Efforts to prevent fraud in state unemployment systems are outdated, hurting millions of people with legitimate claims by causing lengthy and unnecessary delays while not managing to catch much fraud.

Transcript

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.

Tags: Series: The Coronavirus Crisis