'So Hard To Prove You Exist': Flawed Fraud Protections Deny Unemployment To Millions

Oct 14, 2020
Originally published on October 14, 2020 10:19 am

Fraudulent claims for unemployment benefits have been a problem for a long time, and states have set up systems to try to prevent such fraud. But lost in that effort is arguably a bigger problem: Some of those systems have hurt millions of innocent people, keeping the benefits they deserve in limbo.

They're people like Sevy Guasch, who lost his job as a food and beverage manager at a Marriott hotel near San Jose, Calif. In March, he applied for unemployment benefits. He went online, entered his information, and waited. And waited.

He couldn't get through on the phone. After more than a month, Guasch was told to mail in more proof of his identity.

"My driver's license, my picture of my passport, my copy of my W-2."

But the process dragged on. The state unemployment department needed another document. Each time, it would take at least several weeks to hear back.

After six months, Guasch still hadn't received any unemployment money. And he hasn't been able to find another job.

The whole thing just seemed so avoidable to him. "It's so hard to just prove that you exist."

In California alone, millions of people are having a hard time proving they exist as they struggle to get the unemployment benefits they deserve.

And it turns out a lot of these delays really have been unnecessary. A big part of the problem: antiquated fraud prevention systems. They aren't catching many bad guys filing false claims. And the wrong people are getting caught in the net — tangled up unnecessarily for months on end.

Guasch is 32 years old, and he had been saving up to go to community college to try to study software development. He moved into a cheaper apartment. But he had to drain his entire savings — about $17,000. There's not enough left to pay rent next month.

"I don't want to get angry," Guasch says. "But it's been really frustrating."

In California, as cases like Guasch's mounted, it became clear that way too many people were waiting far too long to get unemployment benefits they desperately needed. Over the summer, the state brought in Jennifer Pahlka. She agreed to co-chair a "strike team" to figure out why there have been such long delays during the pandemic.

Jennifer Pahlka co-chaired a strike team that discovered that outdated fraud detection systems were to blame for delaying benefits for millions of Californians. As a result, a new modern ID verification system has just been launched to fix the problem.
Clementine Hecker

Pahlka was a top technology adviser in the Obama White House and the founder of the nonprofit Code for America, which helps improve government computer systems.

Here's what the strike team discovered. Minor discrepancies — like someone using their middle initial in applying for benefits when their full middle name appeared on their driver's license or Social Security card — would send up a red flag for potential fraud. And then the person would be required to provide additional "identity verification." That would mean a manual review by workers swamped with 10 times the normal number of claims.

"If you applied for unemployment assistance, you had a 40% chance of getting flagged for manual processing," Pahlka says. This is what apparently happened to Guasch.

Pahlka found many other people suffered through similar agonizing delays.

"Those 40% of people, which is a lot, have very little chance of getting paid in any reasonable time frame," she says.

At a hearing with lawmakers in July, Sharon Hilliard, the head of the California unemployment system, or EDD, apologized to those people, saying, "What I want to make sure everyone understands is that EDD sincerely regrets any payment delays."

But Pahlka's strike team realized the delays didn't need to be happening. The anti-fraud ID verification process was completely outdated.

"Sadly, they haven't been protecting the system from much fraud. They catch very few people."

So millions of people, 40% of those applying, have faced delays. And how much fraud did the system detect? "Less than half of 1% of people are caught as fraudulent through this tactic," Pahlka says.

This is not just a problem in California. Millions of people across the country are facing big delays.

"People that should be getting benefits in three weeks on average, are getting their benefits in seven or eight weeks," says Andrew Stettner a researcher at The Century Foundation.

And that's just the people who actually get their benefits. Stettner says of the more than 40 million claims that have been filed nationally, about 40% of those people still have not been paid any money.

"We have to do better," says Stettner. He says the outdated fraud prevention systems aren't the only problem. But fixing them would make a big difference.

At least in California, things are now changing. The state has followed a recommendation from the strike team and brought in an outside company with a much more sophisticated system that has launched just over the past week.

Pahlka says now people can verify their identity quickly when they apply just using their phone. Applicants take a photo of their ID and send in a selfie. They're asked questions only they would know how to answer. Software does the verification rather than overworked staff members.

Pahlka says it's hoped that 90% of applicants can now get verified quickly and avoid the dreaded manual review.

Sevy Guasch, who burned through his college savings while waiting for his benefits, says a representative finally told him his case was coming along nicely. There was just one more step. "She let me know that I'm literally ready, they have all of my information entered." But Guasch said someone with more authority still had to give the final approval.

"So I found out I'm waiting on my mysterious hero wherever they may be," he said.

The mysterious hero just came through. Guasch tells NPR his account now shows, more than six months after he applied, that the state of California has finally started to pay him his unemployment money.

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RACHEL MARTIN, HOST:

During the pandemic, state unemployment systems have become a target for organized crime rings. They steal money through fraudulent claims. But arguably a bigger problem is that some of the systems in place to prevent fraud like that have been hurting millions of innocent people. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: When Sevy Guasch lost his job as a food and beverage manager at a Marriott hotel near San Jose, he figured, well, OK, I'll apply for unemployment. This was back in March. He went online, put in his info, waited for weeks, couldn't get through on the phone. After more than a month, he was told to mail in more proof of his identity.

SEVY GUASCH: My driver's license, picture of my passport, copy of my W-2. She said the more documentation that I could put in there to prove who I was would help out my case.

ARNOLD: Help out his case. Guasch had clearly lost his job with a big company. He had ID. What was the problem? But this dragged on and on. Weeks would go by, they'd need another document. And six months later, Guasch still hadn't gotten any unemployment money and he can't find another job.

GUASCH: I had about $17,000 saved.

ARNOLD: Guasch is 32 years old, and he'd been saving up to go back to community college to try to become a computer programmer. He moved into a smaller apartment to save money, but he still had to drain that entire savings for college. There's not enough left to pay rent next month.

GUASCH: I got to watch what I worked really hard to get dwindle away. I don't want to get angry in front of you for the interview, but it has been really, really frustrating.

ARNOLD: And the whole thing just seems so Kafkaesque and avoidable to him.

GUASCH: It's so hard to just prove that you exist.

ARNOLD: In California alone, millions of people are having a hard time proving they exist as they struggle to get the unemployment benefits that they deserve. And it turns out Guasch is right. A lot of this was completely unnecessary. All right. So to understand what's going on, let's just say that I was going to apply for unemployment.

JENNIFER PAHLKA: And you had written Christopher Arnold, but your Social Security card said Chris Arnold, or something like that.

ARNOLD: That's Jennifer Pahlka. She was brought in by the state of California over the summer to co-chair a strike team to figure out why there were such massive delays. She was a top technology adviser in the Obama White House. So like she said, maybe I forgot to enter my middle initial or something minor.

PAHLKA: It's not that hard to tell that you're the same person.

ARNOLD: But Pahlka and her strike team found out that that would send up a warning that, uh-oh, could be fraud. We need to do what's called further identity verification, and that means a manual review. People have to review your case - people swamped with ten times the normal number of claims.

PAHLKA: Right - so if you applied for unemployment assistance, you had a 40% chance of getting flagged for manual processing.

ARNOLD: For the vast majority, it was for this ID verification. This is what appears to have happened to Guasch. And Pahlka found that many other people suffered through traumatically long delays.

PAHLKA: Those 40% of people, which is a lot, had very little chance of getting paid in any reasonable time frame.

ARNOLD: At a hearing with lawmakers in July, Sharon Hilliard, the head of the California unemployment system, or EDD, apologized to those people.

(SOUNDBITE OF ARCHIVED RECORDING)

SHARON HILLIARD: Most importantly, what I want to make sure everyone understands is that EDD sincerely regrets any payment delays.

ARNOLD: But Pahlka's strike team realized that the payment delays - they just didn't need to happen. All this ID verification to try to stop fraud - it was completely outdated.

PAHLKA: Sadly, they haven't been protecting the system from much fraud. They catch very few people.

ARNOLD: Like really, really very few people. Remember, her report found that 40% of the people applying for benefits face these big delays. So millions of people who deserve benefits are getting hung up in this net. How much actual fraud is that successfully catching?

PAHLKA: Less than half a percent of people, less than half of 1% of people are caught as fraudulent through this tactic.

ARNOLD: This is not just a problem in California. Millions of people around the country are facing big delays. By one count, 15 million Americans who filed for unemployment still haven't gotten any benefits. And experts say outdated fraud prevention systems are a big part of the problem.

But at least in California, things are finally changing. The state has followed a recommendation from the strike team and brought in an outside company with a much more sophisticated system. So Pahlka says, starting as of just a few days ago, people can now verify their identity very quickly when they apply, just using their phone.

PAHLKA: It actually asks you to take a photo of your ID - probably your driver's license - right then and there, and then it actually asks you to take a selfie. And it's then drawing on many different databases in a very sophisticated way to really understand if you are who you are.

ARNOLD: Pahlka says a lot of people are working very hard in the state unemployment office, but the hope is that 90% of applicants can now get processed quickly and avoid the dreaded manual review. For his part, Sevy Guasch, who had to spend his college savings, says that he spoke to a representative late last week.

GUASCH: She let me know that I'm literally ready. They have all of my information entered.

ARNOLD: But someone with more authority still had to give the final approval.

GUASCH: So I found out I'm waiting on my mysterious hero wherever they may be.

ARNOLD: That mysterious hero just came through. Guasch tells us more than six months after he applied, his account now shows that the state has finally started paying him his unemployment money.

Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.