It Is Not a Snap Judgment to Criticize SNAP's Rising Overpayment Problem

Everyone needs to eat. If people do not eat food, they die. It is part of why the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps, is touted as playing a crucial role in fighting food insecurity across the United States. This is especially the case considering that SNAP benefits are second to unemployment insurance in terms of providing assistance during economic downturns. While it is purported as being this wonderful lifeline for struggling Americans, the reality is quite different. 

I am not referring to obesity rates exacerbated by SNAP  benefits (see my 2023 analysis here). When I was doing some research a couple of days ago on what to write about next, I came across a recently released report from the Mercatus Center entitled Reducing Waste and Fraud in SNAP. The most shocking finding of this report was that overpayment rates increased from 2 percent in 2012 to 10 percent in 2023. What this translates to is it costing U.S. taxpayers $10 billion in SNAP overpayments. It is smaller than the $31.1 billion in Medicaid improper payments I criticized last month, but it is still a jarring amount given the size of SNAP.

It is mind-blowing because in spite of the U.S. Department of Agriculture (USDA) spending more on improving retailer integrity and fighting trafficking in SNAP benefits, the overpayment rate continued to surge. Part of the reason for the surge is because USDA applied an improved methodology in 2017 and did not re-calculate the pre-2017 data. Then there are the matters of eligibility misreporting, Electronic Transfer Benefit (ETB) technical issues, and SNAP benefits trafficking, the latter of which account for about 40 percent of overpayments. 

This September 2024 report from the General Accountability Office (GAO) gives a better sense of weak oversight. For example, the GAO recommended in 2018 to increase penalties for when a retailer exchanges recipients' SNAP benefits for cash instead of food. As of September 2024, the USDA did not implement that recommendation provided in a GAO 2018 report. In that same 2018 report, the GAO criticized USDA for not applying previous recommendations from 2016. The Mercatus Center came up with a few recommendations on how to deal with these overpayment rates:

1. Create an office of program integrity within the FNS.
2. Require the disclosure of payment errors of any size, instead of just those over $57.
3. Allow states to retain more of the funds that they recover when they detect fraud.
4. Permit states to dis-enroll retailers that are taking advantage of SNAP. 
5. Encourage states to move over to SNAP EBT cards with chips.
6. Close loopholes that allow those with higher income and assets to collect SNAP benefits so that only genuinely needy households qualify.

I would also add some of the recommendations that I wrote about back in 2013, including separating SNAP benefits from agricultural subsidies, eliminating broad-based categorical eligibility, and modify the gross income limit from 130 percent to 100 percent of the poverty line, and enacting spending caps for SNAP. Sadly enough, there has been such little reform made on SNAP that these recommendations are still by and large applicable about 12 years later. The fact that so little has been done this century to improve SNAP benefits is troublesome.

Aside from the fact that this costs millions in taxpayer dollars a year, why should we care? Misallocating resources vis-à-vis overpayments means fewer dollars actually going to those in need. Eroding public trust in the program can mean less support for SNAP, which can harm those who rely on those benefits. More to the point, if the government cannot manage a program such as SNAP with competence, it makes it more difficult to justify its existence. Yes, libertarian economist Frederich Hayek believed that there should be at least a minimal social safety net. At the same time, all the USDA's intransigence and recalcitrance show is that SNAP should be as small and minimal of a social safety net as possible.