When businesses closed their doors at the peak of the coronavirus pandemic, millions of hardworking people were sent home, furloughed, or worse — laid off.
In response, Congress took dramatic action under the CARES Act to expand unemployment insurance benefits, loosen eligibility requirements, and add a weekly $600 bonus to existing benefits. These policies have since created a perfect storm that discourages people from returning to work and exposes states to more unemployment insurance scams than ever before.
In Las Vegas, Nevada, a man was recently arrested for possession of more than $100,000 in cash and money orders related to fraudulent unemployment benefit cards. A medical practice in Reno, Nevada, began receiving fake unemployment claims from surgeons who were still actively working at the practice.
Donna Juell, a manager at the practice, has already gotten fake claim notices on five of the nine surgeons who work at the practice. Two of those surgeons have even received state-issued unemployment debit cards in the mail. Juell has communicated with several other medical practices that are experiencing the same thing. “Every day, I hear from another doctor’s office that they are going through this,” she told the Reno Gazette-Journal.
These are not outlying cases of fraud. Hundreds of scammers are using stolen information to report fake claims on Nevada workers. The exact scope of the fraud is unknown, but the state’s unemployment hotline is overwhelmed. Businesses that need to report fake claims are dealing with hold times exceeding 90 minutes, and in some cases, they are not getting through at all. Many continue receiving fake claims even after their reports are filed.
If nothing is done, the outcomes of unemployment insurance fraud on such a massive scale would be devastating. Reports are saying Nevada’s unemployment trust fund could run out before the end of September due to the sheer number of unemployment claims being filed.
Nevada is not the only state that is scrambling to protect the integrity of its unemployment programs and preserve the resources for people who truly need them. In Ohio, there have been about 270,000 pending unemployment insurance claims that have been put on hold because of suspicious activity. When the Nigerian fraud ring targeted Washington state, it was estimated to cost as much as $650 million in fraudulent claims.
Since mid-March, unemployment systems nationwide have seen a record-breaking 51 million people file for unemployment. While some of these people need the benefits, many others are taking advantage of a lucrative situation.
Right now, thanks to the weekly $600 benefit, at least 68% of people receiving unemployment insurance benefits are being paid more to remain unemployed than to return to work. These people are able to find jobs and return to work but choose to stay home and collect benefits instead. This refusal to return to work is another type of fraud, plain and simple.
Between the scammers filing false claims and the fraudsters who are staying at home and refusing suitable work, the United States Department of Labor’s inspector general now estimates that waste, fraud, and abuse in the unemployment insurance program will explode to more than $26 billion for the CARES Act payments alone.
To put that into perspective, the entire unemployment system paid just over $26 billion in benefits during 2019. This means taxpayers will likely pay more in unemployment fraud costs from the CARES Act in 2020 than they paid for the entire unemployment system last year.
The federal government’s approach to unemployment relief is not working. If we want to stop fraud and abuse in the unemployment system, we have to stop making it so easy and lucrative.
It’s time for Congress and states to tighten their eligibility requirements, improve accountability measures, and let the weekly $600 unemployment insurance bonus expire to make sure that unemployment funds remain available for the people who need them the most.
Nick Stehle is the vice president of communications at the Foundation for Government Accountability.
