RMA’s 2.2 Percent “Improper Payment” Rate: Why this Matters.

At the recent crop insurance industry conference in Indian Wells, California, Brandon Willis, administrator of USDA’s Risk Management Agency or RMA, surprised many and made some trade-press headlines by announcing a seemingly-obscure statistic: that RMA’s “improper payment” rate -- a closely-watched standardized measure of waste and abuse required of all major Federal spending programs – had fallen sharply in 2015.  Its new level of 2.20 percent represented a 62-percent drop from the prior year’s 5.58 percent, was about half the government-wide average of 4.02 percent, and stood far below chronic trouble-spots like Medicare Free-for-Service (12.7 percent), unemployment insurance (11.6 percent), school breakfasts (25.6 percent).

In truth, Willis’s announcement was far more important than the limited coverage suggests.  RMA’s 2.2 percent improper payment” rate, by qualifying the program as among the best ranking for good management and program integrity, signaled an important coming-of-age moment for USDA’s Federal crop insurance program.  Much like the elimination of Congressional ad hoc disaster programs, it represented an accomplishment decades in the making. 

Those with long memories of Federal crop insurance will recall that its reputation for integrity was not always so good.  It wasn’t so long ago crop insurance abuses were a favorite target of high-profile expose journalism, all-too-often for good reason.  CBS’s “60 Minutes” and its star reporter Mike Wallace made particular sport of headlining crop insurance glitches, including one segment that ran while I was serving as administrator during the 1990s that told the story of an error in an RMA-adjusted T-yield – one out of over 30,000 T-yields RMA had adjusted that year – and how a local crop insurance agent noticed the error, brazenly urged local farmers to exploit it, and hid the error from RMA until after the contract change date.  The incident resulted in a government overpayment totaling millions of dollars.  Yes, these things happened.

“60 Minutes” wasn’t alone.  The Washington Post, USDA’s Office of Inspector General, the Farm Press, and rural Congressmen all joined in.  One Congressman even told me how he had reported one of his own constituents to law enforcement officials because he was embarrassed by the crop insurance abuses in his district.

This negative perception of crop insurance back then was obviously and grossly unfair to the large majority of farmers, agents, company professionals, and FCIC/RMA staff.  But while honesty was the rule, high-profile exceptions kept surfacing, making the issue a serious political liability as the FCIC portfolio was doubling and tripling in size.

But starting in the 1990s, RMA, its participating insurance companies or AIPs, and its Congressional oversight committees, began a concerted effort to tackle the problem.  The effort took many forms.  Together with the AIPs, RMA launched a special initiative in parts of Texas to carefully double-check all claims before they were paid.  Each new negotiated version of the Standard Reinsurance Agreement (SRA) contained stronger requirements for AIP quality control reviews, litigation support, and reporting. 

Congress came to the table too by including in the 2000 Agriculture Risk Protection Act (ARPA) a panoply of compliance authorities, including a new data mining program, special reviews of agents and loss adjustors connected with high loss ratios, tighter RMA coordination with AIPs, required cross-checks between RMA and FSA data bases, earlier reporting of policy information, and even a funding boost for RMA’s compliance operation.

Since that time, RMA has aggressively held companies to these standards though its oversight reviews as AIPs have tightened internal controls and compliance oversight. Most recently, RMA has instituted SCORE (Supplemental Company Operations Review and Evaluation) reviews to keep AIPs sharp on quality control elements such as monitoring and risk assessment, and has updated its system of National Program Operations Reviews (NPOR).   

Data mining alone, as implemented by RMA through the Center for Agricultural Excellence at Tarleton State University, has revolutionized RMA’s compliance program, allowing the agency to focus scarce resources on growers and regions with patterns indicating a likelihood of abuse.  So successful has the data mining approach proven that the Congressional Budget Office has credited it with budget savings totaling hundreds of millions of dollars.

The bottom line is that RMA’s eye-catching new 2.2 percent “improper payment” rate for 2015 was no fluke.  Rather, it was the product of a long-term commitment and years of work by a wide range of people who deserve credit for sticking to it.

Administrator Willis was right when he told the Indian Wells audience that “The spotlight on crop insurance will continue to grow.”  Budget threats will continue.  Attempted money-grabs like the one we saw with the December 2015 budget deal will come again.  “But,” Willis told them, “this demonstrates crop insurance can withstand it.”

The challenge, of course, will now be for RMA and its AIPs to keep that “improper payment” level down in future years.  The effort will be well worthwhile, as those who remember the “bad old days” can attest.

Follow Blog Via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.