High Cost May Deter Massachusetts from Converting to Cashless Welfare System

Published: March 20, 2019

Health CareHealth ServicesInformation TechnologyMASSACHUSETTSSocial ServicesTRANSITIONAL ASSISTANCE, DEPARTMENT OF (MASSACHUSETTS)Waste, Fraud, and Abuse

According to a new state report, implementing a cashless system for administering welfare benefits could cost Massachusetts over $25 million.

According to a new report by the Massachusetts Department of Transitional Assistance, which oversees the state’s welfare system, converting to a completely cashless system for administering welfare benefits would cost the state millions. While this conversion might help put a stop to public assistance fraud, it is not an economically feasible move, according to the report.   

Converting to a cashless welfare system would prohibit cash withdrawals using electronic benefits transfer (EBT) cards. EBT cards currently function like debit cards, allowing welfare recipients to use their cards for point-of-sale purchases and to withdraw cash at ATMs. Recipients are not able to purchase alcohol, tobacco, or other prohibited items with their cards, but they can buy whatever they want with cash withdrawn from the ATM. A cashless system would restrict the use of EBT cards to point-of-sale purchases, a move the report says would be costly to the state and restrictive to welfare recipients.

The agency’s findings echo those of a similar report created in 2012 by a private consulting group. The 2012 report determined that implementing a cashless benefits system could cost the state upward of $25 million, with annual operational costs ranging from $4 million to $6 million. While the report found that a cashless system would reduce the potential for welfare fraud, it emphasized the high operational costs to the state and the lack of flexibility for welfare recipients to pay for necessary services that require cash, like babysitting or rent.

However, welfare fraud remains a problem, despite the state’s efforts to reduce it. The state auditor’s office discovered nearly $17 million in welfare fraud in fiscal year 2017. The state has taken a number of steps to reduce the fraudulent use of EBT cards, including a computer system that blocks the purchase of prohibited items, like alcohol, firearms, recreational marijuana, and cigarettes. Since 2013, the state says it has blocked the use of EBT cards at over 2,400 cash machines and point-of-sale systems in stores.

The state will likely continue using its current EBT system, given the similar findings in its two most recent reports on implementing cashless welfare benefits. However, if welfare fraud remains so costly in the future, the state may need to consider making the change.

Source: The Eagle-Tribune