Automatic Benefits: Reducing Red Tape, Improving Lives

In 2005, California instituted a pilot program called ReadyReturn in which 50,000 taxpayers received an already-completed state tax return. The state compiled the returns based on data it already had from employers and banks. A survey of ReadyReturn participants found that 90 percent said they had saved time, and the ReadyReturn approach to tax filing has now been adopted by the state as standard practice.

In a 2006 paper, Professor Austan Goolsbee of the University of Chicago (later chairman of President Obama’s Council of Economic Advisors), made the case for the “Simple Return.” Same idea. Goolsbee argued that if the IRS pre-filled the 1040 for the some 40 percent of Americans who take the standard deduction and do not itemize, it would save 225 million hours of time and more than $2 billion a year in tax-preparation fees while increasing revenue to the IRS from reduced errors. Alas, Goolsbee’s proposal is still aspirational.

There’s a lot of appeal to reducing taxpayers’ pain and accelerating their ability to pay into the fisc. But what about applying the same concept to when government pays out benefits? That’s exactly what New York city council member Ben Kallos, a software developer and chair of the council’s Committee on Governmental Operations, wants to do: automate all benefits.

Under a bill Kallos recently introduced, city residents would receive all benefits for which they are eligible simply by filing a tax return or applying for one benefit. Re-certifications would be automatic rather than arduous. The hope is that, instead of confusion, stress and repetitious paperwork, automatic benefits will ensure that the right people get what they need to help them get out of poverty and reduce administrative costs.

Of course, a great deal of research and planning will be needed to “score” the bill and empirically assess how much it would cost, how much it would save, how such a program would be administered and who would benefit. But thanks to today’s readily available open data about the services the city delivers, this task would will be much easier and less speculative than it would have been in the past.

States, too, could easily make the switch to automated benefits. In Louisiana in 2010, the Department of Social Services implemented “express lane eligibility,” which automatically enrolls and renews children for Medicaid- and Children’s Health Insurance Program-based food-assistance eligibility. In doing so, the state has saved $1 million a year in administrative costs while the percentage of uninsured but eligible children has dropped from 5.3 percent to 2.9 percent.

In California, a cash-assistance program called CalWORKS comes automatically with Medi-Cal, the state’s Medicaid program. And across the country, when residents turn 65 they are automatically enrolled in Medicare.

Instead of filling out the same forms over and over again, residents should be signed up for services based on information they have already provided. A smart, efficient, data-driven government can invert the process so that rather than having to fill out forms, people need only to correct them. As a result, delivering services could be dramatically improved. It may seem counterintuitive, but automatic or ready benefits have the potential to result in more services delivered by smaller yet more efficient government.

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