New York Auto Insurers Claim Fraud, Abuse Are Driving Up Medical Costs
Nov. 13, 2009 – Fraud and abuse of the state of New York’s no-fault auto insurance law has driven up average medical claims costs for accident victims by about $3,133 and 56 percent over a five-year period.
Auto insurers in New York on average paid out an average $5,615 toward medical care per auto insurance accident claim in late 2004, according to the non-profit Insurance Information Institute. But during the second quarter of 2009, New York’s auto insurers paid out an average $8,748 in medical costs per accident claim – a steep increase since 2004 and more than double the current national average.
“In less than five years, New York’s auto insurers have seen an extraordinary 56 percent increase in the average cost of no-fault claims – to a great extent the result of abuse and outright fraud in the system,” said Robert P. Hartwig, president of the Insurance Information Institute. “The costs of fraud and abuse of the state’s no-fault system ultimately are borne by New York’s honest policyholders. New York’s no-fault claim costs are now the second highest in the country and are 111 percent higher than the U.S. average of $4,152.”
“No-fault” auto insurance refers to any statewide auto insurance program allowing policyholders to be reimbursed for financial losses and medical costs from their own auto insurance provider no matter who was at fault in an accident. Several states have no-fault auto insurance laws, which are designed to decrease the number of accident-related disputes that wind up in court and reduce costs.
But instead of saving money through tort reform, New York’s auto insurance companies have been subject to an increasing amount of auto insurance fraud – particularly after the recent economic meltdown has boosted unemployment and poverty in the Empire State.
In a report published last year, the New York Insurance Department’s Frauds Bureau claimed a 22 percent increase in fraud tied to no-fault auto insurance claims since 2006, which has spurred a subsequent increase in the number of auto insurance fraud investigations conducted by the state. Prior to 2006, reports of insurance auto insurance fraud had declined by 35 percent since 2003.
With the recently steep increase in auto insurance fraud rates being reported in New York, state officials are weighing several measures designed to curb the rising trend.
Potential reforms include establishing guidelines for treating specific types of injuries sustained in auto accidents. New York’s current no-fault auto insurance law allows insurers to pay health care providers up to $50,000 without requiring any type of review to prevent fraud.
New York officials also might require arbitration proceedings to resolve disputes and avoid potential court trials that cost much more. Although no-fault insurance laws are designed to reduce the number of court battles over vehicular accidents, the state’s courts have a more than one-year backlog and are scheduling cases as far off as 2011.
State officials also are considering requiring plaintiffs produce at least one witness with “personal knowledge” of relevant facts in order to determine the plaintiff’s right to receive no-fault auto insurance benefits, according to the Insurance Information Institute. Statements regarding medically necessary treatments wouldn’t be accepted unless made by licensed medical professionals or witnesses with personal knowledge of the incident in question.
New York law currently only requires medical services providers prove auto insurers received a bill for medical services in order to receive payments from insurance companies regardless of whether or not fraud may have occurred. Auto insurers are held to a much higher standard and must produce witnesses, including at least one qualified medical professional, indicating a treatment was not medically necessary to deny a potentially fraudulent claim.
State officials also might increase the penalty for third parties acting as liaisons to enable fraudulent insurance claims. Known as “runners,” they facilitate fraudulent insurance claims by acting as the middle man between medical professionals and attorneys intent on committing insurance fraud. If implemented, new state regulations would make it a felony instead of a misdemeanor for facilitating fraudulent insurance transactions.
CBO: Tort Reform Could Save $41 Billion in Federal Health Care Costs
Oct. 20, 2009 – A recent federal study suggests taxpayers could save $41 billion over 10 years if lawmakers placed limits on medical malpractice lawsuits tied to federal health care programs.
The nonpartisan Congressional Budget Office study runs counter to a prior report issued from the same organization last year suggesting potential savings would be much less. The report issued last year suggested the only savings from tort reform would be limited to lower premiums paid by doctors for malpractice insurance without encouraging them to improve care delivery.
Federal officials revised their estimate after further studying the matter.
“Recent research has provided additional evidence that lowering the cost of medical malpractice tends to reduce the use of health care services,” said Douglas Elmendorf, director of the Congressional Budget Office, in a letter to members of Congress.
When combined with a potential $13 billion in additional tax revenues, tort reform could net $54 billion over 10 years, according to the Congressional Budget Office report. Some federal lawmakers are attempting to place liability limits on medical malpractice suits in any proposed federal health care reform. And Elmendorf suggested the fear of malpractice lawsuits causes most doctors to perform more work than necessary on most patients, leading to higher health care costs, according to an Oct. 12 Associated Press report.
But among many arguments, patient advocacy groups and lobbyists for trial lawyers say placing liability limits on medical malpractice lawsuits could cause some victims to recoup less than they will be forced to pay over a lifetime of ongoing medical care. Others wouldn’t be compensated properly for their pain and suffering. Proponents of liability limits suggest patients would benefit rather than be harmed.
“Cutting medical liability costs would help preserve patients’ access to care,” Sen. Charles Grassley (R-Iowa), a member of the Senate Finance Committee, was quoted in the Associated Press report. “The more federal health care programs spend on unnecessary tests, the less money is available for necessary patient care.
The Senate Finance Committee recently approved a health care measure encouraging states to find ways to resolve medical malpractice cases rather than battling in court. The highly publicized “Baucus Bill” is one of several federal health care reform proposals and now goes before the entire U.S. Senate for consideration. Another Senate bill also has been approved by the Health Care Committee and awaits approval. The measures are part of federal efforts to reform the U.S. health care system.