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07.01.2008 0

Resisting the Sirens Song

  • On: 07/17/2008 10:43:14
  • In: Economy
  • You heard it here first from ALG News – and now like a systemic infection the ruinous moratorium foreclosure movement is spreading nationwide.

    Fortunately, one State governor is going against the sirens’ song with the fortitude of Odysseus by threatening to veto any attempted deferment of foreclosures.

    Though the Minnesota State Legislature has not yet acted on the proposal, it appears likely that they will:

    “Neither the House nor Senate has taken final action on a more controversial bill that would defer mortgage foreclosures for a year.

    “The measure would allow homeowners with subprime loans to avoid the loss of their property while making partial monthly payments. Davnie said the bill is a bold and balanced approach.

    “’This is a crisis for families across the state,’ he said. ‘We can, if we act decisively, prevent avoidable foreclosures in Minnesota for 15,000 families, and that’s our goal.’”

    Minnesota Governor Tim Pawlenty, a Republican, believes this will only make matters worse:

    “Gov. Pawlenty described Davnie’s deferment proposal as well intended, but said he’s leaning toward a veto if it lands on his desk. Pawlenty said deferring foreclosures could have an unintended effect on credit and interest rates for all homeowners in the state.”

    Not only that, the biggest beneficiaries of the deferment would be the lenders and Big Government, who stand to lose far more in revenue when homes are foreclosed upon.

    ALG News will keep you apprised of the ongoing Big Bailout across the nation, and of any politicians who bravely resist this sirens’ song.

    Insurers Set Hook in Big Government Giveaway

  • On: 07/17/2008 10:39:25
  • In: Entitlements
  • What do you call it when somebody sells you a service, and then later you find out that before you are allowed to use it, you must first utilize some other unwanted service? In advertising, it’s called “bait-and-switch”. In government, it’s called, “business as usual”.

    A combination of clueless bureaucrats and greedy insurers has teamed up to foist a massive fraud on the American taxpayer. Social Security’s disability program – already projected to go bankrupt in 2026 – is wasting hundreds of millions of dollars processing bogus applicants forced by their insurers to file dubious claims in order to help the companies escape paying legitimate benefits.

    In short, the companies are forcing clients to apply for government assistance to avoid paying for insurance claims which are otherwise covered by the terms of the policies – which allows insurers to pad their pockets while passing on massive costs to unaware taxpayers:

    “Forcing people who are injured to apply for Social Security before paying their claims appears to bolster insurers’ profits in several ways. If claimants refuse to apply, the insurers can simply stop paying their benefits, said Dawn Barrett, an employee of the Cigna Corporation, who grew frustrated sending people to Social Security and who is now a plaintiff in one of the lawsuits. More typically, she said, people apply for Social Security when an insurer tells them to. That allows the insurer to reduce its claim reserves, money that is kept in conservative investments for benefit payments. And in the insurance industry, smaller reserves mean bigger profits.

    “’It’s all about the numbers,’ Ms. Barrett said.

    “Finally, disability insurers tell many of their claimants to appeal Social Security’s rejections again and again, until some are finally accepted. Then the insurers can take those people off their rolls, shifting the cost to the government.”

    This corrupt practice has nearly doubled the waiting period involved in folks eventually collecting disability to about a year and a half – which in turn allows insurers to wait even longer to make payments to their own claimants. To make matters worse, insurers are taking advantage of a government loophole by which people can apply for Social Security disability an unlimited amount of times by forcing claimants to continually file appeals to the Social Security Administration.

    And all the while the American taxpayer is forced to foot the ever-escalating bill for this government-industry shell game.

    According to the story, lawsuits have been filed against insurance companies for “recklessly dumping people on Social Security’s doorstep, without properly screening them to make sure they have a chance of qualifying.” In doing so, these insurance companies have placed a terrific burden upon unknowing taxpayers:

    “Mr. Nibali has calculated that it costs $1,180, on average, to process a single Social Security disability application to the first decision, usually a rejection. If the applicant persists through the first three levels — the initial review, a reconsideration and a hearing by an administrative law judge — the case will cost the system an average of $4,759, he found. It is possible to appeal even higher, adding further to the cost. Lawyers from the firm Phillips & Cohen, in Washington, who are representing the plaintiffs, have been working with statistical samples. Their numbers suggest that the industry has been sending tens of thousands of dubious claims to Social Security, costing the system hundreds of millions of dollars over the last decade.”

    Unsurprisingly, Social Security has not even kept track of just how many applicants for disability were being referred by insurance companies – which, of course for government is business as usual. Big Government’s Big Programs do not even check to see where they are losing money. After all, if the losses get too high, the politicians can just turn on the tax spigots.

    And so, none should be surprised that the insurance companies were able to get the Social Security Administration to swallow their bait …hook, line, and sinker.

    ALG Perspective:
    It is clear that government assistance programs create disincentives for the free market to operate as it otherwise would. While this practice by insurers is certainly abhorrent, and tantamount to fraud, it must be noted that it was only allowed to happen because of Big Government cluelessness. It’s one thing for companies to help folks to gain benefits that they are entitled to under law; that’s good customer service. It is quite another to force them to do so as a prerequisite to receiving services which they have already paid for. That’s just wrong, and the American taxpayer should not have to pay for it.

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