Guest Editorial: States misusing food stamps

The Orange County Register
Oct. 12

A certain amount of fraud is to be expected in large government benefits programs, but the fraud usually is committed by beneficiaries, not state governments.

According to a report last month by the U.S. Department of Agriculture’s inspector general, however, states have been massaging data to reduce their overpayment error rates in order to receive bonus payments or avoid penalties from the federal government. The hit to taxpayers in payment errors: more than $184 million.

A key contributing factor is that the states perform their own quality control audits. The USDA’s Food and Nutrition Service conducts a smaller review as well, but it does so based on a subset of the information provided by the states, and federal reviewers are usually reluctant to challenge states’ determinations. “(T)he bias in the (quality control) process was an inevitable consequence of states competing against each other for bonus money,” one state’s Supplemental Nutrition Assistance Program director conceded.

The report also found that states used outside consultants to train quality-control review staff to reduce error rates by manipulating information, such as by contacting beneficiaries after the fact and encouraging them to report additional household or medical expenses, or averaging income over a longer period than normal, to make beneficiaries eligible.

It additionally criticized the federal government for a policy since 2009 that allows states to confer “Broad Based Categorical Eligibility” status on beneficiaries, as long as they have gross incomes of less than 200 percent of the federal poverty level and can be provided with a brochure, website address or phone number about other state welfare programs. This allowed applicants to bypass the usual income and asset requirements.

One BBCE beneficiary was allowed to remain in the program despite income 4.6 times the federal poverty level. Moreover, BBCE beneficiaries were excluded from error-rate data. The FNS’ quality control procedures advised that such households would “never (be) ineligible regardless of income,” and that reviews did “not identify any eligibility errors” for them.

To introduce some more integrity into the system, the food stamp program should ditch the “two-tiered” (state and federal) quality control process, as the National Research Council recommended 28 years ago, and align its BBCE policies with federal regulations. In addition, it should utilize recovery auditing, in which contractors are paid based on a percentage of the savings they recover from payment errors, as has been done to a limited extent in the Medicare program.

Guest Editorial