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Kansas doubles down on welfare fraud

But critics say the move is misguided and punitive toward the poor

By Dave Ranney | July 29, 2013

Convinced that potentially thousands of Kansans are cheating the state’s welfare system, officials at the Kansas Department of Children and Families in the last few months have more than doubled the number of people working in the agency’s fraud investigation unit from 11 to 24.

“There is no formula for the perfect number of fraud investigators. We could certainly use more to combat the problem of fraud abuse, however, budget constraints limit the number of people we can hire,” said Theresa Freed, the agency’s chief spokesperson.

Freed said the agency has “not calculated how much fraud may exist in Kansas,” but that federal officials estimate it is between 1 percent and 4 percent within the food stamp program alone and that there is no reason to think the incidence is less here than occurs nationally.

According to agency records, 318,988 Kansans — 176,417 adults and 142,571 children — were on the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) last month. The average per-person benefit was $121.

Also in June, 18,550 people received cash assistance that averaged about $111 per person per month. In addition, 8,163 families received child-care subsidies that averaged $353 per month.

The federal government pays for most of the three programs, which together last fiscal year cost taxpayers more than $537 million.

“They all have potential for fraud,” Freed said, noting that last year the department’s fraud unit won 240 civil judgments against beneficiaries for the return of $941,000 in wrongfully obtained welfare benefits.

The fraud unit investigated 2,714 cases last year, up significantly from 1,213 the year before.

The agency's stepped up efforts have support in the Kansas Legislature.

“I want to make sure that the money goes to those who need it and qualify for it,” said Senate Vice President Jeff King, an Independence Republican. “I’m supportive of a rigorous fraud prevention effort.”

'Opposite direction'

But advocates for the poor and some experts on the topic of welfare fraud, said the problem is not as big as state officials and others claim and that Kansas has beefed up its investigation unit even as other states have scaled back due to diminishing returns.

Kansas is “going the opposite direction other states are going,” said Kaaryn Gustafson, a law professor at the University of Connecticut and an expert on the nation’s welfare system.

For example, Ohio and California, which have long had reputations for tough enforcement, recently have eliminated or reduced their welfare fraud units because they weren’t cost effective, she said.

“California came to the realization that it was spending $60 million to go after $20 million of fraud and only recovering a small fraction of that,” she said.

Most SNAP and cash-assistance fraud, Gustafson said, is driven by families struggling to make ends meet combined with not being able to use their SNAP benefits to buy non-food items that most people consider essential.

“Food stamps can only be spent on food,” she said. “So if people need things like laundry detergent, or diapers...and they’ve already spent all of the cash benefits on housing or utilities, they’ll do things like buy frozen meat, sell it to a neighbor and use the proceeds to buy essentials.”

Diminishing returns?

“You always want to catch as much fraud as you can and you want to discourage it as much as possible,” said Don Jordan, former head of the Kansas Department of Social and Rehabilitation Services, the predecessor agency to DCF. “But you’re also going come up against a certain amount of diminishing returns. By that I mean you can hire, say, 10 people to go after fraud, but that doesn’t mean you’ll catch twice as much if you hire 10 more people. At some point, you’re going to find yourself spending more and more money to find whatever fraud is there.”

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Don Jordan, former secretary of the Kansas Department of Social and Rehabilitation Services

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The 13 new positions at the DCF fraud unit are expected to cost about $486,000 in the fiscal year that began July 1.

Swipe cards

Most experts said the incidence or potential for welfare fraud was reduced — though not eliminated — with the introduction of digital swipe cards several years ago. The cards make it harder to sell or misuse SNAP benefits than when the food stamps were paper coupons.

The card will not let the holders convert their food stamps or child-care subsidies to cash. But, Freed said, there’s nothing to stop someone using their cash assistance to buy liquor, gamble or for adult entertainment.

Not everyone with a benefit card is eligible for cash assistance or a child-care subsidy. Most welfare recipients are only eligible for SNAP.

Freed said she didn’t know how many cases of cash-assistance misuse the agency had confirmed last year.

“It is extremely difficult to prove that cash assistance withdrawn from an ATM was used to purchase prohibited items,” she said.

DCF does not investigate Medicaid fraud. Instead, those investigations are handled by a 15-member fraud unit at the Kansas Attorney General’s Office. The unit, according to spokesperson Don Brown, has an annual budget of $1.5 million. In fiscal 2013, it had a hand in recovering $24.1 million.

New policies

State officials have beefed up their policies for the benefit cards with the goal of reducing the number it replaces due to loss or destruction.

And last month they began the process for replacing the old state Vision cards with a new one that is labeled “Kansas Benefits Card.” It carries the image of wind turbines and a reminder on the back that it cannot be used at any “liquor store, gambling establishment or any adult oriented entertainment location.”

Freed said much of the welfare fraud detected by DCF appears to involve welfare recipients not reporting income or assets that would prevent them from being eligible for the public assistance cards in the first place.

For example, a young mother with two children may tell DCF she’s living in a three-person household, not mentioning that she has a boyfriend who’s paying a portion of the bills.

Most of the investigations, she said, stem from internal reviews of transaction data and from calls to the department’s toll-free Fraud Hotline, 800-432-3913.

Feeding the family

Critics of the beefed-up enforcement said it was misguided. Some said they believed it was intended to punish the poor.

Dr. Sharon Lee is executive director at Southwest Boulevard Family Health Care, a safety-net clinic in Kansas City.

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Dr. Sharon Lee

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“My whole day is spent with people who are on food stamps,” Lee said. “I don’t hear them talking about selling their food stamps to buy booze, I hear them talking about how they’re not enough to keep their families fed.”

Lee said she knew of one patient who had misused his benefits.

“He’s disabled, he’s mentally ill,” she said. “He was getting about $100 a month in (cash) assistance, but he got cut off.”

The man, she said, had been renting a cot under a stairwell in an older home.

“Somehow, he ended up using his food stamps to pay for his cot,” Lee said. “So, yes, he abused the system. But I don’t begrudge him that and I don’t think anybody else would, either. It just amazes me that when government looks for ways to cut fat from an already lean budget, it goes after the poorest of the poor. That seems wrong to me.”

Already equipped

Marilyn Harp, executive director of Kansas Legal Services, questioned the need for more people in the fraud unit, saying the state already has adequate tools for ferreting out the problem through its access to federal tax and Social Security records.

“If someone is working and collecting TANF (Temporary Assistance to Needy Families) benefits that fact is easily and currently discovered through electronic means,” she said. “The state maintains a 24 hour phone line where the public can report suspected fraud.”

TANF refers to the federal funds that the state uses to underwrite its programs for low-income families, including cash assistance.

For an adult to be eligible for cash assistance they must be living with children who are their dependents.

“Kansas families are desperate for the help provided by these programs as temporary aid in times of trouble,” Harp said. “The stigma created by suggesting that those who use these programs are guilty of fraud is not consistent with the idea of building strong Kansas families.”

But Freed said the agency already has seen a doubling of investigations in the past year and expects to report more in the future thanks to the additional staffing.

“We have no way of knowing exactly how many people are cheating the system. One person fraudulently receiving benefits is one too many,” she said. “After there is a finding of fraud, the collection process can take more than a year. Money is not always recovered immediately. However, in fiscal year 2011, $1.2 million was recovered. In fiscal year 2012, $1.1 million was recovered. This was prior to the expansion of the anti-fraud Unit. We fully expect to recover even more in the next fiscal year.”

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