Report: Cashless Welfare Would Cost Massachusetts Millions

Efforts to cut down on welfare fraud and abuse by limiting access to cash would not only make it harder for families to pay for services like babysitting, but the switch to a new system could cost as much as $25 million.

by Christian M. Wade The Eagle-Tribune / March 13, 2019

(TNS) — Converting to a cashless system for administering welfare benefits might help crack down on public assistance fraud, but the move isn't economically feasible, according to a new report.

The report by the Massachusetts Department of Transitional Assistance, which oversees the welfare system, said prohibiting cash withdrawals using electronic benefits transfer cards wasn't justified because of the high cost to the state of going cashless and the lack of flexibility it would create for welfare recipients who need cash to get basic necessities.

"While a cashless EBT system may minimize the potential of misused benefits or offer a hands-on way to promote client financial proficiency and independence, its practical implementation remains nearly as challenging today as in previous years," the agency said.

Electronic benefit transfer cards work like debit cards, allowing recipients to withdraw cash at ATMs. Welfare recipients can’t buy alcohol, tobacco or other prohibited items with their cards, but they can still take out cash from ATM to buy whatever they want. Under a cashless system, the EBT cards would only work for point-of-sale purchases.

But the DTA report said that move would be too costly and cumbersome while making it more difficult for welfare recipients to get goods and services they need.

The agency's conclusions mirror that of a private consulting group hired by the state several years ago to look at the feasibility of switching to a cashless system.

The 2012 report by the Ripples Group found that switching to cashless would "reduce the potential" for welfare fraud but also "generate high operational costs for DTA and create a significant burden for clients by restricting their flexibility, while still not solving the overall problem."

Implementing the new cashless benefits system could cost upward of $25 million, with annual operational costs ranging from $4 million to $6 million, according to the consultant's report.

"Moreover, there is still no way to easily use EBT cards for paying a babysitter, or for other necessary personal services without cash," the report noted.

While the state has taken a number of steps to reduce welfare fraud, abuse of the system remains a problem.

The state auditor’s office uncovered nearly $17 million in welfare fraud in fiscal year 2017, a 9 percent increase over the previous year. Auditor Suzanne Bump has pointed out that the findings do not indicate more fraud, but better techniques at uncovering welfare cheats. About 61 percent of the fraud was in MassHealth, the state’s Medicaid program.

In its report, the DTA noted that the state has taken a number of steps to combat the fraudulent use of EBT cards, including a new computer system that blocks purchases of banned items such as cigarettes, booze, firearms, recreational marijuana and other prohibited items.

The department said it has blocked the use of benefits cards at more than 2,400 cash machines and point-of-sale systems in stores since 2013.

As a result, spending of welfare benefits at bars, liquor stores and other banned locations has plummeted from $258,080 in 2013 to $16,136 in 2017, according to the agency.

House Minority Leader Brad Jones, R-North Reading, who supports strict welfare rules, said it is clear the state is making progress through legislative reforms and the use of technology.

"There are still issues, for sure, and we always need to be looking at ways to prevent fraud," he said. "But we've made some dramatic improvements in recent years."

Overall, the number of families on the state’s primary cash assistance program, known as Transitional Aid to Families with Dependent Children, has declined by half since the 1990s, to about 30,000 per month, according to the agency. The state spends about $16 million a month on the programs.

Under current law, a recipient is limited to receiving welfare for two years in any five-year period. The average family in the program collects roughly $449 per month.

Advocates for the benefits programs say the money the state uses to root out fraudulent EBT use would be better spent expanding the programs for the neediest of families.

"There’s actually no evidence that people are using cash assistance to buy prohibited items," said Naomi Meyer, a senior attorney at Greater Boston Legal Services, which provides counseling to low-income families. "They’re using every penny they receive to pay for basic needs - food, rent, medicine, diapers and other necessities."

©2019 The Eagle-Tribune (North Andover, Mass.). Distributed by Tribune Content Agency, LLC.