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July 3 2017

Fraud Alert: Federal Free Phone, Internet Program Wastes $100 Mil Annually on Fake, Dead Enrollees

by Patrice Lee Onwuka

A federal subsidy program billed as a “lifeline” to poor Americans is being wasted by people gaming the system to the tune of at least $100 million each year.

When the federal watchdog Government Accountability Office (GAO) reviewed 3.5 million Lifeline accounts, it discovered that it could not confirm eligibility for 1.2 million participants (36 percent) based on those enrollees participating in another federal benefit program such as Medicaid.

Some 5,500 accounts were duplicates costing $51,000 a month in wasted benefits.

Even more unbelievable, a whopping 6,300 active accounts belonged to dead people wasting about $707,000 a year.

During undercover tests where GAO investigators contacted Lifeline providers, those companies approved accounts even though the agents provided fictitious information. Some 19 of 900 providers approved applications for fraudulent individuals nearly two out of three times.

Democratic Senator Claire McCaskill who called for this investigation was angry:

“A complete lack of oversight is causing this program to fail the American taxpayer — everything that could go wrong is going wrong,” McCaskill said. “We’re currently letting phone companies cash a government check every month with little more than the honor system to hold them accountable, , and that simply can’t continue.”

Not all of her Democrat colleagues want to reform the system – not surpringly. Taking away government benefits is not political popular.

One big oversight problem is that Lifeline providers take a “pay-and-chase” approach to oversight, where they make disbursements on the front end and rely on audits and reviews afterward to check for noncompliance and improper payments.Taxpayers expect and deserve better than kind of lax oversight.

The Lifeline program was created in the 1980s by the Federal Communications Commission (FCC) to help low-income Americans pay for landline phone service. The program was subsequently expanded to include cell phones and then last year, internet service under President Obama. The federal government reimburses telecommunications companies that offer discounts for service to eligible customers. All of us consumers pay a fee on our bills to fund this program.

In 2016, Lifeline disbursed about $1.5 billion in subsides to 12.3 million households. Looking at recent data we see that the program jumped from about 6 million subscribers in 2008 to almost 18 million in 2012 due to recession-era expansion under President Obama. After recession ended, the rolls have not been trimmed back leaving double the number of people (about 12 million) than before the recession.

The new FCC chairman Ajit Pai, came under fire earlier this year for scaling back the program. His concern was that the Obama-appointed head of the FCC expanded the program to include internet subsidies despite the program’s demonstrated waste, fraud, and abuse problems.

Pai and his Republican colleague on the FCC were right to be concerned. These new numbers are vidication. They confirm that much needs to be done to scale down the program so that it it to poor families who actually qualify and not those who've figure out how to abuse the system.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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