GAO Floats Capping Crop Insurance Premium Subsidies

The Government Accountability Office (GAO) issued a report outlining possible savings of up to $1 billion a year on crop insurance if Congress capped the subsidies for the premiums paid by farmers and USDA took more aggressive steps to monitor for fraud and abuse in the program. The GAO proposed capping crop insurance premium subsidies at $40,000 per individual producer.

House Agriculture Committee Chairman Lucas (R-Okla.) issued a statement that said, “Over and over again we have heard from our farmers about the importance of crop insurance because it forms the backbone of the safety net. I do not support the repeated attacks on an actuarial sound risk management program that serves as a good example of a public-private partnership where producers pay for coverage. This proposal would discourage participation in the crop insurance program and as a result endanger its integrity.”

Although the president’s budget proposed reducing premium subsidies in cases where the federal government pays more than half of a policy’s cost, Michael Scuse, acting undersecretary for the Farm and Food Agricultural Services, cautioned against congressional action to further limit or reduce premium payments without additional studies.

“In recommending a $40,000 limit in premium subsidy per individual, the report does not fully account for all potentially negative impacts and costs resulting from such a change,” Scuse said. In addition, he said the report fails to show “whether some commodities or regions of the country may be disproportionately impacted by a limit on subsidy.”

The program also has drawn the attention of reformers, fiscal hawks and the White House who are searching for ways to pare federal spending. Many of them have called for producers to pay a greater share of their premiums. 

The GAO study was conducted in response to a request by Sen. Coburn (R-Okla.).