It looks like young Ezra (and, to be fair, everybody else) missed a major policy change in Obama’s shift to the new, shorter (for individuals*), final version of the basic application for ObamaCare.** As it turns out, the issue (or at least one of the issues; gawd knows what other time bombs are buried in the thing) wasn’t only the length and complexity of the form, though that was and is bad enough; the issue is the actual content of the form. Here’s what I’m talking about. It’s right in plain sight. I’m using a screen dump of the new, shorter, finalized form from Ezra’s article:
Here are the key passages as text for Figure 1:
I’m signing this application , which means I’ve provided true answers to all the questions on this form to the best of my knowledge. I know that I may be subject to penalties under federal law if I intentionally provide false or untrue information. …
We need this information to check your eligibility for help paying for health coverage if you choose to apply. We’ll check your answers using information in our electronic databases and databases from the Internal Revenue Service (IRS), Social Security, the Department of Homeland Security, . If the information doesn’t match, we may ask you to send us proof.
Yes, Equifax (a “consumer reporting agency”) could be affecting your eligibility for ObamaCare (a Federal program). Now, this is a major policy change, or perhaps a policy determination. Here’s the equivalent language in the draft 26-page “Single Streamlined Application.” As you can see, the language had not then been finalized:
Here are the key passages as text for Figure 2:
As part of the Privacy step, an individual also provides agreement and consent for their information to be used and retrieved from . They also agree that they have permission from all other persons they may list on the application for their information to be used and retrieved as part of the application process for verifying the household’s information in order to make eligibility determinations. across the federal agencies, but the essence of the language will address the basic agreement to the retrieval and use of their household’s data for verifying information and making eligibility determinations and will include language that agreement is provided and understanding of potential prosecution for false information (similar to when a person signs and submits the application).
Alrighty then. Let’s break out the old lawyerly weasel-wording parser and actually compare what the two forms say.
As you can clearly see in Figure 2, the draft form mentions “data sources” without naming them, and says that “The specific components of the consent language are still under review across the federal agencies…” The new, shorter, finalized form — presumably after “review across the federal agencies” — names those data sources, as we see in Figure 1: “The Internal Revenue Service (IRS), Social Security, the Department of Homeland Security, and/or a consumer reporting agency.” (The definition of the term is well-known; a link to the CFPB appears below.) Notice first that the logic of the sentence permits income (eligibility) determination by using a consumer reporting agency only: “A, B, C, and/or D” can resolve to “A, B, C, or D,” which can resolve to “D” only. Therefore, if Transunion or Equifax only give you a thumbs down, you might not be eligible for ObamaCare, no matter what data (if any) Federal agencies like the IRS, DHS, or Social Security also supply. That’s the plain language of the form. What could go wrong?
Note also that Obama totally owns this policy change of involving consumer reporting agencies. From his presser:
So we cut what was a 21-page form now down to a form that’s about three pages for an individual, a little more than that for a family, well below the industry average. So those kinds of refinements, we’re going to continue to be working on.
So, the White House (“we”) reviewed the form. And having private consumer reporting agencies involved in determining your income (eligibility) for health insurance — and hence, if you’re lucky, health care and a coin flip in your favor for avoiding bankruptcy if you need serious help — is, therefore, one of “these kinds of refinements” that the White House blessed.
Bottom line: ObamaCare now integrates private “consumer reporting agencies [sic]” with public agencies in determining income (eligibility) for a Federal program. The term “consumer reporting agency” is at best a euphemism for “credit reporting company,” even if “agency” does sound awfully official. In fact, in the house of consumer reporting are many mansions. Here’s a list of the types of “consumer reporting agencies” from the Consumer Financial Protection Bureau:
- National Credit Reporting Companies
- Check Screening/Check History
- Payday Lending
- Auto and Property Insurance History Reports
- Supplementary/Alternative Credit Reports
- Employment History Reports
I don’t know about you, but the thought of using payday lender debt slave data*** for ObamaCare income (eligibility) determination gives me the creeps. (“Whoa! She couldn’t make the 339% interest rate payments! Thumbs down!”****) Oh, and “Supplementary/Alternative Credit Reports” looks exactly like the grab bag of bottom feeders you’d expect it to be.
But let’s give the administration the benefit of the doubt, assume that the rules are not yet written, and that “consumer reporting agencies” are limited to National Credit Reporting Agencies. Again, what could go wrong?
1. Credit reporting agencies have bad data. CBS:
A new government study to be released tomorrow indicates as many as 40 million Americans have a mistake on their credit report. Twenty million have significant mistakes.
One out of five Americans has an error on their credit report. And one out of 10 has an error on their credit report that might lower their credit score.
Steve Kroft: I’m trying to think of another industry where a 20 percent error rate would be acceptable. That’s a pretty high error rate.
Jon Leibowitz: It’s a pretty high error rate.
Since the income (hence eligibility) determination algorithm for ObamaCare is utterly opaque, we have no way of knowing how many people’s eligibility will be affected by bad credit reporting data. We also have no way of knowing which errors apply to income alone, which presumably — we don’t actually know this — is the only data that ObamaCare will be going to the private credit reporting agencies for. But in the worst case scenario, and assuming ObamaCare’s population is representative of the general population, the errors could be as high as 20%. (Granted, the errors could capriciously grant some people eligibility, and deny it to others.) However, the people who do not already have private health insurance — that is, those who ObamaCare is putatively designed to help — are much more likely to be poor, much less likely to have the time to fight credit reporting errors, and much less likely even to know they have the right to dispute errors, or how to do so. ***** It’s exactly because your situation is precarious that you need ObamaCare in the first place!
2. Credit reporting agencies refuse to fix their data. The CBS link above has numbers, but here’s a grindingly Kafka-esque field report from Kiplinger’s; that is, from a solidly middle-class publication dedicated to people who actually have money and time:
I had always paid my bills on time and had been approved for credit cards and loans with no problem. But when I got my reports from the three major credit bureaus, two of them mentioned an unpaid balance of $38 from a water company dating back to my college days — four years earlier — at the University of North Carolina. I assumed there had been a mistake, and set out to correct it. ….
At first glance, the rules for fixing an error seem simple enough. But because lenders don’t necessarily report to all three credit bureaus, a mistake might appear on one, two or all three of your reports, and you must dispute each one separately. Plus, challenging an error doesn’t mean the credit bureau will send Sherlock Holmes to investigate. The law requires the bureaus to verify the disputed information with the data provider, but that means the credit agencies are simply validating the information they already have. “The bureau considers you to be guilty until you can prove yourself otherwise,” says John Ulzheimer, president of consumer education for Credit.com.
This guy ultimately wins (except for the massive time suck and the stress) but here’s more for the flavor:
Calling back to complain wasn’t even an option because the bureaus frequently change their toll-free numbers, and they typically allow only people with current reports to talk to representatives. So I purchased another report and credit score, then picked up the phone. The rep told me that Equifax had no evidence of either of my previous disputes (even though I had a confirmation number for my conversation in January). I demanded to speak with a supervisor.
In other words, if you have time to go through a six-step-process, and if you have money to pay for more credit reports, and if you fight through a rotating series of call center hells, and — above all — if you have that sense of middle-class entitlement where demanding to speak to a supervisor is even an option, you may get your credit report fixed. Or not! And you may be eligible for ObamaCare. Or not! Just what the life lessons of a job at Walmart and that stack of bills from being unemployed prepare you for!
(Of course, all this is before we get to identity theft (10% of all Americans) and data breaches (Equifax, Transunion, Experian, 2013), any of which could — under Obama’s policy — affect your eligibility for ObamaCare as well.)
But finally, there’s a really big problem. Let’s call it….
3. The Match Game. MarketWatch:
When consumers order their credit reports, they have to provide their full name, Social Security number, date of birth and address. But credit bureaus often use fewer pieces of information to match account activity — like a report from a lender that a person has applied for a new line of credit — to borrowers’ credit reports. In many cases, they’ll only use seven out of the nine digits of the borrower’s Social Security number, says Chi Chi Wu, a staff attorney with the National Consumer Law Center, a nonprofit focused on consumer advocacy.
This practice becomes problematic when people have similar names and Social Security numbers, because it can lead to “mixed credit profiles” (when credit information relating to one consumer is placed in someone else’s file). … In the last three months of 2011, 33% of credit disputes related to claims by a consumer that an account in their file did not belong to them, either because of an error or identity theft, according to the CFPB.
[Norm Magnuson, a spokeshole for the Consumer Data Industry Association] says the credit bureaus are careful in matching data. He adds that a 100% match wouldn’t solve such concerns and says it would force bureaus to omit account activity from credit reports whenever there’s a small mistake in, say, the last two digits of a Social Security number, even if most of the identifying information is correct.
The question now becomes, how many “pieces of information” will the ObamaCare backend system use when matching IRS records to Social Security records to DHS records to “consumer reporting agency” records in order to determine income (hence eligibility)? Again, we can’t know, because ObamaCare’s income (eligibility) determination algorithm is completely opaque. Nor can we know how many of the “mixed credit profiles” will affect income determination (assuming, again, though we don’t know, that this is the only data requested from the consumer reporting agencies.******) And again, the errors could be capricious, and grant coverage to some while denying it to others.
But here’s the bottom line: You fill out the ObamaCare form under penalty of perjury. And “if the information does not match” “we may ask you to send us proof” (see Figure 1). So, if you play “the match game” and lose, you could be facing a perjury charge driven by credit reporting data (or payday lending data, or utility data, or….). Data that you may not know about, that may well be false, that might even be about somebody else, and for which the burden is on you, personally, to correct, which is extremely difficult and costly to do.
How would you like to be straightening out HHS, and any one of three national credit reporting agencies all at the same time, and the IRS if they decide to get into the act, all while the prospect of a Federal charge hangs over your head? Remember, the credit reporting agencies “consider you to be guilty until you can prove yourself otherwise,” so that’s the kind of data ObamaCare is going to be using. Will ObamaCare’s income (eligibility) determination algorithm consider you guilty until proven innocent? How about the navigators? How about the call centers? How about the ObamaCare appeals process? How about the Federal courts, if your data doesn’t “match” and a perjury charge is laid?
* * *
The real problem is simple, and it’s the basic flaw in ObamaCare’s system architecture: Income (eligibility) determination should not be a system requirement. (Proverbs for Programmers: “The cheapest, fastest, and most reliable components are those that aren’t there.”) Sleazy and error prone credit reporting firms should not be involved in determining your access to health care through ObamaCare’s exchanges, because the only eligibility requirement for health care should be your birth certificate (or, more pragmatically, your SSN). I know this may be hard to believe, but there actually is a system they have right on this continent, somewhere up north, I think in Canada, that works exactly like that, and it’s been very good for patients, doctors, taxpayers, and just about everybody but the rentiers.******* They call it “Medicare”. Look at that cost curve bend, eh?
NOTE I would so love to be wrong about this. But if I am wrong, then “and/or a consumer reporting agency” needs to be stricken from the “final version of the basic application.”
NOTE * Kudos to Ezra Klein for pointing out that the trade-off for making ObamaCare’s forms easier to fill out for individuals was making the forms harder to fill out for families of four, who will now have to xerox extra copies.
NOTE ** We should have known something was up; Joe Klein both “broke” the story that the old form was too long, and, in an “exclusive,” published the new, shorter, finalized form, revised by the wise heads in the West Wing. Purest kayfabe.
NOTE *** “Debt slave” may seem like extreme language, but the Pew report linked to above says that “The average payday borrower is indebted for five months during the year.” And for tiny amounts, like $500. I don’t know what you call that but debt slavery.
NOTE **** To be fair, a decision making process like this would be embodied in software.
NOTE ***** I would also very much like to know if the “navigators” are being asked to explain to their clients that their eligibility for ObamaCare depends on their credit record, their payday loan company, their utility payments, etc.
NOTE ****** The ObamaCare form also asks whether you smoke. The Acxiom database marketing company collects smoking data. No doubt some data broker could hook them up with a “consumer reporting agency” if need be. So perhaps “The Match Game” will apply not only to income data, but other data. Why not?
NOTE ******* And, granted, some well-funded right wing weasels.
UPDATE Why this policy determination now? (Interestingly, a search on “consumer reporting agencies” at Kaiser, the goto source for health care reform, shows two hits. From 2009.) It would be irresponsible not to speculate, and my speculation is this: A second difference between the draft (HHS, 26 page) and the finalized (Obama, 3 page) form is what system architects call “placement of function.” In the draft form, the function of gathering income data was placed at the front end (that is, on the web site or the paper form), where the user answers questions, rather like on a 1040. In the finalized form, these questions have been removed, and this function has been placed at the back end, meaning that the system itself will merge (“match”) information from various data sources to determine income (hence eligibility) by itself, without asking the user.
So why, very late in the day for building a big system under severe deadline pressure, did Obama bet on shifting the income data gathering function from the front end to the back end? I would bet that’s because the credit reporting agencies told him that was a good idea, and that their data would help him make it work. If I had to speculate on Obama’s source, it would be Penny Pritzker, who used to own Transunion, and for all we know still does, through a straw.
In comments, Bob Swern makes an especially important point:
4.) HEALTHCARE credit scoring is, like many other sectors, it’s own “sub-field” of expertise. (Much like mortgage, automotive and consumer credit scoring are separate areas of expertise, with different products being used, accordingly.) The reality is this methodology, relying upon consumer credit data, will–MUCH MORE THAN LIKELY–intensively contribute to a wide variety of follow-on nightmares. (i.e.: , with much-more-than-likely “criteria” being created quite subjectively, if not being altogether unknown to the public at large. How much “WEIGHT” is going to be given to these disparate sources of information/data when it comes to actually determining eligibility, and so forth. If it ends up being similar to how the private sector does it, –but, as long as they’re “applied uniformly,” then they’re SUPPOSEDLY in compliance with Federal Laws.
Naked Capitalism would love to hear from people who are familiar with RFPs for systems like the one Swern describes (I believe the term of art is “eligibility engine”), or even better from consultants or implementers in the field. There must be some people out there who are disgusted with the health insurance practices that ObamaCare seems to be integrating, or who have had loved ones injured by those practices, or who have themselves been injured by them.