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Island Crackdown Weeds Out Health-Insurance Rip-Off Artists

Iván Román

February 23, 2003
Copyright © 2003
ORLANDO SENTINEL. All rights reserved. 

SAN JUAN, Puerto Rico -- With $1.3 billion going through so many hands, Puerto Rico's massive program to provide private health insurance to the poor was bound to include people who didn't deserve it.

But Lotto millionaires and revelers zipping along on their own Jet Skis?

Government officials are now finding out exactly who and how many. The effort to find those who cheat is paying off -- and now that they've tasted blood, other agencies are moving in for the kill.

Health officials recently knocked some 197,000 people --slightly more than 10 percent -- from the rolls of the massive program under which Puerto Rico taxpayers buy health insurance for the poor. Insurance for nearly half of all Puerto Ricans is covered by the government.

Established in 1994, the plan set up by former Gov. Pedro Rosselló sought to improve health care for the poor. It dismantled the island's vast public-hospital network with a goal of securing cheaper and more efficient private HMO coverage for everyone.

But as politicians liberally handed out the "health card" in the frenzied 2000 election campaign, some gained coverage who shouldn't have -- either by having the forethought to cheat or by sneaking in.

Almost 6,500 of the "medically indigent" found on the books owned boats orwater scooters. Nine families had won $14.3 million in the lottery, and another 115 households won $11.4 million in lottery prizes during four years.

About 20,000droppedfamilies were found to own five or more cars, and 2,560moremade the mistake of buying new cars after signing up for the government-purchased health insurance. Others just made too much money and hid it from health officials.

With the help of the Ernst& Young accounting firm, officials dug them out. The firm compared health-agency records to income-tax returns, car registrations, driver and boat licenses and other documents to piece together the household's true income.

It seems so logical, but in a highly centralized government where its 143 agencies don't typically share records that often are still on paper, the cracks into which information can fall -- or hide -- is as wide as the Grand Canyon.

Just on the $65-per-person monthly premiums, the government is saving $155 million this year as a result of the audit. Officials are now trying to at least collect the premiums paid on these families, and possibly some or all of the money paid for doctor's visits, hospitalizations and other medical treatment.

"We represent the Puerto Rican family, and our duty is to defend every penny," Health Secretary Johnny Rullánsaid. "People must learn to behave honestly."

But it doesn't stop there. Local treasury officials, who for years did little more than audit some tax returns, are taking a tip from the health agency and now are piecing information together to sniff out tax cheats.

Treasury Secretary Juan Flores Galarza said the government loses about 12 percent of the income taxes it should get -- more than $1 billion a year -- from just a piece of the island's huge underground economy.

"We're not worried about those who file tax returns, but about those who don't file one, or those who file one, but don't report all the income they should," Flores said. "We didn't . . . do this before. We're trying a different tack now."

And they need every penny they can get. Gov. Sila Calderón's first two years in office have been marked by pre- and post-9-11 economic doldrums that hit Puerto Rico hard.

She's running a slight deficitin this year's $22.9 billion budget but has avoided the massive layoffs and service cuts seen in some states steeped in red ink. She has cut fat in some agencies, refinanced the island's debt and is collecting old debts more aggressively, netting $250 million last year. Last week, she proposed a $23.3 billion budget for the year starting July 1, less than a 2 percent increase.

But the push to squeeze more out of less these days has fueled calls for tax reform. Legislators, businessmen and some civic groups want to establish a sales tax to bite into the economy that is now off the books.

The underground economy traditionally has been an escape valve for high unemployment. But it puts a bigger burden on salaried workers, who must hand over up to a third of their paychecks in taxes.

That's a tough debate, though, and a long way off. So for now, those living somewhat under the radar should be ready to be slammed with a bill.

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