[Senate Hearing 110-721]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-721
 
 MEDICARE VULNERABILITIES: PAYMENTS FOR CLAIMS TIED TO DECEASED DOCTORS

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

                                HEARING

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                                 of the

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              JULY 9, 2008

                               __________

       Available via http://www.gpoaccess.gov/congress/index.html

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs



                     U.S. GOVERNMENT PRINTING OFFICE
44-122 PDF                 WASHINGTON DC:  2008
---------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001

        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK PRYOR, Arkansas                 NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk
                                 ------                                

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                     CARL LEVIN, Michigan, Chairman
THOMAS R. CARPER, Delaware           NORM COLEMAN, Minnesota
MARK L. PRYOR, Arkansas              TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

            Elise J. Bean, Staff Director and Chief Counsel
          Kristina Ko, Legislative Assistant to Senator Levin
  Mark L. Greenblatt, Staff Director and Chief Counsel to the Minority
           Clifford C. Stoddard, Jr., Counsel to the Minority
                     Mary D. Robertson, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Levin................................................     1
    Senator Coleman..............................................     3
    Senator Carper...............................................     6
    Senator Collins..............................................     9
    Senator McCaskill............................................    10
    Senator Coburn...............................................    11

                               WITNESSES
                        Wednesday, July 9, 2008

Herb B. Kuhn, Deputy Administrator, Centers for Medicare & 
  Medicaid Services, U.S. Department of Health and Human Services    12
Robert Vito, Regional Inspector General for Evaluation and 
  Inspections, Office of Inspector General, U.S. Department of 
  Health and Human Services......................................    14
William E. Gray, Deputy Commissioner of Systems, Social Security 
  Administration.................................................    16

                     Alphabetical List of Witnesses

Gray, William E.:
    Testimony....................................................    16
    Prepared statement...........................................    63
Kuhn, Herb B.:
    Testimony....................................................    12
    Prepared statement...........................................    41
Vito, Robert:
    Testimony....................................................    14
    Prepared statement...........................................    49

                                EXHIBITS

1. GFollowup responses received from the Centers for Medicare & 
  Medicaid Services (CMS)........................................    69
2. GPermanent Subcommittee on Investigations Staff Report: 
  Medicare Vulnerabilities: Payments For Claims Tied to Deceased 
  Doctors........................................................    80
3. GPermanent Subcommittee on Investigations Minority Staff 
  Report: Medicare Vulnerabilities: The Use of Diagnosis Codes in 
  DME Claims.....................................................   111


 MEDICARE VULNERABILITIES: PAYMENTS FOR CLAIMS TIED TO DECEASED DOCTORS

                              ----------                              


                        WEDNESDAY, JULY 9, 2008

                                 U.S. Senate,      
              Permanent Subcommittee on Investigations,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
Room SD-342, Dirksen Senate Office Building, Hon. Carl Levin, 
Chairman of the Subcommittee, presiding.
    Present: Senators Levin, Carper, McCaskill, Coleman, 
Collins, and Coburn.
    Staff Present: Kristina Ko, Legislative Assistant to 
Senator Levin; Mark L. Greenblatt, Staff Director and Chief 
Counsel to the Minority; Clifford C. Stoddard, Jr., Counsel to 
the Minority; Timothy R. Terry, Counsel to the Minority; Mary 
D. Robertson, Chief Clerk; Gina Reinhardt, Congressional 
Fellow; Nicholas Standiford, Intern; Donell Ries, GAO Detailee; 
Jonathan Ende, Intern; and John Kim, Law Clerk; Peggy Gustafson 
(Senator McCaskill); John Collins (Senator Carper); Priscilla 
Hanley (Senator Collins); and Evan Feinberg (Senator Coburn).

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Good morning, everybody.
    Medicare is a critically important program that provides 
essential health care to folks across the country. But Medicare 
has a reputation for weak controls that waste hundreds of 
millions of taxpayer dollars each year. Today's hearing 
provides one example of those weak controls. From 2000 to 2007, 
we estimate that nearly half a million payments, totaling about 
$76 million, went to medical equipment suppliers that had 
submitted claims using the identification numbers of 17,000 
deceased doctors, and that represents about half of the 
deceased doctor population.
    At the request of Senator Coleman, the Subcommittee 
undertook this investigation to examine Medicare claim 
prescriptions for durable medical equipment presumably 
authorized by deceased doctors. This program is operated by the 
Centers for Medicare & Medicaid Services (CMS).
    We found that doctors who had died 1, 5, even 10 years 
earlier, were listed on Medicare claims prescribing equipment 
supposedly ordered by them years after their death. Here is how 
the Subcommittee estimates the dollar amounts of these claims. 
The Subcommittee received, from the American Medical 
Association, a list of physicians whose dates of death were 
between 1992 and 2002. We identified more than 33,000 deceased 
physicians who had what are called Unique Physician 
Identification Numbers (UPINs), and we created a random sample 
of 1,500 of those physicians. We then requested data from CMS 
about claims that had been filed from 2000 to 2007 using those 
physician identifiers on a prescription dated more than a year 
after the physician's death.
    Within our sample of 1,500 doctors, we found that 734 
UPINs, or about half of the sample, were used by durable 
medical equipment suppliers on 21,000 claims totaling over $3.4 
million during that 7-year period. That is an average of almost 
30 false claims filed per deceased doctor, or about $4,600 paid 
out per deceased doctor. Then we used those numbers to generate 
statistically valid estimates of the total population of 
erroneous payments for medical equipment using the UPINs of 
deceased physicians. We estimate that, from 2000 to 2007, the 
UPINs of more than 17,000 deceased physicians were used on 
close to a half a million erroneous claims for durable medical 
equipment that were paid over $76 million. The failure to 
reject these claims raises questions about who at Medicare is 
safeguarding taxpayer dollars, and why basic protections are 
not in place.
    One example is a physician in Florida who died in 1999. Six 
to 7 years later, from November 2005 through November 2006, 
Medicare paid out over $544,000 worth of durable medical 
equipment claims supposedly ordered by this physician.
    How is that possible? It seems apparent that the CMS system 
has failed to adequately monitor and audit the contractors who 
are paid to update the UPIN numbers and process the durable 
claims, the medical equipment claims. When a durable medical 
equipment claim comes in, the CMS contractor who processes the 
claims--called a DME Regional Carrier, (DMERC)--is supposed to 
verify that the claim includes a valid and active UPIN for the 
prescribing physician. If the UPIN does not exist or if it is 
assigned to a physician that is deceased, the claim should not 
be paid. It is supposed to be that simple.
    When the $544,000 in Florida durable medical equipment 
claims were submitted to Medicare using the UPIN of a physician 
who had died up to 7 years earlier, the contractor should have 
determined that the claims were invalid. Instead, the 
contractor accepted the claims from these companies using the 
deceased doctor's UPIN. While those claims happened to be in 
Florida, contractors have been approving claims filed with 
deceased doctors' UPINs all over the country. We estimate that 
about 2,500 deceased physicians still had active UPINs as of 
May of this year.
    What makes matters worse is that CMS was alerted to UPIN 
failures back in 2001 and said they took steps to correct it, 
but then never re-evaluated the situation to ensure that the 
problem was fixed. It was in November 2001, when the Inspector 
General of the Department of Health and Human Services, 
released a report finding that over $90 million had been paid 
for medical equipment and supply claims with invalid or 
inactive UPINs in 1999 alone. In 2002, CMS said that they 
implemented procedures to ensure that these medical equipment 
claims with inactive or invalid UPINs, including those 
belonging to deceased physicians, would be rejected. CMS issued 
instructions to its contractors, including the National 
Heritage Insurance Company, the contractor that maintained the 
UPIN registry--and, by the way, these are all contractors that 
are for-profit. These are not nonprofit contractors. CMS 
instructed them to conduct a one-time cleanup to eliminate 
deceased physicians' UPINs. They were then paid to update their 
UPIN registries every 15 months. Its contractors were also 
required, as of April 1, 2002, to reject all claims using the 
UPINs of deceased physicians. Looking internally, CMS also 
issued a directive to reprogram its own data system to 
guarantee the rejection of these types of claims.
    Apparently, neither CMS nor their contractors did what they 
were supposed to do. The UPIN registry was not kept up to date. 
The contractors' systems did not reject deceased physician 
claims. Neither did the CMS data system. And no one--CMS or the 
contractors--checked to see if the procedures were working. So 
7 years after the IG report, we are back where we started, with 
CMS paying claims containing UPINs assigned to deceased 
doctors.
    A few months ago, CMS terminated the use of the UPIN 
registry and replaced it with a new registry. But unless CMS 
and their contractors are held accountable for failures, and 
unless companies who wrongfully profited from improper use of 
deceased physicians' identification numbers are held 
accountable, we will be back here 7 years from now asking the 
same questions.
    The failure to stop payment of deceased physician claims is 
inexcusable since dates of deaths are so readily available. 
This type of abuse should have been stopped long ago. It is 
easy to obtain deceased physicians' identification numbers and 
easy to use those numbers to obtain payouts through fraudulent 
claims. As long as millions of dollars in claims with deceased 
provider identification numbers are paid, fraudsters will 
continue to rip off the system.
    To examine these issues in greater detail, we are going to 
hear today from some of the agencies that deal with Medicare, 
the Centers for Medicare & Medicaid Services--CMS--the 
Inspector General of the Department of Health and Human 
Services, and the Social Security Administration. Each of these 
agencies has cooperated with the Subcommittee's inquiry. We 
appreciate that cooperation, but we will, of course, press them 
as hard as we can to end the taxpayer rip-off that we have 
identified.
    Finally, I would like to again thank the Subcommittee's 
Ranking Republican, Norm Coleman, who initiated this 
investigation, and his staff, who have worked hard to examine 
these issues.
    Now I will call on Senator Coleman.

              OPENING STATEMENT OF SENATOR COLEMAN

    Senator Coleman. Thank you. Thank you, Senator Levin, and 
let me return the thanks by saying that you and your staff have 
been extremely supportive. Like all our investigations, this 
has been a tremendous bipartisan effort, and I certainly 
appreciate that very much.
    This morning, we turn our attention to a familiar topic: 
Medicare fraud and abuse. And I do want to be very clear from 
the beginning that Medicare is an important program that 
provides health insurance for the elderly and the disabled. It 
is a genuine blessing for many of America's most vulnerable 
citizens.
    But the program has been plagued by persistent and 
pervasive fraud and abuse. For almost 20 years, the Government 
Accountability Office has consistently designated the Medicare 
program as ``high risk'' because of its vulnerability to 
mismanagement and improper payments. According to its own 
reports, Medicare made improper payments in 2004 and 2005 
amounting to roughly $34 billion. That is the size of the 
entire Minnesota State budget general fund--wasted on improper 
payments.
    One Harvard professor estimated that fraud and abuse could 
consume about 15 to 20 percent of the Medicare budget. That 
would be more than $70 billion in 2008 alone. Let's remember 
that these billions and billions are tax dollars paid by hard-
working Americans.
    In keeping with our long tradition of government oversight, 
the Subcommittee spent the past year examining the Medicare 
program. Our bipartisan inquiry ultimately zeroed in on abuses 
in payments for durable medical equipment (DME).
    In short, the Subcommittee's investigation uncovered some 
appalling facts. The Subcommittee found that, between 2000 and 
2007, Medicare paid for hundreds of thousands of DME claims in 
which the prescribing doctor had died years earlier. It has 
been estimated, as the Chairman has noted, that these payments 
for those claims could total over $70 million, possibly $100 
million. The evidence also establishes certain links to 
fraudulent activity, which we will examine shortly. Clearly, we 
have a problem.
    Although the jargon can get confusing, here is the big 
picture: Medicare regulations require that DME claims contain 
certain information in order to qualify for payment, including 
valid identification numbers for the patient, the DME supplier, 
and the prescribing doctor. As the Chairman has noted, the 
doctor's ID number is a UPIN.
    The bottom line is that Medicare paid tens of millions of 
dollars on claims that contained the UPINs of doctors who died 
long before the claims were filed. For hundreds of thousands of 
claims, the doctors had passed away 5, 10, or even 15 years 
beforehand.
    To get a sense of the problem, I just want to review a few 
alarming cases:
    The Chairman has discussed the case of the Florida doctor 
who passed away in 1999 with claims to the tune of over 
$500,000 being processed. At least three different companies 
used this doctor's ID number, filing claims using his ID number 
6, 7, or 8 years after the doctor died. Two of the culprits 
have been convicted of health care fraud, and the other 
companies were cited by State health agencies for violations. 
Altogether, the Subcommittee identified at least $350,000 paid 
by Medicare to these fraudulent actors for claims containing 
the ID number of this one doctor alone.
    Another doctor passed away in 2001, and his UPIN was used 
in more than 3,800 claims submitted between 2002 and 2007. The 
total payments for these claims amounted to over $354,000.
    The UPIN of another physician who died before 1999 was 
listed in more than 2,000 claims submitted up to 8 years after 
he died. These claims resulted in Medicare payments of more 
than $478,000.
    Now, what is alarming is that the problems are not new; 
that CMS had been notified of these issues several years ago; 
that the Inspector General of the Department of Health and 
Human Services reported that Medicare had paid tens of millions 
for claims with invalid and inactive UPINs. The IG urged CMS to 
make changes to ensure that the system was fixed.
    CMS then did that. They then stated that claims with UPINs 
of deceased doctors would not be paid starting April 1, 2002. 
CMS attempted to fix the problems in 2002. They instituted 
several procedures designed to ensure that the claims with 
UPINs of these deceased physicians would not be used.
    Unfortunately, the Subcommittee's investigation establishes 
that those changes did not work. For instance, even though CMS' 
new procedures were supposed to reject claims with UPINs of 
dead doctors starting on April 1, 2002, the evidence obtained 
by the Subcommittee reveals that an estimated 63 percent of the 
improper payments occurred after that date.
    Similarly, CMS required that the UPIN database must be 
updated every 15 months and the UPINs of dead doctors must be 
deactivated. Yet the evidence indicates that the UPINs of 
thousands of physicians remained active, even though they 
passed away long ago. For instance, the Subcommittee estimates 
that the UPINs of thousands of doctors who passed away in the 
1990s were still active as of this past May.
    It is clear that the claims review process has not worked 
properly. Medicare has not made sure that dead doctors are 
removed from the system and that claims linked to those doctors 
are rejected. This is simply unacceptable. Making sure that the 
prescribing doctor is alive before paying a claim should be a 
no-brainer. These errors leave Medicare--and, therefore, 
American taxpayers--vulnerable to fraud. The problem must be 
fixed and it must be fixed now.
    How do we clean up the system? The good news is that we 
have a unique opportunity right now to address the problem. 
Medicare has recently replaced the old UPINs with a new 
numbering system called the National Provider Identifier (NPI). 
So there is a golden opportunity to make sure that the problems 
are fixed at an early stage and make sure that the improper 
payments that plagued the UPINs will not recur with the NPIs.
    I just have to state this. We live in a high-tech world. 
FedEx and UPS can track every movement of a flow of goods. 
Surely we should have the capacity to figure out if doctors are 
dead and not making payments. Information is reported. Social 
Security has it. The AMA has it. And to me it is somewhat 
incomprehensible that we do not have in government the computer 
capability--I should not say in government as the Chairman 
indicated, we have outside providers here that they do not have 
the computer capability to match a dead doctor's ID number with 
a claim that is being processed after they died.
    We cannot afford $100 million loopholes, especially not 
now. There are too many challenges that this country is 
facing--energy, education, homeland security, and housing. And 
what is required now is an unprecedented level of fiscal 
discipline and political leadership to overcome these 
challenges.
    I will close by saying that, almost every day, my staff and 
I learn of a deserving Minnesota senior that is having a 
problem with Medicare coverage. If we want to look them in the 
eye and say we are trying to fix their problem, Job Number One 
must be attacking Medicare fraud, waste, and abuse so that 
precious tax dollars go to the noble use for which they were 
intended.
    We have a special responsibility to preserve the integrity 
of a vital service to the Nation's elderly and disabled, and I 
am confident that CMS will be a productive and willing partner 
in that effort. I look forward to discussing with each of 
today's witnesses how we can work together to ensure that 
Medicare accomplishes its noble goals while protecting American 
tax dollars from fraud, waste, and abuse.
    Thank you, Mr. Chairman.
    Senator Levin. Thank you, Senator Coleman.
    Let me now welcome our panel of witnesses for today's 
hearing: Herb Kuhn, the Deputy Administrator for the Centers 
for Medicare and Medicaid Services of the Department of Health 
and Human Services here in Washington; Robert Vito, the 
Regional Inspector General for the Office of Evaluations and 
Inspections of the Department of Health and Human Services in 
Philadelphia; and William Gray, the Deputy Commissioner for the 
Office of Systems of the Social Security Administration in 
Baltimore.
    Gentlemen, I want to thank each of you for being here 
today. I want to thank you for the cooperation of your 
agencies. We look forward to your testimony.
    Before we call on you, I understand there are other Members 
who may want to give brief opening statements, and we would be 
happy to accommodate that. So let me first call on Senator 
Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thank you, Mr. Chairman. I have a statement 
I would like to enter for the record. Let me just briefly say, 
however, when you look in the dictionary and you look up a word 
and sometimes they have a picture beside the word? I don't know 
if there is any place in the dictionary where we look up ``low-
hanging fruit.'' But I think if there were, we would find this 
issue of making Medicare payments to doctors who have been dead 
in some cases for many years. If we cannot go out and make sure 
that we are not making those kinds of improper payments, heaven 
help us.
    Yesterday, a reporter grabbed me. I was on my way into the 
LBJ Room for our weekly caucus luncheon, and they said, ``I 
understand that the Medicare trust fund is in enormous 
difficulty, and it is going to go broke, and you guys are going 
to raise taxes.'' And I said, well, before we raise taxes, I 
think there are a couple things we need to do. One of those is 
to make sure that we are collecting the taxes that are owed, 
and there are a lot of taxes that are owed that are not being 
collected, including some of these for our payroll taxes.
    The second thing we need to do is to stop making payments 
to deceased physicians who are no longer providing Medicare 
services.
    The third thing we may want to do is to look at the monies 
that we spend on equipment, whether it is wheelchairs or oxygen 
and that sort of thing, to make sure that we are getting our 
value, our dollar's worth from the money that we are spending.
    And another thing we might want to do, this is something 
that Dr. Coburn and I have been working on. We have a strong 
interest in addressing not just overpayments or improper 
payments in Medicare, but across the Federal Government. And 
one of the things that we have learned is there is about $55 to 
$60 billion in improper payments that we are aware of, and that 
does not cover all the agencies. But we have got a ton of it 
that is in Medicare. Actually, in the last 2 or 3 years, there 
has been a post-audit recovery operation going on with 
Medicare. They focused on three States: California, Florida, 
and New York. Last year, they recovered about $1 billion. That 
is real money. And I think we are just scratching the surface 
there.
    So before we raise taxes, those are a couple things we need 
to do. And for God's sake, for something that would seem to be 
as easy to fix as this, if we cannot do this, heaven help us 
when it comes to going after the tough stuff.
    I am delighted we are having this hearing. This is 
oversight at its best, putting a spotlight on something that we 
ought to know better than to let happen. I think by virtue of 
having this hearing, we are going to make sure that this does 
not continue to be a problem, and hopefully we will remind some 
other folks who have low-hanging fruit that can be snatched up 
in their own operations in the Federal Government, whether it 
is CMS or elsewhere, that they need to be more diligent in the 
work they do. And to the extent that there is stuff that we can 
do here in the Congress, in this Subcommittee or otherwise, 
that can help give you the tools that you need to ensure that 
this kind of stuff does not happen, we need to hear that as 
well.
    We thank you for being here and look forward to your 
testimony.
    [The prepared opening statement of Senator Carper follows:]
              PREPARED OPENING STATEMENT OF SENATOR CARPER
    Thank you Mr. Chairman.
    I'm pleased that you and Senator Coleman have taken on this issue 
and are holding this hearing today.
    Senator Coburn and I held a hearing at in our Financial Management 
subcommittee just before the 4th of July recess about the dire long-
term financial crisis our nation faces. We heard testimony from the 
administration, from GAO, and from experts like former Comptroller 
General David Walker about what we need to do and what the next 
administration will need to do to turn things around.
    The conclusions that are witnesses came to shouldn't be a surprise 
to any of us. We need to reform entitlement programs like Medicare and 
Social Security because, as the Baby Boom generation retires, these 
programs will eat up a bigger and bigger portion of our budget. We need 
to redefine our spending priorities and start focusing again on 
balancing our budget. We need to redefine our priorities on the revenue 
side as well and, along with that, do as much as we can to collect 
those taxes that are owed to the Treasury each year, but never paid. 
Finally, we need to do all we can to stop agencies from making 
avoidable improper payments.
    Senator Coburn and I have been working on this improper payments 
issue for years now. According to the latest figures released by OMB--
and these are based on numbers from fiscal year 2007--agencies are 
making an estimated $55 billion in improper payments each year. Nearly 
$11 billion of that total can be attributed to the Medicare fee-for-
service program. Nearly $13 billion can be attributed to Medicaid. So 
nearly half of the improper payments--and keep in mind that these are 
avoidable errors--are attributable to the programs for which Mr. Kuhn 
and his team at CMS are responsible.
    We are wasting a tremendous amount of money year-in and year-out. 
But the $55 billion estimate that OMB has reported does not yet even 
include improper payments made in a number of large programs, including 
the Medicare Advantage and Medicare Prescription Drug Program.
    We have our work cut out for us. I was troubled, then, to read over 
the materials for this hearing and learn that, as challenging as the 
improper payments problem is at CMS, we are not doing all we can to go 
after the low-hanging fruit. As I understand it, CMS knew about the 
payments to deceased doctors that we'll be discussing today but just 
didn't follow through. That is unacceptable. So I look forward to 
hearing from our witnesses to learn more about the path forward on this 
issue in particular, but also on the larger improper payments issue 
that has been plaguing the Medicare and Medicaid programs for a number 
of years now.
    There may come a time in the not-so-distant future when Congress 
will be called upon to make some painful decisions about the future of 
these programs, especially Medicare. The least that we can do between 
now and then is eliminate the silly mistakes that have already 
contributed to billions in waste.
    Thank you again, Mr. Chairman.

    Senator Carper. Thank you, Mr. Chairman.
    I'm pleased that you and Senator Coleman have taken on this 
issue and are holding this hearing today.
    Senator Coburn and I held a hearing at in our Financial 
Management subcommittee just before the 4th of July recess 
about the dire long-term financial crisis our nation faces. We 
heard testimony from the administration, from GAO, and from 
experts like former Comptroller General David Walker about what 
we need to do and what the next administration will need to do 
to turn things around.
    The conclusions that are witnesses came to shouldn't be a 
surprise to any of us. We need to reform entitlement programs 
like Medicare and Social Security because, as the Baby Boom 
generation retires, these programs will eat up a bigger and 
bigger portion of our budget. We need to redefine our spending 
priorities and start focusing again on balancing our budget. We 
need to redefine our priorities on the revenue side as well 
and, along with that, do as much as we can to collect those 
taxes that are owed to the Treasury each year, but never paid. 
Finally, we need to do all we can to stop agencies from making 
avoidable improper payments.
    Senator Coburn and I have been working on this improper 
payments issue for years now. According to the latest figures 
released by OMB--and these are based on numbers from fiscal 
year 2007--agencies are making an estimated $55 billion in 
improper payments each year. Nearly $11 billion of that total 
can be attributed to the Medicare fee-for-service program. 
Nearly $13 billion can be attributed to Medicaid. So nearly 
half of the improper payments--and keep in mind that these are 
avoidable errors--are attributable to the programs for which 
Mr. Kuhn and his team at CMS are responsible.
    We are wasting a tremendous amount of money year-in and 
year-out. But the $55 billion estimate that OMB has reported 
does not yet even include improper payments made in a number of 
large programs, including the Medicare Advantage and Medicare 
Prescription Drug Program.
    We have our work cut out for us. I was troubled, then, to 
read over the materials for this hearing and learn that, as 
challenging as the improper payments problem is at CMS, we are 
not doing all we can to go after the low-hanging fruit. As I 
understand it, CMS knew about the payments to deceased doctors 
that we'll be discussing today but just didn't follow through. 
That is unacceptable. So I look forward to hearing from our 
witnesses to learn more about the path forward on this issue in 
particular, but also on the larger improper payments issue that 
has been plaguing the Medicare and Medicaid programs for a 
number of years now.
    There may come a time in the not-so-distant future when 
Congress will be called upon to make some painful decisions 
about the future of these programs, especially Medicare. The 
least that we can do between now and then is eliminate the 
silly mistakes that have already contributed to billions in 
waste.
    Thank you again, Mr. Chairman.

    Senator Levin. Thank you, Senator Carper. Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman.
    Let me thank both the Chairman and the Ranking Member for 
holding this hearing and conducting this investigation. I am 
going to put my full statement into the record and just make a 
few comments with the Chairman's permission.
    First of all, I come to this hearing with a disturbing 
sense of deja-vu because the very first hearing that I chaired 
of this Subcommittee back in 1997 focused on fraud and abuse in 
the Medicare program. And during our investigation 11 years 
ago, we learned that the Medicare program loses more than $20 
billion a year to waste, fraud, and abuse. Moreover, our 
investigation revealed far too many instances where Medicare 
and its contractors regularly wrote checks first and asked 
questions later.
    For example, we discovered back in 1997 that Medicare had 
paid more than $6 million to durable medical equipment 
companies that had provided no goods or services whatsoever, 
and one of those companies listed an absurd fictitious address 
that, had it existed, would have been in the middle of the 
runway of the Miami International Airport.
    I mention that particular case because just as sending 
checks based on claims from deceased doctors seems absurd and 
impossible to have occurred, sending checks to fictitious 
addresses also was occurring.
    It is disturbing that the Subcommittee's current 
investigation reveals that so little has changed. Unscrupulous 
actors continue to take advantage of the system, wasting 
billions of taxpayer dollars and undermining the credibility of 
what, as Senator Coleman has pointed out, is an absolutely 
vital program to our seniors and disabled citizens.
    So I am very concerned that for a decade the Medicare 
program has been on the GAO's high-risk list. For more than a 
decade, congressional investigations have time and time again 
shined a spotlight on egregious fraud. And yet so little seems 
to have changed, and that to me is very disturbing and 
completely unacceptable.
    So it is my hope that PSI's investigation and report, the 
excellent bipartisan work that has been done by this 
Subcommittee's leaders, will finally lay the groundwork for 
legislative and administrative reforms to address this problem 
once and for all. There are many issues the Federal Government 
faces that are complex and difficult to resolve, but paying 
fictitious claims submitted by people using the identification 
numbers of deceased doctors does not seem to be one of them. 
Our Nation's taxpayers and seniors and disabled Americans who 
depend on the Medicare program deserve no less.
    Thank you, Mr. Chairman, and thank you, Senator Coleman, 
for your excellent work.
    [The prepared opening statement of Senator Collins 
follows:]

             PREPARED STATEMENT OF SENATOR SUSAN M. COLLINS

    Mr. Chairman, I commend the Chair and Ranking Member for calling 
this morning's hearing which is based on the Subcommittee's 
investigation into waste, fraud and abuse in the Medicare program, with 
a particular focus on durable medical equipment claims.
    When I first came to the Senate in 1997, I had the honor and 
privilege of serving as Chairman of this Subcommittee. The very first 
hearing that I chaired was focused on the Subcommittee's ongoing 
efforts to investigate and expose fraud and abuse in the Medicare 
program, with the twin goals of protecting the taxpayer from 
unscrupulous individuals who were stealing literally billions of 
dollars from Medicare and of protecting elderly and disabled Americans 
who rely upon this critically important program for their health care 
needs.
    During the course of our investigation, we learned that the 
Medicare program loses more than $20 billion a year to waste, fraud and 
abuse. Moreover, our investigation revealed far too many instances 
where the then-HCFA and its contractors regularly wrote checks first 
and asked questions later. For example, we discovered that Medicare had 
paid over $6 million to durable medical equipment companies that 
provided no goods or services whatsoever. One of these companies even 
listed an absurd fictitious address, that, had it existed, would have 
been in the middle of the runway of the Miami International Airport.
    Sadly, as the Subcommittee's current investigation reveals, little 
has changed. Unscrupulous actors continue to take advantage of the 
system, wasting billions of taxpayer dollars and undermining the 
credibility of the Medicare program in the process.
    The Subcommittee's current investigation has found that Medicare 
has paid as much as $92 million over the past seven years for durable 
medical equipment claims containing the identification numbers of 
deceased prescribing physicians, many of whom had died ten years or 
more before the service date on the claims.
    Moreover, these problems are not new. In 2001, the HHS Inspector 
General reported that Medicare paid $91 million in 1999 for medical 
equipment and supply claims with invalid or inactive numbers. In 
response to this report, CMS did take steps to reject claims containing 
the provider identification numbers of deceased physicians. These 
efforts, however, have evidently not been successful, since the claims 
are still being paid.
    Mr. Chairman, it is my hope that PSI's investigation and report 
will help lay the groundwork for legislative and administrative reforms 
to address this problem once and for all. Our nation's taxpayers and 
the seniors and disabled Americans who depend on the Medicare program 
deserve no less.

    Senator Levin. Thank you, Senator Collins. Senator 
McCaskill.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Thank you, Mr. Chairman. In preparing 
for this hearing today, I think as Senator Collins just said, 
the part that was most depressing is that I assumed that this 
was a problem that had just come to light, because this is the 
kind of problem when it comes to light, I think most average 
people think this is not a hard fix.
    CMS has full access to the Social Security Administration 
database relating to deaths, and it is deemed to be 99.5 
percent accurate. We are talking about a data match. We are 
talking about something that people do all the time in terms of 
data matches. And the idea that this was exposed as long ago as 
it was exposed and as of May of this year we still have 2,900 
deceased physicians still active in this database--that is 
enough to make you want to tear your hair out.
    The sense of urgency appears to be missing, and I know that 
all of you have important jobs, and I know that this is a 
massive program. But somebody has to explain to me today why 
this is so hard. Why a problem that has been identified as 
creating an excessive amount of fraud and waste in a program 
that is going broke, that is so dramatically needed by the 
American people, is incompetence, frankly. And I do not 
understand it.
    Now, the other thing that I am concerned about that I hope 
we cover today is that in June, CMS temporarily allowed the 
suppliers to use their own NPIs rather than the NPIs of order 
physicians. In auditing, there is a very important concept 
called ``segregation of duties.'' Segregation of duties is, in 
fact, as the Inspector General--I see him nodding his head. It 
is the best tool we have to make sure that there is not fraud, 
waste, and abuse. And when you allow on a temporary basis them 
to use their own numbers instead of the doctor's number, you 
are taking away a segregation of duties. We are going the 
opposite direction that we should be going in terms of ensuring 
that we root out this important amount of fraud and waste.
    So I really appreciate all those who have come to this 
Subcommittee before me, that have worked on this. Thank you, 
Mr. Chairman and the Ranking Member. And, obviously, I thank 
the others that exposed this problem over a decade ago. But 
there is somebody over there that is not mad enough, and they 
need to be getting mad. Thank you, Mr. Chairman.
    Senator Levin. Thank you, Senator McCaskill. Senator 
Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Mr. Chairman and Ranking Member Coleman, 
thank you for having the hearing. I have to say that I am 
somewhat perplexed. We are looking at $100 million worth of 
fraud. If you combine the CRS studies, the IG studies, and the 
GAO, we have $80 billion a year in waste, fraud, and abuse in 
the Medicare and Medicaid programs. I am not belittling the 
$100 million.
    The Congress this week is going to pass a bill probably 
that eliminates $1 billion worth of savings per year in terms 
of DME. That is $200 million of premiums that are going to be 
paid by seniors that they should not be paying because we felt 
a little heat from competitive bidding. We already pay 30 to 40 
percent too much for the DME equipment that Medicare buys.
    So I am discouraged because I do not think--we are going to 
have a hearing here today, and the Chairman and Ranking Member 
are rightly so bringing this forward, and we are going to do a 
lot of talk, and we are going to get after CMS. But when it 
comes to acting responsibly, the Congress is not going to do 
anything except delay the competitive bidding on DME, which 
will get rid of a lot of the fraudulent DME companies, which is 
part of the problem.
    We passed a farm bill that has $8 billion worth of fraud to 
dead farmers. We could not even get rid of that in the farm 
bill. We passed a farm bill that did not fix that even though 
we amended it in the Senate. When the compromise bill came 
back, we did not fix it. So there is $8 billion worth of farm 
fraud that is going out to dead farmers and $100 million being 
paid on DME only--that is DME only that we are talking about. 
We are not talking about the fraudulent claims of dead doctors 
for other things. And yet we will not do the hard work as a 
Senate or as a Congress to come alongside behind you.
    So my hope is, Mr. Chairman and Senator Coleman, that you 
start the rolling ball for us to start acting responsibly in 
the Congress, first by having this hearing, which I am thankful 
for, but, more importantly, doing the bigger things that need 
to be done to get rid of some of this $80 billion worth of 
fraud. Eighty billion means $200 billion of American taxpayer 
Medicare money that is being paid out, their share in Part B, 
$200 billion false claims to Medicare patients that they are 
paying for that we have not fixed.
    Thank you.
    Senator Levin. Thank you, Senator Coburn.
    Now, pursuant to Rule VI, all witnesses who testify before 
the Subcommittee are required to be sworn, and at this time I 
would ask each of you to please stand and raise your right 
hand. Do you swear that the testimony you are about to give 
before this Subcommittee will be the truth, the whole truth, 
and nothing but the truth, so help you, God?
    Mr. Kuhn. I do.
    Mr. Vito. I do.
    Mr. Gray. I do.
    Senator Levin. Thank you. We will be using a timing system 
today, and about a minute before the red light comes on, you 
will see the lights change from green to yellow, giving you an 
opportunity to conclude your remarks. Your written testimony 
will be printed in the record in its entirety. We would ask 
that you limit your oral testimony to no more than 5 minutes.
    Mr. Kuhn, we will have you go forward, followed by Mr. 
Vito, and finish up with Mr. Gray. And then after we have heard 
all of the testimony, we will turn to questions.
    Mr. Kuhn, again, thank you for being here.

TESTIMONY OF HERB B. KUHN,\1\ DEPUTY ADMINISTRATOR, CENTERS FOR 
  MEDICARE & MEDICAID SERVICES, U.S. DEPARTMENT OF HEALTH AND 
                         HUMAN SERVICES

    Mr. Kuhn. Chairman Levin, Mr. Coleman, Members of the 
Subcommittee, thank you for the opportunity to testify today 
regarding the Subcommittee's findings on Medicare payments for 
claims containing invalid and inactive provider identification 
numbers of deceased physicians. CMS appreciates the time and 
resources that the Subcommittee has invested in this study and 
is grateful for the Subcommittee's shared interest and goal in 
reducing waste, fraud, and abuse in the Medicare program. We 
are currently reviewing the findings of your report. We 
consider these findings very valuable for identifying areas of 
vulnerability in the program and accelerated our efforts to fix 
them.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kuhn appears in the Appendix on 
page 41.
---------------------------------------------------------------------------
    CMS has taken several steps to implement policy changes and 
new procedures to ensure that invalid or inactive provider 
identification numbers, or PINs, are not used by unscrupulous 
suppliers of Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies (DMEPOS). Internally, and with our claims-
processing contractors, we are making changes to substantially 
curb and, ideally, eliminate this practice altogether.
    Specifically, our conversion to the new National Provider 
Identifier (NPI), along with further documentation and data 
exchange improvements, have significantly strengthened CMS' 
ability to combat fraud and abuse that rely on invalid provider 
identifiers. All providers and suppliers intending to bill 
Medicare are required to apply for and secure a new NPI, and to 
use the NPI exclusively on all forms when billing Medicare. 
Before a NPI is used, CMS verifies the Social Security number 
with the Social Security Administration (SSA), thereby 
verifying the information as accurate at the time of issuance. 
Given this change, CMS believes the vulnerability for further 
fraud and abuse relying on provider identifiers and deceased 
physicians is substantially smaller today than before full NPI 
implementation.
    However, as you noted in your report, we will need to guard 
the new NPI system, and in order to do that, CMS finalized a 
new information exchange agreement with the Social Security 
Administration, which will provide CMS with monthly updates of 
SSA's Death Master File and unrestricted State death data 
beginning in August. CMS will match this information with data 
contained in the National Plan and Provider Enumeration 
System--the central system that maintains information about the 
NPI--and, of course, also our provider enrollment database as 
well. After confirming an individual practitioner is deceased, 
CMS will deactivate both the NPI and the practitioner's 
enrollment in the Medicare program.
    But we do not stop there. While our claims-processing 
system allows any NPI to be used for ordering and referring 
services to Medicare beneficiaries, we anticipate implementing 
changes in 2009 that will limit ordering and referring to only 
those individual practitioners enrolled in the Medicare 
program.
    In addition to assuring the accuracy of the NPI, we also 
need to work on the other side of the ledger to make sure that 
we have qualified DMEPOS suppliers out there, and in this 
regard, we are taking the following steps to make sure that we 
work both sides of the ledger so that we come to the middle to 
have a good, secure program.
    First, on July 1--and this is something Dr. Coburn 
referenced--we implemented DME competitive bidding in 10 
metropolitan areas in the country and plan to expand to 70 more 
next year. This program, which ushers in new accreditation, 
financial and quality standards for DME suppliers, will 
substantially increase the quality of this program and those 
who are enrolled as suppliers. Furthermore, it will bring about 
market pricing to DME supplies. One of the vulnerabilities of 
the program is when you mis-price something, you bring the 
fraudsters into the program. This will help eliminate that.
    Second, we are in the process of completing the final 
regulation that for the first time will require surety bonds 
for DMEPOS suppliers.
    Third, we recently published a proposed rule requiring 
DMEPOS suppliers to maintain ordering and referring 
documentation received from a physician or other non-physician 
practitioner for 7 years. This change, if adopted, will 
strengthen our ability to identify fraudulent billing during 
documentation reviews.
    And then, finally, through our enrollment demonstration 
projects initiated last summer in South Florida and Los Angeles 
metropolitan areas, we were able to revoke the billing 
privileges of nearly 1,000 DMEPOS suppliers.
    Protecting Medicare's integrity, ensuring its efficient 
operation, and assuring safe and quality health care for all 
beneficiaries is our goal in all that we do. In this regard, we 
appreciate the Subcommittee's work on this issue and your 
ongoing efforts to support the Medicare program's integrity.
    I look forward to answering any questions that you may 
have.
    Senator Levin. Thank you, Mr. Kuhn. Mr. Vito.

  TESTIMONY OF ROBERT VITO,\1\ REGIONAL INSPECTOR GENERAL FOR 
 EVALUATION AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. Vito. Good morning, Mr. Chairman and Members of the 
Subcommittee. I am Robert Vito, Regional Inspector General for 
Evaluation and Inspections at the U.S. Department of Health and 
Human Services' Office of Inspector General.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Vito appears in the Appendix on 
page 49.
---------------------------------------------------------------------------
    Because the Medicare DME benefit has proven to be 
particularly vulnerable to fraud, waste, and abuse, OIG has 
devoted substantial resources to conducting work in this area. 
We have performed studies on a wide array of DME-related 
issues; made recommendations to help CMS correct 
vulnerabilities; and performed targeted follow-up work to 
ensure that corrective action has been taken. One such issue--
the use of ordering UPINs on DME claims--is the subject of my 
testimony today.
    DME and related supplies are only covered by Medicare when 
ordered by a physician or a health care practitioner. To help 
ensure this condition is met, CMS requires DME suppliers to 
list the UPIN and, as of May 2008, the NPI of physicians who 
order the equipment on the claim form. However, as part of our 
DME work, we learned that Medicare's claims-processing system 
only verified that the UPIN met a certain format; edits were 
not being performed to ensure that the UPIN had been assigned 
or was active.
    In the November 2001 report, we found that Medicare and its 
beneficiaries paid $32 million for DME claims with invalid 
UPINs in 1999. In addition, $59 million was paid for DME claims 
listing UPINs that were inactive on the date of service. Almost 
$8 million of this involved UPINs for deceased physicians. We 
recommended that CMS revise claims-processing edits to ensure 
UPINs listed on DME claims were valid and active. In response, 
on two occasions CMS issued instructions to its carriers to 
deny DME claims listing deceased physician UPINs. However, 
other than provider education, we know of no further action 
taken by CMS to address the issue of invalid and inactive 
UPINs. We annually highlighted this vulnerability in various 
publications, including our semiannual reports to Congress and 
our ``Compendium of Unimplemented Office of Inspector General 
Recommendations.''
    To ensure effective edits for invalid and inactive UPINs, 
CMS needed to maintain accurate information in the UPIN 
Registry. However, in each of the three OIG reports issued 
between 1999 and 2003, we found the UPIN Registry contained 
inaccurate data. For example, in the 2003 report, the OIG found 
that 52 percent of the providers listed in the active UPIN 
database had inaccurate information in at least one of their 
practice settings. Seventeen percent of the providers no longer 
billed Medicare from any practice setting listed in the active 
UPIN file, and of that number, 14 percent were deceased, and 26 
percent were retired.
    Because CMS was planning to discontinue the use of UPINs 
once the NPI system was fully implemented, we did not perform 
additional studies on the UPIN for several years. In the 
interim, we focused on other DME issues, including payments for 
and coverage of power wheelchairs, pricing and utilization of 
inhalation drugs covered under the DME benefit, and excessive 
payments for home oxygen equipment.
    We also significantly expanded our efforts into the area of 
provider enrollment. For example, in 2006 and 2007, the OIG 
conducted in-person site visits of more than 2,500 DME 
suppliers in South Florida and Los Angeles to assess compliance 
with Medicare supplier standards.
    Now that the NPI is fully implemented, OIG is revisiting 
the use of physician identifiers on DME claims. Based on our 
preliminary analysis and discussion with CMS staff, we have 
concerns that valid and inactive physician numbers may be a 
continuing problem with the NPI. While it appears that edits 
will be established to verify the NPI is in the correct format, 
it is unclear whether there will be controls that identify NPIs 
that have not been assigned or correspond to inactive 
physicians.
    In addition, according to CMS, DME suppliers are 
temporarily allowed to use their own NPI in place of the NPI of 
the ordering physician. CMS has not indicated when this policy 
will be discontinued. However, as long as DME suppliers are 
allowed to enter their own NPI rather than the physician's, a 
major control for preventing fraud, waste, and abuse will not 
be operational.
    In summary, the OIG will continue to devote considerable 
resources to fighting fraud, waste, and abuse in the Medicare 
program while maintaining a particular focus on vulnerabilities 
related to the DME benefit. As CMS moved away from the UPINs 
and began requiring the use of the NPIs in their place, there 
was an opportunity to address vulnerabilities highlighted in 
our earlier findings and recommendations. However, we remain 
concerned that old vulnerabilities as well as new challenges 
may affect the integrity of the NPI system. To address these 
concerns, OIG expects to conduct studies related to the NPI 
during the 2009 fiscal year.
    This concludes my statement. Thank you for the opportunity 
to testify today. I would be pleased to answer your questions.
    Senator Levin. Thank you, Mr. Vito. Mr. Gray.

    TESTIMONY OF WILLIAM E. GRAY,\1\ DEPUTY COMMISSIONER OF 
            SYSTEMS, SOCIAL SECURITY ADMINISTRATION

    Mr. Gray. Chairman Levin, Members of the Subcommittee, 
thank you for inviting me to appear before you today. You have 
asked us to address two questions: How can we provide death 
record information regarding medical providers on a timely and 
regular basis to the CMS? And what, if anything, do we need to 
facilitate the sharing of death record information with CMS? 
Before I explain how and when we provide death information to 
CMS, I would like to briefly describe who we are and what we 
do.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gray appears in the Appendix on 
page 63.
---------------------------------------------------------------------------
    Social Security touches the lives of virtually every 
American. Through the Old-Age, Survivors, and Disability 
Insurance program, we provide benefits at critical junctures in 
people's lives: When they retire, when they become disabled, 
and when the family's wage earner dies. We also administer the 
Supplemental Security Income program, which provides a cash 
assistance safety net for aged, blind, and disabled individuals 
with little or no income or assets. Each year, we send benefits 
totaling about $650 billion to almost 60 million individuals.
    In addition, we have other responsibilities that are 
vitally important to the Nation, but are not directly connected 
to our core mission, including many workloads for other 
programs, such as Medicare, Medicaid, E-Verify, and Food 
Stamps.
    We collect and maintain death records which we use to 
determine continuing eligibility for benefits and for other 
program purposes. We receive approximately 2.5 million death 
reports each year. They come from a variety of sources, but 90 
percent come from family members and from funeral homes. My 
written testimony describes in some detail how we gather death 
information and the circumstances under which it is made 
available to other Federal agencies and to the public. For 
purposes of our discussion today, I would like to summarize a 
few points.
    Currently, there are about 85.6 million records on our 
Death Master File, which is commonly known as the DMF. About 4 
percent of these are from State reports. The publicly available 
Death Master File includes all verified death information, but 
it does not include any State death data. However, since 2001, 
we have given CMS access to all of our death records, both 
public and State.
    We provide the death information to CMS in three ways:
    In 2001, we began providing the public Death Master File to 
CMS via direct electronic connection, and we update it weekly 
in the same way.
    SSA also provides CMS with access to death information via 
the State Verification Exchange System (SVES). SVES is an 
overnight batch query process that matches against our records. 
In addition to the public data, this also gives CMS access to 
the State data. SSA responds each year to approximately 2 
million CMS queries to SVES.
    SSA also provides CMS with access to the State On-Line 
Query system (SOLQ). SOLQ includes the same death information 
as SVES, but it provides real-time online access to this 
information. SSA responds to approximately 1.1 million CMS 
requests per year through SOLQ.
    Studies show that, overall, our death data is over 99.5 
percent accurate, and almost 90 percent of all deaths are 
posted within 30 days of the date of death. Over the last 6 
years, SSA and HHS have been working with the States to 
implement an electronic death notification process. Death 
information received through this Electronic Death Record (EDR) 
system gets to us within 5 days of an individual's death and is 
virtually error free. Currently, 22 States participate in EDR, 
and in those States, EDR replaces the more cumbersome and 
labor-intensive manual process of reporting death information 
to us. We continue to work with States who want and are able to 
begin using EDR.
    In closing, let me say that timely and accurate death 
information is vital to maintaining and assuring the integrity 
of Federal programs and protecting taxpayer funds. However, we 
can do only so much. We are unable to take on any additional 
work without adequate resources. That said, we will keep 
working with CMS to make sure that it continues to be provided 
accurate and timely death information.
    We are happy to provide the Subcommittee any additional 
information it would need on this issue, and I will be glad to 
answer any questions. Thank you.
    Senator Levin. Thank you, Mr. Gray. Let's try an 8-minute 
round of questions for the first round.
    As I stated in my opening statement, Mr. Kuhn, our staff 
found that from 1992 to 2002, there were 33,000 deceased 
physicians listed by the AMA, and I am sure this is similar to 
what we have just heard about in terms of Social Security. Our 
staff then took a random sample of 1,500 of those physicians. 
They looked at the claims that were paid by CMS as to how many 
of those 1,500 physicians' numbers, identification numbers, 
received payments. They obviously did not. They were deceased. 
But the numbers of these physicians were used. About half, 734 
of those 1,500 deceased physicians' identification numbers were 
used to pay claims. Now, that is an incredible number.
    Who is responsible for failure to remove those physicians' 
names from the approved list? Do you hire a contractor to do 
that?
    Mr. Kuhn. Yes. We use contractors to pay claims. Under the 
Medicare program, contractors run our enrollment systems as 
well. So we have contractors, but ultimately we hold the 
contractors responsible. So the responsibility comes to CMS, 
Senator.
    Senator Levin. Ultimately you hold them accountable or you 
don't hold them accountable?
    Mr. Kuhn. We do hold them accountable, yes.
    Senator Levin. How much money was paid to those contractors 
during this period of time?
    Mr. Kuhn. I do not have that information with me, but I 
would be happy to get that for the Subcommittee.
    Senator Levin. Well, now, we identified 33--let me see if I 
can get you the exact number here. There were about 500,000 
erroneous claims for durable medical equipment that were paid 
during that period by our analysis. How many of those erroneous 
claims paid out based on erroneous identification numbers were 
recovered from our contractors who were paid to make sure that 
did not happen?
    Mr. Kuhn. I am not sure if I completely understand that 
question.
    Senator Levin. Well, we pay contractors to make sure what 
happened did not happen.
    Mr. Kuhn. Correct.
    Senator Levin. When it happens, do we recover from the 
contractor?
    Mr. Kuhn. Oh, I see your question there. We have 
performance metrics with the contractors, and some of those 
performance metrics are enhanced by bonus payments or other 
things that are available to the contractors. So if they were 
not hitting their performance metrics, then it would impact the 
remuneration that they receive.
    Senator Levin. Well, I am sure there are performance 
metrics. There are hundreds of thousands of claims based on 
numbers that should not have been paid. How much recovery did 
we get from those contractors, for money we paid contractors to 
avoid that? How do we hold them accountable?
    Mr. Kuhn. I don't know if I have that specific information 
on there----
    Senator Levin. Well, about how much have we paid to 
contractors for not doing their job? Give me an idea.
    Mr. Kuhn. I guess, the amount that we pay contractors 
across the board exceeds $1 billion for the Medicare program 
that is out there. But part of the issue----
    Senator Levin. How much have we recovered from contractors 
for paying claims they should not have paid?
    Mr. Kuhn. Yes. And I don't have that information, but would 
be happy to get it for the Subcommittee.
    Senator Levin. Well, about how much?
    Mr. Kuhn. I wouldn't even hazard a guess.
    Senator Levin. Is it a common practice that we say to 
contractors, ``You have authorized claims that should not have 
been authorized under your contract. We want you to pay us back 
for that money''? Is that a common practice?
    Mr. Kuhn. Yes, that would be part of the performance 
metrics, whether we pay them or not. In terms of whether the 
performance metrics of the contract require us or allow us to 
go back and reclaim money for erroneous claims, I would have to 
go back and look at the specificity of the contracts.
    Senator Levin. Well, shouldn't they do that?
    Mr. Kuhn. That could be something that we could do in 
performance in the contracts that are out there. But, really, a 
lot of what the contractors----
    Senator Levin. It could be something that we--why isn't 
that an automatic thing? If they are given a job to do and they 
do not do it, why is there not a penalty paid by our 
contractors?
    Mr. Kuhn. Part of the reason for the penalty to the 
contractor is really our ability to provide appropriate 
oversight in this area.
    Senator Levin. It is not oversight. It is just the dates of 
death, which are provided easily to them.
    Mr. Kuhn. Well, in this issue, and I think it begs really 
the issue in terms of some of the questions that you and others 
asked in the Subcommittee. What are the resources or the tools 
that we as an agency need in order to fulfill our 
responsibility to manage this program in an effective way? And 
one of the areas is really the Medicare Integrity Program. It 
is annual appropriations that we receive from Congress. This 
has been capped since 2003. We have asked over the last 3 years 
for about $300 million more infunding for that program in order 
to allow us to deal with vulnerabilities like this. And so when 
we face situations like this--and if you look at inflation 
adjusted, we are probably $90 million less than we were in 
2003--we have to make decisions as a program: Where are the 
worst vulnerabilities that we need to take on? And I will be 
real candid with this Subcommittee. This is an area that was 
not a high vulnerability compared to others in the program as 
we were going forward.
    So one of the things--and I really appreciate the report 
that the Subcommittee has done and want to make sure it is 
clear with the Subcommittee--is that as you ask what do we 
need, funding for the Medicare Integrity Program would be 
extraordinarily helpful for us to fulfill some of these 
obligations.
    Senator Levin. Some of that funding ought to come from 
contractors who were not doing their jobs.
    Mr. Kuhn. And the contractors do the jobs that we give them 
the information to----
    Senator Levin. They have this information.
    Mr. Kuhn. Right.
    Senator Levin. You have told them to do it. According to 
the Inspector General over here, his testimony, in responding 
to the recommendations that were made back in 2001 or 2002, 
``CMS indicated it had developed instructions, system changes, 
and edits that would reject claims listing a deceased 
physician's UPIN. CMS stated it planned to expand the edits to 
include all invalid and inactive UPINs. In November 2001 and 
April 2002, CMS issued instructions to its carriers stating 
that DME claims listing a deceased physician's UPIN would be 
denied.''
    Now, you do not even know if the contract with these 
carriers has a clause that penalizes the contractor for failing 
to do their job?
    Mr. Kuhn. And what we do with the contractors--and I would 
go back and look at the contracts and get that information for 
you. I don't have that information readily available to me now. 
But we send out, as you indicated, I think during this period 
from 2002 through 2006, at least five instructions in this area 
to deal with not only the PINs, but the UPINs in this area. And 
we have the change requests. We gave the instructions to the 
contractors to execute. Some probably were executed better than 
others, I think as your report shows, versus Florida, versus 
other areas where we show some great variation there. But we 
have the information in their hands. Presumably they are 
executing.
    Where we have the difficulty----
    Senator Levin. Presumably they are not executing.
    Mr. Kuhn [continuing]. Is for us to follow up to make a 
determination on the execution. And, again, that is where we 
made a choice back in 2004 in terms of program vulnerabilities. 
We did not have the resources to do the follow-up here that we 
needed to, Senator.
    Senator Levin. Presumably they are not executing. Look, we 
have a small staff. Our small staff identifies, going through 
these materials, huge amounts of mistakes or payments that 
never should have been made. Do you assume, by the way, that 
most of those are fraudulent or most of those are non-
fraudulent?
    Mr. Kuhn. I would like to think some are mistakes, but I 
suspect, knowing what goes on in the DMEPOS area, probably a 
lot of those are true fraud.
    Senator Levin. All right. So our staff, our limited staff, 
is able to do this in a very short amount of time, I mean, this 
is a huge issue here, to identify the use of the UPINs numbers 
of 17,000 deceased physicians. Now contractors were supposed to 
catch that. They did not catch it. We have got to go after our 
contractors. Will you?
    Mr. Kuhn. We are working with them on----
    Senator Levin. Not working with them. Will you go after 
them to recover money that was paid that should not have been 
paid?
    Mr. Kuhn. We will go back and have conversations with them, 
but the other thing about the contractors----
    Senator Levin. I don't want conversations. I want a 
commitment from you that you are going to seek recovery from 
them.
    Mr. Kuhn. We will go back and exercise everything we have 
in our contracts with them.
    Senator Levin. If the contracts do not provide rights to 
get recovery from contractors who did not do their job because 
they paid claims that should not have been paid, will you 
insist that those contracts in the future have that provision?
    Mr. Kuhn. We will review our contracting strategy and make 
sure that is something we will work on.
    Senator Levin. Well, I have to tell you, that is too wishy-
washy for me. Will you let this Subcommittee know what you have 
done or will do?
    Mr. Kuhn. Absolutely.
    Senator Levin. And will you let us know how much you have 
paid contractors during this period 2000 to 2007?
    Mr. Kuhn. Those are appropriate follow-ups, and we will get 
those for you.
    Senator Levin. Thank you. Senator Coleman.
    Senator Coleman. Thank you, Mr. Chairman.
    Just if I can, one follow-up on that. Do you know whether 
CMS withheld any bonuses from contractors from 2000 to 2007?
    Mr. Kuhn. I am not sure during that period, Senator, and 
that is information we could get for the Subcommittee.
    Senator Coleman. That would be another--Mr. Chairman, I 
would like to know whether we withheld any bonuses during that 
period.
    And let me just say I appreciate the cooperative 
relationship that CMS has had with the Subcommittee on 
acknowledging the nature of the problem and the new system that 
is being put in place. But the IG, even with that new system, 
has raised some concerns. Let me see if I could focus on that a 
little bit.
    First, I am not sure whether Mr. Gray or Mr. Kuhn should 
deal with this, but Social Security has the data, they have the 
information. They know who is dead. It is not that complicated. 
You pass it over to CMS and their contractors.
    First, is there any question about the computer capability 
to process the Social Security data? Do we have the capacity to 
do that so that we have systems that are compatible today?
    Mr. Kuhn. We believe we do. We have actually a new 
interagency agreement with Social Security that was recently 
executed to be able to get this data feed in a format that will 
fit our enrollment system. So we think that is going to work 
out real well for us on this new system.
    Senator Coleman. And when you say agreement, I have some 
information that the agreement was signed last week.
    Mr. Kuhn. Yes. That was wrapped up last week.
    Senator Coleman. And somehow could I get perhaps a little 
more of understanding why in 2008 that we are having issues 
about whether CMS can use data from Social Security that--I 
mean, thank goodness last week we got an agreement, but why did 
it take so long?
    Mr. Gray. We have been sending that information to CMS 
since 2001 in exactly the same format that this new agreement 
will call for.
    Senator Coleman. So 2001 until last week, you are sending 
information, but they cannot process it----
    Mr. Gray. It is the exact same format. It is not changing. 
So, yes, they----
    Senator Coleman. Mr. Kuhn, I just want to make sure as we 
move forward that, in fact, we have a unique opportunity. You 
have said with the new NPI system, we are going to first--
again--we are going to clean out the system--if you are dead, 
you cannot apply. So at least we start with that. We know we 
have a base. But, on the other hand, we did this in 2002, we 
found out that it really did not clean up the system.
    First of all, I want to find out technically what we are 
capable of doing and see if there are shortcomings there. So 
all this data was coming over. What was the issue in terms of 
them being able to use the data that was given?
    Mr. Kuhn. It is interesting. We are using two different 
sources of data. When we were looking at the deceased 
physicians' files, we were collecting that data initially from 
the American Medical Association. We thought that was a good 
source document. But I think as we are all finding out, that 
was probably not as robust a system that we needed, and, 
therefore, we think the Social Security file will provide a 
much better data source for us.
    The data feeds we have been getting from the Social 
Security Administration, as Mr. Gray indicates, we have been 
using more on the beneficiary side in terms of looking at 
eligibility, issues like that. This will be the first time we 
have begun using this in terms of enrollment as well as for the 
NPI. And our technical staff are working on this interagency 
agreement to make sure that it comes in a format that is 
functional for us.
    I know Mr. Gray has indicated that it will be coming in the 
same exact format. Our technical folks just want to make sure 
this will work for our systems that we have because this is a 
different system than on the beneficiary side. And we want to 
make sure we do those data matches appropriately.
    The nice thing about the NPI system is that it is a new 
system, and it is almost like the term in golf. We got a 
``mulligan'' here. And what have we learned from the past in 
order to make sure that we safeguard the system as best we can? 
We think using the Social Security data will really help us do 
that.
    Senator Coleman. This is a $100 million mulligan. That is a 
pretty expensive one.
    Mr. Kuhn. It is big, and we are as outraged as you are 
about it, Senator.
    Senator Coleman. In terms of the new system, one of the 
issues, Mr. Vito, you talked about concerns continuing problems 
with NPI. One, you talked about controls. Can you give me a 
little more information? What type of controls do you want to 
see in place that you do not see right now?
    Mr. Vito. When we did the work in 2001, what we looked for 
were edits that would prevent claims that came in that had 
inactive and invalid UPINs on them. Part of that would have 
stopped the problem for deceased physician UPINs as well. What 
we expect to look at in the future is to see if the NPI system 
will be able to have edits that would prevent that from 
occurring again in that they would have claims that would come 
in and they wouldn't be checked to see if it was a valid NPI 
and if it was an active NPI.
    In addition to that, another important part is that the 
system has integrity, that the data in the system is accurate. 
We have found in the past that the UPIN Registry contained 
inaccurate data. So this is an opportunity for CMS to take the 
new system, rectify some of the persistent problems and make 
sure they have good data. When they do the edits, the data has 
to be good in the program for them to run properly and for it 
to be effective.
    Senator Coleman. One of the issues that you raised, Mr. 
Vito, that has been of certain concern to the Subcommittee--and 
perhaps, Mr. Kuhn, you can help me understand--apparently CMS 
has for some period of time allowed providers to use their own 
NPI, their own identification number. I take it we all agree 
that you have three entities here: You have a patient, you have 
a physician, and you have a provider. And you have some measure 
of cross-control when we have the physician. There is a reason 
for the physician to sign that. They get reimbursed. We want to 
have an identification number.
    Can you help me understand you would allow claims to be 
processed without the NPI from a physician?
    Mr. Kuhn. Yes, Senator. Because we have the new NPI system 
that was brought about on May 23, on June 2 we did allow and 
will allow for a very short period of time for the supplier of 
the DMEPOS products to use their own NPI if they are unable to 
obtain the NPI from the ordering or referring physician. Some 
of those physicians do not have their NPIs yet. It is a new 
system. And what we wanted to make sure is that there was no 
interruption in terms of services to Medicare beneficiaries. 
Had we had a hard and fast rule, we think we would have created 
some access issues for Medicare beneficiaries out there.
    Having done that, we knew that we were creating a program 
with vulnerability, but when we made this decision, we told all 
those suppliers that are going to use their own NPI, ``Do it at 
your own risk, because if you do, be sure that you are on our 
list for post-payment review.'' And I hope people hear this 
loud and clear, that we will be going to those suppliers that 
use their own NPI to make sure that they are candidates for 
post-payment review. That is the other side of the ledger to 
make sure that we have integrity for this short-term fix in 
order to assure access to beneficiaries. And that is why we did 
it.
    Senator Coleman. And I understand the value of getting 
access to beneficiaries. In terms of being unable to obtain, 
other than a physician not having the new NPIs, is there any 
other reason why a provider would not be able to get a NPI 
number from a physician?
    Mr. Kuhn. It might be that they might not be communicating 
well between one another. There could be other kinds of process 
reasons. But we hope that this is truly the exception to the 
rule. But we think the fact that those that do use it will be 
subject to post-payment review, we think we can----
    Senator Coleman. But here is the problem you have with 
that. What we have seen with DME, what we have seen with this 
program is that this has been a cash cow, an ATM machine for 
fly-by-night players. In our discussion with some of the folks 
who have been convicted, they talk about passing around UPIN 
numbers. Why do drug deals when you can get long sentences and 
go to a tough place, when you can simply create a DME 
operation, submit claims? And in this case, if you have fly-by-
night suppliers, folks who are not going to worry about any 
post-payment review, aren't we setting ourselves up for a 
period of time in which folks simply want to cash in knowing 
that all you have to have is your own number? How do you 
protect against that?
    Mr. Kuhn. Senator, your point is well taken. It is a 
vulnerability to the program. But it is a balance between 
making sure beneficiaries have access and making sure that 
through the post-payment review we think that is the best check 
we could put in place here. We could have sided on the other 
side of the ledger, but then I think our goal here is to serve 
the beneficiaries, and we thought we were serving them well by 
doing that.
    Senator Coleman. And I appreciate that. My concern is that, 
again, other than a physician not having the number in which 
you could then put in an old number, which other than that, the 
idea that ``there is any difficulty''--I mean, part of this 
system requires that you can get reimbursed by the Federal 
Government for either something to do with durable medical 
equipment--and you talked about prosthetics and others, by the 
broader phrase there--that a physician has to say this is going 
to be reimbursable. And so for a provider to say they are 
having difficulty, it is their responsibility if they want to 
get paid. Why wouldn't we put the burden on them to do that?
    Mr. Kuhn. Well, the other part of this is that while in 
that particular field there would be the NPI for the referring 
or prescribing physician or the particular entity's NPI, it 
still does not--it still needs to have all the documentation 
there and for some that they are going to get what is called a 
Certificate of Medical Necessity (CMN). There needs to be a 
prescription. The other documentation needs to be there as 
well.
    So, again, that gives us the opportunity to deal with the 
post-payment reviews.
    Senator Coleman. Thank you, Mr. Chairman.
    Senator Levin. Thank you very much, Senator Coleman. 
Senator Carper.
    Senator Carper. Thank you.
    Dr. Coburn and I held a hearing about 2 weeks ago. We 
invited a number of folks to come in and testify, including 
David Walker, who until very recently was the Comptroller 
General of our country. And we asked them to look way down the 
road at the kind of fiscal challenges, budgetary challenges 
that we are going to face.
    I think one of our witnesses mentioned that within maybe 25 
years or so, we are going to be spending about 18 percent of 
GDP in this country just for three programs: Social Security, 
Medicare, and Medicaid--18 percent of GDP. The reason why that 
is alarming is because historically in the last decade or two, 
we spent about 18 percent of GDP to run the whole Federal 
Government. And we are looking in our lifetime at a time when 
we will be spending about that much just to run those three 
programs--nothing for the environment, nothing for 
transportation, nothing for space, nothing for food programs. I 
mean, it is not just alarming. It is scary.
    One of the reasons why we are all over this issue and other 
issues--and Dr. Coburn and I are going to drive people crazy 
before we leave here on improper payments. But we are going to 
make sure that improper payments come down, most of which are 
overpayments. And we are going to make sure to the extent that 
improper payments are made that we go out there and recover the 
money that has been mis-paid or overpaid.
    One of the things that we are looking at in the legislation 
that he and I have co-authored to change the improper payments 
law is how might we penalize agencies that are not making 
progress in addressing their improper payments problems And I 
might add, Senator McCaskill has been all over this with us. 
She has been just a great partner in this issue. But in 
addition to having sticks, we want to have a couple carrots in 
this as well.
    And you started to say, Mr. Kuhn, in response to what the 
Congress can do to better make sure that you all are doing your 
job--let's return to that for a second. What can we do? And I 
think you were saying something about funding for the Medicare 
Integrity Program. Just go back to that. What can we do to help 
make sure that you are doing your job so that a year from now 
when we have you back, and we say, well, what is different now, 
you have a much better story to tell us? If you do not, I would 
not want to be in your shoes.
    Mr. Kuhn. I thank you for that question. Two or three 
observations I would make for you on that point.
    One is the Medicare Integrity Program, it has been capped 
since 2003. If you look at inflation growth, we are probably 
$90 million less than we were in 2003, and our requests have 
been for about $300 million over the last 3 years, which we 
have not seen that funding. And so when you really think about 
our ability to manage these programs and deal with the 
integrity and the fraud and abuse, full funding in that area, I 
think, would be extraordinarily helpful for the agency in order 
to fulfill our work in this area.
    Senator Carper. Let me just interrupt for a second. I think 
in our legislation, we provide the opportunity for agencies to 
retain some of the monies that they recover and to be able to 
use those monies for better financial management. Would that be 
of help?
    Mr. Kuhn. That would, in fact, and we have a pilot, which I 
think you referenced in your opening comment, the recovery 
audit contractors, which we did pilots in three States and then 
ultimately six States, and we hope to launch nationally here 
very soon, which really go back to providers and look at 
improper payments and the recoveries. They captured in that 
period of time about $1 billion in those three States. We think 
they were good, and there might be opportunities to retain some 
of that funding to fund some of the program integrity area.
    And then, finally, I think another important tool for us 
will be something that Dr. Coburn talked about earlier, DME 
competitive bidding. The real issue--there are two sides to 
this ledger, as we were talking about earlier. One is these 
invalid numbers, to make sure that we do things well on the 
front end. I think the folks in law enforcement will tell you 
it is kind of like health care. You want to prevent something, 
a disease from happening before it happens. The same thing with 
fraud and abuse, you want to prevent it before it occurs. So 
having these good quality numbers can hopefully prevent some of 
this stuff from happening.
    But on the back side, we have to have legitimate suppliers 
out there to make sure that they are valid, and DME competitive 
bidding gives us a new set of tools to deal with that in terms 
of accreditation, quality standards, financial standards, plus 
by holding an auction, we can get pricing where it needs to be. 
Under the 10 demonstration areas that we are looking at right 
now, or the pilot areas, we brought prices down by about 26 
percent across the board. That is real savings to the program, 
and it shows that when you mis-price something in this program, 
that brings the fraudsters in.
    So I think competitive bidding, the issue of the recovery 
audit contractors, and ultimately funding for the MIP program 
would be very helpful to the agency.
    Senator Carper. All right. Thank you.
    One of my core values in our office--and a core value when 
I was governor and running State administration in Delaware--
was to really focus on excellence in everything we do. I used 
to say, ``If it is not perfect, make it better.'' And I think 
we have a real opportunity to do just that with the recent 
switch over to the National Provider Identification for all of 
Medicare's providers. You have got basically a clean slate 
right now, and my concern is that it stays that way.
    Let me just ask, what is your agency doing to take 
advantage of this fresh start? You spoke to this at least 
indirectly, but let me ask it again. What is your agency doing 
to take advantage of this fresh start to ensure that the 
registry does not face the same kind of problems that its 
predecessor did? How do you plan to incorporate some of the 
report's recommendations?
    Mr. Kuhn. I think the point is well taken, and I think you 
are right. We have this unique opportunity here that you do not 
really see in government too often, where we have a fresh start 
for a program that began on May 23, and then the value of this 
report that the Subcommittee has put forward, because it really 
puts in place, as you talked about excellence, the basic 
engineering model--that is, let's identify the gaps, let's 
address those gaps, and let's improve as part of the process.
    So a couple of the real improvement areas, of course, is 
going to be the new data match agreement we have with the 
Social Security Administration to make sure that we deal with 
that issue effectively.
    A second improvement that we are looking at, again, based 
on resources, is a periodic validation process in terms of all 
the providers that have come in with new NPIs that are out 
there. We estimate right now that about 25 percent of 
physicians have some kind of change in terms of their NPI or 
their enrollment process over a 5-year period, and we want to 
do periodic validations to keep that system as robust as we 
possibly can.
    Another new edit we want to put in place is to make sure 
that the referring or ordering physician actually is an 
enrolled provider in the Medicare program, and we will have a 
cross-check that will make that happen as we go forward.
    And then, finally, to make sure, at least on the DMEPOS 
side, we have an enrollment contractor that is doing the work 
there. That contract has now changed. It is a new contract that 
was let just a couple weeks ago, where before they mostly 
focused on enrollment, now they are going to be looking at 
enrollment and fraud. And their follow-up, their on-site 
inspections of these facilities out there to make sure they are 
legitimate businesses out there is stepped up dramatically, and 
I think that will help us as well.
    Senator Carper. All right. GAO has told one of our 
subcommittees that Dr. Coburn and I serve on--that Medicare 
Advantage and the Medicare Prescription Drug Benefit Program 
are likely committing substantial improper payments. These 
programs did not report their improper payment estimates for 
fiscal year 2007. They did not report them for 2006 or 2005 
either. Nor did they provide a target date for when they would 
be providing that information. In fact, they were the only two 
programs identified by GAO who did not give a time frame--the 
only two in the whole Federal Government that I am aware of.
    When does CMS plan on releasing this information? And does 
your agency have any set goals for reducing improper payments 
with respect to those programs?
    Mr. Kuhn. Senator, I am not familiar with that particular 
report or the timetables there, so I would like to get back to 
you with that information and to kind of understand behind that 
a little bit in terms of the improper payments because under 
those particular programs they are paid to an entity, and then 
they have separate contracts with the providers. So if it is an 
improper payment that we are making to the MA plan or PDP, that 
is one issue. If it is their contractual relationship with the 
providers, that is something else. And I would like to 
understand a little bit more, and we could get back to you in 
writing on that one.
    Senator Carper. Thank you. The improper payments law has 
been around for less than a decade. Finally, I think most of 
the Federal agencies are actually complying, a couple of big 
ones--Department of Defense, Homeland Security. A couple 
programs I just mentioned do not. Not only are they not out 
there recovering improper payments, they are not even reporting 
what their improper payments might be. And before we can go out 
and recover, we need to know, the agencies need to know, some 
idea of what the magnitude of the improper payments is, and 
then we need to go to work and recover as much of that money as 
we can. I will look forward to your responses.
    Again, I just want to say to Senator Levin, to Senator 
Coleman, and to your staffs, thank you very much for your 
diligence and bringing us to this hearing. Thank you.
    Senator Levin. Thank you, Senator Carper. Dr. Coburn.
    Senator Coburn. Thank you, Senator Levin.
    Mr. Kuhn, I want to go back to something. You did not 
answer Senator Levin's question, and before you leave here 
today, I think you--it is unbelievable that we would have 
contracts with Medicare service organizations that are not held 
responsible. And I have a very direct question for you. Will 
you make sure that in the future all contracts with all these 
service companies, these payers, have a section in there in 
which they are culpable and held responsible for overpayments 
which they should have avoided?
    Mr. Kuhn. Senator, I thank you for asking that question 
again, and here is what I will follow up and do. One, I am 
going to go back and sit down with our General Counsel to look 
at existing contracts to see if they include those provisions 
and did we exercise those clauses appropriately in terms of 
collecting improper payments. And then on a go-forward basis, 
we will engage with our contracting process to make sure that 
the Federal Acquisition Regulations out there, FAR contracting 
and all that, to make sure that we are properly exercising 
contractual arrangements; that if there are improper claims 
made, that we are meeting all Federal standards to go forward. 
So I will make sure----
    Senator Coburn. I am not sure that is a yes. The fact is 
that any American looking at this hearing today would say 
Medicare is contracting with service providers, and you have 
not told us, yes, we will hold them accountable. And what I 
want is an answer, yes, we will hold them accountable.
    Mr. Kuhn. To the extent we can, we will. The reason I 
equivocate a little bit is I just do not know all the 
provisions of the FAR contracting rules. But if we can hold 
them accountable, yes, sir.
    Senator Coburn. You can hold them accountable. And if you 
cannot, we have to change those rules. It is ridiculous. If you 
cannot hold a contractor accountable for doing something 
because of some silly regulation that we have written in 
contracting rules, then we need to know that and change the 
rules. But the fact is that we know $80 billion in waste, 
fraud, and abuse is in Medicare, and that $16 billion--I 
misspoke earlier when I said $200 billion. It is $16 billion 
that is coming out of the pocket of Medicare payers. Individual 
Medicare recipients are paying $16 billion more than they 
should be. So what we need is a commitment.
    The second thing I would like to ask that you supply the 
Subcommittee with is a list of all the service contractor 
providers and their 10-Ks to this Subcommittee. In other words, 
here is the list, here are the companies, and here are their 
10-Ks, and you provide that, because we are going to be wild by 
the time you see the profitability of the people who are your 
service contractors, and then we compare that to this fraud, it 
is a drop in the bucket to hold them accountable in terms of 
their profitability.
    Senator Levin. Well, we ought to get an answer to that.
    Mr. Kuhn. Yes, sir. We would be happy to supply that 
information to the Subcommittee.
    Senator Coburn. Thank you.
    Did I understand your testimony that you only cross-
reference this list in the past as far as dead physicians every 
15 months?
    Mr. Kuhn. That is correct. That was the instructions.
    Senator Coburn. Is that changing?
    Mr. Kuhn. That will change--depending on what we come up 
with with Social Security, whether it is now weekly, monthly, 
but it will--the periodic rate of that will be accelerated 
greatly under the new NPI system.
    Senator Coburn. It ought to be every week. I mean, that is 
punching a button on a computer cross-checking a list.
    Mr. Kuhn. Right.
    Senator Coburn. So why is that not just common sense that 
we are going to do this every time we get a list?
    Mr. Kuhn. That is right. Under the new interagency 
agreement, it is my hope it will be weekly. But weekly, 
monthly, biweekly, the periodic rate is going to be much 
quicker.
    Senator Coburn. Now, one other thing you said, Mr. Kuhn, in 
answering questions for Senator Carper was the problem of not 
cross-checking whether you had--even though you had a UPIN 
number or a new NPI number, not knowing whether they were 
enrolled providers? Have we not been checking against enrolled 
providers all this time?
    Mr. Kuhn. No, we haven't. In fact----
    Senator Coburn. OK. That is--just think about that for a 
minute. People who are not enrolled to provide for Medicare, we 
are paying DME suppliers for prescriptions from people who are 
not qualified to give those prescriptions? The question I would 
have is why haven't we.
    Mr. Kuhn. There are rare exceptions in the program, changes 
in the future, where there may be a physician who has elected 
not to participate in the Medicare program. But they are 
licensed in the State. They can practice in the State. But they 
see a Medicare beneficiary who signs an Advanced Beneficiary 
Notice (ABN), and says, ``I am going to self-pay because I want 
to come to this doctor. I have been seeing him for years,'' and 
they write him a prescription. We have filled those 
prescriptions for that particular individual as a result of 
that relationship with that physician.
    Senator Coburn. Fine. That is the exception to the rule.
    What about the people who are off the Medicare list who 
have been sanctioned and still have a UPIN number and still 
have a NPI number? You are not cross-checking against those 
people for writing prescriptions for DME equipment?
    Mr. Kuhn. Not under the old system. Under the new one we 
will.
    Senator Coburn. OK. Mr. Vito, on page 9 of your testimony, 
when you looked at the UPIN database, you found 52 percent of 
the providers in that database had inaccurate information in at 
least one category, and 17 percent of those providers no longer 
billed Medicare from any of the practice settings listed in the 
UPIN file.
    Now, does that mean they were not practicing or they just 
were not at the location at which the UPIN file listed them?
    Mr. Vito. I don't know that answer. We would have to go 
back and look. I think sometimes that they might not have been 
practicing at that location.
    Senator Coburn. And of that 17 percent, 14 percent were 
deceased?
    Mr. Vito. That is correct.
    Senator Coburn. And 26 percent were retired?
    Mr. Vito. That is correct. And we found that out because we 
asked the physicians about their info. We got the information 
from the UPIN directory. We asked the actual physician. We 
found that information because either when we asked at the 
practice they told us that the physician had died or a family 
member told us that they had died.
    Senator Coburn. So what that means is at least 6 percent of 
the total UPIN numbers are lousy numbers because they either 
represent retired physicians or physicians who no longer 
participate in Medicare or are no longer at the practice site 
which they supposedly are supposed to keep updated with 
Medicare. Correct?
    Mr. Vito. I believe there are problems with that database. 
There were problems with that database, and we pointed that 
out. But I think the point is that there was never any check at 
all for the UPIN other than it started with an alpha, then 
either had an alpha or a numeric in the next two digits, and 
the following three digits were just numeric.
    Senator Coburn. So there was no integrity to the list in 
terms of the quality of the UPIN? You didn't know, even though 
you had a UPIN number, that may have not represented the----
    Mr. Vito. What I am saying, when they processed the claims, 
when the claim came in, they didn't match it up to see if it 
was an actual----
    Senator Coburn. A good number.
    Mr. Vito. Yes.
    Senator Coburn. OK. Mr. Kuhn, do DME equipment providers 
who use dead physician numbers get sanctioned by CMS?
    Mr. Kuhn. Yes.
    Senator Coburn. Explain the sanctioning process.
    Mr. Kuhn. When we are aware of that, it can come about in a 
number of different ways. One, revocation of their ability to 
work with the Medicare program. They are out of the program. 
And then where we see cases like this, we refer them over to 
our law enforcement partners--IG, Department of Justice, 
others--for follow-up and case development if there is outright 
fraud there and for prosecution.
    Senator Coburn. Can you give me a situation where a dead 
physician's prescription would not be outright fraud?
    Mr. Kuhn. I think there is a possibility. This is a 
credible hypothetical, but it is plausible, I guess, where 
someone wrote a prescription one day, the physician, the next 
day was in a car accident.
    Senator Coburn. OK, so within a month, let's say. After a 
month, can you give me a situation in which a DME supplier 
could logically use a dead physician's UPIN number without 
trying to commit fraud?
    Mr. Kuhn. Without a month, 60 days, I think you are 
probably looking at fraud, or perhaps a mistake, but certainly 
more likely fraud.
    Senator Coburn. So why would not all of them be completely 
sanctioned and banned from Medicare for that?
    Mr. Kuhn. They should be, and when we work up those cases, 
I think there should be absolutely revocation as part of that 
process. And what we are pleased about is that with our new 
contractor, our new contract in terms of those that do 
enrollment for DME suppliers, this is going to be one of their 
new charges, to make sure that we are even better policing 
that, because you are absolutely right, there is the one side 
in terms of making sure these numbers are good. But if we still 
have bad suppliers out there, they are going to try to find a 
way to commit fraud against us, and we have got to work both 
sides of that ledger.
    Senator Coburn. Would you kindly forward to the 
Subcommittee the number of fraud causes that you--or the number 
of sanctions that have been banned from the program in the last 
year of DME suppliers?
    Mr. Kuhn. Sure, we would be happy to.
    Senator Coburn. And the number that also have had dead 
physician prescriptions that have not been banned from the 
program?
    Mr. Kuhn. We would be happy to get that information for 
you.
    Senator Coburn. Thank you, Mr. Chairman.
    Senator Levin. Thank you, Dr. Coburn. Senator McCaskill.
    Senator McCaskill. Thank you, Mr. Chairman.
    I am curious with this new system, the NPI system. 
Obviously, I am beyond alarmed that you have allowed these 
folks to make claims without a NPI number from the doctors. 
Could somebody explain to me why you wouldn't give the doctors 
NPIs before you give the providers NPIs?
    Mr. Kuhn. We do, and I think it is the issue in terms of us 
allowing how they use their own NPI in that field in terms of 
referral and prescription. Is that your question?
    Senator McCaskill. Yes. I mean, as of June 2, you are 
allowing DME suppliers, durable medical equipment suppliers, to 
use their own NPIs rather than the prescribing doctor. And the 
issue, I was told, is that because there were some order 
physicians that did not have their NPIs yet.
    Mr. Kuhn. Right.
    Senator McCaskill. Well, why would you give them to any 
providers before you give them to all the doctors?
    Mr. Kuhn. Here is the way that scenario works. Everybody 
applies for a NPI. They get their NPI. The physician or his 
office manager, his or her office manager, might not readily 
have it. They might not have applied for it yet, but they still 
are practicing in the community, been there for 20, 30 years, 
whatever the case may be. What we were concerned about here is 
we know this created a vulnerability in the program. But we 
were also trying to balance that against access for Medicare 
beneficiaries to make sure that they could get the supplies and 
services that they needed. This is a temporary patch, but the 
key here, as I mentioned earlier, is that anybody that uses 
their own NPI in that field, any supplier, they are a very good 
candidate for post-payment review as a result of this scenario.
    So, yes, they have the opportunity to use it if it is a 
true access issue. But if you do use it, beware, we are going 
to come and look over your shoulder.
    Senator McCaskill. Do you get the Social Security number of 
the prescribing doctor if there is not a NPI for the 
prescribing doctor?
    Mr. Kuhn. We have that information in terms of the 
enrollment process. That is correct.
    Senator McCaskill. OK. So for every single claim that is 
coming in from a provider where there is not a NPI for the 
doctor, are you running it through the Social Security database 
to make sure that the doctor is alive?
    Mr. Kuhn. Yes, on enrollment, yes, we do.
    Senator McCaskill. No. I am asking on these claims. You 
have stopped segregating duties.
    Mr. Kuhn. Right.
    Senator McCaskill. We have a program that cannot figure out 
for 6 years how to match the Social Security numbers of the 
doctors with the information you have been getting from the 
Social Security Administration. You have been getting the 
Social Security information for 6 years. You cannot figure out 
how to do that.
    If someone is making a claim for durable medical equipment 
with a NPI without a doctor's NPI, you have that doctor's 
Social Security number; before you pay that claim, are you 
running it to make sure they are alive now, this minute?
    Mr. Kuhn. We are not right now.
    Senator McCaskill. OK. So why not?
    Mr. Kuhn. We are making those systems changes. Those will 
be system changes that we hope will be in place by the end of 
this year or early next year as part of the process.
    Senator McCaskill. OK. Clearly, the cart is before the 
horse here because this seems to me that at a minimum, if you 
are going to allow these people to use their own numbers, you 
have to have another safeguard in place in terms of prevention. 
With all due respect, Mr. Kuhn, you came to this hearing not 
even knowing if you have a mechanism to hold these contractors 
accountable. You don't even know if it is in the contract or 
not. That has not even gotten on your radar screen until some 
very pointed questions from this Subcommittee. That does not 
give me comfort that the priorities are in terms of looking at 
how we prevent fraud, waste, and abuse.
    Let me ask you about this $300 million that you currently 
get for the Integrity Program. Who is in charge of it?
    Mr. Kuhn. Our Office of Financial Management and our 
Program Integrity Group.
    Senator McCaskill. Who is the person in charge of the 
program?
    Mr. Kuhn. Program Integrity is run by Kimberly Brandt.
    Senator McCaskill. Kimberly Brandt is in charge of a $300 
million budget to make sure that bad guys are not ripping us 
off?
    Mr. Kuhn. No, let me correct the numbers here. Right now we 
get $720 million for Program Integrity. That number has been 
frozen since 2003. Over the last 3 years, we have requested 
additional funding to the tune of $300 million in that area. 
Overall, that program is run by our Office of Financial 
Management. That is run by a gentleman by the name of Tim Hill. 
And then a particular group within the Office of Financial 
Management is the Program Integrity Group. They run many of the 
program integrity issues, but those dollars are also used in 
terms of audit function, different organizations within the 
Office of Financial Management.
    Senator McCaskill. Well, so now what you are telling me is 
we are spending $720 million--and you want $1 billion--to make 
sure people are not stealing from us.
    Mr. Kuhn. That is correct.
    Senator McCaskill. OK. That gives me a headache. That means 
that we are spending $1 billion on top of all the people who 
work there, on top of the IG and the GAO, we are spending $1 
billion--you want us to spend $1 billion. We are spending $720 
million.
    Mr. Chairman, I think it would be a really good idea to 
have a hearing and talk to these integrity people. I would love 
to know what they are doing. I would love to see an org. chart. 
Could you provide to the Subcommittee an org. chart of how the 
$720 million is being spent?
    Mr. Kuhn. Happy to.
    Senator McCaskill. And I would like to know how many people 
it is paying for. I would love to know how many contractors we 
are buying with that money. And what are they doing? The idea 
that you would be spending $720 million a year and for 6 years 
nobody has checked the death database at Social Security for 
doctors? Talk about needing to fire some people.
    Mr. Kuhn. I think that is a fair question. But I think as I 
tried to share with the Subcommittee earlier, we face on a 
regular basis a number of vulnerabilities in the program. In 
2004, when we were going to do the follow-up checks in terms of 
this issue of the deceased physician files that were out there, 
here is what we were looking at in 2004: We had a major scandal 
going on in this country with the issue of powered mobility 
devices or powered wheelchairs in certain parts of the country, 
to the tune of about $1 billion being ripped off from the 
Medicare program. With law enforcement, we launched a major 
initiative called Operation Wheeler Dealer. We threw resources 
in that direction.
    We had the new enrollment program, the PECOS system that 
came up. We moved resources in that direction. We had, on the 
heels of the Medicare Modernization Act, the new Part D 
program, and we wanted to make sure that was secure and up and 
running before it got out of the gate.
    So we make tough choices in terms of areas of 
vulnerability. This is an important area, but at that time when 
we were making these decisions, there were things that were 
much higher for us to put resources on. These are tough 
choices, but these are the decisions we made.
    Senator McCaskill. Well, all of the money that you are 
throwing to these various programs is addressing fraud that has 
occurred as opposed to investing that money, integrating this 
money into prevention. And this hearing today is a drop in the 
bucket. I realize that. But it is a symbolic drop in the bucket 
in terms of, we are chasing the cow after it gets out of the 
barn rather than doing some pretty simple checking on that lock 
on the barn. And, if there are $720 million worth of people at 
Medicare that are supposed to be fixing the lock on the barn, 
then the very basic would be some of the things that clearly 
have not been done.
    I am curious that the Integrity Section, how they felt 
about you guys using NPI numbers for people providing the 
equipment as opposed to the doctors that were prescribing it. 
Did anybody over there scream? They should have. That should be 
something they should be reviewing. Everything should be going 
on at the front end, not at the back end.
    Of all the dead doctors we have found who prescribed DME 
after they had been dead a month, how many of those have been 
referred for prosecution? How many of those providers have gone 
to jail?
    Mr. Kuhn. We are hoping to get the information from the 
Subcommittee in terms of the report. In the report, I think 
they identify one DME supplier. I did not see that they 
identified any physicians by name, but we hope to follow up 
with the Subcommittee to get their files, their identification. 
And I have asked staff, once we get that, to pursue active 
investigations in these areas and recoveries where we can.
    Senator McCaskill. What I would certainly like to see is if 
you all can do this without us passing a law demanding you do 
it. Is there any reason that every time you find a prescription 
that has been filled for a doctor who has been dead for more 
than 30 days that you cannot send a letter to the Attorney 
General in that State saying, ``We have evidence of fraud. Go 
for it?''
    Mr. Kuhn. That might be a nice improvement to have as part 
of this process. I like that suggestion. I will take that back.
    Senator McCaskill. Yes, and the $720 million worth of staff 
over at the integrity place, I would be curious why they have 
not demanded that you be doing that. You have 50 Attorneys 
General out there that are staffed and ready to handle these 
cases, and I know that it is a big deal in my State, and local 
prosecutors, too. Everybody wants to go after people that are 
preying upon sick people and undermining the Medicare program.
    I know my time is up. Thank you, Mr. Chairman.
    Senator Levin. Thank you, Senator McCaskill.
    We have asked you for a number of reports. Can you assure 
us we will have those reports in 30 days?
    Mr. Kuhn. We will do our level best to get it to you in 30 
days. If we are unable to, we will inform you accordingly and 
give you a time certain when we think we can deliver the 
information.
    Senator Levin. Fine. Now, let's just take maybe 3 minutes 
each because we have some roll call votes coming on the Senate 
floor.
    You indicated, Mr. Kuhn, that CMS had a problem in terms of 
the data that was coming in. You apparently suggested that the 
AMA data was faulty. Now, the data that our staff looked at 
were your files. In your files, the prescription dates came 
after the dates of death.
    Mr. Kuhn. I think the issue is not that it was faulty, but 
it was not as robust as----
    Senator Levin. Forget robust. That is, 734 out of the 1,500 
cases were in your files.
    Mr. Kuhn. Right.
    Senator Levin. It does not take much. Look, I am not a 
high-tech guy, but it does not seem to me it is very 
complicated for software to be written that says if there is a 
date of death in your file, you do not pay claims.
    Mr. Kuhn. Oh, I do not dispute----
    Senator Levin. What is complicated about that?
    Mr. Kuhn. I do not dispute that the matches weren't made as 
good or----
    Senator Levin. Not ``as good.'' The claims should not have 
been paid.
    Mr. Kuhn. But, again, a lot of it is the thing that we have 
got to have good data sources. I know when we talked to the 
staff----
    Senator Levin. No. I am sorry. I have to interrupt you. I 
have only 3 minutes. This is not good data. So this is your 
data. This investigation by our staff looked at your files. In 
your files, the date of death was present. For the 1,500 we 
looked at, that random sample, in half of those deceased 
physicians there were payments made. Those 1,500 cases had 
dates of death in CMS files. It is not a matter of getting 
information from Social Security or from AMA. Your files had 
the date of death. How complicated is it for someone to write a 
program that says in your files where there is a date of death, 
you hold off paying any claims? Why is that complicated?
    Mr. Kuhn. I cannot imagine why that should be so 
complicated, and I do not understand why that one was not 
corrected. I will look into that one personally.
    Senator Levin. Why does that take $300 million to do?
    Mr. Kuhn. It was an issue of priorities at the time, what 
we were----
    Senator Levin. But there is no dollar priority. That is a 
software issue. That is just writing a simple software program 
that says do not pay a claim where there is a date of death in 
CMS' files for a physician.
    Mr. Kuhn. Senator, it is tough calls. If someone is 
stealing a billion dollars here, someone----
    Senator Levin. Go after the billion dollars.
    Mr. Kuhn. We are going to go after the billion dollars.
    Senator Levin. I am with you, but could you get $1,000 for 
someone to write a program?
    Mr. Kuhn. We will see what we can do to chase the others.
    Senator Levin. No. It is not chase the others. It is to 
write a program in your own file which says if there is a date 
of death in your file, you do not pay claims. That is not a 
complicated, expensive deal. So I do not think it is good 
enough for you to say, well, you have asked for $300 million 
more above the $700 million that you have not gotten when that 
is a simple software cure.
    Mr. Kuhn. The only thing I can answer, Senator, is that we 
have to make choices with limited resources. We made some 
choices on vulnerabilities here. I understand that this sounds 
simple, but we made some choices in 2004, and this is the 
choices we made.
    Senator Levin. You mean you looked at this possibility and 
decided not to do it?
    Mr. Kuhn. We looked at where we had program 
vulnerabilities, and as I said, $1 billion, chasing those that 
were stealing on power wheelchairs, the new PECOS system, the 
new Part D program is where we put our resources.
    Senator Levin. I would agree with that decision to put 
resources there. What I am telling you is this is not a 
complicated thing. This is writing software, a program, which 
is not complicated. This is not a matter of making sure the 
data that comes in from Social Security or AMA is accurate and 
up to date. This is where your file has that record in there 
that there is a physician that has died and where you have not 
automatically then said no payments based on that 
identification number.
    Mr. Kuhn. And I appreciate that distinction.
    Senator Levin. I have to tell you, I just do not find your 
testimony credible in this regard. To talk about other needs 
that you have to go after--the wheelchair frauds--I agree with 
you, if it is a matter of either/or, you do it. But this is a 
very simple fix, and I do not get how you can defend not doing 
it and how you do not know whether or not the contract that you 
signed with contractors who are supposed to implement this 
program contains a provision that holds them accountable for 
failures to do their job. On all those items you mentioned, 
looking forward, you have to have accountability in there. And 
that is what has been missing, and it is still missing. There 
is no accountability for failure to do people's jobs. That to 
me is a huge gap, and it is a gap in too many programs, too 
many government programs, where people, including our 
contractors, are not held accountable for not doing their job.
    I would add that to your program as the No. 1 item that you 
ought to have in any new program.
    Senator Coleman.
    Senator Coleman. Thank you, Mr. Chairman.
    First, just to go back to the issue of the DME providers 
providing a number and not the physicians. Again, I stress the 
concern with the fly-by-night folks, that a post-payment review 
is not going to be of help for those folks who are doing this 
to rip off the system. We know that they are out there. Then we 
have contractors that do the review. That costs money.
    My strong suggestion is that as you go back, you look at 
putting a guard at the front door. It goes back to the issue 
the Chairman raised and I raised in my opening statement. I 
talked about things that UPS does and FedEx does. It is the 
ability with computer capability today to be able to check 
things. You would think that there would be some kind of 
automated system at the front door. So I would urge you to go 
back because I do not want to be back here in another year 
looking at what happened in that period where we did not 
require the new NPI from physicians.
    Second, it would appear that if we have dead physicians, 
there was obviously no system in place to check against 
treatment visits. In other words, CMS has information from 
treatment visits. Physicians are being reimbursed for that. So, 
again, where we are today, we have to look back and you see all 
these years of payments with this--it was then a UPIN, but I 
would presume that there would be a big blank for many years 
about any treatment visit because there is no physician. Why 
doesn't CMS cross-check claims with DME for doctor visits?
    Mr. Vito, I would turn to you. Would that be another piece 
of the way in which we ensure greater integrity by doing--
again, at the press of a button. I have to believe that you can 
press a button, and it may be more expensive than $1,000. It 
probably costs money to do this. But we are paying contractors 
to do it. This is not the government's limitation. We have lots 
of money in the private sector. What am I missing in having a 
cross-check of treatment visits to physicians in looking at DME 
payments, claims?
    Mr. Vito. Well, there are two different systems at CMS. 
There is the DMERC, the DME system, and also the Part B system. 
And sometimes they are not housed together. But when we do 
reviews and when we look at billing patterns for aberrations 
involving UPINs, we look at the beneficiaries. Then we also 
look to see if there were any Part B bills indicating that they 
had an office visit at the time that they were supposed to have 
gotten an order for this equipment.
    Senator Coleman. But that is my point. I would presume that 
is what you do, and in this day and age, where we have such 
capability electronically, it shouldn't matter where you are 
housed. It shouldn't matter. That is of no relevance today. It 
is a question of whether we want to ensure that the right hand 
knows what the left hand is doing. And so it all goes to this 
issue of what kind of capability do we have today to be able to 
provide--not waiting for you to come in after the fact, Mr. 
Vito. And I appreciate it--I do not want to put you out of a 
job. But it would be nice if you would have less to look at 
because you are doing what I believe could be done up front.
    Mr. Vito. Right. The only issue here is that they are not 
even editing for the most basic format. CMS did not edit for 
the most basic edit of just seeing if the UPIN was active. You 
are talking about even doing more, which would be even more 
computer capabilities and requirements because you would then 
have to match it up onto the Part B system. What I am saying is 
we could start by taking first steps and build upon those first 
steps to make it so that we would have a system that certainly 
has more integrity and does more checks. We will be glad to 
work with CMS and you to make sure that happens.
    Senator Coleman. I appreciate that, Mr. Vito. Thank you, 
Mr. Chairman.
    Senator Levin. Thank you. Dr. Coburn.
    Senator Coburn. Thank you. I am starting to get a little 
worried that CMS' computer systems are like the Pentagon's, and 
it is scaring me to death. Am I hearing you right that there is 
no cross-reference capability between Medicare Part D, CME, 
Part B, and Part A to talk to one another?
    Mr. Kuhn. Probably 5 years ago there was not, but there is 
now.
    Senator Coburn. All four of those, you can run cross-checks 
all the way across--eligibility, UPIN numbers, date of birth, 
certification, enrolled doctors, certified suppliers--all that 
can be cross-referenced?
    Mr. Kuhn. My understanding is that with the changes--let me 
even back up, a little more history here. Part of the Medicare 
Modernization Act gave us authority to do contractor payment 
reform, something that the agency has wanted to do for 20 years 
of this whole legacy system that we had out there. And so we 
got rid of the fiscal intermediaries; we got rid of the 
carriers; we got rid of the DMERCs. All those folks are gone 
now, and basically we are creating what we now call Medicare 
Administrative Contractors (MACs), which for the first time 
brings Medicare A and B together. Those systems now talk to one 
another. They work together.
    Senator Coburn. But do they talk to Medicare Part D?
    Mr. Kuhn. And we are working on making sure that they can 
now talk to the DMACs. I don't know if that system is actually 
put in place yet, but ultimately that is the goal so that the 
whole system is synched up across the way. And that is part of 
the reform effort to get at the very issues Mr. Coleman was 
raising.
    Senator Coburn. Mr. Chairman, I would just say Medicaid is 
designed to be defrauded. I mean, we have designed it. You look 
at DME. We set artificial prices. We inflated the prices based 
on inflation. It had nothing to do with the real cost of goods. 
We set it up, and we created the system and said here is a real 
lucrative area, let's go take some of it. And what we really 
have to do is we have to go back and look at Medicare and 
change it. And I have proposed this to CMS before, if we are 
not going to do everything up front like we should be doing--
which we should be holding contractors accountable. If you were 
in the private sector and you did not have this cross-
referencing available and you did not think about doing it 
beforehand, not after the fact, I mean, why wasn't this part of 
the program 10 years ago of talking? We had a very accurate 
computer. But the answer to this is undercover patients. The 
fact is people do not like going to jail. And all you have to 
do is throw about 50 doctors in jail and about 100 DME 
suppliers and 100 hospice suppliers, and you know what? This 
fraud would go from $80 billion a year down to about $5 
billion. But nobody wants to do the hard work of the true 
undercover to get rid of the fraud. And we will not do the hard 
work of changing the system where it is not fraud--it is not a 
pro-fraud environment.
    I would like to know from Mr. Kuhn and Mr. Vito, how would 
you have us change the Medicare program so that it is not so 
enticing for fraud?
    Mr. Kuhn. Boy, that is a very good question. I think part 
of the issues you talked about in terms of are there better 
ways that we can do it in terms of active surveillance or areas 
that we are looking at. For example, one of the initiatives we 
launched with the Justice Department, the IG, and others was 
about 2 years ago called Operation Accidental Tourist, where we 
went through the Miami area looking at DME suppliers. And as a 
result, that resulted in a revocation of close to 500 suppliers 
out there that were nothing more than storefronts, folks that 
were clearly trying to defraud the program.
    There is a new Medicare task force operated by the 
Department of Justice that is having some real success, and my 
understanding, within the last year to 18 months, is that has 
led to around 55 prosecutions and convictions out there right 
now.
    So I think getting tougher on the fraud side of the ledger 
is going to make a big difference. But you are right at the 
outset. It really is how you pay and what you pay for. When you 
have mis-priced procedures, when you pay too much for 
something, as we do in DME and other areas, it does bring the 
fraudsters into the program.
    When you have systems that do not adequately work with one 
another and talk, as has been the subject of this hearing, it 
leaves opportunities for people to kind of encroach on the 
program that is out there.
    But I think at the end of the day, where it really makes a 
difference is that we have good, legitimate suppliers out 
there, people we can count on and trust and try to drive 
integrity in every step of the process that we have there, and 
to make sure that the payment systems are as fair and as honest 
as they can be. I think we have a fair payment and legitimate 
suppliers out there. Those are the areas that I think are going 
to give us the biggest bang for our buck.
    Senator Coburn. Mr. Vito.
    Mr. Vito. Well, it is very important that the controls that 
are established be utilized in the manner that is most 
effective. Largely, the program is relying on honest providers 
to file claims properly, and that is the way the system was 
designed. So it is a lot of trust that is involved in the 
provider billing process. But I think there needs to be more 
verification with the trust and more checks up front to ensure 
that things are done properly.
    We have worked with CMS, the Department of Justice, and 
others, for example, in South Florida, and we have really made 
a dent into the problem of the DME suppliers down there. I 
think it is a concerted effort of identifying vulnerabilities, 
correcting those vulnerabilities, making sure that they do not 
exist, and then engaging in collaborative activities that best 
utilize our investigators and the Department of Justice 
resources simultaneously. So largely what it is, is all of us 
working together to get the best results and by doing it with 
all the tools that are available to us, such as eliminating the 
vulnerabilities that we identify and then taking actions to 
prosecute the people who committed the crimes and make sure 
that is known by other people who would do likewise. We need to 
make sure that we continue to stay on the task until it is 
resolved.
    Senator Coburn. Mr. Chairman, I have one further request, 
and I don't know if I asked you this. And I think I did, but I 
wanted to confirm it with Mr. Kuhn. The list of people who have 
been filing claims for DME equipment under the pretense of a 
deceased physician and the sanctions applied, you will give 
that to the Subcommittee?
    Mr. Kuhn. You did ask for that, and we will supply that to 
the Subcommittee.
    Senator Coburn. Thank you, Mr. Chairman.
    Senator Levin. Thank you, Dr. Coburn.
    Just one thing that I want to pursue and then see if 
colleagues have any additional questions. There is supposed to 
be a vote any minute.
    When we talked before about the deceased date information 
coming to the agency, what you said, Mr. Gray, is that the same 
information is going to be going under the new system as is 
going under the old system. That is not going to change.
    Mr. Gray. Let me be clear, Senator. It is the same file 
format.
    Senator Levin. All right. And then the question was raised: 
How often would somebody press a button, I guess, at CMS to put 
a hold on any payment to somebody, a doctor, who is deceased, a 
payment to a provider based on that identification number? And 
I think Dr. Coburn asked the question about--well, you said 
every month, and Dr. Coburn I think said why not do it every 
week, and you said, well, we could do it every week.
    Why can't that be done automatically? Why couldn't it be 
done when the information comes over from Social Security that 
somebody is deceased, automatically there is a hold on that 
file? Why does someone have to press a button even? Why can't 
we have software saying it is automatic?
    Mr. Kuhn. I think there are two different issues here at 
play. One is trying to update the files to make sure that we 
have the batches that we get from Social Security in order to 
get the deceased physicians, and that is one issue, to make 
sure that our files are accurate. That presumably would be done 
on a weekly basis.
    I think the question you are asking is that when our claims 
system detects that there is a deceased----
    Senator Levin. No.
    Mr. Kuhn. OK. I am sorry.
    Senator Levin. I go to the first question. Why is that not 
done automatically? Why isn't there a hold placed automatically 
when that information comes electronically to you?
    Mr. Kuhn. Oh, well, it depends when we process the batches.
    Senator Levin. Is that electronic processing?
    Mr. Kuhn. Yes, and presumably--and again, our data folks 
would be the ones that could speak to this better. But 
presumably they have to reserve data-processing time. These 
probably would be files that would be run at night, on 
weekends, things like that.
    Senator Levin. It would just be inputted by hand?
    Mr. Kuhn. I do not think so. I am sure it is all 
electronic.
    Senator Levin. Well, then, why do we have to wait a week? 
Why isn't it an automatic hold on that file electronically when 
that information comes in?
    Mr. Kuhn. Well, I think, as you may know, Senator, there is 
real competition for computer time when you run large files 
like this, and I think it is just a matter of whenever they can 
schedule that. If we can do it even more rapidly than every 
week, I think that would be preferable.
    Senator Levin. Well, I am just wondering why it is not an 
automatic deal. If you could check----
    Mr. Kuhn. Sure, with the data folks.
    Senator Levin. Just find out whether that could be done 
automatically as the information comes in, bingo, it is done 
electronically as it comes in, just the way we get e-mail 
automatically, which triggers a bell in my wife's head 
somewhere.
    Senator Coleman. I have nothing further now. We have a lot 
of information coming back to us, Mr. Chairman, that we will 
need to take a look at and see whether we need to schedule 
another hearing.
    Senator Levin. We want to thank our witnesses. Again, thank 
you, Senator Coleman, and your staff for your initiative here, 
and we thank all of our staff. They work together very well, as 
you pointed out. We are grateful for that.
    We will stand adjourned.
    [Whereupon, at 11:54 a.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

[GRAPHIC] [TIFF OMITTED] T4122.001

[GRAPHIC] [TIFF OMITTED] T4122.002

[GRAPHIC] [TIFF OMITTED] T4122.003

[GRAPHIC] [TIFF OMITTED] T4122.004

[GRAPHIC] [TIFF OMITTED] T4122.005

[GRAPHIC] [TIFF OMITTED] T4122.006

[GRAPHIC] [TIFF OMITTED] T4122.007

[GRAPHIC] [TIFF OMITTED] T4122.008

[GRAPHIC] [TIFF OMITTED] T4122.009

[GRAPHIC] [TIFF OMITTED] T4122.010

[GRAPHIC] [TIFF OMITTED] T4122.149

[GRAPHIC] [TIFF OMITTED] T4122.011

[GRAPHIC] [TIFF OMITTED] T4122.012

[GRAPHIC] [TIFF OMITTED] T4122.013

[GRAPHIC] [TIFF OMITTED] T4122.014

[GRAPHIC] [TIFF OMITTED] T4122.150

[GRAPHIC] [TIFF OMITTED] T4122.015

[GRAPHIC] [TIFF OMITTED] T4122.016

[GRAPHIC] [TIFF OMITTED] T4122.017

[GRAPHIC] [TIFF OMITTED] T4122.151

[GRAPHIC] [TIFF OMITTED] T4122.018

[GRAPHIC] [TIFF OMITTED] T4122.019

[GRAPHIC] [TIFF OMITTED] T4122.020

[GRAPHIC] [TIFF OMITTED] T4122.021

[GRAPHIC] [TIFF OMITTED] T4122.022

[GRAPHIC] [TIFF OMITTED] T4122.023

[GRAPHIC] [TIFF OMITTED] T4122.024

[GRAPHIC] [TIFF OMITTED] T4122.025

[GRAPHIC] [TIFF OMITTED] T4122.026

[GRAPHIC] [TIFF OMITTED] T4122.027

[GRAPHIC] [TIFF OMITTED] T4122.028

[GRAPHIC] [TIFF OMITTED] T4122.029

[GRAPHIC] [TIFF OMITTED] T4122.030

[GRAPHIC] [TIFF OMITTED] T4122.031

[GRAPHIC] [TIFF OMITTED] T4122.032

[GRAPHIC] [TIFF OMITTED] T4122.033

[GRAPHIC] [TIFF OMITTED] T4122.034

[GRAPHIC] [TIFF OMITTED] T4122.035

[GRAPHIC] [TIFF OMITTED] T4122.036

[GRAPHIC] [TIFF OMITTED] T4122.037

[GRAPHIC] [TIFF OMITTED] T4122.038

[GRAPHIC] [TIFF OMITTED] T4122.039

[GRAPHIC] [TIFF OMITTED] T4122.040

[GRAPHIC] [TIFF OMITTED] T4122.041

[GRAPHIC] [TIFF OMITTED] T4122.042

[GRAPHIC] [TIFF OMITTED] T4122.043

[GRAPHIC] [TIFF OMITTED] T4122.044

[GRAPHIC] [TIFF OMITTED] T4122.045

[GRAPHIC] [TIFF OMITTED] T4122.046

[GRAPHIC] [TIFF OMITTED] T4122.047

[GRAPHIC] [TIFF OMITTED] T4122.048

[GRAPHIC] [TIFF OMITTED] T4122.049

[GRAPHIC] [TIFF OMITTED] T4122.050

[GRAPHIC] [TIFF OMITTED] T4122.051

[GRAPHIC] [TIFF OMITTED] T4122.052

[GRAPHIC] [TIFF OMITTED] T4122.053

[GRAPHIC] [TIFF OMITTED] T4122.054

[GRAPHIC] [TIFF OMITTED] T4122.055

[GRAPHIC] [TIFF OMITTED] T4122.056

[GRAPHIC] [TIFF OMITTED] T4122.057

[GRAPHIC] [TIFF OMITTED] T4122.058

[GRAPHIC] [TIFF OMITTED] T4122.059

[GRAPHIC] [TIFF OMITTED] T4122.060

[GRAPHIC] [TIFF OMITTED] T4122.061

[GRAPHIC] [TIFF OMITTED] T4122.062

[GRAPHIC] [TIFF OMITTED] T4122.063

[GRAPHIC] [TIFF OMITTED] T4122.064

[GRAPHIC] [TIFF OMITTED] T4122.065

[GRAPHIC] [TIFF OMITTED] T4122.066

[GRAPHIC] [TIFF OMITTED] T4122.067

[GRAPHIC] [TIFF OMITTED] T4122.068

[GRAPHIC] [TIFF OMITTED] T4122.069

[GRAPHIC] [TIFF OMITTED] T4122.070

[GRAPHIC] [TIFF OMITTED] T4122.071

[GRAPHIC] [TIFF OMITTED] T4122.072

[GRAPHIC] [TIFF OMITTED] T4122.073

[GRAPHIC] [TIFF OMITTED] T4122.074

[GRAPHIC] [TIFF OMITTED] T4122.075

[GRAPHIC] [TIFF OMITTED] T4122.076

[GRAPHIC] [TIFF OMITTED] T4122.077

[GRAPHIC] [TIFF OMITTED] T4122.078

[GRAPHIC] [TIFF OMITTED] T4122.079

[GRAPHIC] [TIFF OMITTED] T4122.080

[GRAPHIC] [TIFF OMITTED] T4122.081

[GRAPHIC] [TIFF OMITTED] T4122.082

[GRAPHIC] [TIFF OMITTED] T4122.083

[GRAPHIC] [TIFF OMITTED] T4122.084

[GRAPHIC] [TIFF OMITTED] T4122.085

[GRAPHIC] [TIFF OMITTED] T4122.086

[GRAPHIC] [TIFF OMITTED] T4122.087

[GRAPHIC] [TIFF OMITTED] T4122.088

[GRAPHIC] [TIFF OMITTED] T4122.089

[GRAPHIC] [TIFF OMITTED] T4122.090

[GRAPHIC] [TIFF OMITTED] T4122.091

[GRAPHIC] [TIFF OMITTED] T4122.092

[GRAPHIC] [TIFF OMITTED] T4122.093

[GRAPHIC] [TIFF OMITTED] T4122.094

[GRAPHIC] [TIFF OMITTED] T4122.095

[GRAPHIC] [TIFF OMITTED] T4122.096

[GRAPHIC] [TIFF OMITTED] T4122.097

[GRAPHIC] [TIFF OMITTED] T4122.098

[GRAPHIC] [TIFF OMITTED] T4122.099

[GRAPHIC] [TIFF OMITTED] T4122.100

[GRAPHIC] [TIFF OMITTED] T4122.101

[GRAPHIC] [TIFF OMITTED] T4122.102

[GRAPHIC] [TIFF OMITTED] T4122.103

[GRAPHIC] [TIFF OMITTED] T4122.104

[GRAPHIC] [TIFF OMITTED] T4122.105

[GRAPHIC] [TIFF OMITTED] T4122.106

[GRAPHIC] [TIFF OMITTED] T4122.107

[GRAPHIC] [TIFF OMITTED] T4122.108

[GRAPHIC] [TIFF OMITTED] T4122.109

[GRAPHIC] [TIFF OMITTED] T4122.110

[GRAPHIC] [TIFF OMITTED] T4122.111

[GRAPHIC] [TIFF OMITTED] T4122.112

[GRAPHIC] [TIFF OMITTED] T4122.113

[GRAPHIC] [TIFF OMITTED] T4122.114

[GRAPHIC] [TIFF OMITTED] T4122.115

[GRAPHIC] [TIFF OMITTED] T4122.116

[GRAPHIC] [TIFF OMITTED] T4122.117

[GRAPHIC] [TIFF OMITTED] T4122.118

[GRAPHIC] [TIFF OMITTED] T4122.119

[GRAPHIC] [TIFF OMITTED] T4122.120

[GRAPHIC] [TIFF OMITTED] T4122.121

[GRAPHIC] [TIFF OMITTED] T4122.122

[GRAPHIC] [TIFF OMITTED] T4122.123

[GRAPHIC] [TIFF OMITTED] T4122.124

[GRAPHIC] [TIFF OMITTED] T4122.125

[GRAPHIC] [TIFF OMITTED] T4122.126

[GRAPHIC] [TIFF OMITTED] T4122.127

[GRAPHIC] [TIFF OMITTED] T4122.128

[GRAPHIC] [TIFF OMITTED] T4122.129

[GRAPHIC] [TIFF OMITTED] T4122.130

[GRAPHIC] [TIFF OMITTED] T4122.131

[GRAPHIC] [TIFF OMITTED] T4122.132

[GRAPHIC] [TIFF OMITTED] T4122.133

[GRAPHIC] [TIFF OMITTED] T4122.134

[GRAPHIC] [TIFF OMITTED] T4122.135

[GRAPHIC] [TIFF OMITTED] T4122.136

[GRAPHIC] [TIFF OMITTED] T4122.137

[GRAPHIC] [TIFF OMITTED] T4122.138

[GRAPHIC] [TIFF OMITTED] T4122.139

[GRAPHIC] [TIFF OMITTED] T4122.140

[GRAPHIC] [TIFF OMITTED] T4122.141

[GRAPHIC] [TIFF OMITTED] T4122.142

[GRAPHIC] [TIFF OMITTED] T4122.143

[GRAPHIC] [TIFF OMITTED] T4122.144

[GRAPHIC] [TIFF OMITTED] T4122.145

[GRAPHIC] [TIFF OMITTED] T4122.146

[GRAPHIC] [TIFF OMITTED] T4122.147

[GRAPHIC] [TIFF OMITTED] T4122.148

                                 
