Government report says IRS 'may not be capable' of detecting Obamacare fraud

The Treasury Inspector General for Tax Administration released a report Wednesday that said the IRS's information management system may not be fully capable of detecting fraudulent efforts to get Obamacare benefits.

TIGTA's report was an annual assessment of the IRS's information technology program, and it found weaknesses in the ability of the IRS to protect federal tax information, along with other weaknesses. It said some of these problems are related to funding shortages, and said the IRS is making efforts to address these issues.

A report from a watchdog agency says Obamacare may not be able to detect Obamacare fraud. Photo Credit: Shutterstock

But it said problems related to Obamacare persist.

"TIGTA is also concerned that the IRS's existing fraud detection system may not be capable of identifying Affordable Care Act refund fraud or schemes prior to the issuance of tax refunds," TIGTA said. "As a result, TIGTA plans to continue oversight of this area."

The report also warned that Obamacare will pose several implementation challenges in the coming years.

"[S]ystems development activities to implement ACA provisions will require extensive IRS resources," it said. "The ACA contains an extensive array of tax law changes that will present a continuing source of challenges for the IRS in the coming years."

"The IRS estimates that at least 42 provisions will either add to or amend the tax code and at least eight will require the IRS to build new processes that do not exist within the current tax administration system," it added.

Obamacare requires the IRS to collect information from health insurance providers and drug manufacturers, and the IRS will try to do so through a so-called ACA Information Returns (AIR) project. That project will involve validating, accepting and processing forms that will be provided by these commercial actors.

TIGTA reviewed this system late last year, and at the time indicated that it fund "vulnerability weaknesses" in this project that could pose problems down the road. But it said it could not determine whether this issue had been solved yet.

Republicans have argued for months that there aren't enough safeguards in place to ensure the law is implemented properly. One key complaint from the GOP involves the failure of the government to create a system to verifying whether people are eligible for health care subsidies in the form of tax credits.