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A brief from The Pew Charitable Trusts indicates the approach has been successful.
New Mexico’s use of data analytics and a behavioral economics theory to prevent fraudulent and ineligible unemployment benefit payments appears to be working effectively.
That’s according to a brief published last week by The Pew Charitable Trusts, which details several years of state efforts to address unemployment insurance overpayments. This has involved updating and linking two computer systems that were previously disconnected, building data analytics models and crafting “behavioral nudge” messaging.
Spearheading this work was New Mexico’s Department of Workforce Solutions, which oversees the state’s unemployment insurance program. The approach marks a shift toward trying to stop improper benefit payments before they are made, rather than turning to “pay and chase” tactics.
The state’s computer system upgrades enabled employers to enter information online about workers who’d lost their jobs, replacing a process that had relied on paper documentation.
Additionally, the system for employer records was connected to one that handles unemployment claims from former workers. Combining the two data systems allowed the state to more quickly detect applications for unemployment benefits that were inconsistent with employer filings.
Retooling the computer systems also made it possible for claims to be cross-checked with other information that can be used to catch ineligible benefit applications, like birth and death records.
Between 2012 and 2013, unemployment insurance fraud in New Mexico dropped by 60 percent, or about $10 million, according to the Pew brief.
Last year, the state began working with Deloitte Consulting LLP uncovering trends and patterns in unemployment insurance program data. This helped the department identify points in the benefit application process when clients were most likely to enter incorrect information.
With that knowledge providing a foundation, a strategy was developed to use behavioral nudge messaging to push people toward submitting accurate unemployment claims.
Nudge theory is a concept commonly associated with behavioral economics, and hinges on the idea that certain suggestions and reinforcements can influence decision-making.
The nudge messages for New Mexico's unemployment insurance program were launched in May 2015.
They appear in popup windows during the online application process. Rather than using one-size-fits-all language, the messages a person will see depend on their answers when they’re filling out an application for benefits.
A nudge might include wording like: “9 out of 10 people in Bernalillo County report their earnings accurately. Please report all information.”
According to the Pew report, New Mexico reduced “benefit year earnings” overpayments through the unemployment insurance program from over 5 percent to 2.9 percent between 2015 and 2016. The national average dropped less than 1 percentage point during the same period.
The overpayments occur when a person returns to work but continues to collect benefits.
A full copy of the brief from The Pew Charitable Trusts can be found here.
Bill Lucia is a Reporter for Government Executive's Route Fifty and is based in Washington, D.C.