Last week, The New York Times reported that the Obama Administration over the Independence Day holiday quietly awarded “a contract worth as much as $1.2 billion” to Serco, a British company, to help develop the federal insurance exchange. Now comes word from London that Serco is one of two companies under investigation by British authorities for overbilling government contracts.
Britain’s Lord Chancellor, Chris Grayling, made a statement in Parliament on Thursday about a “wholly indefensible and unacceptable state of affairs” and indicated that the over-charges may have begun nearly 15 years ago:
The audit team is at present confirming its calculations, but the current estimate is that the sums involved are significant and run into the low tens of millions of pounds in total, for both companies, since the contracts commenced in 2005. The audit shows that the overcharging began at least as far back as the commencement of the current electronic monitoring contracts in 2005. It might even date back as far as the previous contracts let in 1999.
Even as the integrity of Serco’s contracting work has come into question in Britain, the Obama Administration could pay Serco billions to verify the integrity of individuals’ exchange applications. As the Times reported:
Serco will help the Obama administration and states determine who is eligible for insurance subsidies, in the form of tax credits, and who might qualify for Medicaid….Serco will also help the administration decide who is entitled to exemptions from the tax penalties that can be imposed on people who go without health insurance starting next year.
This billion-dollar contract represents a glaring contradiction in terms—a company under investigation for inaccurate, and potentially fraudulent, bills in Britain being asked to verify the accuracy of Americans’ applications for federal exchange subsidies. Particularly given that the Administration also announced it will rely on the “honor system” for individuals to self-report income to the exchanges next year, this development raises even more concerns about the potential for rampant fraud in Obamacare programs.
More broadly, the events in London also raise questions about why federal taxpayers should be asked to give more than $1 billion to a contractor at the center of a major investigation. Of course, Congress can—and should—put a stop to these machinations by refusing to spend a single dime on Obamacare.