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Paduda: The Real Fraud in Workers' Comp

By Joe Paduda

Thursday, June 8, 2017 | 900 | 0 | min read

It's not the occasional worker cashing checks he shouldn’t, or bowling while fully disabled, or double-dipping. 

Joe Paduda

Joe Paduda

No, it’s employers going without insurance coverage so workers and taxpayers foot the bill,
providers scamming the system to make millions, and a relative few applicant attorneys and their schemes to defraud employers and taxpayers.

Wednesday’s WorkCompCentral has a terrific piece by Greg Jones highlighting this latter scam. Jones has dug deep into capping, a California scheme to recruit allegedly injured workers for attorneys and their physician “partners.”

These alleged fraudsters may have single-handedly generated hundreds of repetitive trauma cases in the Los Angeles County area. California Workers' Compensation Institute has done masterful reporting on this issue, finding “a strong association between attorney involvement and regional variation in the Los Angeles Basin and the high cost of CT claims.”

Then there’s the incredibly creative providers that make millions from dispensing drugs to patients; doing drug “tests” using their in-house machines; unholy alliances with compounding “pharmacies;” or compounding drugs in their own offices.

A new scam was also reported in Wednesday's WorkCompCentral: A Florida doctor (why is it always Florida and L.A. County?!) allegedly used telemedicine “visits” to prescribe compounds to work comp claimants.

These bad actors suck money out of taxpayers and employers, and do NOTHING to help work comp patients.

Blood boiling yet? Well, it’s about to vaporize. Bad as that is, the real fraud is employer misclassification and related schemes.

A seminal study indicates 10% to 20% of employers misclassify workers as independent contractors.

As the gig economy expands, this is going to get worse — much worse. From the Economic Policy Institute:

  • Atlanta stagehands for concerts produced by Live Nation, a company listed on the New York Stock Exchange that has held shows for such artists as Maroon 5 and Billy Joel, have been misclassified as ICs by a staffing provider.
  • An estimated one-third of construction workers in southern states such as North Carolina and Texas have been misclassified.
  • And roughly 20,000 employees of CrowdFlower Inc., a San Francisco-based startup that breaks down digital jobs such as data entry, are misclassified, according to a case now moving through the courts.

This is particularly problematic in construction, but it isn’t limited to southern states. Payroll fraud cases have been reported in Massachusetts, Washington and many other states.

Yet you wouldn’t know from the press — and press releases from insurers — that payroll fraud and other schemes are the real problem dwarfing the individual worker fraud problem.

That’s just awful.

I’d encourage real journalists to concentrate a lot more on the real problem — employer fraud — and avoid the clickbait nickel-and-dime “fraud” allegedly perpetrated by individuals.

What does this mean for you?

Work comp insurers, the ones who are really screwing you are employers. Get with it.

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers. This column is republished with his permission from his Managed Care Matters blog.

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