Kicking Off the Office Pool on the Size of the Block-Report Scandal

With Governor Lincoln Chafee planning a “media availability” at 2:30 this afternoon related to an analysis by Ken Block’s Simpatico Software to find waste, fraud, and abuse in Rhode Island’s social services programs, many residents are wondering whether he’s been hoping to hide something.

Governor Chafee has excused his early decision not to release the full report on the grounds that there is an investigation ongoing into the results, but there is much that he could tell us without jeopardizing official state police activities.  Most significantly: What’s the total?  What’s the bottom line for what the State of Rhode Island is losing to incompetent, inappropriate, and illegal activity?

The biggest portion of the waste likely comes via Medicaid.  Digging in to estimates of such waste and fraud nationally, a common number to come up in searches is a minimum of 10% of spending.  In our updated report on the Zero.Zero sales tax initiative, the RI Center for Freedom & Prosperity referred to a U.S. House of Representatives Committee on Oversight and Government Reform document that uses that number.

Estimates from the federal Department of Health and Human Services, however, put current “improper payments” at 7.1%, with 6.4% as the target.  While we were looking for potential sources of money to invest in elimination of the state sales tax, we conservatively chose 10% as the high end, with 6% as the low end, for the flawed expenditures that Mr. Block’s work may have already uncovered.

The governor’s budget document for fiscal year 2014 revises the current estimate of what the state will spend this year on “medical assistance” (i.e., Medicaid) to $1.616 billion, going up to $1.743 billion next year. Using the 2013 estimate puts the range for waste, fraud, and abuse at between $96.9 million and $161.6 million.

The other large portion of government spending in the report that Chafee is withholding is the food stamp program — also known as the “Supplemental Nutrition Assistance Program” or by the mechanism used to distribute the money, electronic benefit transfer (EBT) cards.  A report on government waste that Senator Tom Coburn (R, OK) published in October offers such examples of “improper payments” as 2,000 well-nourished dead people in New York and Massachusetts and 7,236 people in those two states receiving duplicate benefits.

Coburn’s report actually provides a low-end, for our purposes, estimating around 3% in “improper payments” nationwide. The more official number from the Department of Agriculture is 3.8%, which I’ll round up to 4% for the high end.

In this case, Governor Chafee’s revised expenditure for 2013 is $298.2 million, recommended to hold steady through 2014.  That puts the range for food stamp waste, fraud, and abuse between $8.9 million and $11.9 million.

In summary, I anticipate that the release of Simpatico Software’s report for Rhode Island (if the governor releases it) will show a problem in the range of $105.8 million to $173.5 million.  That puts 38 Studios at the lower end of this scandal of government inefficiency — a scandal that recurs each and every year.

It is reasonable, therefore, to wonder whether Governor Chafee’s motivation for keeping a cloth over the actual results doesn’t have something to do with the programs for which he advocates.  Proof of big-dollar taxpayer losses could bring into question the wisdom of pursuing a centrally planned, government-first strategy for economic development and social welfare.

While Governor Chafee, Lieutenant Governor Elizabeth Roberts, and Secretary of the Executive Office of Health and Human Services Secretary Stephen Costantino were charging forward with ObamaCare’s Medicaid expansion, the Center for Freedom & Prosperity was pointing out that doing so would likely add around $365 million in new costs, not including administration.  That would imply new waste, fraud, and abuse of up to $36.5 million.

That high end might actually turn out to be a low end, though, because the Medicaid expansion widens the door through which people can get to Medicaid benefits, which would likely have the effect of increasing the rate of “improper payments.”

And this is just the tip of the Big Government agenda that our state’s governor, our nation’s president, and many of the mayors and councils of our cities and towns appear determined to chase down.


According to the AP, Rhode Island’s “error rate” for the food stamp program in 2012 was 7.69%.  That would bring the high-end estimate for food stamp waste, fraud, and abuse to $22.9 million, bringing the overall total to $184.5 million. (Via John DePetro.)


Of the following two issues related to Rhode Island’s public schools, which one is a greater concern?

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