[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





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                     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:]
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[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:]
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    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:]
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    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:]
    [GRAPHIC] [TIFF OMITTED] 90581.049
    
    [GRAPHIC] [TIFF OMITTED] 90581.050
    
    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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