Budget cuts in California have claimed one of the most effective and innovative anti-fraud programs targeting dishonest medical providers. On Feb. 26, longtime prosecutor Al MacKenzie ended his tenure with the Los Angeles County DA’s office. With Al’s departure, his creation — the Fraud Interdiction Program — also closed up shop.

Al created this program in 2004 to find a quicker and easier way to convict medical providers who were milking workers compensation insurance. His program was designed simply: once he zeroed in on a suspect, he contacted insurers and self-insureds to obtain data on claims paid to the suspect and then compared the amounts to state tax records.

Al reasoned that providers who defrauded insurers likely also cheated in paying taxes. More times than not, he was right. Armed with such hard evidence, suspects pled out quickly. The record of convictions Al’s team wracked up was impressive. His work earned him the 2008 “Prosecutor of the Year” award from the Coalition.

Success isn’t always rewarded, and there are plenty of examples of “penny-wise” decision-making that make little sense. This is surely one of them.

It’s nice to see a familiar name advance at the FBI. The agency announced today that Kevin Perkins will be the new head of the criminal investigations division. Kevin has more than 20 years of experience in combating white-collar crime and formerly managed the insurance fraud program in the days when that area was just starting to ramp up.

His history in the fraud area — combined with renewed efforts by federal law enforcement for more public/private cooperation — gives us hope that greater priority will be given to fraud cases.

We wish him continued success with his new assignment.

Kevin Pushia, a 37-year-old pastor in Baltimore, was charged on Friday with buying six life insurance policies on a disabled man and then having him killed. Pushia, who freely confessed when confronted, stood to gain up to $1 million in insurance proceeds.

One aspect of this story that is troubling, aside from the obvious, is that this murder may have been prevented had an earlier fraud scheme been investigated more thoroughly.

Police think Pushia may have used the proceeds from a church fire to pay the hit man. While the fire claim may have been legitimate, though doubtful, anecdotal evidence suggests that with every successful scam fraudsters become more brazen.

Does one scam lead to the next? Seems so.

This trend appears to start when people get away with filing small bogus claims that are paid quickly and, though suspect, are not investigated thoroughly. Confidence builds and, perhaps aided by pressures of a troubled economy, people move on to bigger and bolder insurance scams.

We’ve seen it time and again with medical providers who upcode a bit here and there, and before long, get greedy (and sloppy) and become major fraud artists.

A fire investigator in Nevada last year told me most of the vehicle arsonists he interviews are surprised that an investigator shows up at their doorstep. Many have filed previous suspect claims, he surmises, and most of these claims have been paid quickly — no questions asked.

Such an observation begs the question: Are some insurers unwittingly encouraging more fraud by not investigating small, suspect claims?

Now, many insurers, especially the ones listed here, will investigate any claim deemed suspicious. They’ll spend $2,000 to investigate a $1,000 claim because they understand the value of creating deterrence and understand the next bad claim might be for $10,000 or $100,000 — and likely will be much more expensive to investigate.

The number of bad claims never filed because of aggressive action by insurers will never be known. It’s too late for Kevin Pushia’s victim. But for future victims — be they individuals, insurers or all of us who pay the higher costs of insurance fraud — let’s hope that more insurers adopt a zero-tolerance policy and send a strong signal that committing fraud nevers pays.

In a state where medical fraud is wreaking economic havoc and even putting people’s health in jeopardy, this seems like a trivial matter. Losing four fraud fighters unexpectedly for a week probably hurts the state more than the fact they had a couple of beers at a cookout, albeit on state property.

Criminals who make a $30 billion industry out of defrauding insurance companies are in it for the long term, Travelers exec Doreen Spadorcia told the audience in her keynote address to the annual Insurance Fraud Management conference on Monday.

So, insurance companies need to maintain a similarly sustained focus on shutting them down.

That was one of many pearls of wisdom from Ms. Spadorcia, who challenged insurers to work smarter to prevent fraud and to adopt longer-term strategies.

She also cautioned companies against letting current pressure to reduce costs sabotage investments in fraud-fighting activities. “As a claim executive, I may have to reduce costs, and the easiest and perhaps the most equitable method would be across-the-board cuts. But that may not be the best strategic decision,” she explained, commenting that “a dollar saved on reducing anti-fraud activities is a poor investment.”

The same longer-term view needs to be taken in dealing with crooked medical providers, Ms. Spadorcia said. Travelers is one of a handful of courageous industry leaders who go after medical providers in civil court. Suing in federal court takes a good dose of fortitude and willingness to spend a bundle on legal fees. “Keep a roll of Tums in your top drawer because you’ll need it” in seeing these civil cases through, she said. “It’s not going to be a nice, comfortable process,” Ms. Spadorcia warned.

But she says Travelers does it, not just to attempt to get back their stolen money, but more importantly to put crooks out of business and to send a signal that insurers will not be allowed to be seen as easy targets.

She ended her talk on a serious note about the need for insurers to improve their public image as a means to convince consumers to become allies in the fight against fraud. “We need to be seen as ‘doers of good,’” she said. “Our next phase together must include a relentless focus on modifying our cultural orientation that tolerates or ignores insurance fraud.”

Great advice.