS. Mr. Chairman, my friend, I want to thank you for 

yielding. 

Mr. Chairman, I want to ask you a question. Can you share with 

the Democratic Members of the Committee a copy of the letter that 

you sent to GAO? It is my understanding that GAO does not make 

public ongoing investigation. 

Chairman BOUSTANY. Yeah. We will be happy to share that 

letter with you. I was under the assumption that you had seen it. 

Mr. LEWIS. Well, thank you very much, Mr. Chairman. 

That will be most helpful. 

Mr. Director, let’s get right to the heart of the matter. Have you 

drawn any conclusion at this point in your investigation? 

Mr. BAGDOYAN. No, sir, we have not. Our work is ongoing. As 

I mentioned earlier, this is our first touch-through looking at the 

controls, and we have identified certain areas for further audit and 

investigation as appropriate, but we can’t draw any conclusions 

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Mr. LEWIS. What is your time frame for concluding this investigation? 

Mr. BAGDOYAN. It is difficult to say at this point. It could be 

several months, but our work is very active, and we are receiving 

new information as we speak from CMS, and we will have a chance 

to analyze and follow up that, but we are looking at at least several 

more months, sir. 

Mr. LEWIS. What areas are subject to further review? 

Mr. BAGDOYAN. Sure. In general terms, I think there are various types of controls where they are at along the process, how they 

interact with each other, who is responsible for them, how they 

might benchmark against best practice, that sort of thing. 

Mr. LEWIS. And the false income information that the GAO 

gave, would that not be caught up during a true process? Can you 

explain this process? 

Mr. BAGDOYAN. I am sorry. Could you restate the question? 

Mr. LEWIS. Yeah. The false information that the GAO gave, 

would that be caught up during the true-up process? 

Mr. BAGDOYAN. I think what we used was part of the overall 

investigative plan, but the identities we employed, the information 

and the documents were all fictitious. 

Mr. LEWIS. The income process, how do you go about getting 

this information? Are you free, at liberty? 

Mr. BAGDOYAN. Well, in a general sense, we set our income 

levels within the range of eligibility to obtain subsidies, and that 

is pretty much all I can discuss at this time. 

Mr. LEWIS. Okay. Over the past year, a lot has been made of 

the problem with the Web site. Tell me how many fraudulent applications were you able to get past the Web site. 

Mr. BAGDOYAN. Our online applications, as I state in my formal statement, our applications were flagged for identity 

verification. We were referred to the contractor, who is tasked with 

resolving those identity questions. They were unable to do so. They 

referred us to the Marketplace’s call center, and through the call 

center, we were able to bypass the initial flag and obtain coverage. 

Mr. LEWIS. Could you tell Members of the Committee, what are 

the benefits of cheating the ACA system? The money goes to the 

insurance company, not the individuals. 

Mr. BAGDOYAN. Yes. I mean, we are not receiving the subsidies 

directly to our accounts. They are paid by the government to the 

insurers directly upon presentation of what I would imagine would 

be some sort of an invoice on a monthly basis. 

Mr. LEWIS. Thank you very much, Mr. Director. 

I yield back my time. 

Chairman BOUSTANY. I thank the gentleman. 

Mr. Reed, you are recognized for questioning. 

Mr. REED. Thank you, Mr. Chairman. 

Thank you for the testimony today, sir. One of the pieces of information I found intriguing in your preliminary work is as you went 

through this work, my understanding is you talked with the officials of CMS that handle this situation, and they indicated to you 

that—the CMS officials told you that their experience has not 

shown the need for any changes in the eligibility determination 

process. So CMS is working with you throughout this investigation, correct? 


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process. So CMS is working with you throughout this investigation, correct? 

process. So CMS is working with you throughout this investigation, 

correct? 

Mr. BAGDOYAN. Yes. We have been in touch with CMS officials 

and obtained documents and other information. 

Mr. REED. Very, very frustrating to me as a member of this 

oversight committee that the officials that are responsible for trying to implement this program are sending you and sending this 

body a message that they are not interested in making any changes 

to improve the situation, even though you have given them examples of clear, egregious violations of the procedures. Am I misunderstanding the response of CMS? 

Mr. BAGDOYAN. Well, I think that has been their position at 

the time. I believe in press reports regarding this hearing, the public statement that CMS made was their willingness to continue to 

work with GAO and identify areas where improvements were 

made. So I would have to reconcile those two statements during the 

course of our work. 

Mr. REED. Well, I would hope this oversight process and this 

public spotlight does do its job and gets CMS on the ball to not 

send a message that they don’t want to work with you and others 

to clear up this clearly egregious behavior that you have discovered 

and that you continue to discover as you go forward with this investigation. 

There is another interesting thing in your written testimony that 

I read, and it is that you indicated that CMS is currently unable 

to identify who has made a premium payment and who has not. 

Is that accurate? I mean, did I read your testimony correctly? 

Mr. BAGDOYAN. Yes. That is our understanding, that that part 

of the back-end system, that is part of the broader data hub, I believe, has not been constructed, but there is a plan to do so, we just 

don’t have a timeline for that to happen. 

Mr. REED. Okay. So there is a plan that CMS has advised to 

you that they have in order to verify that information? 

Mr. BAGDOYAN. That is our understanding at this time, yes. 

Mr. REED. But they can’t give you a timeline as to when they 

are going to get that done or implemented or—— 

Mr. BAGDOYAN. That’s correct as of this date. 

Mr. REED. What are the details of that plan? 

Mr. BAGDOYAN. I can’t comment on them. We can check back 

and see with my staff to determine. If we have appropriate documentation, we can get back to you on that. 

Mr. REED. So just say you don’t know, and there is probably information out there that you could check? 

Mr. BAGDOYAN. There might be in our work papers set, but I 

am just not familiar with that plan specifically. So I don’t want to 

give you a wrong answer. We will get back to you. 

Mr. REED. And am I correct in your testimony, though, too, that 

the insurers have given the information to CMS on the payment? 

Mr. BAGDOYAN. Again, that is our understanding, that the insurers provide a list and an amount of subsidy owed, and the government takes that self-attestation and reimburses the insurers for 


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the subsidies directly without touching the enrollee, which is an 

important point to make. 

Mr. REED. So just so the American people understand that may 

be enrolled in these situations, what happens if the government 

doesn’t catch the fact that they are not paying their premiums anymore with the individual’s responsibility to repay back these premiums that may be erroneously or fraudulently issued to them? 

Mr. BAGDOYAN. Well, I think the requirement is that the applicant or the enrollee continue to make payments to be eligible for 

the subsidy, but that is a determination that I wouldn’t be able to 

make in terms of what exactly the process would be for the government to follow up with that particular enrollee and determine why 

the payments are not being made, whether there would be a grace 

period to restart the payments. 

Mr. REED. Okay. But maybe I am not being clear. So if an enrollee doesn’t make the premium payment and the subsidy continues to be provided to the insurer, correct? 

Mr. BAGDOYAN. I—that is a possibility, yes. 

Mr. REED. And then, subsequently, it is discovered that the premiums weren’t made, isn’t there an obligation on CMS’ part or the 

government’s part to go after the enrollee to say, Hey, we gave you 

a premium subsidy that you are not entitled to, because the premiums weren’t made? Is that—that is my understanding of it. 

Mr. BAGDOYAN. Thank you for your clarification. We are aware 

of situations like that, but so far, the audit part of our work has 

not focused on it, and we will be focusing on that area going forward. 

Mr. REED. Well, I appreciate that, because I am very concerned 

about the fraud and everything that you have uncovered in this 

preliminary report, but I am also very concerned that enrollees 

don’t understand what is coming down the pipeline, because if 

CMS doesn’t do its job, if the government doesn’t do its job, if they 

continue to engage in this fraudulent behavior, then premiums are 

going out. That is one thing. That is wrong. That is illegal. That 

is a clear violation. But also if the premiums go out and the enrollees have pay back those premiums because of some type of mistake 

that the government made, I hope the American people understand 

they are the ones who are going to be on the hook to have to pay 

this back, and not the insurer. 

I yield back, Mr. Chairman. 

Chairman BOUSTANY. Thank the gentleman. 

Mr. Crowley, you are recognized for 5 minutes. 

Mr. CROWLEY. I thank you, Mr. Chairman. 

I am interested in hearing about the concern for the enrollees. 

That is very interesting. My friend from New York spoke so eloquently about concern for the enrollees. I would just add for the 

record that 52 times my colleagues on the other side of the aisle 

have voted to repeal the Affordable Care Act, 52 times. I am not 

asking you to comment on that, but just to state for the record that 

52 attempts by my colleagues on the Republican side of the aisle 

have been to repeal the entire act itself, so it is interesting to hear 

about the concerns for the enrollees. 


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Quite frankly, Mr. Bagdoyan, I think that this hearing is premature. You have stated yourself that you have not finished your 

investigation. Is that correct? 

Mr. BAGDOYAN. Yes. The work is ongoing on the investigative 

and the audit front, yes. 

Mr. CROWLEY. And I would suggest that possibly part of that 

investigation, as Mr. Lewis was referring to, was seeing this 

through. Have any of your undercover investigators actually 

accessed any healthcare through these plans? 

Mr. BAGDOYAN. They have not. 

Mr. CROWLEY. They have not. And they are paying a premium—they are paying a premium, and the government is giving 

a subsidy directly to the insurance companies, correct? 

Mr. BAGDOYAN. That is correct. As part of the investigative 

scenarios, that is correct. 

Mr. CROWLEY. So it appears as though you have operated a 

very sophisticated criminal operation here, not that your intention 

is criminal. In other words, if someone is thinking in terms of a 

criminal mindset to actually exploit the system, you are kind of 

working in that—that mode in an honest way, I guess you could 

say, right? 

Mr. BAGDOYAN. Well, that is part of our tasking, to investigate 

and—— 

Mr. CROWLEY. And I appreciate that. 

Mr. BAGDOYAN. And it is the authority of the GAO to do that, 

sure. 

Mr. CROWLEY. And it is important from an accounting point of 

view in understanding and saving taxpayers. This is not accusatory 

towards you and what—— 

Mr. BAGDOYAN. I understand. 

Mr. CROWLEY. [continuing]. You are doing. I want to make that 

clear. 

Mr. BAGDOYAN. No worries. 

Mr. CROWLEY. But what is the ultimate price here for the 

criminal? Is it a free colonoscopy? What is the ultimate benefit to 

the criminal who is taking these risks to do this? You know, this 

isn’t like Medicare fraud where the doctor is actually cooking the 

books to put more money into his or her pocket. Why would a noncitizen, for instance, risk discovery by applying for health insurance, or a fraudster with an illegal Social Security Number use 

them for this purpose when there are other obviously more lucrative ways in which to exploit those things? Why would they do 

that? 

Mr. BAGDOYAN. I am afraid I wouldn’t be able to comment on 

the intent of anyone attempting fraud. 

Mr. CROWLEY. Let me ask you this question, then: in addition 

to the penalties in the Federal criminal law, the ACA has civil penalties for providing false information. Is that correct? 

Mr. BAGDOYAN. I believe that is my understanding. 

Mr. CROWLEY. So, in a perfect world, if people—again, if these 

were real criminals, if they were attempting to do this, they would 

probably be—they would have some knowledge that possibly there 

would be some penalties if this were uncovered. Is that correct? 


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Mr. BAGDOYAN. I can’t speak for individuals. There is, I think, 

sufficient information. 

Mr. CROWLEY. And, in fact, the two penalties are as stiff as $25,000 for failure to provide information and $250,000 for providing false information. That is a substantial amount. Is that not enough, or do you think we shou

viding false information. That is a substantial amount. Is that not enough, or do you think we shou

viding false information. That is a substantial amount. Is that not 

enough, or do you think we should maybe increase those penalties? 

Do you think that those penalties would have some impact on the 

criminal’s intent to pursue this? 

Mr. BAGDOYAN. Again, Mr. Crowley, I would be hesitant to 

comment on that. 

Mr. CROWLEY. I appreciate that. I see that—I know that I am 

running out of time, but I see that my colleagues once again on the 

other side of the aisle are using this as an opportunity, I think, to 

exploit their dislike of the Affordable Care Act, and I know that 

they don’t like it, I get that, but today, I guess the theatrical selection is much ado about nothing, because there is really nothing 

here yet until we see what happens in the true-up what the followup of the IRS would be in terms of determining whether or not that 

individual was eligible for those credits. And I know that they 

haven’t helped in terms of making that even more helpful to the 

recipient of the credits themselves, so I appreciate that. It is just 

another attempt to try to smear, I think, the Affordable Care Act. 

More people are getting coverage, as my colleague from Georgia 

has said, and they are liking it. All the doomsday predictions 

haven’t come true, and they are now trying to trump up new accusations that ignore the reality of it that people are actually accessing healthcare and enjoying it. 

Yes, there are instances where people misstate or wrongly estimate their income, and for those inconsistencies, they are later 

verified and corrected, and if not, they have to pay it back. 

So I think, you know, Mr. Bagdoyan, as I mentioned before, I do 

appreciate your work and you needing to do this and it is important work that you are engaged in, but I think it has been premature. It is like having an investigation of organized crime, and 

talking about an investigation that is going on before you have gotten to the conclusion. It tips off a lot of people that we may not 

want to be tipping off. 

With that, I will yield back. 

Chairman BOUSTANY. I thank the gentleman. 

Which underscores why we are taking a serious look at oversight 

early in this process, to avert problems and taxpayer dollars going 

out to waste, fraud and abuse, rather than letting this linger on for 

years on end and taxpayers being caught up in this trap. 

With that, I will now yield to Mr. Roskam. 

Mr. ROSKAM. Thank you, Mr. Chairman. 

Mr. Bagdoyan, the gentleman from New York, Mr. Crowley, said 

that this is an attempt to smear the Affordable Care Act, and I 

would argue just the opposite. I think the Affordable Care Act, to 

use his adjective—or his verb, is smearing itself, and he posed a 

number of hypotheticals to you. Let me move out of the hypothetical and into the actual. 


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So, actually, based on this investigation, there were 12 attempts 

to defraud the system, and 11 of those attempts were successful. 

That is right, isn’t it? 

Mr. BAGDOYAN. That is correct, Mr. Roskam. 

Mr. ROSKAM. That is not hypothetical. Those are actual 11 attempts that came up where the bad actor rang the bell and got a 

benefit that they weren’t supposed to get. That is right, isn’t it? 

Mr. BAGDOYAN. That is correct in these 11 instances. 

Mr. ROSKAM. I find that number, 11 out of 12, shocking, jarring, troubling; you know, pick your descriptor. Have you come to 

an opinion based on your experience as to how you would characterize the robustness of the program? I recognize your admonition 

at the beginning that you don’t want to overlay, but for example, 

accept this hypothetical: if this trend were to continue and 11 out 

of 12 were to continue to be the trend and you were to lay that out 

over this entire program, how would you describe that net result? 

Mr. BAGDOYAN. Well, again, I would be reluctant to project 

based on this very limited sample. 

Mr. ROSKAM. I accept that at face value. 

Mr. BAGDOYAN. But as I mentioned, again, and I will underscore it in this instance, is that we have identified several areas 

of control that need attention, and our audit work will focus on 

that and benchmark against appropriate standards for us to make 

any kind of judgment in terms of forward looking in this regard. 

Mr. ROSKAM. Have you come to an opinion about the 

robustness of the Internal Revenue Service and their role in the 11 

cases that you came across? 

Mr. BAGDOYAN. Our work has not touched the IRS as yet, but 

they are part of the overall scope of our work. 

Mr. ROSKAM. So the IRS inquiry is ongoing? 

Mr. BAGDOYAN. It is, yes. It is—it is active work as we speak, 

and that is one of the agencies we will be touching on in terms of 

their roles in controlling enrollment. 

Mr. ROSKAM. And this GAO report, this investigation came 

about as a result of a specific congressional inquiry. Is that right? 

Mr. BAGDOYAN. That is correct, at the request of Chairman 

Boustany and others. 

Mr. ROSKAM. I think that we are going to continue to have 

these episodic insights into the weakness of some of these things. 

And what we need to be doing and what Congress needs to be 

doing is advocating an overall structure for oversight. 

I have introduced H.R. 4158, which would create a special inspector general to monitor the Affordable Care Act, or SIGMA. 

Congress has appointed special inspectors general for things like 

the Troubled Access Recovery Program, TARP, Afghanistan, Iraq 

and elsewhere, where literally billions of dollars in waste have 

been uncovered. 

And if you think about the scope of what we are talking about 

here, CBO projects that over a trillion dollars in Affordable Care 

Act subsidies are going to be paid out over 10 years. Those types 

of numbers just absolutely take your breath away. Even if a portion of the trend that you uncovered continues, these numbers are 

really jarring. 


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The special inspector general approach that I have advocated 

would have a similar role with jurisdiction that spans all implementing agencies, and the ability to bring important data to light 

and hold the administration accountable. And in the case of subsidies, it is given specific oversight over the IRS and its implementation of the law more broadly, but also its subsidy verification and 

overpayment recapture process. So I think that there is a real opportunity here. 

Your insight is incredibly helpful. I want to join my colleagues 

in thanking you for the work that you are doing. We are not overcharacterizing it, but we are really concerned about the depth and 

the problems that you have identified and articulated. Thank you 

for your time. 

And I yield back. Thank very much. 

Chairman BOUSTANY. Thank the gentleman. 

Mr. Paulsen, you are recognized for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

And I thank you for taking the time to be with us this morning. 

You know, we already knew that we were unable to verify income 

and eligibility information. We have had that discussion in this 

committee as the law has been put into practice, for those that are 

applying for health insurance, but this review, the review that you 

provide today, calls into question whether the government is even 

able to verify that these people who are applying for insurance are 

who they say they are. I mean, just those folks, it is just—you 

know, the 11 out of the 12 cases that you mentioned earlier as a 

part of this review. 

And just to follow up a little bit on what Mr. Roskam had said, 

it is troubling to follow on the heels of your report, knowing full 

well that the inspector general for tax administration has already 

found seriously inadequate controls available in administering 

their part of the law. HHS, the Office of the Inspector General has 

already found their internal controls are deficient. And now we 

have this report where you have laid out 11 of 12 successful cases 

in defrauding, essentially defrauding the system. So we know that 

improper payments in other Federal programs have cost money. 

You look at the EITC over a 10-year period, costing taxpayers $132 

billion. If you apply that percentage to what would be transpired 

into this extensive, expensive program with the Affordable Care 

Act, Obamacare, we are talking real money here, real money that 

can be prevented. 

But let me ask you this. I want to just follow up on a little different line of questioning, Mr. Bagdoyan. You stated that six of 

your 18 applicant scenarios included in-person applications through 

the navigators and those in-person assisters, but you tested—your 

testing had one problem. In five of the six scenarios, they were either unable to find these individuals or they were turned away, 

correct? 

Mr. BAGDOYAN. Well, the six cases are independent of the 

other 12, because they focused on testing the income control. And 

the five who were unable to assist us was done, as I mentioned earlier, for a variety of reasons. They said they didn’t have sufficient 

training to do so, they focused on a narrow part of the applicant 

population, two of them were experiencing some Web site access 


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problems at the times, and another one told us that we needed to 

make an appointment. When we attempted to do so onsite, we were 

advised to call, but our calls were unsuccessful. 

Mr. PAULSEN. Okay. So you have worked through this scenario. 

We know that CMS awarded these navigators that you were approaching $67 million in grants to help consumers complete their 

eligibility applications and the enrollment forms, and then other inperson assisters received this money as well, but your testimony, 

then, is suggesting that many of these groups may be pocketing that money, taxpayer money, witho

then, is suggesting that many of these groups may be pocketing that money, taxpayer money, witho

then, is suggesting that many of these groups may be pocketing 

that money, taxpayer money, without providing the services. 

Can you just describe a little bit about what your experience and 

GAO’s experience was at trying to obtain in-person assistance in 

your applications? 

Mr. BAGDOYAN. Yes. I would refer you to my answer earlier. 

There was a mix of having to make appointments, we were not able 

to make them on the spot, and we didn’t get our phone calls returned, and there were also Web site problems. Someone said that 

they didn’t have sufficient training, so they were uncomfortable in 

performing the service. 

Mr. PAULSEN. So there is insufficient training, the Web sites, 

you know, may be inaccurate or not working correctly. Do you expect that later, GAO, through your ongoing investigation, is going 

to name those entities where you sought assistance but you were 

unable to obtain it? In other words, is there going to be a trail of 

accountability here? Is that going to be part of your recommendation? Do you see that happening? 

Mr. BAGDOYAN. Well, we will have to look at the assister issue 

in the broadest context possible within the controls focus of our 

work. I can’t really comment beyond what the implications are to 

the entire assister population, because this was, again, a very narrow slice of that population that we looked at. So we will take a 

variety of factors into consideration, but in terms of naming names, 

I don’t think that at this time or in the future, we would necessarily go that route. 

Mr. PAULSEN. Well, and let me just ask this, then. So knowing 

5 of 6 or 11 of 12, we are talking high percentages here, right, 80 

to 90 percent of issues here. Is a part of the investigation, I would 

expect, accountability, right, as a part of your investigation, maybe 

not naming names, but naming those that—where the contracts 

were let, where the navigators were supposed to be providing these 

services, where there is no accountability in essence, correct? 

Mr. BAGDOYAN. I think from the perspective of looking at the 

controls in their totality, that is an area that we will take a look 

at, but, again, I would emphasize the narrowness and the smallness of our sample, and the percentages would be out of whack if 

we had something that would be projected to those populations. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

Yield back. 

Chairman BOUSTANY. Thank the gentleman. 

Mr. Davis, you are recognized for 5 minutes. 

Mr. DAVIS. Thank you very much, Mr. Chairman. 


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And thank you, Mr. Director. 

It seems to me that this is a very interesting investigation, that 

we are investigating what we think might happen. And I guess 

from watching television, I am of the opinion that much of the forensic work relative to investigations are about things that have occurred, and we are trying to find out how and why. It is interesting 

to me that the focus of the investigation is on individuals who 

would qualify for a subsidy, yet that there isn’t anything that we 

can project they are going to benefit; that the beneficiaries become 

the insurance companies. It certainly does not become them. So if 

we can’t establish any intent relative to fraud, then we can establish that maybe somebody who was helping them or somebody who was giving them information ha

lish that maybe somebody who was helping them or somebody who was giving them information ha

lish that maybe somebody who was helping them or somebody who 

was giving them information had not been trained as well as they 

should have been and, as a result of that, mistakes occur, and yet 

we still focus on them. 

Let me ask you, is the 11 out of 12, is that really accurate? I 

mean, it is hard to determine the accuracy of projections sometimes. Anyway, things don’t always go as it looks as though they 

would, but is the 11 of 12, is that a firm level of accuracy that we 

really could expect? 

Mr. BAGDOYAN. Thank you for your question. The intent of this 

sample was not to project in any way. It is too small of a sample 

to do so, anyway. The intent of this phase of our work, the investigative undercover phase, is basically to identify areas for potential focus for our future work in terms of the overall controls and 

then the specific controls and tools and how they interact, where 

they are in the process and how they might work or not work depending on their application. So it was not intentional on our part 

to say, Well, 11 out of 12 we can project to the entire universe of 

applicants. And that is one of the limitations that I identified in 

my oral comments. 

Mr. DAVIS. I have always thought and felt that a bit of prevention is worth much more than the cure, and so surely if we can prevent things from happening, but I guess I am wondering, where 

would the money come from since we have not passed an HHS appropriation bill, since ‘‘cut, cut, cut’’ has been the theme of our colleagues on the other side? Where would the money come from to 

do this broad investigatory work that related across the board to 

these individuals who could get a subsidy, but it wouldn’t go to 

them? I mean, what is—— 

Mr. BAGDOYAN. Well, certainly, sir, I can’t comment on the 

budget necessarily to do this work, but I would concur with your 

earlier comment about the importance of preventative controls, 

what we call the front-end controls. That is part of GAO’s fraud 

prevention framework. So I would agree to that extent, that that 

is where the action has to happen, because the back-end controls 

traditionally are less effective. 

Mr. DAVIS. Well, thank you very much. 

I yield back. 

Chairman BOUSTANY. I thank the gentleman. 


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Before we go to the next questioner, I also want to make the 

point, and I think you—it is highlighted in your report, that you— 

even though the sample size is small, you sampled diverse areas 

of the country, rural and urban. So it sort of gives us, even with 

a small number, kind of a broad snapshot of—within the confines 

of those small numbers, that we have a trillion dollar program over 

10 years, we are very concerned about the integrity of the program, 

and safeguards on the front end, which we know are more effective 

than trying to go through pay and chase, which as we know from 

other programs, that is not effective in recouping and protecting 

taxpayers. And so I just wanted to make that point, and if—and 

I want you also to state for the record a little bit about the fact 

that you looked at diverse areas, both urban and rural. 

Mr. BAGDOYAN. Certainly we tried to have a representation of 

different geographic locations in the country, and within those geographic locations, we attempted to represent urban and rural settings so that we had, given, again,

graphic locations, we attempted to represent urban and rural settings so that we had, given, again,

graphic locations, we attempted to represent urban and rural settings so that we had, given, again, our limited sample, as diverse 

coverage as possible. 

Chairman BOUSTANY. And you will continue the investigation 

along those same lines, so—— 

Mr. BAGDOYAN. Right. As more information becomes available, 

the more we analyze, we will identify, as appropriate, additional 

steps in that regard, yes. 

Chairman BOUSTANY. Thank you. 

Mr. Marchant, you are recognized for 5 minutes. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

And thank you, Director, for this report. 

I guess the word is out to America that what we have suspected 

all along is true. Wall Street Journal says fictitious applicants get 

to U.S. health insurance tax credits. The Washington Post says, 

Federal uncover investigation signs up fake applicants for ACA 

coverage and subsidies. And then NBC comes out and says, GAO 

sting finds it easy to fake it. Get Obamacare premiums. 

So what we have suspected since we passed this law and it began 

to be implemented is that it is another Federal program that is 

going to be easily scammed and easily accessed by someone willing 

to commit fraud. We have several programs in the Federal Government that we find out daily that that is happening to. 

I guess we also found out what the new definition of a navigator 

is. The new definition of a navigator is a fraud assistant agent. It 

is something that we have suspected since the first TV and news 

stories came out when we found people in these agencies not being 

able to answer questions, some of them had criminal backgrounds. 

From the very beginning, we suspected that the people that were 

going to be assisting people to sign up to this program were not 

qualified to do so. This report, this preliminary report completely 

ratifies that. 

In one of these stories, it says that 4.3 million of the applicants 

have some inconsistency in their application, 4.3 million, and the 

agents and the contractors that are supposed to be vetting these 


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inconsistencies are so far behind, they will never catch up, never 

catch up to verifying these inconsistencies. 

This last year, this year, we will have spent $17 billion on this 

program, another Federal program. Where did the money come 

from? The money came from taxpayers. In the last year, millions 

of taxpayers in the United States have found out that they are paying for Obamacare; they are paying in extra taxes. So it is the responsibility of this committee, it is the responsibility of this Congress to make sure that those taxpayers, those hardworking taxpayers do not have their money wasted, and so I think that your 

preliminary report has done a great service to this Congress and 

this committee, because it is giving us some direction now in finding out exactly how to address this problem. 

When you gave the navigators the information, did you provide 

income information? 

Mr. BAGDOYAN. Yes. I would refer you to my opening statement where I said that the one person who did assist us, correctly 

identified our income, which we gave this person, as being outside 

the boundaries of qualifying for a subsidy. So we did provide a 

number, and this assister assessed that number and correctly told us that it was outside of that bou

number, and this assister assessed that number and correctly told us that it was outside of that bou

number, and this assister assessed that number and correctly told 

us that it was outside of that bound. 

Mr. MARCHANT. So your—in these 11 to 12 cases—in all 12 

cases, you provided the IRS with income that was verifiable and 

you provided them with a Social Security Number that was 

verifiable? 

Mr. BAGDOYAN. We provided a series of data points as part of 

the application, but I will remind you that the six navigator scenarios are not intended to seek coverage like the other 12 were. So 

it is a technical nuance, but it is a very important one to make. 

But we did provide information online during our online application process, and then when we switched over to the telephone 

process, we were submitting various bits of information, yes. 

Mr. MARCHANT. So you could draw the conclusion that, as 

flawed as the Web site started and as flawed as it is and as flawed 

as it is, and now on the back end as you described, catching those 

fraud and catching those inconsistencies, the Web site, you found 

you—it was much more difficult on the Web site to give them false 

information and sign up than it was if you would switch to a navigator? 

Mr. BAGDOYAN. Well, we were flagged on the online process. 

We were referred to the contractor, who was intended to clarify or 

verify our identity. When they weren’t able to do so, they directed 

us to the call center, and that is where we got through in terms 

of obtaining coverage. 

Now, I would say that when we did provide information as part 

of the application process, there were inconsistencies that were 

flagged, and we subsequently received requests to submit documentation which would be—to substantiate the information we 

were providing, and that is the documentation that is now at the 

back end with the contractor, who processes that documentation. 


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And as I mentioned earlier, in several instances regarding two of 

our applicants, those documents have been verified as authentic. 

Mr. MARCHANT. Thank you, Director. 

Chairman BOUSTANY. I thank the gentleman. 

Ms. Jenkins, you have 5 minutes. 

Ms. JENKINS. Thank you, Mr. Chairman. Thank you for having 

this important hearing. 

Mr. Director, thank you for being here. We are very concerned 

about this GAO report and your findings that the premium tax 

credit offered by enrollment in the exchange is vulnerable to abuse. 

In particular, it is concerning to me. This subcommittee has held 

two similar hearings on this topic this year. And your findings have 

confirmed our fears. 

When Commissioner Koskinen of the IRS testified on this subject 

back in May, he told this subcommittee that he hoped, he hoped 

taxpayers would do certain things, such as notifying the exchange 

of life events, so that their subsidies would be adjusted, but acknowledged that more public outrage might be necessary to ensure 

that the enrollees are compliant. 

In June, a panel of tax experts told this subcommittee that it 

was very unlikely that taxpayers would notify the exchange of their 

life events. I am afraid that this will leave those receiving premium 

tax credits on the hook for thousands of dollars in penalties in the future. 

tax credits on the hook for thousands of dollars in penalties in the future. 

tax credits on the hook for thousands of dollars in penalties in the 

future. 

Now this GAO report highlights the broader problem of intentional waste, fraud, and abuse of premium tax credits by providing 

that these agencies simply do not have the infrastructure necessary 

to verify this information before handing taxpayer dollars to bad 

actors. Instead of doubling down on the investigating wrongful premium tax credits, CMS issued a proposed rule in late June that 

will automatically reenroll participants in the exchange for 2015. 

So I have several questions for you. First, do you believe that the 

administration currently has the ability to accurately verify eligibility for these premium tax credits? And do you believe that it will 

be possible for CMS to accurately verify eligibility for the current 

enrollees in time for open season in November? 

Mr. BAGDOYAN. Thank you for your question. At this point, we 

haven’t touched those areas, but they are within the scope of our 

work. And as appropriate, we will follow up vigorously. And again, 

within the broad context of looking at all the controls, that would 

be part of the picture, definitely. 

Ms. JENKINS. Okay. But you saw nothing that indicated that 

these—— 

Mr. BAGDOYAN. Not at this point. We narrowly focused on our 

investigation at the beginning of our overall work to, again, touch 

several controls and see which areas were candidates, if you will, 

for additional focus. 

Ms. JENKINS. Okay. Fair enough. Could you just comment on 

whether you believe automatically reenrolling exchange participants is a good idea? 


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Mr. BAGDOYAN. I can’t comment. That is really not part of our 

scope right now. So I can’t comment on that. 

Ms. JENKINS. Okay. Thank you. 

I yield back. 

Mr. BAGDOYAN. My pleasure. 

Chairman BOUSTANY. I thank the gentlelady. 

We will next go to Ms. Black for 5 minutes. 

Mrs. BLACK. Thank you, Mr. Chairman. 

I want to thank you for having this very important hearing. 

These are subject matters that we have been talking about for 

quite some time, at least since I have been here for the last 3 and 

a half years and ones that are close to my heart. 

I want to reiterate the fact that this is so important, as you said, 

Mr. Chairman, that these dollars do not go out the door and then 

us try to retrieve them. We know from other tax credits that have 

been given, that there is billions of dollars that go out and we 

never receive those back. So this is so important that we get this 

right now and take care of this, because those dollars are precious, 

and they need to be used for people that truly need the assistance. 

So thank you again. Let me ask you about something that is not 

in your report and has not been mentioned here today, and that is 

there were two major planks to the ACA. One is the verification 

of an income to make sure that someone qualified for those subsidies. But the second was that if you had employer-sponsored insurance, you would not be eligible for those subsidies. And I don’t 

see anything here to show that that is one of the major planks that 

we should be looking for. Are you looking at that major plank in the work that you are doing? 

we should be looking for. Are you looking at that major plank in the work that you are doing? 

we should be looking for. Are you looking at that major plank in 

the work that you are doing? 

Mr. BAGDOYAN. I am not familiar with that particular aspect. 

It is a big plan. But we would be happy to get back to you on that 

particular point. 

Mrs. BLACK. Well, I know that the data hub was supposed to 

do a lot. And we looked at that data hub from the beginning and 

knew that it was very complicated. As a matter of fact, a number 

of people who are experts in the industry said it was so complicated 

they didn’t believe that it ever could be done. So the data hub was 

supposed to be one of the mechanisms to be used, but I am just 

really curious, because I don’t know that we know how many people currently are applying for these subsidies that potentially 

would not be eligible because of their employer-sponsored insurance. So I would really love to hear back from you on what your 

thoughts are on that because it is a major plank. And I think that 

we have got to make sure that that one is covered as well. 

As far as the income verification goes, again, the data hub was 

supposed to be the mechanism to be used that it would then ping 

into the IRS. The IRS would then get that information back to say 

whether that was good information or not. But would it make sense 

in your opinion that they would be using something, say, like 

Equifax that is being used by the SNAP program to verify income? 

Mr. BAGDOYAN. I believe Equifax does have a role, but I would 

have to, again, check and confirm that and get back to you. 


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Mrs. BLACK. Do you also know in your investigation whether 

this administration has provided any deadline for these contractors 

to complete the remaining inconsistencies? Because I understand 

there is a large number of those. So, in the meantime, people potentially are getting the subsidies, but it seems that it is going to 

take a long time to have those inconsistencies verified. Do you have 

any information to share with us on where this administration is 

going? 

Mr. BAGDOYAN. Based on our visit to the document processing 

contractor’s facility, they are actively trying to clear out the backlog 

of inconsistencies. But in terms of timing, I would have to again 

get back to you on that if there is a specific end date for that process. But as you can imagine, there are hundreds of thousands of 

application-related documents that need to be vetted and cleared. 

And there are also, as my statement alludes to, a number of documents which cannot be matched against applications as well. 

Mrs. BLACK. And then my final comments, really more comments than anything, but when we looked at the navigators, and 

I read all of the rules and regulations related to the navigators, 

and noted at that time that it would be pretty difficult for a navigator with a small amount of training that they received to even 

be able to help somebody work through a very complicated system, 

especially if that individual had a complicated application process. 

So I would be very interested to see what additional information 

you get back about what navigators are able to do for those who 

come to get assistance. And there certainly is a difference between 

the navigators and the navigator assistants, the assistant navigators, because there is a big difference in their training. So I would 

be very interested to see, as you complete your report, on the kind 

of information and help that are given to people, given the amount or the lack of education that the

of information and help that are given to people, given the amount or the lack of education that the

of information and help that are given to people, given the amount 

or the lack of education that they really have in order to take on 

that role. 

Thank you, Mr. Chairman. 

Chairman BOUSTANY. I thank the gentlelady. 

Mr. Kelly, you are recognized for 5 minutes. 

Mr. KELLY. I thank the chairman. 

Mr. Bagdoyan, thanks for being here today. I was reading 

through your testimony last night. United States Government Accountability Office. That is who you represent. What is your job? 

I mean, why even create a GAO? 

Mr. BAGDOYAN. Well, GAO exists to serve the Congress in its 

investigative and oversight capacity in its broadest term. 

Mr. KELLY. Okay. So, I mean, it is kind of an early detection, 

right? I mean, if you were in the private sector—I got to tell you, 

I came out of the private sector. If I had the ability to go to an 

agency before I made an investment, kind of the look-before-youleap type of philosophy, because in the private sector you are not 

allowed to make a mistake. You go out of business. To have the 

ability to look ahead and see what the total cost of this program 

was going to be; where are the traps on this? Where were the 

downfalls on this? What could possibly go wrong? When you look 


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at the numbers, these are staggering. There is nobody in the private sector that would look at this model and say you know what, 

I think that is acceptable. My God, you just can’t do those things, 

not in the private sector. 

Now, in government, it is kind of fun because we work with 

OPM. And for those of you that aren’t in the private sector, that 

means other people’s money, in this case hardworking American 

taxpayers’ money. So it is easy to throw those dollars around and 

say you know what, unintended consequences. Doggone it, we did 

it again. And we are going to have the GAO do a study. And then 

you do a study, and we say, well, wait a minute that is too limbed. 

You can’t tell me that and expect me to believe that somehow down 

the road this has a happy ending. What do you see coming? And 

I am just talking about from a practical everyday American’s outlook on life. People that get up every morning, throw their feet out 

over the bed, go to work so that they can put a roof over their children’s heads, spoons on the table, clothes on their backs, and keep 

giving money to a government who they are trusting to spend it 

the right way, and we are finding out that they don’t even trust 

us any more than that because we have wasted so much of it. The 

district that I come in, you know what people watch? They don’t 

watch dollars, they watch pennies. And the old adage is if you 

watch pennies, you pay attention to pennies, the dollars will add 

up. My God, $17 trillion and climbing in the red ink here, and we 

are still saying, you know what, this is all hypothetical. Come on, 

if we can’t do these wonderful things. But it comes down to this. 

Our job in this body is to protect the hardworking American taxpayers’ investment, their tax dollars, and make sure that they are 

being spent the right way. And if we find something wrong, early 

detection is always the best way to get a correction. Certainly in 

your health it is much better to find out early on that you are on 

the wrong trajectory and you have to change your lifestyle or you have got to do something. 

the wrong trajectory and you have to change your lifestyle or you have got to do something. 

the wrong trajectory and you have to change your lifestyle or you 

have got to do something. 

So just tell me, the GAO, the job that you are doing, you are 

looking at things right now, and there has got to be bells and whistles going off everywhere. And it is my understanding that the administration was told, you know what, light is not green. It is yellow, and it is about at the end of its yellow term. It is going to turn 

red real quick. You better look before you leap. You better make 

sure that you are spending this money the right way because you 

are collecting it from people who go to work every day and put that 

money in this furnace. That is where the revenue comes from. It 

does not come from Congress. It comes from the American taxpayer. 

So I just wonder, as you go on with this study, is there anything 

that you look at and think, well, my gosh, I think if we keep going 

the way we are going, things are going to be all right because this 

is all hypothetical. And I got to tell you I am fed up with every 

issue that involves policy that affects the American people to be 

about politics. Really? Really. If you came here for a political career 

and you didn’t come here for the people that you represent, then 


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my God, take a look at the mirror and say, am I still doing what 

they sent me to do? So you are sitting there every day. You are 

watching this go on. You got to sit there and just pull your hair 

out and say, you know, I keep telling them that it is not working. 

I keep telling them that they are wasting dollars. And they keep 

saying to me, too early. Too early. This is too partisan. You are seeing this coming. Where does this lead as we go forward? 

Mr. BAGDOYAN. Mr. Kelly, our work is definitely ongoing. In 

the next several months, we will be looking again, as I mentioned 

earlier, at a wide range of issues. And when we issue our report, 

we are likely to have recommendations to address the issues we 

have identified and direct those recommendations to the relevant 

agencies. And they are supposed to get back to us with their specific plans within 60 days of how to begin implementing those. 

Mr. KELLY. I hope it works better for you than for me, because 

the people I have talked to said, you know what, Kelly, you got to 

get reelected. I have just got to get through this cycle. The people 

I talk to, the bureaucrats, the problem is that you folks don’t understand, this is our career. And we will keep doing what we have 

to do. There is something drastically wrong here. And I would hope 

that you are able to stay on line and keep doing what you do best. 

I just think that sometimes you try to help people, and they turn 

a deaf ear and a blind eye to what you have offered them. And I 

see that happening here. And at the end of the day, it is the American taxpayer who foots the bill for every single thing that comes 

out of their pockets. And they have co-signed a note for the future 

that includes their children, their grandchildren, and their great 

grandchildren. And we sit here with our eyes covered and our ears 

plugged and say, no, no, no, this is just politics. It is not politics. 

This is about people, and it is about the American people. I thank 

you for your work. And please keep doing what you are doing. God 

bless you. 

Mr. BAGDOYAN. Thank you. 

Chairman BOUSTANY. I thank the gentleman. I think he made 

a very eloquent case for early and aggressive oversight because he 

certainly made clear that the American people do want accountability. 

Thank you, Mr. Bagdoyan. Thank you to you and your staff for 

appearing before us today, and the important work that you are 

doing. Please be advised that members may have additional questions they may submit in writing to you. 

Mr. BAGDOYAN. Absolutely. 

Chairman BOUSTANY. And we expect answers to be made part 

of the record. 

And with that, this subcommittee now stands adjourned. 

[Whereupon, at 11:42 a.m., the subcommittee was adjourned.] 

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Member Submissions For The Record 


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Rep. John Lewis 1 


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Rep. John Lewis 2 


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Public Submissions For The Record 

Tim Albright 


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