A Note on Unemployment Benefit Fraud

The spending madness from last year’s artificial economic shutdown continues, morphing into the American Families Plan in Biden’s FY2022 budget and a colossal infrastructure bill that has very little to do with infrastructure. You don’t need to be a fiscal conservative to see that such an unhinged blowout of government money would come with a lot of waste, fraud and abuse, but even ardent libertarians are struck by just how insane that black hole is. Here is Tyler Durden over at ZeroHedge:

According to Blake Hall, CEO of ID.me – a fraud prevention service, America has lost over $400 billion to fraudulent claims, with as much as 50% of all unemployment payments possibly being stolen. Of that, up to 70% of the money stolen by impostors ultimately left the country according to Haywood Talcove, CEO of LexisNexis Risk Solutions, who ways [sic] “These groups are definitely backed by the state.” The rest of the money was likely stolen by street gangs domestically, who have made up a greater share of the fraud in recent months.

Ya think? Figure 1 below provides the unemployment benefits paid out per unemployed person, month by month since 2018. It is calculated from the unemployment benefits received under personal income as reported by the Bureau of Economic Analysis and the number of people who are unemployed according to the Bureau of Labor Statistics. Does anyone really believe that unemployed individuals on average cashed in over $6,500 per month in June and July last year?

Figure 1

Sources of raw data: Bureau of Economic Analysis (Personal Income); Bureau of Labor Statistics (Unemployment)

Government is still currently paying out about ten times more per unemployed person than before last year’s artificial economic shutdown. And we don’t even have to pay the taxes for all this – we are throwing the burden of all that onto the shoulders of our grandkids! Whatever they did to deserve that burden, I don’t know, but maybe we can ask someone who likes this government spending blow-out.

There is not a whole lot of interest in stopping wasteful and fraudulent use of government money. Medicaid is a good example: in 2016 the American Action Forum reported that so-called improper payments in Medicaid accounted for 8.4 percent of average Medicaid spending. And that was a low estimate, the AAF noted:

Medicaid has been on the Government Accountability Office’s (GAO) list of high-risk programs since 2003 because of its high improper payment rate, consistently ranking second among federal programs with the highest improper payment rates. Since 2008, Medicaid’s improper payment rate has averaged 8.4 percent, resulting in $161 billion worth of improper payments and accounting for more than 17 percent of all improper payments made by the federal government. Eliminating all of the waste, fraud, and abuse in just Medicaid (assuming a continued improper payment rate of the current 9.8 percent) would reduce the deficit by approximately 11.4 percent, according to the Congressional Budget Office’s most recent projections.

And this was five years ago. As a testament to the lack of interest in this issue, I did a search for “waste fraud and abuse in medicaid” on all the major search engines. Google, Bing and DuckDuckGo all yielded similar results, with the AAF article and a 2011 study by the National Conference of State Legislatures being the only ones of any substance. Yandex produced a couple of more hits, among them a Congressional bill from 1997 that aimed to reduce waste, fraud and abuse in Medicaid.

Searches of the same kind for other entitlement programs yield a slightly better crop of results, but not by much. Overall, the improper use of government funds is not something our politicians, think tanks and media pay that much attention to.

The one way, of course, to stop government waste, fraud and abuse is to end the welfare state. Its very structure, its very purpose, invites those immoral activities.