A federal program designed to help millions of low-income Americans afford phone and Internet service is riddled with fraud and abuse, with at least $137 million a year going to ineligible, fake or dead people, according to government auditors.
The explosive report Thursday from the Government Accountability Office shows that despite efforts to rein in abuse of the sprawling Lifeline program, which serves 12.3 million subscribers on Medicaid, food stamps or other benefits, many recipients of the $9.25-a-month credit are violating program rules.
Established during the Reagan administration, Lifeline is aimed at closing the digital divide between those with access to vital communications services and those without. Altogether, Lifeline distributes about $1.5 billion a year in subsidies.
It is funded by fees that are added to every consumer's monthly phone bill, and was expanded in 2016 — allowing beneficiaries to spend their monthly credits not only on traditional landline phone service, as they have done for decades, but also on residential Internet and mobile broadband.
The changes — which were proposed and approved by the Federal Communications Commission — reflect the Internet's growing importance to Americans as a way to find jobs, do homework and create economic opportunities for themselves.
For years, however, Lifeline has come under bipartisan criticism over its handling of benefits. Thursday's report, commissioned by Sen. Claire McCaskill (D-Mo.), appears to underscore those problems. GAO's study of 46 states and the District of Columbia found that 1.2 million subscribers could not be confirmed as being eligible for Lifeline benefits — out of 3.5 million accounts analyzed by the agency. It is unclear how many ineligible subscribers may be in the remaining pool of 8.9 million subscribers GAO did not study.
By analyzing Lifeline's database and also matching it against Social Security Administration records, GAO found 5,500 duplicate beneficiaries, as well as 5,400 who had actually been dead for more than a year. These individuals accounted for roughly $1.2 million of wasted funds every year, according to GAO estimates.
In Georgia and Michigan, auditors discovered that roughly half of all Lifeline recipients who had signed up for the program via Medicaid or food stamps — which are known officially as the Supplemental Nutrition Assistance Program — had questionable eligibility for discount phone and Internet service.
When government auditors posed as Lifeline applicants, approaching as many as 19 telecom carriers with false personal information, a dozen of the requests were approved, indicating that the companies — who are responsible for verifying a potential customer's eligibility — were not reliably screening out fraudulent applicants.
The FCC has called for the creation of a national third-party verifier to relieve phone companies of that obligation. So far, however, that proposal remains in its early stages of implementation, and the GAO report questioned the feasibility of carrying it out.
Despite the program's flaws, many Americans who are eligible for Lifeline are not signed up for it, according to federal statistics.
“A big problem with Lifeline is how relatively few eligible people actually take advantage of it,” said Brent Skorup, a research fellow at George Mason University's Mercatus Center. “In my view, of the four programs, it's probably the best one; many on the right favor a voucherlike system for universal service and low-income programs.”
Consumer groups called for shoring up support for Lifeline in the wake of the GAO report.
"Lifeline continues to be the only government program that helps low-income Americans afford phone and Internet service — essential for gaining employment, learning, expressing our views, staying in contact and keeping informed," said Carmen Scurato, policy director at the National Hispanic Media Coalition.
Others feared the report could become politicized.
"Some may use the limited findings of this report as justification to cut back on the Lifeline program even further, but that would be catastrophic for those most in need," said Mignon Clyburn, an FCC Democrat.
Still, FCC officials largely agreed with the report's findings, and the agency's chairman, Ajit Pai, said it upholds an investigation into Lifeline he led last year.
“Today’s GAO report confirms what we discovered then: Waste, fraud, and abuse are all too prevalent in the program,” said Pai in a statement. “I stand ready to work with my colleagues to crack down on the unscrupulous providers that abuse the program so that the dollars we spend support affordable, high-speed broadband Internet access for our nation’s poorest families.”
Earlier this year, Pai took steps to prevent a number of telecom providers from selling service to Lifeline applicants. And, he said Thursday in his statement, his agency is developing further recommendations to enhance the program.