CQ Roll Call | DeLauro Points to Potential for Fraud in Crop Insurance

By Ellyn Ferguson | CQ Roll Call | March 22, 2013

If Congress wants to search for waste, fraud and abuse, it should look beyond federal nutrition programs to other government-backed programs such as crop insurance, a senior Democratic appropriator said Thursday.

Rep. Rosa DeLauro of Connecticut is unlikely to win over members of the House Agriculture Committee or other appropriators from farm country to her point of view. The Agriculture Committee plans to produce a five-year farm bill this year that will make crop insurance the centerpiece of the financial safety net for farmers.

But DeLauro took the opportunity at an Agriculture Appropriations hearing to counter congressional Republicans’ scrutiny of the Supplemental Nutrition Assistance Program and a proposal by House Budget Chairman Paul D. Ryan to convert the $80 billion-per-year program into a block grant to the states. SNAP, formerly known as food stamps, is the single largest program in the Agriculture Department’s budget in cost and size with a monthly average of 46 million participants. Crop insurance, which cost $14.1 billion in fiscal 2012, is rapidly replacing traditional farm subsidies.

DeLauro, a vocal defender of federal nutrition programs for low-income people, noted two items in Agriculture Inspector General Phyllis K. Fong’s written testimony that the lawmaker said should prompt questions. First, data provided by Fong’s office showed that SNAP had less than 1 percent of potentially ineligible recipients. Because of SNAP’s size, even that low of an ineligible rate would translate to $3.7 million a month in payments, the inspector general said.

DeLauro focused on another review by Fong’s office of a crop insurance program for new farmers. The inspector general’s office found in a small sampling that 154 of 176 such policies in the 2007-2008 crop year went to farmers who were ineligible under the criteria that they have no more than two years history in growing a specific crop. Under the new producer designation, farmers can buy federally subsidized crop insurance at an affordable rate. Without the designation, people new to farming or farmers trying a new crop would not have the production history to qualify for crop insurance or to find reasonably priced coverage. Of the 2.3 million policies issued that crop year, 144,000 were through the new producer program.

The USDA’s Office of the Inspector General “found nearly two tenths of 1 percent of SNAP participants were potentially ineligible for the program, compared to the 87.5 percent of new policies that OIG found were sold to ineligible producers,” DeLauro noted. Insurance companies paid out $2.4 million in indemnities on 57 of the questionable policies.

She said this should prompt closer scrutiny of the Risk Management Agency, the USDA department that oversees the private insurance companies and agents that sell policies to farmers.

“You have a very stringent requirement on the SNAP program, which have over the years been put into place. So you’re looking at an error rate — overpayment and underpayment rate — of 3.8 percent. What I want to find out is what is the similar process that we [have to] deal with RMA and with insurance companies so that we don’t have an 87.5 percent rate of ineligible producers getting an advantage,” DeLauro said.

Gil H. Harden, assistant inspector general for audit, said insurance companies were primarily at fault for poorly screening applicants but he also said the RMA needed to provide better oversight of the companies. Neither Harden nor Fong could provide DeLauro an estimate on how much poor screening might be costing the crop insurance program.

Fong noted that SNAP and the crop insurance program both have had cases of fraud. Two insurance fraud cases — one involving an insurance agent and one a crop adjuster — has resulted in 40 convictions and determinations of $23 million in restitution. On the nutrition side, a case involving a ring operating 13 storefronts to defraud SNAP and the Women, Infants and Children program of $5 million in benefits resulted in jail time for 13 people and a restitution order of $6.3 million. Overall, the inspector general had 342 convictions with a value of $57.7 million.

No one on the subcommittee directly responded to DeLauro, although Chairman Robert B. Aderholt, R-Ala., and Rep. Jeff Fortenberry, R-Neb., said they understand that SNAP is a safety net. However, they said instances of fraud and mismanagement undermine its integrity.

“Even when you have a small amount of fraud the numbers are actually very large,” Fortenberry said, referring to the size of the SNAP caseload.