Keeping Identities Straight

At the NCPA Health Policy blog, Linda Gorman discusses the problems the government has tracking identities:

Thanks to identity "borrowing," it appears that even the IRS has problems determining who is earning what. The report notes that of the 3 million returns filed using individual tax identification numbers (ITIN) in 2007, "[a]bout 1.2 million returns reported wages earned by ITIN taxpayers using another person's SSN [social security number]."

At present, the IRS does not distinguish between legitimate and illegitimate users of a social security number (SSN). If someone uses someone else's SSN and fails to pay taxes on the income, then the IRS tries to collect from the legitimate holder of the SSN. Collection actions for taxes on income that someone never earned can include seizure and sale of any type of real or personal property.

Or, as the bureaucracy puts it, "income matching associated with individual taxpayer identification numbers presents many challenges to tax administration."

....

The report discusses a set of 96 returns from 2007. Of these, 4 were filed using an ITIN, but the return reported W-2 wages under another person's name and SSN. The name on the W-2 matched the legitimate owner of the SSN, but not the name on the ITIN tax return.

In cases like this, the IRS says that it cannot match the income to the person earning it. Instead it matches the income to the taxpayer legally assigned the SSN. The legitimate owner of the SSN may or may not know that he owes taxes on income he didn't earn and the IRS has no procedures for notifying him about the mismatch. In 2007, the IRS figures that about 23,000 taxpayers had their names and SSNs appropriated by ITIN filers.

In 73 of the 96 cases, the name on the W-2 matched the name of the taxpayer filing the return, but the SSN on the W-2 belonged to someone else. In 27 of the 73 cases of mismatched names and SSNs, the legitimate SSN owner was under 18, dead, or over 100. You will be relieved to know that in these cases the IRS and the Social Security Administration bureaucracies did "not associate the income and benefits with the lawful taxpayer."

Buying and selling social security numbers is a business, and health care records provide fertile grounds for crooks. In 2006, for example, a Social Security Administration audit reported that a buyer paid an Alabama hospital employee $100 each for children's social security numbers that were reportedly used to file fraudulent tax returns. At the end of 2007, the Social Security Administration reported that it had records on 296 million mismatched W-2 forms associated with $835.7 billion in wages.

And the question introducing the whole thing was, will the government be up to keeping track of health care for everyone?  They may not be.

And while income and Social Security benefits are fungible, and messes are something an accountant can (eventually) straighten out, mixing up medical information can be more serious.

In tax records, using someone else's identity may artificially inflate someone's tax bill. In a system of electronic health records, errors propagate rapidly and identity fraud increases the probability that a thief's health conditions will be confused with the health conditions of the person whose identity he stole. Two questions arise. First, was the person living in Arizona, the legitimate owner of the SSN used by Mr. Mangino, informed that his identity was used by someone else? And second, did he have the right to remove false information from his health record? In some states, people do not have the right to delete information from their medical record, and they can only amend it if the health care provider originating the record agrees to do so. This increases the probability of confusion between their medical history and a thief's.

It's bad enough having to prove to the IRS that you've never moonlighted as a sewing machine operator in El Paso.  What if you wind up in a hospital, unconscious, being treated for diabetes or cancer you don't have?