NY Times
reports Sen. Coburn asked GAO to study the possible impact of payment limitations on crop insurance. The report was released today and is
here.http://gao.gov/products/GAO-12-256. The first two paragraphs from the summary:
If a limit of $40,000 had been applied to individual farmers’ crop
insurance premium subsidies, as it is for other farm programs, the
federal government would have saved up to $1 billion in crop insurance
program costs in 2011, according to GAO’s analysis of U.S. Department of
Agriculture (USDA) data. GAO selected $40,000 as an example of a
potential subsidy limit because it is the limit for direct payments,
which provide fixed annual payments to farmers based on a farm’s crop
production history. Had such a limit been applied in 2011, it would have
affected up to 3.9 percent of all participating farmers, who accounted
for about one-third of all premium subsidies and were primarily
associated with large farms. For example, one of these farmers insured
crops in eight counties and received about $1.3 million in premium
subsidies. Had premium subsidies been reduced by 10 percentage points
for all farmers participating in the program, as recent studies have
proposed, the federal government would have saved about $1.2 billion in
2011. A decision to limit or reduce premium subsidies raises other
considerations, such as the potential effect on the financial condition
of large farms and on program participation.
Since 2001, USDA has
used data mining tools to prevent and detect fraud, waste, and abuse by
either farmers or insurance agents and adjusters but has not maximized
the use of these tools to realize potential additional savings. This is
largely because of competing compliance review priorities, according to
GAO’s analysis. USDA’s Risk Management Agency (RMA), which is
responsible for overseeing the integrity of the crop insurance program,
has used data mining to identify farmers who received claim payments
that are higher or more frequent than others in the same area. USDA
informs these farmers that at least one of their fields will be
inspected during the coming growing season. RMA officials told GAO that
this action has substantially reduced total claims. The value of
identifying these farmers may be reduced, however, by the fact that
USDA’s Farm Service Agency (FSA)—which conducts field inspections for
RMA—does not complete all such inspections, and neither FSA nor RMA has a
process to ensure that the results of all inspections are accurately
reported. For example, RMA did not obtain field inspection results for
about 20 percent and 28 percent of these farmers, respectively, in 2009
and 2010. As a result, not all of the farmers RMA identified were
subject to a review, increasing the likelihood that fraud, waste, or
abuse occurred without detection. Field inspections were not completed,
in part because FSA state offices are not required to monitor the
completion of such inspections. In addition, RMA generally does not
provide insurance companies with FSA inspection results when crops are
found to be in good condition, although USDA’s Inspector General has
reported this information may be important for followup. Past cases have
revealed that some farmers may harvest a high-yielding crop, hide its
sale, and report a loss to receive an insurance payment. Furthermore,
RMA has not directed insurance companies to review the results of all
completed FSA field inspections before paying claims that are filed
after inspections show a crop is in good condition. As a result,
insurance companies may not have information that could help them
identify claims that should be denied.
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