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

About a month after this is published, our Supreme Court willrender its verdict on the Affordable Care Act, which is morecommonly called “Obamacare.” This will not be the first courtdecision; Our nine justices are reviewing decisions, both for andagainst, made by U.S. Circuit Courts—including the 11th, whichcovers Florida and Georgia, the two states in which I spend most ofmy time.

These states joined some 24 others in suing to have the lawdeclared unconstitutional, primarily because it mandated thateveryone purchase health insurance and that insurance companiescould not cancel or not pay for pre-existing conditions. There wereother factors as well, but those were the biggies. Some of theappellate courts had found the law constitutional; others ruledotherwise. How will those boys and girls in Washington rule? Theyare 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 experiencesas justices as well as some of their comments on the notorious“five to four” decisions on everything from Bush v. Gore toCitizens United, I would bet that if the ruling is “five to four”declaring the healthcare act unconstitutional, there will be a lotof national contempt for those five fellows who don't seeeye-to-eye with the other four.

Semi-Political Eyes
Courts are notsupposed to be political, but historically that is often what theyhave been, from the days of John Marshall to the nine old grumpsthat kept knocking down FDR's New Deal programs until he was ableto get his own crew aboard. As Supreme Court justices are nominatedby a political president of either party, those justices will oftensee the cases they judge with a semi-political eye. One of the bestbooks on the Court that I've ever read was The Brethren,by Bob Woodward. It was a good inside look at the Court from Warrento Rehnquist.

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

These same complainants don't raise holy cane when statesmandate some insurance requirement, such as mandatory autoinsurance under state Financial Responsibility Acts or fireinsurance on mortgaged property. Federal project contracts requiresurety bonds. GOP-led state legislatures often mandate other typesof insurance as well, such as injury insurance for children wishingto participate in athletics. It was the GOP that has wanted somesort of medical insurance law since the days of Teddy Roosevelt. Sowhy the big hullabaloo now?

No-Fault and State Insurance
When my wifeand I were first transferred from the Philadelphia area to Miami in1969, Florida courts had just upheld the first million-dollar-plusinjury verdict, won in 1967 by Attorney J. B. Spence, the “Dean ofTorts.” It involved a truck accident, as I recall. Over the years Idealt with Spence, who passed away last year, and his firm on manyoccasions. In 1970 Massachusetts, always a leader (along withCalifornia) in inventive insurance ideas (as in mandatory healthinsurance) had just passed the first automobile reparations act,the so-called no-fault law. It was based only partially on theKeeton-O'Connell suggestions for curing the auto insurance industrymess that the 1960s had brought upon the nation. By 1971 Miami wasbesieged with Hare-Krishna chanting monks with bald heads andsaffron robes, beating drums in the street. Allegedly the cult wasseeking pleasure. But the joke among adjusters was that these wereformer Boston plaintiff attorneys now jobless due to the newno-fault law there.

In 1972 Florida became the next state to pass an autoreparations or no-fault law. We claims adjusters should have seenwhat was coming. In 1971, when the infamous Florida Legislature wasdebating this bill, occasionally having fist fights on the Housefloor, every hospital in Dade and Broward County began a buildingcampaign. Now, there weren't that many retirees flowing intoFlorida in 1971, and the influx of Cuban refugees had not yetincreased the population that much, so why were all of these newhospital beds needed?

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

Philadelphia lawyers were well-known to be “slick.” They werenothing compared to the South Florida plaintiff bar, though. Oneattorney (I had often dealt with his firm) had become Florida'sinsurance commissioner. After a year or so he went to jail. TheU.S. Postal Service put a few others in the clink as well. Weadjusters used to take two or three bills from one particular NorthMiami physician and hold them up to the light. Everything on themwas 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 alwayssuffered that indefinable disaster: “whiplash.”

Over the years, the Florida Legislature tinkered with theno-fault law. Now, 40 years later, Tallahassee and the currentgovernor are still tinkering. Is the target fraud?

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

The Insurer of LastResort
While beating up on Florida, let us considerthat great Florida institution, the state-operated CitizensProperty Insurance Corporation. As many other property insurershave fled the state, Citizens became the ultimate insurer of lastresort.

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

Citizens paid out millions. Now, I wasn't the one inspecting allthose claims, but if I had been, I would have noted something thatwas very clear from the newspaper reports of the calamities. Manyif not most of the claims were in the same neighborhoods of newlyconstructed homes. Did the Citizens property policies not have asubrogation clause? If a developer cranked up the crews to buildhomes on potential geological sinkholes, then why did nobody goafter the developer for failure to get a geological or engineeringreview prior to obtaining the building permits?

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

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

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

Every kind of swindle, con job, and Ponzi scheme theenterprising 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 manyfraudulent Medicare and Medicaid claims are being operated out ofSouth Florida. By the time the FBI goes to investigate, they find avacant office or nothing but a postal mail drop, and the money isgone. 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 foranyone disabled, they are a necessity. The rip-off artists,however, plainly advertise that anyone (handicapped or not) needonly come on in and ride out in a chair, and the store will handlethe claim with Medicare. Need to test your blood sugar level? Why,the TV ad says that they will send a gross of the expensivesupplies to you and take care of billing the insurance on yourbehalf. Undoubtedly much of this is legitimate, but the likelihoodof fraud is certainly evident.

The Organized Crime Epidemic
Miamiadjusters often knew they were dealing with organized crimesituations. The newspaper even published a map showing where thevarious Mafia figures lived—many of them in posh homes on MiamiBeach, Bal Harbour, and places like that. My wife, who was theorganist at a Bal Harbour church, used to see Jimmy Hoffa at theshopping center frequently. Restaurant fires were common; big adswould bring big customers for a few months, and then the qualitydropped, customers disappeared, and the restaurants wouldmysteriously burn down. They were well-insured, of course.

After I was transferred to Atlanta in 1978 at lunch with my newboss one day I naively asked, “Do you have much of a mafia problemhere in Atlanta?” Those at the lunch looked at me and started tolaugh. “Ha! He believes in the mafia,” they exclaimed. At the timeAtlanta had only one crook, some porn king named Thevis. He waswell-named, and there were rumors of a safe full of money in hisabandoned mansion after he went to prison. There was organizedcrime, though. It was called the “Dixie Mafia.”

I bumped into it in several claims over the next few years. Itextended as far as Tampa, to an arson ring consisting of a crookedreal estate agent who “found” the properties; an agent who morethan willingly overinsured them; an arsonist named “Smokey the BearNoriega” who torched them; and a claim adjuster who declared everyone of the losses “incendiary, by persons unknown.” Oh, he knew. Helater testified before Congress with a bag over his head and wentinto the witness-protection system. His claim files ended up withthe FBI.

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

Only if medical claim adjusters spend the time to fullyinvestigate, evaluate, and negotiate—including seekingsubrogation—will a health insurance program be successful. Even themedical profession is now suggesting that there are too many tests,too many physicians pandering to patient pleas for medications andunnecessary treatments, including surgeries. Of course, asking thequestion, “Was that test necessary?” immediately brings criticismon 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 yetis the unhealthiest nation on earth.