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New unemployment head balances paying claims, stopping fraud

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Posted at 7:28 AM, Dec 03, 2020
and last updated 2020-12-03 07:28:16-05

Michigan's acting unemployment director told lawmakers on Wednesday that her office is trying to strike a balance between quickly paying benefits to jobless workers and preventing fraud, saying impostor claims are rampant in a backlog of approximately 90,000 cases.

Liza Estlund Olson took over the Unemployment Insurance Agency less than a month ago after the previous chief, Steve Gray, fell out of favor with Democratic Gov. Gretchen Whitmer. The agency last week released an independent report showing how — faced with an unprecedented deluge of claims during the coronavirus lockdown last spring — it made policy, technological and organizational changes that increased the system's exposure to fraud.

The state, for instance, waived a 10-day review period in late March so that it could pay benefits more quickly. A “sequencing error,” though, resulted in claims being filed, certified and paid on the same day before being run through fraud-check software at night. That went on for seven weeks until the agency made changes and stopped additional payments for 340,000 claims that previously received them.

“The idea was a potentially good idea if it had worked the way it was supposed to work,” Estlund Olson told the Republican-led Joint Select Committee on the COVID-19 Pandemic. “It's just this constant balancing act between not paying out to people who aren't supposed to be paid and paying those people timely who are supposed to get paid.”

She estimated that fraud losses will total hundreds of millions of dollars out of $26 billion in state and federal benefits paid since the pandemic began. Of the 90,000 backlogged claims under review, a “significant number” are fraudulent, she said.

“We understand there are claimants that have been caught up in that process who are legitimate claimants who need and deserve their benefits," she said. “But we also know that there are quite a few in there that are not deserving of benefits and don't quality for those benefits.”

The panel's chairman, Republican Rep. Matt Hall of Marshall, expressed frustration that background checks were not done on hundreds of contract employees who were hired to help process claims. One has been charged with using her insider access to fraudulently disburse more than $2 million.

The agency has been slow to fulfill legitimate claims after making decisions that led to more fraud, Hall said.

“That made it take longer for hundreds of thousands of people, many of which came before this committee. It's unacceptable," he said. "I'm happy that director Gray is gone, and I'm very excited to hear from director Olson, who has some experience running this agency in the past.”

Estlund Olson was acting director in 2007 and 2008 when Jennifer Granholm was governor. Whitmer put her in charge of the Office of State Employer after taking office in 2019.

The unemployment agency has nearly 3,000 people helping claimants, up from 650 before the virus outbreak. This fall, it developed a new phone-based appointment system and increased slots by 20%. The website has been improved and staff have been thoroughly trained to resolve complex claims, Estlund Olson said.

“All of these improvements have positioned the agency to better deal with large fluctuations of demand if necessary,” she said.

Rep. Julie Calley, a Portland Republican, said her constituents are frustrated that once a claim is initially approved, there can still be a four- or five-week managerial review if it is a backdated claim.

“That continues to be a real strain for the people that we serve,” she said.

Estlund Olson said the state will refer cases to federal, state and local authorities for criminal prosecution and seek to recoup the money.