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A New Prosecution Priority for DOJ

The lead story in the Washington Post today reports that possibly a million applicants for Obamacare subsidies may have "misstated" their income:

The government may be paying incorrect subsidies to more than 1 million Americans for their health plans in the new federal insurance marketplace...

The problem means that potentially hundreds of thousands of people are receiving bigger subsidies than they deserve. They are part of a large group of Americans who listed incomes on their insurance applications that differ significantly -- either too low or too high -- from those on file with the Internal Revenue Service.

Some of the under-reporting of income is sure to be inadvertent or mistaken; anyone who has wrestled with a Form 1040 knows that getting everything right is difficult. But we all know there's a strong likelihood that hundreds of thousands of applicants have intentionally understated their income to squeeze the government for fatter subsidies.

At the base of the financial crisis a few years back was something similar:  A huge number of people lied about their incomes and assets to obtain mortgages for which they were unqualified.  When the housing bubble burst, they couldn't pay, and the enormously painful Great Recession was underway.

DOJ should not allow something like that to happen again.  Whether one loves Obamacare or hates it, no one has the right to bilk it by cheating.  A few hundred highly publicized false statement prosecutions would go a long way toward keeping applicants honest and, therefore, keeping the program as solvent as it's going to get. 


I agree.

I would add to that there are a large number of filers who have no earned income but report earned income just to obtain the earned income tax credit. My CPA gets a number of these pounding on his door every spring. He refuses to file for them. Perhaps some of these should be a priority as well.

Thank you, and good for your CPA.

Methinks Obama and Holder will decline this prosecution initiative. Something about the "chilling effect" such reckless prosecution would have on ordinary citizens who are desperate for government-supported healthcare.....

Nailed it.

My post, ever hopeful that the Administration might for once be taken at its word, was willing to assume that it really doesn't want Obamacare to become insolvent. But that's a rose-colored assumption for sure.

I mean, since when has this Administration (the last one wasn't too hot either, to be honest) cared about solvency?

The WaPo article says excess subsidies from overstated income have to be repaid the next year if the individual does not provide proof within 90 days of notice of a discrepancy with government records. Those records are presumed correct after 90 days. So if the administration fixes the software and process issues, individuals shouldn't be able to benefit from false statements.

Rather than trying to prove knowing and willful false statements (or more realistically, coercing defendants into pleading out under threat of a 5 year sentence), it seems more likely that the administration will just do the same thing the IRS does when it detects discrepancies between informational returns (W-2s, 1099s, etc.) and taxpayers' 1040s. Taxpayers get an automated notice of the error and are assessed the unpaid tax with interest.

It would also probably make more sense to just use government information in the application instead of leaving it up to individuals to fill in the info, since the WaPo article reports that around half the applications had errors. Individuals would have to submit supporting documents if they thought the government information was wrong. This would make willfulness much easier to prove and make it much easier for DOJ to adopt your preferred enforcement strategy.

I doubt we will see much action here aside from a few prosecutions for the most egregious offenders - the short version if my opinion it is because prosecuting individuals for "obamacare" fraud is difficult and can be hard to prove - same reason prosecutions for tax fraud, bankruptcy fraud, medicare fraud, worker's compensation fraud are so rare outside the the egregious offender.

Since there are limited prosecutorial resources, it appears those resources are largely devoted to prosecuting other types of crimes.

The value here is deterrence. If people think they might actually go to jail for lying in order to get fatter Obamacare subsidies, they'll think twice before doing it.

I go back to the "liar loan" crisis that lay behind the Great Recession. Having a sound financial and/or insurance system depends on getting the truth from borrowers/claimants. The temptation to lie is already strong. We saw what rampant lying with no enforcement did.

I would just as soon not repeat the experience. As I say, merely two or three hundred well-publicized prosecutions, with pictures on the evening news of the liar being led away in belly chains and an orange jumpsuit, will, I think, have a wonderfully positive effect on people's honesty.

Obamacare is going to be a financial black hole even if run honestly, and failure to punish cheating will make it that much more expensive that much faster.

I have one comment and one question.

The comment is in response to this remark: "Rather than trying to prove knowing and willful false statements (or more realistically, coercing defendants into pleading out under threat of a 5 year sentence)..."

OK, fine, I'll be happy to make a concession. Under my proposed program, the government will not initiate or participate in plea bargaining, thus to avoid "coercing" defendants into admitting anything. Everyone goes to trial.

If the government fails to meet its high burden, hey, that's how the cookie crumbles. If, on the other hand, the jury convicts, the government will allocate for the max, noting that the defendant continued his dishonesty by falsely denying guilt.

Does that abridge anyone's constitutional rights? How?

My question is this: Do you really think that intentionally swindling a government program does not deserve criminal sanctions of some kind?

Bill, I agree with you on the deterrence factor. My point / observation is that since other similar crimes - bankruptcy fraud, tax fraud, medicare ect... are woefully under prosecuted, I am highly skeptical we will see any different approach as to Obamacare fraud.

Do you agree with me then, that the above mentioned crimes should be prosecuted more vigorously as well? If so, then I think we are in agreement.

Lastly, having practiced bankruptcy law on the front lines of the great recession in Southern California since 2007, your statement about liar loans is true but over-simplified - the entities lending did not take any steps to verify income or assets. Trying to place all the blame on the borrowers is misplaced.


Yes, I think all the cheater crimes you mention should be more vigorously prosecuted. A society that winks at mass dishonesty is headed for (and as we saw, will get) big trouble.

Once people find out they can cheat and get rewarded for it, where do they stop?

I also agree that the banks' willful blindness toward, if not outright encouragement of, liar loans was a disgrace and a major contributing cause. If I were back in the USAO, let me tell you, they'd be hearing about it.

The Great Recession was a gargantuan lesson on what happens when standards slide on a massive scale. The country really must learn from it, or it will be headed right back to the same trouble.

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