Fraud & Medical Marijuana

Requests for medical marijuana have skyrocketed.  Some reports estimate an increase anywhere between 50% and 300% since President Obama took office and indicated that he wouldn’t override state laws with federal ones as the Bush administration did.

In November, the American Medical Association changed it’s tune with regard to the potential medical benefits of marijuana.  The AMA “urges that marijuana’s status as a federal Schedule I controlled substance be reviewed with the goal of facilitating the conduct of clinical research and development of cannabinoid-based medicines.”  The statement indicates that the AMA is not endorsing legalization of marijuana but that further research is warranted.

The announcement comes exactly one year after the Michigan Medical Marihuana Act was voted into effect.  According to the Michigan Medical Marihuana Program (MMMP) website, more than 12,000 people have registered for the program since it’s inception – an average of 71 applications per day!

Perhaps marijuana does have medicinal benefits.  But can such programs contribute to an increase in fraud?  You bet.  Unscrupulous workers seeking a little relaxation may be inclined to fake a workplace injury, begin receiving workers compensation benefits and get a doctor to prescribe some cannabis for their “ailment”.   What’s better than a paid vacation from work – especially when that vacation comes with a free pass to get high?  Insurance fraud with a bonus.

‘Tis the Season for Burning Down Your House

Earlier this year, a Connecticut court upheld an arson conviction for Randal Licari.  The fire, which destroyed Licari’s home and resulted in a large insurance payment, occurred during the holiday season and appeared to involve a Christmas tree.  Initially, fire investigators could not determine the cause of the fire but stated it seemed ‘‘to be accidental in nature and more probably than not caused by the Christmas tree.’’  It turns out that Licari’s Christmas tree was freshly purchased and well hydrated and therefore could not have accidentally caught fire.  Further investigation revealed that he had placed Duraflame logs under the Christmas tree and lit them.  Licari did not have a fireplace in his home.

This case is a reminder that although Christmas trees can start fires (the National Fire Protection Association estimates about 210 Christmas tree fires per year), the moisture content of a Christmas tree plays a significant role in how hazardous it can be.  A DRY tree burns very quickly and will become fully engulfed in flames within 30 seconds.   However, a properly hydrated tree will not burn.  The National Institute of Standards and Technology (NIST) conducted several tests and attempted to light a well hydrated tree with a match, electric current attached to an entire matchbook, and an open flame applied with a blow torch (see the test results here with video).  The needles burned a bit while the open flame was applied but they self-extinguished quickly.  So, this holiday season, if you choose to have a real Christmas tree in your home, remember to keep it well hydrated!  And don’t light Duraflame logs directly underneath it.

More Medicare Fraud

Following up on my last post, I wanted to share this recent CBS 60 Minutes article and video on Medicare fraud in south Florida.  It’s a tremendous example of how easy it is to steal money from the government.  Private insurance companies with a profit motive have more incentive to stop this type of fraud.  Unfortunately, the government has not had the motivation to seriously address this problem.  Dennis Jay at the Coalition Against Insurance Fraud has a great post on this topic here and a follow up post on how Democrats are getting more aggressive on fraud.

One of the commenters to Dennis’ follow up post makes a great point about private carriers who write Auto, Liability, or Workers’ Compensation insurance.  These insurers (full disclosure:  I work for one of them) pay medical claims every day and are subject to the same scams.  But they don’t have access to the same resources and, while there have been improvements in information sharing among these carriers, information sharing is lacking between them, the private healthcare payers, and government medical programs.  Groups like the National Insurance Crime Bureau (NICB) are targeting this issue and I forsee this being an area of focus in the coming months for insurance investigators.

Organized Crime Attacks Medicare

Organized crime rings who normally deal in drugs, prostitution, and extortion are trying a new venture:  Medicare and Medicaid insurance fraud.  Identity theft plays a central role as scammers steal the identities of both doctors (to setup fake clinics) and patients (to bill the government).  These ethnic organized crime groups often target poor, elderly or otherwise disadvantaged folks who rely on government aid.  When offered a token payout (usually $100 or less) to come in for “treatment” these individuals comply – but rarely receive any sort of medical care even if they truly need it.  CNN posted this article about the problem recently.  How big is the problem?  This press release from the Office of the Inspector General for Health and Human Services indicates that it’s owed $2.4 billion for the first HALF of the fiscal year 2009.

The Fraud Excuse

Two insurance companies in Florida are in liquidation due to their insolvent financial condition.  Among the reasons for their downfall quoted in a recent article about their situation, “…roughly $4 million in losses due to being the target of ‘several fraud rings’ preying on personal injury protection coverage in its commercial auto line.”

North Las Vegas Fire Captain Indicted on Arson Charges

Still think owner give-ups aren’t a problem?  Even members of the fire department are burning their cars to get out from under their loans.  Gary V. Stover, a Captain with  the North Las Vegas fire department allegedly faked the theft of his Toyota Sequoia and his insurance company paid off his $35,000 loan – including $12,000 of negative equity.  An accomplice helped Stover and provided an alibi.  Means.  Motive.  Opportunity.

Arson Awareness Week: May 3rd – 9th

The United States Fire Administration (USFA) is sponsoring Arson Awareness Week with a theme of Arson for Profit, in conjunction with the ATF and the International Association of Arson Investigators (IAAI).  According to the Insurance Information Institute, arsonists destroyed nearly $900 million in insured property and killed 295 civilians nationwide in 2007.  With skyrocketing foreclosures and a sagging economy, arson for profit is a major concern.

The USFA website offers up a great media kit (pdf) and other helpful resources.

For insurance claim personnel, law enforcement, SIU investigators, or other individuals who may investigate suspicious fires, the IAAI training website CFItrainer.net is a great training resource.  They have a series of professionally edited training videos which provide students with a solid foundation in fire investigation techniques.  Registration is required but free.  

And of course, any discussion about fire  investigation should refer folks to the National Fire Protection Association guide for Fire & Explosion Investigations – commonly referred to as NFPA 921.

Clone Wars

The FBI issued a press release yesterday detailing a joint investigation into a $25 Million auto theft and cloning ring based in Tampa.  The ring has allegedly been in operation for 20 years and is responsible for over 1,000 vehicle thefts in the state of Florida.  The scammers “cloned” the stolen cars by removing VIN plates and other identifying features and replacing them with counterfeit ones – whose numbers trace back to other legitimately-owned non-stolen vehicles.  The cloned cars were sold to unsuspecting buyers in 20 states and Mexico.  More than 50 people have been charged in association with this investigation.

Auto Dumping on the Rise

According to the Coalition Against Insurance Fraud, the New York Alliance Against Insurance Fraud issued a report this week detailing a 35% increase in so-called “owner give up” frauds where a car owner arranges to have a car stolen and destroyed – often by fire or by dumping the vehicle in a lake or river.  Fraud investigators across the industry saw a spike in these scams -particularly with high-end SUV’s – when gas prices skyrocketed.  But now with the deterioration in the economy over the last few months, it seems the trend may continue.