Unemployment Insurance: Increased Focus on Program Integrity Could Reduce Billions in Overpayments
GAO-02-697
Published: Jul 12, 2002. Publicly Released: Jul 12, 2002.
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Highlights
The Unemployment Insurance (UI) program is a federal-state partnership to help replace the lost earnings of unemployed persons and to stabilize the economy during a recession. The Department of Labor estimates that $2.4 billion in overpayments were made in 2001, including $577 million attributed to fraud or abuse. Overpayments in the UI program result from management and operational practices at the state and federal level. At the state level, many states do not sufficiently balance the need to quickly process and pay UI claims with the need to control program payments. Moreover, states rely heavily on self-reported information from claimants for other important data, such as a claimant's receipt of other federal or state program benefits and whether they are citizens of the United States. At the federal level, policies and directives from the Department of Labor affect states' priorities and procedures in a manner that makes overpayments more likely.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status Sort descending |
|---|---|---|
| Department of Labor | To facilitate a change in Labor's management approach that will help to improve UI program integrity, the Secretary of Labor should develop a management strategy to ensure that the UI program's traditional emphasis on quickly processing and paying UI claims is balanced with the need for payment accuracy. Such a strategy should include revising program performance measures to ensure increased emphasis on payment accuracy. |
Closed – Implemented
Labor has established a GPRA measure of the ratio of overpayments established to a sample-based estimate of recoverable overpayments. A target of 59% for this overpayment detection activity was set for FY 2003. Labor also issued a UI program letter (UIPL 15-03) to all state workforce agencies emphasizing that it has established a baseline to improve UI payment accuracy nationwide.
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| Department of Labor | To facilitate a change in Labor's management approach that will help to improve UI program integrity, the Secretary of Labor should develop a management strategy to ensure that the UI program's traditional emphasis on quickly processing and paying UI claims is balanced with the need for payment accuracy. Such a strategy should include using the annual administrative funding process or other funding mechanisms to develop incentives and sanctions that will encourage state compliance with payment accuracy performance measures. |
Closed – Implemented
Labor asserts that section 20 CFR 602.43 of the regulations does not permit the agency to use sanctions or funding incentives to achieve specified error rates in state UI programs. However, Labor has used funding in other ways to encourage state compliance with payment accuracy performance measures. In particular, (1) it provided grants to 26 states to help them gain access to their State Directory of New Hires. Labor also encourages states to use a portion of their Reed Act distributions to enhance program integrity and reduce overpayments. As of March 2003, 39 states reported that they detected overpayments by using their Directory of New Hires; (2) Labor is working with SSA to give states online access to SSA data during the initial claims process; and (3) Labor is currently conducting a study on how to link budget and performance and will include recommendations for addressing the study's findings.
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| Department of Labor | To facilitate a change in Labor's management approach that will help to improve UI program integrity, the Secretary of Labor should develop a management strategy to ensure that the UI program's traditional emphasis on quickly processing and paying UI claims is balanced with the need for payment accuracy. Such a strategy should include using its quality assurance data more intensively to help states identify internal policies and procedures that need to be changed to enhance payment accuracy. |
Closed – Implemented
Labor has initiated studies utilizing its Benefit Accuracy Measurement (BAM) quality assurance data. A UI program letter (UIPL 23-03) was sent to all state workforce agencies advising them of the findings of these studies, and providing states with data analyses that suggest effective ways to improve the detection, prevention and recovery of UI benefit overpayments. Labor has also continued to develop and report data on overpayments from its BAM program, which are addressed in the annual UI Performs report issued in August of each year.
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| Department of Labor | To facilitate a change in Labor's management approach that will help to improve UI program integrity, the Secretary of Labor should develop a management strategy to ensure that the UI program's traditional emphasis on quickly processing and paying UI claims is balanced with the need for payment accuracy. Such a strategy should include developing a plan to help states increase the proportion of UI overpayments that are recovered each year. |
Closed – Implemented
Labor has undertaken actions that may help states improve their overpayment recoveries. These include (1) conducting a program integrity conference in conjunction with the National Association of State Workforce Agencies (NASWA)that included workshops on best practices for recovering overpayments (such as greater use of automation in collections, application of penalties/interest as a recovery tool, and use of civil and criminal actions); and (2) use of state Directories of New Hires to enhance the initiation of (and thus increase the potential for) overpayment recoveries.
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| Department of Labor | To facilitate a change in Labor's management approach that will help to improve UI program integrity, the Secretary of Labor should develop a management strategy to ensure that the UI program's traditional emphasis on quickly processing and paying UI claims is balanced with the need for payment accuracy. Such a strategy should include studying the potential for using the Wage Record Interchange System as an interstate eligibility verification tool. |
Closed – Implemented
In our report we stated that the National Directory of New Hires (NDNH)is the most effective means of obtaining timely wage and new hires data. If Labor could not help states obtain access to the access, in lieu of access to the NDNH, we recommended that the agency use its WRIS system as an interstate eligibility verification tool. However, on July 14, 2004 the Congress passed H.R. 3463, the SUTA Dumping Prevention Act. This bill also granted states access to the NDNH to ensure the accuracy of UI payments. CBO has estimated that this bill would save $498 million over 5 years.
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state relationsInternal controlsOverpaymentsUnemployment insuranceQuality assuranceInsurance claimsUntimely protestsDatabase management systemsPublic officialsPerformance measurement