[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
WASTE, FRAUD AND ABUSE: A CONTINUING THREAT TO MEDICARE AND MEDICAID
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MARCH 2, 2011
__________
Serial No. 112-13
Printed for the use of the Committee on Energy and Commerce
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chair DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi JOHN BARROW, Georgia
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BILL CASSIDY, Louisiana
BRETT GUTHRIE, Kentucky
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
_____
Subcommittee on Oversight and Investigations
CLIFF STEARNS, Florida
Chairman
LEE TERRY, Nebraska DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma Ranking Member
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas MIKE ROSS, Arkansas
MARSHA BLACKBURN, Tennessee ANTHONY D. WEINER, New York
SUE WILKINS MYRICK, North Carolina EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California GENE GREEN, Texas
PHIL GINGREY, Georgia CHARLES A. GONZALEZ, Texas
STEVE SCALISE, Louisiana JOHN D. DINGELL, Michigan
CORY GARDNER, Colorado HENRY A. WAXMAN, California (ex
H. MORGAN GRIFFITH, Virginia officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
----------
Page
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 1
Prepared statement........................................... 3
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 4
Prepared statement........................................... 4
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 5
Prepared statement........................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 10
Prepared statement........................................... 11
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 148
Hon. Cory Gardner, a Representative in Congress from the State of
Colorado, prepared statement................................... 150
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, prepared statement................................ 152
Witnesses
Kathleen King, Director, Health Care Division, Government
Accountability Office.......................................... 13
Prepared statement........................................... 15
Gerald T. Roy, Deputy Inspector General for Investigations,
Office of the Inspector General, Department of Health and Human
Services....................................................... 29
Prepared statement........................................... 31
Omar Perez, Assistant Special Agent in Charge, Office of the
Inspector General, Department of Health and Human Services..... 41
Prepared statement........................................... 43
John Spiegel, Director, Medicare Progam Integrity Group, Center
for Program Integrity, Centers for Medicare and Medicaid
Services, Department of Health and Human Services.............. 50
Prepared statement........................................... 52
Answers to submitted questions............................... 153
R. Alexander Acosta, Dean, Florida International University
College of Law................................................. 98
Prepared statement........................................... 101
Craig H. Smith, Partner, Hogan Lovells U.S., LLP................. 111
Prepared statement........................................... 113
Sara Rosenbaum, Hirsh Professor and Chair, Department of Health
Policy, George Washington University School of Public Health
and Health Services............................................ 124
Prepared statement........................................... 126
Submitted Material
Subcommittee exhibit binder...................................... 162
WASTE, FRAUD AND ABUSE: A CONTINUING THREAT TO MEDICARE AND MEDICAID
----------
WEDNESDAY, MARCH 2, 2011
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Cliff
Stearns (chairman of the subcommittee) presiding.
Members present: Representatives Stearns, Terry, Myrick,
Murphy, Burgess, Bilbray, Gingrey, Scalise, Gardner, Griffith,
Barton, DeGette, Schakowsky, Gonzalez, Dingell and Waxman (ex
officio).
Staff present: Stacy Cline, Counsel, Oversight/
Investigations; Todd Harrison, Chief Counsel, Oversight/
Investigations; Sean Hayes, Counsel, Oversight/Investigations;
Debbee Keller, Press Secretary; Peter Kielty, Senior
Legislative Analyst; Carly McWilliams, Legislative Clerk;
Andrew Powaleny, Press Assistant; Krista Rosenthall, Counsel to
Chairman Emeritus; Ruth Saunders, Detailee, ICE; Alan Slobodin,
Chief Investigative Counsel, Oversight; Sam Spector, Counsel,
Oversight/Investigations; John Stone, Associate Counsel,
Oversight/Investigations; Kristin Amerling, Democratic Chief
Counsel and Oversight Staff Director; Phil Barnett, Democratic
Staff Director; Brian Cohen, Democratic Investigations Staff
Director and Senior Policy Advisor; Karen Lightfoot, Democratic
Communications Director and Senior Policy Advisor; Ali
Neubauer, Democratic Investigator; and Anne Tindall, Democratic
Counsel.
Mr. Stearns. Good morning, everybody, and let me welcome
everybody to the Subcommittee on Oversight and Investigations
of Energy and Commerce.
OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Stearns. We convene this hearing of the Subcommittee on
Oversight and Investigations today to examine the efforts of
the Department of Health and Human Services and the Centers for
Medicare and Medicaid Services to address fraud, waste and
abuse in the Medicare and Medicaid programs.
This issue is of great importance to us. During this
Congress and the last, I introduced the Medicare Fraud
Prevention Act, which would increase the criminal penalties for
those convicted of defrauding the Medicare program. As a Member
of Congress from Florida, I have personally seen how this issue
can greatly impact my State and its citizens. During my town
hall meetings last week, many of my constituents shared their
concerns with stories about waste, fraud and abuse in Medicare.
Recently, the Government Accountability Office listed the
Medicare and Medicaid programs as ``high risk.'' High-risk
programs are identified as having greater vulnerability to
fraud, waste and abuse and mismanagement. As much as $60
billion is lost to Medicare fraud every year. This is an
estimate because the exact number is unknown. When my staff
asked the folks from CMS how much fraud was being carried out,
they had no idea.
So it is hardly news that the Medicare and Medicaid
programs are at high risk. GAO has listed Medicare as high risk
since 1990 and Medicaid as high risk since 2003. Over the
years, this committee has had countless hearings on this
subject and yet nothing seems to change. The volume of Medicare
fraud and the corresponding cost to the taxpayer continues to
go up and up.
Meanwhile, the stories we hear from States like Florida
continue to horrify taxpayers. News reports have indicated that
Medicare fraud is rapidly eclipsing the drug trade as Florida's
most profitable and efficient criminal enterprise. With
Medicare fraud, the penalties are lower and the threat of
violence is nonexistent. Meanwhile, seniors who notice that
their Medicare number is being used for fraudulent schemes
often find themselves begging the government to do anything
about it, often with no results.
The types of fraud we are seeing run the gamut from
fraudulent billing schemes to the actual creation of fake
storefronts to sell durable medical equipment and then bill it
to Medicare. Once the criminals get their money from Medicare,
they close up shop and open a new storefront in a new location
and start the scam all over again.
The Administration says that additional measures are being
put in place to screen Medicare providers and suppliers, and
halt payments when there are credible allegations of fraud.
These are good and these are necessary steps to take, but only
if they work, and GAO has said that there is much more work to
be done.
In 2014, the Administration's health care bill will
implement massive changes. Medicare will be cut and Medicaid
will expand. According to the Chief Actuary of Medicare and
Medicaid, 20 million people will be dumped onto the Medicaid
rolls and $575 billion will be cut from Medicare. While we are
all committed to repealing this onerous law on this side, we
also must do our best to end fraud before 2014. If we can't
stop fraud now, how are we going to do so while simultaneously
adding 20 million people to Medicaid?
We have to make sure that the focus remains on preventing
fraud and abuse. Unfortunately, CMS uses a pay first, check
later system. That must change. We need to check first, and pay
later before taxpayers' funds are wasted. CMS needs to fix its
verification system to prevent these kinds of crimes or we will
never get a handle on this problem.
Every dollar that is lost to fraud is one that is not spent
on medical care for those in need. Fraud raises the costs of
health care for all Americans. Since Obamacare will raise those
costs even further, it is absolutely necessary that we get a
handle on Medicare and Medicaid fraud.
So I look forward to hearing what the Federal Government is
doing to get Medicare and Medicaid fraud and abuse under
control.
[The prepared statement of Mr. Stearns follows:]
Prepared Statement of Hon. Cliff Stearns
We convene this hearing of the Subcommittee on Oversight
and Investigations today to examine the efforts of the
Department of Health and Human Services and the Centers for
Medicare and Medicaid to address fraud, waste, and abuse in the
Medicare and Medicaid programs.
This issue is of great importance to me-during this
Congress and the last I introduced the ``Medicare Fraud
Prevention Act'', which would increase the criminal penalties
for those convicted of defrauding the Medicare program. As a
Representative from Florida, I have personally seen how this
issue can greatly impact my State and its citizens.
Recently the Government Accountability Office (GAO) listed
the Medicare and Medicaid programs in its ``High Risk'' report.
High risk programs are identified as such due to their
``greater vulnerability to fraud, waste, abuse, and
mismanagement.'' Indeed, as much as $60 billion is lost to
Medicare fraud every year. This is a massive amount of fraud,
although apparently the exact number is not even known.
Recently, when my staff asked the folks from the Center for
Medicare and Medicaid Services how much fraud was being carried
out, CMS had no idea.
It is hardly news that the Medicare and Medicaid programs
are at high risk for fraud, waste, abuse, and mismanagement.
GAO has listed these programs as high risk for over 20 years,
beginning in 1990. Congress' interest in Medicare fraud and
abuse isn't new either. Over the years, this Committee has had
countless hearings on the subject. And yet, nothing seems to
change. The volume of Medicare fraud, and the corresponding
cost to the taxpayers, continues to go up and up and up.
President Obama has repeatedly promised that he would somehow
SAVE taxpayer money and fund health care reform by eliminating
Medicare fraud, but in the last two years, under his watch,
Medicare has remained on the GAO's list as a ``high risk''
program for fraud. Estimates of fraud remain in the $60 billion
a year range, despite President Obama's commitment to fight
Medicare fraud.
Meanwhile, the stories we hear from States like Florida
continue to horrify honest taxpayers. News reports have
indicated that Medicare fraud is rapidly eclipsing the drug
trade as Florida's most profitable and efficient criminal
enterprise. The penalties are lower and the threat of violence
is nonexistent. Meanwhile, honest seniors who notice that their
Medicare number is being used for fraudulent schemes often find
themselves begging the government to do anything about it,
often with no results.
The types of fraud we are seeing run the gamut from
fraudulent billing schemes to the actual creation of fake
store-fronts to allegedly sell durable medical equipment and
bill it to Medicare. Once the criminals get their money from
Medicare, they close up shop and open a new store-front in a
new location, and start the scam all over again.
Now the Administration says that additional measures are
being put in place to screen Medicare providers and suppliers,
and halt payments when there are credible allegations of fraud.
I agree that these are good--and necessary--steps to take,
assuming that they work.
Yet, GAO found that there is still much more that can be
done in both Medicare and Medicaid. Considering that Obamacare
puts the federal government on the hook for 90 percent of these
increased costs to Medicaid alone, I sincerely hope we move to
do more to combat fraud sooner rather than later.
In 2014 massive changes will take place because of
Obamacare. Medicare will face drastic cuts and Medicaid will
drastically expand. According to the Chief Actuary of Medicare
and Medicaid, 20 million people will be dumped onto Medicaid
rolls while $575 billion will be cut from Medicare. While we
are committed to repealing this onerous law, we also must do
our best to end fraud before 2014.
If we can't stop fraud now, how are we going to do so while
simultaneously adding 20 million people to Medicaid?
I hope the witnesses at today's hearing will help us
understand the challenges CMS will face as it prepares for the
full implementation of health care reform, and how it plans to
combat fraud and waste in the system.
We have to make sure that the focus remains on preventing
fraud and abuse before it takes place. If CMS is not setting up
the right systems and checks to prevent these kinds of crimes,
we are never going to get a handle on this problem.
Every dollar that is lost to fraud is one that is not spent
on medical care for those who need it. Fraud raises the costs
of health care in America, and since I believe that Obamacare
will raise those costs even further, it is absolutely necessary
that we put and end to Medicare and Medicaid fraud.
I look forward to the testimony of the witnesses today and
learning what the federal government is thinking of doing to
get Medicare and Medicaid fraud and abuse under control.
Mr. Stearns. My remaining 1 minute I will give to the
gentleman from Texas, Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. The easiest thing in Washington to do is talk
about waste, fraud and abuse and the hardest thing in
Washington to do is to actually do something about it. As
Chairman Stearns just said, on both sides of the aisle we have
had numerous hearings about waste, fraud and abuse in Medicare
and Medicaid and yet the problem still obviously persists. We
can't even get a direct answer as to what the scope of the
problem is. It is an $800 billion combined program. Is it 10
percent? Ten percent would be $80 billion a year. Is it 5
percent? That would be $40 billion. Is it 1 percent? That would
be $8 billion. Nobody knows.
Mr. Chairman, I hope on a bipartisan basis this
subcommittee and the full committee under your leadership and
under the leadership of Ranking Member Waxman and Chairman
Upton in this Congress actually do something about it. With a
$1.5 trillion budget deficit annually, there is no question
that money spent here will be money that we get a huge return
on investment.
I look forward to hearing from our witnesses and I hope
that they have some solutions in addition to helping us define
the scope of the problem.
With that, Mr. Chairman, I yield back.
[The prepared statement of Mr. Barton follows:]
Prepared Statement of Hon. Joe Barton
Thank you Mr. Chairman for holding this hearing in an
attempt to discuss, expose, and potentially prevent wide-spread
waste, fraud, and abuse in the Medicare and Medicaid systems.
I welcome all of our witnesses and I hope they can answer
the hard questions this Committee has for them. In particular,
I want to know why the Centers for Medicare and Medicaid
Services (CMS), a federal agency that has a budget of almost
$800 billion a year and a Center dedicated to Program Integrity
can not give us an estimate on how much money is lost to fraud
each year.
It is frustrating that we all agree fraud is a problem, we
all want to solve the problem, and yet, we still don't even
know the scope of the problem. Now why is that important? I
believe that if you don't know what the problem is, you can't
set goals on how to solve it. So let's say it's a 10 percent
problem which would be $80 billion. Maybe a reasonable goal
then would be to cut that by 25 percent in a given year, which
would be $20 billion. Maybe it's only a 40 billion problem a
year. But if you guys can't help us determine what the problem
is, it is hard for us to decide how to set goals to solve it.
This inability is deeply disappointing considering in less
than three years, under the Affordable Care Act, this agency
will take over much of the healthcare system and President
Obama has repeatedly stated that one of the ways he plans to
fund Obamacare is by saving billions of dollars by identifying
and preventing this fraud.
Mr. Chairman, the hearing today highlights just one of the
many flaws of expanding huge entitlement programs that are
currently unmanageable, unsustainable, and highly susceptible
to waste, fraud, and abuse.
Mr. Stearns. I thank the gentleman, and I recognize the
ranking member from Colorado, Ms. DeGette.
Ms. DeGette. Thank you very much, Mr. Chairman.
OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Mr. Chairman, Medicare and Medicaid fraud have
been persistent problems that have plagued both Democratic and
Republican Administrations, as you have said, and it costs
Americans billions of dollars every year. It affects health
care providers at every level in the programs themselves and
also in the private sector.
Today's hearing will focus on a very worthy target of
oversight: waste, fraud and abuse in these two systems.
Medicare and Medicaid provide millions of people with access to
medical services and so it is a vital concern to this committee
that we maintain their integrity.
Fortunately, as you said, it is important to try to get a
handle on Medicare and Medicaid fraud, and that is also a high
priority for President Obama. Beginning in 2009, the Obama
Administration made fighting fraud a priority. These efforts
expanded even more after passage of the Affordable Care Act,
which contains dozens of provisions designed to help fight
Medicare and Medicaid fraud.
The Administration asked for and received additional
funding to fight health care fraud in both 2009 and 2010. They
have reorganized within HHS and they have started several new
collaborations with law enforcement authorities to uncover and
prevent health care fraud.
In May of 2009, HHS and DOJ announced the creation of the
Health Care Fraud Prevention and Enforcement Team, or HEAT,
designed to coordinate Cabinet-level agency activities to
reduce fraud. Under the HEAT program, HHS and DOJ have expanded
the use of dedicated strike force teams, placing law
enforcement personnel in locations that are identified as
health care fraud hotspots. These teams carried out the largest
health care fraud takedown in U.S. history last month, netting
over 100 arrests in just one day. The work undertaken by the
strike force teams has led to criminal charges against 829
defendants for defrauding Medicare of almost $2 billion. There
is an answer to your question about the extent of this.
The Administration's efforts have been a huge success for
taxpayers, with a return on investment that would make most
hedge fund managers jealous. And thanks to landmark health care
reform law passed by Congress last year, HHS and law
enforcement authorities now have a host of new tools and new
funding to fight fraud.
The Affordable Care Act contains dozens of new provisions
to fight Medicare and Medicaid fraud. The most important
changes allow CMS to apply a preventative model in its
antifraud efforts. For years, CMS employed, as you said, a
``pay and chase'' model of enforcement, simply paying
fraudsters' claims, then attempting to recover its losses. Now,
CMS has new authority to keep fraudsters out of Medicare and
Medicaid in the first place.
The Affordable Care Act contains stiffer enrollment
requirements for all providers, mandates enhanced background
checks, adds new disclosure requirements, and calls for onsite
visits to verify provider information. It requires that
providers create internal compliance programs, and it contains
several provisions aimed directly at fighting fraud in, as you
mentioned, the high-risk durable medical equipment and home
health programs.
The government's ability to act once it has uncovered fraud
or the possibility of fraud is also enhanced by the Affordable
Care Act. The Secretary now has authority to enact moratoria on
enrolling new providers if she believes that such enrollments
will increase fraud risks, and she can suspend payments to
providers where there is a substantiated allegation of fraud.
Once fraud has been proven, the Affordable Care Act provides
stiffer monetary penalties and expands the HHS Inspector
General's authority to exclude violators from the Medicare and
Medicaid programs.
Data sharing and collection between CMS, States, and other
federal health programs are modernized under the Affordable
Care Act, and the Affordable Care Act provides an estimated
$500 million in increased funding over the next 5 years to
fight fraud, money that will return billions of dollars to the
taxpayers. This expanded authority, combined with the
coordinated and focused attention of the Obama Administration,
has laid the groundwork for a new era in the Federal
Government's response to fraud.
Mr. Chairman, as you said, the GAO first designated
Medicare a high-risk program in 1990, and Medicaid joined the
high-risk list in 2003. I look forward to hearing from the GAO
about why this is the case and what can be done. I am hoping
that these new commitments that I just talked about can really
substantially reduce fraud and ultimately produce the result
that all of us want.
Mr. Chairman, if there is more than we can do to reduce
waste, fraud and abuse on a bipartisan level, I would be eager
to hear it and I would be happy to work with you and your
colleagues on both sides of the aisle to make sure that we can
do that because I think one thing we can agree on in a
bipartisan way is, nobody wants to see money wasted and we
certainly do not want to see fraud, waste and abuse in Medicare
and Medicaid.
And with that, I yield back.
[The prepared statement of Ms. DeGette follows:]
Prepared Statement of Hon. Diana DeGette
Health care fraud costs Americans billions of dollars every
year. Fraud affects health care providers at all levels, in
Medicare and Medicaid, and in the private sector.
Today's hearing will focus on a worthy target of oversight:
waste, fraud, and abuse in the Medicare and Medicaid programs.
Medicare and Medicaid provide millions of people with access to
essential medical services, and the integrity of these programs
is a vital concern of this Committee.
Fortunately, fighting waste, fraud, and abuse in Medicare
and Medicaid is also a high priority for President Obama.
Beginning in 2009, the Obama Administration made fighting fraud
a priority. These efforts expanded even more after passage of
the Affordable Care Act, which contained dozens of provisions
designed to help fight Medicare and Medicaid fraud.
The Administration asked for and received additional
funding to fight health care fraud in 2009 and 2010. They have
reorganized within HHS and started several new collaborations
with law enforcement authorities to uncover and prevent health
care fraud.
In May of 2009, HHS and DOJ announced the creation of the
Health Care Fraud Prevention and Enforcement Team (or
``HEAT''), designed to coordinate Cabinet-level agency
activities to reduce fraud. Under the HEAT program, HHS and DOJ
have expanded the use of dedicated strike force teams, placing
law enforcement personnel in locations that are identified as
health care fraud hotspots. These teams carried out the largest
health care fraud takedown in U.S. history last month, netting
over 100 arrests in a single day. The work undertaken by strike
force teams has led to criminal charges against 829 defendants
for defrauding Medicare of almost $2 billion.
The Administration's efforts have been a huge success for
taxpayers, with a return-on-investment that would make most
hedge fund managers jealous. And thanks to the landmark health
care reform law passed by Congress last year, HHS and law
enforcement authorities now have a host of new tools and new
funding to fight fraud.
The Affordable Care Act contains dozens of new provisions
to fight Medicare and Medicaid fraud.
The most important changes allow CMS to apply a preventive
model in its anti-fraud efforts. For years, CMS employed a
``pay and chase'' model of enforcement, simply paying
fraudsters' claims, then attempting to recoup its losses. Now,
CMS has new authority to keep fraudsters out of Medicare and
Medicaid in the first place.
The Affordable Care Act contains stiffer enrollment
requirements for all providers, mandates enhanced background
checks, adds new disclosure requirements, and calls for on-site
visits to verify provider information. It requires that
providers create internal compliance programs. And it contains
several provisions aimed directly at fighting fraud in the
high-risk durable medical equipment and home health programs.
The government's ability to act once it has uncovered fraud
or the possibility of fraud is also enhanced by the Affordable
Care Act. The Secretary now has authority to enact moratoria on
enrolling new providers if she believes that such enrollments
will increase fraud risks, and she can suspend payments to
providers where there is a substantiated allegation of fraud.
Once fraud has been proven, the Affordable Care Act provides
stiffer civil monetary penalties and expands the HHS Inspector
General's authority to exclude violators from the Medicare and
Medicaid programs.
Data sharing and collection between CMS, States, and other
federal health programs are modernized under the Affordable
Care Act.
And the Affordable Care Act provides an estimated $500
million in increased funding over the next five years to fight
fraud--money that will return billions of dollars to the
taxpayer.
This expanded authority, combined with the coordinated and
focused attention of the Obama Administration, has laid the
groundwork for a new era in the federal government's response
to health care fraud.
The Government Accountability Office first designated
Medicare a ``high-risk'' program in 1990, and Medicaid joined
the ``high-risk'' list in 2003. For two decades, the programs
have been on GAO's high priority list. We will hear today from
GAO about why this is the case, and what can be done. I am
hopeful that the Obama Administration's commitment to reducing
fraud, and the substantial anti-fraud boost provided by the
Affordable Care Act will ultimately produce the result that
preceding Republican and Democratic Administrations have been
unable to achieve: removal of Medicare and Medicaid from the
GAO high-risk list.
Waste, fraud, and abuse in Medicare and Medicaid are bi-
partisan problems, and I believe there is bi-partisan
commitment to combating them. I hope there is also bi-partisan
recognition of the commendable anti-fraud efforts undertaken by
the Obama Administration and the vital anti-fraud authority
granted by the Affordable Care Act. 5
I thank the witnesses for joining us here today and look
forward to hearing their testimony on this important topic.
Mr. Stearns. The gentleman from Texas, Mr. Burgess, is
recognized for 3 minutes.
Mr. Burgess. I thank the chairman and I thank our witnesses
for being here today. I know several of you we have seen before
and several of you we have seen several times before, which
just underscores the problem that at the federal level we have
really not done enough to address the issue of fraud, and as
the reports that we have in front of us indicate that our
Nation's government-run health care system needlessly does
waste billions of dollars each year through programs that are
ineffective and unfocused.
Fraud analysts and law enforcement officials estimate, and
we have heard the figures already, 10 percent, as Mr. Barton
did the math for us on an $800 billion public program. That is
a substantial sum of money every year, and over a 10-year
budget window, it is really astounding. But 10 percent of total
health care expenditures are lost to fraud on an annual basis.
The point has been raised by others, I have raised it
numerous times before, how much fraud is enough for us to take
notice? The answer that we all expect to see in the amount of
fraud is none, zero, zero tolerance, but in reality, sometimes
it is even as simple as just the lack of a prosecutorial force
with the background in prosecuting health care laws cripples
our ability to go after the people that need to be gone after,
and certainly that has been true in my communities in north
Texas where repeated violations by some of the same people who
have multiple provider numbers but a single post office box,
you can bust someone in the morning but we are sending out
payments to the same post office box under a different provider
number that afternoon. Clearly, that has to stop.
Now, the Government Accountability Office has been able to
identify areas where they may have made recommendations to the
Centers for Medicare and Medicaid Services to prevent improper
payments, some really dating back almost a decade, and they
failed to fully implement them and that in fact has caused
fraud to rise. If we are serious about bringing down the cost
of health care and protecting the patient not just reducing but
eliminating fraud, that needs to be the goal for which we
strive.
Medicaid expansion under the landmark health care
legislation passed last year that has already been referenced
but Medicaid expansion under the Affordable Care Act is
estimated to exceed $430 billion over the next 10 years. Under
current standards, taxpayers would be losing over $40 billion a
year to fraud.
Now, we also talk about the medical loss ratio and how we
are going to control costs in the private sector but I would
just simply ask, what is a more cogent indicator of medical
loss ratio than dollars that are lost to fraud? Maybe we ought
to include that in our calculation.
I realize the clock is misbehaving. Let me yield back to
the chairman because I think he has others he wants to
recognize.
Mr. Stearns. Thank you, Mr. Burgess.
Mr. Bilbray of California is recognized for 1 minute and
then Mr. Gingrey.
Mr. Bilbray. Thank you, Mr. Chairman.
Mr. Chairman, I think there are many ways of addressing the
potential or the existence of the fraud issue. I think that one
of the concerns that a lot of people had when we were talking
about expanding health care coverage last year was the
President stood on the podium and said I assure you that those
who are illegally in this country will not have access to this
system, though when the bill was passed there was no
requirement for verification, the same verification required
almost of every other federal program wasn't included in that
expansion of health care service. I would like to make sure
that we all address the fact that if you do not verify, if you
do not use the check system, you cannot straight face in the
American people and tell us that people who are not qualified
are going to be kept out of this system. Just by saying they
are not allowed to participate in the system is as logical as
saying that providers will not create a fraud because we have
said that they shouldn't do it. There has got to be some checks
and balances here.
And just as much as need to make sure that we are on top
and checking the providers of the services, we also have a
responsibility, especially after the President promised the
American people that they would not participate is to make sure
that we check and have a verification system for those who are
providing the services and those who are being provided to
those services, and I think not until we are willing to do that
across the board with all of our health care system can we
truly have our President stand up and assure the American
people with a straight face that no, we are doing everything
possible to make sure we fighting fraud in this country and we
make sure that every dollar spent on health care in this
country is going only to those who qualify and only being
provided under a legal system.
I yield back.
Mr. Stearns. The gentleman yields back.
The gentleman from Georgia, Mr. Gingrey, is recognized for
1 minute.
Mr. Gingrey. Mr. Chairman, thank you. I am very pleased to
welcome the witnesses on both the first and second panel. I
look forward to hearing their testimony.
I practiced medicine for 31 years, 26 of those years in the
specialty of obstetrics and gynecology, so this issue of waste,
fraud and abuse, particular in our Medicare and Medicaid
systems, is something that really, really gets to me, and some
of the comments that I have heard already this morning,
particular from the other side, you would almost think that one
of the reasons for adopting Obamacare or the Affordable Care
Act was so that we could succeed in combating waste, fraud and
abuse. I certainly don't agree with that, and if it is true,
then it will be more successful than the bill has been in
lowering the cost of health care to individuals who are now
uninsured. It will do more than it has done in regard to
medical liability reform that was promised. It will do much
more than providing a sustainable rate of reimbursement to our
hardworking health care providers that was promised. So it kind
of remains to be seen what is in this bill that is going to
make us more successful in combating waste, fraud and abuse.
But in any regard, I look forward to hearing from the
witnesses and we do need to get a handle on this problem, and I
yield back.
Mr. Stearns. I thank the gentleman, and Mr. Waxman, the
ranking member of the full committee, is recognized for 5
minutes.
Mr. Waxman. Thank you very much, Mr. Chairman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Well, this hearing is a very useful one already
because we have the opportunity to educate two of our
Republican members about the accuracy of the legislation that
we just adopted. One of the reasons I am so proud of the
Affordable Care Act, the historic health care reform law signed
by President Obama last year, is that it contains dozens of
antifraud provisions. This legislation has the most important
reforms to prevent Medicare and Medicaid fraud in a generation.
According to the Congressional Budget Office, these new fraud
provisions will save over $7 billion for taxpayers.
The health care reform law shifts the prevailing fraud
prevention philosophy from pay and chase where law enforcement
authorities only identify fraud after it happens to inspect and
prevent. It allows CMS to impose moratoria on enrolling new
providers if the Secretary believes that such enrollments will
increase fraud risk. It allows the HHS Secretary to close the
barn door before the horses have left.
The new law also contains new penalties for fraudulent
providers and new data-sharing provisions to catch criminals,
and it provides hundreds of millions of dollars in new funding
to help CMS, the Inspector General and the Department of
Justice fight Medicare and Medicaid fraud, and we will hear
today about how the CMS and Inspector General have already put
these funds to work. I am proud of these efforts to reduce
fraud.
The second thing I want to point out is that the
legislation does not allow undocumented aliens to access
Medicare or Medicaid or the exchanges, and it is not just on
their self-affirmation that they are not here illegally, it is
based on an inspection that is required under the law. That can
be done in two ways. They can either check with Social
Security, get all the information to be sure that the claimant
is accurately stating his or her status, or they can require
the birth certificates and passports and other information to
be produced to show that they are not taking advantage. So
these oversight hearings have a real opportunity to educate
people.
I can't tell you how much I think this is an important
reason for our hearing. When we have health care fraud, it robs
the taxpayers of funds, affects the quality of care provided to
program enrollees and saps public confidence in the Medicare
and Medicaid programs. And that is why I see fighting Medicare
and Medicaid fraud as a critical need and an issue where we
should be able to achieve bipartisan consensus.
But I am wary of those who use the existence of fraud in
these programs for the express purpose of undermining support
for them. I do not believe we should attempt to exaggerate the
scope of the problem just to foster ideological efforts to cut
or eliminate them. When I hear estimates of the amount of
Medicare and Medicaid fraud that have no basis in fact, or when
members confuse Medicare and Medicaid improper payment rates
that consists mostly of simple paperwork or clerical errors
with the rate of intentional fraud against the programs, then I
become concerned that members are just using fraud as an excuse
to bash these programs, not to improve them.
The vast majority of Medicare and Medicaid providers are
compassionate and honest. The vast majority of beneficiaries of
these programs desperately need the care that is provided. We
need to be tough on fraud and tough on criminals who take
advantage of these programs and their beneficiaries, but we
cannot and should not blame the victim.
In January, every single Republican Member of Congress
voted to repeal the entire Affordable Care Act, including
essential antifraud provisions. In February, as part of the
Continuing Resolution, every single Republican voted to ban the
use of funds to implement the Affordable Care Act, including
the funds needed to implement the antifraud provisions. That
vote was penny-wise and pound-foolish.
We are going to hear from CMS, from the HHS Inspector
General and from GAO about the new authority and new funding
they have to eliminate Medicare and Medicaid fraud, thanks to
the Affordable Care Act, and I hope this testimony will make
some members reconsider their views. If we truly care about
protecting the taxpayer, we should support, not defund, the
Administration's initiatives to reduce Medicare and Medicaid
fraud.
I yield back the balance of my time.
[The prepared statement of Mr. Waxman follows:]
Prepared Statement of Hon. Henry A. Waxman
Mr. Chairman, I want to thank you for holding this hearing
today, and for focusing on the important topic of Medicare and
Medicaid fraud.
I have dedicated much of my career in Congress to improving
the Medicare and Medicaid programs and the quality of care they
provide and pursing waste, fraud, and abuse in government
spending. This hearing combines both subjects.
Health care fraud robs taxpayers of funds, affects the
quality of care provided to program enrollees, and saps public
confidence in the Medicare and Medicaid programs. That's why I
see fighting Medicare and Medicaid fraud as a critical need--
and an issue where we should be able so achieve bipartisan
consensus.
But I am wary of those who use the existence of fraud in
these programs for the express purpose of undermining support
for them. I do not believe we should attempt to exaggerate the
scope of the problem just to foster ideological efforts to cut
or eliminate them.
When I hear estimates of the amount of Medicare and
Medicaid fraud that have no basis in fact . or when members
confuse a Medicare and Medicaid ``improper payments'' rate that
consists mostly of simple paperwork or clerical errors with the
rate of intentional fraud against the programs . then I become
concerned that members are just using fraud as an excuse to
bash these programs, not to improve them.
The vast majority of Medicare and Medicaid providers are
compassionate and honest. The vast majority of beneficiaries of
these programs desperately need the care they provide. We need
to be tough on fraud and tough on criminals who take advantage
of these programs and their beneficiaries--but we can and
should not blame the victim.
One of the reasons I am so proud of the Affordable Care
Act, the historic health care reform law signed into law by
President Obama last year, is that it contains dozens of anti-
fraud provisions. The legislation has the most important
reforms to prevent Medicare and Medicaid fraud in a generation.
According to the Congressional Budget Office, these new fraud
provisions will save over $7 billions for taxpayers.
The health care reform law shifts the prevailing fraud
prevention philosophy from ``pay and chase''--where law
enforcement authorities only identify fraud after it happens--
to ``inspect and prevent.''
It allows CMS to impose moratoria on enrolling new
providers if the Secretary believes that such enrollments will
increase fraud risks. This allows the HHS Secretary close the
barn door before the horses have left.
The new law also contains new penalties for fraudulent
providers and new data sharing provisions to catch criminals.
And it provides hundreds of millions of dollars in new
funding to help CMS, the Inspector General, and the DOJ fight
Medicare and Medicaid fraud. We will hear today about how the
CMS and the Inspector General have already put these funds to
work.
I am proud of these efforts to reduce fraud.
In January, every single Republican member of Congress
voted to repeal the entire Affordable Care Act, including these
essential anti-fraud provisions. In February, as part of the
Continuing Resolution, every single Republican voted to ban the
use of funds to implement the Affordable Care Act, including
the funds needed to implement the anti-fraud provisions. That
vote was penny-wise, pound-foolish.
We will hear today from CMS, from the HHS Inspector
General, and from GAO about the new authority and new funding
they have to eliminate Medicare and Medicaid fraud, thanks to
the Affordable Care Act. I hope this testimony will make some
members reconsider.
If we truly care about protecting the taxpayer, we should
support--not defund--the Administration's initiatives to reduce
Medicare and Medicaid fraud.
Mr. Stearns. I thank the gentleman.
At this point we will go to our witnesses, and we have our
witnesses at the table. The first is Kathleen King, Director of
Health Care Division, Government Accountability Office. She is
the director of this health care team at the U.S. Government
Accountability Office, which is responsible for leading various
studies of the health care system, specializing in Medicare
management and prescription drug coverage. She has more than 25
years' experience in health policy and administration. She
received her M.A. in government and politics from the
University of Maryland.
We have John Spiegel, who is Director of Medicare Program
Integrity, Centers for Medicare and Medicaid Services. He has
worked in various components of the Centers for Medicare and
Medicaid Services. After several years working outside the
public sector, he returned to federal service in 2010 as the
Director of the Medicare Program Integrity Group.
Then we have Gerald Roy, who is Deputy Inspector General
for Investigations, Department of Health and Human Services. He
has served in OIG since 1995. He was also instrumental in
increasing OIG's civil and criminal conviction record and a 25
percent increase in OIG's monetary recoveries from $3 billion
in 2008 to over $4 billion in 2009.
And then we have Omar Perez, Assistant Special Agent in
Charge, Health and Human Service Office of the Inspector
General, Miami Regional Office. He joined the department in
July 1998 and he has been promoted to special agent in January
1999. He has led a number of successful criminal and civil
investigations and orchestrated Project Ghost Rider to address
fraudulent ambulance companies, Bad Medicine to address Puerto
Rico's Medicaid equivalent, and the First Child Support Round
in the U.S. Virgin Islands.
So I welcome our witnesses, and let me swear you in first
of all.
[Witnesses sworn.]
Mr. Stearns. Ms. King.
STATEMENTS OF KATHLEEN KING, DIRECTOR, HEALTH CARE DIVISION,
GOVERNMENT ACCOUNTABILITY OFFICE; GERALD T. ROY, DEPUTY
INSPECTOR GENERAL FOR INVESTIGATIONS, OFFICE OF THE INSPECTOR
GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES; OMAR PEREZ,
ASSISTANT SPECIAL AGENT IN CHARGE, OFFICE OF INSPECTOR GENERAL,
DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND JOHN SPIEGEL,
DIRECTOR OF MEDICARE PROGRAM INTEGRITY, CENTERS FOR MEDICARE
AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES
STATEMENT OF KATHLEEN KING
Ms. King. Mr. Chairman, members of the subcommittee, thank
you for inviting me today to speak about our recent high-risk
report, specifically about Medicare. We have continued to
designate Medicare as a high-risk program because of its
complexity and susceptibility to improper payment added to its
size. This has led to serious management challenges.
In 2010, Medicare covered 47 million elderly and disabled
beneficiaries and had estimated outlays of $509 billion, making
it the third largest federal programs in terms of spending.
Currently, Medicare remains on a path that is fiscally
unsustainable in the long term. This heightens the urgency for
the Centers for Medicare and Medicaid Services to address our
recommendations, effectively implement new laws and guidance
and improve its management in four areas. Broadly, these areas
include reforming and refining payments, improving program
management, enhancing program integrity and overseeing patient
care and safety. Today I am going to focus my oral comments on
payments and program integrity.
With regard to reforming and refining payments, CMS has
implemented payment reforms such as for Medicare Advantage,
inpatient hospital and home health services. It has also begun
to provide feedback to physicians on their resource use, which
is positive but which could benefit from additional refinement,
and is developing a new payment system that accounts for the
cost and quality of care. But more could be done. For example,
we have recommended to CMS that they consider implementing more
front-end approaches to controlling the growth of imaging
services. In addition, we recently found that although payments
for home oxygen have been reduced or limited several times in
recent years, further savings are possible.
In regard to program integrity, Congress recently passed
laws including the Improper Payments Elimination and Recovery
Act, the Patient Protection and Affordable Care Act and the
Small Business Job Act that provide authority and resources and
impose new requirements designed to help CMS reduce improper
payments.
The Administration has also issued executive memoranda
including one that requires agencies to check certain databases
known as the Do Not Pay List before making payments to ensure
that payments are not made to individuals who are dead or
entities that have been excluded from federal programs. CMS is
taking steps to implement these laws and memoranda through
regulations and other agency actions. In 2010, it created a new
Center for Medicare and Medicaid Program Integrity to better
coordinate efforts to prevent improper payments. CMS has been
tracking its improper payment rates in Medicare fee for service
and Medicare Part C and has established performance goals for
reducing those rates in the future. However, the agency has not
reported a single error rate for Part D and has not been able
to demonstrate sustained progress in lowering its improper
payment rates. So continued oversight is warranted.
Having a corrective action process in place to address
vulnerabilities that lead to improper payments is also
important to managing them effectively. Our work on recovery
auditing, which reimburses contracts on a contingency basis to
uncover payments that should not have been made found that CMS
had not developed an adequate process to address the
vulnerabilities that had been identified by the contractors.
Since it is important to address these issues going forward, we
recommended that CMS develop a robust corrective action
process.
Further, we issued a report in February 2009 that indicated
that Medicare continued to pay some home health agencies for
services that were not medically necessary or were not
rendered. To address this, we made several recommendations
including that CMS direct its contractors to conduct post-
payment reviews on home health agencies with high rates of
improper payments. CMS has not implemented this and several
other recommendations to improve its program safeguards.
In conclusion, although CMS has taken many actions to
improve the integrity of the Medicare program, further action
is needed to ensure that payments are proper and
vulnerabilities to improper payments are addressed. We are
beginning new work to address some of these issues to determine
if additional agency or Congressional action might be helpful.
Mr. Chairman, this concludes my statement. I would be happy
to answer any questions.
[The prepared statement of Ms. King follows:]
Mr. Stearns. Thank you.
Mr. Roy.
STATEMENT OF GERALD ROY
Mr. Roy. Good morning, Chairman Stearns, Ranking Member
DeGette and distinguished members of the subcommittee. I am
Gerald Roy, Deputy Inspector General for Investigations at the
U.S. Department of Health and Human Services, Office of
Inspector General. Today I am privileged to have with me OIG
Assistant Special Agent in Charge Omar Perez of our Miami
Regional Office.
OIG is an independent nonpartisan agency committed to
protecting the integrity of more than 300 programs administered
by HHS. The Office of Investigations employs over 450 highly
skilled special agents who utilize state-of-the-art
investigative technologies and a wide range of law enforcement
actions including the execution of search and arrest warrants.
We are the Nation's premier health care fraud law enforcement
agency. Our constituents are the American people, and we work
hard to ensure their money is not stolen or misspent. Over the
past fiscal year, OIG investigations have resulted in over 900
criminal convictions and civil actions and over $3.7 billion in
recoveries.
Today I will discuss three critical aspects of OIG's work:
the Medicare fraud strike force model, corporate fraud
investigations and tools employed by OIG. The Medicare fraud
strike force model is a critical component of one of the
Administration's signature initiatives known as HEAT. This is a
joint effort by HHS and DOJ to leverage resources and expertise
to prevent fraud and abuse. Strike forces concentrate antifraud
efforts in geographic areas at high risk for fraud. Strike
force teams consisting of OIG agents and our law enforcement
partners are assigned to dedicated prosecutors. Strike force
cases are data driven, which allows us to catch criminals in
the act. We operate in nine locations and we plan to expand to
other high-fraud areas. Last month, HEAT strike forces engaged
in the largest federal health care fraud takedown in our
history, arresting over 100 defendants in nine cities
associated with more than $225 million in fraud. More than 300
OIG special agents led this operation. The photos you see here
today show our special agents engaged in search and arrest
activities.
We are also aggressively pursuing major corporations and
institutions that commit health care fraud on a grand scale.
Corporate fraud often involves complex kickbacks, accounting
and illegal marketing schemes. Some of these companies play
such a critical role in the health care delivery system that
they may believe that the OIG would never exclude them. Some
executives consider civil penalties and criminal fines just the
cost of doing business. As long as the profit from fraud
outweighs the cost, abusive corporate behavior will continue.
OIG plans to alter this cost-benefit calculus of executives by
more broadly employing one of the most powerful tools in our
arsenal: the authority to exclude individuals and entities from
participating in federal health care programs. When there is
evidence that an executive knew or should have known of the
underlying criminal misconduct of the organization, OIG plans
to exclude that executive from our programs.
Recently, we assigned a special agent to the International
Criminal Police Organization, INTERPOL. INTERPOL facilitates
international investigative cooperation between 188 member
countries and more than 18,000 law enforcement agencies in the
United States. HHS OIG is the first in the Inspector General
community to have a special agent assigned to INTERPOL. We have
over 170 fugitives running from health care fraud charges. We
will leverage the resources of INTERPOL's worldwide partners to
bring them to justice.
In February, OIG launched our most-wanted fugitive Web
site. The individuals you see on our top 10 fugitive poster
allegedly defrauded taxpayers of more than $136 million. We
have partnered with America's Most Wanted and INTERPOL to
feature our Web site and actively spread the word. We are
asking the public to help us bring these fugitives to justice.
The bottom line: We are sending a clear message that fraud
will not be tolerated and our success represents a prudent
investment of taxpayer dollars. For every $1 spent on our
health care fraud programs, we return over $6 to the Medicare
trust fund.
Thank you for the opportunity to discuss our law
enforcement efforts and strategies. We are committed to serving
and protecting the Nation's most vulnerable citizens and the
federal health care programs on which they rely.
[The prepared statement of Mr. Roy follows:]
Mr. Stearns. Thank you.
Mr. Perez, welcome.
STATEMENT OF OMAR PEREZ
Mr. Perez. Good morning, Chairman Stearns, Ranking Member
DeGette and distinguished members of the subcommittee. I am
Omar Perez, Assistant Special Agent in Charge with Human and
Health Services Office of Inspector General. I am stationed in
Miami and currently supervise agents assigned to the Medicare
strike force, and prior to assuming my position, I was a member
of one of the strike force teams. I am honored for the
invitation and opportunity to discuss our efforts in combating
health care fraud.
This morning, I am here to tell you what our agents and I
experience as criminal investigators on the front line in this
fight against health care fraud. Although the vast majority of
Medicare providers are honest, my job and our job is to focus
on those intent on stealing from the program. My squad is
actively engaged in criminal investigations, testifying before
grand juries, executing search and arrest warrants and seizing
bank accounts.
Medicare fraud is discussed openly on the streets of south
Florida because it is accepted as a safe and even way to get
rich quick. Now, the money involved in staggering. We see high
school dropouts making anywhere from $100,000 to millions a
year. Typically, we see business owners, health care providers,
doctors and Medicare patients participate in the fraud but now
we see drug dealers and organized criminal enterprises joining
in.
Today I will describe the typical fraud scheme, highlight
Miami's investigative model, share success stories, and finally
discuss the evolution of fraud in south Florida.
Now, prior to the state of the strike force, Miami was
riddled with sham DME companies whose owners had one idea in
mind: steal from the program. In order to perpetrate the fraud,
nominee owners were recruited to place their names on corporate
documents, lease agreements and corporate bank accounts, and in
exchange were paid between $10,000 to $20,000. Stolen patient
information was obtained from corrupt employees at hospitals,
clinics and doctors' offices. They also obtained lists of
stolen physician identifiers, and with these two key pieces of
information submitted fraudulent claims to Medicare for
equipment that was never provided. Once the money was deposited
into the account, it was withdrawn within days. The idea was to
deplete the account so that by the time Medicare even realized
that there was a fraud, there was no money left to recover.
These schemes are executed within a matter of months so we
developed a streamlined investigative approach to HEAT
investigations. The model includes the following steps to help
identify our targets: quickly obtain and analyze Medicare
claims, identify and obtain banking information, obtain the
corporate documents, and identify the medical billing agent.
Now, the following examples highlight the successes of our
model. Two months ago, one of our agents received information
from a confidential source that a DME company was submitting
fraudulent claims. Through data analysis, we saw that $1.5
million was billed in just 3 weeks after a corporate change of
ownership. Further data analysis showed that this company and
another that we had under investigation was billing for about
the same 100 patients, so within 30 days the agents
corroborated that fraud was taking place and we were able to
arrest the target. Using this model, he got zero money. When we
arrested him, we found a fake driver's license and learned that
he was about to purchase yet another company under this assumed
identity.
In another example, a source alleged a corporation owning
several community mental health centers was paying patients to
allow them to bill for services they were not receiving. Data
analysis and other investigative techniques led to five
individuals being indicted and arrested and seven search
warrants being executed simultaneously. Now, 2 weeks ago, we
indicted and arrested another 20 individuals associated with
this corrupt corporation and those arrested included center
directors, physicians, therapists, patient recruiters and money
launderers. The photographs you see are of the lavish estate of
a patient recruiter who also laundered money for the corrupt
corporation. We are finding that criminals have migrated to
other services within the Medicare program including home
health, community mental health centers, physical and
occupational therapy. Historically, Medicare patients and
doctors were not involved but now we are finding that in many
cases both are getting paid to participate in the fraud.
Additionally, not only are we seeing criminals migrate to
other parts of the State but we know that they have migrated to
States adjacent to Florida and other parts of the country like
Georgia, North Carolina, Tennessee, West Virginia and Michigan.
Thank you very much for the opportunity to discuss strike
force operations in the south Florida and the investigative
model that we utilize to protect the taxpayers interest, and I
certainly welcome the opportunity to address any questions the
panel has.
[The prepared statement of Mr. Perez follows:]
Mr. Stearns. Thank you, Mr. Perez.
Mr. Spiegel.
STATEMENT OF JOHN SPIEGEL
Mr. Spiegel. Thank you. Chairman Stearns, Ranking Member
DeGette and members of the subcommittee, thank you very much
for the invitation to discuss the Centers for Medicare and
Medicaid Services' efforts to reduce fraud, waste and abuse in
the Medicare, Medicaid and Children's Health Insurance programs
and the new tools and authorities provided in the Affordable
Care Act. I am happy to be here today appearing on behalf of
Peter Buddetti, who is the Director of the Center for Program
Integrity where I work as the Director of the Medicare Program
Integrity Group.
Dr. Buddetti said from the beginning of the time on his job
that people are asking two questions repeatedly: why do you let
the perps into Medicare and Medicaid and why do you continue to
pay fraudulent claims? Well, I can tell you that with the new
authorities provided in the recent laws and the commitment of
the Administration in fighting fraud, we are making progress on
both fronts. Our approach will be keeping people who don't
belong in the programs out and we will be kicking out
fraudulent claims before they are paid. We now have the
flexibility to tailor resources to address the most serious
problems and quickly initiate activities in a transformative
way.
Under the leadership of Secretary Sebelius, CMS has taken a
number of administrative steps to better meet emerging needs
and challenging in fighting fraud and abuse. For example, CMS
consolidated the Medicare and Medicaid Program Integrity Groups
under a unified Center for Program Integrity to pursue a more
strategic and coordinated set of program integrity policies and
activities across both programs. This change in structure and
focus served our program integrity well and has facilitated
collaboration on antifraud initiatives with our law enforcement
partners in the HHS Office of Inspector General and in the
Department of Justice and State Medicaid fraud control units as
well. And just last week we restructured the center to provide
some additional concentrated focus on the new initiatives that
I will be talking about in a little bit, some examples being
increased focus on data development and uses of analytics that
will help bolster our work.
The Affordable Care Act enhanced this organizational change
by providing an opportunity to develop policies across all of
our programs jointly. The act's division such as enhanced
screening requirements for new providers and suppliers apply
across all the programs, not just for Medicare and not just for
Medicaid. They are uniform across the board. This ensures
consistency obviously as one of the goals that we try to pursue
in our fraud and abuse activities.
So many might argue that just rearranging the boxes doesn't
have much of a value but we think that having created a Center
for Program Integrity, it is on a par with other major
operating components within CMS. It sends a powerful message
that the Administration is seriously committed to fighting
fraud and it puts the bad actors on notice, and because most
success in anything comes from clarity of purpose, we have made
certain that our sights are firmly fixed on the goal of
ensuring correct payments are made to legitimate providers for
covered, reasonable and appropriate services for eligible
beneficiaries.
I would like to take a little time today to explain how we
have been transforming our fraud detection and prevention work
through the new approach on the poster over there. So first,
central to our goal is the shift away from identifying fraud
before it happens. We want to prevent things from taking shape.
We want to move away from ``pay and chase'' that we have relied
on so heavily in the past. Second, we don't want to be limited
to a monolithic approach to fighting fraud. Instead, we want to
focus our efforts on the bad actors who pose elevated risk.
Third, we are taking advantage of innovation and technology as
we move quickly to take action focused on prevention when
possible. And fourth, consistent with the Administration's
commitment to being transparent, we are developing performance
measures that will specify our targets for improvement. We are
actively engaging public and private partners from across the
spectrum because there is obviously much to learn from others
who engaged in the same endeavor of fighting fraud. We know the
private sector is victimized by the same schemes we see in
public programs in collaboration and communication among all
parties. And finally, we are committed to coordination and
integration of our activities across all the programs in CMS
based on best practices and lessons learned.
So as we move away from the old ways to more modern and
sophisticated successful approaches, we are continuing to
concentrate our actions----
Mr. Stearns. Just if you can, sum up. Your time is over.
Mr. Spiegel. OK. Sorry.
Mr. Stearns. Thank you.
Mr. Spiegel. Let me just get through this one particular
part and I will be finished.
Mr. Stearns. Can you just summarize?
Mr. Spiegel. Sure. We want to do a better job of keeping
people out before they get in. We want to move quickly when we
see those who have gotten in that are potentially improper
bills and take steps to reduce claims payment error by 50
percent and get people out who don't belong.
[The prepared statement of Mr. Spiegel follows:]
Mr. Stearns. Thank you. With that, I will open up with
questions. Let me start with you, Mr. Spiegel. When I looked at
your resume, it looks like you have been on the job less than a
year. You started June 2010. So you have really been the man
who is Director of Medicare Program Integrity for less than one
year. Is that correct?
Mr. Spiegel. That is correct.
Mr. Stearns. And you came from the private sector?
Mr. Spiegel. Most immediately.
Mr. Stearns. OK. You might not have a handle on this, but
how much money, in your opinion, is lost to fraud each year in
the Medicare program precisely?
Mr. Spiegel. Well----
Mr. Stearns. Just precisely.
Mr. Spiegel. I would have to answer that question and say
that there is no actual one number----
Mr. Stearns. So you don't know? Is that fair enough?
Mr. Spiegel. That is correct.
Mr. Stearns. Now, 60 Minutes in September had an expose on
Medicare, and they indicated it was $60 billion, and they had
one witness who indicated it would be $90 billion. Do you think
it is fair to say that it is anywhere from $60 billion to $90
billion based on what 60 Minutes said?
Mr. Spiegel. Like all of us, I have heard the estimates
that have come from private groups as well as government----
Mr. Stearns. Why is it so difficult to understand what the
figure is? If 60 Minutes has come up with it and witnesses have
come up with it, we had the Justice Department give an
estimate, why is it that you are the man in charge of Medicare
Program Integrity, why can't you give us an estimate of what it
is, approximately?
Mr. Spiegel. Well, because a lot of the estimates that you
cite and others cite contain information that deals with things
that aren't necessarily fraud. Some of them turn out to be
improper payments, things we want to know about but they are
really not fraud and it is not necessarily----
Mr. Stearns. All right. Mr. Waxman indicated in his opening
statement that these new requirements that are in the Obamacare
prevention will save us $7 billion. Do you think that is an
accurate statement?
Mr. Spiegel. I believe Mr. Waxman cited CBO estimates.
Mr. Stearns. OK. Now, the problem is, it is a $650 billion
program and they are saving $7 billion. That is probably about
less than 1 percent. How can you effectuate eliminating waste,
fraud and abuse when you cut the program $550 billion like
Obamacare does? So it is a question for Ms. King. If you are
actually cutting Medicare program, wouldn't that make it
difficult to prevent waste, fraud and abuse just by axiomatic?
Wouldn't it be self evident that you can't cut a program that
amount of money and still reduce waste, fraud and abuse?
Ms. King. Mr. Chairman, I think that the reductions in
Medicare spending are reductions off the rate of growth and not
overall reductions in the size of the----
Mr. Stearns. Well, that is not how we understand it. But
Mr. Spiegel, let us go to Medicaid. How much is lost to
Medicaid, not Medicare, because you say you don't know. What
about Medicaid? What is the loss to fraud?
Mr. Spiegel. Well, it is the same issues that surround
trying to come up with a number for fraud in Medicare.
Mr. Stearns. So you have no idea, not even approximate? OK.
Now, Ms. King, they are expanding Medicaid by another 20
million people they are going to add, and so if you are going
to expand and increase it, and Medicaid has a lot of fraud,
wouldn't that indicate that you are going to have increased
fraud?
Ms. King. I think it depends on what happens with the new
authorities that CMS was given in the Affordable Care Act and
how they are implemented.
Mr. Stearns. Let me say, the Republicans on this side would
be very glad to vote for any legislative measure to prevent
fraud. Any fraud measures, we would be glad to implement. It is
just we are worried about some of the things I mentioned about.
So Mr. Spiegel, my concern is, before we expand Medicare
and Medicaid, we still don't know how much we lost to fraud and
you are the man in charge less than a year, so you are saying
at this point we just have no idea how much it is, how much
fraud, waste and abuse. So it seems to me that if you don't
even have a handle on what the amount is, it is going to be
very difficult to penetrate it down.
Let me ask a question to Mr. Roy and Mr. Perez. I
appreciate, Mr. Perez, I said in my opening statement, I just
said that Medicare fraud is rapidly eclipsing the drug trade as
far as most profitable and efficient criminal enterprise
system. This was comments based on the 60 Minutes expose. Do
you think that is true?
Mr. Perez. Well, we certainly have seen some of our
investigations that individuals that used to participate in the
drug trade are now certainly involved in health care fraud.
Mr. Stearns. Have you seen a lot of organized crime
involved in Medicare and Medicaid fraud, Mr. Roy?
Mr. Roy. Yes, sir. We are seeing----
Mr. Stearns. Just bring the mic just a little closer to
you, if you don't mind.
Mr. Roy. My apologies. We are seeing an uptick in organized
crime elements engaging in health care fraud, whether it is in
structured organizations like Eurasian organized crime that we
see out in Los Angeles to more loose--knit organizations that
we see in Texas and the Miami, Florida, area.
Mr. Stearns. Mr. Roy, this is probably putting you on the
spot but do you or Mr. Perez and your colleagues, have you come
up with what is a figure of how much fraud? Would you venture a
guess?
Mr. Roy. No, sir, I cannot.
Mr. Stearns. Would you venture a guess it is more than $7
billion a year?
Mr. Roy. Yes, sir, I would.
Mr. Stearns. And Mr. Perez, would you venture a guess that
the fraud in Medicare is more than $7 billion a year?
Mr. Perez. I know we recovered $3.7 billion, so certainly I
think----
Mr. Stearns. So what I am trying to say, Mr. Spiegel, is
here you have no idea what the fraud figure is and the people
to your right, one has indicated that he has found just in
Florida $3.5 billion, so you have--it is just incomprehensible
to me how you can come here this morning and say you have no
idea how much the fraud when the man to your right has
indicated that he can track $3.5 billion himself and so I think
when Mr. Waxman mentioned $7 billion, that is just the tip of
the bucket. That is just the tip, and there is so much more
there and I think Mr. Roy and Mr. Perez have confirmed that.
My time is expired. I will turn to the ranking member, Ms.
DeGette.
Ms. DeGette. Thank you so much, Mr. Chairman.
Let me follow up on that, Mr. Spiegel, with you. I believe
the CBO estimated that the provisions of the Affordable Care
Act will save the taxpayers $7 billion over the next 10 years.
Is that correct?
Mr. Spiegel. I believe that is what it says.
Ms. DeGette. Is that the only money that the Administration
intends to save on fraud in Medicare and Medicaid?
Mr. Spiegel. No.
Ms. DeGette. Could you explain, please, why that is not
the--I don't want this to be misinterpreted that the
Administration, that these are the only efforts that are going
to be made. What other efforts are being undertaken to
eliminate fraud, waste and abuse, briefly?
Mr. Spiegel. First of all, however much the number is for
fraud that is going on is too much.
Ms. DeGette. Right. What other efforts are being undertaken
to avoid fraud, waste and abuse, briefly?
Mr. Spiegel. So we are implementing the new provisions of
the Affordable Care Act that allow us to do a better job----
Ms. DeGette. OK. What other--Mr. Perez, do you have an
answer? Oh, you are just trying to move the mic.
Mr. Spiegel. I mean----
Ms. DeGette. What I am saying is, the provisions of the
Affordable Care Act are not the only provisions of law that
help----
Mr. Spiegel. Right. That is true.
Ms. DeGette [continuing]. Us to avoid waste, fraud and
abuse. What other provisions in law that may be separate and
apart from the $7 billion are going to help us avoid fraud,
waste and abuse?
Mr. Spiegel. OK. So in addition to the things that I was
talking about with regard to provider screening, we have a
whole range of activities that we do now and that we are going
to do to oversee proper payments----
Ms. DeGette. OK. If you can supplement your answer in
writing, that would be helpful.
Mr. Spiegel. I would be happy to do so.
Ms. DeGette. But in essence, what you are saying is, the $7
billion is in addition to efforts that are being currently
made?
Mr. Spiegel. That is right.
Ms. DeGette. Now, Mr. Perez, the efforts that you are
undertaking, those are being undertaken under current law,
right? Because the Affordable Care Act hadn't been implemented
yet, correct?
Mr. Perez. Yes, ma'am.
Ms. DeGette. OK. Now, Mr. Spiegel, perhaps you can talk
about the enrollment screening requirements in the Affordable
Care Act. Will they work to prevent enrollment by fraudulent
providers?
Mr. Spiegel. Yes.
Ms. DeGette. And how are they different than previous
requirements?
Mr. Spiegel. Well, the new enrollment screening provisions
allow us to focus on providers based on the risk that they
pose, the risk of fraud that they pose. We have new and
enhanced screening that we would be applying to those that pose
the greatest risk like criminal background checks, database
checks, fingerprinting for those that are posing the greatest
risk. We have new approaches to consolidating our data and
sharing data across Medicare and Medicaid so that both programs
have access to information about, for example, providers that
have been terminated from Medicaid that may be terminated from
Medicare as well and vice versa. The particular provision
that--one of the particular provisions in the provider
screening rule we just published that may have the most effect
is the Secretary's authority to impose temporary enrollment
moratoria when she determines that there is a need to do that
to combat fraud, waste and abuse.
Ms. DeGette. Ms. King, do you believe that some of these
new provisions that we have talked about today will add to our
arsenal in being able to target waste, fraud and abuse and to
eliminate it?
Ms. King. Yes, we do. We have previously identified several
areas where increased enforcement and action would be helpful.
One of those is enrollment. One is them is in prepayment edits.
One is in postpayment edits, contractor oversight, and the
other is, the last is a robust process for corrective action,
and the Affordable Care Act has provisions in several of these
areas designed to enhance CMS's ability, and some of the key
ones I think are on the enrollment side because preventing
fraud is a lot better and easier than chasing after it when it
has been committed so----
Ms. DeGette. Correct, and these are new tools.
Ms. King. Yes, they are.
Ms. DeGette. But would you agree that some of the existing
tools that CMS has could also be used in a robust way?
Ms. King. Yes. Congress starting in 1997 in HIPAA created a
program, a Medicare integrity program that was designed to
focus on reducing improper payments and fraud and abuse, and
that is what some of these activities that have been discussed
today are funded from----
Ms. DeGette. Thank you.
Ms. King [continuing]. Before the Affordable Care Act.
Ms. DeGette. I yield back.
Mr. Stearns. The gentlelady's time is expired. The
gentleman from Texas, Mr. Barton, is recognized for 5 minutes.
Mr. Barton. Well, thank you, Mr. Chairman.
Let us start off by saying that everybody on the dais here
is anti fraud and abuse. John Dingell is anti fraud and abuse.
Jan Schakowsky is anti fraud and abuse. Diana DeGette is anti
fraud and abuse. The chairman is anti fraud and abuse. All of
our freshmen down here in the front row are anti fraud and
abuse on the Republican side. Dr. Murphy is anti fraud and
abuse. I mean, we are all anti fraud and abuse, so this is not
a partisan issue. But we are very frustrated. I have chaired
hearings on this, John Dingell has chaired hearings on this,
Diana DeGette has chaired hearings on this, Waxman has chaired
hearings on this. I mean, it is so frustrating that we all
agree it is a problem, we all want to solve the problem, and
yet we still don't even know the scope of the problem.
Now, why is that important? I believe that if you don't
know what the problem is, you can't set goals on how to solve
it. So let us say it is a 10 percent problem, which would be
$80 billion. Maybe a reasonable goal then would be to cut that
by 25 percent in a given year, which would be $16 billion or
$20 billion. Maybe it is only a $40 billion a year. But if you
guys can't help us determine what the problem is, it is hard
for us to decide how to set goals to solve it.
So I am going to go through a series of questions here and
they are kind of sophomore 101 questions, and hopefully you
have got great answers to every one of them. My first question
is--and I am going to ask Mr. Perez because you seem to be the
guy at the table that actually can do something about it, not
just study it or whatever but you can actually make things
happen. Do you have the ability to seize assets of folks that
you arrest and accuse of Medicare and Medicaid fraud?
Mr. Perez. Well, first, Congressman, thank you very much
for the vote of confidence. I certainly appreciate that. And
the department does not have, or OIG does not have seizure
authority but we do work in tandem with the Federal Bureau of
Investigation or other entities that do you have the seizure
authority.
Mr. Barton. Does anybody within HHS have the ability to go
out and actually seize physical assets, seize cash, seize
equipment, or do you have to go to the FBI to do that?
Mr. Perez. Currently, we have to use the FBI unless it is a
civil proceeding.
Mr. Barton. Would you like to have the authority, if
Congress gave you the authority to seize assets?
Mr. Roy. Sir, if I could respond to that? We would be more
than happy to have that authority, but you have to understand
that the size of our organization, taking on full seizure
authority entails taking on a tremendous amount of additional
assets to be able to seize that and care for that property and
then liquidate that property. It is a tremendous undertaking
that is probably----
Mr. Barton. Right now I just want to know if you want to
have the authority. Mr. Perez seems to think he would like it.
You seem to think it is more trouble than it is worth.
Mr. Roy. Well, Mr. Perez is in lockstep here. We will take
any additional authority that comes our way and utilize----
Mr. Barton. I only have another minute and 25 seconds. Are
there currently under existing programs taxpayer hotlines where
people can phone in or mail in or Internet in tips on people
they think are defrauding the government on billing claims? Do
you have that?
Mr. Roy. Yes, sir. OIG has 1-800-HHS-TIPS as our hotline.
Mr. Barton. What about my friend here, Mr. Spiegel? Do you
have those hotlines?
Mr. Spiegel. We do. We have 1-800-Medicare. We have special
hotlines in south Florida.
Mr. Barton. Do you pay bonuses or some sort of a cash
payment if the tip is followed up and actually proves to be
correct?
Mr. Spiegel. We have a set of rules around that, and yes,
we have.
Mr. Barton. How often is that used?
Mr. Spiegel. It depends. Well, there is a number of
criteria that define it. It hasn't been used all that often but
it has been just recently actually.
Mr. Barton. Do you have within your agency the ability to
check internally for people that are employees that are part of
scams in terms of credentialing people that shouldn't be or
checking for folks that are paying bills that they shouldn't
pay? Is there an internal ability to check within the system?
Mr. Spiegel. There are. There is a number of contracting
requirements in place to make sure that the people who actually
make decisions on our behalf are following the rules.
Mr. Barton. My last question. If it is not proprietary, how
often does that type of investigation actually produce
fraudulent activity within the system? In other words, 10
percent of the time that you check?
Mr. Spiegel. I don't know the exact number. I would be glad
to get back to you with that, though.
Mr. Barton. OK. Thank you, Mr. Chairman. And I will have
some questions for the record.
Mr. Stearns. Thank you, and recognize the chairman
emeritus, Mr. Dingell from Michigan, for 5 minutes.
Mr. Dingell. Mr. Chairman, I thank you and commend for this
hearing. It is a very important matter, and I would note, I was
one of the people who went with our very fine investigators
when they were conducting the nine community raids on these
malefactors that we are discussing today, and I want to commend
you down there for the work that you are doing on this matter.
I also want to commend the people from the Inspector General's
Office, from the GAO and our friend, Dr. Spiegel.
I would like to observe one thing very quickly. No
environmental impact statements are filed by these criminals
and they don't file any 10Ks or 10Qs so we can know what they
are up to, and I want to say, Mr. Chairman, I commend you for
having this hearing because moving this process forward is
extremely important and there is a lot of money in the recent
health care reform legislation which will make available to us
the ability to make significant savings. I am not about to
criticize our witnesses today or anybody else for not having
the cost of these things. These criminals don't operate by the
clear light of day.
These questions are to Dr. Spiegel and to Ms. King. Dr.
Spiegel and Ms. King, do you believe that the new tools
included in the Affordable Care Act will help CMS to meet its
goal? Yes or no.
Ms. King. Yes, if they are implemented properly.
Mr. Spiegel. Yes.
Mr. Dingell. Again, if you please, funding for the health
care fraud and abuse control program includes mandatory and
discretionary funding. It is divided by CMS's integrity
programs and law enforcement programs at the Office of the
Inspector General and DOJ. The President's 2012 discretionary
request is $581 million. If this funding is not provided, will
CMS be able to hire the personnel necessary to implement the
antifraud provisions included in the Affordable Care Act? Yes
or no.
Mr. Spiegel. Until we find out exactly how much would in
fact be appropriated, we won't know exactly what we would be
able to do but we know that are limited in our ability to plan
right now.
Mr. Dingell. If you don't get the money, you can't plan and
you can't hire----
Mr. Spiegel. And we wouldn't be able to----
Mr. Dingell [continuing]. People to support the program
work?
Mr. Spiegel. We would have to ratchet back.
Mr. Dingell. All right. Now, the Affordable Care Act
requires high-risk providers and suppliers who want to enroll
in Medicare, Medicaid CHIP to undergo a higher level of
screening. This increases scrutiny will be critical in rooting
out fraud, waste and abuse in susceptible programs. If the
requested discretionary funding is not provided, will CMS be
able to fully implement and utilize enhanced screening? Yes or
no.
Mr. Spiegel. Again, it would depend on the levels of
funding that ended up----
Mr. Dingell. The simple fact of the matter is, if you don't
get that, you aren't going to be able to move forward. You
aren't going to be able to move forward until you know that you
are going to get it, and until you get it, you aren't going to
be able to do the hiring and the other things that are
necessary to bring your enforcement program up to date. Isn't
that right?
Mr. Spiegel. It would have a severe effect on that, yes.
Mr. Dingell. Very good. Now, again, Dr. Spiegel, the
Affordable Care Act requires data sharing among federal
agencies to monitor and assess risk levels in program areas
that improve identification of fraud. If the requested
discretionary funding is not provided, will CMS be able to
implement full data-sharing technology needed to coordinate
monitoring and identifying sources of fraud across the federal
agencies? Yes or no.
Mr. Spiegel. No.
Mr. Dingell. Now, again, Doctor, the goal of the antifraud
provisions in the Affordable Care Act is to move CMS away from
that wonderful practice of ``pay and chase'' and preventing
improper payments from happening in the beginning. While some
improper payments may be due to honest mistakes, many, many
criminals have made Medicare and Medicaid their targets and
also the other programs of this character. CMS has already
begun testing risk-scoring technology to predict and prevent
fraud. If the requested discretionary funding is not provided,
will CMS be able to fully test and pursue the technology? Yes
or no.
Mr. Spiegel. No.
Mr. Dingell. This to Deputy Inspector General Roy. This
last summer, as I had mentioned, I was fortunate enough to
attend a ride-along with the Detroit Medicare's fraud strike
force. That is nine communities. And I saw some of the most
extraordinary practices by the criminals in making money at the
expense of Medicare that you could ever believe possible. And
so as the first Member to ever join Medicare strike force on a
ride-along, I have enormous respect for the fine work that the
strike forces are doing. They have the difficult task of not
only rooting out fraud in our health system but protecting our
neediest populations, the poor, the elderly and the sick, from
the criminals seeking to make money from the most vulnerable.
Do you believe that the Medicare strike forces have the
staffing resources they need to be effective? Yes or no.
Mr. Roy. Yes, I do.
Mr. Dingell. You believe they do now?
Mr. Roy. Sir, right now in the cities we are operating,
yes. If we want to expand, I will need additional funding.
Mr. Dingell. So your answer is that they don't have the
resources and you are hoping to get them. Is that right?
Mr. Roy. Absolutely.
Mr. Dingell. Now, do you agree on that, Ms. King?
Ms. King. I don't have the basis of evidence to answer that
question.
Mr. Dingell. Any other witness like to make a comment on
that? Very well.
This goes to you again, Inspector General Roy. If the
requested discretionary funding for the health care fraud and
abuse control program is not provided, will the health care
fraud prevention and enforcement action team be able to expand
the Medicare strike force? Yes or no.
Mr. Roy. No, sir.
Mr. Dingell. All right. Now, I guess that completes my time
and I thank you for your kindness and generosity, Mr. Chairman.
Mr. Stearns. I thank the gentleman.
Mr. Burgess, the gentleman from Texas, is recognized for 5
minutes.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Spiegel, so I don't get lost in all the numbers that we
are hearing this morning, let me walk through some things and
you tell me if the thinking is generally correct. Now, if I
understand correctly, the Congressional Budget Office score for
the entirety of the Patient Protection and Affordable Care Act
that the provisions in that act would save about $8 billion
over the 10-year budgetary cycle. Is that correct?
Mr. Spiegel. That is my understanding.
Mr. Burgess. And the HHS estimate of the error rate in the
payments, the payment error rate, is just under 10 percent at
9.4 percent a year. Is that correct?
Mr. Spiegel. Yes.
Mr. Burgess. Now, Medicaid expenditures are going to
increase of necessity under the Patient Protection and
Affordable Care Act. The number I calculate for that is about
$430 billion over 10 years. Does that sound about right?
Mr. Spiegel. I am not an expert on that Medicaid budget.
Mr. Burgess. Does GAO have an opinion on the amount that we
are going to spend additionally in Medicaid over the life cycle
of the 10-year budgetary window?
Ms. King. I actually don't have that number off the top,
either.
Mr. Burgess. Well, it is----
Ms. King. But it certainly----
Mr. Burgess [continuing]. A part of the GAO report that we
have that the cost of Medicaid expansion is estimated to exceed
$430 billion over the next 10 years. So I am going to assume
the answer from GAO is yes.
So just in Medicaid, just in the expansion of the Medicaid
system that we are doing, we have an error rate that will lose
$43 billion over the 10-year budgetary cycle but we have
safeguards in the act that are going to save us $8 billion, so
we are not netting out very much in that exchange, are we? And
that is your division of CMS, right? I mean, that is what you
are going to fix, right?
Mr. Spiegel. I am in the Medicare Program Integrity Group,
and yes, we are focused keenly on preventing fraud, waste and
abuse in our program.
Mr. Burgess. But in fact, the numbers just don't add up. I
mean, this is going to cost us a tremendous--I am all for the
antifraud provisions that are in the Patient Protection and
Affordable Care Act but there is no way in the world they are
going to pay for the expansion that is occurring even just in
the Medicaid part of this, let alone other areas.
In my area in Dallas-Fort Worth, we have got a very
aggressive--Mr. Roy and Mr. Perez, I am basically directing
this question to you. We have got a very aggressive
investigative reporter. She is very, very good. Becky Oliver is
her name, and you just never know when she is going to walk up
behind you and put a microphone 2 centimeters away from your
face and ask a very, very tough question, and most of those
tough questions have to do with Medicare and Medicaid fraud,
and I referenced some of that in my opening statement. It
almost seems as if organized crime and organizations from
outside the continental United States, offshore organizations,
are getting involved. This business is so lucrative and so easy
and the risks are so slight that they are really going after
this money aggressively. And she was the one that pointed out
to me that there was a Nigerian national who had several home
health agencies opened under various provider numbers and a
single post office box. I guess she wants to be cost-effective
so she wasn't spending much on overhead, a single post office
box, and yet after one of our provider numbers was busted, CMS
keeps sending payments to the same post office box. I mean, you
say you are doing stuff with the electronics and getting better
at this, but oh, my God, that is the sort of stuff, the
American people look at and they just don't understand. Is
there a way to get at that?
Mr. Roy. Well, first and foremost, that is the scheme, to
have multiple provider numbers and set those up.
Mr. Burgess. So you know that, right?
Mr. Roy. Yes, sir. We are addressing it. In your city of
Dallas, that is our brand-new strike force city and we are
bringing the resources to there to adopt that model to address
this issue.
Mr. Burgess. I am going to run out of time. I referenced in
my opening statement about the prosecutorial force. You guys
are doing the job we asked you to do and we are grateful for
that, but when you bring these folks to light, are we able to
actually get justice on these criminals or do they end up back
out on the street to sin again?
Mr. Roy. Now more than ever, I am seeing sentences and
people go to jail that is more than I have seen before in the
past. People are being prosecuted. They are going to federal
prison for stealing from Medicare.
Mr. Burgess. How comfortable are you with the prosecutorial
manpower, the strength of the prosecutorial force that is
available to prosecute this?
Mr. Roy. Getting better all of the time. In your particular
city, the resources coming from the Department of Justice are
some of the best health care fraud prosecutors in our country.
Mr. Burgess. Well, I appreciate that, and of course, I have
had several meetings with HHS and the Department of Justice on
this issue after being asked the tough questions by Becky
Oliver, so I credit her with having put some pressure on that,
but I have to tell you, we have got to do a lot more in this.
It is going to overwhelm the system.
Thank you, Mr. Chairman. I will yield back.
Mr. Stearns. I thank the gentleman.
Ms. Schakowsky from Illinois is recognized for 5 minutes.
Ms. Schakowsky. Thank you.
Do you have a strike force in Chicago, Mr. Roy?
Mr. Roy. Yes, ma'am, we do.
Ms. Schakowsky. Can I go on a ride-along?
Mr. Roy. Yes, ma'am, you can.
Ms. Schakowsky. Thank you. The Affordable Care Act
increased mandatory funding for the health care fraud and abuse
control fund by about $350 million, and indexed funding for the
health care fraud and abuse control fund and the Medicare and
Medicaid integrity programs to make sure that funds keep up
with inflammation. Overall funding to fight fraud will increase
by about $500 million over the next 5 years. The House
Republicans voted to repeal the health care reform bill, and
that would cut off the funds the law provided for antifraud
activities, so I do want to ask you, Mr. Roy, could you
describe the impact of cutting off this funding and what it
would do to antifraud initiatives that the Administration is
implementing under the Affordable Care Act?
Mr. Roy. Well, right now, as I stated, from the perspective
of strike force, we were in nine cities. I would ultimately
like to expand that using data to justify and find our
hotspots. I will say without additional funding at this point
in time, I don't think I am going to be in a position to open
up additional strike force locations. I need the resources. I
need the additional bodies to put in fraud hotspots across the
country.
Ms. Schakowsky. Thank you.
Mr. Spiegel, would you want to answer that?
Mr. Spiegel. Sure. I mean, we had planned to expand the
strike force locations from where they were to a total of 20
because they are so effective in what they do, and we are
obviously not going to be able to go there with the adequate
resources to do that.
Ms. Schakowsky. Thank you.
Ms. King, the Affordable Care Act includes provisions to
provide more transparency in nursing home ownership and
operating structures and to require training, compliance and
ethics. Ensuring that we have complete and accurate information
on ownership allows not just more transparency but provides
tools to allow regulators to hold any wrongdoers accountable.
How important is it to have this data, in your view, or in
GAO's view?
Ms. King. I think that we believe it is always important to
have good data about the people who are participating in the
program so that you can track what is going on.
Ms. Schakowsky. Mr. Roy, you had mentioned the importance
in your written testimony, I didn't hear it orally necessarily
but of whistleblowers in identifying possible wrongdoing. Last
month, a Florida long-term-care ombudsman asked for information
on nursing home structure, the same information that will be
required in the Affordable Care Act, and was subsequently fired
by Governor Scott. Without getting into the specifics of the
case, do we need to provide whistleblower protections for long-
term-care ombudsmen and others who seek information about fraud
and abuse? And in the nursing home area, do we need to look at
special protections for long-term-care ombudsmen?
Mr. Roy. I am certainly in favor of some type of protection
for all our whistleblowers. I am not familiar too in-depth with
the matter you are speaking about.
Ms. Schakowsky. Mr. Perez, are you, being in Florida now?
Mr. Perez. No, ma'am.
Ms. Schakowsky. And so the protection for whistleblowers,
is that an important source for you?
Mr. Roy. It is, specifically with corporate fraud.
Whistleblowers often file what we refer to as qui tam lawsuits,
which are lawsuits on behalf of the Federal Government. They
are usually corporate insiders with in-depth knowledge of
corporate fraud. From a corporate standpoint, they are
essential to our work.
Ms. Schakowsky. And do we have those protections in the new
act? Are we going to do better to make sure we protect those
people?
Mr. Roy. In the new act, I do not--I am not familiar with
anything that would point toward whistleblower protection but I
am certainly not an expert on everything in that Affordable
Care Act.
Ms. Schakowsky. OK. Thank you very much. I yield back.
Mr. Stearns. The gentleman from Nebraska, Mr. Terry, is
recognized for 5 minutes.
Mr. Terry. Thank you, Mr. Chairman.
I like the strike force, or HEAT. It seems to be a common
theme on both sides of the aisle probably because it is
positive news of success. I am trying to get my arms around
what resources CMS has right now to fight fraud and abuse.
Under the PPACA, I understand there will be an additional $35
million per year, as Dr. Burgess said, that won't even come
close to what will fight fraud and abuse from the expansion of
Medicare, but that is the CBO number. I don't know what the
base is right now. What does CMS set aside per year for
investigating and prosecuting fraud and abuse? Do you know that
number?
Mr. Spiegel. I don't know right offhand but the
investigating and the prosecuting takes place to my right.
Mr. Terry. All right.
Mr. Spiegel. But the identification and the looking for in
dealing with the improper payments and fraud at the front end
would be us, and it is----
Mr. Terry. Will you please provide that number to the
committee, please?
Mr. Spiegel. Yes.
Mr. Terry. And why I wanted that is so I can get a picture
of what percentage of your budget is being used for policing
purposes, and then I would like the opportunity to compare that
to private sector health insurance who seems to be able to do a
lot better job in weeding out and finding insurance fraud and
abuse and what they spend in policing. I think that is a good
opportunity to figure out if you have enough resources or not.
Obviously I would say you don't have enough resources.
Mr. Spiegel. Well, one of the things about the way the
private sector does things versus the way we do it is, they
have different----
Mr. Terry. I didn't ask that, and I only have 2 minutes.
Mr. Spiegel. Sorry.
Mr. Terry. But I am curious about it.
Let me talk to Mr. Roy. With your strike forces and the
work with Justice in being able to prosecute these, if you had
the perfect world and Congress came to you and CMS came to you
and said what do you need to get $50 billion a year recovered,
what would you need?
Mr. Roy. It would have to be a joint effort between us and
Department of Justice. I can hire as many agents as possible to
address the fraud but I also need prosecutors to prosecute that
case. The perfect world is that we utilize the models we are
using now, looking at data to find these hotspots and then have
the ability to put agents in those particular hotspots and the
prosecutors to prosecute the cases as well.
Mr. Terry. Would you be able to provide us information if
we set a goal of $50 billion per year? And by the way, I think
it was the testimony, I don't know if it was you or Mr. Perez
said you already have 300 agents working in HEAT and these
strike forces.
Mr. Roy. That was just the agents--I do not have 300 agents
assigned to strike force locations. When we did that operation
2 weeks ago, I took 300 out of my 420-plus agents and detailed
them if they weren't already on the ground to the cities where
we had strike force operations take place.
Mr. Terry. Can I assume that not all 420 of your agents are
dedicated to fighting CMS fraud and abuse?
Mr. Roy. That is correct, sir. Eighty percent of our time
is spent in the realm of health care fraud but we over see the
300-plus programs of the department, and I am certainly engaged
in oversight activities, criminal activities in those other
departments as well.
Mr. Terry. Mr. Perez, being on the streets and getting
information, it sounds like fighting drug distribution on the
streets. What do we need in communities and on the streets to
be able to obtain this? The gentlelady from Illinois mentioned
whistleblowers. I think that is probably an important part of
this. How much of it, and how much of it comes from just
hearing on the street?
Mr. Perez. I unable to quantify exactly how much we get
from the street but I think one of the things, to underline
your question or at least answer it, is one of the things that
I think we would like to see in the field, at least as agents,
are two things, one, an ability to access the claims data
directly, in other words, be able to have--sit outside of a
business who we believe fits all the mold of a fraudulently run
company and actually open up a laptop, log on and actually to
be able to see whether or not a claim is being submitted by
that company now, whether or not there are any payments that
are on the payment floor, if they have already submitted
claims, and we can make phone calls and actually start doing
the investigation from right outside of the parking lot. That
would be helpful.
Mr. Terry. And that is not available to you today?
Mr. Perez. Not today.
Mr. Terry. Thank you.
Mr. Stearns. The gentleman from Texas, Mr. Gonzalez, is
recognized for 5 minutes.
Mr. Gonzalez. Thank you very much, Mr. Chairman.
My question will be to Mr. Spiegel and Mr. Roy. I am trying
to get at percentages of fraud. I know GAO did a study on
Medicare and CMS estimated that it could be as much as $48
billion in improper payments. What I don't follow here is
equating fraud, waste and abuse with improper payment.
Mr. Stearns. Does the gentleman have your speaker on?
Mr. Gonzalez. Thank you very much, Mr. Chairman.
I do not want to equate fraud, waste and abuse to improper
payment, which may be a billing error or a good-faith mistake.
So can you--taking that into consideration, and I think that
Dr. Burgess asked if it was an accurate--I think he quoted a
percentage of 10 percent of payments on Medicaid can be
attributed to fraud, but that wouldn't be accurate. Is that
correct? I think it was Mr. Roy or Mr. Spiegel may have
responded to Dr. Burgess's question.
Mr. Spiegel. That is--what you said is accurate. It is not
fraud, it is improper payments, and it is important to make
that distinction as we try and calculate what the elusive
number is that everybody is going after. Some of the numbers
tend to have a lot of improper payments or just billing errors
or things that aren't anything more than a mistake included in
them. They are not fraudulent. And so we are reluctant to say
things like that but the Medicaid number is improper payments.
Mr. Gonzalez. Mr. Roy, obviously you are not going to go
and prosecute and seek some sort of legal action against
someone who made a good-faith mistake, yet that number is going
to be taken into consideration when we are trying to look at
payments, overpayments and so on. What I am saying is, it is
not all criminal activity so that when you take Jan out there
in your car and you are making all the big busts, you are not
going to be going to providers that have simply made a good-
faith mistake on a billing statement?
Mr. Roy. That is correct, sir. In the strike force model
for the most part, these providers that we are going after are
involved in almost 100 if not 100 percent fraud.
Mr. Gonzalez. But you have limited resources, and I
understand that, and you are going after the true wrongdoers
and such, because I think there are some participants out there
that make good-faith mistakes. I don't want to make excuses for
anybody out there that is billing the government again
fraudulently and so on and no one is for that, and my colleague
from Texas, Mr. Barton, pointed that out.
What about the private sector? Let me ask Mr. Roy and even
Ms. King, has there ever been a comparison--or Mr. Spiegel--as
far as what is happening when it comes to fraud, waste and
abuse with the private sector? What is the percentage there
that is being suffered as a result of the same actors or
similar actions by individuals that are defrauding obviously
the private sector? Do we have numbers there? Is there a
percentage that we can estimate, guesstimate as to how much is
the private sector suffering as a result of fraud or criminal
activity?
Ms. King. To my knowledge, there is not a number out there
about that and one of the difficulties I think on fraud is that
you don't know what you don't know, and part of the reason I
think that Medicare doesn't know the number about fraud or we
don't know about that, if someone does something fraudulently,
for example, they submit a claim on behalf of a beneficiary who
is deceased or they buy a beneficiary's number and they submit
a clean claim, that claim is paid and that is not going to show
up as fraud or improper payments because it slipped through the
system, so that is part of the difficulty about estimating a
number on fraud.
Mr. Gonzalez. And I appreciate that. Whether it is in the
private sector or public sector, you are still faced with the
same dilemma, and I think that is important to point out rather
than saying that this is something distinct and unique to
Medicaid or to Medicare.
Mr. Roy, I am just curious, and I have got about 32 seconds
but quickly, what is the State's obligation when it comes to
Medicaid fraud? Because we had an incident in Texas--I don't
know if you are familiar--that the governor did relieve the
doctor that basically was managing or the head of looking at
the Medicaid contracts with providers as well as the attorney
that was charged with prosecuting. Are you familiar with that
case?
Mr. Roy. No, sir. I believe this might be a question that
is probably better posed to Mr. Spiegel than myself.
Mr. Gonzalez. Mr. Spiegel, what is the role of the State
government?
Mr. Spiegel. Well, the State government has a
responsibility to have fraud control, a Medicaid fraud control
unit, and they do and they look at instances where they can
take action to both identify and prevent fraud. There is data
systems in place in most--and again, I am not an expert on this
but there are data systems in place in most all State Medicaid
programs that allow a fairly robust analysis of things that
appear to be aberrant or improper. They have----
Mr. Gonzalez. You can complete your answer, Mr. Spiegel.
Mr. Spiegel. Sorry. That are similar to the way we do
things in Medicare where they make sure that they are paying
for people who are properly enrolled in Medicaid in a proper
amount for a provider that is eligible to provide the service.
Mr. Gonzalez. Thank you, Mr. Spiegel. So that is a shared
responsibility then?
Mr. Spiegel. Yes.
Mr. Gonzalez. Thank you.
Mr. Chairman, thank you for your indulgence.
Mr. Stearns. Thank you.
Mr. Gingrey from Georgia is recognized for 5 minutes.
Mr. Gingrey. Mr. Chairman, thank you.
I want to go back to Ms. King in a follow-up on the
question that Mr. Gonzalez from Texas just asked you, because I
think it is a real important, pertinent question. Ms. King, you
are director of the Health Care Division of GAO and if you
don't have this information here today, you ought to be able to
get it for the committee, and the question that he asked in
regard to comparing the amount of waste, fraud and abuse in the
private sector versus the government sector, and primarily we
are discussing Medicare and Medicaid, I think is of paramount
importance and I want, Mr. Chairman, to ask Ms. King, maybe she
can answer that right now and I will gladly give you the
opportunity to do so.
Ms. King. You know, we would be happy to look into it and
see if we could get an answer to it, but as a practical matter,
we don't have a right of information from the private sector so
we would have to ask them to provide that information to us as
opposed to on the government side where we have a right to
information.
Mr. Gingrey. Well, yes, and I appreciate that and certainly
I think that you ought to use every tool that you do have
available to get that information because quite honestly, a lot
of us feel that the big government and the bigger it gets, the
more expansive it gets, and 15 million additional people on the
Medicaid program and we have got 47 million now on the Medicare
program of aged and disabled, and that number is just going to
grow as all the Baby Boomers are maturing, and, you know, you
expand this Obamacare program, another entitlement program, in
fact.
Let me ask you a specific question about that. On July 30,
2009, President Obama stated that his health plan--that is why
I refer to it as Obamacare--was funded by eliminating the waste
that is being paid out of the Medicare trust fund, and then on
September 10, 2009, Speaker Pelosi said that Congress will pay
for half of Obamacare, $500 billion, by squeezing Medicare and
Medicaid to wring out the waste, fraud and abuse, and I will
ask you, Mr. Spiegel, as well, was cutting $137 billion out of
the Medicare Advantage program in any way, shape or form
cutting out waste, fraud or abuse?
Ms. King. I don't have the exact numbers off the top of my
head but we in MedPAC have done work that has shown that
payments to Medicare Advantage plans are higher than those that
are made in fee for service.
Mr. Gingrey. Well, Ms. King we know that. We understand
that. It is 112 percent. That is not an arguable--the point is,
you overpaid them. That is not waste, fraud and abuse. It may
be waste but it is certainly not fraud and abuse.
Ms. King. It is not fraud and abuse but it could be
considered waste by some.
Mr. Gingrey. Mr. Spiegel, any comment on that?
Mr. Spiegel. I am just trying to identify and prevent fraud
in my job. You know, to respond to the questions about----
Mr. Gingrey. You are going too slow for me. I am going to
give you a pass.
Let me go to Mr. Perez and Mr. Roy. Can you tell us what
you are seeing in terms of organized crime involvement in
Medicare and Medicaid fraud? That poster over there, I keep
looking at it. It looks like Murderers Row. But you know, what
is going on in Miami and is organized crime involved heavily in
Medicare and Medicaid fraud and abuse, and why?
Mr. Roy. I will answer the first portion of that question
about the overall scope of organized crime because it is
geographical in nature. For instance, in the Los Angeles area
you are seeing very organized criminal structures, in essence
Eurasian organized crime entities heavily involved in Medicare
fraud. They are involved in many street-level crimes as well.
They are also involved in things such as credit card fraud and
identity theft but what we are seeing is that in order to get
to the upper echelons of these organized criminal elements, you
have to go through health care fraud. That is where they make
their money and that is different from what we would in Texas
and in Miami, and with respect to what we see in Miami, I will
turn that over to ASAC Perez and he will give you an idea of
what is going on there.
Mr. Gingrey. Mr. Perez, thank you.
Mr. Perez. Thank you for the question. A lot of the things
that we are seeing are a group or groups of individual that
have tiers underneath them and for all intents and purposes
there is even another subset of cells that work underneath that
second tier and one cell won't necessarily know what the other
cell is doing but they all kind of report to the same few folks
in the top.
Mr. Gingrey. I see my time has expired, Mr. Chairman, and
thank you, panelists, for your response, and I yield back.
Mr. Stearns. I thank the gentleman.
Mr. Scalise, the gentleman is recognized for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate the
panelists for coming.
We are talking about waste, fraud and abuse. I want to
first go back to something I saw in our State and ask you to
comment on some of the things that we saw and how it is being
dealt with at the federal level. In 1996 when I started in our
State legislature, our governor appointed a 24-year-old to run
our health department. At the time it was the largest
department in State government, and there was a lot of waste,
fraud and abuse and the governor made it a priority. And we
talk about zero tolerance against waste, fraud and abuse, it is
an attitude. It can't just be rhetoric. It has got to be
followed by real action. And so the governor set out on a
mission to root out that waste, fraud and abuse. He appointed,
as I said, back in 1996 a 24-year-old to run that department
and to go and seek it out, and in fact, that new head of our
department was very aggressive. People went to jail. They shut
down programs. There were Medicare mills, a lot of things that
were going on that got rooted out. We cut out almost a billion
dollars in waste, fraud and abuse in our department. I say that
to make a point, that person that 24 years old at the time is
now called the Governor Bobby Jindal. He is now the governor of
our State, but he was very aggressive then as the head of our
Department of Health and Hospitals in rooting out that waste,
fraud and abuse and he is still aggressive today.
I want to know, what coordination do you all have with our
governors who are aggressive in rooting out whether you find
Medicare fraud or Medicaid fraud, if you are finding Medicare
care by a provider that is maybe doing business in other States
and Medicaid, how do you coordinate those things with the
States who are specifically dealing with Medicaid because they
do have real jurisdiction there? I will you all kind of down
the list. Ms. King.
Ms. King. There is one provision in the Affordable Care Act
that gives CMS the authority to revoke Medicare enrollment if
Medicaid enrollment has been revoked in a State, so if someone
is a bad actor in Medicaid and they are excluded from Medicaid,
Medicare can follow the lead on that, and that is a new
authority.
Mr. Spiegel. And that is addressed in our most recently
published final rule with the new screening authorities.
Mr. Scalise. Do you coordinate with the governors when you
do find--let's say you find Medicare fraud or even, you are
working on Medicaid fraud, are you all coordinating with those
governors in those States who maybe have some enforcement that
they are trying to do as well?
Mr. Roy. Sir, from a law enforcement perspective, we are
working very closely with our Medicaid fraud control units,
which obviously the governor, that would be their
representative from a fraud level. We are doing great work
there. Over the last 3 years we have probably increased our
joint cases with the Medicaid fraud control units by upwards of
25 percent.
Mr. Scalise. Thanks. And I need to move because we are
limited on time. I apologize.
One of the components we really haven't talked about a lot
is the waste component of waste, fraud and abuse, and you know,
when you talk to doctors, and I have talked to a lot of
doctors, especially over the last few years since I have been
in Congress and we have been working on ways to actually reform
health care as opposed to what I think President Obama did,
doctors will tell you the biggest area of, you can call it
waste--I would--the biggest area of work that they do that
doesn't really relate to improving patients' health but it is
defensive medicine. They run tests that everybody knows they
don't have to run but they do it because they are afraid of
frivolous lawsuits. In many cases they have had to fight
frivolous lawsuits but it costs them a lot of money so it is
just something that every doctor will tell you they do. Do you
all consider--first of all, do you all consider defensive
medicine to be part of waste in the definition that we are
discussing today, Ms. King? Yes or no.
Ms. King. I don't know. I don't honestly know the answer.
Mr. Scalise. Have you done any kind of research to know how
much this does cost?
Ms. King. Defensive medicine? We have not done any direct
work on that.
Mr. Scalise. Mr. Roy or Mr. Perez?
Mr. Roy. I don't have a direct comment to that but I want
to say that we are putting people in jail that are committing
fraud, not necessarily involved in----
Mr. Scalise. Mr. Spiegel?
Mr. Spiegel. I don't know the answer to that.
Mr. Scalise. I can't believe that, you know, especially Mr.
Spiegel and Ms. King, would say that you don't know the answer
to what doctors will tell you is the biggest area of
unnecessary spending but something they have to do because they
will get sued if they don't run the test but they will tell you
probably a third of those tests are done not because they think
it is in the best decision for care of the patient but because
they are afraid of getting frivolous lawsuits, and in fact, the
President's bill does absolutely nothing to address that
problem, and doctors will tell you that people in the medical
profession across the board will tell you that topic was
completely ignored, the topic that doctors will tell you is
probably the biggest cause of waste in health care. And so when
we talk about adding another 20 million onto the Medicaid
rolls, at least, I would hope you all would go back and look at
just how much more we are going to waste in making these
doctors run these tests, because in our bill, in our real
reform bill after we have done repeal, we are including medical
liability reform where you get dramatic savings in waste in
health care. But I would ask if both Ms. King and Mr. Spiegel
would go back and include defensive medicine and come back to
us with some real costs. Will you get the committee that
information on what you estimate are the costs that it adds to
the system to have these defensive medicine practices that
weren't addressed in the President's bill?
Ms. King. We can certainly look into it. I think it is a
difficult question because what someone considers defensive
medicine may be, you know, an unnecessary test on someone's
part----
Mr. Scalise. But you can estimate the cost of that?
Ms. King. Well, there is a lot of variability in how
physicians practice medicine.
Mr. Scalise. As there is with anything that you give
estimates on.
Mr. Spiegel?
Mr. Spiegel. I mean, I would say the same thing Ms. King
said. We could look into it but the definitions of what falls
into the category that you are trying to get a handle on vary,
depending upon to whom you are speaking.
Mr. Scalise. Thank you. I yield back.
Mr. Stearns. The gentleman's time has expired.
Mr. Griffith from Virginia is recognized for 5 minutes.
Mr. Griffith. Mr. Spiegel, how many claims does CMS get a
day? Do you know?
Mr. Spiegel. I don't.
Mr. Griffith. But it would be millions, would it not?
Mr. Spiegel. It would.
Mr. Griffith. And do you have any idea what percentage of
them you are able to review before payment is made?
Mr. Spiegel. Well, we do a substantial amount of review on
virtually all of them before they get paid.
Mr. Griffith. And I saw somewhere, I know that there was
some testimony earlier that there was some indication that we
didn't really know what the private sector's rate was but I had
seen somewhere or have information that their rate is about 1-
1/2 percent lost to fraud, and I am just wondering if you have
seen that, A, and B, if you have studied what the private
sector is doing to eliminate fraud so you could see maybe if
there are better ways for eliminating or preventing Medicare
fraud.
Mr. Spiegel. Sure. I have seen some numbers for the private
sector, and we did look into what it is about them that makes
them different from us in the way they approach this. So in the
private sector, they have a different approach to how they deal
with approval of services that we don't do in Medicare because
we are designed as a program to get beneficiaries needed
services and not to impose restrictions at the point of
service. But private insurance can have prior authorization for
a whole range of things that we don't, and so they can
eliminate things that may have an impact on someone's need for
services or at least impose a barrier there that we don't
operate that way.
Mr. Griffith. Since there appears to be some intent to pay
for all of this new health care by getting rid of this fraud,
have you all considered going to a preapproval process?
Mr. Spiegel. Well, we have had discussions about that among
ourselves but right now it is not consistent with I guess our
statutory authorities to be doing that.
Mr. Griffith. And let me switch----
Ms. King. Sir?
Mr. Griffith. I am sorry.
Ms. King. If I might point out something else that is a key
difference between the private sector and Medicare is that
Medicare is an ``any willing provider'' program so the private
sector has much more ability to restrict the providers who are
coming into the program than Medicare does. Now, with some of
the new authorities in the ACA, CMS is going to have more
authority to take a closer look at providers and keep out
providers who are not good actors.
Mr. Griffith. Let me claim back my time. Let me ask,
switching, something that is kind of interesting, it is my
understanding that the Medicare number, and I don't care
whether it is Ms. King or Mr. Spiegel, but the Medicare number
is the same as your Social Security number. Is that correct?
Ms. King. That is correct.
Mr. Griffith. And then if somebody steals your identity,
you can't just go out and change your Social Security number.
Wouldn't it be a better policy to have each patient have a
separate Medicare number and then when somebody steals that
number the patient can get a new number just like you do with
your credit card if you lose it or it is stolen by somebody?
Ms. King. Certainly there have been proposals made to that
effect.
Mr. Spiegel. And we are doing a substantial amount of work
right now to eliminate all the compromised numbers that we have
identified through both providers and suppliers as well as
beneficiaries.
Mr. Griffith. Doesn't that have the impact on the one hand
of making it very difficult for the patient and then I guess I
would ask, what is your opinion of that? You said it had been
talked about but what do you think? Don't you think that would
be a better policy, Ms. King?
Ms. King. I think it probably would be. There would be a
question, I think, in our minds about what it would cost to
effect that transition and how long that would take and what
would be involved with that because you have every living
beneficiary and then new beneficiaries as they come on the
rolls.
Mr. Spiegel. And we agree with that.
Mr. Griffith. New ones would be a lot easier. That wouldn't
probably very much at all.
Ms. King. Yes, they would.
Mr. Griffith. But anyway. All right. I yield back my time,
Mr. Chairman.
Mr. Stearns. The gentleman yields back his time. The
gentlelady, Ms. Myrick, is recognized for 5 minutes.
Mrs. Myrick. Thank you, Mr. Chairman. Thanks to all of you
for being here and thank you, you two who do the investigative
work for what you are doing and the way you are going about it.
My question I guess is to Mr. Spiegel. I am not real sure.
On States, is there a requirement that States report fraud to
you, to CMS? Because I understand that maybe half the States
don't even report data.
Mr. Spiegel. I don't know what the requirement is for----
Mrs. Myrick. Would you mind finding out and getting back?
Because I would like to know.
Mr. Spiegel. Sure.
Mrs. Myrick. And then the next question is relative to
States, do they have their counties report? Does it
individually vary by State to State? In North Carolina,
counties are responsible for reporting the fraud to the State.
Is that something that happens across the country? You know,
when you get right down to the local level where they have
better control on it maybe than the whole State does. It is
more efficient?
Mr. Spiegel. I don't know about the efficiencies, and it
would really depend on how each State is set up its operational
structure.
Mrs. Myrick. So each State is in control of how they report
that?
Mr. Spiegel. I would think so.
Mrs. Myrick. But why do some States not report? Do you
know?
Mr. Spiegel. I don't know the extent to which they don't. I
mean, I know we have fraud investigation databases and we
collect information from States, and I think we--what I was
trying to say before is, I didn't know what the requirement
was. I know we get reporting from States about the fraud cases
that they uncover and I am sure they coordinate closely with--
--
Mrs. Myrick. I would be curious to know.
And then the second part of that, are there any minimum
standards that States have to meet relative to, you know, the
waste, fraud and abuse, whatever you want to call it, to
receive their FMAP?
Mr. Spiegel. Well, again, I am not a Medicaid expert but
there are requirements that States have to meet, you know, to
have a proper State plan in place, they have certain
administrative requirements they have to meet. They have to
have a single State agency with authority. They have to have
Medicaid fraud control units and things.
Mrs. Myrick. And is there a follow-up on that to make sure
that gets done? And I guess that goes back to my first
question, do the States all report? Anyway, if you don't know--
--
Mr. Spiegel. Well, I know there is follow-up on how the
States organize themselves and there is constant interaction
between the folks in CMS who oversee Medicaid around that.
Mrs. Myrick. But all of you pretty much agree that there
needs to be more of an effort on this relative to dollars that
come from what you said before to the different people and you
have all responded that if there were more dollars into the
program for what you are doing, you would have a better ability
to do it, particularly with the two in the middle and what you
do with the inspection work.
Mr. Spiegel. We have found that for every dollar we are
spending, we are getting a substantial return on investment,
6.8 percent, I believe.
Mrs. Myrick. But yet in the new health care bill, there is
only, in my understanding, $350 million in there for any fraud
activities, which, if that is divided up across all the
agencies, you know, it is less than one-tenth of 1 percent of
what we are spending on the health care bill. So it seems like
it is a very small amount that is being dedicated to what
really is getting at the crux of so much of the waste that
everybody talks about is going to pay for all this. It just
doesn't seem to make sense. It seems like there should be more
effort put into what you are doing from the standpoint that you
are actually seeing results and you are getting to the bottom
of the issue.
Mr. Spiegel. I mean, I guess we would welcome the
opportunity to have more resources to do more of the things
that we have embarked on.
Mrs. Myrick. But I know Mr. Terry asked a question about
actually if we could do this what would it take type thing, so
you all are going to get back to him with that?
Mr. Spiegel. Yes, ma'am.
Mrs. Myrick. I appreciate it. No more questions.
Mr. Stearns. The gentleman, Mr. Murphy from Pennsylvania,
is recognized for 5 minutes.
Mr. Murphy. Thank you.
I want to go over this list here and I wonder if you can
tell me if you have any idea where these fugitives are. Carlos
Benitez, do you know where he might be? Do we know what country
he is in?
Mr. Roy. Sir, I may indeed know the general whereabouts of
some of these individuals but----
Mr. Murphy. Cuba?
Mr. Roy. Probably not, sir.
Mr. Murphy. Are any of these folks in Cuba?
Mr. Roy. Probably not.
Mr. Murphy. I understand that some of them actually may be.
Mr. Roy. Sir, I correct myself. There may be several of
those that are in Cuba, yes.
Mr. Murphy. Because my understanding is there may be as
many as six, and the question is what the Cuban government is
involved in here. According to some reports, ``In a discussion
with a high-level former intelligence official with the Cuban
government who asked to remain unnamed,'' and this is from
University of Miami report. He states, ``There are indeed
strong indications that the Cuban government is directing some
of these Medicare frauds as part of a desperate attempt to
obtain hard currency.'' The source notes that the Cuban
government is also assisting and directing other instances of
Medicare fraud providing perpetrators with information with
which to commit fraud. They go on to say in the instance where
the Cuban government is not directing or facilitating the
fraud----
Ms. DeGette. Mr. Chairman?
Mr. Murphy [continuing]. It does provide Cuba as a place
for fugitives to flee. This gives the Castro regime a
convenient and carefree way to raise hard currency. Are we
doing anything about that?
Mr. Roy. I have actually inquired before about what are the
ties to Cuba, and nothing has been brought to my attention that
would substantiate what you are saying. I am more than happy to
take a name and a number or if you can get me in touch with
that individual to follow up on that.
Mr. Murphy. This was a report----
Ms. DeGette. Mr. Chairman, will the gentleman just yield
briefly?
Mr. Murphy. Not on my time.
Ms. DeGette. I would like to make----
Mr. Murphy. I didn't yield yet, because I really only have
a couple of minutes----
Mr. Stearns. Does the gentlelady request a personal
privilege or a point of order?
Ms. DeGette. I just want to make sure----
Mr. Stearns. Is this a request for a point of order?
Ms. DeGette. It is a request for a point of order.
Mr. Stearns. OK. The gentlelady is recognized.
Ms. DeGette. I just want to make sure, and I know that you
are not intending to ask Mr. Roy any information that would in
any way undermine an ongoing investigation.
Mr. Murphy. Absolutely.
Ms. DeGette. I just wanted to clarify that. Thank you.
Mr. Murphy. Absolutely.
Ms. DeGette. He looked a little uncomfortable when you
asked that question.
Mr. Murphy. I am just asking if----
Ms. DeGette. Thank you very much.
Mr. Murphy. Thank you. I appreciate that.
This is a report from the University of Miami. I would be
glad to let you read that. It is just something I wanted to
bring attention because it does bring to light there has also
been concerns about how things happen by other countries where
they may be doing this as part of an organized-crime issue,
recognizing the ability to have false claims with Medicare
actually may be easier, less risk and lower penalties than it
would be, for example, with cocaine trafficking where you have
long mandatory sentences. And so I am wondering along these
lines if you are also looking to see-I mean, I appreciate the
work you are doing. This is great. I am glad you are pursuing
this. The American people appreciate that. As Mr. Barton talked
before, we are all in favor of this. I just want to make sure
we are also looking at this as a mechanism to see if you think
we need more enforcement, do you need more funding, do you need
more personnel, or do we need stiffer penalties, or all of the
above?
Mr. Roy. We need all of the above, sir.
Mr. Murphy. Do you think the level of penalties is a factor
in terms of people are willing to risk the risk and consider
jail time as the price of doing business?
Mr. Roy. Well, I certainly felt that way probably 5 to 10
years ago but in the recent years I have seen across the board
sentencing guidelines go up and I have seen perpetrators of
health care fraud go to federal prison for longer periods of
time. If I had my way, they would go there longer but that is
not the perfect world but I see a movement toward the
punishment fitting the crime, sir.
Mr. Murphy. Thank you. Anybody else want to comment on
that, Mr. Perez or Mr. Spiegel?
What additional tools then do you think that Congress can
give all of you with regard to helping investigate Medicare and
Medicaid fraud and abuse cases? Are there any other tools you
want from us?
Mr. Roy. First and foremost, the funding aspect of it. The
funding has to be continuous. It has to be long term to ensure
that I can keep bodies on the ground. It can't be a one shot in
the arm type of a situation. Our organization is human resource
driven, and the more agents I have in the field and the more
support staff I have, the better job I am going to be able to
do.
Mr. Murphy. I appreciate that. Anyone want to comment? Yes,
Mr. Perez.
Mr. Perez. Just from an investigative standpoint, and I
mentioned this earlier. I apologize if I am repeating myself at
least to you. But we certainly would like to have real-time
data access so that we can see the claims as they are hitting
them. We currently don't have that. And there is another system
that is out there that we would also like access to that
actually gives us the profile of the providers that are in so
that we know once they are in, all of the makeup of that
particular provider and then we can initiate investigations.
Mr. Murphy. Do you have that profile access now or that is
something you are asking for in addition?
Mr. Perez. We do not have it now.
Mr. Murphy. So to be able to get that profile information
on the providers and the real-time data so you could I guess
more or less profile as people are submitting claims that there
are things that appear to not match standard billing procedures
with durable medical equipment or services, that would show up
and you could hit on that right away, would that help you?
Mr. Perez. I think that certainly would help us, yes.
Mr. Murphy. Mr. Spiegel, do you have a comment on that?
Mr. Spiegel. Sure. And what I would say is, the President's
budget has laid out a number of things that we would want to do
in 2012, and for now, we need to have a little bit of time to
gauge the impact of all the things that we started doing in the
last year to refocus our efforts on the front end and to take
prompt action on the folks who need to have action taken
against them.
Mr. Murphy. Thank you. I think if any of you had any other
details of how that work would out to let the committee know.
Thank you so much.
Mr. Stearns. The gentleman's time has expired. The
gentleman, Mr. Gardner, from Colorado is recognized for 5
minutes.
Mr. Gardner. Thank you, Mr. Chairman, and thank you to the
witnesses for being here today. I appreciate your work on
something that obviously everybody is concerned about.
In Colorado, we were able to do a couple of things to
detect fraud, to fight back against those who would abuse the
system. We passed legislation that would freeze--you know, pair
up benefits, the public pension fund. If it was a public
employee that was involved, it allowed the board to freeze
those assets. We also tried to pass legislation that said if
you were a contractor, a provider that had been convicted of
fraud elsewhere, that after a certain point you were barred
from dealing with the State of Colorado and so I want to get
into that a little bit for a couple of questions.
Mr. Spiegel, I wanted to follow up on one of your responses
to Mr. Griffith. I believe Medicare receives about 4.5 million
claims a day, and you substantially review every single one of
those claims?
Mr. Spiegel. In some way. We verify that the person who
sends in the bill, for example, is enrolled in Medicare and
that the person who received the services is an eligible
beneficiary. I mean, there are automated claims edits that are
in place that look at that.
Mr. Gardner. How many would you say you substantially
review that you are actually able to really look at? Because
that is all automated. I mean, what percentage are you able to
actually look at to detect----
Mr. Spiegel. If what you are talking about is do we take an
opportunity to collect medical records and make a judgment
about the clinical conditions that were present and things like
that, I don't know the exact percent. I could get back to you
with that.
Mr. Gardner. That would be great if you would get back to
me on that. Thank you.
And then Mr. Spiegel, we have heard that in terms of both
durable medical equipment and home health, both are highly
susceptible to fraud. What other areas lose a substantial
amount to fraud?
Mr. Spiegel. Well, in our recent screening rule, the ones
that we put in the high-level-risk category were newly
enrolling suppliers and newly enrolling home health agencies
and those individuals or entities that hit some of the triggers
that we put in the rule. There are examples of other provider
and supplier types that we have uncovered and that the
Inspector General's work has identified that maybe not as a
class but as individuals have had some problems.
Mr. Gardner. And I see in your testimony where you talk
about delivery system reform, you talk about inflated prices
that could lead to increased fraud but you have only made
reforms in, I believe it was nine areas. Why did you just add
those reforms in nine areas? If you are overpaying somebody,
shouldn't we reform them all?
Mr. Spiegel. The nine areas were in statute.
Mr. Gardner. So if they are being overpaid and it is
causing fraud, do you have an ability to add to those nine
areas?
Mr. Spiegel. I don't know the answer to that. Over time we
have an opportunity to add to that based on what we learn from
our work.
Mr. Gardner. And the President's budget 2012 said we are
going to recover about $32 billion in fraud. Is that how much
fraud there is? What percentage of fraud total are we
recovering?
Mr. Spiegel. Well, as I mentioned before, we don't know the
exact number because the estimates that we have all seen
contain things that are in addition to fraud. They contain
improper payments, they contain administrative errors, they
contain both public and private sector estimates. Until we can
get to one number that identifies fraud, which is in a sense a
legal determination, we are not going to be able to----
Mr. Gardner. At what point is a provider barred from doing
business with a Medicare and Medicaid provider?
Mr. Spiegel. Well, it would depend on the circumstances.
Mr. Gardner. After one time they have been found
fraudulent?
Mr. Spiegel. Well, it would depend on, you know--we don't
determine fraud at CMS. That is a law enforcement decision. And
if somebody has been convicted of fraud, the Inspector General
has the opportunity to exclude them from the program for a
period of time.
Mr. Gardner. So if somebody is convicted of fraud, are they
automatically barred?
Mr. Spiegel. Sir, yes, they are.
Mr. Gardner. And then are States using that then to bar
them from their Medicaid programs?
Mr. Spiegel. We are working on that issue right now. I am
not sure how in depth the State goes with respect to who they
exclude from their programs.
Mr. Roy. We have provisions in our recently published rule
to implement that so that when someone is excluded from
Medicare, States will be doing the same thing as well as States
excluding from Medicaid entities or individuals that have been
excluded by other State Medicaid programs.
Mr. Gardner. What happens to the money that you are
recovering from fraud? Does that go back into fraud-fighting
efforts?
Mr. Roy. By law, the money that we recover goes right back
in the Medicare trust fund.
Mr. Gardner. So it does not go into additional fraud
prevention?
Mr. Roy. No, sir.
Mr. Gardner. I yield back my time.
Mr. Stearns. I thank the gentleman, and I thank the first
panel for their indulgence and forbearance here.
Ms. DeGette. Mr. Chairman?
Mr. Stearns. Just let me finish and I will be glad to
recognize you.
There was a question, Mr. Spiegel, that was asked of you
and you did not know the answer concerning the claims per day.
I thought I would put in the record that Health and Human
Services' Bill Corr testified in front of the Senate Finance
Committee in October 2009 that CMS gets 4.4 million claims a
day with a requirement to pay within 14 to 30 days and they are
only able to review 3 percent of the prepayment.
The gentlelady from----
Ms. DeGette. I would just ask unanimous consent to follow
up on one question.
Mr. Stearns. Sure. Go ahead.
Ms. DeGette. Mr. Perez, someone asked you if you needed
more powers and you said you would like to be able to access
claims data directly when you are on these investigations. Do
you need--is this a matter of more authority to be given to you
by Congress or is it just the procedures that your office is
using?
Mr. Perez. I believe it may be an internal issue with the
department working with CMS and allowing OIG then to have
direct access to that.
Ms. DeGette. If you need more powers, let us know because
it would seem to us to be good information for you to be able
to access. Thank you.
Mr. Stearns. I thank the gentlelady. We have another member
who has joined us. The gentleman from California, Mr. Bilbray,
is recognized for 5 minutes.
Mr. Bilbray. Thank you.
Mr. Perez, we were talking about the ability to impound.
IRS has been given that power to impound so why wouldn't we--if
we are as serious about making sure that taxpayer funds are
going out inappropriately, wouldn't we at least give you the
authority that we give to the people who make sure that revenue
comes in to the Federal Government appropriately?
Mr. Roy. If I could, sir?
Mr. Bilbray. Go ahead.
Mr. Roy. I am more than willing and happy to look at that
particular issue in terms of the ability to impound. We do
seize bank accounts. It is more in the matter of physical
assets but I am more than willing to take any additional
resources that come my way.
Mr. Bilbray. I am just concerned, because you see the
disconnect that we take income of the revenue very seriously
but traditionally we haven't put as much weight on reviewing
and oversight and recapturing of assets coming back.
Ms. King, I appreciate your kind words about the wrongful
payment bill. I was one of the authors of that bill, one of the
few bipartisan bills that got passed last year, but I don't
think that weight has been traditionally applied and I would
like to make sure that we do it.
Speaking of the IRS, the fact is, a lot of these people are
engaged in fraud and abuse. I have to believe as a former tax
consultant that once they get in the habit of filling out
applications for revenue from Medicare and Medicaid
inappropriately, I have to believe there has got to be more
opportunity in there to engage the IRS to be able to be
involved with this. Remember, it wasn't the FBI that got Al
Capone, right?
Mr. Roy. Sir, you are correct. We work joint cases with
IRS/CID all the time just for that purpose.
Mr. Bilbray. Mr. Spiegel, I have a concern with something
you said. I know that this is waste, fraud and abuse in here
but you appear to take wrongful payments as being sort of
separate and apart from waste, fraud and abuse.
Mr. Spiegel. Well, from fraud.
Mr. Bilbray. From fraud? OK. And that is why I want to
clarify because you will admit the impact to the taxpayer and
to the federal family is financially the same between wrongful
payment and fraud.
Mr. Spiegel. We are against all of us. We are against
improper payments and fraud and waste and abuse.
Mr. Bilbray. OK. So the fact is, is that we need to fast-
track those items and get it there.
One of the items that has been brought up is the fact of
the use of false documentation, identify theft. Now, we usually
talk about identify theft in different fields, and we have gone
around with individual the use of identify fraud to falsify
employment opportunities, illegal presence in the country and
everything else. But the identity fraud issue that we have seen
here with your enforcement of the ability of somebody to get a
driver's license, get a document and use it fraudulently, that
has been documented in your enforcement as a vehicle that
organized crime or these bad guys are using in implementing
their fraud to the health care system.
Mr. Perez. Certainly, and in Miami I know that in those
instances where we are able to prove that beyond reasonable
doubt, we certainly are including those in----
Mr. Bilbray. Has Florida implemented the REAL ID bill yet?
Do you know?
Mr. Perez. That I do not know, sir.
Mr. Bilbray. Mr. Chairman, I just think we need to point
out that that is one bill that we passed how long ago which was
basically the number one request of the 9/11 Commission, but we
still have States that are looking at dragging their feet about
using biometrics, and biometrics is one way we could catch
these guys. You have biometrics through a driver's license
under one name, you do the other. Anybody who watches NCIS
knows that, you know, we have got that computer technology. We
have had it in California since 1978. That they will get busted
coming in, one guy coming in as Smith, another guy coming in as
Martinez, and we cross-reference those biometrics. So I just
want to point out that I think that the federal bureaucracy
needs to be sensitive that the States are the people that
provide the IDs in lieu of a federal ID, that REAL ID is a way
we can secure the system without having to have a federal ID
and make sure--you know, there is one reason why we have got to
be serious as federal agents to push that the States have to do
their part down the line.
And maybe, Mr. Chairman, our committee can recommend to
Homeland Security that before we send money to States for
homeland security projects that we require that the first
priority that if States haven't implemented REAL ID and secured
this identification issue that should be the first project used
with federal funds on Homeland Security, and with that, I yield
back, unless anybody has a comment on that.
Mr. Stearns. All right. I thank the gentleman. That could
be your piece of legislation.
So I want to thank the first panel again. We will move to
our second panel and ask the Hon. Alex Acosta to come up and
Mr. Craig H. Smith and Ms. Sara Rosenbaum, and I invite all my
members to stay for the second panel.
The Hon. R. Alex Acosta is a native of Miami and the
current Dean of the College of Law at Florida International
University. He received his law degree from Harvard. He served
as a law clerk to Justice Samuel Alito, then a judge on the
U.S. Court of Appeals for the 3rd Circuit. He has been the
longest serving U.S. attorney in south Florida since 1970,
sitting as a Senate-confirmed United States Attorney for the
Southern District of Florida.
Our second panelist is Craig Smith. He is a partner of
Hogan and Lovells. He rejoined the firm in 2008 after serving
as General Counsel for the Florida Agency for Health Care
Administration. While serving as the chief legal officer of one
of the Nation's largest Medicaid programs, he coordinated
frequently with the federal officials at the Centers for
Medicare and Medicaid Services and the Department of Justice.
Our third panelist is Sara Rosenbaum, who received her J.D.
from Boston University Law School. She has played a major role
in design of national health policy in areas such as Medicare
and Medicaid, private health insurance and employee health
benefits, access to health care from medically underserved
persons, maternal and child health, civil rights in health care
and public health. She also worked for the White House Domestic
Policy Council.
So I thank all three of you, and we welcome the Hon. Mr.
Acosta for your opening statement of 5 minutes. Thank you for
staying with us.
STATEMENT OF R. ALEX ACOSTA, DEAN, FLORIDA INTERNATIONAL
UNIVERSITY COLLEGE OF LAW; CRAIG H. SMITH, PARTNER, HOGAN
LOVELLS, LLP; AND SARA ROSENBAUM, HIRSH PROFESSOR AND CHAIR,
DEPARTMENT OF HEALTH POLICY, SCHOOL OF PUBLIC HEALTH AND HEALTH
SERVICES, THE GEORGE WASHINGTON UNIVERSITY MEDICAL CENTER
STATEMENT OF R. ALEX ACOSTA
Mr. Acosta. Thank you, Mr. Chairman, Ranking Member DeGette
and distinguished members of the committee. I appreciate the
opportunity to appear before you to discuss waste, fraud and
abuse in Medicare and Medicaid. As the chairman mentioned----
Mr. Stearns. Let me just swear you in. If you don't mind,
please stand and raise your right hand.
[Witnesses sworn.]
Mr. Stearns. Sorry. Go ahead.
Mr. Acosta. As the chairman mentioned, I served as the
United States Attorney for the Southern District of Florida
from 2005 to 2009.
Early in my term, I made the prosecution of health care
fraud a top priority in my district. I organized in 2006 the
South Florida Health Care Fraud Initiative. As a result, we
became home to the first Medicare fraud strike force in the
Nation. The results were spectacular but they were also very
sad. By 2008, we accounted for 32 percent of the Nation's
health care fraud prosecutions.
From fiscal year 2006 through May 2009, we charged more
than 700 individuals responsible for more than $2 billion in
fraud. That is actual fraud charged in criminal indictments. I
have heard this morning that figure now stands at 3.5 billion.
Put differently, those $2 billion, which is sometimes hard to
imagine so I put it in per-beneficiary terms. That is $1,900-
plus per beneficiary in south Florida.
Numbers alone, though, don't tell the story. I was very
happy to hear that some Members are going to do ride-alongs. I
wish more Members could visit the strike forces. If I was U.S.
Attorney and if you visited south Florida, I would take you to
our facility. There we have a wheelchair that we have shown to
other interested individuals. That wheelchair was billed again
and again and again, the same wheelchair not used by patients.
We call it the million-dollar wheelchair because it was billed
that many times. We have boxes after boxes of evidence. We have
pictures of a pharmacy, and that pharmacy is billing thousands,
perhaps millions of dollars in expensive brand-name inhalation
products. In fact, the pharmacy was a broom closet and there
was nothing there.
That level of fraud should absolutely disgust each and
every one of us. We enjoy one of the world's best health care
systems but we often hear of the skyrocketing costs of health
care and we worry that one day we will not be able to afford
quality care. Reducing fraud, as you have already mentioned,
is, in public parlance, a no-brainer. It should be a bipartisan
effort.
Now, let me say I am proud of the work we did in south
Florida prosecuting fraud but prosecution is not the solution.
We need to prevent fraud from happening in the first place.
Prosecutions have limited deterrence. The sentences, while
increasing, are not sufficient. Prosecutions are resource-
intensive. Prosecutions rarely recover taxpayer dollars
wrongfully paid out in fraudsters. The fraudsters for the most
part spend the money or send the money overseas. Prevention is
the preferred approach.
Think of this as perhaps, analogize fraud to a busy
intersection. How do you prevent accidents at a busy
intersection? Do you post a police officer at that intersection
and ticket cars after they commit accidents or do you put a red
light at that intersection and prevent accidents in the first
place? In the same way, we need to prevent fraud in the first
place. Prosecutions are not the solution.
Now, effective prevention requires a lot more than front-
end screening. Effective prevention requires continuous and
proactive efforts to identify and stop fraud as it happens. The
gentleman from Virginia, Mr. Griffith, mentioned the issue of
unique IDs. Well, Mr. Chairman, Ranking Member DeGette, I
assume both of you have credit cards. Imagine if you call--you
use that credit card and you call American Express and you say
I just lost my card and they say thank you very much, we can't
issue a new card with a new number; when you get fraudulent
charges, let us know and continue to let us know in the future
because we cannot cancel your card. How long would American
Express stay in business? But that is the system that Medicare
uses. Your Medicare number is your Social Security number, a
number that is easily found and a number that can then be used
to bill in your name and that number cannot be changed.
Effective predictive modeling is another tool that can
assist with fraud prevention. An example of how effective this
can be comes out of south Florida. South Florida in one year
was responsible for $92 million in Budesonide billings. This is
an expensive inhalation drug, and inhalation drugs are a large
problem in south Florida. Well, the Office of Inspector General
did a study to look at these billings. Seventy-four percent of
the beneficiaries for this drug submitted claims that exceeded
the 90-day coverage maximum. Any private insurance company
would say if you exceed a coverage maximum, we are not going to
pay. Sixty-two percent of those that allegedly submitted claims
for these drugs in fact hadn't seen a prescribing physician in
3 years. Ten doctors in south Florida were responsible for more
prescriptions for this drug than all the doctors in Chicago
combined. Chicago is the next highest billing city.
These are the kinds of issues that predictive modeling can
catch. These are the kinds of issues that should be caught.
Experience shows that prepayment prevention computer models
that identify billing patterns that stop payments when you see
spikes like this are the preferable approach. Post-payment pay
and chase does not work.
Now, I have heard this morning that CMS is moving away from
pay and chase, and I think that is a wonderful idea. It is an
important issue because we need to catch this before it
happens. After the fact my former colleagues and good friends
at OIG can prosecute with DOJ but that is not going to solve
the problem. Thank you.
[The prepared statement of Mr. Acosta follows:]
Mr. Stearns. I thank the gentleman.
Mr. Smith, you are recognized for 5 minutes.
STATEMENT OF CRAIG H. SMITH
Mr. Smith. Thank you, Chairman Stearns, Ranking Member
DeGette and distinguished members of the committee. Thank you
for inviting me to testify today.
I do want to say at the outset that I am here in my
personal capacity and that my views are not necessarily the
views of my law firm, Hogan Lovells, or any of the firm's
clients.
I was asked to appear today to share with you my views of
ways we can detect and prevent Medicare and Medicaid fraud and
abuse based principally on my time serving as General Counsel
of Florida's Medicaid program which as you have heard operates
one of the Nation's largest Medicaid programs in this country.
Now, we have certainly heard this morning about the serious
problems that have plagued the Medicare and Medicaid programs
in terms of fraud, waste and abuse. The real concern is that
the expenditures under both programs as shown by the chart that
is on the screen before us today are set to significantly
increase over the next 10 years, and this means that there is
an even greater number of bad actors who will look for ways to
defraud these programs.
In the past 10 to 12 years, Florida officials realized that
the rapidly rising costs of the Medicaid program were
threatening the State's long-term financial health, and they
began focusing on prepayment fraud and abuse prevention. That
is going to be a recurrent theme you are going to hear with me
as you heard from Mr. Acosta and others today.
Florida officials also began administering the Medicaid
program more like a private health insurer would do. Medicare,
in contrast, has for the most part continued along the ``pay
and chase'' approach, as we have heard, and that made Medicare
an especially easier target for fraudsters, especially in south
Florida, as compared to Medicaid.
The recent sting operation involving 700 federal and State
law enforcement officials across the country to apprehend 111
suspected health care fraud criminals was impressive but it
shows that at a rate of about seven law enforcement officials
to every one person arrested, the postpayment is inefficient
and highly expensive.
In the written remarks I submitted to the subcommittee, I
offered several recommendations for preventing fraud and abuse
in these programs. For purposes of my testimony today, I would
like to highlight three of those that have been very effective
in Florida's Medicaid program. Number one, the first
recommendation is that the programs need to better control the
provider enrollment process and provider network process. You
heard Ms. King testify this morning from the GAO that the
Medicare program is an ``any willing provider'' program. This
is a problem because bad actors should not be able to gain
access to the program. One of the most egregious stories
involves a Miami man who served 14 years in prison for murder
and then recently purchased a medical supply business for
$18,000 and proceeded to bill the Medicare program for over
$500,000 in false claims. Now, he was eventually arrested but
that was only after he was charged with murdering another
person and dismembering that person. This is the type of person
we should not have in any of these programs and a better
provider screening and enrollment process would catch that.
The other thing I want to highlight about the provider
network process, going back to this ``any willing provider''
approach in Medicare is despite some misconceptions, there is
no constitutional right for anyone to be a Medicare or Medicaid
provider. There are entitlements for the beneficiaries but
there is not a constitutional right to be a provider in these
programs. Florida understands that in its Medicaid program and
has added ``without cause'' termination provisions in its
Medicaid provider agreements. These allow the program to very
quickly get bad actors out of the program or people we don't
need in the program whereas the Medicare program has really
struggled expelling bad actors.
The second recommendation I have for the subcommittee is
that the programs should consider shifting away from fee-for-
service reimbursement methodologies that are ripe and very
susceptible for fraud and abuse and move toward other payment
systems including managed care. Risk-based managed care
companies have a financial incentive to detect and prevent
provider fraud and abuse in these programs. They could be a
helpful partner to the government in stopping provider fraud
and abuse and saving taxpayer dollars.
My third recommendation is that the programs, as Mr. Acosta
said, should use predictive modeling and other analytical
technologies. Prepayment predictive modeling has been used to
analyze health care claims for many years but in the past its
effectiveness has been hampered by the inability to limit false
positives and produce focused, actionable results. Well, those
technologies have significantly improved and so today, just as
the credit card industry is able to send its cardholders an
instant text message or alert if there is a suspected fraud
transaction, the Medicare and Medicaid program ought to be able
to do that up front, and as Agent Perez testified this morning,
it would be great if they could do that in real time as the
claims are coming in. In 2008, Medicare paid home health
agencies in south Florida over $550 million just to treat
patients with diabetes, and that is more than was paid to every
other locale in the entire country combined. Predictive
modeling can stop that.
So we have heard that the fraud, waste and abuse program is
very real and I applaud the committee for having this hearing
today. If we focus on prepayment for prevention, that is the
way to best protect taxpayer dollars, and I welcome any
questions you might have. Thank you.
[The prepared statement of Mr. Smith follows:]
Mr. Stearns. Thank you.
Ms. Rosenbaum, you are welcome for 5 minutes your opening
statement.
STATEMENT OF SARA ROSENBAUM
Ms. Rosenbaum. Thank you, Mr. Chairman, Ranking Member
DeGette, committee members.
You have heard so much information this morning that what I
would like to focus my comments on has to do with a question
that arose during the question-and-answer period that I think
merits a closer look, which is the extent to which fraud and
abuse are issues in private insurance, not only in private
insurance but actually fraudulent and abusive activities by
private insurers.
One of the great things, in my view, about the Medicare and
Medicaid programs is that they are public programs and so we
are able to know a lot as evidenced by the testimony this
morning about the extent to which fraud, waste and abuse may be
happening in the programs. They are extensively studied. There
are many, many reports. You have made many incredibly important
investments in curbing fraud, waste and abuse in Medicare and
Medicaid and those investments have begun to yield real
benefits. We know very little actually about fraud, waste and
abuse in private insurance. We do know that since 1995,
according to at least some studies, 90 percent of health
insurers have begun to institute more significant antifraud
efforts. Clearly, they have concluded that they are
experiencing some of the very same problems in their payment
systems that Medicare and Medicaid are experiencing in their
payment systems.
I would note that one factor about the Medicare and
Medicaid programs that may make them slightly more susceptible
to fraud and waste and something that I think would be very
hard to remedy, even were the entire Medicare and Medicaid
system changed, is the nature of the beneficiaries. A lot of
studies show that fraud generally is more concentrated in
communities and among populations who are extremely poor,
extremely disadvantaged and much more vulnerable to fraud.
Whether they were given public insurance or a voucher to buy
private insurance, in communities with high concentrations of
poor and vulnerable populations, this is an issue and the
investment of federal resources and State resources in
protecting them against fraud is enormous.
I think there is something else that is worth mentioning,
and that is when we see fraudulent behavior by the insurance
industry itself, and there are actually three kinds of fraud
behaviors that I think are worth thinking about as you
contemplate further efforts to try and reduce and prevent
fraud. The first of course is Medicare Advantage marketing
abuses. They are extensively documented. A simple Google search
of Medicare Advantage marketing abuses shows thousands of
reports. One of the most interesting is a study in rural
Georgia. A group of public health students, near and dear to my
heart, since I am a professor of public health, took on as a
summer project in an effort to try and uncover marketing abuses
in rural Georgia by Medicare Advantage salesmen going door to
door. I would note that one of the best Web sites on the
problem and what can be done about it is found in the Texas
Department of Insurance, so this is something the State
insurance departments are aware of.
A second kind of abuse is an abuse in which a health
insurer negotiates deep, deep, deep provider discounts, fails
to disclose those discounts among its network providers to
enrollees who then instead of paying what they think is a 20
percent coinsurance rate are paying coinsurance rates that are
in some cases actually even more than the fee that was paid to
the provider. And a third type of abuse, one that was disclosed
by Attorney General Cuomo, is the abuse that we saw in the
Ingenix cases in which out-of-network-provider payment
standards are manipulated, reduced and enrollees who thought
they had out-of-network coverage are in fact gouged and made to
pay very high balance bills.
Now, these issues, I think, are important to focus on as we
move into a time when tax subsidies are flowing into the
purchase of private insurance products and health insurance
exchanges and other locations, and so my strongest
recommendation to the committee would be to consider further
steps to empower investigation of insurer fraudulent and
abusive behavior. Thank you.
[The prepared statement of Ms. Rosenbaum follows:]
Mr. Stearns. Thank you.
Now I will start with questions. I just note, Ms.
Rosenbaum, that you had indicated your strong support of the
public sector but the public sector, Mr. Spiegel could not tell
us at all how much fraud is in the Medicare system but I can
assure you that in the private sector they would go out of
business if they couldn't answer that question on a continual
basis. They would go out of business.
Mr. Smith has outlined three ways he thinks he can prevent
waste, fraud and abuse, and of course, the predictive modeling
using computers was one that you mentioned, Mr. Acosta, too. Do
you agree or would you add to the three that Mr. Smith
mentioned I thought were pretty incisive? Are there any other
ones you would suggest?
Mr. Acosta. I would agree with that and I also would like
to support a prior comment made about the importance of data
access. One of the ways that we were able to bring as many
cases as we did in south Florida is, we employed a nurse
practitioner that had access to not real-time data because we
couldn't obtain that but fairly recent data to look for billing
spikes, and we did that ourselves rather than have the HHS OIG
agents defer to CMS. That kind of integrated data is very
important and I would like to support Mr. Perez's request.
Mr. Stearns. Mr. Acosta, Mr. Smith, do you think we should
have Medicare issue something besides a Social Security number
so that they could actually, when a person calls and said
listen, there is fraud in my billing here, instead of saying
well, just keep alerting us, do you think we should change
that? Because that was not one that either one of you suggested
and that has been mentioned.
Mr. Acosta. Well, let me--you know, let me apologize
because I thought I had referenced that. I think it is
absolutely critical. As U.S. Attorney, we would get calls on a
weekly basis from individuals saying we have two legs yet
Medicare is paying for a prosthetic leg. Medicare says they can
do nothing about it.
Mr. Stearns. In the 60 Minutes expose, there is a woman
there who said for 6 years she called for artificial limbs,
artificial legs, 6 years and Medicare did nothing.
Mr. Acosta. Mr. Chairman, how long would American Express
be in business if----
Mr. Stearns. That is what I mean.
Mr. Acosta [continuing]. When you would call and say I lost
my card, they say we can't help you.
Mr. Stearns. Are either one of you concerned that here we
are expanding the Medicaid program by 20 million people under
Obamacare and federal spending on Medicare and Medicaid will
rise from $900 billion in 2010 to almost $2 trillion in 2019?
Are you concerned that, you know, unless we implement these
things that obviously we are going to have more fraud?
Mr. Acosta. From my perspective, I think, you know, it is
critical that Medicare and Medicaid spend money to modernize
their system. That involves unique IDs, not the Social Security
number. That involves predictive modeling. Again, credit cards,
if your spending patterns deviate at all, they call you up. Why
can Medicare not do the same thing?
Mr. Stearns. Are you familiar with what the Medicare
prevention fraud in the ACA does? Are either one of you, Mr.
Smith or Mr. Acosta? Do you think they would help pay for the
cost of this Medicare expansion and Medicaid expansion just
based upon what you see in the bill, or do you know what is in
the bill?
Mr. Smith. I certainly am aware of some of the provisions
in the bill. I think one of the big concerns is we heard
testimony today from the OIG saying that the current problem,
current Medicaid and Medicaid fraud problem with the current
population of beneficiaries we have exceeds, in his estimate,
$7 billion. So even if you took the CBO's suggestions that the
additional funding in the federal health reform legislation
could help save $6 billion or $7 billion, that is barely enough
to get close to the estimates of what the OIG says is the
problem today.
Mr. Stearns. Excellent point.
Mr. Acosta, anything you would like to add?
Mr. Acosta. Yes. I would add to that that most of the--I
assume you are referring to the ACA, most of the ACA focuses on
screening measures, licensure checks, background checks, site
visits, which are important. But, you know, it is not enough.
You need to actually review claims as they come in using
predictive modeling. You need to have prepayment screening of
claims.
Mr. Smith. And Chairman, I would echo that and say that
that is why I really think it is important as part of the Small
Business Jobs Act, that is where the predictive modeling
legislation was added. It is not part of the original federal
health reform legislation and so I think that predictive
modeling and analytical technology----
Mr. Stearns. It is hard to believe. So the predictive
modeling using computers is not part of the prevention program
in Obamacare right now. Is that the way you understand it?
Mr. Smith. Well, I think that the federal health reform
legislation does ask and does provide for additional
technologies to be used but the predictive modeling piece and
the key piece for prepayment----
Mr. Stearns. Is not there. I am just going to close by
asking you quickly, in your opinion, do you think organized-
crime involvement in Medicare and Medicaid has been, you know,
pretty prevalent in south Florida? Have you seen a lot of
organized-crime figures engage in Medicare fraud?
Mr. Acosta. I certainly have. If I could just clarify a
small point. The Small Business Jobs Act of 2010 did have
authorization for predictive modeling. HHS is looking at this.
But the authorization was put in a separate provision.
With respect to organized crime, I think it is a clear
method by which organized crime makes money. It is highly
profitable. We are talking not millions but billions of
dollars, $2 billion in actual charged criminal indictments.
That is not all of it that is on the street. That is simply
what we proved in court in south Florida alone. One of the
frustrations is when you take down an operation, when you do
these national stings, you get the nominee owners, the
individuals that are being paid a little bit of money so their
name can be used but they are not really the brains behind the
operation and so you need to go up the chain just like you do
in organized crime.
Mr. Stearns. All right. My time is expired. The gentlelady
from Colorado.
Ms. DeGette. Thank you so much, Mr. Chairman.
So Mr. Acosta, what you are saying is, in fact Congress did
pass the predictive modeling, the prepayment information, it
was just not in the same bill as Affordable Care Act, correct?
Mr. Acosta. Correct. If memory serves, I believe Senator--I
don't know in the House but the Senate side Senator LeMieux
added it----
Ms. DeGette. So it is in the law now, we can do that,
right?
Mr. Acosta. HHS has the authorization if they choose to use
it.
Ms. DeGette. The authorization. Now, both of you, I
really--well, actually I want to thank all three of you for
your testimony because I thought it all gave good, different
perspectives on how we can target waste, fraud and abuse, and
as we said with the last panel, we are all interested in
rooting out waste, fraud and abuse in every part of the system.
One of the new tools that we talked about that is in the
Affordable Care Act and that CMS and HHS are using is this
preventative approach so that we are moving away from the ``pay
and chase'' model to the model that emphasizes keeping
criminals out of the system to begin with, and I would assume,
Mr. Acosta, you would agree with that approach, correct?
Mr. Acosta. I entirely agree that the ``pay and chase'' is
a bad approach and that we need to move----
Ms. DeGette. Thank you.
Mr. Smith, would you agree with that?
Mr. Smith. Absolutely agree that is not a good approach.
Ms. DeGette. You don't think that the preventative approach
is a good approach, or you don't think that ``pay and chase''
is a good approach?
Mr. Smith. ``Pay and chase'' is a terrible----
Ms. DeGette. Is a bad approach?
Mr. Smith. Yes.
Ms. DeGette. And what about you, Ms. Rosenbaum?
Ms. Rosenbaum. I agree that prevention is the best
approach.
Ms. DeGette. OK. Now, Mr. Smith, you testified, this was
really quite shocking to me. You said that there is ``any
willing provider'' rule which would allow even people with
murder convictions to become a provider. Here is my question.
Is that under statute or is that just under practice?
Mr. Smith. Well, Ms. King testified this morning referring
to the ``any willing provider'' rule.
Ms. DeGette. Yes.
Mr. Smith. Basically, CMS's approach historically has been
to let providers in unless they clearly had an issue in the
screening process that CMS caught, and they weren't very good
historically at catching those problems.
Ms. DeGette. OK. So do you think that there are some
criteria that we could pass that would be absolute barriers,
like, for example, a felony conviction where you would say, you
know, you are just--because I know they use their discretion so
they could reject somebody for having a felony conviction. Are
you saying that it would be a good idea for us to pass a bright
line of certain criteria that they just couldn't consider
somebody if they met those criteria?
Mr. Smith. Certainly, and there are certain criteria in
statute that are bright lines but I would say that it goes
beyond just felony convictions. It also goes to operating your
provider network like an insurance company would, which is, if
we have too many home health agencies in Miami-Dade, regardless
of whether we think a particular provider is fraudulent, we
shouldn't let more agencies in the program.
Ms. DeGette. Yes, I agree with that, but that is not a
bright line, that is sort of a discretionary criterion, and
that is what I am asking you. So if any of you actually think
that there are additional bright-line criteria we should put in
statute, we would appreciate it if you would supplement your
answers and provide that to us because I agree too, those kind
of outrageous things should not happening and sometimes I do
think they slip through the cracks.
Now, Mr. Acosta, you testified that one thing that would be
really helpful would be using these unique IDs, not using
Social Security numbers, correct?
Mr. Acosta. Correct.
Ms. DeGette. Mr. Smith, do you agree with that, that that
would be a good way to improve the system and to decrease
fraud?
Mr. Smith. Yes.
Ms. DeGette. And Ms. Rosenbaum, do you agree with that too?
Ms. Rosenbaum. I do.
Ms. DeGette. I think that is a really great idea, and I
appreciate you bringing that up. I guess that is all the
questions I have. I yield back.
Mr. Stearns. I thank the gentlelady.
Mr. Murphy from Pennsylvania is recognized for 5 minutes.
Mr. Murphy. Thank you, and thank you to the panel. This is
very enlightening.
Mr. Acosta, you were talking about--a couple of you, you
and Mr. Smith were talking about issues involved with
prevention versus chasing. Do we have any estimate of the costs
involved with bringing a Medicare or Medicaid fraud case to
justice, from bringing charges to jail time?
Mr. Acosta. The costs, well, I can tell you that in my
office, I received a line item of about $1 million that I
supplemented with about $2.5 million of my own discretionary
spending and so I spent about $3.5 million per year to
prosecute cases. Now, that does not include the costs of the
agents from HHS, OIG and FBI.
Mr. Murphy. Do you have any kind of ratio to make decisions
with regard to whether or not to prosecute a case, if it is
less than $1 million or so and it is going to cost you $3.5
million?
Mr. Acosta. We have cutoffs all the time. We don't like to
discuss them publicly but obviously you have more cases than
you can imaginably prosecute and so you go after the larger
cases, and that is a problem and every now and then we
prosecuted some smaller fraudsters because you don't want to
send the message that if you stay below a certain number you
get away with it.
Mr. Murphy. What would the cost of prevention be?
Mr. Acosta. The costs of prevention at the end of the day I
think are much lower and much more effective. Computer programs
that screen, for example, inhalation drugs in south Florida.
Budesonide that I mentioned is just one but there are a number
of other inhalation drugs. In one year, Miami-Dade County
received $93 million in billings. The next highest billing city
was Cook County with $2.7 million. That is a red flag if I have
ever heard one. That is the kind of issue that should be caught
by a computer program, and if you can prevent those $93 million
and reduce it to the size of Chicago of $2.7 million, that is
$90 million that you are preventing right there.
Mr. Murphy. Thank you.
And Mr. Smith, on the ``any willing provider'' issue, how
do you recommend we define providers? Obviously we don't want
to stop people who want to start a business who are legitimate
about it but should it involve such things as the ranking
member was talking about something alone the lines of a
criminal background check requirement or would these be people
who would be at a higher level of screening for their first
year or two? Would they be specifically licensed on some other
level to begin with, probationary? Do you have any
recommendations for that?
Mr. Smith. There already exists in law provider screening
requirements that would look at convictions, different things
in the person's past, and CMS did just recently come out with a
final rule regarding provider screening enrollment and what
they have done is try to tier the risk areas so a provider
seeking or a person seeking to open up a new Medicare-certified
durable medical equipment company, a home health agency or
perhaps an infusion clinic would be tiered in a higher risk
category and perhaps be screened closer than someone hoping to
open up a new hospital, and I think that is a wise idea.
Mr. Murphy. Do you think with regard to these issues, and
you are familiar with Florida. I don't know if you heard my
questions before regarding the questions of the Cuban
government's role in this. Would we have picked up on this? Is
there any thought that we might pick up when another country is
involved perhaps in organized crime?
Mr. Smith. I think from a Medicaid perspective, part of it
goes to not only to making sure you screen for certain bad
actions in their past but also making sure you collect enough
data to get the people on the applications so that you know
what the links are, and one of the things that is beneficial
about the predictive modeling is not just the claims analysis
but also it has the capability of doing what I call social
network analytics so you can basically see which people who
have had an experience with a fraudulent enterprise have links
to other people that you might not be aware of, might not have
their names in any applications but they are operating in
clusters and they sort of swarm around like bees with patients
and defraud the program. That type of technology has great
opportunities for us to save money.
Mr. Murphy. Mr. Acosta?
Mr. Acosta. Congressman Murphy, thank you. If I could, you
asked earlier, you referenced the list of OIG's most wanted,
and based on public information, my understanding is that a
majority of these individuals are in fact in Cuba. One of the
issues that we had early on was that defendants were being
granted bond by federal judges on the theory that because they
were Cuban nationals, they could not return to the island of
Cuba, and in fact, they were then jumping bond and we had a law
enforcement problem. Since then federal judges have actually
stopped using the fact that someone may not flee to Cuba as a
reason to grant bond because of reduced risk of flight because
in fact the risk of flight to Cuba is high because Cuba
welcomes the hard currency that they receive from these
individuals.
Mr. Murphy. Thank you very much.
Thank you, Mr. Chairman.
Mr. Stearns. The gentleman from Virginia is recognized, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman. I do think that is
very interesting. So even if the Cuban government is not
involved, they still welcome these folks in because they are
bringing cash with them?
Mr. Acosta. They certainly welcome them in. There is some
evidence that shows that there is governmental involvement as
well but that is based on University of Miami reports.
Mr. Griffith. Interesting.
Professor Rosenbaum, I am just trying to do some things on
background, and I would just ask you some questions, if I
might. I see that you have listed some government contracts on
your Truth in Testimony form, and I am just wondering if you
could tell me what those contracts involve.
Ms. Rosenbaum. Sure. I am a law professor at George
Washington University and I am the chair of the department of
health policy in the medical center, and I am the principal
investigator on a contract that provides analytical support to
what is now I guess the center--as opposed to DCIIO, it's
CCIIO--to review and summarize the comments for the requests
for comments and the notices of proposed rulemaking related to
health insurance exchanges.
Mr. Griffith. OK. And so they don't have somebody in-house
that is doing that?
Ms. Rosenbaum. Oh, I am sure they must review as well but
we do policy support work for the department and have under
federal contracts for administrations since 1991.
Mr. Griffith. Yes, ma'am. And is there anything else you
are working on with HHS or CMS in regard to the Affordable Care
Act and the regulations?
Ms. Rosenbaum. I have no other contracts in which I am the
investigator, no.
Mr. Griffith. All right. I appreciate that. Thank you,
ma'am.
Mr. Chairman, I yield back my time.
Mr. Stearns. The gentleman yields back his time. I think we
are all through. I am getting ready to close. I did have one
follow-up for Mr. Smith. I think you talked about, or maybe it
was Mr. Acosta, about using a data access process to cut fraud.
I wasn't quite sure, because Inspector General and GAO can go
in and look at these statistics to get--who were you talking
about when you talked about data access?
Mr. Acosta. One of the issues that we had early on in south
Florida for the health care fraud initiative that later became
the strike force, we set up a separate location where we
collocated the agents and the prosecutors to focus on this. At
the time I had requested that everyone have access to the
billing data so they could look for aberrant billing patterns.
We were finally able to obtain access to some data and that was
restricted in appropriate ways at the time.
Mr. Stearns. So you want law enforcement agents----
Mr. Acosta. Absolutely.
Mr. Stearns [continuing]. And the prosecutors to have
access to this data prior to--while they are investigating a
crime?
Mr. Acosta. As the data comes in, give law enforcement
access to the CMS systems, protect privacy but give us access
to the billing patterns so we can catch the fraudsters in the
act.
Mr. Stearns. Would you need to go to a judge to get access?
Or you just want to be able to have access to it?
Mr. Acosta. Correct. Yes.
Mr. Stearns. So you could call up the Health and Human
Services and say we have this particular case, this particular
modeling, we want you to give us access so we can look at the
data?
Mr. Acosta. Not call up HHS but actually put your
investigators, have the--we have a facility in south Florida.
We would like a computer terminal there where we can go and see
billings for X drugs spiked by 300 percent in the past month
for these five providers. Well, maybe that is a reason we
should investigate those five providers.
Ms. DeGette. Will the gentleman yield?
Mr. Stearns. Sure. I would be glad to yield.
Ms. DeGette. Is that a legal barrier that you couldn't get
the data or is that an agency policy that prevented you from
getting the data?
Mr. Acosta. In all candor, I am uncertain whether it is
legal or bureaucratic. I just know it is a barrier.
Ms. DeGette. As I said to the previous panel, I think that
is some data that would be really helpful in these
investigations, so if you can try to figure that out and
supplement your answer, then we can know what we need to do to
help expedite that.
Thank you, Mr. Chairman.
Mr. Stearns. Thank you. Let me conclude by--oh, good. We
have another member came back. The gentleman from Texas, Dr.
Burgess, is recognized.
Mr. Burgess. Thank you, Mr. Chairman. Actually, I have been
watching off the floor. I have a couple of constituents that
are here. They are both serving their country, so I am making
some time for them while this hearing is going on.
Let me just ask a question, Ms. Rosenbaum--well, actually I
want to ask it of Mr. Smith, but Ms. Rosenbaum made an
observation that we should empower more investigation of
fraudulent insurance behavior but Mr. Smith, some of your
testimony to me indicated that you didn't feel that it was
necessary to have the same focus. Would you care to expound
upon that?
Mr. Smith. I think what I said came at maybe a slightly
different angle. I said one of my recommendations was that the
Medicare and Medicaid programs continue to move away from a
fee-for-service-based system and more toward other payment
systems such as managed care and also to operate the programs
more like a private insurer would. I guess it might be
interesting historically to hear what percentage private
insurers have suffered in fraud and abuse but that goes to
their bottom line, it doesn't go to taxpayer dollars. What the
Medicare and Medicaid programs need to do is focus on
protecting taxpayer dollars, and if you engage an outside
managed care company and you pay them risk-adjusted rates, they
have the financial incentive to stop provider fraud and abuse.
If they don't, it goes to their bottom line. It doesn't hurt
taxpayer dollars any further.
Mr. Burgess. Yes, and that is interesting that you say
that. When was this? June of 2009, you may be familiar with an
article published in the New Yorker by Atul Gawande, and it was
important to me because he was talking about Texas. I should
point out that Texas today is 175 years old. It was 175 years
ago this morning that Texas declared its independence and
became an independent country. But that is another story.
Part of Dr. Gawande's investigation in south Texas led
him--I don't know that he came right out and said it but he
certainly implied that overutilization and overbilling of
Medicare was rampant within the medical community in McAllen.
So it bothered me. I know a lot of doctors, or I know some of
the doctors who work there. We work together on border issues.
So I took a trip down to McAllen to see for myself on the
ground if I could what was going on, and just the point you
make, Mr. Smith, was you don't see the headlines in the paper
that Aetna Life and Casualty has been defrauded of 15
wheelchairs. It just doesn't happen. It is always Medicare,
Medicaid and SCHIP. It is always the public side.
Now, Ms. Rosenbaum has some issues with private insurers,
and I get that, but here we are talking about the actual
delivery of care, and appropriately, it never seems to happen
on the private sector, or if it does, perhaps they just don't
talk about it the same way we do on the public side. But is
that your observation as well?
Mr. Smith. It has certainly been a prevalent problem in
both programs. There was a report recently that in 2009 the
Medicare program paid for over 420 million claims for mental
health in Florida alone, which was four times higher than the
amount paid in Texas and 635 times higher than the amount paid
in Michigan, and to paraphrase Carl Hiaasen, who is a funny
novelist out of Florida, he said no matter what you think of
Floridians, there is no way that we are four times crazier than
Texans, respectfully, Congressman.
Mr. Burgess. Well, exception taken. Yes, I was going to
suggest perhaps they need to move to Texas and that would solve
our problem.
Well, it is just--you know, it raises an important issue.
What is happening on the private side that prevents the same
problems that are happening on the public side. Now, we talked
a little bit about the payment error rate, and Ms. Rosenbaum,
some of that is truly just a coding error. Someone makes a
mistake when someone comes in and they write the code down and
that goes into the payment error rate, correct?
Ms. Rosenbaum. Absolutely.
Mr. Burgess. But that error rate of 9.4 percent or whatever
was quoted to us, that is not predominantly made up of honest
mistakes made in tallying up the office visit. Is that correct?
Ms. Rosenbaum. I am not sure I understand the question.
Mr. Burgess. Well----
Ms. Rosenbaum. You mean of the total amount?
Mr. Burgess. Yes. How much is just simple coding errors
that----
Ms. Rosenbaum. I couldn't begin to answer the question.
Mr. Burgess. It wouldn't these two guys that were on the
panel earlier with their handcuffs and nightsticks? Just
wouldn't be involved, right? The amount of the error rate that
is just attributable to simple coding errors is likely pretty
small out of that 9.4 percent?
Ms. Rosenbaum. I truly don't know. I have only seen the
numbers aggregated.
Mr. Burgess. Well, let us even say this. Let us say it is
that high for just simple coding errors. Doesn't that tell us
something about how we should be approaching this problem, that
if nothing else, perhaps some education of doctors and nurses
and clinics about how to code properly would be part of what
should be happening at the level of CMS?
Ms. Rosenbaum. Yes. I think anything and everything that
can be done to clarify how to bill, how to file appropriate
claims----
Mr. Burgess. I don't have any data on it but I would
suspect that number is very low, because as you recall in the
late 1990s, there were all of these compliance audits, and I
know because I was in practice at the time, and they were very,
very severe, and yes, you could be put in jail, so I am just
telling you I think that number of actual coding errors of that
9.4 percent is in fact very small because most physicians and
nurses and nurse practitioners do not want to undergo that type
of scrutiny because we all had to go through those compliance
audits, we all had to put forward what we were doing in our
offices to prevent that from happening.
Mr. Chairman, I see I have gone over my time. Thank you for
the indulgence.
Mr. Stearns. All right. I thank the gentleman.
By unanimous consent, we would like to put the document
binder into the record, and I will conclude by saying the
purpose of Oversight and Investigations is to ferret out
details. You have done an excellent job, the second panel here.
We are going to recommend to the Health Subcommittee on Energy
and Commerce a lot of the recommendations that have come out of
this hearing and that is the purpose, and hopefully they will
have a hearing and follow up with legislation. I know the
Democrats think a lot of these suggestions you have made are
part of Obamacare but I am not sure they all are, and obviously
changing the Social Security number so a person can have a
Medicare ID number that you seem to all agree upon is something
that we should look at quickly.
So with that, the----
Mr. Burgess. Mr. Chairman, just a point of personal
privilege, can I recognize two of my constituents?
Mr. Stearns. Sure.
Mr. Burgess. Captain Dambravo and Captain Dambravo were
visiting me today during the hearing, and I want to thank them
for their service to their country. If I can further relate, my
relationship with Captain Dambravo goes back some time. Without
violating HIPAA, I delivered him 27 years ago. Thank you both
for being here with us today.
Mr. Stearns. Thank you for being here.
And with that, the subcommittee is adjourned.
[Whereupon, at 1:02 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]