GAO Report Exposes Massive Fraud in Federal Health Insurance Program

The Government Accountability Office (GAO) has released a groundbreaking report that reveals The Office of Personnel Management (OPM), which oversees health insurance for 8 million federal workers and their families, has never checked the eligibility of those on its rolls. According to the report, the OPM spends over $60 billion a year, and a large part of it goes to waste at the hands of fraud due to the OPM’s lack of accountability. “OPM does not care about fraud, or they would do it. It’s not that hard,” said Senator Rick Scott, who requested the GAO report, according to a Politico report.

Scale of Potential Loss

The GAO in its audit performed between May 2021 and December 2022, found several instances where claims of ineligible enrollees were processed by the OPM. The GAO interviewed five government agencies and five of the program’s health insurance carriers, all of which reported not identifying and removing ineligible family members regularly.

For instance, a federal worker was caught in January 2017, when an insurance carrier noticed an enrolee submitted altered court documents to remove his ex-wife from the health plan and add his new wife to the plan. In the case, it was found that the government had paid out over $150,000 in claims on behalf of the fraudulent ex-wife over 14 years of ineligible coverage.

In another case, the agency’s Office of Inspector General received a tip against an employee who had enrolled their child as a dependent incapable of self-support to keep the health coverage beyond 26 years of age. The child was allegedly capable of self-support and failed to qualify for disability. However, the government had paid out over $160,000 in improper claims, including payments to several drug rehabilitation centers.

Overall, the GAO estimates that the cost of claims from such ineligible enrollees could be $1 billion a year. However, since the estimate is based on the information shared by the OPM itself, it can be only considered an estimate of the potential fraud.

The office of Assistant Inspector General for Audits Michael Esser, who oversees audits of all programs administered by OPM, estimates that the ineligible enrollees cost the federal health program between $250 million and $3 billion a year.

OPM’s Lax Response

According to the Politico report, despite the GAO prodding the OPM to conduct an audit, the agency has shown no signs of doing so as it deems it to be too expensive. The GAO estimates that the $120 million audit would be paid for by OPM. 

Currently, the OPM relies on 160 government employing offices and it has over 70 contracts with health insurance carriers. It is their responsibility to enroll and verify the eligibility of Federal Employees Health Benefits Program members. However, the only way to discover an ineligible enrolee is by catching them when they try to make a change in the program or through a tip on the agency hotline.

“It’s not an easy problem to fix, there’s no doubt about that,” Esser said, in the Politico report. “But it is potentially a very costly problem to not address,” he added.

Further, the director of GAO’s forensic audits and investigative service team, Seto Bagdoyan said that the OPM is not likely to conduct an audit. “With what we found to be OPM’s passivity in its oversight role, we essentially concluded that program integrity and managing risk are not apparent priorities for OPM,” Bagdoyan said.

Possible Solution

Bagdoyan stated  that congressional action might be the only way to make the OPM address the issue.Thus, Senator Rick Scott, former governor of Florida, is planning to introduce a bill in March that would help solve the issue. 

The bill would mandate OPM to implement the recommendations of the GAO including removing ineligible members from the program, and assessing the impact of fraud while documenting its assessment. Senator Scott is confident the bill will garner bipartisan support, as per the report.