Insurance fraud as a gateway crime

PushiaKevin 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.

Feds to get tough on medical fraud?

dollarsCongressional bill drafters seem to be getting close to finishing a massive proposal on health care reform — a proposal that should be closely scrutinized by fraud-fighters everywhere for several reasons.

The proposal likely will include tough and innovative anti-fraud measures that will help to curb fraud committed against both public and private insurance, including property-casualty.

There’s hope that Congress will finally get serious about fraud in the Medicare and Medicaid programs. In a meeting this week on Capitol Hill, Congressional staffers admitted they’ve done a lousy job in protecting taxpayer money with these programs. While better anti-fraud efforts have been launched in recent years, the fleecing of these programs by crooked medical providers is a national disgrace.

This week a medical writer for the Las Vegas Sun, Marshall Allen, articulated this point very well:

The numbers don’t lie: The federal government does not put its money where its mouth is in terms of fighting Medicare fraud.

Everyone talks about the importance of policing Medicare fraud, but consider the following annual figures:

• Medicare billing totals more than $400 billion, and that’s mostly taxpayer money.

• Kim Brandt, who leads Medicare’s anti-fraud efforts, said some estimate the agency loses up to $80 billion to fraud, though she thinks that number sounds too high. (The truth is, no one is sure. All they know is that the more they look the more they find, Brandt said.)

• In 2008 Medicare recovered about $20.4 billion related to fraud.

• Medicare spends only about $120 million on fraud investigation.

If the problem is so large, and if every dollar spent on enforcement is multiplied exponentially in the form of recovered taxpayer money, why doesn’t Medicare spend more money to ferret out fraud?

One reason there aren’t more programs to fight fraud on the federal level is because lobbyists for medical interests have killed them. They fear anti-fraud efforts could end up costing honest providers. But killing them has ended up costing of all.

Allen cites an example of the paltry efforts in his article: Medicare spends about $20 million to support offices in three cities — Los Angeles, Miami and New York — all hotspots for fraud. Yet, among them, there are only 20 investigators.

There’s a growing realization that medical fraudsters are equal-opportunity crooks in that they ply their trade across both public and private insurance payers, and certainly between health plans and property/casualty insurance. That realty likely will set the stage for more public-private partnerships and greater levels of cooperation among the entire fraud-fighting community.

We’ll have to wait and see how health care reform and anti-fraud provisions take shape.

But one aspect is certain. If Congress is going to ask the American people to invest heavily in health care, there needs to be a sense that the money is not wasted. And they can start down that road by including comprehensive anti-fraud measures in their soon-to-be-announced package.

Upside down on car loan? Here’s some advice

GMAYesterday Good Morning America aired a good segment on auto giveups, which included an interview with coalition spokesman Jim Quiggle.

Consumer reporter Elisabeth Leamy offered some solid advice to anyone who can no longer afford their car payments:

Avoid repossession at all costs. When your car is repossessed you still have to pay the loan off, plus your credit is ruined for up to seven years.

Contact Lender. Instead, immediately contact your lender and try to work out a deal with lower monthly payments.

Trade car in. You could also try to trade your car in for a much cheaper one. This is tough if you owe more on your car than it is worth, but it will work if you choose a much more modest vehicle.

Short sale. Another option is a short sale in which you sell the car yourself and give the money to the lender and they agree to write off the difference without dinging your credit.

Transfer lease. And finally, if you lease your car, you may be able to transfer your lease to somebody else, as long as your lender allows this.

On the Good Morning America webpage, a handful of car owners posted comments about their experiences in trying to get lenders to give them a break. This is one posted story:

I called my bank. They pretty much said tough luck for you. I have good credit. Lost my job 6 months ago. I can’t find another job. I had the car for about a year before I lost my job. I’m in my 40’s and this is my first car loan. I have never been late or anything. but it is really bad where I live and I can’t find a job. My bank said there was nothing they could do for me. they can’t lower my interest rate because I can’t refinance becasue I don’t have a job. It’s getting harder and harder to pay this. It’s been up for sale since I lost my job. Not even 1 call. So much for “call your bank”. a lot of good that did me. I might as well of told them just to come get the car. Not everyone is willing to work with you apparently, some banks don’t care.

Most banks repossess vehicles as a last resort. Perhaps they’re hoping that borrowers will dump the car and pay off the loan with insurance money.

Anyone have any other advice for people in these desperate situations?

Innovations in combating auto insurance fraud

sealCongratulations to the Lawrence, Mass. police department for winning a prestigious award from Harvard. The Lawrence Auto Fraud Task Force was cited as one of this year’s top 50 innovations in government. The task force is credited with breaking a community’s tolerance for staging car crashes to steal millions from insurance companies.

Lawrence Police Chief John Romero initiated the task force in 2003 after the death of a 65-year-old grandmother who died in a staged crash. To date, citizens of Lawrence have saved more than $15 million on car insurance premiums thanks to the program.

Congratulations also should go to the other agencies who make up the task force, including the Massachusetts Fraud Bureau and the state’s AG’s office.

The award is from The Ash Institute for Democratic Governance and Innovation at Harvard University’s John F. Kennedy School of Government.