Employment and Training Administration
U.S. Department of Labor
Washington, D.C. 20210
July 31, 2002
|ADVISORY:||UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 33-02|
|TO:||ALL STATE WORKFORCE AGENCIES|
|FROM:||GRACE A. KILBANE /s/|
Office of Workforce Security
|SUBJECT:||Development of an Unemployment Insurance (UI) Payment Accuracy/Integrity Measure|
|July 31, 2003|
The President's Management Agenda for FY 2002 provides a strategy for improving the management and performance of the federal government with the emphasis on performance and results. One of five government-wide initiatives, "Improved Financial Performance," calls for establishing a "baseline of the extent of erroneous payments." Federal agencies are expected to include in 2004 budget submissions information on erroneous payment rates, including actual and target rates, where available, for all benefit and assistance programs over $2 billion, which include UI. Using this information, the Office of Management and Budget will work with agencies to establish goals to reduce erroneous payments for each program.
This UIPL discusses a process through which the UI Program will respond to both GPRA and the President's Management Agenda by developing an appropriate indicator for the goal of improving benefit payment accuracy.
4. Overview. Since 1988, ETA has published a measure based on the Benefit Accuracy Measurement (BAM) program that provides a comprehensive estimate of all overpayments in the UI system. Its standard is each state's own eligibility requirements as embodied in its law and policy. Although BAM provides statistically valid and representative estimates, the variation from one state to another reflects more the differing potential for error due to more or less stringent eligibility requirements than the quality of the states' benefit payment administration. Many of the errors are "technical" in nature. Many also do not tie well to the other source of information on overpayments, which are data on the amount of actual overpayments detected and recovered through ongoing Benefit Payment Control (BPC) operations. For example, BAM estimates include several categories of overpayments such as failure to meet work search requirements, that are not readily detectable, or cost-effective to detect, through BPC operations. They also include overpayments that the agency cannot recover and thus lie outside the scope of BPC.
For both GPRA and the President's Management Agenda, ETA seeks to develop a measure that ties better to the realities of program operations, including BPC operations, and reflects better the general understanding of "overpayments" than the standard BAM rate. This measure should thus reflect the underlying level of overpayments in the system while not being adversely affected by initiatives designed to improve integrity by increasing the detection and establishment of overpayments. For example, ETA is encouraging states to aggressively use data on new hires, from their own State Directory of New Hires and, if access can be obtained through legislation, from the National Directory of New Hires. These data would be used both to inform BAM estimates of claimants who have returned to work while continuing to claim benefits, and reduce the size of such overpayments by limiting their duration. The short-term result, suggested by states piloting the use of new hires data, could be the seemingly perverse effect of a rise in the overpayments BAM estimates, despite an increase in overall program integrity.
After conducting an analysis of both BAM and BPC data, ETA developed the three potential measures of accuracy and integrity described below. As the discussion indicates, none perfectly meets the ideal criteria for an indicator for this goal, and thus none is recommended at this time. This UIPL, and other consultation with states and stakeholders, are intended to help all involved develop a better understanding of the difficulties inherent in quantifying improvements in UI benefit payment accuracy. The comments will help guide development of a measure, either by offering refinements to one or more of the measures below, or by offering other options. To assist in the review, we identify what may be seen as advantages and disadvantages.
5. Proposed Measurement Options.
A. An "operational overpayment rate" derived from BAM data that includes all fraud and most non-fraud recoverable overpayments. Starting from the BAM "Annual Report" rate, and analyzing the various categories of errors, we developed a measure that includes only overpayments that states could/would recover, both fraud and non-fraud. Three major categories of errors are excluded: failure to meet work search requirements; failure to meet active employment service registration requirements; and base period wage errors. State laws and policies vary widely with respect to the first two categories, which thus contribute to high state-to-state variation in overall measured error rates. Work search violations are generally not cost-effective to detect either during the payment process or after payments have been made. The measure excludes base period wages errors (most due to employer reporting) because BPC can rarely detect them. The payment error rate using this new operational definition was 5.2% in calendar year (CY) 2001, and its five-year average was 4.9%. The proposed operational rate is in the same range as reported error rates for other entitlement programs (e.g., Food Stamps, 6.5%; SSI, 5.5%; and TANF, 6.1%.) For CY 2001, the standard published BAM overpayment rate was 8.2%.
B. The ratio of fraud and non-fraud overpayments established for recovery (reported on the ETA 227 report of BPC activities) to dollars paid. Taking the ratio of reported overpayments established to benefits paid produces an accuracy rate that ties directly to state benefit payment operations. The rate is also based on actual overpayments, not an estimate. Progress toward achieving the GPRA goal would be articulated as an increase in this ratio of overpayments established. For 2001 this ratio was 3.0%. Its five-year average was also 3.0%.
C. The ratio of estimated recoverable overpayments that are established for recovery through the BPC process to the estimated dollars of the "operational overpayment" rate from BAM. One way to clarify the meaning of the level of BPC establishments is to take them as a ratio to an estimate of the underlying level of recoverable overpayments that BPC can be expected to establish for recovery, instead of total payments. The estimate of dollars overpaid using the operational overpayment rate (Option A, above) is our best estimate of the underlying universe that BPC seeks to penetrate. Thus, the numerator of this ratio is the sum of fraud and non-fraud overpayments established, as reported quarterly on the ETA 227 report of BPC activities. The denominator uses the operational error rate described in Option A, above, i.e., the total fraud and non-fraud recoverable overpayments estimated from BAM data. The denominator is for a period 6 months earlier than the numerator, to allow for lags in detection through crossmatch activities, a major BPC detection tool. Progress toward achieving the GPRA goal would be articulated as an increase in this ratio. This ratio was 57% in 2001; for the past five years it averaged 61.5% and ranged from 57% to 65.4%.
6. Projected Timeline. After development of a measure, ETA will establish a baseline and a new GPRA goal from which to measure improvements in payment accuracy nationwide. The planned completion date for work on the goal is September 30, 2002.
7. Action Required. SWA administrators are requested to provide comments on options for payment accuracy/integrity measures presented in this UIPL, and to suggest improvements or additional options. Please submit comments by September 1, 2002. All comments should be mailed or faxed to:
8. Inquiries. Inquiries should be directed to your Regional Office.