A subsidy program can survive many things. Paying benefits to the dead should not be one of them.
That is the problem now facing the Federal Communications Commission’s (FCC) Lifeline program, which was designed to ensure that low-income Americans can connect to the communications networks modern life depends on. As the program has expanded to cover new services, the Universal Service Fund (USF) contribution factor—essentially a tax on consumer phone bills—has climbed to 37%. That makes every dollar lost to fraud more than an accounting error. It is a charge passed on to the consumers funding the system.
Reasonable people can debate the merits of the existing USF structure, and of broadband-subsidy programs more generally. But if regulators want to continue supporting broadband deployment and adoption, those programs should maximize benefits while minimizing costs.
USF costs have risen largely because support has expanded to broadband. But waste, fraud, and abuse still drive costs higher without producing any offsetting public benefit. Most notably, the FCC Office of Inspector General (OIG) found that providers in states that opted out of federal verification systems collected nearly $5 million in reimbursements tied to more than 116,000 deceased individuals over just five years. Roughly 40% of those payments went to individuals who may have died before they ever enrolled.
Eliminating waste, fraud, and abuse matters. But doing so also carries costs. Compliance burdens that are too heavy, eligibility rules that are too blunt, or verification requirements that are too cumbersome can prompt eligible households to abandon enrollment. They can also push providers out of thin-margin markets rather than absorb mounting administrative overhead.
Fortunately, the FCC could take two immediate steps to address this specific fraud with minimal burden on consumers.
First, the FCC should require all states to use federal verification systems, ensuring that up-to-date mortality information is used to verify claims. Second, it should require a secondary consent mechanism to confirm that the individual subscribed to a Lifeline-supported service is actually eligible and receiving that service.
Taken together, these reforms would directly target one of the Lifeline program’s most significant fraud vectors without undermining participation in the program.
The Fine Line Between Oversight and Overkill
Fraud reduction and program access are not competing values. Still, policies designed to reduce fraud can also make it harder for legitimate recipients to access the program. Section 254 of the Communications Act requires the FCC to promote affordable access to quality communications services. That means every proposed reform should be judged not only by how much fraud it eliminates, but also by the burdens it imposes on eligible households and the providers that keep the program running.
Eliminating waste, fraud, and abuse has obvious value. Every dollar paid to a deceased subscriber, a fictitious enrollee, or a provider that never delivered service is a dollar that did not reach a qualifying family trying to afford a phone bill. With the USF contribution factor now at 37%, the surcharge has become one of the largest hidden taxes on American telecommunications consumers. Improper payments therefore impose a direct and ongoing financial cost on the very people subsidizing the system.
Reducing waste, fraud, and abuse also stretches existing program dollars further, lowers the contribution burden on ratepayers, and helps restore the legitimacy that any subsidy program needs to maintain public and political support.
At the same time, anti-fraud reforms are not costless. Compliance burdens that appear modest on paper can become decisive in thin-margin markets. When the FCC layers on enhanced compliance plans, mandatory audits, expanded financial disclosures, and duplicative reporting obligations, providers must decide whether participation in Lifeline still makes economic sense.
When the answer is no, providers scale back operations, exit high-cost markets, or leave the program altogether. The subscribers they serve then lose access. Overly rigid rules can produce the same result through a different mechanism, deterring eligible households from enrolling or remaining enrolled.
The goal of Lifeline reform should be a program that is harder to defraud and easier to use—not one that replaces a fraud problem with an access problem of equal or greater magnitude.
Fraud Thrives in Fragmented Systems
Earlier this year, the FCC OIG released findings that exposed a structural fraud problem in the Lifeline program. The report found that providers in states that opted out of the National Lifeline Accountability Database (NLAD) collected nearly $5 million in reimbursements tied to more than 116,000 deceased individuals over a five-year period. Roughly 40,000 of those enrollments appear to have occurred after the subscriber had already died.
The OIG also uncovered widespread duplicate claims, including cases in which the same individuals were enrolled simultaneously in multiple states. Taken together, the findings describe a verification system with gaps large enough to sustain systematic abuse at scale, year after year, without detection.
The opt-out framework was intended to give states flexibility. In practice, the OIG’s findings suggest that flexibility came at a substantial cost. State-run systems lack the direct, real-time connections to federal mortality and identity databases that the National Verifier uses. States can also adopt rules that conflict with federal policy.
California offers a particularly striking example. The state eliminated requirements that applicants submit Social Security numbers, making it impossible for the Universal Service Administrative Co. (USAC) and the FCC to reliably verify Lifeline enrollment and reimbursement claims. These state-by-state variations have also produced uneven outcomes, creating inequities among participants depending on where they live.
The most straightforward solution is to eliminate the opt-out framework entirely and require all remaining states to transition to the National Verifier on a clear and reasonable timeline. That reform would directly address the vulnerabilities identified by the OIG while imposing minimal burdens on legitimate participants.
Federal verification systems already perform functions that state systems have demonstrably failed to perform. The National Verifier runs automated death checks against authoritative federal mortality data, applies uniform identity-verification standards nationwide, and conducts real-time or near-real-time eligibility checks that do not depend on varying state policies or administrative capacity.
Centralizing verification would also reduce compliance burdens on providers. Right now, providers operating in multiple states must navigate different verification systems, documentation requirements, and reimbursement processes depending on the jurisdiction they serve. A single federal framework would replace that patchwork with a more predictable and administrable system.
One More Click, Much Less Fraud
In addition to creating a single verification system, regulators should consider adopting a secondary-consent requirement. Under such a rule, any Lifeline enrollment or benefit transfer would require affirmative confirmation from the actual subscriber before completion.
The mechanics are straightforward. When an enrollment or transfer is initiated, the system sends a confirmation message to the applicant’s contact information on file. The transaction proceeds only if the individual responds affirmatively. The reform would not impose new documentation requirements or tighten eligibility standards. It would simply confirm that the person named on the application is the same person who actually wants the service.
That reform would target two common forms of enrollment fraud.
First, when fraudsters fabricate contact information, nobody can respond to the confirmation request, and the enrollment fails automatically. Second, when someone uses a real person’s information without that individual’s knowledge or consent, the legitimate subscriber receives an unexpected notification and can reject the transaction. What otherwise would have become a completed fraud instead becomes a detectable red flag that triggers scrutiny rather than reimbursement.
A secondary-consent mechanism would also help curb fraud in benefit transfers. Under the current NLAD framework, a provider can initiate a transfer of a subscriber’s benefit to a new carrier based largely on the provider’s own certification of consent. Applying secondary verification to transfers would reduce the ability of fraudulent actors to use benefit transfers as a workaround for existing verification checks. A subscriber who did not authorize a transfer would receive notice before it occurs and could block it.
As with eliminating state opt-out verification systems, the burden on legitimate users would be negligible. In most cases, the reform would require nothing more than a single tap or reply—the sort of action smartphone users perform dozens of times each day in other contexts. It would be far less onerous than the annual recertifications, officer certifications, and documentation requirements the program already imposes on both subscribers and providers.
Paired with the opt-out reforms discussed above, a secondary-consent requirement would directly target one of the Lifeline program’s remaining major fraud vectors without undermining participation.
Dead Subscribers Make Bad Public Policy
The Lifeline program exists to ensure that low-income Americans can access the communications networks modern economic and civic life increasingly requires. If federal regulators intend to preserve the program, they must also ensure that it operates efficiently and does not impose costs that outweigh its benefits.
Every dollar lost to a deceased subscriber, a fictitious enrollee, or an unauthorized transfer is a dollar that never reached a qualifying household. It is also a cost shifted onto the ratepayers funding the system and another blow to the public legitimacy that keeps the program politically sustainable.
The reforms outlined above directly target the structural weaknesses identified in the OIG’s findings. Just as importantly, they do so without raising eligibility barriers, increasing documentation burdens, or imposing compliance costs that could drive providers out of thin-margin markets.
The broader lesson for Lifeline modernization is that the FCC does not have to choose between program integrity and program access. That tradeoff becomes unavoidable only when regulators ignore who bears the costs of reform and whether those costs are proportional to the expected gains.
A rigorous cost-benefit framework—one that weighs the harms of fraud and overregulation with equal seriousness—can produce targeted, high-impact, low-burden reforms. Done properly, Lifeline reform can create a program that is harder to defraud, easier to administer, and more reliably available to the households that depend on it most.
Because a subsidy program that cannot distinguish between a living subscriber and a dead one is not merely inefficient—it is unsustainable.
