Having been a social worker and serving in Army hospitals during the Vietnam War, after which I tried my hand at selling medical insurance, I have acquired some vague understanding of the medical insurance world and its costs.

About a month after this is published, our Supreme Court will render its verdict on the Affordable Care Act, which is more commonly called “Obamacare.” This will not be the first court decision; Our nine justices are reviewing decisions, both for and against, made by U.S. Circuit Courts—including the 11th, which covers Florida and Georgia, the two states in which I spend most of my time.

These states joined some 24 others in suing to have the law declared unconstitutional, primarily because it mandated that everyone purchase health insurance and that insurance companies could not cancel or not pay for pre-existing conditions. There were other factors as well, but those were the biggies. Some of the appellate courts had found the law constitutional; others ruled otherwise. How will those boys and girls in Washington rule? They are making bets on that question in Vegas.

For myself, having just read insightful books by Stephen Breyer, John Paul Stevens, and Sandra Day O'Connor about their experiences as justices as well as some of their comments on the notorious “five to four” decisions on everything from Bush v. Gore to Citizens United, I would bet that if the ruling is “five to four” declaring the healthcare act unconstitutional, there will be a lot of national contempt for those five fellows who don't see eye-to-eye with the other four.

Semi-Political Eyes
Courts are not supposed to be political, but historically that is often what they have been, from the days of John Marshall to the nine old grumps that kept knocking down FDR's New Deal programs until he was able to get his own crew aboard. As Supreme Court justices are nominated by a political president of either party, those justices will often see the cases they judge with a semi-political eye. One of the best books on the Court that I've ever read was The Brethren, by Bob Woodward. It was a good inside look at the Court from Warren to Rehnquist.

What I don't understand is why it is the so-called “conservatives” and Tea Party folks who hate the new law. It would seem to me that conservatives would agree that it is unfair for those of us who pay medical insurance premiums to “carry” those who are uninsured, getting their care for free at our expense. If one is looking for historical precedence, consider Ben Franklin's 1752 Philadelphia Contributionship, whose policy consisted of a “fire mark” that would be hung above the door of the insured premises. If there was a fire, the insurer also operated the fire department and would come and put the fire out, but only if the premises had the “fire mark.” If there wasn't one, then the insurer would suggest that the owner consider insuring the next premises to be built on that location. There was no free lunch in 1752. Why should there be a free lunch in 2012?

These same complainants don't raise holy cane when states mandate some insurance requirement, such as mandatory auto insurance under state Financial Responsibility Acts or fire insurance on mortgaged property. Federal project contracts require surety bonds. GOP-led state legislatures often mandate other types of insurance as well, such as injury insurance for children wishing to participate in athletics. It was the GOP that has wanted some sort of medical insurance law since the days of Teddy Roosevelt. So why the big hullabaloo now?

No-Fault and State Insurance
When my wife and I were first transferred from the Philadelphia area to Miami in 1969, Florida courts had just upheld the first million-dollar-plus injury verdict, won in 1967 by Attorney J. B. Spence, the “Dean of Torts.” It involved a truck accident, as I recall. Over the years I dealt with Spence, who passed away last year, and his firm on many occasions. In 1970 Massachusetts, always a leader (along with California) in inventive insurance ideas (as in mandatory health insurance) had just passed the first automobile reparations act, the so-called no-fault law. It was based only partially on the Keeton-O'Connell suggestions for curing the auto insurance industry mess that the 1960s had brought upon the nation. By 1971 Miami was besieged with Hare-Krishna chanting monks with bald heads and saffron robes, beating drums in the street. Allegedly the cult was seeking pleasure. But the joke among adjusters was that these were former Boston plaintiff attorneys now jobless due to the new no-fault law there.

In 1972 Florida became the next state to pass an auto reparations or no-fault law. We claims adjusters should have seen what was coming. In 1971, when the infamous Florida Legislature was debating this bill, occasionally having fist fights on the House floor, every hospital in Dade and Broward County began a building campaign. Now, there weren't that many retirees flowing into Florida in 1971, and the influx of Cuban refugees had not yet increased the population that much, so why were all of these new hospital beds needed?

It is quite simple. Prior to no-fault, the typical cervical strain and sprain (also commonly known as “whiplash”) injury generated around $500 in medical bills, and a $1,200 to $2,500 settlement. In order to bring a tort claim under the new no-fault law, however, one had to reach a medical bill “threshold” of $1,000 (or prove a serious injury). Therefore, instead of a few trips to the chiropractor and a couple of massages, the typical auto victim was hospitalized for a few days (daily hospital rates weren't all that high in those days) and presto! The magic number was reached. The new average settlement now went for about $5,000. Instead of reducing auto liability insurance costs, the new bill only increased the premiums.

Philadelphia lawyers were well-known to be “slick.” They were nothing compared to the South Florida plaintiff bar, though. One attorney (I had often dealt with his firm) had become Florida's insurance commissioner. After a year or so he went to jail. The U.S. Postal Service put a few others in the clink as well. We adjusters used to take two or three bills from one particular North Miami physician and hold them up to the light. Everything on them was identical except the patients' names and dates of treatment. The diagnosis, treatment, and prognosis for each were identical, patient after patient. No matter how slight the impact, they always suffered that indefinable disaster: “whiplash.”

Over the years, the Florida Legislature tinkered with the no-fault law. Now, 40 years later, Tallahassee and the current governor are still tinkering. Is the target fraud?

Are you kidding? The new proposals include giving “accident victims” 14 days to seek medical benefits and allowing chiropractors to treat PIP patients (but not acupuncturists or massage therapists); and they remove any cap on attorney fees, although judges will be prohibited from using multipliers to increase those fees in complicated cases. Insurers will be allowed to examine insureds under oath. (Apparently that right had been withdrawn sometime after I left Florida in the mid-1970s.) PIP has been increased from $5,000 back in 1972 to $10,000, but only $2,500 of it can apply to “soft tissue” injuries. And all this was a legislative compromise.

The Insurer of Last Resort
While beating up on Florida, let us consider that great Florida institution, the state-operated Citizens Property Insurance Corporation. As many other property insurers have fled the state, Citizens became the ultimate insurer of last resort.

In 2011, Florida had a bad series of killer frosts; citrus and other produce farmers try to protect their crops by spraying water on them. The 2011 problem was that all that spraying, combined with a long-term drought, drained the aquifer and land started caving in. All over Central Florida sinkholes developed. Sinkhole coverage is mandated in Florida, so somebody started paying claims. Allegedly anybody with a crack in their sidewalk or a slight dip in their backyard yelled “Sinkhole!” and made a claim.

Citizens paid out millions. Now, I wasn't the one inspecting all those claims, but if I had been, I would have noted something that was very clear from the newspaper reports of the calamities. Many if not most of the claims were in the same neighborhoods of newly constructed homes. Did the Citizens property policies not have a subrogation clause? If a developer cranked up the crews to build homes on potential geological sinkholes, then why did nobody go after the developer for failure to get a geological or engineering review prior to obtaining the building permits?

Furthermore, who issued those building permits? There is something fishy in this issue. Maybe there is a public official bond sitting there with a nice penalty that might be claimed by the insurer. And if the geologist said, “Nothing to worry about!” that sounds like malpractice. Sinkholes are not a new phenomenon in Central Florida—they've been around for centuries. Somebody wasted Citizens' good surplus and apparently never thought about getting the money back from some other responsible party.

I don't know any Citizens adjusters, so I can't ask this question to them directly. If any reader does know one, and asks, please write me at Claims and explain why a full and complete investigation was not part of the sinkhole adjustments.

The Fountain Pen Con$piracy
In 1973 my wife bought me a book called The Fountain Pen Con$piracy written by Jonathan Kwitny, a Wall Street Journal reporter. It was a book about fraud, and the headquarters for much of the fraud then being committed in the U.S. was Ft. Lauderdale. The crooks used off-shore banks in places like the Island of Sark or Panama. Do real businesses or insurers ever actually reside in a postal box in the Turks and Caicos Islands?

Every kind of swindle, con job, and Ponzi scheme the enterprising businessmen could dream up would be centered in Ft. Lauderdale or Miami. (Bernie Madoff made a bundle in South Florida, too, as I recall.) That is still the case; look at how many fraudulent Medicare and Medicaid claims are being operated out of South Florida. By the time the FBI goes to investigate, they find a vacant office or nothing but a postal mail drop, and the money is gone. According to the Tampa Bay Times this past March, the latest scheme is scooters for the handicapped.

Those mobile wheelchairs are handy for the elderly, and for anyone disabled, they are a necessity. The rip-off artists, however, plainly advertise that anyone (handicapped or not) need only come on in and ride out in a chair, and the store will handle the claim with Medicare. Need to test your blood sugar level? Why, the TV ad says that they will send a gross of the expensive supplies to you and take care of billing the insurance on your behalf. Undoubtedly much of this is legitimate, but the likelihood of fraud is certainly evident.

The Organized Crime Epidemic
Miami adjusters often knew they were dealing with organized crime situations. The newspaper even published a map showing where the various Mafia figures lived—many of them in posh homes on Miami Beach, Bal Harbour, and places like that. My wife, who was the organist at a Bal Harbour church, used to see Jimmy Hoffa at the shopping center frequently. Restaurant fires were common; big ads would bring big customers for a few months, and then the quality dropped, customers disappeared, and the restaurants would mysteriously burn down. They were well-insured, of course.

After I was transferred to Atlanta in 1978 at lunch with my new boss one day I naively asked, “Do you have much of a mafia problem here in Atlanta?” Those at the lunch looked at me and started to laugh. “Ha! He believes in the mafia,” they exclaimed. At the time Atlanta had only one crook, some porn king named Thevis. He was well-named, and there were rumors of a safe full of money in his abandoned mansion after he went to prison. There was organized crime, though. It was called the “Dixie Mafia.”

I bumped into it in several claims over the next few years. It extended as far as Tampa, to an arson ring consisting of a crooked real estate agent who “found” the properties; an agent who more than willingly overinsured them; an arsonist named “Smokey the Bear Noriega” who torched them; and a claim adjuster who declared every one of the losses “incendiary, by persons unknown.” Oh, he knew. He later testified before Congress with a bag over his head and went into the witness-protection system. His claim files ended up with the FBI.

The Connection
Is there any connection between the types of fraud occurring in places like South Florida, Tampa, Los Angeles, Las Vegas, New York, or Chicago and the Affordable Care Act now before the U.S. Supreme Court? Yes, there is plenty. For the act to work, if it survives, it will require much greater attention to preventing Medicare and Medicaid and other medical insurance fraud. That fraud is estimated to cost Americans around $70 billion or more annually. If such loss was cut in half, it would pay for much of the future costs of the act. But that may be hoping for too much.

Only if medical claim adjusters spend the time to fully investigate, evaluate, and negotiate—including seeking subrogation—will a health insurance program be successful. Even the medical profession is now suggesting that there are too many tests, too many physicians pandering to patient pleas for medications and unnecessary treatments, including surgeries. Of course, asking the question, “Was that test necessary?” immediately brings criticism on the insurer for trying to cut costs. As of this moment, though, the U.S. has the most expensive medical care in the world and yet is the unhealthiest nation on earth.

Special Reports /

Contempt for Court and Other Governmental Entities

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