Fraud fighters have a duty to use reliable data

Like or loathe, the term “fake news” is now part of our national culture. Even the venerable Webster’s Merriam Dictionary now includes “fake news.”

Fakes, frauds and scams are well-known to the fraud-fighting community. Yet how often do we consider the source of information or data we rely upon in our investigation or advocacy efforts?

As a child I remember my father somewhat cynically stating the adage: “Figures don’t lie, but liars make figures.” We often use data and reports to support our positions and advance our goals. As an attorney, I was taught to cite the law and information if you want to prevail. It remains good advice.

But fraud fighters especially owe a special duty to the public to be cautious about what reports and statistics we cite, and even define what constitutes insurance fraud.

A good case in point recently was discussed among insurance policymakers. The battle has raged for many years over whether insurers have the “right” to use aftermarket versus original (OEM) parts in making vehicle repairs.

Proponents argue that aftermarket parts are at least of equal quality, while critics say insurers use shoddy knockoffs to avoid paying for higher-priced OEM parts. The usually impartial Insurance Institute for Highway Safety recently was embroiled in a battle about the safety of aftermarket parts.

A Dallas law firm is handling a case involving injuries allegedly caused by using aftermarket parts. The firm ran crash tests supposedly showing increased risk of injuries to passengers in vehicles repaired with aftermarket parts. The findings ran counter to tests by others, and referenced by IIHS, which issued a news advisory questioning the validity of the law firm’s findings.

This is one example of how statistics can support far-differing positions on issues affecting insurance overall, and fraud specifically. Leaders such as the Coalition spoke to legislators, often citing studies and data, at the recent NCOIL spring meeting in Atlanta.

One debate showed how “reliable” data can support far-differing views. Of growing national importance are Pharmacy Benefit Managers (PBMs). The “Big 3” PBMs control 78 percent of the prescription drug market, with more than 180 million enrollees. One PBM just made national news by announcing Cigna’s plan to spend $54 billion to take over Express Scripts. Combined, they had revenue of about $142 billion as of last year.

Even before this mega-merger was announced, NCOIL speakers cited statistics, data and pricing analysis to favor and demonize PBMs and their impact on America’s health and prescription drug insurance markets. Statistics were cited to praise and ridicule. Certainly, both sides couldn’t have talked about the same data and “facts” … yet they did. The Coalition was asked if we view PBMs as “insurance fraud.”  We’re monitoring the issue, though are carefully researching before taking a stance, if even at all. Why?

First, is the data itself. Today there’s plenty of data on almost any issue. As we consider what constitutes insurance fraud, we seek accurate and verifiable data. Our credibility rests on having good data on which to base a reliable and informed decision. Often that takes time, and willingness to weigh many viewpoints. Having important groups such as NCOIL, NAIC and NCSL as vital parts of the Coalition gives our members an “ear” and “voice” to address these fraud issues on the national stage.

Second, there is a major difference between insurance fraud and abuse. Some practices are disdainful, yet legal, abuses of America’s insurance systems. With hundreds of billions at stake every year, fraud and abuse run rampant. The Coalition uses our 25-year history as a barometer to help decide what to target as fraud versus abuse.

To prove the point, the Coalition recently filed strongly worded comments voicing concern about the Administration’s proposal to authorize  Association Health Plans potentially under sole federal control. The Coalition educated federal decisionmakers using our first-hand experience of seeing tens of thousands of consumers defrauded by fake health plans when AHPs ran amuck in 2002-2004. Citing this sorry history, we urged policymakers to allow all-important state oversight of AHPs in conjunction with federal involvement.

Whether the debate is over AHPs, PBMs, OEMs or another string of acronyms, data can support potentially all sides of a debate. We talk about the importance of SIUs deciding whether a claim is fraudulent only when the investigation is complete, with all the facts. We caution younger adjusters to be thorough to avoid allegations of bad faith.

It’s always wise to be certain that data we rely upon is tested and derived from reliable sources. Or does it represent only the views of a special interest group with an agenda? And, is the issue about insurance fraud, or abuse of our insurance system? America’s insurance consumers rely upon carefully weighed opinions and actions by the Coalition, our members and allies as we protect the public from insurance fraud. To that viewpoint, certainly, the Coalition is committed.

About the author: Matthew J. Smith serves as general counsel and director of government affairs for the Coalition Against Insurance Fraud.

Satisfied claimants good for business – and can help fight fraud

Property/casualty insurers should feel pretty good about themselves after seeing glowing numbers in the latest customer satisfaction report. In fact, J.D. Powers says claimant satisfaction is at an all-time high — and this comes after a couple of years of heavy homeowner disaster claims.

High customer satisfaction is good for business. It promotes goodwill and creates loyalty. Customer satisfaction helps reduce the consumer complaints received by insurance departments, lessening the burden on regulators.

Satisfied customers also can help to reduce the perceived need for claimants to run out and hire an attorney at the first sign of a loss.

And there’s one more reason insurers should continue to work hard to keep customers satisfied: It can help reduce fraud.

When consumers feel they’re treated fairly, they’re less likely to be tolerant of fraud. Research by the Coalition strongly suggests a correlation between satisfied claimants and their attitudes about fraud. After a loss and a good claim experience, policyholders are more likely to look down on friends, family members and co-workers who are considering a scam.

Exerting such peer pressure can be the strongest deterrent to fraud, according to researchers.

Insurers have plenty of reasons to continue to keep claimants satisfied. Let’s hope it’s a trend that will lead to even higher levels of satisfaction in the future, and lower levels of fraud.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Specialist also sticks Medicare with $137M in bogus eye claims

Patients flocked to Dr. Salomon Melgen, looking for relief of serious eye conditions. The West Palm Beach, Fla. eye specialist returned their trust by thrusting needles painfully in their eyes and searing their retinas with lasers. It was a festival of worthless and botched procedures that left patients with damaged eyes.

For Melgen, the payoff was a $136-million filching of Medicare and taxpayers. He became a rich man replete with a luxury mansion until investigators, well, saw through his shortsighted eye ruses.

The Harvard-trained specialist was well-known and sought-after, especially for seniors with eye problems. Their misery became his path to insurance wealth.

Melgen treated up to 100 patients a day. He falsely diagnosed most with debilitating diseases, even when most had no disease. Macular degeneration was his most-common bogus diagnosis. It’s a retina disease that can permanently sap the vision of seniors 65 and older. The prospect of an incurable descent into blindness made patients take whatever treatment the expert in the white coat said they needed.

Painful eye injections

That often meant painfully injecting expensive medicines into their eyes, then billing Medicare. Melgen often had his staff fill out medical charts and diagnoses before he even saw patients. Medicare paid him for 37,075 injections in 2012 alone — more than 100 per day. Tests often were done in just seconds, making them worthless for diagnosing. Melgen’s average insurance haul was more than $23,000 per patient.

Some seniors had a plastic prosthetic eye, yet Melgen billed Medicare for testing and treating serious eye conditions. Other patients had eye conditions that were too far gone to benefit from treatments. Melgen still soaked Medicare with batteries of tests and treatments.

Anna Borgia had painful injections and laser treatments for supposed glaucoma and diabetes-related sight loss. Melgen then botched a surgery that left her nearly blind, she testified. She says she’s confined to her home, listening to the TV and paying drivers to take her to the grocery store.

Developed eye infections

Melgen convinced a 90-year-old woman to have laser treatments and injections. She later said she didn’t need the treatments — she had no eye disease. Patients developed eye infections from injections. Fully one of every 13 patients grew infected. That was “astronomically high,” an expert testified at his trial. Normally only about one in 3,300 patients are infected, experts said.

Randy Frick’s attorney read a letter saying Melgen convinced his 90-year-old mother to get laser treatments and injections. He later learned they were unneeded because his mother has no eye disease.

“She underwent systemic torture at the hands of Melgen,” wrote Frick, who drove his mother to the appointments. “I feel so guilty I have nightmares.”

Melgen played another billing trick on Medicare — give patients partial doses of medicines, bill Medicare for a full dose, then bill again for using the remaining meds in the vile. That turned a $2,000 vial into a $6,000- $8,000 insurance windfall.
Melgen was handed 17 years in federal prison in February 2018.

“I love dancing but what man wants to take a blind woman dancing?” Anna Borgia told the judge.