Is the Embattled IRS the Next Obamacare Nightmare?
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The Fiscal Times
October 29, 2013

Shortly before Obamacare’s nerve system crashed over the weekend, Health and Human Services Secretary Kathleen Sebelius touted the data services Hub as a “model of efficiency and security.” 

The giant router funnels tax and income information to the new federal and state government websites designed to sell medical coverage; it is critical to the success of the HHS in attracting enough consumers – and the right mix of ages -- to make the system financially feasible. 

Beyond that, the Hub will be vital to the Internal Revenue Service as it assumes responsibility for administering a multitude of tax increases and tax credits and collecting and verifying data from employers and individuals to determine eligibility for federal subsidies. 

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Now, the spotlight is on the major structural flaws in the Affordable Care Act on-line enrollment system that has thwarted millions of people from logging on and enrolling for coverage since the official rollout began Oct. 1. The administration has mounted a “technology surge” to correct the legion of problems, and has vowed to have the system humming by the end of November. 

Lurking down the road, however, could be another crisis when the IRS moves center stage in the next year or two to assume responsibility for enforcing 46 new tax-related provisions and tasks associated with Obamacare. Those include imposing new taxes on medical devices and Medicare, overseeing new itemized deductions for medical expenses, and imposing penalties on uninsured Americans who fail to purchase coverage on the new exchanges.

As a result, the agency has struggled to collect the hundreds of billions of dollars a year that the government is owed but not paid, Nina E. Olson, the national taxpayer advocate, said in her annual report to Congress last year. 

J. Russell George, the Treasury Inspector General for Tax Administration, warned in March testimony that the IRS was being overwhelmed by new responsibilities in areas not traditionally associated with the tax-collection agency. 

The IRS will be obliged to create numerous new computer programs to handle the added workload, although the agency has had mixed success in the past in creating software to implement changes in the tax law. 

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Finally, George said, the IRS will experience a massive surge in demand for assistance at already busy call-in and walk-in tax help centers.  

“In all candor, unless the IRS receives additional resources in order to implement the ACA (Affordable Care Act), they truly -- it's a zero-sum game,” George told a House Appropriations subcommittee. “They're going to have to make very difficult choices in terms of customer service, in terms of enforcement, in order to take on this huge responsibility that they have been presented with," George said. 

Last June, a Government Accountability Office (GAO) report estimated that the IRS would spend $881 million of taxpayers’ money to implement the first four years of Obamacare, including about $500 million that the HHS diverted to the agency. 

The Obama administration requested $12.9 billion to the IRS as part of its 2014 budget proposal, nearly $1 billion more than it requested for FY2013. About $440 million would go toward helping the agency implement the health care law.  The IRS has estimated that it would need to assign a total of 2,195 employees to deal with health care reform by the end of this year. 

And now there is concern about the Hub. 

Asked if the agency was concerned about the security of the system and confidentiality of consumer data transmitted over the route, a spokesperson for the Center for Medicare & Medicaid Services, Julie Bataille, replied: “As we have conducted the planning and now the operational phase of the site, we continue to take cyber security issues seriously – both to protect consumer information as well as to safeguard the site in its entirety.” 

Yet the IRS could be headed for major computer headaches and glitches as it assumes an unprecedented boost in its workload. 

Earlier this month, Sarah Hall Ingram, who heads the IRS's Affordable Care Act office, testified before Congress that the IRS’ implementation of the law was going smoothly and that the Hub was working well.

IRS officials did not respond directly to The Fiscal Times’ request for comment on how further problems with the hub might impact the agency's ability to implement the new health law.

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.