[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
HEARING ON THE STATUS OF THE AFFORDABLE CARE ACT IMPLEMENTATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
September 10, 2014
__________
SERIAL 113-HL16
__________
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 SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
KEVIN BRADY, Texas, Chairman
SAM JOHNSON, Texas JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin MIKE THOMPSON, California
DEVIN NUNES, California RON KIND, Wisconsin
PETER J. ROSKAM, Illinois EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska
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C O N T E N T S
__________
Page
Advisory of September 10, 2014 announcing the hearing............ 2
WITNESSES
The Honorable John Koskinen, Commissioner, Internal Revenue
Service........................................................ 8
Andy Slavitt, Principal Deputy Administrator, Centers for
Medicare & Medicaid Services, Department of Health and Human
Services....................................................... 62
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HEARING ON THE STATUS OF THE AFFORDABLE CARE ACT IMPLEMENTATION
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WEDNESDAY, SEPTEMBER 10, 2014
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to call, at 10:06 a.m., in
Room 1100, Longworth House Office Building, the Honorable Kevin
Brady [chairman of the subcommittee] presiding. Advisory
[The advisory announcing the hearing follows:]
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ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, September 3, 2014
No. No. HL-15
Chairman Brady Announces Hearing on
Status of the Affordable Care Act Implementation
House Committee on Ways and Means Subcommittee on Health Chairman
Kevin Brady (R-TX) today announced that the Subcommittee will hold a
hearing on the Administration's continued efforts to implement and
administer the Affordable Care Act (ACA). The Committee will hear
testimony from Andy Slavitt, Deputy Principal Administrator of the
Centers for Medicare & Medicaid Services (CMS) at the U.S. Department
of Health and Human Services (HHS), and John Koskinen, Commissioner of
the Internal Revenue Service. CMS is the federal agency that oversees
the operation of the Exchanges through the Center for Consumer
Information and Insurance Oversight (CCIIO), and the IRS oversees the
distribution and verification of the subsidies in the ACA. The hearing
will take place on Wednesday, September 10, 2014, in 1100 Longworth
House Office Building, beginning at 10:00 A.M.
In view of the limited time available to hear from the witnesses,
oral testimony at this hearing will be from the invited witness only.
However, any individual or organization not scheduled for an appearance
may submit a written statement for consideration by the Committee and
for inclusion in the printed record of the hearing.
BACKGROUND:
As the ACA's Exchanges approach the second enrollment period,
beginning on November 15, 2014, CMS and the IRS continue to implement
new policies to address on-going problems including: the delay of the
employer mandate; the back log in resolving eligibility
inconsistencies; the failure to complete the back-end systems for the
Exchanges; and the numerous exemptions to the individual mandate. Many
of these challenges were identified at a Health Subcommittee hearing on
December 4, 2013, and remain unresolved.
The ACA provides for an income-based premium tax credit for certain
individuals who purchase health insurance through the new Exchanges.
The accuracy and availability of these tax credits, which began with
coverage on January 1, 2014, depends on multiple pieces of data,
including an individual's income and eligibility for affordable
employer-sponsored insurance. The Administration's 2013 decision to
delay employer-reporting requirements continues to complicate the
government's ability to verify an offer of "affordable employer-
sponsored insurance."
The accuracy of these tax credits, which are paid directly to
insurance companies, cannot be guaranteed without accurate income and
insurance information. As a result of the failure to provide complete
and accurate information, the government may overpay and be forced to
rely on the IRS to recover overly generous tax credits from individuals
during the 2015 tax-filing season.
On January 1, 2014, Health and Human Services Secretary Kathleen
Sebelius certified the ability of HHS to verify the income and
eligibility of enrollees on the Exchanges and healthcare.gov, as she
was required to do so by law. The Continuing Appropriations Act, 2014
required that "prior to making such credits and reductions available,
the Secretary shall certify to the Congress that the Exchanges verify
such eligibility consistent with the requirements of such Act." Despite
the Secretary's cer
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tification, a June 2014 HHS Office of Inspector General report noted
that CMS had yet to verify nearly 1 million income inconsistencies
potentially putting at risk millions in taxpayer dollars through
inappropriate subsidies/1/.
In announcing the hearing, Chairman Brady stated, "This White House
continues to rewrite the President's health care law because the law is
unworkable. The growing number of American families losing the health
insurance they have and like is not something that can be glossed over.
The White House must come clean with the American public and tell us
how they will fix this mess before the beginning of Open Enrollment in
November. More delay and confusion will only result in more mistrust
and more families losing access to the health insurance that works for
them and their families. The Centers for Medicaid and Medicare Services
and the IRS need to do more to protect American families and
taxpayers."
FOCUS OF THE HEARING:
The hearing will focus on the status of the Obama Administration's
implementation and oversight of the Affordable Care Act.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to
submit 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 Wednesday,`` http://
oig.hhs.gov/oei/reports/oei 01 14 00180.pdf''September 24, 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) 225-1721 or (202) 225-3625.
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.
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Note: All Committee advisories and news releases are available on
the World Wide Web at http://www.waysandmeans.house.gov/.
The subcommittee met, pursuant to call, at 10:06 a.m., in
Room 1100, Longworth House Office Building, the Honorable Kevin
Brady [chairman of the subcommittee] presiding.
Chairman BRADY. Committee will come to order. The
Affordable Care Act has changed how Americans receive their
healthcare. There has been ample debate over the last 4 years
about the ACA and what impact it will have. Today we have the
chance to look in the rearview mirror and judge results rather
than the rhetoric and promises, and we have the opportunity to
look forward to next year to see what other changes and
surprises may lay ahead for the American people.
It is no surprise that I and many of my colleagues on this
side of the aisle were very concerned about what would happen
with the rollout of the ACA and HealthCare.Gov. Unfortunately,
for the American people, many of those concerns came true. The
ACA has helped some Americans, no doubt, but has hurt many
more. Millions of families lost their doctor and their
healthcare plan. Millions more saw their premium spike because
of new taxes and regulations that provide them with no
additional coverage, just more costs, and many more workers saw
their hours cut as businesses prepare for further mandates.
But worst of all, many Americans have lost trust in our
government when it comes to being honest about its healthcare
promises. Many patients fear what may be in store for them
next. They have lost their health care they have and like, lost
their doctor and are seeing their premiums soar. And for those
that end up in the government exchanges, the ones that the law
was supposed to help, they were subjected to a disastrous
rollout of HealthCare.Gov, delays as paperwork went missing,
and the ongoing reality that they may owe thousands of dollars
back to the IRS for subsidies they are not eligible for. Not
because they did anything wrong, but because the ACA income
verification system was not and still is not working.
But the administration assures us next year its smooth
sailing. Unfortunately, the answer to that is ``no.'' Open
enrollment has been delayed until November 15. I am worried
that individuals won't enroll. The Centers for Medicare and
Medicaid Services recently announced that if individuals don't
select a new plan by December 15, they will be auto enrolled in
their old plan.
The problem with that, however, is that their premium tax
credit, if they get one, will be based on the one they are
receiving today, whether accurate or not. If a person wants to
accurately know how much of a subsidy they will receive for
2015, they need to go through HealthCare.Gov again. Yes, the
HealthCare.Gov that was just hacked, carries the risk of
putting Americans' sensitive, personal information at risk.
In plain English, it means that working families will have
to wait that much longer or work that much harder to find out
how much their health care will cost next year. It is not right
for those trying to put together their family budgets right
now. What is also
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not right is the fact that the ACA's income verification is
still not working.
Despite Secretary Sebelius' certifying to Congress on
January 1st of this year that a working verification system was
in place, the HHS inspector general found that there were
nearly 1 million income inconsistencies on exchange
applications. Because individuals were able to self-attest to
their income levels, there was little data before taxpayers'
subsidies were sent out the door. And if the data is wrong,
thanks to the horrible poor implementation of the bill,
hundreds of thousands of Americans could be hit with a nasty
surprise when they do their taxes next year. They could be
forced to pay back hundreds or even thousands of dollars.
Recently, the Treasury Department spokesperson suggests
that the ineligible subsidy that someone owes back to taxpayers
could be capped. That is not how the law is written.
Individuals who are not eligible, either because of improper
income data or coverage from another source must repay the
entire amount. The ACA tried to invent a system that would
collect that information to prevent things like this from
happening and improper subsidy, but guess what? It has proven
so far to be too complicated and too burdensome.
The administration has admitted time and time again, the
law doesn't work, delaying one provision after another or
exempting special interests or politically-favored friends from
the most onerous parts of the law. And while the mandate on
local businesses is not being enforced, for 2014, the mandate
on individuals to buy government-approved health care or pay a
tax is. That certainly doesn't sound fair to me. And that is
why this White House has lost, in my view, the trust of the
American people.
Today's hearing is an opportunity for CMS and IRS to begin
an open and honest conversation with the citizens of the great
country about their health care. And before I recognize Ranking
Member Dr. McDermott for the purposes of an opening statement,
I ask unanimous consent that all members' written statement be
included in the record. Without objection, so ordered.
And I will recognize the Ranking Member Dr. McDermott for 5
minutes for the purpose of his opening statement.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Mr. Koskinen and Administrator Slavitt, welcome to a tale
of two cities. Before we enacted the ACA 4 years ago, America's
healthcare system was dysfunctional and deadly. Forty-six
million people were uninsured, and every year 45,000 Americans
died because they lacked coverage. Many Americans who had
insurance weren't getting a good deal. Their health security
was tenuous at best and prospect of bankruptcy due to medical
bills was a real threat for far too many families. Insurance
companies could hike up plan rates with impunity and without
accountability. Insurance companies could refuse to cover
people with preexisting conditions, and benefits dropped away
from people who were most sick and needed health care the most.
Meanwhile, Medicare costs were increasing at unjustifiable
high rates, in part because the Federal Government was
overpaying private insurance companies tens of billions of
dollars through the Medicare Advantage program. Waste, fraud,
abuse continued to
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chip away at the trust fund as fraudsters and other
questionable actors built beneficiaries. And the American
taxpayer, while law enforcement like the tools to crack down
on, fraud, in fact, had existed. Millions of seniors were
falling into the Medicare prescription donut hole where
coverage evaporated just when they needed it.
Today, things are different. There is a real health
security for millions of Americans due to ACA. Marketplaces
across the country are backed up, running, ready for business.
Eight million Americans signed up for coverage during the first
open enrollment period, and the number of uninsured Americans
has dropped by almost 10 million. Six million Americans have
gotten tax credits and subsidies to help offset their
healthcare costs.
In addition, smart States have expanded Medicaid, which has
increased coverage to millions more of the most vulnerable
Americans. Thanks to the ACA, hardworking Americans have no
longer been denied coverage because they have preexisting
conditions, and their rates cannot be arbitrarily raised when
they get sick. We are cracking down on fraud, waste and abuse,
instead of targeting fraud after the fact. Federal regulators
are increasingly preventing violations on the front end.
Thanks to vigorous enforcement and the tools provided by
the ACA, the administration has recovered more than $19 billion
over the past 5 years. Payments to private insurance companies
have been reduced to more appropriately reflect the cost of
delivering Medicare while Medicare benefits have actually been
increased. With free preventive care and coverage in the donut
hole, millions of seniors have saved billions of dollars since
the ACA was enacted.
Now, have there been a few hiccups? Yes, there have been a
few hiccups. You start something big, you always have a few
hiccups. Talk to the Boeing Company. Implementations of the ACA
have suffered due to Republican propaganda designed to confuse
and scare the public, senseless repeal votes and harmful
budgets cuts. And as the Commissioner from the IRS has
testified in the past, the IRS is seriously understaffed making
it harder for the agency to implement key parts of the ACA.
Similarly, CMS has been denied needed resources, yet
despite the Republican's best effort at sabotage, the ACA is
working. The law is saving money and lives. And my belief is
that we are on a pace to guarantee health security for 32
million more Americans in the coming years and Medicare
spending is at its lowest per-person growth in history.
In light of the ACA's success, I look forward to the day
when Republicans do an about-face to accept their share of the
responsibility in guaranteeing health security for all
Americans. That means ending this senseless mission of sabotage
and repeal. That means working with the Democrats to ensure all
of our constituents benefit from all the ACA has to offer.
And we look forward to your testimony. Thank you.
Chairman BRADY. Thank you, Ranking Member Dr. McDermott.
Today, we will hear from witnesses on two panels. John
Koskinen, Commissioner of the Internal Revenue Service, and
Andy Slavitt, Principal Deputy Administrator for the Centers
for Medicare and Medicaid Services.
Commissioner Koskinen, you are recognized for 5 minutes.
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Mr. KOSKINEN. Thank you, Chairman Brady, Ranking Member
McDermott and Members of the Subcommittee, thank you for the
opportunity to appear before you today to update you on the
work that the IRS is doing to fulfill our responsibilities
under the Affordable Care Act. My testimony will focus on the
significant efforts the IRS has been making to prepare for the
2015 filing season in relation to the premium tax credit and
the individual shared responsibility provision under the Act.
The IRS has already implemented a number of tax provisions
under the Act, including the branded prescription drug fee, the
tanning tax and the medical device excise tax. It should be
noted at the outset that the vast majority of taxpayers will
need to do nothing more next year under the Affordable Care Act
than check a box on their tax returns because they have health
coverage from one source or another.
People who buy insurance through the marketplace and who
qualify for the premium tax credit will have an extra
calculation to make when they file. Most of them chose to have
an advanced payment sent to their insurer during the year based
on their family situation and estimated income for 2014. They
will have to reconcile this advance payment on their return. We
have already issued a draft of the new form they will use for
this purpose, Form 8962.
If anyone paid for the insurance up front and claims to be
eligible for the premium tax credit, they will calculate the
amount of the credit they are entitled to and claim it on their
tax return. The IRS has also developed the Form 1095-A and
instructions. Beginning with the coverage purchased in 2014,
the marketplace must issue the Form 1095-A to those who bought
a policy through the marketplace. The data on this statement
will verify the fact of marketplace coverage and facilitate the
reconciliation process for the premium tax credit.
The data will also be sent to the IRS and it will help us
make sure that only people who qualify for the premium tax
credit receive it. We are in the process of conducting tests
with the Federal and State marketplaces to ensure that our
systems can accept this data and will be ready to operate as
planned when filing season opens next year.
The work being done to prepare for filing season also
involves the individual shared responsibility provision. This
requires people to have insurance coverage for each month of
the year, have an exemption or make a shared responsibility
payment. A number of individuals will be exempt from this
provision.
For example, a person could be exempt for hardship reasons
or if a gap in their coverage during the year was less than 3
consecutive months. Those who qualify for an exemption will
provide information about it on a new form we have developed,
Form 8965. The IRS has also been working to make sure that
people understand how these two major ACA provisions may affect
them at tax time. In helping people understand how the ACA
might affect them, our primary goal is to make it as easy as
possible for people to file their taxes next year. By providing
this information in advance, we are also trying to answer as
many questions as possible before the
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filing season to limit the number of people who need to call us
for help.
For example, our Web site, IRS.gov, has a new section
devoted to the ACA. We have also issued 16 healthcare tax tips
and nine YouTube videos on ACA topics so far this year, with
more on the way. And we have increased our use of social media,
including Tumblr and Twitter to help get the word out. And yet,
we still anticipate an increase in calls next filing season
from taxpayers seeking assistance in regard to the ACA.
We are concerned about our ability to meet this demand
because of ongoing budget constraints and because of the
possibility of additional increase in calls if Congress passes
tax extender legislation later this year. We hope that Congress
will pass any extenders as early as possible this year with as
few changes as possible.
I would note that the various ACA implementation efforts I
have just described were accomplished in the absence of
appropriated dollars requested for this effort. For fiscal year
2014, the administration requested $430 million for the IRS to
implement these tax-related provisions. Of that total, 300
million was needed for building and improving information
technology systems and processes. No portion of the request was
funded. Nonetheless, the IRS continues to deliver on this
mandate given to us by Congress by refocusing the needed
funding from other IT and agency priorities.
Our concern with fiscal year 2015 budget request of about
$400 million for additional taxpayer services, if we had the
funding, we would hire enough full-time equivalents to end up
with a level of service at 80 percent. Without the funding, we
expect that our taxpayer level of service may drop to as low as
below 50 percent, which would mean that almost half of the
people calling will not be able to reach a live assistant. We
continue to work, as I said, to ensure that taxpayers in
advance have as much information as possible to limit that load
on our call-in system, but it is going to be one of our major
challenges.
This concludes my testimony, and I would be happy to take
your questions.
[The prepared statement of Mr. Koskinen follows:]
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Chairman BRADY. Thank you, Commissioner.
Mr. Slavitt, welcome.
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Mr. SLAVITT. Good morning, Chairman Brady, Ranking Member
McDermott, Members of the Subcommittee. I am Andy Slavitt,
Principal Deputy Administrator of CMS. I joined CMS 2 months
ago from the private sector where I spent the last 20 years
principally working with physicians, hospitals, health plans
and employers on solutions to problems of healthcare costs,
quality and access. During that time, I have been both an
entrepreneur and have run a major division of one of America's
largest healthcare companies.
In late October of last year, I began my involvement with
the Affordable Care Act implementation when I joined the group
of people helping the CMS team on the turnaround effort of the
health insurance marketplace. I am pleased to appear before you
today. Before answering your questions, I will briefly walk you
through some of the progress of the Affordable Care Act to date
and talk about our priorities for the coming period.
There is growing evidence that the Affordable Care Act is
working to make higher quality healthcare more affordable and
accessible for millions of Americans. During the first open
enrollment, millions of Americans selected a private insurance
plan through their State or Federal health insurance
marketplace and millions more have retained coverage on their
parents' policies or have newly qualified for Medicaid or CHIP.
According to Gallup, the adult uninsured rate fell to 13.4
percent for the second quarter of 2014, a record low. In
addition, we are seeing historically low growth and overall
health spending measured at both the consumer level and the
national level. This success is not being achieved by
government policy alone, but in partnership with the private
sector as insurers grow by competing to provide better quality
and affordable services. Now, as we continue through the first
year of marketplace implementation, we must build on that
progress that is underway and continue to approve our execution
based on the lessons from the last year.
First, we are focusing on increasing the value consumers
get when they come to the marketplace. Early evidence from
States that have already published this information is
indicating consumers will have more options and more
competitive rates. According to a recent survey conducted
across 16 major cities, premiums for the benchmark marketplace
plan will actually decrease on average in the coming year.
This is good news for consumers who are typically paying
less than $100 a month for premiums for a policy in the
marketplace. Most important is that this gives many families
access to affordable, quality health care for the first time.
According to a Commonwealth Foundation survey, two out of three
newly-covered adults are saying they are now taking medicine
and seeing doctors they couldn't afford before. When you get
underneath all the statistics about the uninsured rate dropping
and rates remaining competitive, this is what counts.
Next, we have heightened our focus on execution. Even as we
continue to learn about new consumer needs, we are building out
further automation and are working to improve interaction
points with consumers and health plans. High on our agenda is
making it easier for consumers to enroll and renew their
coverage, pro
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viding scale to handle greater volumes of people, and
completing back office functionality.
How we execute has been a major area of focus from the
Secretary on down. Our operating principles are
straightforward: Clear accountability with a new marketplace
CEO and clearer structure; ruthless prioritization, which has
meant we haven't done everything everyone has wanted, but have,
instead, built in more time to test what we build; and
transparency, even when things happen that we don't plan on.
The team at CMS is hard at work on implementation. This
coming year will be one of visible and continued improvement
but not perfection. We are in the early stages of the program
newly serving millions of consumers and are still learning
about the best ways to support their unique needs. We are
making the right progress to have a successful open enrollment
and continue to deliver on the promise of the Affordable Care
Act to improve healthcare access, cost and quality for all
Americans.
Thank you, and I look forward to your questions.
Chairman BRADY. Thank you, Mr. Slavitt.
Commissioner Koskinen and Mr. Slavitt, I want to return to
the theme I mentioned in my opening statement and that is
trust. I think, my view, the American people have lost trust in
the IRS for a number of reasons, including health care. And I
think the disastrous rollout of HealthCare.Gov has created a
lack of trust among the American people, as well as promises
not kept.
I do appreciate the work, Mr. Slavitt, you are doing, and
there is a lot of it, to try to bring that site up to speed,
more importantly, making sure we get the back end completed and
right. Problems, obviously, remain with this. There are going
to be more problems going forward into the second year.
So my question to both of you, and it really isn't a gotcha
question, but in spite of all these problems, you know, how do
you expect to, again, regain the trust of the American people
when it comes to their health care? The ACA, in my view,
through heavy subsidies is reducing the cost for some, but it
is increasing the cost for others. And there is real concern
back home from patients, providers and businesses about the
Affordable Care Act.
So what are you doing to make sure the second year of the
ACA is not like the first year in that steps will be taken to
regain the trust of the American people regardless of what
party they are, that are just simply concerned about their
health care? Commissioner.
Mr. KOSKINEN. Well, we take, as I hope everyone knows,
seriously the obligation to, as I say, try to make it as clear
and straightforward and as easy as possible for people to
determine what they owe and to be able to make those payments.
As I have said on numerous occasions, we distinguish between
the willing to pay and the unwilling to pay. And those willing
to pay, even if they have difficulties, as I have said, don't
have to hire somebody off late night TV to come talk to the
IRS.
If you are willing to pay, trying to become compliant, we
are anxious to work with you. We have installment agreement
possibilities, we have ways of creating offers and compromise.
With a focus on ACA, our role and the front-end rollout to
providing income
[[Page 18]]
verification data went very smoothly. The Inspector General
said that it was virtually perfect. But we understand that
there are going to be challenges with the first filing season,
and that is why we are spending as much time as we are,
starting last spring, trying to explain to the American people
how the ACA affects them and what they need to do for filing.
And as I said, one of the most important things for the
public to understand is the vast majority of those filing next
year out of the 150 million expected individual returns, 120,
125 million of them will simply check a box that they have
coverage and that is all they will have to do. The other people
filing, those who are either reconciling premium tax credits,
seeking a credit, filing an exemption or dealing with the
shared individual responsibility payment will have additional
responsibilities when they file, and we are doing everything we
can to get them that information. We have had tax preparer
forms across the country with 10,000 tax preparers focusing on
the ACA.
But we take very seriously that, again, compliance with the
Internal Revenue Code is a critical part of the tax system in
the United States. We have a very compliant population. Our
compliance rate is among one of the highest in the world. But
to maintain that compliance rate, your point is well taken,
people have to have trust and confidence in the system. They
have to be confident they are going to get treated fairly no
matter who they are.
As I have said, one of my highest priorities is to try to
make sure that people understand, when they hear from the IRS,
it is not because of who they are, what organization they
belong to, who they voted for in the last election, if they
hear from us, it is about an issue in their tax return. And if
somebody else had that issue, they would hear from us, as well.
Chairman BRADY. There are questions about that. But let me
ask you this: The IRS has three main tasks right now. One is to
confirm income verification to those who are getting subsidies
today; secondly, on January 1, delivering to American people
Form 1095-A that tells them what they need to do to file their
taxes; and then to prevent having verification income placed
before the second year premiums and subsidies are released.
Where are you on each of those three?
Mr. KOSKINEN. As I noted, last year in the rollout, we
provided income verification information to 27 million
inquiries. The inspector general reviewed it and said we were
100 percent accurate on the information we provided. It was
primarily information about tax return information for 2012.
Chairman BRADY. Of those you have the information for, but
the inspector general said roughly 1 million of them had
inconsistencies, were not complete applications. What has been
going on with those?
Mr. KOSKINEN. That was the review of HHS's and CMS's
rollout. But in terms of the information provided by the IRS,
the inspector general found that 100 percent of it was
accurate. It was accurate to----
Chairman BRADY. So all the income from the IRS standpoint,
everyone who is receiving subsidies today, their income has
been fully verified?
[[Page 19]]
Mr. KOSKINEN. Our role is to provide the data when the
inquiry was made. We don't play a role in terms of what they do
with the data. We will have a significant role when people
file----
Chairman BRADY. The IRS has a roll of income verification?
Mr. KOSKINEN. When they file, we will obviously verify
income as we do for the 150 million people who file, and that
will determine the calculation that the taxpayer makes. It will
determine whether they are eligible for the premium credit, how
much of the advance payment they got and what reconciliation
they have to make.
Chairman BRADY. So again, today, of those receiving
subsidies through the ACA that are helping them with their
health care, the IRS says you can assure us all of those
incomes have been verified at this time?
Mr. KOSKINEN. We provided income verification when
requested last year in the rollout. We will do it again in this
year's rollout. We have been advising taxpayers since last
spring that whatever determination they made with the
marketplace is about their circumstances. If there is any
change in those circumstances, either in their family size or
their income, they need to go back to the marketplace, because
our concern is that everybody makes an estimate when you file
your W-2s and your withholding. You are estimating what your
income will be, obviously, for most people it changes to some
extent.
Chairman BRADY. Sure.
Mr. KOSKINEN. So we are focused on and concerned that we
don't want people to have either gotten too small an advanced
payment or too large of an advanced payment.
Chairman BRADY. What I didn't hear was a ``yes'' there. And
I am hopeful we can get to the day where you can say yes, we
have verified them.
The 1095-A due in January, have you completed testing on
that? Can the American public be assured when they are ready to
do their taxes and get their refunds, that that form will be
there in January?
Mr. KOSKINEN. Right. We don't provide that form. That form
is provided by the marketplace.
Chairman BRADY. But you provide the information for it?
Mr. KOSKINEN. Happy to turn it over to my colleague.
Chairman BRADY. Okay. How about preventing income
verification to prevent eligible subsidies, ineligible
subsidies in the future?
Mr. KOSKINEN. As I said, in this rollout period for the
second year, we will continue to provide income information to
our system marketplaces and determine eligibility. But I would
stress in the filing season, we will check, as we always do
with everybody who files, their income will be verified. As I
say, we have a very compliant population. They provide
information about their income as it actually happened. What we
are providing in the rollout is income information that can be
used for verification for a previous tax year.
But, again, that is what your, in this year's rollout, it
will be what your tax income information was for 2013, but
it'll be used for eligibility for 2015. And again, when you
file for your 2015
[[Page 20]]
taxes, you will have a different number almost no matter who
you are as opposed to what you estimated.
Chairman BRADY. Sure. What is the process for collecting
overpaid subsidies to those who are not eligible? Do you have
that process in place?
Mr. KOSKINEN. That process will be our normal process in
the sense that to the extent that your subsidy was too small,
you will get a credit for that. For a lot of people in this
income range it will be a refund. To the extent that your
advance payment was too large, there will be a deduction either
from your refund or an increase in the tax owing.
Chairman BRADY. Sure. Now, I know how that process works.
Is it fully in place to do that?
Mr. KOSKINEN. It is, at this point, we are about to test
our own systems. But I am assured, I have been meeting every 2
weeks since January with the IT people, with the program people
and the business people, looking at exactly what we have to do
to make that happen, and thus far, I have been assured that,
while it is a challenge, we are on track to be able to do that.
Chairman BRADY. Sure. For someone who, through no fault of
their own, received a subsidy they weren't eligible for, about
what month in next year will they get the bad news that they
owe taxes back to Uncle Sam?
Mr. KOSKINEN. They will get that news whenever--shortly
after----
Chairman BRADY. It would be bad news. They will get that
news.
Mr. KOSKINEN. They will get that news when they file, in
the normal course. In other words, that news would be no
different than any other bad news you might get if you turn out
to owe taxes. So you will file a return. You will actually make
your own calculation off the 1095 you get. You will determine
whether you got too much and you owe additional tax or have a
smaller refund. You will make that determination and you will
file it with your return. Some people file in January. Some
people file in April, and obviously, some extend their return
into October.
Chairman BRADY. So they may start the repayment as early as
January of the coming year?
Mr. KOSKINEN. It will all depend when they file.
Chairman BRADY. Sure.
Mr. Slavitt, can you address the issue, again, I know the
serious work you are doing, both to address the problems in the
past and try to both get the site working right and the back
end right. There is no question about that seriousness. Can you
address the trust issue at this point?
Mr. SLAVITT. Sure. Mr. Chairman, thank you for the
question. I have actually thought a little bit about this
question. As I mentioned, I have worked for the government for
2 months, and interestingly----
Chairman BRADY. You are an old man.
Mr. SLAVITT. I am an old man. Well, interestingly, the
people that I work with at CMS and at the Department and across
the government, the career people have been some of the most
trustworthy people I have ever worked with, yet, coming from
the pri
[[Page 21]]
vate sector, as you have said, there is a trust gap. And, you
know, the way I understand that trust gap to be closed is the
following ways: One is with transparency. Even when the news is
bad, we need to be clear about what that news is, and I think
this summer you have seen we have put out numbers, even worse-
case numbers when there are challenges to help people with
inconsistencies and so forth, rather putting those numbers out
than other numbers and waiting for them to get better.
Second, is accountability. That means being here, and my
first several months I have been here as frequently as I need
to be. It also means owning up to mistakes. I don't think
people expect us to be perfect. I do think people expect us to
fix things when they don't work and be very candid about them
and be very accountable.
And the third is straight talk. As much as possible, that
means giving a direct and clear response when people are asking
us very fair questions. It means saying ``I don't know'' when
we don't know, even when we want to struggle to get back to
people. There is no question that this implementation has a lot
of pieces. It requires a lot of cooperation, and I think we can
gain trust, I believe, in the work we are doing across
government if we are clear in those categories.
Chairman BRADY. Thank you, Mr. Slavitt. Again, I think you
are trying to implement a poorly-designed, poorly-written,
unworkable law; nonetheless, I think that approach of openness,
transparency and straight talk will go a long way, frankly,
towards restoring that trust. So thank you very much.
Dr. McDermott.
Mr. MCDERMOTT. Thank you, Mr. Chairman. I would like to
enter in the record the tax inspector general's for tax
administration's report, ``Affordable Care Act: Accuracy of
Responses to Exchange Requests,'' dated 3 July, 2014. I ask
unanimous consent.
Chairman BRADY. Without objection.
[The Honorable Jim McDermott]
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Mr. MCDERMOTT. Both you gentlemen are listening to these
questions, and I am trying--I am a physician, so I am thinking
I have got a patient sitting in my office, and his name is John
Smith and he has a wife named Mary, and their income is $70,000
between them. So that is their income last year. Do I
understand that is the income that they bring forward, they say
this is what I made last year, right?
[[Page 48]]
Mr. KOSKINEN. That is correct. They provide that
information to the marketplace.
Mr. MCDERMOTT. Now, if during the year John and Mary both
have done good work and they get a pay increase, let's say they
get $5,000 increase this year because the economy is
recovering, so now they are making, not $70,000 together but
$80,000, how does that affect their income verification from
last year?
Mr. KOSKINEN. It won't change their verification. Their
verification was made at the time they applied for the policy
and if they applied and were eligible for the tax credit. So
again, what I said in response to the chairman's question, one
of our concerns has been since the spring trying to remind
people, if you were in that fortunate situation and you now
expect to earn more money than you originally expected with
your income verification, you should report back to the
marketplace and adjust any advance payment you are getting,
because to the extent you qualified and the payment is going to
the insurance company, if your income goes up, the amount of
that payment will go down.
And if you can adjust it during the course of the year, it
means you will be closer to the right number when you file a
return. If you don't make the adjustment during the year, your
premium tax credit will be higher than it should've been and
you will have to actually make that adjustment on your tax
return.
Mr. MCDERMOTT. So the individual, when they get a pay
increase, has to go to their employer and say--or who do they
go to and say, I want to adjust because I am now making $35,000
instead of $30,000 or whatever?
Mr. KOSKINEN. They go back to the marketplace where they
purchased the policy.
Mr. MCDERMOTT. Back to the exchange?
Mr. KOSKINEN. Back to the exchange.
Mr. MCDERMOTT. Not to the insurance company but to the
exchange?
Mr. KOSKINEN. To the exchange. The exchange is what
determines how much of a premium payment, advance payment goes
to the insurance company.
Mr. MCDERMOTT. And they have to do that if----
Mr. KOSKINEN. Mr. Slavitt, will correct me if I'm wrong.
Mr. SLAVITT. You got it right, Commissioner.
Mr. MCDERMOTT. If they get it anytime during the year, they
have to make a correction that month to be able to take care of
it at the end of the year or--I thought that was a fixed
figure, that their income for this year is $70,000, and if they
get an extra $10,000 that is next year's income.
Mr. KOSKINEN. No. What happens is the estimate was made
last fall. We provided income verification for the tax year
2012.
Mr. MCDERMOTT. Which is $70,000 for this couple.
Mr. KOSKINEN. Assume that was $70,0000. Now we are in 2014
and they are going to make $80,000. The premium advance payment
was made on the basis of the $70,000, but your tax return for
this coming filing season will be based on what you actually
earned in 2014 and what you actually earned in 2014 will be
reconciled as to what your premium tax credit should be and
what the advance payment should have been. So if your income
goes up this
[[Page 49]]
year, which is a terrific situation, your eligibility for the
premium tax credit will decline to some extent.
Mr. MCDERMOTT. So anybody whose pay goes up this year and
is getting subsidies will have a deduction or have a reduction
in the subsidy at the end of the year?
Mr. KOSKINEN. Correct. When they make their reconciliation,
they estimated they were going to make $70,000, turned out they
made $80,000, on their calculation on the forms we provided
they will calculate what their premium for 2014 premium tax
credit should be, and if the advance payment turned out to be
larger because their income had gone up, they will make an
adjustment on their return.
Mr. MCDERMOTT. So how many people is this going to affect?
How many people's income go up during the year?
Mr. KOSKINEN. I am not sure anybody knows. We expect of the
8 million people covered, we are probably going to have 3
million or 3.5 million returns because you have families in
that 8 million. And of those 3 million, 3.5 million, any number
of them are likely to have had a change in family
circumstances, a change in income. The income may have gone up,
it may have gone down. I don't think there is any way that I
know off the top of my head to tell you what percentage will be
affected.
Mr. MCDERMOTT. Suppose you have some problems--I guess my
time is just about up--but if they have had some problems at
the job and their income has now been reduced by $5,000 apiece,
so they now are only making $60,000.
Mr. KOSKINEN. Again, if they go back to the marketplace
during the year, their advance payment will be adjusted in
light of the new estimate of what they are actually going to
make during the year. If they don't go back to the marketplace,
when they file next spring, they will do a calculation and it
will show that their premium tax credit amount they are
eligible for is actually larger than the sum of the advanced
payments that went to the insurance company and they will have
an increase in their refund.
So there is no penalty for not going back to the
marketplace, but if you go back to the marketplace, it will be
able to make an adjustment that gets you closer to what your
actual tax return is going to look like next spring.
Mr. MCDERMOTT. Thank you.
Chairman BRADY. Thank you, Dr. McDermott.
Mr. Johnson is recognized.
Mr. JOHNSON. Thank you, Mr. Chairman.
Good morning, sir. You know, you all promised Americans
under the Affordable Care Act that they could keep their health
plan and their doctor at a lower cost. But as my constituents
are seeing, those promises are just empty promises. They are
outright lies. The reality is that millions of Americans have
lost their health care and are being forced by this Act to get
plans with higher out-of-pocket costs and fewer doctors.
And as you know, we are less than 4 months from the tax
filing system, and unfortunately, Americans will face yet
another hardship under Obamacare, because you can't file a
simple tax form anymore. You've got to report your health care
on it and you can't do that on a simple form. Is that true? In
other words, will folks
[[Page 50]]
who are forced to pay more for health care and lose their
doctor now be forced to file a more complicated tax return?
Mr. KOSKINEN. Those who actually have gotten a premium tax
credit will have a calculation they have to make for it. As I
say, the vast majority of Americans are going to have, you
know, we estimate 120 million, 125 million Americans are going
to be affected by the Act by simply checking a box on their
return. But anyone who actually has purchased a policy and is
either claiming the premium tax credit or reconciling the
advance payment they have already gotten, will have a more
complicated process as they will have to make that calculation
on their return.
Mr. JOHNSON. So they can't file a simple form?
Mr. KOSKINEN. So they will not be able to file the simple
form.
Mr. JOHNSON. So that is a hardship on America, isn't it?
Mr. KOSKINEN. It's part of the obligation, if you have got
premium tax credit advance payment, then you have to reconcile
it at the end of the year.
Mr. JOHNSON. Okay. Mr. Slavitt, under President Obama our
national debt has reached a record high of almost $18 trillion.
So one of the most important things we can do here in
Washington is get the fiscal House in order. In April, the CBO
and the Joint Tax Commission estimated that the Federal
Government will pay $17 billion in 2014 for health insurance
subsidies and over $1 trillion from 2015 through 2024. The GAO
testified in a July hearing that they had obtained numerous
policies through the Federal exchange using false identities,
including made up or nonexistent Social Security numbers.
Then the HHS Office of the Inspector General released a
study of internal controls at select insurance exchanges, that
report found that those exchanges were unable to validate the
Social Security numbers and other eligibility requirements.
Considering that nearly 87 percent of those who enroll in a
plan through the Federal exchange receive a subsidy, that is a
major concern.
Can you respond to these findings and tell us exactly what
you are doing about it, and are you personally following that
issue?
Mr. SLAVITT. Yes, Congressman Johnson. So there is a fairly
extensive process when someone fills out an application to
apply to the covered under insurance marketplace. For a typical
family of four, they provide 21 pieces of information that we
independently verify through our computer systems that link up
to various government entities. If even one of those pieces of
information, of those 21 pieces of information we cannot
verify, for whatever reason, then it is our obligation to seek
physical documentation from the individual to make sure that,
in fact, what they are reporting, when this pertains to their
income level, whether it pertains to their citizenship status
or whatever the information happens to be, that we get
verification.
We have been contacting people extensively, in many cases
with 10 or more outreaches, to ask them to submit the
documentation so that we can be sure that all the information
is coming in as accurate. It is, as you can imagine, a fairly
extensive process. It is our first year doing it. It's the
first year consumers have had to do it, and we are being, I
think, fairly open about the fact that there
[[Page 51]]
are numbers of people who have inconsistent information that we
have to match, and we are making that level of progress.
Mr. JOHNSON. Thank you.
Thank you, both, for being here.
Thank you, Mr. Chairman.
Chairman BRADY. Thank you.
Mr. Thompson, you are recognized.
Mr. THOMPSON. Thank you, Mr. Chairman.
Thank you, both, for being here.
Mr. Koskinen, I want to follow up on Mr. Johnson's question
about the extra hoop that you have to jump through if you
receive a subsidy. There isn't an easier way to do this? You
have to elevate them to a completely different process for
filing?
Mr. KOSKINEN. It is a calculation. In other words, they
have applied, as I discussed earlier, they have applied based
on an estimate of what their income will be for 2014, those who
have gotten----
Mr. THOMPSON. So can this be an extra box to check or
something on the short form?
Mr. KOSKINEN. No, because you actually, if you got the
premium, advance payment has gone to your insurance company,
you have gotten that benefit. And what we need to do at the end
of the year is reconcile--you need to do as a taxpayer is
reconcile how much of an advance payment have you gotten
compared to what you are actually entitled to. And what
determines what you are entitled to is how much you actually
made this year as opposed to what you estimated when you
enrolled.
Mr. THOMPSON. Let me ask a different way. Is this going to
be an significant enough change to trigger some sort of
elaborate filing, or is it something people can still do on
their own?
Mr. KOSKINEN. This should be something that people can do.
The form, is the usual form. It is simply a calculation of what
you earned, what you are eligible for, what you actually
received. You will have the 1095-A that will give you the
information you need to fill out that form. The vast majority
of Americans----
Mr. THOMPSON. Dr. McDermott had asked about individuals who
either get a raise during the year or get a reduction in salary
during the year and you explained--and it sounded to me like a
pretty complicated process that these folks are going to have
to go through. But are you doing something to educate people,
to let them know that if they do have a change of income that
they are going to have to proactively do something on their
forms?
Mr. KOSKINEN. Yes. As I noted, we have been talking about
this in our public releases since the spring. Our Affordable
Care Act site on the Web site has this information highlighted.
We have been trying to continually remind people to make that
adjustment, although it is not a requirement. If they don't
make the adjustment, they make more money. When they make the
calculation it will be a simple calculation. This is what I was
entitled to and this is what I got.
Mr. THOMPSON. I suspect that most folks after they sign up
for health care aren't going back to review the Web site. They
figure that they have done that and they are getting on with
the other things in their life. So I don't know that merely
putting something
[[Page 52]]
on the Web site is going to be enough. And it seems to me there
ought to be some way to better educate folks what they may have
to face in this process.
Mr. KOSKINEN. Well, I am not a user of Twitter or Tumblr,
so I can't tell you the reach of it, but we have YouTube
videos, we have information that is going out on all the social
networks and Web sites. As I say, we have talked to tax
preparers across the country all year long about this.
Again, to the extent they go back to the marketplace and
make the adjustment, it means they will be closer in their
calculation. But one way or the other, whatever they do----
Mr. THOMPSON. Somebody ought to be thinking through this. I
am not saying you are not. But somebody ought to be thinking
through this, because when this hits, I don't think it is going
to be enough to say I am not a user of Twitter or whatever. I
think we need to figure out how to better educate folks going
into this.
Mr. KOSKINEN. Right. We are continuing to do it. We are
doing the best we can. We are open to other suggestions, as I
say. We have got what I call a full court press trying to get
full information out to people, not only about the adjustments,
but about how the calculation is made when they file their
returns.
Mr. THOMPSON. Mr. Slavitt, you have got pretty extensive
private sector experience working in the technology industry,
including working on components of HealthCare.Gov. And you now,
in your current position, you are leading efforts related to
marketplaces and other technology innovations. And given the
issues that HealthCare.Gov experienced last year, which I add
that you helped to fix, I am glad that you are there given your
experience. It seems to me you probably know the right
questions to ask.
Looking forward to November 15, the next enrollment period,
what are the markers or the benchmarks you are looking for to
prove the system is ready for open enrollment?
Mr. KOSKINEN. So Congressman, we are in a more favorable
situation when we have a functioning Web site that is already
up and running. Having said that, we have new functionality
that needs to be added for open enrollment next year. So let me
give you a little bit of a feel for how we are approaching
that. First is, we are rolling out new functionality and adding
it over the summer as opposed to all at once, and so that helps
us ensure that we can put things into the marketplace and test
them.
Second thing, and I know we are over time, is that we have
built a much longer period of time in for testing, because when
software is built, people need to use it and pound on it before
it can be rolled out. We are more fortunate this year in that
we have more time. Having said all of this, I am a realist and
we will not get it perfect, but we have, I think, the right
processes in place to make it as good as it should be.
Mr. THOMPSON. Thank you.
Chairman BRADY. Thank you.
Mr. Roskam, you are recognized.
Mr. ROSKAM. Thank you, Mr. Chairman.
Commissioner, the Congressional Budget Office estimates
that there is going to be $1 trillion in Obamacare subsidies
over the next 10 years, and that is just a huge pool of money,
as you know.
[[Page 53]]
You said that those who simply check a box are going to be free
from a level of scrutiny, which suggests that there is going to
be a significant number of people who are going to be subject
to scrutiny in terms of income verification and so forth. And
it seems to me like the IRS is just poised to go swimming in a
huge pool of money.
So the question is, what are the things that are happening
proactively to prevent the next Lois Lerner, Lois Lerner 2.0,
from looking out of a landscape with a high level of
discretion, to be able to say, you know what, we are going to
make inquiries here and we are going to make inquiries there
and we are not going to make inquiries over here. And you see
where I am going.
Mr. KOSKINEN. Right.
Mr. ROSKAM. And there is a high level of suspicion.
And also, I mean, you said you are meeting with IT people
every 2 weeks, and I accept at face value that you need to meet
with IT people every 2 weeks, but are these the same IT people
that can't find Lois Lerner's emails and can't deal with hard
drives? And so what level of confidence does the American
public have as they are looking out and they are saying to
themselves, holy Moses. I mean, when this institution, the
Internal Revenue Service, reaches its long arm into our lives
and grabs somebody by the neck and shakes them up, it gets
people's attention and it can be incredibly damaging.
Now, you know, the administration last year said we are
basically going to do an honor system because it is too
overwhelming. So what is the level of confidence that there is
not an environment where Lois Lerner 2.0 is able to emerge?
Mr. KOSKINEN. You have asked a set of questions, and let me
try to deal with all of them. First of all, and we are trying
to remind everybody of this, the inspector general who filed a
report about the use of improper criteria said, to fix the
problem there were a series of nine recommendations that the
IRS should adopt. We have adopted and implemented all of those
recommendations. In our normal exam process, there is no way
that any individual can single out any taxpayer for review.
Mr. ROSKAM. Why not?
Mr. KOSKINEN. Because there is a review process.
First of all, the first cut of the selection is made
automatically by computer. To the extent, then, exams are
decided, there are three people who meet and have to approve
that; so that the system is designed and has been for some time
so that no one can pick out an individual taxpayer for review.
We have buttressed that with all of the recommendations the IG
said we should do.
Mr. ROSKAM. Wasn't that true, though, in the (c)4
situation, where, I mean, look these are (c)4 applicants that
rise to a level of scrutiny. They were presumably chosen by a
computer by definition because they were (c)4 applicants, and
then Lois Lerner makes decisions about, well, we are going here
and we are going there. So you have got now another computer
that is going to be deciding there is a threshold that the
program presumably pops people up, and presumably those are
people by your own definition who haven't checked the box.
Mr. KOSKINEN. Right.
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Mr. ROSKAM. So now they are in open country.
What prevents an IRS employee from saying, I am going after
you?
Mr. KOSKINEN. First of all, and I am waiting for the rest
of the investigators to be completed, there is no evidence thus
far that anybody picked an individual organization to be picked
out. There were improper criteria to select an entire set of
organizations. No individual organization was targeted.
Mr. ROSKAM. You are not defending Lois Lerner?
Mr. KOSKINEN. I don't know her, and I am not defending her.
Mr. ROSKAM. I wouldn't give her eye contact, but go ahead.
Mr. KOSKINEN. What I am trying to defend is that whatever
the recommendations were the inspector general thought were
necessary to fix the problem have been adopted, have been
implemented, and I am confident that if people haven't learned
any other lesson in the last year and a half they have learned
this lesson, that we need to provide guarantees to the American
public that they can be confident that whether it is the
Affordable Care Act or any other part of the implementation of
the Tax Code, if they hear from us, they are hearing from us
for something in their return and that they have not been
selected arbitrarily. If someone else had that same issue, they
would hear from us as well.
Mr. ROSKAM. Commissioner, my time is waning. Let me just
impress upon you one point, that I know you are understanding
what I am saying, but just unambiguously, this committee has a
high level of scrutiny and a high level of expectation that the
administration by the Internal Revenue Service of all elements
of the Tax Code are unbiased and impartial, and it is a huge
background to overcome because the American public is burned,
and they are not going to put up with it.
And so with that, I yield back. Thank you, Mr. Chairman.
Mr. KOSKINEN. I would just say, we share that view with
you; that is, that the American public deserves and needs to be
confident that the IRS is a tax administration agency without a
political agenda, without political connections. And we stand
ready to work with this committee and every one of the members
of this committee to do whatever we can to make sure that that
happens.
Chairman BRADY. Thank you.
Mr. Kind, you are recognized.
Mr. KIND. Thank you, Mr. Chairman.
I want to thank our guests here for your testimony. And I
would like to just echo Mr. Roskam's sentiment, Mr.
Commissioner. We do expect impartiality and fairness from the
IRS. I feel more confident with you in the seat right now with
the overview and following the recommendations of the IG report
that you have followed up, and I commend you for those efforts.
But naturally, there is some credibility that has to be
restored right now and we look, you know, forward to working
with you in order to do that.
Now, let's just back up and keep today's testimony a little
bit in context. Commissioner Koskinen, you, again, in your
opening testimony indicated that the vast majority of Americans
were merely needed to just ``check a box,'' and they are going
to satisfy what they need to do as far as showing if they have
got health insurance in their lives. Is that correct?
[[Page 55]]
Mr. KOSKINEN. Correct.
Mr. KIND. And can you break that down as far as percentage-
wise, the number of Americans that are filing who just merely
have to check the box and not do anything further?
Mr. KOSKINEN. Because it is the first year of filing, it is
hard to know with precision, but our best estimate is that out
of 150 million returns we will process, 125 million will simply
check a box.
Mr. KIND. And that won't require a separate IRS form to do?
It is built into the normal----
Mr. KOSKINEN. The normal 1040 will have a box. I have
looked at the line.
Mr. KIND. If you are a recipient of some tax credit in the
exchanges and that, there is a separate form for them to have
to fill out in order to match up income verification for that
purpose, right?
Mr. KOSKINEN. That is correct.
Mr. KIND. That won't be on a 1040-EZ; that requires a
separate form?
Mr. KOSKINEN. That requires a separate form that we have
already provided, and we are trying to educate preparers and
everyone else about how to fill it out.
Mr. KIND. Mr. Slavitt, now, some of us had a recent meeting
with Secretary Burwell, and she was trying to put the numbers
in context, too. There is really two kind of reconciliations
that are going on right now: One is income verification, but
one is also citizenship verification, too. And she indicated
that on the citizenship side there was initially 970,000
discrepancies or so, but that number has been drastically
reduced to about 220,000. Does that sound right to you?
Mr. SLAVITT. Right. So I think, in August we had sent out
about 310,000 letters informing people who we have had contact
with on a number of occasions that we needed to receive
documentation from them in order to maintain their policy in
the marketplace. Since that time, and I believe the estimate
that Secretary Burwell gave you was, since that time, as
deadlines have tended to do for us, we have seen an influx from
individuals, and so I think that that number has been dropping
below 310,000 pretty meaningfully.
Mr. KIND. And probably safe to assume that number is going
to continue to go down as more people respond to the inquiries
sent to them. Is that right?
Mr. SLAVITT. That is right.
Mr. KIND. Now, some of this might be a little confusing for
some. Is there a role for the navigators to play in order to
help these individuals to send the proper documentation in
order to satisfy the requirements?
Mr. SLAVITT. Well, we found in the first year that in-
person assistance of a variety of types, navigators certainly,
but also agents and brokers and others have a tremendous role
to play in helping people through, whether it is that issue or
even some of the issues that Commissioner Koskinen has
addressed.
Mr. KIND. Now, is that going to be true for income
verification, or are there some privacy concerns that attach to
that?
Mr. SLAVITT. Regarding navigators, or regarding----
[[Page 56]]
Mr. KIND. Yeah, the role of navigators, someone assisting
the individual to get proper documentation.
Mr. SLAVITT. Yeah, I think that level of assistance is
available to most people and they should take advantage of
that. They also can call our call center directly and we can
walk people through that process.
Mr. KIND. You indicated that on average, the typical
individual is getting about ten touches from you in order to
match up the data that you have with what they are submitting?
Mr. SLAVITT. That has been true for citizenship and
immigration status, and for other categories it has been five
or six.
Mr. KIND. And what form of information are the individuals
getting? Is it more detailed? It is not just a letter saying,
hey, something doesn't match up, or is it this is what you are
missing? Can you----
Mr. SLAVITT. So we have tried reaching out to them with
letters. We have also had the health plans directly reach out
to them with some success, as well. And then where we haven't
had success we have used the telephone, we have called them,
and we have attempted to walk people through them. We
understand that for a lot of people, this is their first time
through a process like this, and sending information to some
place that they are not familiar with isn't always the most
comfortable thing.
Mr. KIND. Commissioner Koskinen, back to you again, the
income verification information you are looking for is really
no different from what a typical taxpayer may have to do. If
something doesn't match up with their income that they are
submitting through the W-2 form or whatever, such as if they
are missing a 1099 or something, they will get a notification
from the IRS saying, hey, something doesn't match up here. Is
that right?
Mr. KOSKINEN. That is correct. Although, initially, we
expect that, as with all tax returns, people will make that
calculation themselves. As I say, when we all do our
withholding, we make an estimate as to what we are going to end
up owing and it always is a different number at the end and it
is the same way here.
Mr. KIND. And that has been going on for years and we
haven't seen the demise of western civilization with that
practice, have we?
Mr. KOSKINEN. Not yet.
Mr. KIND. Okay. Thank you. Thank you, Mr. Chairman.
Chairman BRADY. Some would argue differently, Mr. Kind.
Dr. Price, you are recognized.
Mr. PRICE. Thank you, Mr. Chairman. I want to thank the
witnesses as well for the information. I have found much of
this fascinating.
Our friends on the other side of the aisle seem to be
waking up to the fact that it is a complex program that it is
requiring things of Americans and patients across this country
that haven't been required before and may be significantly
problematic. In fact, the CEO of H&R Block, Mr. Koskinen, says
that Obamacare would add significant complexity to the tax
system, and I think that the questions from Mr. McDermott and
Mr. Thompson actually outlined that. And Mr. Kind put the
punctuation point on it, and that is that anybody who fills out
their form today, tax form today, 1040-EZ, simple form, good
thing for consumers, good thing for citizens,
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but if they have any change in their work status, any change in
their income, will not be able to fill out the 1040-EZ. Is that
correct?
Mr. KOSKINEN. No. That is an overstatement of the
situation. They will not be able to use the 1040-EZ if they
have received an advance payment on a premium tax credit. A lot
of people use the 1040-EZ who are going to be part of that
125----
Mr. PRICE. But those 25 million that you estimate, I
suspect is going to be greater than that, because millions,
tens of millions, if not over 100 million Americans see some
change in their income----
Mr. KOSKINEN. Right.
Mr. PRICE [continuing]. Throughout the course of the year.
The fact of the matter is that they are not going to be able to
use the form that they used before, they will be required to
use another form.
Mr. KOSKINEN. That will be----
Mr. PRICE. In fact, if they go to the site that you
identify, that is not even done automatically, right? If----
Mr. KOSKINEN. Right.
Mr. PRICE. If they go to the marketplace, as you call it,
go to the exchange now and they say, my income just went up, is
that automatic?
Mr. KOSKINEN. No. First of all, I would like to make it
very clear: Millions of people use the 1040-EZ and they are
going to continue to use the 1040-EZ. The people who are going
to actually have to make a separate calculation are only those
who actually get advanced premiums on the premium tax credit or
are applying for the premium tax credit.
Mr. PRICE. Millions of folks. Is it automatic when they go
on the site and identify that they have in--either increased
their income or decreased? Isn't that a manual process now?
Mr. KOSKINEN. I don't know what happens on the Web site, so
Mr. Slavitt would have to tell you.
Mr. PRICE. Is that a manual process at this point?
Mr. SLAVITT. If someone has a change in status of any
variety, income, of several varieties, they have children, a
divorce, a loss in the family, we ask them to come back to the
Web site and update their information.
Mr. PRICE. Is that a manual process now or is that an
automatic process?
Mr. SLAVITT. It is automated. Once they update it, it is
automated.
Mr. PRICE. I know you have only been with them for 2 months
now, and I won't hold you to account on that, but please go
back and check.
Mr. SLAVITT. Okay.
Mr. PRICE. Let me get some basic information, Mr. Slavitt.
How many folks are enrolled through the exchange?
Mr. SLAVITT. As of the end of the last open enrollment
period, there were--I think the number was some 8 million
people that had enrolled in coverage.
Mr. PRICE. How many?
Mr. SLAVITT. Some 8 million had enrolled in coverage.
[[Page 58]]
Mr. PRICE. 8 million. How many of those folks had insurance
coverage before?
Mr. SLAVITT. I don't know.
Mr. PRICE. You don't know.
Mr. SLAVITT. I don't.
Mr. PRICE. HHS doesn't know how many folks had coverage
before but now were forced into the exchange?
Mr. SLAVITT. We do know that we have seen the uninsurance
rate drop significantly in the second quarter. I think that
tells us that there are a lot of people through the exchanges
or through Medicaid----
Mr. PRICE. Wouldn't it be helpful to know how many had
insurance before to see whether or not the system's working?
Mr. SLAVITT. Sure. We also--that is fair. We also don't
want to overburden people by asking them needless questions
when they are applying for insurance.
Mr. PRICE. Well, we ought to poll the American people as to
whether or not you are asking them needless questions.
How many folks had coverage through the workplace before
the Affordable Care Act went into effect?
Mr. SLAVITT. I don't know the exact number. I believe some
96 percent of people who have coverage have it through their
workplace. I haven't seen----
Mr. PRICE. 159 million sound somewhere in the range?
Mr. SLAVITT. Sounds--sounds right.
Mr. PRICE. How many folks have coverage through the
workplace now?
Mr. SLAVITT. I haven't seen an updated study.
Mr. PRICE. Well, I would urge you to look. Again, I know
you have only been there for 2 months and it is a lot of
numbers, but that number has gone down.
Mr. SLAVITT. We will do, Congressman.
Mr. PRICE. So the place where folks have been getting their
coverage that has worked for them for years and years and years
has decreased the numbers of individuals.
You talk about costs going down. In fact, costs are
actually going up, by HHS's own admission. Average of 7 percent
increase in premiums in the next year. With the higher
deductibles that folks are having, paying--the deductibles for
many people now are between $4,000 and $12,000 a year. Let me
suggest to you that an individual making $50,000 a year, a
family making $50,000 a year who has a $6,000 to $8,000
deductible, that is not a person who can afford a $6,000 to
$8,000 deductible. That is how you have shoved everybody into
these programs.
The increase in bad debt in physician's offices across this
country in the exchange is up 60 percent, 60 percent. Those
folks are going to have to figure out what to do, and it is not
going to be able to continue to provide coverage for people.
I want to touch on identity theft. You all had a hacker
break into the system, correct, in July?
Mr. SLAVITT. That is correct.
Mr. PRICE. When did you know that?
Mr. SLAVITT. August 25th.
Mr. PRICE. When did you notify the Federal authorities?
[[Page 59]]
Mr. SLAVITT. I believe it was within 10 days or so of that.
Mr. PRICE. When did you notify the insurers that were
participating in the exchange and covering those lines?
Mr. SLAVITT. At the very same time. There was no impact to
the insurers, but at the very same time.
Mr. PRICE. The fact of the matter is, as you should know,
is that the insurers found out about this through the press,
through the press. If we are going to protect people's personal
information, especially as it relates to health care, and not
notify those individuals and not notify the insurers who are
trying to protect as hard as they can the information that they
have, this is unconscionable. This is what the American people
are concerned about.
Mr. SLAVITT. Congressman----
Mr. PRICE. I think that we have underscored once again the
challenges with this law, and urge you to get the facts, look
objectively. You spent a significant amount of time in United
Health Care and Optum. You--talk to those folks. I have talked
to them recently. The fact of the matter is what CMS is doing
right now, what HHS is doing right now with the ACA isn't
working in the real world. I would urge you to talk to your
former colleagues. They will shed a whole lot of light on what
is going on.
Mr. SLAVITT. Congressman, thank you. You want you to know I
did personally call a representative of the Insurance
Association to inform them.
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Chairman BRADY. Thank you, Dr. Price.
Mr. Pascrell, you are recognized.
Mr. PASCRELL. Thank you, Mr. Chairman, very much.
Look, Commissioner, you know what is going on here. If you
can't shoot the dog, starve it. That is what this is all about.
In the budget itself, in the budget itself, the House bill as
amended for the appropriations, the total IRS funding in 2015
would be about $9.8 billion, which is 19 percent below 2010,
when the ACA became the law of the land. So we are--in every
manner, shape or form, in every hearing that we have had here,
and I have a great respect for every Member of our side as well
as the other side, but we know what it is: Starve it and it
will go away, it will disappear, it will die.
[[Page 69]]
I mean, there are some great things that are happening in
the ACA, even to--its detractors know that. They won't admit
it. They will not admit it.
So we know how many people we have enrolled, and we know
how many people have received tax credits. We are trying to
verify all of them, which is true. You want to know the mess we
had 10 years ago on the prescription drug bill? Nobody wants to
talk about that. This is half a story you get here, and there
is a reason: We are going to starve the dog. We are not going
to shoot it, because they haven't found the way to do that,
either. And, again, 6 million more people are enrolled in
Medicaid. Or the Children's Health Insurance Program, you don't
want to talk about that, do you, what you have done to it?
So the United States uninsured rate continues to decline.
It is about 13.4 percent now. Correct me if I am wrong,
gentlemen.
Mr. SLAVITT. That is correct.
Mr. PASCRELL. Thank you. Before the ACA, many people were
paying for plans that didn't provide them with the coverage
they needed. Some of these people that have lost their coverage
are better off now because they had to go into the exchange and
they got better plans. Let's talk about that. And for those who
are falling through the cracks, we have an obligation to them,
too. Nobody's denying that.
I like to talk about this at town meetings. I hope you do,
too. And I am sure you will be objective and tell the good with
the bad.
Americans are denied coverage for pre-existing conditions
and insurance companies arbitrarily increase their premiums to
the point where they can't afford it. You talk about 7 percent
increase. I will tell you what the increases were for each of
the last 5 years.
My Republican colleagues refuse to acknowledge any benefits
that have resulted from this law. And it is not a perfect law,
Mr. Commissioner. We have never passed a perfect one, believe
it or not.
Unlike the Part D Medicare prescription drug plan, where
Democrats who voted against the bill came together and helped
educate and enroll seniors, I voted against that, but I went
back to my district to initiate those folks, the seniors, with
what this plan was all about, they have done nothing to do
that. They haven't cooperated in the least.
So my question to you is this, Mr. Commissioner. And thank
you--I was here the last time you were grilled, and you handled
it very, very well, you kept your cool. Continue to keep your
cool, Mr. Commissioner.
My Republican colleagues are fond of attacking the Obama
administration at every step of the Affordable Care Act's
implementation. They have expressed outrage over the delays,
but at the same time, refused to give the agencies the funding.
That is a big cut, 20 percent. The House appropriations bill
for fiscal year 2015 that would set the funding at 19 percent
below what it was 4 years ago.
Mr. Commissioner, can you explain how budget cuts have
affected your agency's ability to implement the ACA?
Mr. KOSKINEN. We view, as I have said on numerous occasions
in the past, implementing the Foreign Account Tax Compliance
Act, FATCA, and the Affordable Care Act are statutory mandates
[[Page 70]]
that we have an obligation to implement, so whatever else it
means we are not doing, we are going to implement both Acts
this year in the filing season. As I noted, by not providing
the $430 million for fiscal 2014 or the $450 million for fiscal
2015, it simply means that we have to take that money from the
other places we have available.
Mr. PASCRELL. So therefore----
Mr. KOSKINEN. It is either enforcement, taxpayer services,
or continued improvement in----
Mr. PASCRELL. So you are moving dollars around?
Mr. KOSKINEN. We have to move the dollars around.
Mr. PASCRELL. The Affordable Care Act, Mr. Chairman, so far
has had little impact on the insurance people get through their
jobs, with roughly the same share of employers offering
coverage in 2014 as last year, to correct the record.
Chairman BRADY. Thank you, Mr. Pascrell.
Mr. PASCRELL. May I just finish my point?
Chairman BRADY. Very quickly.
Mr. PASCRELL. As you have allowed other folks to. I
appreciate that.
Chairman BRADY. No. We have been--I tell you what, we have
been very close to time on everybody. And certainly finish.
Mr. PASCRELL. And you have been very, very charitable in--
--
Chairman BRADY. Thank you, sir.
Mr. PASCRELL [continuing]. With all of us. Thank you.
The employer sponsored health insurance premiums were
rising about 3 percent. I would like to enter this report from
the Kaiser Family Foundation on employer health benefits since
that seems to be of interest to my friends on the other side.
Thank you, Mr. Chairman.
Chairman BRADY. Without objection.
[The information follows: The Honorable Bill Pascrell]
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Chairman BRADY. Mr. Buchanan, you are recognized.
Mr. BUCHANAN. Thank you, Mr. Chairman. I also want to thank
our witnesses for taking their time to be here today.
Mr. Commissioner, let me just ask about subsidies people
have brought up. One of my colleagues mentioned about getting a
$5,000 increase, but what happens--at least in Florida, I see a
lot where you have realtors that are independent contractors,
you have a lot of people that have a minimal salary but they
are on commission, or you have minimal salary where they get
subsidies, but they
[[Page 79]]
might get a year-end bonus. How do you address that? Or
somebody, for example, that one year as a realtor where real
estate hasn't been great for a period of time, but Florida is
back now, was making $30,000 a year, now he might make $100,000
this year, the next year make $30,000. How do you deal with--
you know, I would say that is a large percentage of people that
are employed in America are in those circumstances where they
don't have a fixed salary at $60,000 a year. They might earn
$70,000, but it is based on how they do over the year----
Mr. KOSKINEN. Right.
Mr. BUCHANAN [continuing]. In terms of bonus, commissions
or other things. How do you address that in terms of subsidies
one year making $30,000 and the next year making $150,000 the
following year making $30,000?
Mr. KOSKINEN. Those--it is a situation many people face.
They face the same issue when they file their estimated taxes
or make W-2 determinations. They make an estimate, their best
judgment as to what they are going to owe in taxes. Everybody
tries not to owe taxes at the end of the year, so over 80
percent of the people who file actually get refunds every year.
And so they are going to make the same kind of judgment here.
They have to make an estimate when they file for withholding or
when they file estimated taxes, they have to make an estimate
here if they are going to apply for the premium tax credit. At
the end of the year when they file their tax return, much as
when they reconcile their income generally on their overall
taxes, they will make a reconciliation as to whether they got
too much or too little on their premium tax credit in the
advanced payment.
Our expectation is, just as people adjust their estimates
for withholding, and they usually over withhold to make sure
they take into that account, that we expect that a lot of
people when they make their estimates, if they are fluctuating
like that, will estimate on the low side, will have a lower----
Mr. BUCHANAN. Well, it sounds like you have got a pretty
good handle on, you know, all these variations of
possibilities.
Mr. KOSKINEN. Well, we expect them to kind of mirror the
normal variations people make when they have to estimate how
much to pay in estimated----
Mr. BUCHANAN. Thank you. I want to kind of move over to Mr.
Slavitt real quick.
You have been in the healthcare-related industry for how
many years?
Mr. SLAVITT. 20 years.
Mr. BUCHANAN. Yeah. Let me just tell you, as someone that
has been in business before I got here 30 years and bought a
lot of health care for a lot of employees, I think we have got
quality health care, but it is--my biggest concern is cost. I
think it is--everybody likes to talk about the middle class, I
grew up in the middle class, but it is bankrupting the middle
class, cost. It is not unusual in my area, I represent a part
of Florida, but I am the only member in Florida, where you have
someone between 50 and 65 years old, I do a lot of town halls,
that are talking their costs for them or maybe their employees,
but ideally for them and their family of four could be as high
as $2,000 a month. That is not unusual,
[[Page 80]]
$1,500 to $2,000. So I am very concerned about health care in
general, and I see the costs continuing to go up. As someone
that has employed a lot of people or I talk to a lot of people
back in the district, they get a bill every year, even since
the ACA, going up 10 to 20 percent a year, cost of living is 2
to 3 percent, and this has been going on for, it seems like, 10
or 15 years. It is one of the biggest concerns we have got, is
health care. It is not that we don't have good providers, but
the cost is bankrupting, in my opinion, the middle class. What
do you say to that? Do you think--do you share that concern.
Mr. SLAVITT. Yes. Congressman, you are--you are exactly
right. You know, affordability----
Mr. BUCHANAN. I don't use the term ``bankruptcy''----
Mr. SLAVITT. Right.
Mr. BUCHANAN [continuing]. Lightly, I am an optimist, but
it does concern me when people are paying $1,000 to $2,000 a
month for health care along with all their other costs, and I
don't see that changing.
Mr. SLAVITT. Yes.
Mr. BUCHANAN. Go ahead.
Mr. SLAVITT. Yes. Congressman, affordability is one of the
three critical pillars of our implementation, along with
quality and access. And I think there are a couple things that
are, I think, highly encouraging, although early still: one is
that the premium levels that people are paying are at much more
affordable levels; second is I think those in business and
those who are individual health plan members for some time are
used to things like double digit rate increases. And I think,
you know, the five or six States that have publicly put forward
the rates that they are going to have for 2015 are all in the
range of single digits. I think Arkansas was a couple percent,
I think Delaware was a couple percent, I think California was 4
percent. So these are relatively----
Mr. BUCHANAN. I would take--just do me a favor and take a
look at Florida. I have met with one of the largest providers
in the State and did a lot of our stuff, one of the largest,
met with the CEO for the State.
Mr. SLAVITT. Yep.
Mr. BUCHANAN. And, you know, they are talking--I don't know
what they are going to be. It is going to 20, 40 percent. They
are losing a lot of money, because they have got the sickest in
Florida, a lot of them that are joining up and they are very
concerned. They used to make tens of millions, now they are
making zero. So I can see what is going to happen to--you know,
from that standpoint, so I am very concerned about that.
Let me mention one other thing I wanted to bring up. The
insurance companies in our State have been in to see me that
they are looking to the Federal Government, because they were
promised or felt they were promised that they would make a
certain return or somehow the government would underwrite their
losses. What is your sense of that? Is there any--are insurance
companies going to have the opportunity to come back to the
Federal Government and get subsidized somehow?
Mr. SLAVITT. So let me follow up in writing, given that I
am out of time, but, no, that is--that is not going to be the
case.
[[Page 81]]
Mr. BUCHANAN. That is what they are looking for.
Chairman BRADY. Thank you. Time has expired.
Mr. Blumenauer is recognized.
Mr. BLUMENAUER. Thank you, Mr. Chairman.
Commissioner, I appreciate your coming back for another
round.
Mr. MCDERMOTT. You might push your mike.
Mr. BLUMENAUER. My mike was on. It is not----
I will try Mr. Pascrell's, not that he needs a mike.
Chairman BRADY. It always seems to work.
Mr. BLUMENAUER. That is right.
Mr. MCDERMOTT. He turned that off.
Mr. BLUMENAUER. Mr. Commissioner, I appreciate your joining
us for another round. I particularly appreciate the end of your
testimony where you were talking about needing the resources to
be able to meet the needs of people, not just with the
Affordable Care Act provisions, but just the ongoing challenges
of trying to administer an IRS Code that Congress repeatedly
makes more complex. No IRS employees are complicating the Code.
That is our job.
I had the occasion last month to just sit down in a large
sort of brown bag discussion with your employees in Portland,
and I was--I was struck by how frustrated they are. They don't
want people on hold for 45 minutes. They want to be able to
meet their needs. And I would just urge you to be relentless in
driving this point home that we can't continue to cut the IRS
budget, reduce staffing, make the Code more complex, and then
beat up on the IRS and still expect that we are going to keep
the highest compliance rate in the world for over 150 million
taxpayers. I appreciate your forthrightness, and I would just
encourage it.
And I would hope that individual members of this committee
in particular could sit down in a shirtsleeve session off the
record, no cameras, and just meet with the men and women who
are trying to meet the needs of our constituents. I have found
it instructive every time I do it, and I think maybe if more of
our members did that, we might look at the budgeting a little
different.
But I would just say, Mr. Chairman, I appreciate your
ongoing efforts and your evenhandedness, even allowing us to
slide over for a second or two, and your good humor. I also
appreciate that you have been looking at a draft kind of tying
together some elements that a number of us have co-sponsored on
the committee, good work from Mr. Roskam, Mr. Gerlach.
I have indicated in the past that I hope we can shift gears
and get to the point where we can actually have hearings on
things that can pass and don't have anything to do with the
Affordable Care Act. I would note the legislation I have with
my good friend Dr. Roe helping make sure that end of life care
has a value. And we put it in the Affordable Care Act. It
somehow wasn't included in terms of reconciliation. But in
terms of what we do with Medicare, card identification, the
secure card, the Prime Act, Congresswoman Black and I have some
legislation dealing with value-based insurance. There is a
whole host of things that we could be making progress on. Put
them on the floor. They will pass. They will make the system
better. They are not going to make the nightly news, but
collectively we will be doing our job. And I hope we can
minimize hearings that are just beating up on people for things
beyond
[[Page 82]]
their control, that actually we kind of make their job harder,
and that we get down to cases.
I appreciate the draft that you are circulating. I look
forward to supporting it. And the other references that I have
made of bipartisan legislation that will make a difference,
that can be approved, they could--some of these could roll out
before we adjourn for October, and certainly in the lame duck
when we will be standing around trying to figure out what to
do, waiting for the powers that be on the big stuff, we could
get some good things going and give Congressman Gerlach a
going-away present with important legislation that will make a
difference.
Thank you, Mr. Chairman. Again, I appreciate your good
humor and your evenhandedness, and I would respectfully request
that maybe we could put that to work on some legislation that
will pass before we adjourn for the year.
Chairman BRADY. Thank, Mr. Blumenauer. I want to--I share
your belief that while we have very strong differences on the
Affordable Care Act, and a hearing like today is really about
finding out what our families and patients and taxpayers have
to face in the second year, there are legitimate questions that
need to be asked. But we are also trying to create a climate
where we can take the good work that is being done by these
committee members on all those areas that you have an interest
in, I think we have a bipartisan interest in, in legislation
and move that forward. So we have got some work to do in each
of those areas. We are trying to work through these final
points, for example, on the--our fraud, bipartisan fraud bill
and some other issues as well. So look forward to working with
you. Thank you.
Now, Mr. Smith, you are recognized.
Mr. SMITH. Thank you to our witnesses today for your time
here and sharing your insight and expertise. I think between
the two of you, you do have vast insight, perhaps Mr. Slavitt,
you bring some objectivity as a relatively new employee over at
CMS.
Let me start. Commissioner Koskinen, the waivers that are
offered by HHS or CMS, does IRS keep track of those waivers?
Mr. KOSKINEN. Yes. We have got a very, I think, positive
working relationship with HHS and CMS. And to the extent that
exemptions or waivers are created, they get built into our
system as well, and so we are--we need to be aware of those,
because obviously when people file their taxes, that we have a
form that allows them to identify the exemption that applies to
them.
Mr. SMITH. What percentage of the American population files
a Federal tax return?
Mr. KOSKINEN. Well, that is a very good--a good question,
because if you are below a certain income level, you are not
required to. We have 150 million returns that are filed every
year, and it is obviously the vast majority. I would be happy
to get back to you, because I have never actually asked that
question as to how many people do not have to file a return.
Mr. SMITH. I mean, because we have heard earlier that, you
know, there are so many great and wonderful things that have
come about, and yet we know that the enforcement of and the
benefits perhaps to some, benefits of the healthcare situation
here are offered through the Tax Code. So are there concerns
that perhaps
[[Page 83]]
there might be some beneficiaries out there who would not see
the benefits or the complications associated along the way?
Mr. KOSKINEN. Thus far, our experience has been, as a
general matter, and there are a number of tax credits that have
been written into the Tax Code that we administer, the vast
majority of people take advantage of those credits. We do run
the earned income tax credit program, and part of our goal
there is to make sure everybody who is eligible for the credit
knows about it and uses it. In that case, about 80 percent of
the eligible people for the earned income tax credit actually
take advantage of it. So I am sure if everything continues to
go as it usually does, there will be some people who are
eligible for the premium tax credit and support for health care
who may not take advantage of it.
Mr. SMITH. Okay. Thank you.
Mr. Slavitt, let's talk about the individual mandate
briefly. Can you give us an update on the individual mandate?
Obviously the administration is choosing to stick with the
individual mandate in contrast to delaying the employer
mandate. Is that accurate?
Mr. SLAVITT. The individual mandate, yes, is law and we
are--we are administering and implementing the law that way,
yes.
Mr. SMITH. And what would you say is a rough, I am not
expecting exact, but a rough compliance rate with the
individual mandate?
Mr. SLAVITT. I don't think that will be known until after
we get through the year and through tax season, but in any
event, I don't have an estimation, and I would be happy to try
to get one to you, if it is possible.
Mr. SMITH. So penalties being levied would take place when?
Mr. SLAVITT. I think through the Tax Code, is my
understanding.
Mr. KOSKINEN. It would be--it would be this year. There is
no----
Mr. SMITH. No. I know. That--that is the how; but the when.
Mr. SLAVITT. During the tax filing season.
Mr. KOSKINEN. It will be when you file your return, on the
1040-A, you will check either I have got coverage or I have a
premium tax credit.
Mr. SMITH. Wait. We are through one tax-filing season where
that question has been asked, correct?
Mr. KOSKINEN. No. It did not apply last year. So the 2014
filing season for tax year 2013 did not have any requirement
for individual shared responsibility payment. The first time it
will take effect----
Mr. SMITH. But the question was asked about health care,
was it not?
Mr. KOSKINEN. No. In other words, the tax returns last year
did not have Affordable Care information in them.
Mr. SMITH. Okay. So--but then in this next tax-filing
season, it will.
Mr. KOSKINEN. This coming spring for the 2014 tax year, we
call it filing season 2015, because----
Mr. SMITH. Okay. If someone marks ``no,'' can you share
what happens from that point forward?
[[Page 84]]
Mr. KOSKINEN. Yes. If you mark on your return that--``no,''
and you don't--aren't eligible for an exemption or a waiver,
and there is a form you can fill out, then what happens is you
will do a calculation and you will have the responsibility, the
additional tax for this year is the $95 per individual capped
at $250, give or take a little, for a family.
Mr. SMITH. Would that be considered a penalty?
Mr. KOSKINEN. Well, it is an additional tax. You can call
it, you know--you can call it a penalty. Whatever it is, you
will owe that amount of money.
Mr. SMITH. It is avoidable, you are saying?
Mr. KOSKINEN. Pardon?
Mr. SMITH. It is avoidable?
Mr. KOSKINEN. It is not avoid--it is avoidable if you are
eligible for an exemption, and there are a significant number
of exemptions available for people who don't--who had short--
lack of coverage for less than 3 months, people who have
particular hardships can provide that information, some
religious affiliations will be able to provide that
information. There are a series of exemptions. So it is
avoidable to that extent, but if you don't qualify for an
exemption, then you will owe the additional tax.
Mr. SMITH. Thank you. I yield back.
Chairman BRADY. Thank you.
Ms. Black is recognized.
Ms. BLACK. Thank you, Mr. Chairman. Thank you for holding
this very important hearing. I appreciate being a non-member of
this committee and having an opportunity to be able to ask the
witnesses questions. And thank you, by the way, for being here.
Commissioner, I want to go back to a line of questioning
that my colleague from Florida was talking about in relation to
income accuracy in the filing process. And I think that I have
probably--I think I remember bringing this up the last time we
had a hearing on the oversight, and that was the idea of the E-
FLEX Coalition.
Mr. KOSKINEN. I am sorry. E-FLEX----
Ms. BLACK. The E-FLEX Coalition made a specific
recommendation to make the administration of the tax credits
more accurate. They suggested, and I quote, their suggestion
is, ``giving employers the option to prospectively file
information with the IRS about the coverage available to
employees through an annual certification process.''
Their letter went on to say, we believe that it is in the
collective best interests of individual Americans, the
employers and the administration to ensure accuracy--which is
what my colleague was talking about--on such upfront
determinations to avoid the subjecting of individuals to
unexpected payments of any credits for which the exchanges
incorrectly deemed them to be eligible.
Now, the Treasury during the rule writing process rejected
that recommendation. Do you believe, given what we are going to
be seeing, as my colleague referenced, that sometimes the--
especially for those that are in sales where their income may
be here and the next year it might be down here, that it would
be helpful to have that information prospectively?
[[Page 85]]
Mr. KOSKINEN. Well, tax policy matters are determined by
the Treasury Department and the Congress. We are just the tax
administrators, so we follow whatever the rules are.
As I noted, every taxpayer makes an estimate in advance as
to what their income is going to be in the following year and
then they reconcile it when they file their tax return and they
know exactly what they earned. Where taxpayers have variety and
they have bonuses or they are on commissions, in the normal
process of filing their taxes, they make estimates, and they
generally make estimates trying to make sure that they don't
owe any more tax than usual, which means that is why most
people get a refund.
We expect that with regard to those who qualify for the
premium tax credit and are applying for an advanced payment,
they will adjust and make the same kinds of estimates that they
make for their withholding purposes.
Ms. BLACK. But the system is more complicated when you are
having to go back and figure out, okay, do taxes. Now, let's
just say someone has earned more than what they anticipated.
Will there be a call-back?
Mr. KOSKINEN. Not a call-back. If you have earned more than
you anticipate and you have been getting you advanced payment--
--
Ms. BLACK. Right.
Mr. KOSKINEN [continuing]. Paid to your insurance company,
the payment doesn't come to you, at the end of the year, if
you, in effect, have claimed more of a credit that has gone to
your insurance company, you will either have a smaller refund
or more tax owed, yes.
Ms. BLACK. So it will just be withheld from them. That
won't be--let's say that they don't owe--or they are not due a
return. And so what will happen then, because you can't
withhold something from someone who wasn't due a return? How
will you retrieve the money that has been paid out for an
advanced tax credit?
Mr. KOSKINEN. They would be treated the same way any tax
collection process. We would match up, we would determine if
there is an amount owed. The first thing we usually do is send
people a letter saying we see a discrepancy in your return. Can
you explain what the issue is.
In fact, I would just make a plug here. We are trying to
make people understand. We contact taxpayers by letter first.
So if you are hearing from us by phone for the first time, the
chances are pretty good you are not hearing from us. There is a
significant amount of tax scamming going on that we are
concerned about.
But in any event, we would advise the taxpayer. And they
would be treated the same way any taxpayer was who had an
amount owing, or at least some apparent discrepancy in what
they filed and what they owed.
Ms. BLACK. It seems so complicated. It seems to me it would
almost be better for us to say, what was your income this year,
and then having the filing date maybe 2 months after they know
what their income is at the end of the year. So moving the
signup to maybe February so they know what their income was
last year and you can go on that, but it seems like a very
complicated system.
[[Page 86]]
Let me go to Mr. Slavitt on an issue that you did actually
mention, and that was the end-to-end testing. And we know that
the end-to-end testing is a critical step in preparing for that
successful 2015 open enrollment. Last year the testing occurred
far too late, and we know that there was not time to correct
those problems. And so you did mention that there is a new
functionality and you are going to be rolling that out over the
summer. Does this include testing of the auto enrollment
renewal transaction process as well?
Mr. SLAVITT. Yes, Congresswoman, that will be tested. I
believe it is slated in October.
Ms. BLACK. Slated in October.
Mr. SLAVITT. Yeah.
Ms. BLACK. So that is--the----
Mr. SLAVITT. The auto----
Ms. BLACK [continuing]. Signups--okay. And the signups will
begin when?
Mr. SLAVITT. So recall that the auto enrollment
functionality will occur in December----
Ms. BLACK. In December. Okay.
Mr. SLAVITT [continuing]. Because that is when----
Ms. BLACK. You won't test it until November?
Mr. SLAVITT. We will be--so to give a quick overview of the
process, and I know I am over time, people will have--the
beginning of open enrollment is November 15th. People will have
an opportunity to come back, shop, and select a plan. The
functionality you are referring to is what do we do in the
occasion when somebody is enrolled in a plan----
Ms. BLACK. Right.
Mr. SLAVITT [continuing]. But doesn't come back.
Ms. BLACK. Right.
Mr. SLAVITT. December 15th, we will automatically enroll
them in their existing plan, presuming that that plan is still
offered through the marketplace.
Ms. BLACK. But you are doing some testing on that as well?
Mr. SLAVITT. We will--we will test, we will test
everything.
Ms. BLACK. Okay. So have you worked with the insurers on
this testing?
Mr. SLAVITT. So our initial testing with insurers actually
is beginning this week with a group of insurers we call alpha
insurers, and then in early October, we will invite all the
insurers to begin to do their testing, end-to-end testing with
the goal to make sure that when someone comes through the
process, at the end of it, they get an 834 and they can return
one back to us.
Ms. BLACK. Okay. Thank you very much.
Thank you, Mr. Chairman.
Chairman BRADY. Thank you, Ms. Black.
Commissioner Koskinen, I just want to follow--I am not sure
we got a clear answer on one part of Representative Black's
questions. If your income changes or if some reason there is an
overpayment of subsidies, there is a cap on your overpayment
depending upon your income, but if you were given, for example,
affordable--offered affordable insurance at work and you don't
take it, you are not eligible period. The law is very clear
that all of that must be repaid.
[[Page 87]]
Will you be following--following the law in the collection of
that in that instance in the ineligible subsidy?
Mr. KOSKINEN. Yes. If somebody is ineligible and has
received a credit, they will be treated the way anybody else
would be in our compliance process.
Chairman BRADY. No, no, no. The question was, the law in
that case, there is not a cap. All of the subsidy must be
repaid. Will you be following the law in that recapture?
Mr. KOSKINEN. Yes. Wherever we can, we follow the law.
Chairman BRADY. Whenever we can. I encourage you to follow
the law----
Mr. KOSKINEN. Right.
Chairman BRADY [continuing]. In all instances. And I had so
many things going through my mind at that point. Commissioner,
thank you for being here.
Mr. Slavitt, I know my office has reached out to you as
well from a letter that Ms. Black, myself and others sent to
Ms. Tavenner in August regarding the issue of the abortion
surcharge, if you recall from the law that was a sensitive
issue. The resolution was that consumers could know which plans
provided those services, to choose one or the other, and if
they did, there would be a separate charge to that. That was
very clear. We sent a letter asking for a written response from
the agency. I would encourage you to encourage the agency to
respond as soon as possible.
Mr. SLAVITT. Yes, chairman. We are--we have the letter.
Chairman BRADY. Great.
Mr. SLAVITT. We are working on it.
Chairman BRADY. Great. Thank you very much.
I want to thank the witnesses for being here today. There
are still a lot of questions dealing with the law going
forward, but we will work together on this.
I do want to recognize Dr. McDermott for a special notice.
Mr. MCDERMOTT. Thank you, Mr. Chairman. Before we close the
hearing, I would like to say a few words about a departing
staff member, Askia Suruma is leaving the committee after 21
years in Congress--or working for Congress. He is the staff
director of the Democrats on the committee and the staff
director on the Oversight Committee. Prior to coming to this
committee, he was a staff director--senior staff director for
the Rules Committee and worked with Martin Frost from Texas. He
is leaving to go to George Washington University, and we are
grateful for his time here and wish him all the best, and
please join me in thanking him.
[Applause.]
Chairman BRADY. Thank you for all your hard work.
With that, the witnesses, members do have 14 days in which
to submit questions. Encourage the witnesses to respond as
quickly as possible. Again, thank you for being here today.
Hearing is adjourned.
[Whereupon, at 11:45 a.m., the subcommittee was adjourned.]
[all]