November 26 2013

Mission Impossible: IRS Enforcement of ObamaCare

Patrice J. Lee

If you think the ObamaCare enrollment has been a disaster, just wait until IRS enforcement kicks in. But wait – the IRS’s ineffectiveness may be a good thing for Americans.

The scandal-ridden IRS has managed to fly under the radar over the past few months thanks to the debacle that’s been the rollout of ObamaCare. While we have not hesitated to call out the misbehavior of IRS agents in targeting conservative groups that sought tax exemption or allegedly sharing tax information of private entities with the Administration, the media has all but dropped any investigation about the politicization of the agency.

But this week the Washington Post nudged the IRS back under the microscope investigating whether the federal agency is up to the task enforcing the ObamaCare individual mandate. Here’s more:

Whether the new law can be enforced will be up to the Internal Revenue Service, an already beleaguered agency charged under the act with carrying out nearly four dozen new tasks in what represents the biggest increase in its responsibilities in decades. None is more crucial than enforcing the requirement that all citizens secure health insurance or pay a penalty.

But those efforts have been hampered by a one-year delay in applying new insurance regulations to large employers. Those employers had been expected to provide insurance coverage information that the IRS would use to help identify who has insurance and who does not.

While failures in launching the federal insurance Web site and online exchanges have thrust the Department of Health and Human Services to the center of public attention, the IRS also has a huge role in carrying out the law, including helping to distribute trillions of dollars in insurance subsidies and penalizing people who do not comply.

The fine is intended to encourage healthy people to enroll even if they do not have an immediate need for care. If the elderly and the sick dominate the ranks of those who sign up, it could lead to what health economists call an “insurance death spiral” of rapidly escalating costs, premium hikes and declining enrollment.

So does the IRS think it’s ready? As of last month ‘yes,’ according to a leading IRS official who testified during a House Oversight and Government Reform Committee hearing:

… Ingram, the director of the IRS Affordable Care Act office, said the glitches that have plagued the launch and stymied enrollment aren’t from her agency.

“Our systems have come up on time and operated as planned in turning interactions around,” she said.

She also sought to ease Republican concerns about protecting massive amounts of private taxpayer information.

If a user’s information is compromised, the IRS can “turn off the switch in minutes” to halt the flow of data, she said. And while the Department of Health and Human Services has been under a harsh spotlight for ongoing website failures, Ingram said her agency is ready and able to deliver the necessary information so people can start enrolling in coverage and getting subsidized.

I don’t share Ingram’s optimism considering the hurdles the IRS faces:

Besides lacking coverage information that would help the agency enforce the “individual mandate,” the IRS also is hamstrung in penalizing those who do not sign up. The lawmakers who drafted the health-care law intentionally barred the IRS from using its customary tools for collecting penalties — liens, foreclosures and criminal prosecution. The only means of collecting the fine is to essentially garnish tax refunds for people who overpaid their taxes.

Enforcing compliance with the law is just part of what one Treasury Department official calls “the largest expansion of IRS responsibilities in recent history.” And the increased workload comes as the IRS is suffering from high turnover of senior managers, years of budget cuts and congressional inquiries into the alleged politicization of the agency.

Let’s be real. As Americans continue to receive cancellation notices about their healthcare plans, learn that they can’t keep their doctors, and reel from the sticker shock of rising healthcare costs, opting out of the system may be the most economical choice for many individuals and families. A $95 penalty in 2014 is cheaper than a three-digit monthly premium and four-digit deductible. It’s a game of poker and we all know the IRS has a weak hand, so why shouldn’t Americans flout the healthcare requirement?

That’s a fear that keeps someone up late each night at the White House, although that’s probably not the President. He seems quite unaware of what goes on in his Administration.

What happens if the IRS fails in its enforcement duties? ObamaCare would spiral out of control and eventually perhaps, out of existence.  While that will cause a lot of pain and problems along the way, ultimately, that may be the best outcome we can hope for.   

 

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