New Farm Bill Maintains Criticized Crop Insurance
ANDREA SEABROOK, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Andrea Seabrook.
And now, two stories from Capitol Hill this week that may have escaped your notice. The first is about the federal crop insurance program. Crop insurance companies earn billions of dollars on policies that the government heavily subsidizes. This program is valued at $50 billion, and has been called one of the most inefficient in the entire federal government. But on Thursday, the Senate rejected several attempts to scale back huge agricultural subsidies.
And as NPR's John Burnett reports, crop insurance reform was among them.
JOHN BURNETT: The crop insurance industry's troubles began last spring with the release of an eye-opening report by the Government Accountability Office. The GAO reported private crop insurance companies earned nearly three times the rate of return as traditional property and casualty companies. And further, their profits keep going up as commodity prices rise even though the services they provide do not change.
A bipartisan amendment in the Senate would have stripped $2 billion from crop insurance and put it toward other USDA programs. In floor debate, Senator Sherrod Brown, an Ohio Democrat, pointed out that since 2000, farmers have received $10.5 billion in benefits, but it cost the government $19 billion.
Senator SHERROD BROWN (Democrat, Ohio): That's because the crop insurance have had such huge subsidies, huge overpayments, huge profits during that seven years. According to the GAO, crop insurance companies take 40 cents out of every dollar that Congress appropriates to help farmers. Think about that. No place operates that way.
BURNETT: The amendment was soundly defeated by arguments such as this from Senator Pat Roberts, a Kansas Republican.
Senator PAT ROBERTS (Republican, Kansas): I am rising in strong opposition to the Brown amendment, which I really think, bluntly put, would kill the crop insurance program more especially in certain sections of the country. And as a result, endanger a great many farmers.
BURNETT: Crop insurance is a vital safety net for farmers particularly in regions of the country prone to hail, drought and freeze. The USDA is accordingly generous with subsidies. The federal treasury helps the farmer pay his premium, pays the crop insurer to administer the policies, and, ultimately, pays out disaster losses on the riskiest policies.
Last spring, Congressman Henry Waxman, chairman of the House Government Reform Committee who's used to grilling war profiteers and Medicaid scammers, turned his attention to crop insurance.
Representative HENRY WAXMAN (Democrat, California; Chairman, House Committee on Oversight and Government Reform): I think it's hard to imagine a more wasteful government program. I know there are plenty of times when farmers faced with natural disasters will need help from the federal government, but I simply can't fathom how we've managed to set up such an inefficient way to give them that help.
BURNETT: That kind of talk put the crop insurance industry on the defensive. They maintain the GAO report is just wrong, that their profits are not excessive, and they lose money in bad years.
Bill Hanson is a longtime crop insurance agent in Manhattan, Kansas.
Mr. BILL HANSON (Agent Division Representative, American Association of Crop Insurers): And as a result of the Waxman hearings, et cetera, and the misperceptions regarding profits and profitability, crop insurance has become a sort of a piggy bank for the people looking for money to spend.
BURNETT: The ag insurance industry says they've already made important reforms to increase program integrity; that's polite talk for rooting out crooked farmers. Federal investigators have turned up cases of multimillion dollar insurance frauds in which farmers fake a crop disaster, - sometimes in collusion with agents and adjusters while the companies look the other way.
NPR reported one case two years ago in which a Tennessee farmer had his workers beat his tomato plants with wooden stakes and then toast cocktail ice in the field and snap pictures. All of that to make it look like a hailstorm so he could collect the insurance.
In recent years, both the USDA and the insurance industry have done more to police their farm clients, says Bob Parkerson, president of National Crop Insurance Services, the industry trade group.
Mr. BOB PARKERSON (President, National Crop Insurance Services): There are always going to be folks who will like to take advantage of any program - government program, and we are trying to weed out those individuals, find out how to better spot them.
BURNETT: With the Sherrod Brown amendment now dead, there are some modest cuts to crop insurance company profits left in the House and Senate versions of the farm bill, but not much. A report by the Congressional Budget Office says when you look beyond the accounting shifts, it amounts to a $713 million reduction over the next five years, and that's more than offset by a new supplemental disaster package. At least for now, attempts to reform the bloated federal crop insurance system have been plowed under.
John Burnett, NPR News.
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