Digital IDs Could Have Prevented Billions of Dollars in Unemployment Insurance Fraud in the United States

Last month, the U.S. Government Accountability Office (GAO) shared findings that four new unemployment insurance (UI) programs designed to support workers during the COVID-19 pandemic experienced fraud totaling over $60 billion. While these UI programs offered critical lifelines to the millions of Americans who lost their jobs during this unprecedented public health crisis, neither the U.S. Department of Labor nor the state agencies responsible for overseeing UI programs had the technical infrastructure to deliver benefits at this scale. These deficiencies include poorly designed websites and case management systems, but they primarily involved agencies simply failing to quickly and accurately verify the identity of individuals applying for benefits. To reduce fraud of this kind and improve service delivery in the digital era, Congress should approve the implementation of a national digital ID program.

The GAO report offers a handful of examples that clearly illustrate the core challenge of identification verification. One example involves a former state employee using others’ identities to submit nearly 200 fraudulent applications. Another refers to an individual using stolen identities to submit 300 applications across 17 states. The latter specifies a foreign national, who used fake ID cards to submit fraudulent claims in multiple states.

In fact, the challenge of verifying identity extends to numerous government services. Whether an individual is applying for health insurance, filing taxes, or trying to secure a student loan, government agencies must verify whether that person is who they say they are. And fraud is not a one-time occurrence of pandemic circumstances. The Office of Management and Budget confirmed approximately $5 billion in fraud for the fiscal year 2021 for government services like these.

Right now, state and federal agencies in the United States rely on a patchwork of identification documents to verify identity, including driver’s licenses, birth certificates, social security numbers, and passports. But as governments digitize more services, people need a secure and reliable way to prove their identity online. Digital IDs provide a single method to confirm an individual’s identity online and thus offer a solution to the identity verification challenge in the digital era.

Many countries have already instituted national digital IDs, with Estonia’s program often considered the gold standard. With 99 percent of the country’s population enrolled, residents can access a vast array of services that sit on top of the electronic ID infrastructure, including voting online, signing contracts, and accessing health information.

Similarly, India implemented the Aadhaar program—essentially a massive registry of biometric data set against a unique 12-digit ID number for practically the whole population—in part to reduce fraud, corruption, and waste in its delivery of welfare services. By some measures, Aadhaar saves the Indian government approximately $1 billion each year by improving efficiency and reducing fraud and waste.

Admittedly, Estonia and India are different countries operating in different circumstances from the United States, but the federal government doesn’t need to replicate either. Rather, policymakers should consider how digital IDs could benefit U.S. citizens and improve service delivery while understanding there are critical improvements to be made when designing a digital ID program.

Additionally, a digital ID program isn’t a harbinger of a totalitarian dystopia. Taking an opt-in or voluntary approach to a national digital ID program will allow people to take advantage of the program if they choose or continue to use existing identification methods, with a primary goal to prevent eligible individuals from getting erroneously boxed out of government services.

If a national digital ID program had been in place during the pandemic, states could have used these IDs to verify whether a person is who they say they are, confirm whether they’re eligible for UI benefits (and if they’ve already received benefits in other states), and then deposit cash directly into the applicant’s bank account if approved.

Furthermore, a number of commercial activities that require identity verification can be expedited by sitting on top of the digital ID infrastructure, such as opening a bank account, applying for a mortgage, and sending digital payments.

In response to GAO’s pandemic UI fraud findings, the Biden administration shared its plan to dole out $300 million to federal agencies to help modernize ID verification technology. Instead of that money going to a myriad of band-aid fixes across multiple levels of government, the White House and Congress should work together to initiate a national digital ID program that works for everyone. This funding and political momentum are particularly timely given the news that Login.gov—the federal government’s single sign-on and identity verification solution designed to work across multiple websites—may not be secure or robust enough to scale across the government.

In short, the time is ripe for a national digital ID program in the United States. This effort is not without its challenges. Concerns around security and privacy should be considered and appropriately addressed to ensure the program maximizes benefits while minimizing harm. After all, government services like UI benefits can mean the difference between a rent payment and homelessness. With limited funds for programs like UI, a robust national digital ID program means less money going to fraudsters and more money going to those who need it most.