This is great! Nice to see technology tackle a big problem. I don't see how you should have any expectation of privacy from the government in order to get government benefits. Totally reasonable.
I don't think people are saying they have any expectation of privacy (regarding PII) from the government under those circumstances.
I think people are saying they shouldn't be forced to expose themselves to a private, for-profit organization without, at least, some very strong legal safeguards.