Republicans calling for reform cite $16B in unemployment overpayments

The Unemployment Insurance program’s error rate has jumped as the program has grown during the economic downturn, paying out billions of dollars in improper payments in 2011, making it the second-worst program on a special government watch list.

Making matters worse still, the UI program also has a poor record of recovering money from those it overpaid, meaning it left about $16 billion in the hands of people who didn’t deserve the benefits in 2010, according to figures the Labor Department provided to Sen. Tom Coburn, an Oklahoma Republican who has pushed for more accountability.

Now, calls to reform the program are growing even as Congress prepares to extend the program once again as part of an end-of-year tax-cuts package.

“Before Congress extends UI benefits yet again, we need to fix what’s wrong with the program,” Mr. Coburn said. “We have an unsustainable debt and employment problem because Congress prefers to spend money rather than ensuring the money we are already spending is spent wisely.”

House Republicans on Tuesday will send to their chamber floor a bill that would extend unemployment benefits again for the long-term jobless, but would cut down on the total number of weeks federal aid is available. The bill also includes incentives for states to crack down on overpayments, and it cuts off benefits to millionaires - another idea from Mr. Coburn, which saves $20 million over the next decade.

The unemployment provisions are attached to a bill extending this year’s payroll tax cut, worth an average of about $1,000 per family, into 2012. The bill also extends full payments to doctors to treat Medicare patients, preventing a 27 percent cut from taking effect, and directs the administration to allow construction of the Keystone XL pipeline, which would bring in the U.S. oil derived from Canada’s tar sands.

“It’s my hope we’ll be able to move ahead, get this done, ensuring the American people who are truly in need will have access to benefits but at the same time will bring about reforms,” said House Rules Committee Chairman David Dreier, California Republican.

But President Obama has said he opposes it because it contains the pipeline provision, and congressional Democrats said the bill doesn’t go far enough to extend unemployment benefits.

The legislation House Republicans wrote puts stricter requirements on those claiming unemployment to make sure they are searching for jobs, and reduces the maximum number of weeks someone can get benefits from 99 to 59 - undoing extensions passed by Democrats and signed by Mr. Obama in the last Congress.

Democrats said that will cut off benefits for many at a time when the economy is still struggling.

“I don’t think cutting 1 million people from unemployment constitutes reform,” said Rep. Sander M. Levin of Michigan, the ranking Democrat on the House Ways and Means Committee.

Republican leaders felt they had to include both the time limits and the overpayment controls in the bill in order to earn support of conservative lawmakers who argued the last two years’ extensions had already overtaxed the government.

Overpayments have been a problem in the program for years, but have gotten worse as Congress made the program more generous over the past two years.

In 2010, when UI benefits peaked at $156 billion, the program overpaid some $16.5 billion, for an error rate of 10.6 percent, which was a full percentage point higher than in 2009. Meanwhile, in 2011, when the program paid out $114.1 billion, it overpaid $13 billion, for an even higher error rate of 11.4 percent.

About 30 percent of those wrong payments were made to people already back on the job - and at least half of those had been back at work for at least five weeks, which constitutes fraud in most states.

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