CAUGHT IN THE CROSSFILE

...In a hearing called by Senator Cohen last June, Egger asked, "If this public information can be used to sell everything from aluminum siding to magazine subscriptions, why shouldn't it be available to us to catch tax cheats...

...The commercial list plan, with its intermingling of privately and publicly generated data, is a small but significant step toward development of a centralized Government computer file, a civil libertarian's nightmare...

...11 requires states to perform matches with that wage information to check on the eligibility of recipients in such Federally funded programs as AFDC and Medicaid...

...In recent years, the IRS has been confronted with declining levels of voluntary compliance with the tax laws...

...Giving state officials access to such data is part of an alarming trend toward the use of private-sector files in the pursuit of Government aims...

...The information on unearned income brought into the matching process by the new law comes from forms filed with the IRS by banks and other financial institutions...

...The Selective Service System was embarrassed last summer by the disclosure that it had obtained a mailing list compiled by a national chain of ice cream parlors...

...Jerry Ber-man, legislative counsel in the ACLU's Washington office, argues that the coordination of different computer files and frequent matching adds up to a centralized data bank, even though the computer tapes are not all in one place...

...A report by the New York Civil Liberties Union argued that the costs attributed to New York state's matching program have been seriously understated and the savings exaggerated...

...Matching of the lists with IRS records has already been done, and suspected nonfilers are being notified...

...The law: H requires all states to institute, by 1988, quarterly reporting systems under which private employers reveal the names and wages of all their employees...

...In 1979, the Office of Management and Budget, which is responsible for enforcing the Privacy Act of 1974, issued guidelines on the use of matching by Federal agencies...

...Steps are being taken to standardize data formats among various government computer files to facilitate matching...

...whether recipients are also on private payrolls, and whether recipients in one state are simultaneously collecting in another...

...The amendment bars Government officials from terminating or rejecting benefit claims on the basis of a computer match alone...

...In Michigan, the state department of social services gained the cooperation of such major employers as General Motors in a scheme to match welfare rolls with private payrolls...

...This involves the refinement of computer records so that a benefit request can be thoroughly reviewed for eligibility even before the applicant starts receiving payments...

...A certain level of cheating against the Government is inevitable, but all evidence suggests that so long as the system was perceived as being fair, traditional screening procedures and safeguards would keep fraud within tolerable limits...

...The OMB's concern was that matching might be regarded as a violation of the Privacy Act's requirement that information collected by the Government for one purpose should not be used for another...

...Allan Rodgers, executive director of the Massachusetts Law Reform Institute, which sued the state over the computer matching program, estimates that as few as 25 per cent of the names generated in the process turned out to involve fraud...

...And in yet other instances, the computer had missed the fact that the funds it detected were exempt from the established limits...

...The recipients were accused of cheating by concealing assets that exceeded the limits set by law...

...At the Federal level, more than 160 matching programs have been reported...

...Instead of matching up the records of all recipients, prescreening involves investigating each applicant individually by searching Government records for any disqualifying information...

...In the meantime, the foes of matching have adopted two tactics...

...Such reservations were swiftly dispelled when the Reagan Administration took office in 1981...

...The 700-page Deficit Reduction Act passed by Congress last summer gave a solid statutory base to matching...

...A 1983 report by the agency put the total "gap" between what theoretically ought to have been paid and what was actually remitted at more than $80 billion...

...he prefers to call the practice "computer-aided audits and investigative techniques...

...The guidelines exploited a loosely worded exception in the law for "routine uses" of data, but bureaucrats contemplating a match were supposed to "consider alternative means of detecting or curtailing fraud" and were allowed to proceed "only if the alternatives [were] less effective, more expensive, or would present a greater threat to personal privacy...

...Persons whose names surface as "hits" between two files are compelled to prove their innocence in the face of a computer "conviction" that may have been based on inaccurate, outdated, or misinterpreted information...

...An even more ominous use of commercial lists for matching purposes is taking place in the Internal Revenue Service...

...Such practices have expanded enormously in the Reagan Administration, and last summer Congress quietly passed legislation requiring the states to perform matches on recipients in the major Federally funded benefit programs...

...Zealous fraud investigators in state government and some U.S...

...The only redeeming feature of the law is a provision inserted as an amendment by Republican Senator William Cohen of Maine, one of the few outspoken Congressional critics of matching...

...The IRS had long engaged in a kind of internal computer matching in the comparison of tax returns with third-party information documents such as W-2 wage forms from employers...

...The approach taken by Senator Cohen has been to establish legal safeguards in matching, such as the due-process provision inserted into the Deficit Reduction Act...

...The ACLU and Senator Cohen have been almost alone in calling attention to the dangers of the practice...

...Everyone is put under suspicion...

...a "human" verification of the discrepancy is required, and the affected individual must have an opportunity to respond...

...In the last category were the "excess assets" some elderly people had put aside for funeral expenses...

...the program was thus branded "an extraordinarily clumsy and wasteful operation...

...H gives the states access to Internal Revenue Service data on unearned income such as interest and dividends...

...General searches of everyone's files are thus avoided...

...Kusserow and his counterpart in the Labor Department, Brian Hyland, have published inventories showing just how extensive matching has become...

...The willingness of some privacy proponents to regard prescreening as an acceptable alternative is an indication of just how entrenched computer matching has become...

...IRS Commissioner Roscoe Egger has expressed exasperation with criticism of the agency's plan—which was considerably greater than has attended computer matching aimed at welfare recipients...

...Philip Mattera is a journalist based in New York...

...Among the hundreds of efforts are matches to detect whether recipients of one benefit are receiving any other, incompatible payments...

...Califano's enthusiasm was not fully shared by other Carter Administration officials...

...The project was later expanded to include a search for Government workers who were also on the lists of student loan delinquents...

...The other tack has been to question the cost-effectiveness of matching...

...Bergman does acknowledge, however, that the IRS is using commercial real estate information to investigate individuals who may not be reporting taxable capital gains when they sell property...

...One Congressional aide observes, "It is real popular to catch welfare cheaters...

...Kusserow is also targeting dishonest providers of health care by developing computer "screens" that will automatically reject invalid repayment claims made by doctors in the Medicare and Medicaid programs...

...In many cases there was confusion about the actual ownership of assets...

...There is a presumption of wrongdoing...

...When Cohen voiced concerns about IRS intrusions, Egger wondered, "Why should [people] have anything to fear from Internal Revenue if they are complying with the tax laws...

...Half a dozen states do matches directly with the records of private employers, and Massachusetts does its quarterly matches with the records of major private banks...

...The Massachusetts program, which has since been modified to give recipients a chance to defend themselves before their benefits are cut off, is just one of a multitude of computer matching efforts initiated by Government agencies in recent years...

...It was, the department assumed, a foolproof way of catching recipients whose financial resources disqualified them for aid...

...In 1977, Califano announced the creation of Project Match, a national effort in which Federal payrolls would be matched against state lists of recipients of Aid to Families with Dependent Children (AFDC...

...Federal payrolls have been matched against lists of student loan delinquents...

...About a sixth of the names appeared on the list because Social Security numbers were incorrectly recorded in Government or bank files...

...Proposals for a national computer data bank have surfaced periodically since the mid-1960s—most recently in a 1981 plan by HHS—but they have always encountered strong Congressional and public resistance...

...Project Clean Data is an effort to detect benefit recipients who are using invalid Social Security numbers...

...Word of the new investigative method soon reached Joseph Califano, President Carter's Secretary of Health, Education and Welfare, who jumped at the chance to step up his campaign against fraud...

...Social Security rolls have been matched against death records...

...What made these cases different from other instances of alleged welfare fraud was that the Massachusetts participants had, in effect, been investigated, tried, and convicted by a computer...

...Norma Rollins, director of the American Civil Liberties Union's Privacy Project, notes that "matches are performed on whole classes of individuals, with some presumption that there is wrongdoing...

...Selective Service used the information to mail warnings to young men reaching draft registration age...

...He insists that only nonfilers are being targeted and that commercial list data will not be used for investigating underreporting of income...

...The entire process, Rollins says, "turns the justice system upside down...

...But the officials' confidence in computer technology turned out to be misplaced, for the list of supposed welfare cheats was riddled with errors...

...CAUGHT IN THE CROSSFILE In its fight against fraud, the Government strikes a dangerous match BY PHILIP MATTERA In the fall of 1982, hundreds of Massachusetts residents were notified that their Medicaid benefits or their food stamps or other Government assistance payments were about to be cut off...

...Attorneys' offices developed the technique as a tool in the crusade against "welfare cheats...

...some were troubled by the privacy infringements implicit in computer matching...

...Some opponents believe that public outcry will begin when it is understood that matching is being directed not just against the poor but against all segments of the population...

...The computerized roster consisted of 167,000 names of children who had listed their birth dates to qualify for free ice cream sundaes...

...The states have been no less enthusiastic about the practice...

...The plan was to see whether the commercial lists for high-income areas yielded a significant number of households which did not file tax returns...

...To combat cheating in Federal programs, Reagan set up the President's Council on Integrity and Efficiency, composed of the inspectors general of all major Government agencies and other officials concerned with combating "fraud, waste, and abuse...

...The latter official is Richard Kusserow, a former agent in both the CIA and FBI, who is the leading proponent of computer matching in the United States, though he no longer likes the term...

...The obsession many Government officials now have with rooting out every last bit of cheating—often for ideological rather than budgetary reasons—is simply not worth the price we pay in the erosion of our liberties...

...Among the most active agencies are HHS (relating to such programs as Medicaid, Medicare, and AFDC), Labor (unemployment compensation and black-lung benefits), and the Veterans Administration (veterans' medical and educational benefits...

...First reports of computer matching by official agencies date back to 1977...

...Only a few voices have been raised against matching, warning of the dangers the practice poses to privacy and due process...

...lists of disability recipients have been matched against prison rosters...

...Pennsylvania matches AFDC and Medicaid recipients with the lists of lottery winners every month...

...Walter Bergman, a deputy assistant IRS commissioner who originated the commercial list plan, says the agency's intention is simply "to give everyone an equal opportunity to comply...

...The ultimate argument against computer matching is that a softer line must be taken on fraud and tax evasion...

...Test results are expected by next summer...

...The IRS scheme, launched without statutory authority, was derailed when David Burnham broke the story in The New York Times and several list-makers decided not to cooperate because of the adverse publicity...

...Each of the fifty states has some sort of matching program in effect...

...Privacy may have been an afterthought for the Carter Administration, but the Reagan people have elevated matching to an art," says Robert Ellis Smith, publisher of the highly regarded newsletter Privacy Journal...

...In the search for nonfilers, the agency turned to private companies that compiled estimates of household income by analyzing such public data as auto registrations and records of real estate transactions...

...The benefit cut-off notices resulted from a program the Massachusetts department of public welfare had initiated in August 1982: Lists of recipients in six public-assistance programs were matched by computer against the account records of major banks in the state...

...Acting through a broker, the IRS eventually did obtain its list of two million households, and the project is proceeding...

...The Long Term Computer Matching Project is promoting a process known as front-end verification or prescreening...

...Yet the standardization of data formats and the use of common identifiers among different files to expedite matching amounts to something similar...

...everyone is put under suspicion' Among the council's major activities is the Long Term Computer Matching Project, co-chaired by the inspectors general of the departments of Labor and Health and Human Services (HHS...

...But the growing underground economy included an estimated five million persons who simply filed no return and thus often completely escaped the IRS matching and audit systems...

...Ironically, what some see as a solution to the privacy problem would actually promote increased centralization of information...