Home > Worker's Compensation Division > WC Fraud > Fraud Report for 1996

Report on Alleged Worker's Compensation Fraud for 1996

October 1, 1997

Executive Summary

This is the third annual report of the Division of Worker’s Compensation on its administration of the fraud clearinghouse program mandated under s. 102.125, Wis. Stats. The program continues to meet its objectives of preventing and punishing criminal fraud in obtaining worker’s compensation benefits. It appears to be very cost effective relative to other state fraud programs. The character of allegations has changed little from last year’s report--most are difficult to investigate and build a prosecutable case. Nevertheless, the quality of insurer investigations continues to improve, and success with prosecutions is good throughout the state. The cooperative relationship among the Division of Worker’s Compensation (Division), insurers, and district attorneys is constructive and efficient.

The above partners in combating fraud face the ongoing challenge of focusing employer and employee attention on the true meaning of fraud and how to combat it. Too often criminal fraud is confused with other abuses (and sometimes legal behavior) that are not remotely prosecutable. If this were just a semantic problem it could be ignored. Unfortunately, the confusion between prosecutable fraud and abuse distracts employers from using more cost effective remedies, like avoiding incidents that give rise to claims. The Division of Worker’s Compensation is committed to educating employers and the public on how best to fight fraud and abuse. Our goal is to reduce all forms of inappropriate and unethical behavior that adds to system friction costs and may develop into criminal fraud.

The following tables are selected from the full report to summarize the activity of the clearinghouse in combating worker's compensation fraud.

Table 1

Cases of Alleged Fraud Reported to the Worker's Compensation Division

Calendar Years 1994-96

 

	1994		1995		1996
	Number	% growth 94 to 95	Number	% growth 95 to 96	Number
Number of allegations	95	50.5%	143	6.3%	152
		1995 as % of total allegations		1996 as % of total allegations
Anonymous	84	61.5%	88	58.5%	89
Identified source	11	38.4%	55	41.4%	63

Table 2

Outcomes of Cases Sent to the District Attorney for Prosecution

 

	Referrals to DA	Prosecutions Commenced by DA	Convictions	Rejected by DA
1996	11	7	1	3
1995	16	11	2	3
1994	7	1	1	5

Conclusions

The number of alleged cases of worker's compensation fraud reported to the Division continues to be very low in comparison to the number of reported worker’s compensation injuries. In 1996, allegations were 0.06 percent of total estimated compensable claims and .2 percent of all reported lost time claims in Wisconsin. These fractions become much lower if one restricts the definition of an allegations to those with a claim on file and enough facts to launch an investigation. The low fractions are similar to numbers reported in 1995.

Clearly, these allegations of fraud are a flawed measure of the level of criminally prosecutable fraud in Wisconsin. However, it does indicate that the level of prosecutable fraud is probably a very small fraction of all compensable claims. There is no objective evidence that criminally prosecutable fraud is more than one percent of all reported claims in Wisconsin--a far cry from the 20-30 percent estimates thrown about elsewhere.

The large volume of unfounded allegations of worker's compensation fraud are a common problem facing fraud investigators. Anonymous allegations typically contain little factual information to begin an investigation. Such allegations are common in fraud hot-lines. In Wisconsin, anonymous allegations represent about 58 percent of the 1996 totals. The number of allegations without any underlying worker’s compensation claim was 33 percent, compared to 23 percent in the previous year.

Cases sent to DA dropped. During 1996 there were 13 referrals to District Attorneys for prosecution, down from 22 in 1995. This is largely due to the drop in strong cases, i.e., those which after investigation result in cases that prosecutors are likely to pursue.

Convictions are very difficult to get--even after painstaking investigations. There were only four successful convictions of worker’s compensation fraud stemming from Division referrals, up two from the same number as in the previous year. However, there is a very long lead time between referral to the DA and conviction. Thus 1996 convictions are largely the result of allegations made in the prior two years. We expect that the larger number of credible cases referred in 1995 will result in a higher conviction rate in 1997. Conviction rates are not the whole story-- settlements with restitution send a strong message to would-be perpetrators of fraud.

The Division is enjoying good cooperation from a large majority of district attorneys. District attorneys are very open with the Division on their constraints and requirements to prosecute a case. We make every effort to cooperate with their requirements.

Publicity of anti-fraud measures is one of the most potent tools for combating fraud. The Division is widely publicizing the fraud clearinghouse and successful prosecutions by the District Attorneys. The Division believes that publicity increases the deterrent value of prosecutions. Press releases after each successful prosecution are a very cost-effective means of getting publicity for the fraud program and the district attorneys’ efforts to combat fraud. The message is carefully constructed to not deter employees from reporting legitimate insurance claims.

The Division’s informal clearinghouse function seems to be producing excellent results compared to other state programs with formal/well-funded anti-fraud programs. The level of awareness of the Division’s fraud programs among employers and insurers seems to be high. The number of referrals for prosecution and successful prosecutions is at least as good as the average state-run anti-fraud program. This effective program--run without any additional funding or personnel in the Division--is a superb example of partnership between government and the private sector.

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