Politico: GAO Recommends Crop Insurance Subsidy Reforms for Cost Savings

The Government Accountability Office (GAO) is recommending that lawmakers consider reducing or recalibrating crop insurance subsidies for both private insurers and the largest farms as a cost-saving measure for taxpayers, according to Politico, who says the new report was shared exclusively with them. This recommendation comes amid a long-standing policy debate that is expected to become a contentious issue during the next farm bill discussions.

Crop insurance is a widely popular program designed to provide financial protection to farmers in the event of natural disasters or market disruptions. However, critics argue the subsidy system disproportionately benefits large farms and a handful of private insurance companies. They charge the current subsidy system encourages insurers to focus on larger and more expensive policies, making it challenging for smaller farmers to access the program's safety net.

Key findings from the GAO report, according to Politico:

• GAO found that reducing premium subsidy rates for high-income policyholders by 15 percentage points in 2022 could have saved the federal government approximately $15 million.
• In 2022, only 1% of policyholders accounted for 22% of the federal crop insurance program’s premium subsidy dollars, with an average subsidy of $464,900 per policyholder.
• The federal crop insurance program cost taxpayers $17.3 billion in 2022, with $3.7 billion going to private insurance companies. A significant portion of these subsidies went to insurers writing policies for larger farms with bigger policies.
• Larger policies made up about 2% of total policies but accounted for 36% of the total $2.1 billion in administrative and operating cost subsidies for private insurers.
• Setting the rate of return for insurance companies closer to the current market rate could potentially save billions over the next decade, according to GAO.

The report was requested by Sens. Cory Booker (D-N.J.) and Kirsten Gillibrand (D-N.Y.).

Comments: One farm policy expert, asked to comment, emailed: “GAO has a long record of issuing reports that are hostile toward agriculture policy. This is just one more. Cory Booker is the senator who believes the U.S. food and agriculture system should be totally destroyed and rebuilt. He was featured in The NY Times series hit piece on U.S. agriculture that was widely repudiated even by USDA, which has been sympathetic to many of these goals. The findings are a bit bizarre. Charging farm families who produce the bulk of the nation’s food, feed, fiber and fuel 15 percentage points more for their insurance would save $15 million (with an ‘m’)? To most Americans $15 million is still a bit of money. But the injury to these farmers would be enormous while the money saved isn’t even a rounding error in federal budgeting. The 1% of farmers receiving 22% of total premium support is the same old EWG talking point rebranded for crop insurance. I wonder if GAO thought to ask the question, What percentage of total premium of premiums paid by farmers did these 1% pay? Dollars to donuts it is disproportionately higher.”

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