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Welfare Savings from DSHS Fraud Investigations

Executive Summary

This report provides empirical estimates of the savings that result from DSHS investigations of alleged welfare fraud. The welfare fraud investigations are conducted by the department's Division of Fraud Investigations (DFI) generally at the request of local DSHS welfare offices.

During 1998 DFI completed about 19,010 welfare fraud investigations. Almost 40 percent of there cases (7,403) resulted in clear negative action by the referring Community Services Office (CSO). Most of the negative action cases were determined ineligible; some had their benefits reduced.

This report estimates that over the subsequent 23 months those 7,403 negative-action cases completed in 1998 yielded about $22.9 million in welfare costs avoided (savings). This amount of savings compares favorably with the cost of the entire DFI operation, about $4.6 million per year during the 1997-99 biennium. (The $4.6 million cost of DFI operations also pays for certain other investigative activities.)

Method
The analysis began with all 34,373 cases referred to DFI for investigation over the 21 months between April 1997 and December 1998. By early-January 1999, 29,327 of those cases had been completed, with 11,115 (38 percent) of the completed cases closing with negative action.

What welfare benefits did the members of those negative action cases actually get in the months after that negative action? Using the Automated Client Eligibility System (ACES), the state's new welfare information system, we determined the total dollar value of all welfare benefits (grants, Medical Assistance, and Food Stamps) each member of each case actually got, month by month, after the department's negative action. Cases could be followed for up to 23 months after action.

We then compared the total value of welfare benefits each negative-action case got with the total value of benefits gotten by similarly investigated cases from the same welfare program, but where eligibility was affirmed. Savings were inferred to the extent the negative-action cases later got fewer benefit-dollars than did the eligibility-approved cases.

Findings: Welfare savings per negative-action case
After investigation, the negative-action cases did indeed get appreciably lower welfare benefits than did comparable eligibility-affirmed cases. The benefit differences between the two groups persisted over the next 23 months, though the differences grew smaller with time and by Month 23 had become inconsequential.

Savings each month was defined as the difference between the benefits received by eligibility-approved cases and comparable negative-action cases. To estimate total savings over time we summed the 23 observed monthly differences (monthly savings) between the two groups. The table below shows for each negative-action group of interest the estimated cumulative savings per case over the 23 months after investigation.

Estimated cumulative savings per case over 23 months following negative action
For cases investigated in  this program group:	Eligibility terminated	Eligibility- denied	Application voluntarily withdrawn	Benefits reduced
1-parent Temporary Assistance to Needy Families	$ 4,067	$ 5,049	$ 2,831	$ 295
2-parent Temporary Assistance to Needy Families	$ 7,000	$ 5,679	$ 6,771	$2,183
Food Stamps only	$ 1,607	$ 264	$ 1,082	$ 589
Other programs for children and families	$ 1,297	$ -1,630	(insufficient data)	$ 119
Other programs typically for adults	$ 1,807	$ 3,092	$ 2,642	$ -778

Total savings from 1998 investigations
The estimated $22.9 million savings for cases completed in 1998 is computed by multiplying each of the per case cumulative savings estimates in the above table by the numbers of such cases completed in 1998.

Modified: Wednesday February 20 2008

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