Shrinking Budgets Stem Fraud Fighting Efforts

Fewer Fraud Bills To Be Debated in West

With the downtrodden economy rumbling through the West, momentous and game-changing fraud bills will be in short supply this year. Lawmakers’ time and patience will be soaked up by efforts to shore-up sagging budgets, leaving fewer openings for other priorities. In particular, fraud bills that may require cash infusions from the general fund will have a tough go in 2009.

Arizona may be Ground Zero for grasping how seriously state budget crises can set-back anti-fraud efforts. The fraud bureau was gutted in a budget-cutting move in mid-February. Fulltime staffers were slashed from nine to four, and the survivors must take furloughs to further lower spending. The unit has reduced its caseload in the process, giving many cheaters a virtual carte blanche.

Russian fraud gangs were moving into Arizona before the fraud unit was napalmed. More gangs could follow, as word leaks out that the bureau is decimated.

Not surprisingly, a bill cleaning up the fraud bureau’s confusing and inefficient funding mechanism also appears dead.

Nevada is debating whether to restrict outsider access to police accident reports. Recruiters for fraud rings are said to use the reports to identify crash victims, and to try to badger them into seeking bogus treatment at shady clinics connected to the rings. Recruiters often show up at crash scenes to lure dazed victims. They also show up at the victims’ doorsteps or phone them incessantly.

AB 57 would allow only crash victims, their legal representatives and legitimate reporters to access police reports for 60 days after a crash to give victims a chance to seek legitimate treatment without being bullied.

The bill emerged from a fraud summit sponsored by the National Insurance Crime Bureau. The idea later was adopted a task force created by Nevada’s governor.

In New Mexico, a measure would let courts combine the dollar amounts of frauds when deciding sentences. SB 117 takes aim at fraud rings and larger fraud outfits that bilk insurers with multiple bogus claims. Longer jail terms and larger fines kick in when courts can lump smaller claims into one larger sum during sentencing.

“Fraud rings … usually target several entities, and unless the totality of the activity is considered, the penalty might be a fraction of the total fraud,” the Coalition Against Insurance Fraud wrote to the bill’s sponsor, Sen. Carroll Leavell.

The measure has cleared the Senate and is winding through the House. But the legislature shuts down for the year in mid-March.

Two bills in Washington would let insurers sue convicted swindlers — typically staged-accident gangs and other large fraud outfits — for investigative and legal costs. Currently, criminal sentences don’t include those expenses.

Lawsuits would “allow insurers to recoup their expenses, and that would help reduce costs that can be passed on to consumers,” the Coalition and NICB wrote in a joint letter to the House and Senate sponsors.

Hawaii’s fraud bureau is trying to expand its purview from solely auto scams to other lines. Past efforts stumbled over intractable debates about whether to include workers’ compensation in the fraud bureau’s new portfolio, and if so, whether the unit should chase bogus injury claims and premium scams.

Supporters learned from those debacles. Three current legislative bills now leave workers’ comp out of the picture, thus increasing the chance of passage.

Utah budget problems have derailed a fraud bill. The Utah House defeated HB 263 that would have slightly increased an annual insurer assessment, which funds the state fraud bureau. A majority of House members thought this wasn’t the time to increase one agency’s budget while paring back on other agencies. Fraud fighters hope the environment for passage will improve in 2010.

The fraud bureau also has a new director. Armand Glick is a longtime law enforcement veteran who succeeds Joe Christensen.

Oregon is considering a move against abuse of addictive prescription drugs, such as OxyContin. SB 355 would fire-up a prescription monitoring program — a state database allowing law enforcement and other government officials to track prescription patterns.

Insurance fraud is a major financier of prescription drug diversion, according to “Prescription for Peril,” a Coalition report. Crooked doctors, pharmacists, street abusers and others illegally bill insurers for the fixes.

Fraud fighters have a smaller margin of error than ever in this recession. They’re up against a perfect storm: Short lawmaker attention span, brief legislative sessions, little or no spare cash, and competition from other lobbies. Thus, they must raise their political activism to higher levels of impact. Over the long-term, the perfect storm may become the perfect opportunity. The gains in greater political mobility can help influence passage of new fraud laws long after the recession is a distant memory.

Topics Trends Fraud