Health Reform Bill Adds to IRS Duties

Collecting taxes, auditing tax returns, and chasing delinquent taxpayers are all part of the day-to-day work of the Internal Revenue Service. But under the terms of the healthcare reform bill now being finalized in Congress, the IRS will have several new jobs added to its to-do list and some observers are questioning whether the agency can handle them.

Because of the bill’s requirement that almost all Americans must have health insurance coverage, the IRS will be charged with getting proof of coverage from taxpayers and collecting any penalties due from those who remain uninsured. The agency would also have the task of handing out up to $140 billion a year in subsidies to small businesses and to about 19 million low-income Americans to help them buy health insurance. The IRS would also be charged with collecting new fees aimed at defraying the cost of the reform bill from employers, drug manufacturers, and medical device makers.

Critics question whether the IRS, which is already dealing with budget shortages, inadequate staffing, and obsolete computer systems, is up to the job. According to its own estimate, the agency isn’t doing all that well at its primary task, failing to collect about $290 billion in income taxes in 2005, the last year for which data is available. Critics also point out that the health insurance subsidy program could be a prime source of fraud and abuse. They cite the government’s Earned Income Tax Credit program, which pays lump-sum rebates to low-income workers. A report from the Treasury Department’s Inspector General revealed that about $11.4 billion, or 28¢ out of every dollar, was improperly paid out under the program in 2005.