Blue Cross, Blue Shield, Blue Criminal

[Robert Weissman <rob@essential.org>]

Who are the true criminals in the health insurance crisis?

Try Blue Cross/Blue Shield of Illinois, for one. 

Last month, the company, also known as Health Care Service Corporation
(HCSC), pled guilty to eight felony counts and will pay $144 million after
admitting it concealed evidence of poor performance in processing Medicare
claims for the federal government.

The company, the Medicare contractor for Illinois and Michigan, also
admitted obstructing justice and conspiring to obstruct federal auditors.

The company will pay $4 million in criminal fines and $140 million in a
civil settlement to resolve its liability under the False Claims Act.

June Gibbs Brown is the inspector general of the Department of Health and
Human Services. At a news conference at the Justice Department to announce
the guilty pleas, Brown made it clear that the crimes of Blue Cross/Blue
Shield of Illinois were in no way unprecedented.

"Rogue contractors have been caught cheating the program in the past and I
am sure, because of the vast amount of money spent on Medicare, others
will be tempted to scam the program in the future," Brown said.

By vast amount of money, Brown means $100 billion a year lost to health
care fraud and abuse -- and that may be a low estimate, according to
experts such as Harvard's Malcolm Sparrow, who believe that the number
might be as high as $300 billion to $400 billion a year.

Over the past five years, Brown's office has investigated five additional
cases that have resulted in criminal or civil actions against a Medicare
contractor.

In 1993, Blue Cross/Blue Shield of Florida paid $10 million to settle
charges that it falsified and failed to properly screen provider claims.

In 1994, Blue Cross/Blue Shield of Massachusetts paid a $2.75 million fine
to settle charges that it falsified its performance reports.

In 1995, Blue Cross/Blue Shield of Michigan paid a total of $51.6 million
to settle charges that it falsified audit reports and used Medicare money
to pay claims that were the responsibility of other insurers.

In 1997, Blue Shield of California pled guilty and paid $12 million in
civil penalties to settle charges of falsifying documents and failing to
properly process claims and of destroying claims.

And in 1997, Blue Cross/Blue Shield of Massachusetts paid $700,000 to
settle charges that it falsified statements related to its Medicare HMO
application.

But the Blue Cross/Blue Shield of Illinois case was different at least in
magnitude -- $144 million in fines and damages.

And the government had to be dragged kicking and screaming into the case.
If it were not for a whistleblower, Evelyn Knoob, and her attorney, Ronald
Osman of Marion, Illinois, the government would never have prosecuted the
case.

Knoob began working at Blue Cross/Blue Shield's Marion, Illinois facility
in 1983. Over the years, she witnessed a wide range of wrongful activity,
including destruction and falsification of documents.

To anyone who has ever called their health insurer only to be met by
maddening tape recordings or busy signals, Knoob knows why.

The government hired Blue Cross/Blue Shield to process claims. To keep its
contract, the company had to meet certain performance standards. For
example, the company was supposed to answer 98 percent of the beneficiary
calls within 120 seconds. 

Knoob's supervisors had a way around this standard. They set up a monitor
to keep track of calls. If this performance standard was about to be
breached, Knoob and her colleagues were ordered to shut off the 800 line.
Result: when a beneficiary called in to check on a claim, the line would
be busy. A busy signal did not count as a call coming and thus did not
have to be answered within 120 seconds.

In 1992, Congress held hearings about the busy signals Medicare
beneficiaries were getting. The company felt the heat and changed
strategies. According to Knoob, the company just stopped answering some
calls. Beneficiaries would call and no one would answer.

Under the qui tam provisions of the False Claims Act, a private party may
bring suit on behalf of the United States to recover damages resulting
from the knowing submission of false claims to the government.

The party, in this case Evelyn Knoob, is entitled to receive 15 to 25
percent of the proceeds of the recovery in these cases.

That means Knoob will get anywhere from $21 million to $35 million for
taking on a major corporate criminal -- her employer.

In addition to bringing the False Claims Act on her behalf, Ronald Osman,
Knoob's attorney, went to the Justice Department Criminal Division in
Washington, D.C. to seek a criminal prosecution for the destruction of
documents and creation of false documents. The Justice Department
attorneys said, "No case."

Frustrated, Osman went back home and made a presentation to Chuck Grace,
the U.S. attorney for the southern district of Illinois. Grace saw the
crime, assigned a number of attorneys and FBI agents to investigate the
case. After two years, the company pled guilty to eight felony charges.

The government should have permanently excluded the company from ever
having a contract again with Medicare. But companies the size of Blue
Cross/Blue Shield do not get the death penalty -- that is reserved for
people only.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor.

(c) Russell Mokhiber and Robert Weissman

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