MDHHS Will Incur $ 320 Million FY 27 SNAP Error Rate Penalty

Last year's federal One Big Beautiful Bill Act (OBBBA) includes penalties for states with high payment error rates in the USDA Supplemental Nutrition Assistance Program (SNAP), requiring them to cover a portion of the benefit costs if their error rates exceed 6%.  States with SNAP payment error rates above 6% will be required to cover 5% to 15% of the costs for SNAP benefits.

Michigan's current SNAP error rate is 9.53%.  Michigan is expecting a $ 320 million annual penalty.  Should the OBBBA penalties improve state SNAP error rates, there will be pressure in the U.S. Congress to apply such penalties to other federal/state partnerships such as Medicaid.  The health care community should watch this closely:

https://www.themidwesterner.news/2026/03/michigan-may-face-320-million-federal-penalty-as-snap-payment-error-rate-nears-10/

Michigan may face $320 million federal penalty as SNAP payment error rate nears 10%
'The administrative state does not govern itself. Agencies answer to the legislature and we answer to the citizens of Michigan'
By Travers Koory | March 11, 2026

Members of the Michigan House Oversight Committee raised concerns Tuesday about potential fraud, administrative errors, and weak verification procedures in the state’s food assistance program during a review of a nine-month investigation into the issue.

The hearing examined how the state administers the Supplemental Nutrition Assistance Program, which distributed $3.2 billion in benefits each year through the MI Bridges portal and Bridge Cards.

Lawmakers warned that Michigan could face a federal penalty of at least $320 million if the state fails to reduce its SNAP payment error rate, which currently sits above the federal threshold.

Michigan’s most recent SNAP payment error rate stands at 9.53%, according to figures discussed during the hearing. With the passing of the One Big Beautiful Bill last year a series of guidelines set a 6% threshold before penalties apply.

Rep. Jason Woolford, R-Howell, who chairs the subcommittee investigation, framed the hearing as part of the legislature’s duty to monitor how taxpayer dollars are spent.

“Oversight is not optional. It’s our constitutional duty,” Woolford said. “The administrative state does not govern itself. Agencies answer to the legislature and we answer to the citizens of Michigan,” he added.

“Michigan’s most recent SNAP error rate … was 9.53%, and while this represents improvement from earlier years, it still remains significantly above the 6% threshold,” Woolford said. “We will be writing the check back to the federal government for a minimum of $320 million.”

Committee Chair Rep. Jay DeBoyer, R-Clay Twp., also questioned the scale of spending involved in the program.

“We have $3.25 billion sitting in a pile,” DeBoyer said during the hearing. “And then you said to me, there’s no front-end verification.”

Much of the committee’s questioning centered on whether the state verifies applicants before issuing benefits or relies primarily on checks after enrollment.

Woolford demonstrated how the MI Bridges portal allows applications to begin with minimal verification. During the investigation, he said he attempted to apply for benefits using a real address with a false identity.

“I started applying for those benefits using Governor Whitmer’s address, so a real address with a fake name,” Woolford said. “I was able to bypass the Social Security [number]… never getting denied benefits, and at the very end, getting registered to vote.”

Woolford questioned why the system does not require stronger identity verification before processing applications.

“Why would we spend $16 million on an upgrade to a website and not allow for someone or mandate someone to log in to use a Social Security number or an alien number when we’re handing out $3 billion?” he asked.

He argued the system relies too heavily on self-attestation, allowing applicants to provide information without immediate verification.

“Think of the things that you need to log into or show proof of who you are,” Woolford said. “But when it comes to benefits and over $3 billion we say we trust you, friend. No, that’s not how this works.”

Scott Centorino of the Foundation for Government Accountability told lawmakers that much of the program’s error rate stems not from individual fraud but from systemic weaknesses in how benefits are administered.

“You can’t get under that 6% error rate threshold if you only look at that kind of fraud,” Centorino said. “You’ve got to look at the systemic errors, and that’s what I would always call fraud by design.”

“In Michigan today … you can have unlimited assets and enroll in food stamps. There is no verification. It’s never asked,” he said.

Centorino noted that federal rules set minimum standards but allow states to implement stricter safeguards.

“There are some laws and regulations that state what must be done, what must be accepted, but that’s a floor, not a ceiling,” Centorino said. “There’s no limitation… on what can be verified.”

At the same time, he said, the state has one of the highest participation rates in the country.

“Our job is not to protect the bureaucracy. Our job is to protect the citizens of this great state,” Woolford said. “That means protecting the single mother trying to put food on the table… and the taxpayers who fund them.”

Democrats on the committee also raised questions and called for additional information from the Michigan Department of Health and Human Services, which administers SNAP.

Rep. Reggie Miller, D-Van Buren Twp., said the agency should appear before lawmakers to respond directly.

“I have many questions for MDHHS,” Miller said. “Just getting a report from them or information isn’t enough. I think we need them here to answer questions.”

DeBoyer noted that lawmakers previously requested data from the department and never received a response.

“You made a request of that information from them… about a month ago,” DeBoyer said during the hearing. “No response, not even that, ‘We’re not sending it to you.’”

During the hearing, lawmakers and witnesses discussed several potential reforms, including stronger identity verification during applications, adding photo identification to Bridge Cards, and upgrading the cards from magnetic stripes to more secure to the Europay, Mastercard, and Visa style chips that are common on most credit cards.

Michigan officials are pursuing a $16.3 million plan to transition Bridge Cards to more secure chipped cards after a surge in EBT card-skimming fraud. Reported scams involving electronic benefit cards increased from about $181,000 in replaced benefits in 2023 to nearly $885,000 in 2024, with hundreds of thousands more stolen in early 2025.

Woolford last year introduced legislation to require photos and signatures on Bridge Cards to prevent unauthorized use, arguing the measure could reduce trafficking and misuse of food stamp benefits.

Other proposals discussed during the hearing included expanding cross-checks with tax and income data and joining the SNAP National Accuracy Clearinghouse to detect duplicate participation across states.

DeBoyer emphasized that lawmakers must both protect the integrity of the program and ensure benefits reach those who genuinely need them.

“At the end of the day, we have an obligation to manage the money wisely, provide the benefits to the individuals that are certainly in need,” DeBoyer said, “but at the same time, we have to be certain that people are not taking advantage of those benefits.”

Woolford argued that improving oversight is ultimately about ensuring public programs work as intended.

“Every dollar lost to fraud is $1 stolen from a struggling family,” Woolford said. “Every dollar wasted by bureaucratic complacency is $1 taken from a taxpayer who worked hard… sometimes multiple jobs… to earn it.”