Monday, September 10, 2018

States as the incubators of fraud-fighting policy in safety net programs

States because of their proximity to people served have the ability to act as incubators of proposed public policy.

This is the case when tackling the thorny issue of fraud in the Supplemental Nutrition Assistance Program (formerly known as food stamps).

The federal agency charged with managing SNAP, the Food and Nutrition Service, is partnering with 10 states on what it calls the SNAP Fraud Framework which combines analytics with innovative electronic-payments industry fraud-fighting concepts and techniques to defeat potential SNAP fraudsters.

The Framework provides states with fraud-fighting tools that include analytics and data management, fraud detection, performance measurement, and investigation tools.

This collaborative effort, combining Federal resources with state knowledge  is a good example of the concept of federalism the Framers intended in the Constitute.

Another cooperative fraud-fighting area has been the Food and Nutrition Service’s long campaign to replace the paper food stamp benefit with electronic-benefits transfer systems which use plastic electronic cards with personal identification numbers, similar to bank cards. It is more difficult to scam the system with EBT cards than it was with paper food coupons.

FNS sets guidelines for EBT technology and the states are responsible for running the systems. In another cooperative action, Congress funds the ability of state EBT systems to be interoperable, so that EBT cardholders in one state can use their cards in another state. Cooperatively, the federal agency and the states share the administrative costs of these electronic systems.

The topic of waste, fraud and abuse in the nation’s safety net for poorer Americans has been a never-ending debate among lawmakers and the public for decades, but no program has garnered more attention in this area than SNAP. Anecdotes of program misuse true or not abound in the media.

This much we know is true, the program provides essential nutrition to over 40 million Americans each year at a cost of some 70 billion dollars. SNAP has attracted attention because its cost has almost doubled over the last decade, a period that has seen significant economic turmoil.

That is not to say that abuse doesn’t occur. As the program’s expenditures have grown for legitimate reasons, so too has fraud as criminals have tried to capitalize on the nation’s goodness. Nevertheless law enforcement pursues the fraudsters. In the early 1980s the work of a federal task force of 900 G men led to almost 1400 indictments. From that time to now the rate of fraud has dropped from about 4 cents on the dollar in the early 1990s to about 1 cent in the mid-2000s. Today, the fraud rate is less than 1.5 today.

However, that 1.5 fraud rate represents a lot of money. In 2012 the cost of fraud was estimated at nearly 370 million dollars, a sum that a short 4 years later was estimated to have risen to almost 600 million.

During this 4 year span the number of fraud investigations rose by some 30%. almost half of those investigations were in one state, New York.

 Pinning down program fraud, is a difficult venture. during this 4 year period the number of eligible beneficiaries declined while fraud rose. Normally, we would expect the two rates to rise or fall together.