    [House Hearing, 108 Congress]
    [From the U.S. Government Publishing Office]

      SHOW ME THE TAX DOLLARS PART II--IMPROPER PAYMENTS AND THE TENNCARE
                                    PROGRAM

    =======================================================================

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
                            AND FINANCIAL MANAGEMENT

                                     of the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JULY 14, 2003

                                   __________

                               Serial No. 108-76

                                   __________

           Printed for the use of the Committee on Government Reform

      Available via the World Wide Web: http://www.gpo.gov/congress/house
                          http://www.house.gov/reform

                        U.S. GOVERNMENT PRINTING OFFICE

    90-581-PDF                  WASHINGTON :  2003
    ______________________________________________________________________
    For the sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone toll free (866)512-1800, DC area (202) 512-1800  Fax: (202) 512-2250  Mail Stop SSOP, Washington, DC 20402-0001

                         COMMITTEE ON GOVERNMENT REFORM

                         TOM DAVIS, Virginia, Chairman
    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
    CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
    MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
    STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
    DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
    RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
    JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
    TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
    CHRIS CANNON, Utah                   DIANE E. WATSON, California
    ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
    EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
    JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
    JOHN SULLIVAN, Oklahoma              C.A. ``DUTCH'' RUPPERSBERGER,
    NATHAN DEAL, Georgia                     Maryland
    CANDICE S. MILLER, Michigan          ELEANOR HOLMES NORTON, District of
    TIM MURPHY, Pennsylvania                 Columbia
    MICHAEL R. TURNER, Ohio              JIM COOPER, Tennessee
    JOHN R. CARTER, Texas                CHRIS BELL, Texas
    WILLIAM J. JANKLOW, South Dakota                 ------
    MARSHA BLACKBURN, Tennessee          BERNARD SANDERS, Vermont
                                             (Independent)

                           Peter Sirh, Staff Director
                     Melissa Wojciak, Deputy Staff Director
                          Rob Borden, Parliamentarian
                           Teresa Austin, Chief Clerk
                  Philip M. Schiliro, Minority Staff Director

         Subcommittee on Government Efficiency and Financial Management

                  TODD RUSSELL PLATTS, Pennsylvania, Chairman
    MARSHA BLACKBURN, Tennessee          EDOLPHUS TOWNS, New York
    STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
    JOHN SULLIVAN, Oklahoma              MAJOR R. OWENS, New York
    CANDICE S. MILLER, Michigan          CAROLYN B. MALONEY, New York
    MICHAEL R. TURNER, Ohio

                                   Ex Officio

    TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                         Mike Hettinger, Staff Director
                   Tabetha Mueller, Professional Staff Member
                              Amy Laudeman, Clerk
              Mark Stephenson, Minority Professional Staff Member
                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on July 14, 2003....................................     1
    Statement of:
        Mathis, Barry Thomas, director of program integrity,
          TennCare; William A. Benson, special agent, Tennessee
          Bureau of Investigation, Medicaid Fraud Control Unit; and
          Holly E. Williams, director, Medicare Patrol Project, Upper
          Cumberland Area Agency on Aging............................    54
        Williams, McCoy, Director, Financial Management and Assurance
          Team, U.S. General Accounting Office; and Kerry Weems,
          Acting Assistant Secretary for Budget, Technology and
          Finance, Department of Health and Human Services...........     6
    Letters, statements, etc., submitted for the record by:
        Benson, William A., special agent, Tennessee Bureau of
          Investigation, Medicaid Fraud Control Unit, prepared
          statement of...............................................    73
        Mathis, Barry Thomas, director of program integrity,
          TennCare, prepared statement of............................    59
        Platts, Hon. Todd Russell, a Representative in Congress from
          the State of Pennsylvania, prepared statement of...........     3
        Weems, Kerry, Acting Assistant Secretary for Budget,
          Technology and Finance, Department of Health and Human
          Services:
            Information concerning annual reports....................    52
            Information concerning provider debt.....................    51
            Prepared statement of....................................    21
        Williams, Holly E., director, Medicare Patrol Project, Upper
          Cumberland Area Agency on Aging, prepared statement of.....    82
        Williams, McCoy, Director, Financial Management and Assurance
          Team, U.S. General Accounting Office, prepared statement of     8

      SHOW ME THE TAX DOLLARS PART II--IMPROPER PAYMENTS AND THE TENNCARE
                                    PROGRAM

                                  ----------

                             MONDAY, JULY 14, 2003

                      House of Representatives,
    Subcommittee on Government Efficiency and Financial
                                            Management,
                                Committee on Government Reform,
                                                          Bartlett, TN.
        The subcommittee met, pursuant to notice, at 8:05 a.m., in
    the Bartlett City Hall, 6400 Stage Road, Bartlett, TN, Hon.
    Todd Platts (chairman of the subcommittee) presiding.
        Present: Representatives Platts and Blackburn.
        Staff present: Mike Hettinger, staff director; Dan Daly,
    counsel; and Tabetha Mueller, professional staff member.
        Mr. Platts. A quorum being present, this hearing of the
    Subcommittee on Government Efficiency and Financial Management
    will come to order.
        It is a pleasure to be here at Bartlett City Hall and I
    would like to thank the city of Bartlett for its hospitality
    this morning. Mayor McDonald and others, I appreciate all your
    work with the staff of the subcommittee in making this hearing
    possible here at Bartlett.
        I would also like to recognize the committee's vice chair,
    Representative Marsha Blackburn who has worked throughout her
    career in elected office to ensure the efficient operation of
    government and we are certainly delighted to be here in your
    home district. We are honored to have you as our vice chair and
    your efforts, first here in the Tennessee State Senate and now
    in Washington, seeking to ensure that taxpayer funds are spent
    correctly and especially in programs such as Medicaid that we
    will be focusing on here today.
        Representative Blackburn's efforts dovetail well with
    President Bush and his administration's efforts to make the
    reduction of improper payments a significant part of his
    management agenda in Washington.
        In support of the President's agenda, this subcommittee
    believes that taxpayers have a fundamental right to know how
    their tax dollars are being spent. Improper payments by Federal
    agencies are a serious and growing problem that costs taxpayers
    billions of dollars each year. We have seen some estimates that
    put improper payments at $35 billion a year and many of us
    believe that is probably just the tip of the iceberg, when we
    get into the actual numbers of each of these programs.
        While we do not have our arms around the total extent of
    the improper payment problem, what we do know is that these
    mistakes, which occur throughout government, are made because
    agencies do not have adequate internal financial controls and
    business process systems to protect against these types of
    errors. The Federal Government, led by the President and the
    Office of Management and Budget, the General Accounting Office
    and agency leaders such as the Department of Health and Human
    Services is making progress in identifying and reducing the
    rate of improper payments.
        Here in Tennessee, waste, fraud and mismanagement in the
    TennCare program remain major concerns. Tennessee has in place
    a number of mechanisms aimed at reducing TennCare fraud. In
    addition to the Tennessee Bureau of Investigations Medicaid
    Fraud Control Unit, the State of Tennessee operates TennCare's
    Program Integrity Unit. The most identifiable form of fraud in
    the TennCare program is provider fraud, where providers commit
    fraud by seeking improper payment for services rendered--to
    TennCare recipients. With an annual budget of approximately $6
    billion for TennCare, $4 billion of which is provided by the
    Federal Government with another $2 billion provided by the
    State, both HHS and the State of Tennessee have a significant
    fiduciary duty to taxpayers to remain vigilant in their
    struggle to control improper payments.
        Today, we will first hear from McCoy Williams, Director of
    Financial Management and Assurance Team at the U.S. General
    Accounting Office, along with Mr. Kerry Weems, Acting Assistant
    Secretary for Budget Technology and Finance at the Department
    of Health and Human Services, regarding Federal efforts to
    reduce improper payments.
        Our second panel will feature Mr. Barry Mathis, director of
    Program Integrity for TennCare; Mr. William A. Benson, special
    agent for the Tennessee Bureau of Investigation's Medical Fraud
    Control Unit and last but not least, Ms. Holly Williams,
    director of the Medicare Patrol Project, Upper Cumberland Area
    Agency on Aging, discussing specific aspects of the TennCare
    experience.
        We certainly thank each of our witnesses for being here
    today and for your preparation regarding today's testimony,
    both written and verbal.
        I am now delighted to yield to our subcommittee vice chair,
    Representative Blackburn, and again I want to thank you for
    hosting us here in Bartlett.
        [The prepared statement of Hon. Todd Russell Platts
    follows:]
    [GRAPHIC] [TIFF OMITTED] 90581.001

    [GRAPHIC] [TIFF OMITTED] 90581.002

        Ms. Blackburn. Thank you so much, Mr. Chairman.
        I want to thank you for bringing the Government Reform
    Subcommittee on Government Efficient and Financial Management
    to Memphis to look at improper payments to Tennessee's TennCare
    program.
        Since November 2002, Federal agencies have instituted
    methods to estimate improper payments in programs they manage.
    The current estimate of total improper payments in the Federal
    Government is $35 billion and, as you just said, there are many
    of us that believe that is just the tip of the iceberg.
        One only needs to look at Medicare, where improper payments
    under that system are estimated at $13 billion a year, and this
    is only a partial examination of that program.
        Medicaid, which provides health insurance for the poor,
    however, is administered by the State, making it very difficult
    to estimate improper payments in each system. Tennessee's
    expanded Medicaid program, known as TennCare, is now serving
    about 25 percent of Tennessee's population. This $6 billion a
    year program, out of a $21 billion a year State budget,
    consumes one third of that State budget, and since its
    inception in 1994, its financial management and lack of
    consistent payments to providers has been severely criticized.
        Although waste, fraud and mismanagement occur in almost any
    State or Federal program, the magnitude of TennCare's
    expenditures most probably require extensive steps to be taken
    to control improper payments. Most notably, provider fraud has
    been identified as a serious drain of TennCare resources and
    should be addressed without delay.
        Mr. Chairman, today here in Bartlett, we are going to hear
    from representatives of groups that have investigated and
    resolved cases that involve improper payments, both in TennCare
    and the Medicaid program. Their accomplishments may provide
    valuable guidance to Federal agencies and to Medicaid programs
    in other States that are wrestling with this issue.
        I want to thank Barry Mathis from the Department of
    TennCare; William Benson from the Tennessee Bureau of
    Investigation and Holly Williams from the Upper Cumberland Area
    Agency on Aging for being here and testifying today before this
    committee.
        I want to welcome Mr. Williams and Mr. Weems.
        Thank you for the work that you do and I look forward to
    hearing your testimony.
        Mr. Platts. Thank you, Representative Blackburn.
        And before we begin with testimony, it is committee
    practice to swear in all of our witnesses. If we could have the
    witnesses for both panels stand at the same time and anyone who
    would be advising you regarding your testimony here today, to
    stand and take the oath with you. If you raise your right hand.
        [Witnesses sworn.]
        Mr. Platts. Thank you, the clerk will note that all
    witnesses affirmed the oath and we will proceed to our
    testimony.
        Mr. Mathis, we understand it is Tom--I apologize for the
    misstatement--you go by your middle name.
        We will proceed with our first panel. Mr. Williams, we will
    begin with you followed by Mr. Weems. And then following your
    testimony and questions from Representative Blackburn and
    myself, we will proceed to panel two. Would you like to begin?

     STATEMENTS OF MCCOY WILLIAMS, DIRECTOR, FINANCIAL MANAGEMENT
     AND ASSURANCE TEAM, U.S. GENERAL ACCOUNTING OFFICE; AND KERRY
     WEEMS, ACTING ASSISTANT SECRETARY FOR BUDGET, TECHNOLOGY AND
            FINANCE, DEPARTMENT OF HEALTH AND HUMAN SERVICES

        Mr. Williams. Mr. Chairman and Madam Vice Chairwoman, I am
    pleased to be here today to discuss OMB's guidance to Federal
    agencies on the implementation of the Improper Payments
    Information Act of 2002 and some strategies that Federal
    agencies should consider when planning and implementing actions
    to prevent improper payments.
        Improper payments are a longstanding, widespread and
    significant problem in the Federal Government. As noted in our
    prior reports and testimonies on this topic, there is no clear
    picture of the extent of the problem. Historically, relatively
    few Federal agencies and their components have publicly
    reported improper payment information such as improper payment
    rates, causes, and strategies for better managing their
    programs to reduce or eliminate these payments. This past
    April, OMB estimated improper payments to be about $35 billion
    annually for major Federal benefit programs that made payments
    in excess of $1.2 trillion annually.
        The Improper Payments Act, which this subcommittee
    sponsored, defines improper payments as any payment that should
    not have been made or that was made in an incorrect amount.
        The act requires OMB to prescribe guidance for Federal
    agency use in implementing the act. OMB issued this guidance in
    May of this year. As with any legislation or implementing
    guidance, the ultimate success of the Improper Payments Act
    hinges on each agency's diligence and its commitment to
    identify, estimate, determine the causes of, take corrective
    actions and measure progress in reducing all improper payments.
        OMB's guidance addresses the specific reporting
    requirements called for in the act and lays out the general
    steps agencies are to perform to meet those requirements.
        For years, we have recommended that OMB develop and issue
    guidance to Federal executive agencies to assist them in
    developing and implementing a methodology for annually
    estimating and reporting improper payments and for developing
    goals and strategies to address improper payments. We believe
    the Improper Payments Act guidance is a good start in this
    area.
        Because of the magnitude of improper payments and the
    actual and potential impact these payments can have on Federal
    programs, it is essential that agencies develop appropriate
    methodologies for identifying and measuring improper payments,
    identifying cost-effective actions to correct them,
    implementing those actions and periodically reporting improper
    payment-related information to agency managers, the Congress,
    and the public through publicly available documents. Our prior
    work has demonstrated that attacking improper payments problems
    requires a strategy appropriate to the organization involved
    and its particular risks, including a consideration of the
    legal requirements surrounding security and privacy issues.
        In October 2001, we issued an executive guide that provided
    information on strategies used successfully by public and
    private sector organizations to address their improper payment
    problems. We found that the Federal, private sector, State, as
    well as foreign entities using these best practices, shared a
    common focus of improving the internal control system over the
    program or activity that experienced improper payments.
        We are seeing important leadership and action--both from
    the Congress and from the administration--to address the
    improper payment problem. However, the reduction or elimination
    of the government's improper payment problems will not be quick
    or easy. I want to emphasize our commitment to continuing our
    work with the Congress, the administration and Federal agencies
    to ensure that improper payments are fully addressed
    governmentwide, and that actions are taken to reduce or
    eliminate the government's vulnerabilities to the significant
    problem of improper payments.
        Mr. Chairman, this completes my prepared statement and I
    will be happy to respond to any questions.
        Mr. Platts. Thanks, Mr. Williams. Mr. Weems.
        [The prepared statement of Mr. Williams follows:]
        [GRAPHIC] [TIFF OMITTED] 90581.003

        [GRAPHIC] [TIFF OMITTED] 90581.004

        [GRAPHIC] [TIFF OMITTED] 90581.005

        [GRAPHIC] [TIFF OMITTED] 90581.006

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        [GRAPHIC] [TIFF OMITTED] 90581.011

        [GRAPHIC] [TIFF OMITTED] 90581.012

        Mr. Weems. Good morning, Mr. Chairman; good morning, Madam
    Vice Chairwoman and members of the committee.
        I am honored to have been asked to provide testimony today
    as a followup to testimony before this committee on May 13.
    Today, I will be addressing HHS' efforts to reduce erroneous
    payments, fraud and abuse in the Department's programs,
    especially those related to Medicare and Medicaid. As you are
    aware, the partnering of the Federal Government and State
    governments is critical to achieving success in reducing
    erroneous payments in State-based programs. This is a wonderful
    forum to bring together some of our partners from the States. I
    look forward to hearing their testimony and learning from them.
        One of HHS's foremost strategic goals is achieving
    excellence in management practices. Under Secretary Thompson's
    leadership, we have undertaken a robust program of identifying
    improper payments across many programs, taken appropriate
    management actions to reduce the incidents of improper payments
    and are exploring and developing innovative ways to increase
    compliance.
        HHS consists of 12 operating divisions that manage more
    than 300 programs, all with diverse missions. In fiscal year
    2002, HHS was held accountable for $493.4 billion in outlays.
    Seven of the Department's programs--Medicare, Medicaid, SCHIP,
    TANF, Child Care, Foster Care and Head Start--account for
    nearly 90 percent of those outlays. While the Department
    expects to be reporting erroneous payment rates for these seven
    programs, our initiatives related to Medicare and Medicaid are
    significant because these two programs together account for
    about 80 percent of our outlays.
        Medicare is the largest program. For the Medicare program,
    we have been a leader in monitoring and mitigating improper
    payments. HHS, through our Office of Inspector General, began
    measuring errors in the Medicare program in 1996 and has made
    progressive strides in reducing errors. The fiscal year 2002
    error rate of 6.3 percent is less than half of the 13.8 percent
    error rate estimated in 1996.
        As you are aware, it is not sufficient to only identify
    improper payments. Action is needed to correct errors
    identified and to prevent their recurrence. When we first began
    measuring the Medicare fee-for-service error rate, we
    determined that in nearly all cases, the claim, as it was
    presented to the Federal Government, was processed correctly.
    That is important. The claim as presented to us, was processed
    correctly and accurately. Only through a comprehensive review
    of the sample of claims were we able to detect errors in the
    submitted claim. Because the claim was in error, payment based
    on the claim was also made in error. Our intention is to avoid
    improper by making sure that providers and suppliers are aware
    of Medicare's rules before they submit their claims.
        We believe educating our partners contributed significantly
    to reducing the Medicare fee-for-service error rate by more
    than half over the last 6 years. To bring that error rate down
    further, we have determined that a substantially more detailed
    method is required. This year, the Department is employing the
    Comprehensive Error Rate Testing [CERT] program to calculate
    improper Medicare payments. This will provide a national error
    rate, which we have had in the past as well as an error rate by
    contractor, by provider type and by benefit. Such detailed
    information will allow the Department to more precisely measure
    the error rate, target the intervention at the provider or
    contractor level and better manage contractor performance.
        Based on Medicare's success in measuring errors, the
    Department is well into the process of creating a payment
    accuracy measure in the Medicaid program. Medicaid accounts for
    about 30 percent of the Department's outlays. Federal outlays
    in the program are about $162 billion and the States' share is
    about $122 billion, so a total of about $284 billion is at
    risk.
        Unlike Medicare, Medicaid is administered primarily through
    the States. Each of the States and territorial jurisdictions
    runs its own program. To account for program variation, we are
    taking an incremental approach to the Medicaid error rate. Nine
    States entered the program in the first year 12 States are
    participating this year, and 25 States are expected to
    participate in 2005. It is expected that we will implement this
    program nationwide in 2005.
        In addition to development of the Program Accuracy Model
    [PAM], Medicaid program integrity efforts include use of the
    Medicaid fraud control units. Currently 47 States and the
    District of Columbia have Medicaid fraud control units. These
    fraud control units conduct investigations and prosecute
    providers charged with defrauding the Medicaid program or
    persons charged with patient neglect and abuse. Since the
    inception of the Medicaid fraud control program, the fraud
    control units have convicted thousands of Medicaid providers
    and recovered hundreds of millions of program dollars.
        The Health Insurance Portability and Accountability Act of
    1996 [HIPAA], established the health care fraud and abuse
    program, which funds the Medicare integrity program and
    activities of the FBI and provides an additional pool of funds
    shared between the Department of Justice and HHS.
        In 2002, the Medicare Integrity Program returned $15 for
    every dollar spent in recoveries, claims denials and accounts
    receivable, a total of over $10 billion. Through the use of
    these funds, we have returned $1.4 billion to the Medicare
    Trust Fund in 2002 alone.
        Funding through HIPAA has provided the Department and our
    Office of Inspector General with a stable, predictable funding
    source to detect and prevent errors and to combat Medicare and
    Medicaid waste, fraud and abuse. The funds for the Medicare
    integrity activities have also been used to support our
    activities on error rate methodologies in Medicare, Medicaid
    and SCHIP. Some of those funds also support the Administration
    on Aging initiatives, including the senior patrol projects,
    which you will hear about today in Tennessee.
        The success of our improper payment efforts can be traced
    to five fundamental elements.
        First and foremost, our leadership is committed to the
    initiative. Publicly identifying and correcting errors is not
    without political risk, but the public benefits are enormous.
        Second, creating partnerships with all the parties with an
    interest in the program.
        Third, the Department has a very strong Inspector General
    and a good relationship with the Inspector General.
        Fourth, we actively work with all parties to educate them
    on proper payment and program procedures, especially our
    clients and intermediaries.
        Fifth, where there has been a history of noncompliance with
    statutory and regulatory authority, we have sought civil and
    other legal remedies.
        Between the effort to educate and legal remedies, there is
    a wide spectrum of corrective action that the Department has
    used to reduce improper payments.
        Finally, in the case of fraud as opposed to error, parties
    are prosecuted.
        I hope the information I have provided has been valuable
    today and at this time I would be happy to answer any questions
    that you might have. Thank you.
        [The prepared statement of Mr. Weems follows:]
        [GRAPHIC] [TIFF OMITTED] 90581.013

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        [GRAPHIC] [TIFF OMITTED] 90581.030

        Mr. Platts. Thank you, Mr. Weems and my thanks again to
    both of you for your preparation here today as well as in the
    past and your daily efforts at the Department and at GAO and
    serving our citizens in a great fashion.
        We are going to begin questioning with Ms. Blackburn. I
    yield to the gentlelady for the purpose of questioning.
        Ms. Blackburn. Thank you, Mr. Chairman, and thank you both
    so much for being here with us.
        I think that one of the things that we want to put our
    focus on as we talk with you today and then as the second panel
    comes forward is being sure that we preserve access to health
    care, as well as reducing the overall cost to the taxpayers.
    And one way to do that is to be sure that we are tracking and
    retrieving these improper payments.
        Mr. Williams, a culture of accountability and strong
    internal controls are clearly ingredients of success in
    reducing the improper payments, and I appreciate very much the
    work that GAO has done in addressing that, and in your remarks
    also.
        As part of the process of regularly reviewing and improving
    internal controls, do you think it would be valuable for
    Federal agencies to have audit plans on their internal
    controls?
        Mr. Williams. Yes, I do. We at GAO have strongly supported
    an opinion on internal controls. We believe that this review
    would help identify weaknesses that might exist in the various
    programs that the auditors would be looking at. Our position
    has been that we strongly support it. Not only do we strongly
    support it, but in the audit that we received of GAO's
    financial statements, we received an opinion on the internal
    controls from our auditors.
        Ms. Blackburn. Out of the Federal agencies, how many are
    going through a process of auditing their internal controls?
        Mr. Williams. Well, they all have some form of an audit of
    their internal controls. It is just that there are relatively
    few that receive an opinion. Auditors typically look at those
    controls that they think are material to the financial
    statements or to the financial information that is being
    reported. By looking at those that they think are material, the
    type of report that they issue is less than the one that you
    would receive if you obtained an opinion. It is basically what
    we call negative assurance which means that the auditor is not
    guaranteeing that all of the controls are operating
    effectively, just those that they looked at.
        I would say, to the best of my ability, I can think of
    maybe three or four agencies that receive opinions on internal
    controls. I am not aware of any of the major CFO agencies that
    are currently receiving an opinion on their internal controls.
        Ms. Blackburn. OK. Now the OMB guidance and the new OMB
    guidance on improper payments, does that guidance on improper
    payments address how the agencies should communicate with the
    States that administer Federal programs like Medicaid?
        Mr. Williams. It lays out some initial guidance as to how
    they should communicate. One of the things that we at GAO
    believe will need to take place first of all is that OMB must
    provide leadership in addressing this particular issue. As I
    stated in my testimony, we believe that the guidance that is
    currently out there is a good first step and, as part of that
    process, agencies as well as OMB, in its leadership capacity,
    must work with the States to try to make sure that there are
    control procedures put in place to help reduce the improper
    payment rates and dollar amounts that are currently being
    reported.
        One of the things about a lot of the programs that we have
    identified as having large amounts of improper payments is that
    a lot of the programs are administered by the States. The
    Federal Government must work very closely with those States to
    make sure that they have procedures in place, as we like to say
    at GAO, to first of all try to prevent improper payments from
    occurring. The second process would be to have procedures in
    place that could readily detect them if they have been made and
    have efforts underway to make sure those funds are collected.
        Ms. Blackburn. With the OMB guidance, in your answer to me
    you just stated that ``should try'' or ``should suggest,'' do
    you think that it would be too strong to require the States
    that are administering Federal programs to have an internal
    audit or an audit opinion on the internal controls, over the
    programs that they are administering?
        Mr. Williams. No, I do not think that would be too strong.
    As I said earlier, we have always supported the opinion on
    internal controls and our belief is that would only improve the
    internal control environment from the standpoint of identifying
    those weaknesses. If that step is taken, I can only see
    improvement in the control environments at the Federal level,
    State level or any level that an organization is required to
    receive an opinion on its internal controls.
        Ms. Blackburn. Annually?
        Mr. Williams. Yes, that is correct.
        Ms. Blackburn. Thank you, sir.
        Mr. Weems, thank you for being here.
        Mr. Weems. Thank you for asking us.
        Ms. Blackburn. What kind of guidance do you provide the
    States on how to develop uniform methodologies to estimate
    their improper payments?
        Mr. Weems. Right now in the Medicaid project that we have
    going on with the 9 States and the 12 States, we have just
    gotten back some data that shows some of the approaches that
    the States have taken. A particular State, for instance, took a
    beneficiary-based approach and tracked the beneficiaries
    through the various claims, to check for proper payments there.
        Another State took a provider-based approach instead and
    checked through those providers. We are still examining those
    various approaches to see which might be best in the fee-for-
    service environment. And then there are several States that
    have come in and shown us methodologies for the managed care
    environment and we are looking at those.
        As I said in the testimony, we are going to start with a
    few States and by 2005, we will be doing it with all States. I
    expect that by the time we get to 2005, we will have a firm
    methodology that will be appropriate for the Medicaid fee-for-
    service environment and for the Medicaid managed care
    environment I expect that we will also put those methods in
    place through rulemaking, so there will be a requirement of the
    Medicaid program to follow the payment accuracy measures that
    we find appropriate.
        We are taking a staged approach with our State partners,
    but as we refine and receive information from them, we expect
    to go to rulemaking for payment measures.
        Ms. Blackburn. Let me ask you this, in your testimony, you
    mentioned that the error rate had gone from, I think it was
    13.8 to 6.3.
        Mr. Weems. Yes, ma'am.
        Ms. Blackburn. What would be a--and of course, that seems
    so high. What do you think would be a more expected error rate?
    What is your goal for moving it down to and what is your time
    line for getting the error rate down? We know zero is where it
    ought to be, but what is your time line on that?
        Mr. Weems. Our goal for 2002 was to be at 5 percent. We did
    not get there.
        Ms. Blackburn. OK.
        Mr. Weems. In 2008, our goal is 4 percent in the fee-for-
    service part of Medicare. We have laid out these goals and to
    achieve them, we are going to have to go to the more robust
    sampling environment that I described. Whereas before we were
    drawing between 4,000 and 7,000 cases to look at, now we are
    going to draw 120,000 cases. This will give us the ability to
    look at a particular Medicare contractor and say is there a
    problem with this contractor? Why does this contractor have a
    2-percent error rate for the same set of services and this one
    has 8? The management tools that gives us are enormous.
        It will also give us the ability to compare by type of
    provider. We will be able to look by type of provider and say
    what is it with this particular provider, this type of provider
    where our error rate is so high? Do we need some kind of
    intervention like better education, or additional financial
    controls? It gives us a depth and breadth of a look at the
    Medicare program that we have not had before.
        Ms. Blackburn. In the work that you have done so far in
    looking at the beneficiary, the provider or the MCO, where do
    you find that the error most often does originate? Is it
    originating--where do you find the initial mistake?
        Mr. Weems. Well, first of all, for managed care
    organizations in the Medicare program, we think that our
    financial controls are pretty good. We do not see a lot of
    errors there because since that is a capitated payment, we
    basically make sure that the enrollment is accurate.
        A lot of our errors in the initial part of the program came
    from what we would call documentation errors. In the Medicare
    program, you submit a claim to the government, we do some
    prepayment review to make sure that there is not something
    really odd in it, such as somebody having their appendix
    removed twice in the prepayment part. And then we pay it. It is
    not like other government services where you order something
    and you get something in inventory and you can go check it. We
    pay the bill.
        When we began testing, one of the biggest sources of error
    was documentation error. We would go to the provider and say
    OK, we have this claim, can we see the file to see if you
    actually did this. And there would be errors or missing
    documentation. The service may have been provided correctly and
    it may have been paid correctly, but without documentation, it
    is classified as an error.
        In 1996 provider documentation errors were about 47 percent
    of the total error rate. Now they are down to about 28 percent.
    So by working with them we have been able to move the medical
    establishment to provide better documentation. We find that to
    be quite exciting.
        Right now, in 2002, having reduced those documentation
    errors, we are left with medically unnecessary services. In
    2002, medically unnecessary services accounted for about 57
    percent of the error rate. That is a place where we are going
    to have to do more to make sure that the services offered to
    Medicare beneficiaries are appropriate and that we pay for them
    appropriately. We expect to have even more information about
    that, maybe by the particular type of service, where we can
    target our efforts further.
        Ms. Blackburn. You had mentioned education programs I guess
    with the providers.
        Mr. Weems. Yes, ma'am.
        Ms. Blackburn. If you would speak very briefly just to the
    type of education and outreach that you are doing to try to
    reduce the risk.
        Mr. Weems. That outreach largely occurs through our
    Medicare contractors. The contractor itself will work with the
    providers in the area who are submitting claims, to tell them,
    sometimes through calls, sometimes through letters, exactly the
    kind of documentation that is required, to keep them informed
    of changes. In some cases it is not just working with the
    providers themselves, but it is also working with billing
    services to make sure the bill is coded correctly and that
    there is sufficient documentation behind it.
        Ms. Blackburn. Thank you, sir.
        Mr. Weems. Thank you, ma'am.
        Ms. Blackburn. I yield to the Chair.
        Mr. Platts. Thank you. Mr. Weems, continuing maybe where
    Ms. Blackburn left off on the error rates, you mentioned you
    are at 6.3 now, you were hoping to get to 5 percent and then 4
    percent. Have you done an estimate--I mean, as Ms. Blackburn
    said, in the perfect world, it is zero, but that is not reality
    in the sense of, you know, unintended consequences, unintended
    acts will have some improper payments, but is there a number
    that you are shooting to ultimately as you progress, that you
    expect?
        Mr. Weems. Well, I do not think that we have yet estimated
    what the irreducible minimum would be; 4 percent is a good
    goal. I think once we get back information from the sample of
    120,000 claims we will be able to say can we go to 3 percent,
    can we go to 2 percent? What type of gaol is possible?
        Right now our goal is 4 percent by 2008, but once we have a
    little more information, we will see what that irreducible
    minimum is.
        Mr. Platts. My understanding--and I do not have all the
    details, but in the private sector, to use an example, Wal-Mart
    Co., what was found in their errors of payments to other
    businesses that they deal with, have it down to a 0.1 percent
    error rate, which is about as close as you can get. That would
    mean a lot of dollars in savings if we ever got to that.
        Mr. Weems. Yes, sir, that is certainly desirable. I just
    want to make sure that in doing that, we compare apples to
    apples. Even though we may have, as I said on the documentation
    errors, paid a claim correctly and the service was rendered, if
    the doctor or provider does not have the documentation, then we
    count that as an error. But certainly moving down to even below
    1 percent is a challenge that we should give ourselves.
        Mr. Platts. I imagine with the providers, as they know that
    you are looking at coming up with 120,000 instead of 4000, the
    more they know everything is going to be scrutinized, the more
    incentive for them to have all their documentation lined up and
    not able to be questioned.
        Mr. Weems. Actually, Mr. Chairman, this is a source of some
    worry for us. Under the previous samples that we were drawing,
    the Inspector General was arriving at the provider's door and
    asking for that documentation. The incentives to respond to the
    Inspector General are high.
        For our larger sample, CMS is managing that through a
    contractor. Whether or not a provider will say, I will go ahead
    and photocopy this file, take my office time, and send it to
    you, for a $25 office visit, we are not sure. It is possible
    that we will see an increase in documentation errors simply
    because we do not have the force majeure of the Inspector
    General standing at the provider's door. I think that once we
    get to November 15 and publish our error rate, we may have an
    increase in documentation errors for that reason. We are just
    going to have to look at that.
        Mr. Platts. Those providers would be required to provide
    that documentation to the contractor the same as if the IG, but
    the threat of court action not being the same is your worry?
        Mr. Weems. That is right.
        Mr. Platts. And that is, I assume, part of your education
    efforts with those providers?
        Mr. Weems. Yes, and we also expect after the first year to
    publish error rates by contractor. With that error rate, we
    expect to be able to point to a contractor and say you simply
    have to do a better job. You are going to have to go get this
    documentation.
        Mr. Platts. That actually leads to my next question. With
    the error rate now being 6.3, the most recent number being 6.3,
    what would be your knowledge about the highest rate of any one
    contractor right now, that averaged out for that 6.3?
        Mr. Weems. The 6.3, which came from 2002, was not
    statistically significant for any contractor. In fact, it did
    not give us the ability to impute an error rate by contractor.
        Mr. Platts. OK, still in that small number of 4,000 or so?
        Mr. Weems. That is right, so by the time we get to November
    15 of this year, we will have the statistically significant
    data by contractor, by provider type.
        Mr. Platts. Is there--as you get to that by contractor
    rate, is there a plan to have either incentives for low rates
    or specific repercussions if you are not meeting certain rates?
    Is that envisioned in the contracts for the future?
        Mr. Weems. Mr. Chairman, we certainly will work with our
    contractors to reduce those rates, but we are not in what they
    call a FAR environment, the Federal Acquisition Regulations
    environment, for our Medicare contractors. They are covered
    separately under the statute and our requirements for them are
    quite different.
        The administration has proposed contractor reform year
    after year which would give us the ability to use something
    other than cost contracts with our contractors. For instance,
    for the Part A contractors, to use something besides provider
    nomination, for us to be able to contract and compete on the
    open market for people who can provide contracts for us. So our
    ability to persuade our contractors to provide the kind of
    service that we need is not the same as if we were in a
    competitive Federal Acquisition Regulation environment.
        Mr. Platts. And what would be your assessment of the
    opposition to giving you that change, that added flexibility?
        Mr. Weems. It is difficult to say exactly why somebody
    might not want that. Many of the contractors we have are people
    that the providers know and trust and have worked with over
    many years and as with any change, people resist change.
        Mr. Platts. The rate you have, the 6.3, is just for
    Medicare now and with your payment accuracy measure that you
    are now working through in the 9 States and 25 States coming
    up, I assume it is fair to guesstimate at this point that the
    error rate is at least equal to 6.3 percent in the Medicaid, or
    is it not fair to even make that assumption?
        Mr. Weems. Mr. Chairman, it is difficult for me to say
    without really seeing the data. The last time that we ran a
    national error rate for Medicaid was with the old MEQC program,
    the Medicaid Eligibility Quality Control program. I believe the
    last time that we did it, it was in the 2-percent range, but I
    believe that was 1992.
        A lot of changes have occurred in the Medicaid program
    since then, especially with the growth and advent of managed
    care, which creates different kinds of incentives for errors
    and for fraud.
        So I would hate to speculate.
        Mr. Platts. With it being 11 years since you have done a
    national, is there thought to doing a new one today to get a
    benchmark as you are working with the individual States or is
    it to focus on the individual States' efforts solely?
        Mr. Weems. That is the purpose of our payment accuracy
    measure. At the end of 2005, we intend to have a national
    Medicaid error rate and one for each one of the States.
        Mr. Platts. Under the payment process, is your goal at the
    end to have just worked with each State individually or to
    establish a uniform system for identifying improper payments in
    Medicaid?
        Mr. Weems. I would say as uniform as possible, Mr.
    Chairman. Some States are in a fee-for-service environment,
    some are in managed care. So something that accounts for that
    variability. But as I said, we are considering doing this
    through regulation and that will not leave a lot of room for
    variation.
        Mr. Platts. I take it that what you are looking at with
    States now is kind of just trying to get a handle on what is
    the best practice out there?
        Mr. Weems. That is exactly right, sir.
        Mr. Platts. In whatever State and then how that would
    perhaps apply to all 50?
        Mr. Weems. That is exactly right. The States have a lot of
    good people working for them. The States have an almost equal
    financial interest in controlling improper payments. They are
    the ones that are going to have to administer this, so we
    wanted to start with a few, rely on their thinking, hone in on
    the ones that are best, most appropriate, and then go with
    those.
        Mr. Platts. Following up on Ms. Blackburn's question about
    what guidance you are giving States with Medicare, how about
    with other programs, I guess it is seven in total that make up
    90 percent of your disbursements through HHS. In response to
    the OMB guidance to you, are you now in the process of
    developing guidance that you are going to share with each of
    the States for the programs within HHS?
        Mr. Weems. Yes, as PAM, the program accuracy measure, moves
    out, we will begin working with the States more to let them
    know the direction that we are headed. That will also apply to
    the SCHIP program, which will be covered.
        Two of our programs require legislation for us to measure
    TANF, Temporary Assistance to Needy Families, and the Foster
    Care program.
        The Head Start program as it is currently implemented is a
    direct grantee program, so we will work with those grantees.
    However if the President's proposal on Head Start passes, there
    will be significant State involvement and we will have to work
    with those States. So we are anxious to see the outcome of that
    as we move to improper payment measurements in Head Start.
        In Child Care right now, we are relying on the single State
    audits. We have notified the States that this is at least our
    initial take with them on how we will do that.
        Mr. Platts. With the Foster Care and TANF, I'm not aware of
    specific legislation----
        Mr. Weems. The conference has not received it, sir. We are
    still working within the administration to finish up that
    legislation and send it to you.
        Mr. Platts. That is something that this subcommittee
    certainly would be glad to work with to help promote and to
    really ensure that we have that authority to go out and do what
    we all want, which is to, whatever the program is, make sure we
    are being wise and responsible in the expenditure of those
    dollars.
        Mr. Platts. Mr. Williams, I do not want you to think we
    forgot about you over here.
        We have the guidance that is now out from OMB and we have
    the Improper Payments Act and through various departments, in
    this case HHS, going out to States, what do you see from the
    GAO perspective is going to be the greatest hurdle in actually
    achieving results for the individual departments or agencies in
    getting as definitive an assessment of improper payments and
    then how to control them as possible.
        Mr. Williams. One of the key areas that we would look at
    would be to make sure that the agencies have the resources that
    they need to properly go about carrying out the regulations and
    the act. I think that, in the OMB regulations, there was a
    provision that once agencies go through this process, they are
    to report back if they have various problems in carrying out
    the act, and one of the categories I think that is addressed in
    that is to identify if you have a resource need to implement
    the requirements of the act and the regulations that OMB has
    put out. So I think that is something in one area where I would
    anticipate that you would be getting some responses back--that
    we need the resources to carry out this process.
        Mr. Platts. Just manpower, people in place to actually
    implement whatever the program is.
        Mr. Williams. That is correct.
        Mr. Platts. In the specific guidance that has been issued
    by OMB and where disclosure by the department or agency has to
    be made, the guidance talks about being I guess a mandatory
    reporting if the amount of overpayment or wrongful payment,
    improper payment exceeds $10 million and 2.5 percent of the
    threshold of the program's disbursements. The act only talks
    about the $10 million threshold. And the example is I guess the
    Old Age and Survivors Insurance and Disability Insurance
    programs have error rates of less than a percent, but in total
    amount, over $800 million.
        What is GAO's position on the guidance, the language in the
    guidance that has been issued to HHS and everybody else, having
    that second qualifier in there, the 2.5 percent?
        Mr. Williams. That is an area that in our response to OMB
    when it issued the draft, was that by having the ''and`` in
    there, that you could run into a scenario in which you would
    have a huge program of several billion dollars and you could
    have improper payments that exceeded $10 million but fell under
    that 2.5 percent criteria. So what I would suggest, given the
    current guidance, is that each agency should use what I would
    call good business management practices and while it might not
    fall within that 2.5 percent criteria, that you still should
    follow the intent of the legislation. In addition to that, I
    think that we at GAO and the Congress also probably need to
    work with OMB to take a look at this particular component,
    because there could be a huge gap there in a particular
    program.
        I do not want to speak for OMB, but one of the things that
    comes to mind is that when the regulations were put together,
    there is the possibility that they were looking at a scenario
    in which you had a program that might have only had total
    obligations or outlays of $10 million or less and, when you
    start taking the 2.5 percent, you are hitting some programs
    that would be relatively small. I guess you do not want to get
    into that concept of I am going to spend a dollar just to
    collect 50 cents by hitting some of these smaller programs.
        But you still want to make sure that every program is given
    an opportunity to go through this assessment and, if there is
    $1 that has been improperly spent, the goal should be to try to
    collect that money. But I think this is an area that we need to
    take a look at because there is the potential for a program to
    fall under that 2.5 percent but still be a huge dollar amount
    of improper payments.
        Mr. Platts. ''And`` versus ''or`` is a huge difference.
        Mr. Williams. That is correct.
        Mr. Platts. And I do read the guidance as being contrary to
    the intent of the act, which was $10 million. If they wanted to
    broaden it by having ''or`` so that if it is a smaller program
    and``
        Mr. Williams. Right.
        Mr. Platts. --``Or`` catches smaller programs, but
    excessive percentage, that would be within the intent of the
    act.
        Mr. Williams. That is correct.
        Mr. Platts. But to have an ''and`` is tightening it up not
    as anticipated or planned by Congress and is something we do
    need to look at. You know, if you look at DOD department-wide
    taking up a $400-plus billion budget, 1 percent would be, you
    know, $4 billion in total.
        Mr. Williams. That is correct.
        Mr. Platts. Which is well above $10 million, but only in
    percentage points below the 2.5. So it is something that I
    think we as a committee in working with GAO and OMB need to
    have them give some additional thought to that ''and`` versus
    ''or`` in that guidance.
        Mr. Williams. I agree.
        Mr. Platts. Ms. Blackburn, did you have further questions?
        Ms. Blackburn. Yes, I think I would like to come back to
    Mr. Williams right there on this question talking about the OMB
    directive.
        In looking at the best practices, in that memo of October
    2001, to your knowledge, how many States or are any States
    implementing these best practices in administering their
    Medicaid programs?
        Mr. Williams. I am not aware of the number as far as how
    many States are actually implementing the best practices, but
    our goal is to make sure that the information is provided as
    broad as possible because we believe that these techniques are
    going to be some of the things that every State will need to
    use in order to address this improper payments issue. I would
    like to say, not just from the States' standpoint, but, from
    other Federal agencies, I think HHS has taken a leadership role
    in addressing the improper payments issue. Just listening to
    the statement this morning, there are a lot of examples of best
    practices. I think other Federal agencies as well as State
    organizations should be provided with and implement as many of
    these best practices as possible, because, where entities have
    implemented these best practices, we have seen declines in the
    improper payment rates. Best practices should be as broadly
    disseminated as possible.
        Ms. Blackburn. In one of your previous reports, in a
    previous GAO report and presentation, as we were talking about
    best practices and time lines and goals, it was mentioned that
    some of the agencies change their goals and objectives and that
    it makes it very difficult to track their progress.
        Let me ask you this, is this a tactic that some of the
    agencies use to avoid reporting the true amount of improper
    payments that they have?
        Mr. Williams. I think it was a process in which agencies
    were trying to figure out how best to report the information
    that was required under the Performance Act. I do not think it
    was an effort to mislead anyone on what the actual rate or
    amount of improper payments were at organizations. It was just
    an attempt to better report performance information. So I think
    that was more the focus and as a result of improving the
    efforts to address the Performance Act, it caused some of these
    changes.
        So I do not think it was an intent by the agencies.
        Ms. Blackburn. To your knowledge is the TennCare program
    following the best practices in the October 2001 memo?
        Mr. Williams. I am not aware of all of the components of
    it, but I would strongly encourage them to follow as many as
    they possibly can. That would be GAO's position, you know, that
    they should follow as many as possible in any area that is
    available to them.
        Ms. Blackburn. Thank you, Mr. Williams.
        Mr. Weems, as you know, I love to ask questions that point
    to technology and that is kind of your area. As we are talking
    about trying to get the error rates down and minimize the
    improper payments, is HHS looking at some type integrated
    technology that would allow immediate reporting or would allow
    to interface information from the States or from some of the
    contractors directly back into HHS? And if the answer to that
    is yes, then what is the time line for implementation? And the
    third part of this question is are you looking at a way to
    carry that back down to the beneficiaries in the States with
    any kind of electronic transmission or smart card or magnastrip
    of information and benefits?
        Mr. Weems. Well, thank you for asking the question. It is
    rare that we get a question like that and it gives me the
    opportunity to talk about something that Secretary Thompson
    insisted on the moment he arrived in the Department. And that
    is, right now we have inside of HHS five different accounting
    systems. Getting a clean opinion every year means that we have
    to go through and produce a statement based on those five
    systems this requires a lot of manual work and a lot of
    compromises along the way.
        We are building a unified financial management system
    inside of HHS. A key component of that is a piece called the
    Healthcare Integrated General Leger Accounting System [HIGLAS]
    which will be the health care component inside of CMS. That
    component will not only account for funds, but it will be the
    payment mechanism that the contractors will use. Therefore,
    each one of the contractors will be on the same accounting
    system, bringing information back to CMS central, back to a
    unified accounting and reporting system that is directly linked
    to the payments.
        Ms. Blackburn. And that is shared with the States, they
    would be integrated?
        Mr. Weems. This is on the Medicare side right now.
        You asked about a time line. We will be piloting this with
    two of our big contractors this fall, so we are on a very
    aggressive schedule on this side. On the non-health side right
    now, the National Institutes of Health [NIH] are in the process
    of doing acceptance on their component of the system. The NIH
    System will be the system of record, starting October 1 for the
    next fiscal year. For the balance of the Department, we will be
    completing some pilot testing and begin implementation of the
    system in 2004.
        We will have, for the Department, a completely integrated
    system that will comply with the financial reporting rules by
    2007. 2007 seems perhaps a long ways away, but building a
    system like this is difficult, it is complex and unfortunately
    it is high risk. Something that we do not want, is a
    spectacular failure. Some agencies have had some failures in
    building an accounting system. We do not want to be part of
    that. So we expect to be compliant in 2007 with our system.
        With respect to the beneficiaries, it is not expected to
    reach that far. It will stop at the State and at the contractor
    level, but we will still be able to see and have better
    information about our beneficiaries in that system.
        Ms. Blackburn. Thank you, Mr. Weems. Thank you, Mr.
    Chairman.
        Mr. Platts. Mr. Weems, if I could followup on the testimony
    you just gave there. You said compliant by 2007?
        Mr. Weems. Yes.
        Mr. Platts. And that is within HHS, for all of your
    systems.
        Mr. Weems. Yes.
        Mr. Platts. But at this point, as to the Medicaid program,
    there is not thought at this point as far as having States be
    required to use the same accounting program that you are using
    for Medicaid, given that two thirds of the dollars are roughly
    coming from the Federal Government?
        Mr. Weems. It will be linked to the States, but not to the
    State payments themselves. We provide grants to the States, the
    States actually draw the dollars on a daily basis, based on
    need, under the Cash Management Improvement Act.
        Our ability to see beyond that in the accounting system is
    limited and States probably would ask that we draw the line
    there anyway. We will have to work with them through a
    measurement program to assess the overall accuracy of the
    program.
        I think it would be difficult to extend a Federal system
    down into, for instance, State managed MCOs.
        Mr. Platts. And the PAM system would relate more to the
    accuracy of whatever system they have in place.
        Mr. Weems. Yes, correct, sir.
        Mr. Platts. And I appreciate your caution about other
    agencies, that have not been as successful, as we discussed at
    dinner again last night, and our disbelief at some of the
    testimony--not the testimony, but the facts regarding DOD and
    the literally billions of dollars that have been spent on
    trying to come up with a consistent and uniform accounting
    system and them still being, as GAO has testified, probably 8,
    10 years away, if all goes well.
        We do not want to have that repeated and the fact that you
    are trying to be deliberate and thoughtful so that if it takes
    an extra year or two but you get it right, that is something
    that as a committee we certainly embrace and support that
    approach.
        Mr. Weems. Thank you.
        Mr. Platts. We do not want to be starting over 2 or 3 years
    down the road and saying well, let us try again.
        I am going to jump back to Mr. Williams. With the focus in
    the release of the guidance from OMB in May and passage of the
    act last fall by Congress, the Improper Payments Act, there
    certainly is more scrutiny now, but it has really been an issue
    that has been part of the President's management agenda from
    the beginning of this administration. Is there any one agency
    that is kind of leading the charge, in GAO's opinion, in
    identifying improper payments? And if you could point to it as
    a role model that is really out there and showing us how to do
    it?
        Mr. Williams. Yes. As I stated earlier, I think HHS has
    taken the lead and is coming up with methods and procedures to
    identify their improper payments. I would say thats through the
    various councils and improper payment working groups OMB
    directs, some of the things that we have heard today, other
    agencies should be listening to and taking those concepts and
    thinking about how they can apply some of them to their
    particular operations. There are numerous types of programs in
    the Federal Government and you just can't take one example and
    move it to another agency in some situations, but you can take
    those concepts and those ideas that we have heard about, for
    example, this morning, and just think about it and say how can
    I apply that. How can I use that to get my agency to come up
    with a method in which I can try to identify my improper
    payments and come up with procedures and controls that I can
    put in place to help reduce my improper payment rate?
        Mr. Platts. The working groups you are referencing are ones
    within HHS?
        Mr. Williams. No. This is under the CFO council.
        Mr. Platts. Oh, I see, the CFO working groups.
        Mr. Williams. The CFO working groups, which would include
    OMB as well as the CFO agencies.
        Mr. Platts. And that is some of the intent behind the
    Improper Payments Act and the identification of what the error
    rates are kind of goes to the same with providers, if it is
    public knowledge, there is scrutiny and pressure to improve
    those rates and that goes for our agencies and departments as
    well.
        Mr. Williams. That is correct.
        Mr. Platts. Secretary Thompson wants to not be sitting
    there with a higher rate than his colleagues around the Cabinet
    table.
        Mr. Weems. Neither do I want that. [Laughter.]
        Mr. Platts. I am sure.
        Mr. Williams. Well, as I have stated in previous testimony,
    one of the things that you have to be careful with in just
    looking at an absolute grade, a 6-percent rate in one agency
    might be a tremendous story, whereas a 2-percent rate in
    another agency might not be all that great. So you have to take
    it on an individual basis and look at the inherent risks in
    various programs. You know, is this particular program more
    susceptible to an improper payment occurring. There are several
    factors that you would have to look at in addition to that
    absolute number or rate that agencies are reporting.
        Mr. Platts. I think it is somewhat staggering where we are
    coming from, that 6.3, that it is half where we were 7 years
    ago, I think that was 1996, what you were comparing it to. And
    13-plus percent in the size of the program of Medicaid,
    Medicare, is a huge sum and if it was that, from a dollar
    sense, you know, dramatic difference. I mean in HHS, you have
    most of the big disbursements and so error rates in your
    programs, from a taxpayer standpoint, have the greatest impact.
        Mr. Weems. That is right.
        Mr. Platts. What is the word, Mr. Williams, from GAO's
    perspective as we use technology, and Ms. Blackburn's question
    on how technology is helping us and as you say, kind of drill
    into the detail more with technology and data mining.
        Is there a concern from GAO as you use technology and the
    process of data mining, from the privacy standpoint, whether it
    be providers or beneficiaries, that we need to be very cautious
    about.
        Mr. Williams. Well, one of the things that we think the
    agencies need to be aware of is that there are privacy issues.
    And agencies who face those barriers, such as privacy issues,
    should work with the Congress and work with OMB to see if there
    are alternatives or other things that could be done to work
    around these barriers. We definitely want the agencies to be
    cognizant and to take into consideration any laws and
    regulations that address privacy issues, but if there are
    things that can be done in order to work around them to help
    reduce the improper payment rate or dollar amount, then that is
    what we will be encouraging them to do.
        Mr. Platts. Mr. Weems, could you touch on that as far as
    how you are looking to be cognizant of these privacy issues?
        Mr. Weems. We are careful to protect the privacy issues,
    especially of our beneficiaries. And in the case of our
    providers, we certainly do not want to improperly accuse
    somebody. So we are going to be particularly careful with our
    providers as individuals. We are going to publish by provider
    type, not by individual provider, to start with. So we are
    going to be careful.
        And also, as we move into other programs, we are going to
    require a high standard of care. For instance, in the Head
    Start program our challenge is going to be tracking a child's
    eligibility as their family's living and working circumstances
    change. For example, somebody got a job, somebody moved into
    unemployment or something like that--the eligibility of the
    child might change. We are certainly going to protect the
    privacy of the beneficiaries in that case as we work with our
    individual grantees to look at payment accuracy.
        Mr. Platts. Question, Mr. Weems, it's related but it's a
    little bit maybe outside the realm of what we were envisioning
    today. With the amount of payments made by HHS to providers,
    whether it be Medicare or other programs, but especially
    Medicare, can you share with us--that goes to ensuring that
    payments that are being made to providers are not to providers
    who have debt to the Federal Government? Whether it be tax
    liabilities or other programs. We have tried to focus on that
    in a previous hearing as a committee in that if someone is
    owing taxpayers' money that we are not making a payment to
    them--that we are catching that payment to satisfy their debt.
    What are you able to share with us?
        Mr. Weems. I cannot speak to other debts like a tax debt,
    but if providers owe us a debt, we just offset subsequent
    payments to them.
        [The information referred to follows:]

        CMS has financial controls and edits checks in place to
    recoup outstanding Medicare debt owed by providers. That debt
    is fully recovered before the provider is paid future payments.
    Also, debt that is 180 days old is referred to Treasury for
    further collection efforts. Treasury handles all other types of
    federal debt owed by a provider thru Treasury's Cross serving
    and Offset Program. Currently, CMS can only determine Medicare
    debt.

        Mr. Platts. Is there an effort to try to work with
    Treasury--the testimony we had was about establishing a data
    base so that all agencies, governmentwide can tie into it, and
    if there is a tax liability here and you are providing a
    payment to this provider, but he is $100,000 or whatever
    institution or individual, that would catch that. Technology
    certainly should allow that to happen in a more straight-
    forward fashion.
        Mr. Weems. None that I know of, but that certainly is
    something that the government has undertaken on loans and other
    things in the past. Even other responsibilities of being a
    citizen like signing up for selective service where that is a
    requirement for eligibility for certain benefits.
        Mr. Platts. It is something that hopefully, as Treasury
    increases their efforts, it will get into, especially programs
    of the size of the payments we are talking about with HHS, that
    there is a close correlation.
        Ms. Blackburn, did you have other questions?
        Ms. Blackburn. I have a couple for Mr. Weems, if I can take
    just a moment of his time before we move to talking
    specifically about TennCare.
        What monitoring has been done by CMS over the TennCare
    program?
        Mr. Weems. CMS monitors the program largely through the
    regional office. That staff is in Atlanta. I am not prepared to
    speak specifically to any direct action that we have with
    respect to TennCare monitoring.
        Ms. Blackburn. Has the Department of TennCare submitted
    annual reports on their waiver quality?
        Mr. Weems. I do not know the answer to that. I will provide
    that for the record.
        [The information referred to follows:]

        Since the inception of the TennCare Demonstration Project,
    CMS has monitored it continuously, including quarterly and
    annual reports, submitted by TennCare, related to quality and
    all aspects of the program. The monitoring activities include
    onsite visits, discussions with beneficiary advocacy groups,
    participation on work groups to reform the program, and
    reviewing reports prepared by the state.

        Ms. Blackburn. OK. Let me ask you this one, does the
    TennCare waiver meet the requirements of budget neutrality?
        Mr. Weems. We believe it does. Otherwise, we would not have
    agreed to the waiver. The budget neutrality requirement is not
    a statutory requirement, it is an administrative requirement in
    granting waivers. We work with the States to look at a 5-year
    budget. The States are required within their waiver to stay
    within the budget that we have estimated for the State for that
    5-year period.
        Ms. Blackburn. Thank you.
        Mr. Platts. Mr. Weems, I have a followup on that specific
    aspect. In assessing that compliance with that budget
    neutrality, my understanding it is 5 years so that at the end
    of 5 years, they have not received more than they otherwise
    would have received.
        Mr. Weems. Correct.
        Mr. Platts. Is there an annual assessment of that so that
    we do not get 5 years down the line and find out that we are
    way out of balance? It is 5 years in total, but we can keep a
    pretty good track of it. Is that something again that is
    through the regional office?
        Mr. Weems. We do look at it, but because of the changes in
    the program, changes in enrollment for example, we begin with
    an estimate and we look at it over a 5-year period. A year-to-
    year look, I am just not certain that we do that.
        Mr. Platts. The reason I asked it, I will use an analogy
    with the program of Trade Adjustment Assistance where not HHS
    but the Department of Labor program in my home State, that in
    providing assistance in a great program that has benefited a
    lot of my citizens, the way Pennsylvania was administering it,
    they got basically way out in what they were spending or the
    type of programs and what was envisioned by Washington versus
    the State and that had a huge list of eligible recipients but
    they had already spent all their money because of the way they
    approached it. It seems like with it being 5 years, we need to
    have that annual review.
        Mr. Weems. I agree.
        Mr. Platts. And if there is some more information you could
    provide us after the hearing, that would be great, so that we
    are keeping a pretty good eye so that we do not get 5 years
    down the road and be way out of balance and then the pressure,
    you know, in whatever State it may be, would come to you and
    say we need some forgiveness here as opposed to fulfilling the
    actual agreement.
        Mr. Weems. I will be happy to provide that.
        Mr. Platts. OK. Well, if there are no other questions,
    again, Mr. Williams, Mr. Weems, we appreciate your testimony
    here today and very much your efforts day in and day out in
    trying to work with us as elected officials and serving our
    citizens well.
        Safe travels back to Washington.
        Mr. Williams. Thank you.
        Mr. Platts. We will take about a 10-minute break and then
    we will let the second panel get situated and then we will
    begin.
        [Recess.]
        Mr. Platts. I would like to recognize Ms. Blackburn for
    some comments.
        Ms. Blackburn. Thank you, Mr. Chairman.
        As I was reviewing the items that we have just covered--as
    you know, 8 years ago, at the request of the House of
    Representatives and Energy and Commerce Committee, the GAO
    conducted an analysis of the TennCare program during its first
    year of operation in 1994 and that is a letter that I have that
    had gone to Congressman Dingell. And as part of this request,
    GAO examined TennCare's basic design and objectives, the degree
    to which the program was meeting those objectives and the
    experience of TennCare insurers and medical providers and their
    implications for TennCare's future.
        GAO found that while the TennCare program had resulted in
    lowering costs per Medicaid beneficiary, that the medical
    providers were taking large losses under the new system and
    questioned their ability to provide quality service under the
    TennCare program.
        GAO's report was issued 8 years ago and times have
    certainly changed. And in light of the current budget problems
    that many States are facing, the need to make the most
    effective and efficient use of tax dollars and what we have
    heard from our witnesses today, I believe and I hope that you
    will agree that the time has come to ask GAO to take another
    look at the TennCare program and when we return to Washington
    this week, I would like to work with you in preparing a request
    that would go to GAO asking them to review the successes and
    the failures of the TennCare program.
        Mr. Platts. Thank you, Ms. Blackburn, and as we are about
    to start talking about TennCare in specifics, I think the
    request is one that is appropriate. We heard from Mr. Weems
    about the Department of HHS in looking nationally at Medicaid
    from 1992, is the last national assessment of improper
    payments, and as they are working with Tennessee and other
    States through their PAM system to I guess have a Department
    assessment, it seems appropriate that we would come back and
    kind of update what GAO has done in the past, in this case
    specifically with TennCare. And I look forward to working with
    you that we can request GAO to bring up the speed that 1992
    report or 1994 report to current status.
        Ms. Blackburn. Thank you, I appreciate that.
        Mr. Platts. And with that, we will move to our panel where
    we do get a chance to hear more specifics about the programs
    here in Tennessee and again, I appreciate all our witnesses for
    being with us and your preparation for your testimony here
    today and the testimony you have submitted in writing. I
    appreciate the substantive nature of that testimony and the
    insights you are sharing with both of us. Certainly Ms.
    Blackburn has more insights from her State Senate service and
    her current service than I do coming from Pennsylvania. But it
    reads like similar challenges and actually similar States with
    Pennsylvania having some large metropolitan areas, but a lot of
    very rural Appalachia area as well in my State. So I am glad to
    be here and appreciate your testimony.
        I think what we are going to do is begin, Mr. Mathis, with
    you, Mr. Benson and then get to more kind of regional focus
    with Ms. Williams. So if you would like to begin.

        STATEMENTS OF BARRY THOMAS MATHIS, DIRECTOR OF PROGRAM
        INTEGRITY, TENNCARE; WILLIAM A. BENSON, SPECIAL AGENT,
    TENNESSEE BUREAU OF INVESTIGATION, MEDICAID FRAUD CONTROL UNIT;
    AND HOLLY E. WILLIAMS, DIRECTOR, MEDICARE PATROL PROJECT, UPPER
                    CUMBERLAND AREA AGENCY ON AGING

        Mr. Mathis. Good morning, Mr. Chairman and Madam Vice
    Chair. Thank you for the opportunity to be here today. My name
    is Tom Mathis, I am director of the TennCare Program Integrity
    Unit.
        Part of the things I want to start out with is sort of
    laying out some background, give you the mission, who we are
    within Program Integrity, which is to help prevent, identify
    and investigate fraud/abuse and recover dollars within the
    TennCare system.
        Also I think it is a good idea for us to start out by
    defining fraud as intentional deception or misrepresentation
    made by a person with the knowledge that the deception could
    result in some unauthorized benefit to himself or some other
    person. It includes any act that constitutes fraud under the
    applicable Federal and State law. Whereas, abuse is defined as
    provider practices that are inconsistent with sound fiscal,
    business or medical practices and result in an unnecessary cost
    to the Medicaid program, or in reimbursement of services that
    are not medically necessary or that fail to meet professionally
    recognized standards for health care. It also includes
    recipient practices that result in unnecessary cost to the
    Medicaid/TennCare Program.
        Types of recipient fraud and abuse that we see in
    Tennessee: Unreported income or insurance; access to insurance/
    has insurance; living out of State; drug diversion; unreported
    deaths; incarcerated felons; failure to probate estates
    relating to nursing home cost and recovery.
        Types of provider fraud and abuse that we see: Billing for
    services never provided; duplicate billing; over and under
    utilization of health services; over prescribing narcotics;
    balance billing; short filling of prescriptions; billing for
    more expensive services, upcoding, unbundling.
        The methods that we have set up in Tennessee for concerned
    citizens and individuals to report fraud is we have a hotline,
    of course we have a fax, we use a Web site that is interactive.
    They can report on line, they can print the form out and mail
    it to us--multiple ways of getting that information. We will
    take it however we can get it. The informant can remain
    anonymous if they so choose. They can e-mail it or send it to
    us through the U.S. mail.
        One of the issues that I wanted to share with you is this
    bright orange flyer that I hold in my hand. Over 10,000 of
    these flyers have been distributed to health care professionals
    and concerned citizens over the past 3 years. Copies of this
    are available here this morning and we certainly can provide
    additional copies if they are needed.
        This is part of our educational program and we ask the
    individuals that it is presented to that they post this in
    their offices or somewhere to have ready access to it.
        Investigative tools that we use within Program Integrity:
    The Social Security On-Line Query; the Accent system which is
    the DHS MIS system; driver's license/wage files; Choicepoint,
    which is a national investigation data base; vital records;
    Federal Investigations Data base [FID]; the MED-OIG sanctions/
    exclusions; credit reporting bureaus; Department of Defense,
    Military, TRICARE; Medicare.
        Some of the matches that we do in trying to identify
    individuals that may not be eligible to participate in the
    program: We use the Paris match--which is a Federal match
    program; employer matches for those employers who offer
    comprehensive medical insurance to their employees;
    contractors; Medicare; insurance carriers; Social Security
    Death Index; and Tomis which is the Department of Corrections
    in Tennessee's data base.
        As I was listening this morning, I was pleased to hear
    discussions about internal control issues and one of the things
    that we have required in our MCC contracts, they are required
    to develop a fraud and abuse compliance plan.
        I included that in the handout. I do not have the time this
    morning to go through it but as you can see it is quite
    detailed. It talks about all the requirements, the edits and
    responsibility of having internal controls by the contractors
    and their responsibility to report those findings to us in
    Tennessee.
        The other issue that is proactive is legislation updates
    that were needed to address managed care coming into Tennessee,
    the TennCare program. And Representative Blackburn, if I am not
    mistaken, I believe you helped move this legislation, or part
    of it, in 2000 when 71-5-118 was amended and it is now a felony
    offense to commit fraudulent offenses against TennCare. This
    legislation now allows us to go to the district attorneys for
    presenting cases for prosecution. I am going to talk about that
    a little bit more in a minute.
        I also have included an extract from this piece of
    legislation that I wish I could take some credit for, but I was
    not--did not join this unit until June of that year and it went
    into effect in July 2000, but it was an excellent piece of
    legislation.
        Program Integrity Stats, for the year ending June 30, 2003:
    Summary of enrollee cases, we had cases closed of 21,638; we
    recommended terminations of 6,487 recipients. We adjusted on
    other cases where they were eligible and could not be
    terminated, but we were able to adjust income on 171 cases
    causing the premiums to be increased and health insurance added
    on 388 cases, which allowed us to bill the private insurance
    first or the contractor to bill the private insurance first and
    TennCare would be the payor of last resort.
        A summary relating to provider cases: We closed 176 cases,
    we currently have active 67. Cases that were validated and
    referred to the TBI Medicaid Fraud Control Unit was 14. Cases
    that were referred to Health Related Boards was three.
        Success stories related to providers: (a) was revocation of
    a physician's license and $50,000 in civil penalties; (b) U.S.
    attorney's office indicted a physician on 516 counts of drug
    trafficking; physician has pled guilty and sentence is pending.
    This case also lead to two recipients and one pharmacist
    pleading guilty; (c) Probation of license for 1 year with
    supervision of practice and civil penalties and court costs on
    another provider; (d) Three cases are currently pending in
    Federal court; (e) Fourteen cases validated by Program
    Integrity and passed on to TBI Medicaid Fraud Control Unit.
    These cases are in various stages of investigation with several
    awaiting direction and action of the prosecutor; (f) Four cases
    are also being worked with other agencies such as the FBI, HHS-
    OIG and health related boards.
        Success stories related to enrollees: Seven recipients have
    been prosecuted by the DA for drug diversion. Three of those
    were in a previous year. We are testing new legislation and
    moving it forward. This past year we were successful in having
    four prosecutions but it is moving forth again, we have four
    recipients that are currently under indictment.
        We have 45 recipient cases validated and currently under
    investigation by the District Attorney's Drug Task Force Units
    for drug diversion.
        We have one recipient/provider case that was indicted on 22
    counts of fraud, impersonating a licensed insurance agent and
    selling letters of uninsurability.
        Four recipients are currently under indictment for living
    out of State, never lived in the State of Tennessee but claimed
    to for TennCare purposes, and those are awaiting trial.
        Success stories talking about recoveries. Estate recoveries
    relating to individuals in nursing homes who are deceased. We
    have collected $3,007,516. Overpayments to PA 68s which is
    again a nursing home overpayment claim, of $965,830. And
    something that we are just getting into is premium
    underpayments, and going back and doing collections of $30,301.
    That number I think will definitely increase in the years to
    come.
        What I want to talk to you about last--and I was very
    pleased again to hear the interest of this Commission and
    especially of Madam Vice Chair, about technology. This is
    something that we have taken very, very seriously, and in the
    last 2 years have spent a lot of time on.
        What I want to talk about is the fraud and abuse and the
    TPL sections of that. That is the area that my division has
    spent many hours, a lot of time on it and continuing through
    implementation. Very proactive, and I also believe this will
    address many internal control issues.
        This is a most important tool in identifying and working
    fraud and abuse cases, second only to having personnel
    positions to work cases, is the MMIS system. Tennessee has been
    working for the past 2 years plus, as we first developed the
    RFP, bid out, evaluated response, awarded a contract to develop
    and implement a new state-of-the-art MMIS system which will
    include one of the best fraud and abuse identification packages
    in the country. Highlights of this new MMIS system are as
    follows: DSS profilers with utilization patterns, payment
    ranking profile and age and gender status profiling; ad hoc and
    predefined reporting; immediate access to data, and I cannot
    tell you how important that is, because currently we have to go
    back to programmers to run reports for us whereas our
    investigative staff will be able to immediately access the
    data; statistical analysis identifies providers who are four
    standard deviations from the norm; comparison reporting--
    specialty compare, professional group compare, pharmacy group
    compare, nursing home group compare, hospital compare; again,
    profiling and looking at individuals across the State or within
    various regions.
        Targeted queries: Denied services; duplicated services;
    excessive daily billing; fee-for-service claims that may be
    submitted from a capitated provider; financial summaries;
    recipients with no encounters; services provided after date of
    death; upcoding; pharmacy claims without medical visits;
    transportation claims without medical visits; recipients with
    third party liability insurance coverage; recipients reported
    with out-of-state address.
        The last area relates to TPL and subrogation, which the
    committee has not heard discussions on this morning, but I
    think is a very valuable tool because of recoveries of dollars
    that we can bring back in. This also is very, very important.
        We are looking at carrier matches and validations with
    insurance carriers. Employer data matches; wage file matches;
    review of encounter claims to identify TPL; reports to monitor
    success of subrogation by contractors, going back to the
    contractors and asking them to report back to us if they are
    not following up properly on subrogation; MCC electronic
    updates.
        I could go on and on about that, but due to the timeframe
    this morning, I feel like I need to stop there, but this we
    think is extremely important and we are spending a lot of our
    staff time in the development stages. We are currently moving
    into testing and implementation is to occur before the end of
    this calendar year.
        In closing, thank you for your time. I sincerely hope that
    this has been informative and I will be happy to answer any
    questions.
        Mr. Platts. Thank you, Mr. Mathis. We will wait until we
    hear from all panelists and then come back to questions. Mr.
    Benson.
        [The prepared statement of Mr. Mathis follows:]
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        Mr. Benson. Mr. Chairman, Madam Vice Chair, thank you for
    the opportunity to appear before you today to discuss the role
    of Medicaid Fraud Control Units in investigating and
    prosecuting Medicaid fraud and their successes and obstacles.
        I am William Benson, director of the Tennessee Medicaid
    Fraud Control Unit and a member of the National Association of
    Medicaid Fraud Control Units Executive Committee.
        In 1977, Congress enacted legislation creating the Medicaid
    Fraud Control Units to investigate and prosecute Medicaid
    provider fraud and abuse or neglect of patients. Currently all
    States and the District of Columbia, with the exception of
    Idaho, Nebraska and North Dakota have federally certified
    MFCUs. These 48 units police most of the Nation's Medicaid
    expenditures with combined staff of approximately 1,452 and a
    total Federal budget of $119 million. Since fiscal year 1993,
    when there were only 41 federally certified State units, and
    over the next 10 years, the MFCUs have successfully prosecuted
    over 8,700 corrupt medical providers and vendors and elder
    abusers. In fiscal year 2002, the MFCUs obtained 1,147
    convictions and helped recover over $288 million.
        While the MFCUs' success in detecting and prosecuting
    Medicaid provider fraud is widely recognized, it is less well
    known that the units are the only law enforcement entities in
    the country specifically charged with investigating patient
    abuse and neglect.
        Tennessee's Medicaid Fraud Control Unit was created in 1984
    with a staff of 12, which included 8 investigators, and
    currently has a staff of 37 members including 20 investigators.
    At the time of the MFCU's creation, the Tennessee Medicaid
    program was a fee-for-service system operated by the Bureau of
    Medicaid, with the providers contracting directly with the
    Bureau of Medicaid. In 1994, Tennessee converted to a managed
    care system.
        One change that came with the managed care system was the
    MFCU's need to change how it established and maintained
    relationships with the entities contracting with the providers.
    The MFCU could no longer meet with just the Bureau of Medicaid
    to address fraud issues. It became necessary to meet with the
    multiple TennCare managed care organizations or MCOs or MCCs as
    we call them now. To address this need, the MFCU assigned an
    investigator to meet regularly with the particular MCO to
    educate the MCO regarding fraud. This education has proven to
    be very important, as the MCFU observed a high level of
    ignorance concerning fraud among the TennCare MCOs and had to
    overcome the MCOs' reluctance to report suspected fraud.
        Under the fee-for-service system, the MFCU had a close
    relationship with the Bureau of Medicaid's Surveillance and
    Utilization Review Subsystem [SURS]. The SURS reported aberrant
    billing patterns to the MFCU. Under the new managed care
    system, many of the Bureau of Medicaid's and SURS'
    responsibilities, including fraud detection, was transferred to
    the MCOs. In this system, providers submit claims for payment
    directly to the MCOs. In theory, the MCOs would replace the
    Bureau of Medicaid as the primary source of fraud referrals to
    the MFCU. In reality, this does not occur. While TennCare has
    had as many as 12 MCOs, only one has what could be described as
    a true fraud unit.
        Under the managed care system, the remaining employees of
    the Medicaid programs' SURS became members of the Program
    Integrity Unity. The PIU evolved into a unit that the MFCU
    works extremely closely with and has come to depend on greatly.
        The MFCU and PIU Directors meet with the drug task forces
    and local prosecutors to provide education about how the MFCU
    and PIU can work with the hem on drug diversion cases. Such
    training has been productive. For example--and this is the case
    that Tom referenced--the MFCU, PIU and various other agencies,
    including Health and Human Services, Office of Inspector
    General, DEA, U.S. Attorney's Office, TVA Inspector General's
    Office and the local sheriff's department worked a drug
    diversion case together which resulted in one doctor being
    charged on multiple counts of illegal distribution of
    prescription narcotics, including OxyContin, Adderall and
    Hydrocodone. To date, the investigation resulted in a guilty
    plea by the doctor, a guilty plea by one pharmacist on a count
    of obstruction of justice and guilty pleas by two recipients on
    narcotics charges.
        Within the past couple of years, language has been included
    in the Bureau of TennCare/MCO contracts requiring the MCOs to
    have fraud compliance plans. Hopefully, if the MCOs adhere to
    the compliance plans, they will become more aggressive in
    identifying and reporting incidents of fraud.
        In addition to investigators meeting with each MCO, the
    MFCU and PIU directors and staff members host quarterly round
    table meetings and annual fraud seminars for the MCOs to
    educate their employees about fraud.
        Since one of the most important aspects of a Medicaid fraud
    investigation is getting complete and accurate data, one of
    MCFU's focuses has been working closely with the Program
    Integrity Unit and the Bureau of TennCare to establish a new
    computer system which better identifies aberrant patterns. It
    is expected that Tennessee will convert to a new Medicaid
    computer system in late 2003.
        One of the greatest resources for the MCFU is the National
    Association of Medicaid Fraud Control Units. This organization
    provides specialized provider fraud training, information and
    advice to the MFCUs. Since 1992, States have especially
    benefited from the National Association of Medicaid Fraud
    Control Units' efforts on multi-jurisdictional cases with the
    Federal Government, which resulted in recoveries of over $360
    million.
        In closing, I want to emphasize that much of the
    Tennessee's Medical Fraud Control Unit's success is a result of
    its consistent efforts to foster cooperation with the Program
    Integrity Unit, the Bureau of TennCare, the TennCare managed
    care organizations and our State and Federal prosecutors and
    law enforcement agencies. I also want to emphasize that the
    Medicaid Fraud Control Units throughout the country are viewed
    as having a national leadership role in detecting and
    prosecuting fraud and abuse in government funded health care
    programs. The units have been successful in serving as a
    deterrent to health care fraud; in identifying pro-
    gram savings; removing incompetent and fraudulent
    practitioners; and in preventing physical and financial abuse
    of patients.
        Thank you again for the opportunity to testify today.
        Mr. Platts. Thank you, Mr. Benson. Ms. Williams.
        [The prepared statement of Mr. Benson follows:]
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        Ms. Williams. Good morning, Chairman and Madam Vice Chair.
    I want to thank you for the opportunity to speak with you this
    morning about the Tennessee Senior Medicare Patrol Program here
    in the State of Tennessee. I am Holly Heneger-Williams and I am
    the program coordinator.
        The Upper Cumberland Development District Area Agency on
    Aging and Disability was the recipient of the Tennessee Senior
    Medicare Patrol Project Federal grant from the Administration
    on Aging beginning July 1, 2001 for a 3-year period. At the end
    of this period, which will be June 30, 2004, we will be
    eligible to apply for an additional 3-year project period.
        The Tennessee Senior Medicare Patrol Project's mission is
    to reduce Medicare, Medicaid and TennCare fraud, waste and
    abuse by increasing public awareness on monitoring what is paid
    on behalf of the beneficiaries and how to report suspicious
    claims.
        The program recruits and trains retired professionals and
    others to serve as expert community resources to provide
    individual counseling and conduct group session presentations.
        Since July 2001, the program has recruited and trained
    approximately 250 individuals, provided one-on-one counseling
    to approximately 250 beneficiaries, presented to approximately
    1,250 beneficiaries and their caregivers in small group
    sessions and has reached approximately 273,500 individuals
    through media activity.
        Because education is the key to prevention and recoupment
    of these lost funds, Senior Medicare Patrol has spent the first
    2 years focusing on conducting activities that are educational
    in nature. As a result of these programs' efforts through
    December 2002, 39 allegations of potential fraud, waste and
    abuse have been reported, with 22 of those having been referred
    to the Medicare contractors for followup. Nationwide the Senior
    Medicare Patrol Programs have retrieved $7 for every $1
    invested in their implementation.
        Within the past year, the program has taken a large step by
    integrating all volunteer training sessions and activities in
    conjunction with Tennessee State Health Insurance Assistance
    Program. Because both SHIP and SMP are designed to operate
    through the work of volunteers while focusing on assisting
    beneficiaries of the Medicare/Medicaid program, it seemed to
    only make sense to combine our efforts in this perspective.
    Prior to this initiative, Senior Medicare Patrol volunteers
    were being asked these SHIP-related questions while they were
    out performing their Senior Medicare Patrol work, yet the
    Senior Medicare Patrol training was not comprehensive enough in
    order for them to be able to provide that area of counseling.
        As a component of this initiative, SHIP has taken the step
    to contract out with the same nine area agencies on aging and
    disability across the State, as the Senior Medicare Patrol in
    order to fund nine full time Tennessee Senior Medicare Patrol
    SHIP volunteer coordinators. All these volunteer coordinators
    were cross trained this past October for both programs. These
    volunteer coordinators are responsible for recruiting,
    assisting in training and maintaining all the volunteers'
    activities for both programs within their region.
        Since March 2003, there have been six 2-day SHIP/SMP
    volunteer training sessions held across the State with
    approximately 115 individuals becoming certified as Tennessee
    SHIP/SMP volunteer counselors.
        The major segments of these training sessions' Medicare,
    Medicaid and TennCare fraud, waste and abuse components are
    being conducted by the Tennessee Bureau of Investigations,
    Office of Inspector General Office of Investigations and
    Tennessee Department of Finance Administration Office of Audits
    and Investigations. These partnering organizations are critical
    to Tennessee's Senior Medicare Patrol implementation and
    success.
        In regard to challenges, the most difficult challenge we
    have seen to overcome has been to convince the beneficiaries
    that if they question charges about their billing statement,
    that the relationship between them and their doctor will not be
    jeopardized because the information can remain anonymous. Since
    Tennessee is a very rural State, in these small communities
    where everyone knows everyone, beneficiaries fear being a
    ''troublemaker`` and raising these issues would result in their
    doctor not providing the care they need. So many of them have
    gone to the same doctor for decades and they simply find it not
    worth risking jeopardizing that relationship.
        Thank you.
        [The prepared statement of Ms. Williams follows:]
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        Mr. Platts. Thank you and I stand corrected, I think it
    should be Ms. Heneger-Williams.
        Ms. Williams. That is correct.
        Mr. Platts. By the end of the day, we will get all the
    names right.
        I want to again thank you for your testimony and we will
    now get into questions for the panel and Ms. Blackburn, if you
    would like to begin.
        Ms. Blackburn. Thank you, Mr. Chairman. I would like to
    begin and I also want to thank each of you for being here. As I
    said when we started the hearing, one of our objectives is to
    be sure that health care remains accessible, that it remains
    affordable and one of the ways to make that happen is to be
    sure that we search out and implement the efficiencies that are
    necessary. And it is no secret to anyone involved that TennCare
    has had more than its share of problems.
        Mr. Mathis, I think that I will begin with you, and thank
    you for your well-prepared testimony, I appreciate that.
        Audits have found problems with TennCare's internal
    controls over eligibility determination, and I understand that
    their unit has an RFP out for a new information system. And we
    know that is a problem that has dogged TennCare since its
    inception, is not having a workable information system.
        Is this system going to be one that will allow you to
    address some of the need for some way to address these internal
    controls?
        Mr. Mathis. Yes, it has many, many features built into it
    that will help us address internal control issues.
        You touched on, to start with, your question relating to
    eligibility and the eligibility piece over the last year was
    moved--it was divided, being worked through the Department of
    Health and the Department of Human Services. A revision was
    made to make a one-stop shopping type of process and require
    the TennCare recipients to report annually to the Department of
    Human Services at the local county level for their reviews and
    evaluations. That is the beginning of a process that does not
    relate to the new MMIS system. Once it is fed into the system,
    then we begin to capture by doing profiles on individuals and
    looking at individual recipients and helping to identify those
    individuals that may or may not be eligible, helping to
    identify those individuals that may have other insurance that
    they have failed to tell us about, we will capture that through
    multiple means.
        I can go into that if you would like, but I do not know how
    much detail you would like.
        Ms. Blackburn. I think I can ask the question and get the
    answer this way. So the system that is being designed for you,
    or for TennCare, is a system that will allow data input from
    both the health and the human services side and then it will
    allow reading of that information from both the health and
    human services side.
        Mr. Mathis. Well, the Department of Health at this point is
    basically removed as far as eligibility. It is all being
    processed through the Department of Human Services. There are a
    few loopholes, but for the most part it is all being processed
    through the Human Services Department. And yes, ma'am, that
    information is uploaded into--or will be uploaded into the
    TennCare data base and available then for evaluation,
    comparison reports, review, analysis, etc.
        Ms. Blackburn. OK. With your unit--let me see, I was
    looking through your report last night and I was having a tough
    time, maybe you can help me with this--how many reports of
    possible fraud have you all received since your unit's
    inception?
        Mr. Mathis. Since our inception would be very difficult for
    me to respond to. I have been there since June 2000. The unit,
    prior to TennCare was a fairly significant number of
    individuals working in the unit. I do not want this to sound
    funny in any way, but in looking at it, I can understand why
    that leadership would have felt this way--but there was a
    thought that there would be no fraud in managed care. So
    basically the SURS unit was basically eliminated. And then they
    began, through realization, the concept being that it would be
    shifted to the managed care contractors and the managed care
    contractors would be the ones evaluating and working the fraud
    and abuse and would be the ones ultimately that would incur the
    loss if they did not respond to it and identify it and recover
    it--fraud.
        As the time periods went on, it was obvious that was not
    the total picture, that there needed to be a fraud and abuse
    unit within State government and it needed to be restructured.
    At that point in time, in July 2000, there were roughly seven
    individuals in that unit. When I came over, they gave me 3
    additional people and since that time we have picked up an
    additional 13 staff positions. So the growth has occurred.
        Does that help answer?
        Ms. Blackburn. No, sir, that really is not--let us take it
    this way then, how many reports have you had of fraud this
    year?
        Mr. Mathis. This year, the fiscal year just ended, was--let
    me refer back--at June 30, 2003, we had 21,638 cases referred
    to us.
        Ms. Blackburn. OK, so that was--on this, it says cases
    closed. So in other words, you took care of every single----
        Mr. Mathis. No, ma'am, you are correct, I answered you
    incorrectly. At the end of the year, we still had roughly 2,400
    of those cases open.
        Ms. Blackburn. OK, so there are 2,400 still open.
        Mr. Mathis. Yes, ma'am.
        Ms. Blackburn. So basically what you are looking at is
    21,000 cases a year that come your way.
        Mr. Mathis. With those numbers, we usually run around
    23,000 cases, and that is pretty consistent with what it was
    the previous year, total cases coming in. I am sorry, I failed
    to understand your question.
        Ms. Blackburn. OK. Now your next number was the recommended
    terminations, 6,487. How successful have you or has the program
    been, has the State of Tennessee been in removing those
    individuals who were declared or found to be ineligible by the
    PIU? How successful are you in removing those from the TennCare
    roles?
        Mr. Mathis. We have been--the State has been successful.
    There is a process or a lag time of between 90 and 120 days to
    allow us the process, the appeal process that is allowed to
    take place for these individuals. What we have started to do is
    to develop an internal tracking system. We allow 4 months worth
    of delay and then we send a listing for that 30-day period of
    time or 31 day period of time that has just ended prior to the
    120 day lag time, over to the Bureau. We run it against the
    eligibility listing and get a report back that reflects those
    people who have not been terminated. We then follow back up--I
    assign someone to follow back up on those cases to see why they
    have not been terminated, and there are individuals that fall
    into the category, sometimes if they have filed an appeal,
    successful appeal, it is sitting there waiting in the Office of
    General Counsel, and therefore, they cannot be terminated until
    that appeal has been officially heard.
        But for the most part, we have been successful and
    sometimes we do followup. I am not going to tell you that we
    have not had any errors and some have not fallen through the
    cracks, but if that occurs, we resubmit them for a second time.
        Ms. Blackburn. So adding that up, this particular
    checklist, what you are telling me is it takes anywhere from 6
    months to a year to get somebody off the program.
        Mr. Mathis. It could take--I am saying it takes roughly 120
    days. There are cases, if they have filed an appeal, it can
    take longer.
        Ms. Blackburn. OK. After you have found them to be
    ineligible for the program and they remain on the program and
    go through this process and then it is deemed that they are
    indeed ineligible, are they responsible for reimbursing the
    program for the services that they have used during that period
    of time?
        Mr. Mathis. No, ma'am, but I certainly would like for them
    to have to reimburse the program.
        Ms. Blackburn. All right. In the provider cases, let us go
    to that on your chart. It says cases closed, 176. So how many
    provider cases did you have submitted to you this year?
        Mr. Mathis. I do not have that number with me today. I can
    certainly get it to you, but I am going to give you an
    estimate. Is that OK or would you prefer----
        Ms. Blackburn. What I would like to do is get your estimate
    right now for the sake of discussion and then have you submit
    for the record. I think it would be helpful to us, knowing that
    you all have a check up every 5 years on this, and as we look
    at health care and the health care delivery and the 1,115
    waivers, Mr. Chairman, I think what we would like to do is
    while we are talking with those who have overseen TennCare, is
    collect the data of the number of cases that are reported to
    them every year, the number that are closed, what the decision
    is on that, what the penalties, etc.
        Mr. Platts. Mr. Mathis, could you supply that after the
    fact, both with the recipients and the providers, so we get a
    complete picture for the fiscal year just closed?
        Mr. Mathis. Yes.
        Mr. Platts. Thank you.
        Ms. Blackburn. That would be great. And now for the sake of
    discussion if we could just have the total number that you
    think are submitted to you all each year.
        Mr. Mathis. I am going to project it would be somewhere
    between 200 and 225.
        Ms. Blackburn. OK. Now under the legislation that we had a
    tough time passing, that you referenced, and I appreciate your
    appreciation of that law and making it a felony offense--how
    many convictions have you had? You pointed out a few of what
    you called your success stories. So of course we are sad that
    there is the need for there to be those success stories, but we
    are pleased to see that, you know, it is bearing some fruit.
    How many are you seeing actually get a conviction and then are
    we seeing people removed from participating in the program
    because of this?
        Mr. Mathis. The answer, as I have touched on earlier, a
    total of seven have been convicted thus far.
        Ms. Blackburn. Seven. And that is the total.
        Mr. Mathis. That is total, but now let me, if I can, if you
    will bear with me, it is very important because that is very
    young legislation, and William Benson and myself have been
    traveling across the State meeting with district attorneys, we
    have been talking with them about this piece of legislation and
    making them aware. That is paying dividends, because as they
    become aware of that legislation and the options there, and
    they begin to work with us, their staff begins to work with us,
    particularly the drug task force units where we are focusing
    heavily on drug diversions, then we talk about this piece of
    legislation. We give them copies of this piece of legislation
    and we ask them to work with us and we ask them to use that
    legislation that says if you are convicted of a fraudulent
    offense against TennCare, you can be excluded from the program
    for 12 months on the first offense, 24 on the second, lifetime
    on the third.
        However, there is a conflict between that piece of
    legislation and the Federal rules. The Federal rules say that
    they can be taken off for a maximum of 12 months if they are
    part of the true Medicaid population. Waiver population, we
    believe we can use that legislation (H-S-118). The Federal
    legislation, however, does have--if they are a true Medicaid
    recipient, has the 12 months, I believe. So we try to make them
    aware of that as well and use that language, put that language
    into the judgment order, and when the judgment order comes
    through we submit it to the Bureau with our recommendations for
    termination.
        Ms. Blackburn. OK, thank you, sir.
        This may be a question for both you and Mr. Benson to
    answer. Speaking of the education that you were doing with the
    MCOs. I know there have been as many as nine MCOs and as few as
    four in the TennCare program. Are you all holding the meetings
    with the administrators of the MCOs or what is the education
    process that you are working through?
        Mr. Benson. We do have a fraud seminar once a year, usually
    in May where we invite those people that would be closest
    related to the fraud identification within the MCOs. The
    invitations go out to those individuals at each of the MCOs
    that they have selected as the people that would be coming. We
    have had, like Blue Cross/Blue Shield does have a true fraud
    unit, they have nurse investigators to the investigators, to
    the heads of the special investigations unit staff, and the
    other MCOs or behavior health organizations. The invitation
    will go out to those representatives in their fraud sections or
    quality improvement sections, for them to reach out to anybody
    within the organization that wants to come to the meeting. That
    is once a year.
        We also have quarterly round table meetings that Mr. Mathis
    and I host where we invite the MCOs to come and talk and it is
    usually a dozen to 20 representatives from all of the MCOs. And
    we discuss not necessarily problem providers because we in that
    case may be talking about a provider that is not in one of the
    other MCO networks and would not have any dealings with that
    provider, but we may talk about problem provider groups. For
    instance, maybe the drug diversion issues or transportation
    issues, whatever they think they are having problems with. We
    give them the opportunity to come forward to us and say we are
    having a problem in our MCO, and generally what we find is the
    other MCOs are having similar problems. But we kind of leave it
    up to the MCOs to bring to the meetings the staff members they
    think are appropriate.
        Ms. Blackburn. Mr. Benson, let us talk for a second about
    identity theft, because you mentioned that in your report, as
    being a problem, and we know in Tennessee that has been a
    problem with some individuals acquiring multiple identities.
        And of course, in the Medicaid program the potential for
    the abuse of identity of Medicaid patients is substantial. What
    are you seeing with respect to identity theft in the Medicaid
    program and what tools have been effective in limiting identity
    theft in Tennessee?
        Mr. Benson. We have been fortunate so far that since what I
    will call the startup part of TennCare, we have not seen much
    in Tennessee. As a matter of fact, after about 1996 or 1995, we
    really have not had too many identity fraud cases come to our
    attention. In the beginning with TennCare, we did have,
    particularly one MCO, that was contracting with independent
    marketing representatives and they would pay them so much per
    head for who they enrolled or for who they signed up. We had
    one individual that--or actually three individuals that created
    names and Social Security numbers to go with these names and
    listed them as being residents of a homeless shelter here in
    Memphis actually, about 4,500 names. And when that MCO was
    getting paid $100 a month, we are talking about $450,000 in
    fraud a month. It did take several months for it to come to our
    attention and TennCare did collect back about $1.8 million.
        We also had another individual that was enrolling people at
    the Saturn plant that--and these individuals did not know that
    they were being enrolled and did not give their permission to
    be enrolled. That was to the tune of about $70,000 something I
    believe, and we had several people go to prison on that.
        We have not seen much since then. I cannot say it is
    because it is not going on and may not be being reported to us.
    California in particular has seen a lot of identity fraud
    issues, and some of the other States as well, but to date, we
    have not seen much in Tennessee.
        Ms. Blackburn. OK. Let me ask you this, how has the due
    process requirements of TennCare affected your efforts to
    prosecute fraud?
        Mr. Benson. Could you be more specific as far as----
        Ms. Blackburn. Going through the process that Mr. Mathis
    was stepping through.
        Mr. Mathis. I think you are referring to the appeal process
    relating to the recipients' appeal. As far as prosecuting fraud
    itself, we can still present those cases to a prosecutor. We do
    not have to wait until such time as that appeal or that due
    process has been completely--you know, completed through all
    levels that are necessary.
        Ms. Blackburn. Are you receiving support from the Attorney
    General?
        Mr. Mathis. Basically the way we are set up is we prosecute
    those through the District Attorney's Office instead of the
    Attorney General's Office, but we have received support when we
    have requested it through the Attorney General's Office, we
    have actually had them to come and provide some training to our
    staff and some technical assistance. And in fact, they really
    have made offers if we encounter problems with particular
    District Attorneys, then in moving our cases, they will be
    happy to go with us jointly and do education and training and
    try to persuade the DAs for assistance. We have not had to do
    that at this point, but the AG's office has certainly been
    there and offered assistance to us.
        Ms. Blackburn. Are you receiving the assistance you need
    from HHS or have you had to call on them for assistance with
    any of the fraud cases?
        Mr. Mathis. There are a few cases that we have worked with
    HHS-OIG on, but primarily our role when we work a case,
    particularly if we are talking about provider cases, we do the
    validation and that case then moves over to the TBI Medicaid
    Fraud Control Unit and they take the lead in it and we just
    assist them in any way. At that level, William would be more
    suitable to answer that question relating to working with them.
        But from the recipient side, there are a few cases that we
    have had discussions with HHS-OIG, but their caseload at this
    time is usually so heavy that they are limited pretty much to
    working with provider cases.
        Ms. Blackburn. OK, thank you. Thank you, Mr. Chairman.
        Mr. Platts. Thank you, Ms. Blackburn.
        I am going to give the two of you a respite for a few
    minutes while I go in a little different direction.
        Ms. Heneger-Williams, your program--first I want to make
    sure I understand that the seniors who participate are
    volunteering, right, there is no compensation to the
    individuals?
        Ms. Williams. Correct.
        Mr. Platts. In essence, you are really calling on the civic
    duty of these individuals to participate and to be watchdogs
    out there for us.
        Ms. Williams. Yes.
        Mr. Platts. In our conversation during the break, given the
    area that Upper Cumberland includes, being very rural, what are
    you trying to do to overcome that barrier that you are dealing
    with individuals who only maybe have that one provider to go to
    or have that long history, that they maybe are aware of some
    misconduct but are just real hesitant to report it. What
    efforts or what is your strategy to overcome that?
        Ms. Williams. Yes, as we talked about, that is a huge area
    to overcome. Basically we have relied on speaking with these
    beneficiaries and informing them on the benefits--how
    beneficial it is for them to provide us any information that
    may relate to fraud, waste or abuse. As we were discussing, in
    these very rural areas, which most of Tennessee is comprised
    of, these individuals have gone to the same physicians for
    years and years and years and probably the current physicians
    they go to, they were going to their father who was maybe a
    physician when they were younger. This relationship is very
    strong and they do not want to jeopardize that relationship.
        So that is a huge challenge that we do have. On the flip
    side, the way we have in the last year and a half that we have
    really had the program and tried to work with these individuals
    to show them the benefits of it, is taking the aspect of here
    is the amount of fraud and abuse that is reported out there. If
    we do not all work together to combat these problems, your
    health care is going to be jeopardized, not only for you but
    for generations to come. We take that approach as to comforting
    them, letting them know, you know, if you see something like
    this, most of the time these are simple errors even, simple
    billing errors and that is not going to jeopardize your
    relationship with your physician. That is pretty much the
    standpoint we have tried to take with those.
        Mr. Platts. The 250 volunteers that you have enrolled are
    for that 14-county area?
        Ms. Williams. No, that is Statewide.
        Mr. Platts. Are most of those more in the rural areas or in
    the urban areas?
        Ms. Williams. We have some representatives in probably
    about 85 of the counties in Tennessee.
        Mr. Platts. So about 15 percent have no senior
    participants?
        Ms. Williams. Yes. But--and when I say 85 percent, I need
    to be more specific. Those are the individuals that actually
    reside in the county they do the volunteer work for. We
    probably have, oh gosh, maybe seven or eight counties that do
    not actually have someone that goes to that county to provide
    one-on-one counseling, but that is a goal that we have within
    the next year, to make sure that we are available in each
    county.
        And if I can go back, another thing that we also--a way to
    comfort these beneficiaries, to let them know that the
    relationship between them and their doctor may not be
    jeopardized is letting them know that they can remain
    anonymous.
        Mr. Platts. Uh-huh. Is there--are you familiar with how it
    is working in other States versus Tennessee or is it more just
    the Tennessee--is there a national----
        Ms. Williams. As far as the rule issue goes?
        Mr. Platts. Yeah, in getting people to participate.
        Ms. Williams. I know in Kentucky that they face the same
    barriers. Actually the Administration on Aging just about a
    month ago produced a video that is to address this issue with
    reaching those rural areas. So, you know, nationwide even, the
    Administration on Aging is tackling this as a major challenge
    that we do have.
        Mr. Platts. For seniors and that generation having such a
    strong and thankfully intense civic duty in general, it would
    be natural to solicit them, but if they are in these areas
    where there is one provider or with TennCare one participant in
    the program, it is also understandable that they are going to
    be hesitant to risk losing their own health care because of the
    misconduct of the provider.
        Ms. Williams. We have tried to be flexible in trying to
    figure out what is going to work best and any opportunity that
    we have to try something new, we take those opportunities.
        Mr. Platts. Let me come back to the TennCare
    representatives. We heard in the previous panel in looking at
    national numbers and the effort of Mr. Weems' staff of
    developing the improper payments program, the PAM system, the
    payment accuracy measure. TennCare is currently not one of the
    States participating, is my understanding. But is there
    something already in place to try to get a Statewide
    assessment? We heard that in 1992, if I remember correctly, the
    last time that HHS did it nationally, it was perhaps 2 percent,
    but there has been a dramatic change like here in Tennessee
    where we now have managed care. Is there a Statewide number
    where you can estimate of improper payments for TennCare in
    Tennessee?
        Mr Mathis. No, there is not. If you will allow me to, I
    will respond on where we are. Looking at the PAM project, I
    serve on the national committee and am very much aware and
    staying up to date with the PAM project in talking with my
    peers across the country where those tests or pilots are
    ongoing.
        We continue to look at it, we would like to at some point
    take on that task. However, I will tell you that it is
    tremendously burdening on our resources and staff to develop
    and implement a new IS system. For example, we are in the
    process of starting to assign staff to work in the testing
    phases. We have developed the guidelines, the requirements that
    went into the bid process, evaluated the bids that have been
    awarded and have been working through what is called
    requirement validation with many, many hours of discussion to
    ensure that we are getting what we asked for. And now we are
    going into the testing stages of it.
        And again, tying up resources and staff time to be sure
    that again the program is going to be there. We just simply are
    strapped for resource time. We do think it is an excellent
    program. I am not at this point telling you that we are not
    going to pursue it. I have discussed it with senior management,
    it is on the table, we are just trying to figure out is it
    possible to take on another project at this point in time.
        But Mr. Chairman, I was going to say that many of the
    features, of course certainly we believe that the new system
    will identify many, many things for us other than just payment
    issues. It will profile, it will look at the providers, it will
    look at the recipients, who are outside the norms. It will give
    us opportunities to target those individuals for possible
    review and investigations or going back to our MCC contractors
    and asking them to re-evaluate.
        But I do think that the PAM project is a very valuable
    project, would like to see us pursue it. Just not enough staff.
        Mr. Platts. The fact that you are looking at it and
    following it--in Mr. Weems' testimony, he talked about the nine
    States that are currently in, 25 States that are coming on
    board with the expectation that it will be national by 2005,
    which is not far away, it sounds like for HHS with TennCare,
    there is a long way to go to get to that participation by 2005.
        If we use the numbers, the error rate, in applying
    percentages, in your testimony in talking about recovery, about
    $4 million in recovery--if we had even a--using that 2 percent
    number from very old, 1 percent, if my math is correct, for
    TennCare being a $6 billion program would be about $60 million,
    that there is overpayment in that amount, whether it be
    intentional or unintentional, but some form of overpayment or
    wrongful, improper payment; 2 percent would be $120 million. So
    your $4 million is great in identifying, but that would
    translate to about a 0.067 percent, less than 1 percent of--
    well less than 1 percent.
        It seems like there were a lot of improper payments out
    there that we are not identifying currently. And I understand
    that would take more manpower, more resources, but it seems
    that the return on that investment would be huge, if we get
    there and HHS seems to be making the effort on a national
    level, but for it to really work in programs like Medicaid, it
    is a partnership. I would hope that looking at doing this
    becomes more of actually moving forward and actually doing it.
    And while there would be some initial outlays and costs, it
    certainly seems that the return would be far in excess of what
    you put out.
        The examples that were given, and Mr. Benson, it was in
    your testimony where you talked about the identity theft, and
    you mentioned in your verbal statements as well, that 4,500
    that were--that was under the original setup, is my
    understanding, from a time standpoint, prior to putting in the
    contracts where they had to have fraud units?
        Mr. Benson. That is correct, that was back in--actually
    that fraud was committed back in 1994 and one of the things we
    did was work with the Bureau of TennCare to help revise the
    contract language with the managed care organizations, to
    preclude them from paying their representatives in that manner.
    So one of the first things we did was work with them to try to
    keep that from happening. And while I would call that kind of a
    startup type of fraud, as long as they were enrolling people
    after that time period, by precluding them from being able to
    do it in that manner, I think we stopped the ability for them
    to commit that type of fraud.
        Mr. Platts. How did that particular fraud come to your
    attention, to TennCare's attention, do you know?
        Mr. Benson. In that case, the homeless shelter called up
    the Bureau of TennCare and said we have 17,000 pieces of mail
    down here that we do not think belong to us. We went out and
    picked up those--TennCare called us, we went up and picked up
    the 17,000 pieces of mail and what we found was that a lot of
    them were duplicate mailings from the Bureau of TennCare and
    that particular managed care organization, to individuals that
    the homeless shelter said do not belong there. We only have 100
    people that usually get mail here, not 4,500 people.
        So we were able to take those names, match it up against
    the Social Security listing and find out that they didn't
    exist.
        Mr. Platts. Now the hope is today with the contract
    language where the MCOs have to have a more active fraud and
    abuse unit in place, that will not happen.
        Mr. Benson. Right.
        Mr. Platts. The contract language seems pretty clear and
    detailed as to what they have to have. What oversight does
    TennCare do with the MCOs that they do not just have a plan in
    place, but they are actually implementing that plan and there
    is something being done, not just written about?
        Mr. Mathis. We were successful in getting that language
    added about 18 months ago, if memory serves me right. In the
    last few months we have gone back and are visiting with the
    contract folks and are amending the language again, that will
    require the MCCs to give us an annual progress report. It was
    sort of an implementation of moving to phase one and then
    moving into phase two and we are at the phase two level.
        Mr. Platts. Is there oversight in the sense of, I will use
    the example with the Federal Government, GAO goes out and does
    in essence undercover operations to test whether an agency is
    really doing what it says it is doing. Is that part of the
    oversight? Or is it still really just relying on what the MCOs
    give you versus going out and not waiting for a homeless
    shelter to call and say we have all this mail, but is there an
    effort to go out there and through independent investigations
    get a benchmark for this MCO is doing a good job, this one is
    not?
        Mr. Mathis. No, sir, we currently do not have the staffing
    to go out and do that. I think it would be an excellent--we
    have discussed it and believe it is an excellent tool that
    should occur but the staffing and resources are currently not
    there. However, I will switch and go back again to the
    proactive means of the new MMIS system. That will identify
    those cases where we can then refer back to each of the MCCs
    and ask them to do the in-depth review and letting them know
    that we are looking over their shoulder because these
    individuals are coming off of the pages as outlyers and
    exceptions from the norm. And we believe that is certainly a
    good proactive measure.
        Mr. Platts. And yes, you are kind of heading in the right
    direction, although that would still be after the fact.
        Mr. Mathis. That is correct.
        Mr. Platts. And that goes to the question about recovery
    and the ability to get the money back.
        Mr. Mathis. That is correct.
        Mr. Platts. It is one thing when it is the MCO itself--or I
    guess MCC now, but where it is an individual, the actual
    recipient, it is going to be a lot harder to get that money
    back. It seems it comes back again to resources.
        Mr. Mathis. Yes, sir.
        Mr. Platts. If I understood some of the background
    information, in looking at fraud prevention and the number of
    staff that actually review the eligibility, some of the data we
    have or was provided is that in 2002 there was about 1,000
    applications per week for TennCare and just two staff people
    who were assigned to review the eligibility--was that----
        Mr. Mathis. I am not familiar with where that information
    may have come from, I did not provide that. The eligibility
    review occurs in the DHS office, which there are 95 offices
    Statewide and I am told that number is over 2,000 eligibility
    caseworkers. Now they do more than just Medicaid, they do food
    stamps and TANF, etc.
        Mr. Platts. OK.
        Mr. Mathis. But they are out there. I am just not familiar
    with that information.
        Mr. Platts. OK. With the national organization, I guess Mr.
    Benson, this is for you, you mentioned that the national
    President right now being from Pennsylvania with the Medicare
    Fraud Unit--is there a sharing of kind of best practices State
    to State? Like you hear something worth seeing, you know, with
    a new fraud, type of fraud, that is shared and you kind of
    learn from each other State by State?
        Mr. Benson. I think that is one of the greatest advantages
    of that association, because there is such a sharing of
    information and knowledge and the education process. The
    NAMFCU, the National Association of Medicaid Fraud Control
    Units, puts out a newsletter 10 times a year. Essentially every
    time we get a conviction, we report to the Association and they
    put it in a newsletter that is sent to all of the units. So we
    are able to see what successes and what types of cases the
    other States are seeing. And it will be divided up by provider
    group. It may be a listing of the convictions that occur or
    indictments that occur under--for patient abuse or under
    transportation or hospitals, whatever. So somebody--as a unit
    director, when I see those, I go through it to see if it looks
    like any type of case that is similar to ours or maybe in an
    area that we should be looking at. For instance, Georgia had a
    lot of success in prosecuting transportation vendors a few
    years back. A lot of States gleaned a lot of information from
    the types of cases that they worked.
        We have an annual conference every year that provides a lot
    of training to the different disciplines within our units, such
    as we have breakout sessions for auditors, investigators,
    nurses, attorneys, so that they can learn from each other. We
    also have a mid-year conference to where we have similar
    training like that primarily for the investigators. In a lot of
    cases it is aimed at patient abuse for the last couple of
    years. We also have an advanced training program for those that
    have been in the unit for over 3 years and we have an
    introductory class for those that are new to the units. So we
    provide a lot of training.
        Mr. Platts. National training seminars?
        Mr. Benson. National training seminars, that is correct. We
    have these that--all of the units are invited to all of these
    and we really push for the units to participate. As a matter of
    fact, I am a cochairman of our training committee and one of
    the things we are doing is putting the final touches of our
    annual conference coming up in September. We do those every
    year, the advanced, the introduction, the mid-year and the
    annual conferences. We also have a director symposium every
    spring where the unit directors get together to discuss common
    issues. Problems that we may be seeing in Tennessee, we share
    it with other States.
        When managed care first started in Tennessee, I was going
    around speaking at a lot of the national association
    conferences, telling them what we are seeing, particularly
    these startup types of fraud, so that they could experience
    from us and hopefully--we tapped into Arizona, for instance,
    because they had managed care before we did. We were in
    communication with their fraud unit to try to find out what we
    would be experiencing. And some of the things that they told us
    about came to fruition.
        So we do a lot of the training with that and a lot of
    information sharing and I think that is one of the greatest
    tools that our association has.
        Mr. Platts. Now the system of trying to identify the
    improper payments, again, whatever type, that would be
    something that the association would share--I mean the nine
    States that are already in the program, with HHS, would they
    share that and say here is what we are doing with HHS now?
        Mr. Benson. Well, I think to some degree we would be
    sharing that information as well. I mean we do a lot--a few
    years ago, I participated with HCFA or CMS, to develop the
    guidelines on fraud in Medicaid managed care. That was
    something that several of the MFCU directors participated in
    with SURS directors and Medicaid Bureau personnel, to put that
    out there that we shared with all the units. We came up with
    best practices or model criminal and statutory language a few
    years ago in dealing with Medicaid fraud issues so that the
    States could learn from other States. If they have a good
    statute in another State, we try to look at our State for it.
        Mr. Platts. Your focus though is where it is really fraud
    more so than if it was just unintentional wrongful payments.
        Mr. Benson. Right.
        Mr. Platts. That would not fall in your unit.
        Mr. Benson. That is correct, ours would--and it is on the
    provider side. We are--the Health and Human Services Office of
    Inspector General oversees us and mandates that we work the
    provider side.
        Mr. Platts. Only the provider side.
        Mr. Benson. That is correct, and one of the things that I
    want to throw out is that one of the great advantages to our
    unit is the Program Integrity Unit. In the past, when a
    referral came in or we started looking at a certain provider,
    sometimes it took an investigation to determine if there was
    anything to the allegation. A lot of work would go into it and
    in a lot of cases it turned out that there was nothing--the
    allegation was unfounded.
        We have the ability now as an allegation comes in, to hand
    it off to the Program Integrity Unit. They do their validation
    process, can find out if there is a pattern of--if there is one
    person that calls up and complains that my mother went to the
    doctor and I think he billed for x-rays that he did not do--
    well, for us to investigate that one event might not be that
    cost-effective. But we can hand it off to the Program Integrity
    Unit, they can look for that type of billing and may find a
    pattern of that, then refer it back to us and by the time we
    get it back the preliminary work has already been done and we
    can focus on, as you said, the surveillance, the undercover
    work, the interviews rather than trying to determine is there
    something we really should be looking at here.
        Mr. Platts. And so you are actively doing those type of
    investigations out in the field, but it is more focused on the
    provider.
        Mr. Benson. It is all provider, that is correct.
        Mr. Platts. Where the efforts on the beneficiary, the
    recipient, is more challenged as far as the resources to be out
    there identifying the efforts, your resources versus the unit
    Mr. Benson has.
        Mr. Mathis. That is correct.
        Mr. Platts. Ms. Blackburn, did you have further questions?
        Ms. Blackburn. Yes, I did have a few questions, and I have
    one statement. Ms. Heneger-Williams, I appreciated in your
    testimony that you all are returning $7 for every $1 that you
    spend. And I certainly think that when you look at the public/
    private, non-profit sectors, to see cooperation and volunteers,
    I hope that you are willing to help other States to put these
    programs in place because that is the kind of support that
    these programs needs in order to remain viable.
        Ms. Williams. We are more than willing.
        Ms. Blackburn. And we appreciate very much that good work
    and your statement of such for the record.
        Mr. Benson, it would be my hope that if they are building
    the MMIS, that you are participating and that you and Mr.
    Mathis both are working to put some type of framework in place
    for internal controls to be able to stop some of the problems
    before they occur, but then also to enable audit opinions to
    take place and easily fund those mechanisms.
        This program that you are building, now is it going to
    interface with the HHS program that Mr. Williams spoke of? Are
    you all making plans or is your--you know, one of the things
    that frustrates us, and Mr. Chairman spoke of this earlier, we
    have been doing some review of Department of Defense, and they
    build a program and then it is obsolete. And so they go back
    and they start and they build another one. And if my memory
    serves me correct, I think that since TennCare's inception, we
    have spent over $100 million trying to get an information
    service program to work for the TennCare program.
        So are you all in communication with HHS to be sure that
    you are building a program that can be integrated or can share
    information, are you looking at that?
        Mr. Mathis. Let me answer it in this way, if I may, before
    we could bid the package out, we had to obtain CMS' approval,
    so the RFP was sent to them for review and analysis and they
    gave us their approval because in a system such as this, they
    participate at a 90 percent reimbursement rate, so therefore,
    you definitely want their approval up front. They gave us their
    approval, so it would be our hope that all the language that
    was there that needed to be for them was there.
        Does that answer your question? I cannot go further than
    that.
        Ms. Blackburn. Yes, sir. That will tell us who does need to
    answer that question, to say that is so.
        Now for the record, I want to be sure that I have my
    numbers correct. Tennessee now has 1,428,000 TennCare
    enrollees, correct?
        Mr. Mathis. I do not know the current number, I believe the
    current number is a little lower than that, but I did not bring
    that with me. I think it is 1.3 million, because it is going
    through the process of reviews and terminations.
        Ms. Blackburn. OK, and TennCare now has 700 employees,
    correct?
        Mr. Mathis. I do not have that number with me. I would be
    happy to get it, but that is not something I brought.
        Ms. Blackburn. OK, I was just pulling that from some
    newspaper reports where TennCare was looking for the 200,000
    square feet of office space and they--whomever was giving that
    information, I think your public information officer, had
    stated that TennCare now had 700 employees.
        Mr. Mathis. If that is the case, it would be the equivalent
    of. Many of those are contract employees such as the fiscal
    intermediary or the EDS.
        Ms. Blackburn. So that would include your outsourced?
        Mr. Mathis. Outsourced, yes.
        Ms. Blackburn. OK. Let me see, Mr. Benson, 75 percent of
    your budget comes from the Federal Government, correct?
        Mr. Benson. That is correct.
        Ms. Blackburn. Are you all drawing down or using all the
    dollars that are allocated to you from the feds or are you
    leaving some money aside each year?
        Mr. Benson. There is--we always come in under budget and it
    is usually pretty close to the total amount. This year our
    budget is $2.8 million, of which the Federal Government will
    pay 75 percent and we will spend the majority of that. As you
    know, Tennessee has been under a budget crunch for the last
    couple of years, so there has been sometimes that things we had
    budgeted, particularly out-of-state travel for training, that
    has not been approved by the State government, so we are not
    able to utilize all of that we may have budgeted for out-of-
    state training or travel or whatever. And subsequently, if we
    are not able to use the State funding, the Federal match is not
    used as well.
        But for the most part, we have been able to use the vast
    majority of the funding that we have.
        Ms. Blackburn. And the other 25 percent of your budget, is
    it general fund or does it comes through the State portion of
    the TennCare budget?
        Mr. Benson. It is general fund, it does not come from
    TennCare at all. We have to be totally separate as far as
    funding from the Bureau of TennCare.
        Ms. Blackburn. OK, and the money that you all retrieve
    through the fraud unit, where does that money go?
        Mr. Benson. It depends on the type of--between a criminal
    or civil conviction--the money primarily goes back to the
    Bureau of TennCare. There have been criminal cases where the
    Judge, the court awarded the money back to the managed care
    organization, but the majority of the time it goes back to the
    Bureau of TennCare.
        The civil settlements that we do, we may work a criminal
    case through the U.S. Attorney's Office that the U.S. Attorney
    determines that it does not warrant a criminal conviction or
    criminal proceeding and they will go civilly with it. That
    civil money, depending on how the agreement is worked out or
    the case is worked out, generally the money goes through the
    Attorney General's Office. They have to sign off on all the
    civil cases in Tennessee, the Attorney General does, so we work
    with them a lot on the civil cases. The money goes through the
    Attorney General's Office to the Bureau of TennCare.
        Ms. Blackburn. OK, and the total number of cases that you
    all have had since TennCare's inception?
        Mr. Benson. I do not have the answers on that right now. I
    can get those for you. We have to file quarterly reports with
    HHS-OIG that identifies the number of cases that we have
    worked, but I do not have the total number with me today.
        Ms. Blackburn. Now your department was in place in 1984?
        Mr. Benson. It was created in 1984.
        Ms. Blackburn. So you had 10 years of experience before
    TennCare came into being.
        Mr. Benson. That is correct.
        Ms. Blackburn. Can you elaborate for just a moment on how
    TennCare's creation affected your ability and your department's
    ability to do its job?
        Mr. Benson. Prior to managed care, our primary contact was
    the Bureau of Medicaid; at that time, it became Bureau of
    TennCare. The vast majority of referrals came from that agency.
    The SURS unit would essentially check 10 percent of each of the
    different provider groups per year, that was their goal--10
    percent of the hospitals, 10 percent of the clinics, 10 percent
    of transportation companies. They would do a sampling of their
    patient files. They would get the billing information, they
    would go actually into the provider's office, business, and
    they would pull out those patient files and compare them to the
    billings. If they saw a pattern of abuse or potential fraud,
    they would refer it to our unit.
        When our unit would do the investigations, the Bureau of
    Medicaid was our primary source to get all the information we
    needed. We could get the claims, they were submitted directly
    to the Bureau of Medicaid by the provider, so all we had to go
    was go to them to get the claims, to get the checks, to match
    up the checks to the claims, which in a criminal case you have
    to be able to do. We have to be able to show that this
    fraudulent claim resulted in this payment.
        With the advent of managed care, that has changed
    tremendously because the claims are not submitted to the Bureau
    of Medicaid any more. They go to the managed care organization
    or the behavioral health organizations. So when we get the
    information and we can still have--we still have access to the
    computer system that in comparison to what we anticipate is
    going to happen in the future is an antiquated system. We have
    two programmers on staff and rather than taking minutes or
    hours to pull up the information, it takes days or weeks to
    pull up the information. That was under the old system and it
    is still in place now, but we do not anticipate it will be with
    the new system.
        But once we get that information, that is a starting point,
    that data is a starting point, but we have to go get the claims
    information. We can no longer go to the Bureau of Medicaid to
    get it, that claim information is out at the different MCOs.
    Now if you have a provider contracting with more than one MCO,
    we have to communicate with more than one MCO. Some of them are
    more effective than others in getting the information to us
    quickly. In dealing with one MCO, we may get the claims
    information within a matter of days and it may take another 1
    week or months.
        Accuracy depends on each of the MCOs, as far as being able
    to find all the claims information, and also to be able to
    provide--they have to provide us the payment information that
    goes out. The data that we get from TennCare is the starting
    point, but it is the claims, the computer transmissions or the
    hard copies that are sent in are what makes our criminal cases.
    We have to have those checks, we have to have those claims.
        Ms. Blackburn. Would you say that fraud has been easier or
    harder to track under TennCare as related to your experience
    with Medicaid?
        Mr. Benson. Much harder.
        Ms. Blackburn. Much harder under TennCare?
        Mr. Benson. That is correct. Part of it I think is due to
    the providers I think are becoming more savvy on how they
    commit the fraud, they know that--I have heard it quoted
    sometimes that if they submit the claim accurately--and I heard
    a statement this morning that, you know, most of the claims
    that are submitted, they are reading them accurately, but if it
    is accurate, that does not mean that event actually occurred.
    When a provider submits that claim for payment, that does not
    necessarily mean that he actually did the service that he
    billed for. And you also have, especially when we are dealing
    with the pharmacy issues now, you may have a provider that
    knows that if he is what we call an over-prescriber, a patient
    can come in and all he has to do is ask for a prescription and
    it is filled, that provider knows that if he turns around and
    bills for that service--because the way he is going to get
    reimbursed is by billing an office visit or for a certain
    procedure. If that drug addict or that diverter, somebody that
    is selling the drugs, if they come in once a week to get their
    hydrocodone or whatever other drug and that doctor is billing
    once a week for that visit, it is going to raise a red flag
    somewhere in the system. So what he may do is charge the
    patient cash so that it does not show up in a billing to
    Medicaid. And that is a very hard thing to track sometimes. And
    again, depending on the MCO's quality to identify these things,
    we have to rely a lot on them in the past. Under this new
    computer system, we feel like we are going to be able to look
    at that and identify these things. But that is another
    difficult thing we have had.
        Mr. Mathis. May I respond to that as well?
        Ms. Blackburn. Yes, sir.
        Mr. Mathis. From the standpoint of putting it in a little
    different perspective. And William, if you disagree, please
    speak up.
        But with an MCC, which is our frontline of defense--you
    know, we talked about having our compliance plan. They may see
    a provider billing for 5 hours a day, nothing jumps off the
    chart. But when that provider is a contractor with five MCCs
    and they are billing each one of them 5 hours a day, then we
    are above 24 hours a day worth of billing. That is where the
    new system--certainly we can go in today and extract that
    information, but the new system will certainly pull it all
    together and identify it for us. That is why we need to
    certainly have a system that is very flexible, to support the
    managed care contractors that are out there on the front lines
    as well.
        So that is a very important issue from our point.
        Mr. Benson. That is correct.
        Ms. Blackburn. Mr. Mathis, I am aware that each Governor,
    including our Governor here in Tennessee, received a letter in
    June from the House Energy and Commerce Committee requesting
    information on waste, fraud and abuse in the State. Have you
    all submitted your answers to that letter?
        Mr. Mathis. We have. There was a couple of questions that
    directly related to program integrity and those were sent to us
    and we have responded back to those. One of the major issues,
    if I remember correctly, it asked us about the staffing, how
    many staff positions we had several years ago versus where we
    are at today and what kind of resources that we have and what
    kinds of recoveries have taken place.
        Ms. Blackburn. OK, thank you very much.
        Mr. Platts. Thank you, Ms. Blackburn. We are going to need
    to wrap up here fairly quickly. Unfortunately, Ms. Blackburn
    and I both have to catch a flight to get back to D.C. for
    session later this afternoon.
        I do want to, with all three of you, ask one final question
    and it relates to--Mr. Mathis, I think you talked about your
    kind of three strikes and you are out, if a recipient commits
    fraud. First it is 12 months, then I think 2 years and then
    permanent. And you understand that under Federal law, the bar
    can only be for a maximum of 1 year. So that is something
    specific we need to look at as to whether we need to adjust
    Federal law to give you the authority to hold people
    accountable. And I appreciate that is what you are seeking to
    do and we will look at that.
        Is there anything else that you would like to bring to our
    attention, whether it be with the seniors and how to have a
    program that allows you to be more effective, you know,
    encouraging seniors to participate, whether it be with your
    fraud units, whether it be the Program Integrity Unit,
    something in Washington that you want us to take back with us
    from your State and regional perspective?
        Mr. Mathis. Would you like for me to go first? I am not
    sure you have enough time, but--[laughter]--there are a couple
    of issues along those same lines I certainly would share. Maybe
    the subcommittee should take a look at the State residency laws
    and rules because currently that is--when we work out-of-state
    cases, those are the most difficult cases on recipient fraud
    that we have to work. The reason that it is so difficult is the
    Federal guideline says that it is the intent of the recipient.
    I can intend to live in Tennessee today and intend to live in
    Kentucky tomorrow and intend to live in North Carolina the next
    day. So it is very difficult for us to handle and work those
    kinds of cases, which I reported we have four under indictment
    because we have shown they never lived in Tennessee. They
    rented post office boxes and forwarded their mail, and those
    are going forward and they are very interesting cases. I do not
    have time to share the details with you.
        Another one--and I am sharing these, not on behalf of
    TennCare, you have asked the question and I am sharing them on
    behalf of Tom Mathis and how I feel.
        Illegal alien is another issue that you may want to take a
    look at because that is an issue--if an illegal alien comes
    into this country and goes to the hospital, they are
    automatically covered under the Medicaid program until they are
    released. We receive many complaints about that from
    individuals who are citizens of this country of ours that are
    not able to get on and they go to the hospital and they are
    certainly not covered. And it is difficult for me to sit and
    defend that certainly.
        The other issue I will mention and then I will hush, is
    possibly some assistance--and this may be partially my fault,
    but in doing--we have been doing matches against State prisons
    and county jails for convicted felons. I have not been able to
    find an avenue to get access to do matches against the Federal
    prisons nationwide, and it would be of assistance. I would like
    to run that match because if someone is convicted out of
    Tennessee, they may be placed in a Federal prison in any of the
    States, wherever they have room. And I would certainly like to
    run that match because we have had a high level of success in
    terminating individuals in State prisons and in county jails
    where you are housing felons.
        Mr. Platts. You have made a request to the Federal Bureau
    of Prisons or to someone to try to get that but have not been
    able to get it?
        Mr. Mathis. I have not made an official request, I have
    made several phone calls and had some conversations. Coming out
    of the prison environment where I worked for over 22 years, I
    had knowledge of that and tried to bring that in, but I am told
    that we are not--they are restricted in being able to give that
    to us at this point.
        Mr. Platts. OK. Well, we appreciate those suggestions and
    we will gladly take a look at them. Mr. Benson and Ms.
    Williams?
        Mr. Benson. The only thing I would throw out is just the
    financial--the Federal financial participation is so important
    to the States, the need for that to continue. Without that 75
    percent funding, it would be extremely detrimental to the units
    to say the least.
        The other thing is the emphasis to the States, even the
    ones that are in financial constraints, to release all of the
    State funding that is available to match that for the Federal
    funds is very important. For those States that do not have
    updated fraud detection systems, we know from experience in
    Tennessee, the difficulties we have had, the emphasis to those
    States to create those data warehouse systems like we are going
    to in Tennessee, I think are very important.
        I cannot stress enough the importance of the Medicaid Fraud
    Control Units and SURS and Program Integrity Units working
    together. I cannot imagine how difficult my job would be, more
    difficult my job would be, if we did not have an excellent
    relationship. And for those States that do not, I think the
    emphasis should be put on those States to create and maintain
    an excellent relationship as best they can.
        Mr. Platts. I appreciate the comments. And I do hope that
    as you develop the information system, that--we talked a lot
    about fraud, but that it is again going to capture, in a
    broader sense, what HHS is trying to do with improper payments
    of all types, whether it is intentional fraud or just other
    errors, because to the taxpayer, wrongful payment of any kind
    is still going to hurt the taxpayer.
        Mr. Benson. Right.
        Mr. Platts. I realize to your specific unit, fraud is your
    focus, but to the Program Integrity Unit, it is the big
    picture.
        Ms. Heneger-Williams.
        Ms. Williams. The request that I have to take back to
    Washington would be nothing more than the continuation for the
    Senior Medicare Patrol program nationwide. It is obviously a
    very needed program to get the educational aspect out there
    very effectively and efficiently.
        Mr. Platts. We appreciate that, and also to engage our
    seniors and have the benefit of that civic duty, as we talked
    about.
        Ms. Blackburn, did you want to make a closing statement?
        Ms. Blackburn. Only one thought as we are closing. Just
    with the question that you had asked on the lessons learned and
    I think Mr. Mathis probably has an additional list of those
    that he would recommend to us. I just think that over the next
    couple of days if you all would like to submit in writing for
    the record, that would be very helpful to us as we look at the
    waiver program and the Medicaid program, those lessons learned
    here in Tennessee would be important. And I would ask you to
    submit those. Thank you.
        Mr. Platts. Thank you, Ms. Blackburn, an excellent point.
    And because of time constraints today, anything you would like
    to add. We will keep the official record open for 2 weeks for
    things you want to share, from suggestions standpoint or some
    of the specific followups that we have requested from you, that
    you will be forwarding, and we appreciate you doing that.
        I will add my thanks to each of you for your participation,
    and as with our Federal officials, your work day in and day out
    in trying to serve our citizens well, we appreciate your
    efforts.
        Certainly I think Mayor McDonald was in the room but I
    think he has stepped out now, we appreciate the city of
    Bartlett hosting us here.
        Ms. Blackburn, we are delighted to be here in your district
    and giving us hands-on information both with our Federal
    colleagues but also with your State and local efforts out here
    in the State of Tennessee.
        The focus is certainly one that we all share, the goal, of
    ensuring the taxpayers are getting the return on their
    investment in whatever the program may be. In this case,
    especially Medicaid. My one hope is with Tennessee and the
    TennCare program, as you are developing your system, that
    coordination with HHS becomes tighter and not just something
    that is being, as I said earlier, thought about, but actually
    acted on so that we can get that comprehensive national picture
    of how we are doing and how responsible we are being with the
    taxpayer funds for all American citizens.
        I appreciate everyone's participation. Our thanks to all of
    our staff for their work in setting up this hearing and working
    with not just the elected officials here in Bartlett, but staff
    that may be present here in the room, for your assistance to
    our staff in putting this hearing together.
        This hearing stands adjourned.
        [Whereupon, at 11:06 a.m., the subcommittee was adjourned.]
        [Additional information submitted for the hearing record
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