Feds: Don't even think about cheating on Obamacare

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The Obama administration has drawn unwelcome headlines after issuing regulations delaying some steps to verify the income of Americans seeking government subsidies for health insurance.

But that doesn't mean there's no income verification. As administration officials describe procedures for their new health insurance marketplaces or "exchanges," the risk that some applicants could game the system and gain unwarranted subsidies is no greater than the risk of any American cheating on his or her tax return.

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Under Obamacare, every American is required to obtain health insurance beginning Jan. 1. The insurance marketplaces, to begin operations Oct. 1, are designed to give new insurance options for those who don't receive health coverage from their employers.

The law provides taxpayer subsidies for those with incomes below certain thresholds. For example, a family of four with an income of $50,000 would be eligible for a $6,504 subsidy in 2014, according to calculations by the Kaiser Family Foundation.

When Americans apply to receive a subsidy, administration officials say, the stated income on their application is cross-checked against their previous year's federal tax return, as well as Social Security system records.

"The Marketplace will always check the income information submitted by individuals against electronic income data sources such as tax filings, Social Security data, and current wage information," Marilyn Tavenner, administrator of Medicare and Medicaid, wrote in a "Myth vs Fact" question-answer series on the Department of Health and Human Services website. And when they file their federal tax return the following year, the amount of their subsidy is reconciled with their actual income for the year. If their income was lower than expected, their subsidy can be adjusted up through a tax credit. If their income proved higher than expected, they would repay part or all of the subsidy through a higher tax liability.

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The income verification steps the administration delayed apply only to cases in which applicants report income at least 10 percent lower than the amount of their previous year's tax return. The administration's original plan called for the exchanges to seek documentation from the applicant and his or her employer. But as officials scramble to get the health exchanges up and running and ease burdens on eligibility workers, they delayed that step by a year.

Instead, health exchanges will be required in 2014 only to perform random spot checks of cases when applicants report declining income.

Even in those cases, Tavenner said, the applicant's subsequent tax return provides a safeguard "to ensure that individuals do not fraudulently access premium tax credits."

That won't quiet critics of the law and its taxpayer subsidies. But it does suggest that Obamacare subsidies may not pose any greater risk of fraud than exists in applications for any other kind of government benefits.

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—By CNBC's John Harwood. Follow him on Twitter: @JohnJHarwood.