Worker's Compensation Fraud: Trashing the System
| Publication year | 1991 |
| Pages | 1219 |
1991, June, Pg. 1219. Worker's Compensation Fraud: Trashing the System
William James once said, "There is no greater lie than a truth misunderstood." Recent media coverage has put the spotlight on fraud in worker's compensation cases. Fraud is a more significant problem in terms of the credibility of Colorado institutions (the worker's compensation system) than it is regarding actual costs to the system. Like the blind man who felt the elephant's trunk and concluded that the elephant was like a snake, certain television reporters, after incomplete inquiry, have concluded that Colorado's worker's compensation system is plagued by massive fraud and that this fraud is the paramount cause of the present worker's compensation crisis. However, in this author's opinion, anyone who knows the worker's compensation system in Colorado realizes that this is an erroneous conclusion.
This article discusses the differences between prosecutable fraud, prosecutable perjury, lack of credibility and the effects of these three distinct matters.
There are many causes of the current worker's compensation situation. Topping the list are skyrocketing medical costs, which account for 45 to 50 percent of the system's costs. In 1990, medical costs increased by more than 14 percent and physicians' income increased by 14 percent. Further, the insurance commissioner granted insurance companies a 14 percent rate increase in premiums to be paid by Colorado employers.
It would be simplistic to say that the 14 percent insurance rate increase was caused exclusively by the increase in physicians' incomes. Clearly, increased medical costs contributed to increased insurance rates. Nevertheless, worker's compensation insurance differs from other coverages because it is tied to wages. Wages rose 80 percent in the last ten years, and this increase also contributes to higher premiums.
The most accurate perspective available concerning the role of fraud in the worker's compensation system can be gained from actual facts and the experience of the government workers who operate the system. Here are some statistics to consider:
1. Approximately 50,000 worker's compensation claims are filed each year in Colorado.
2. Arising out of these claims, there are approximately 8,000-9,000 applications for hearing (an application for hearing is entry into the litigation system).
3. Of these hearing applications, approximately 5,000-5,500 cases actually are heard.
4. Of the cases actually heard, it is estimated that, at most, 250 cases are questionable or fraudulent claims.(fn1)
Based on these statistics, it is clear that 10 percent of all claims actually are litigated (from the 15 to 18 percent that enter the litigation system). Of the cases litigated, 5 percent or less concern questionable or fraudulent claims. This amounts to one-half of one percent of all worker's compensation claims filed. However, even one-half of one percent is a distressing commentary on the present state of affairs.
There appears to be considerable misunderstanding about the differences between a claimant (1) being less than credible on the witness stand; (2) committing fraud; and (3) committing perjury. These important differences are explained in this section.
When a claimant is less than candid on the witness stand on matters critical to his or her case, the case is likely to be lost through lack of credibility. If a claimant commits fraud, there are more potential consequences. One is that an admission of liability may be withdrawn unilaterally as void from the beginning. Another is that the claimant may be sued or criminally prosecuted for theft.
If a claimant commits perjury on the witness stand, he or she most likely will lose the case. Further, this may subject the claimant to criminal prosecution for perjury. It is the ethical duty of administrative law judges ("ALJs") to report all crimes committed in their presence to the appropriate authorities. The crime of perjury is comprised of strict elements that must be proven beyond a reasonable doubt. Not every instance of being less than candid is perjury.
Fraud, in the criminal sense, is similar in principle to theft. Theft is defined as follows:
Theft is a Class 4 felony if the value of the thing taken is $300 or more. It is a Class 3 felony if the value involved is $10,000 or more. To prove the crime of theft a prosecuting attorney must establish, beyond a reasonable doubt, that the defendant has a specific intent permanently to...A person commits theft when he knowingly obtains or exercises control over anything of value of another without authorization, or by threat or deception, and: (a) intends to deprive the other person permanently of the use or benefit of the thing of value... .(fn2)
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