[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
  ENFORCEMENT OF THE CRIMINAL LAWS AGAINST MEDICARE AND MEDICAID FRAUD

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

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON CRIME, TERRORISM,
                         AND HOMELAND SECURITY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 4, 2010

                               __________

                           Serial No. 111-113

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee               STEVE KING, Iowa
HENRY C. ``HANK'' JOHNSON, Jr.,      TRENT FRANKS, Arizona
  Georgia                            LOUIE GOHMERT, Texas
PEDRO PIERLUISI, Puerto Rico         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               TED POE, Texas
JUDY CHU, California                 JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin             GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

        Subcommittee on Crime, Terrorism, and Homeland Security

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

PEDRO PIERLUISI, Puerto Rico         LOUIE GOHMERT, Texas
JERROLD NADLER, New York             TED POE, Texas
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee               TOM ROONEY, Florida
ANTHONY D. WEINER, New York
DEBBIE WASSERMAN SCHULTZ, Florida
MIKE QUIGLEY, Illinois

                      Bobby Vassar, Chief Counsel

                    Caroline Lynch, Minority Counsel


                            C O N T E N T S

                              ----------                              

                             MARCH 4, 2010

                                                                   Page

                           OPENING STATEMENTS

The Honorable Robert C. ``Bobby'' Scott, a Representative in 
  Congress from the State of Virginia, and Chairman, Subcommittee 
  on Crime, Terrorism, and Homeland Security.....................     1
The Honorable Louie Gohmert, a Representative in Congress from 
  the State of Texas, and Ranking Member, Subcommittee on Crime, 
  Terrorism, and Homeland Security...............................     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Committee on the 
  Judiciar.......................................................     5

                               WITNESSES

Mr. Greg Andres, Acting Deputy Assistant Attorney General, 
  Criminal Division, U.S. Department of Justice, Washington, DC
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9
Mr. Timothy J. Menke, Deputy Inspector General for 
  Investigations, U.S. Department of Health and Human Services, 
  Washington, DC
  Oral Testimony.................................................    20
  Prepared Statement.............................................    22
Mr. D. Mark Collins, Assistant Attorney General, Director of 
  Nebraska Medicaid Fraud Control Unit, President of the National 
  Association of Medicaid Fraud Control Units, Lincoln, NE
  Oral Testimony.................................................    30
  Prepared Statement.............................................    33
Mr. James Frogue, Vice President and Director of State Policy, 
  Center for Health Transformation, Washington, DC
  Oral Testimony.................................................    50
  Prepared Statement.............................................    53

                                APPENDIX

Material Submitted for the Hearing Record........................    79


  ENFORCEMENT OF THE CRIMINAL LAWS AGAINST MEDICARE AND MEDICAID FRAUD

                              ----------                              


                        THURSDAY, MARCH 4, 2010

              House of Representatives,    
              Subcommittee on Crime, Terrorism,    
                              and Homeland Security
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Robert 
C. ``Bobby'' Scott (Chairman of the Subcommittee) presiding.
    Present: Representatives Scott, Conyers, Pierluisi, Jackson 
Lee, Gohmert, Poe, and Goodlatte.
    Staff present: (Majority) Bobby Vassar, Subcommittee Chief 
Counsel; Joe Graupensperger, Counsel; Veronica Eligan, 
Professional Staff Member; (Minority) Caroline Lynch, Counsel; 
Art Barker, FBI Detailee; and Kelsey Whitlock, Staff Assistant.
    Mr. Scott. The Ranking Member has asked me to go on. He 
will be here in just a moment.
    The Subcommittee will now come to order. I am pleased to 
welcome you today to the hearing before the Subcommittee on 
Crime, Terrorism, and Homeland Security. Today we will discuss 
enforcement strategies for fighting criminal fraud against 
Medicare and Medicaid programs.
    These two programs have provided immeasurable benefits to 
the health of our Nation's citizens, particularly those who are 
often the most in need of assistance. It is the continuing 
responsibility of Congress to examine these programs to ensure 
that our government is making the best possible effort to 
reduce fraud, waste and abuse related to them.
    Health care fraud, including fraud against Medicare and 
Medicaid, is a serious problem. It has been estimated that 
there is more than $60 billion of health care fraud against 
public and private plans each year.
    Criminals have devised a number of ways of defrauding these 
programs, such as billing for services that were never rendered 
either by using genuine patient information, sometimes obtained 
through identity fraud, to fabricate entire claims or padding 
claims with charges for procedures that did not take place; 
billing for more expensive services or procedures than were 
actually provided or performed, commonly known as upcoding; 
performing medically unnecessary services solely for the 
purpose of generating insurance payments.
    Now, we have been advised by some that that is a result of 
defensive medicine, but I think we are going to hear perhaps 
that some of these unnecessary services are just for the 
purposes of generating insurance payments.
    Another is billing each step of the procedure as if it were 
a separate procedure, known as unbundling. In recent years, 
many of these schemes have been perpetrated in connection with 
the sale of durable medical equipment, the provision of home 
health, and infusion of certain expensive drugs for HIV 
therapy.
    Federal law provides statutes that prosecutors use to bring 
charges against those who commit fraud against the Federal 
health care programs. Some are specific to health care fraud. 
Some are statutes with more general application such as the 
prohibition against false statements to the government, which 
are used by prosecutors to pursue many types of crimes.
    I want to hear today how these statutory tools are being 
used as a basis for investigating and prosecuting those who 
defraud Medicare and Medicaid and how the statutes complement 
Federal civil remedies for these frauds.
    And we also need to know whether or not there is a need for 
new laws--new criminal laws or whether the--we just need more 
resources to enforce the laws that are on the books. 
Frequently, our response to these kinds of situations are to 
increase the penalties.
    Now, that obviously is irrelevant if there has been no 
investigation, no prosecution and no conviction. That is when 
the penalties would kick in. Sometimes if you just had the 
resources for the investigations and the prosecution, you could 
pursue these crimes much more efficiently, and that increased 
penalties would be irrelevant unless you would have done the 
investigation.
    Federal effort against these crimes has evolved over the 
years in an effort to keep pace with the volume of these crimes 
and the increasing sophistication of the criminals committing 
them. For instance, irregularities in billing are more easily 
detectable now with the ability to examine billing records 
maintained in computer databases.
    The Justice Department and HHS have increased monitoring of 
this information to detect suspicious patterns in claims data 
and adjust enforcement efforts accordingly. At the same time, 
these agencies have been able to better identify and focus on 
regional hot spots for this type of crime.
    In 2007, DOJ and HHS established a Medicare strike force 
team in Miami-Dade County in Florida. Next year, the strike 
force--the next year, the strike force was established in Los 
Angeles. And over the past year, these two agencies under the 
HEAT program have expanded the use of task forces in Detroit, 
Houston, Tampa, Brooklyn and Baton Rouge.
    I understand that further expansion of the strike task 
force concept is planned for later this year.
    The pursuit of those who commit Medicaid--who defraud the 
Medicaid program involves both State and Federal law 
enforcement.
    In 1977, Congress created a State Medicaid Fraud Control 
Units, which are usually located in the offices of the State 
attorneys general. They investigate and prosecute a variety of 
types of fraud crimes primarily in connection with Medicaid 
programs. We will hear from the director of one of those 
control units today.
    I hope this hearing will serve to highlight the continuing 
need to examine and adjust our efforts to combat fraud against 
Medicare and Medicaid. I look forward to hearing from all of 
our witnesses today concerning how we can better prevent, 
investigate and prosecute this time--this kind of fraud.
    It is now my pleasure to recognize the Ranking Member of 
the Subcommittee, the gentleman from Texas, Judge Gohmert.
    Mr. Gohmert. Thank you. And I do appreciate us having this 
hearing. I appreciate your leadership on this, Chairman Scott. 
And appreciate the witnesses being here today.
    One of the most famous bank robbers in history was William 
``Willie'' Sutton. It is estimated Sutton robbed over 100 banks 
beginning in the late 1920's, stealing an estimated $2 million. 
He was one of the early faces on the FBI's Ten Most Wanted 
list, and when he was asked, famously, why he robbed banks, he 
said, ``Because that is where the money is.''
    Well, whether Sutton really said that or not, if Sutton 
were in this room today he would likely agree Medicare or 
Medicaid systems are defrauded because that is where the money 
is--and, I would submit, apparently from what I have been 
reading of the testimony, easy money.
    One individual convicted of health care fraud commented, 
``Wow. I just won the lottery.'' From making $20,000 to $40,000 
a day cheating Medicare.
    In fact, in some areas of the country, the Medicare fraud 
business is reported to have replaced the drug trade as the 
biggest crime problem. With little effort and with the odds of 
getting caught relatively low, the risk is--that criminal 
investigations and prosecutions are not serious enough 
deterrents to counter the relatively easy way that millions of 
taxpayer dollars are stolen.
    There are witnesses here today from the Department of 
Justice, Department of Health and Human Services and Medicaid 
Fraud Control Unit, all who have success stories to tell.
    I also want to thank my friend Jim Frogue for being here. 
And I appreciated getting and reading a copy of his book, 
``Stop Paying the Crooks: Solutions to End the Fraud that 
Threatens Your Healthcare.'' Newt Gingrich had a good forward 
in that book. But I appreciate his efforts and appreciate him 
being here today with the other witnesses.
    In his testimony before the U.S. Senate on the topic of 
health care fraud deterrence, Professor Malcolm Sparrow of 
Harvard, the John Kennedy School of Government, identified the 
rule for criminals as it relates to these frauds. ``If you want 
to steal from Medicare, Medicaid or any other health care 
insurance program, learn to bill your lies correctly. Then, for 
the most part, your claims will be paid in full and on time 
without a hiccup by a computer with no human involvement at 
all.''
    While the agencies represented by the witnesses before us 
today have implemented enforcement and prosecution strategies 
targeting regions that have been identified as high-risk areas 
for these types of frauds, one representative from an 
investigating agency was quoted as saying that his ``office 
finds fraud everywhere it looks.''
    In any event, to illustrate some of the topics that we will 
discuss here today, I would ask permission to have a brief--and 
it is actually cut down substantially from where ``60 Minutes'' 
played it, but with your permission, we would ask unanimous 
consent to view a small segment of the program that was 
produced by ``60 Minutes'' called ``Medicare Fraud: A $60 
Billion Crime.''
    Mr. Scott. All right. This ``60 Minutes'' story that 
provoked--it was partly responsible for provoking this hearing, 
so we would be, without objection, delighted to roll the tape.
    [Begin videotape.]
    Mr. Kroft. [``60 Minutes'' Correspondent] FBI Special Agent 
Brian Waterman, who we rode with for several days, told us the 
only visible evidence of the crimes are the thousands of tiny 
clinics and pharmacies that dot the low-rent strip malls. You 
don't even know they are there because there is never anyone 
inside--no doctors, no nurses, and no patients.
    Mr. Waterman. [FBI Special Agent] This office number should 
be manned and answered 24 hours a day.
    Mr. Kroft. This tiny medical supply company billed Medicare 
almost $2 million in July and a half a million dollars while we 
were there in August. But we never found anybody in, and our 
phone calls were never returned.
    Mr. Waterman. Say they are currently on the other line. Oh. 
Well, do they want you to hold?
    Mr. Kroft. Sometimes they don't even have offices. We went 
looking for a pharmacy at 7511 Northwest 73rd Street that 
billed Medicare $300,000 in charges. It turned out to be in the 
middle of a public warehouse storage area.
    Mr. Waterman. They have already told us that there is no 
offices here, there are no businesses here. In fact, they are 
not even allowed to have a business here.
    Mr. Kroft. Waterman is the senior agent in the Miami office 
in charge of Medicare fraud. And Kirk Ogrosky, a top Justice 
Department prosecutor, oversees half a dozen Medicare Fraud 
Strike Forces that have been set up across the country.
    This one operates out of a warehouse at a secret location 
in South Florida and includes investigators from the FBI, 
Health and Human Services and the IRS.
    Mr. Ogrosky. [DOJ Prosecutor and Healthcare Fraud Strike 
Force Leader] There is a health care fraud industry where 
people do nothing but recruit patients, get patient lists, find 
doctors, look on the Internet, find different scams.
    There are entire groups and entire organizations of people 
that are dedicated to nothing but committing fraud, finding a 
better way to steal from Medicare.
    Mr. Kroft. Is the Medicare fraud business bigger than the 
drug business in Miami now?
    Mr. Ogrosky. I think it is way bigger.
    Mr. Kroft. What changed?
    Mr. Ogrosky. The criminals changed.
    Mr. Waterman. Sophistication.
    Mr. Ogrosky. They figured out that rather than stealing 
$100,000 or $200,000, they can steal $100 million. We have seen 
cases in the last 6, 8 months that involve a couple of guys 
that, if they weren't stealing from Medicare, might be stealing 
your car.
    Tony. You are waking up every day making $20,000, $30,000, 
$40,000, every day, almost literally, and you are like, ``Wow, 
I mean, I just won the lottery.''
    Mr. Kroft. Let's call this guy ``Tony.'' That is not his 
real name and obviously not his real face. But before he was 
ratted out by a friend and brought down by the FBI, he was 
making Wall Street money running a string of phony medical 
supply companies out of this building that were theoretically 
providing wheelchairs and other expensive equipment to Medicare 
patients.
    How much money did you steal from Medicare?
    Tony. About $20 million.
    Mr. Kroft. $20 million?
    Tony. Yes.
    Mr. Kroft. Was it easy?
    Tony. Real easy.
    Mr. Kroft. And you are not exactly a criminal mastermind.
    Tony. No. No, not really. It is more like common sense. 
That is all you need here.
    Mr. Kroft. Did you actually ever sell any medical 
equipment?
    Tony. No. No. Just have somebody in an office answering the 
phone like we are open for business, and wake up in the 
morning, check your bank account and see how much money you 
made today.
    Mr. Kroft. So you didn't have any medical equipment. You 
didn't really have any clients either, did you?
    Tony. No.
    Mr. Kroft. All of it was fake.
    Tony. All of it was fake, yes.
    Mr. Kroft. And you would just fill out some invoices and 
some forms and send them to Medicare and----
    Tony. Yeah, that is it. And 15 to 30 days you will have a 
direct deposit in your bank account. I mean, it is--it was 
ridiculous. It is more like taking candy from a baby.
    [End videotape.]
    Mr. Gohmert. Thank you, Mr. Chairman. And again, appreciate 
the opportunity to have this hearing. Appreciate your calling 
it.
    Mr. Scott. Thank you.
    The Chairman of the full Committee is with us, the 
gentleman from Michigan.
    Do you have a statement, comment?
    Mr. Conyers. Thanks, Chairman Scott, Judge Gohmert.
    Now, this is an issue that everybody of every persuasion 
can come together on. And I congratulate you for having the 
hearing. And I would like to find out where the next step from 
the ``60 Minutes'' clip goes.
    I mean, to whom did this enterprising young man send 
invoices to get the money? I mean, who sent the money to him? 
And they are the ones that ought to be sitting at the second 
panel here today to explain that, or removed from office, or at 
least discontinuing what they are doing.
    That is the back story to this hearing.
    Mr. Scott. Well, we have one inspector general from the HHS 
who might comment.
    Mr. Conyers. Well, he better make more than a comment. 
[Laughter.]
    I will tell you that. No. No, this is simple. I mean, this 
is not complex crime. It is not international drug smuggling. 
This isn't undercover operations. I mean, this is just ordinary 
household criminal law violations.
    And it is a little bit shocking it takes two Federal 
agencies at the top to combine to bust little guys like this 
who just say it is really just simple, you send in the invoices 
and then you check your bank account to see where the money 
comes from.
    I mean, I want to ask the witnesses this in advance. Could 
you suggest a simpler crime that could be committed in the 
United States than what this young fellow just told ``60 
Minutes'' and everybody in America?
    To be honest, the one thing we have got to worry about is 
how many more people did he incentivize. I mean, people that 
are sitting at home that just got laid off, or their company 
moved out of the States, or their home is in foreclosure, and 
they see this program--I mean, he doesn't need a wake-up call.
    They just told him what he might do, and that it might 
work, and that it--and it is working so successfully that we 
have two agencies at the Federal level--can I ask you why the 
Department of Justice can't get enough money from the Congress 
to bust this simple, ordinary kind of racket?
    The second question that I am going to ask is what about 
the corporate crime that goes on here. We are talking about the 
little guys--if there is an element of corporate activity in--
that we have to know about.
    So I thank you, Mr. Chairman.
    Mr. Scott. Thank you. And I thank you for your comments, 
Mr. Chairman.
    And thank you, Mr. Gohmert, for bringing that piece to our 
attention.
    Our first witness on the panel will be Mr. Greg Andres. He 
is appointed acting deputy assistant attorney general in the 
Criminal Division.
    He is joined in the division on detail from the United 
States--U.S. Attorney's Office in the Eastern District of New 
York, where he has been an assistant U.S. attorney since 1999 
and has served as chief of the Criminal Division since 2006. He 
has been involved in several high-profile prosecutions 
involving organized crime, terrorism and securities fraud 
offenses.
    Our second witness will be Mr. Timothy Menke. He is the 
Department of Health and Human Services deputy inspector 
general for investigations. He has over 20 years of Federal law 
enforcement experience and has been with the Office of 
Inspector General since 1996.
    Our third witness will be Mr. Mark Collins. He joined the 
Nebraska Attorney General's Office in September 2005 as 
director of the Nebraska Medicaid Fraud Control Unit which had 
just been created a year earlier. He also serves as the special 
assistant U.S. attorney for the District of Nebraska for health 
care fraud matters and is president of the National Association 
of Medicaid Fraud Control Units.
    And our final witness is Mr. Jim Frogue--did I pronounce 
that right?
    Mr. Frogue. Frogue.
    Mr. Scott. Frogue, thank you--Mr. Jim Frogue, who is the 
vice president and director of State policy for the Center for 
Health Transformation. He is the center's chief liaison to the 
State policy projects--the primary areas of focus--including 
Medicare, Medicaid and fraud.
    Previously, he was the director of Health and Human 
Services task force at the American Legislative Exchange 
Council, where he coordinated the development of market-
oriented health policies among State legislators.
    Now, each of our witnesses' written statements will be 
entered in the record in its entirety.
    I would ask each of our witnesses to summarize your 
testimony in 5 minutes or less. To help stay within the time, 
there is a timing device at the table which will begin green 
and go to yellow when you have 1 minute left. And when it turns 
red, that signals that your 5 minutes has expired.
    Mr. Andres.

  TESTIMONY OF GREG ANDRES, ACTING DEPUTY ASSISTANT ATTORNEY 
    GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, 
                         WASHINGTON, DC

    Mr. Andres. Thank you, Chairman Conyers, Chairman Scott, 
Ranking Member Gohmert and distinguished Members of the 
Subcommittee.
    Thank you for the invitation to be here today. Thank you 
for the opportunity to outline the Department of Justice's 
efforts to root out, prosecute and prevent health care fraud.
    Every year the Federal Government devotes billions of 
dollars to provide health care services for our citizens, young 
and old alike. Sadly, between 3 and 10 percent of that money 
may be lost to waste, fraud or abuse.
    We in the Department of Justice have a duty to protect 
against fraud and the obligation to make sure that money 
allocated for health care is not siphoned away by criminals. 
This is a responsibility that we embrace.
    And the Department of Justice has used criminal and civil 
enforcement tools to prosecute health care fraud for more than 
a decade. Today we are doing it better. Most importantly, we 
are coordinating more effectively with our partners at the 
Department of Health and Human Services.
    The Health Care Fraud Prevention and Enforcement Action 
Team, or HEAT initiative, is guiding this partnership in a 
smart, strategic and targeted way and it is producing results.
    On the criminal side, we are identifying hot spots with 
unexplained billing patterns, and we are placing Medicare Fraud 
Strike Forces in those cities to catch the most egregious 
offenders.
    We started in Miami and Los Angeles and expanded to Detroit 
and Houston. And later we expanded further, this time to 
Brooklyn, Baton Rouge and Tampa. Our strike force prosecutors 
and agents have made arrests and earned convictions in a wide 
variety of fraud schemes involving claims for services that 
were unnecessary or that were never provided.
    For example, in June of 2009 Federal prosecutors charged 53 
defendants in Detroit relating to fraudulent billing schemes 
involving physical, occupational and infusion therapy services. 
These scheme involved $50 million.
    Days later, Federal prosecutors indicted eight Miami-area 
residents in connection with a $22 million scheme to submit 
false claims to Medicare for home health services.
    And about a month after that, July of 2009, Federal 
prosecutors in Houston charged 32 defendants in schemes 
involving more than $16 million in fraudulent Medicare billing. 
Similar prosecutions have been brought in Los Angeles and 
Brooklyn alike.
    In all, since its inception, strike force prosecutors and 
agents have charged more than 500 defendants who collectively 
billed the Medicare program for more than a billion dollars.
    They have secured more than 260 guilty pleas to date, 
obtained prison sentences for 94 percent of defendants 
convicted. These efforts have a tangible result in terms of 
savings.
    In the first year after strike force operations in Miami, 
there is an estimated reduction of $1.75 billion in durable 
medical equipment claims submitted.
    The HEAT initiative also has a civil fraud enforcement 
component. Using the False Claims Act and the Anti-Kickback Act 
and Food, Drug and Cosmetic Act during fiscal year 2009, DOJ 
civil lawyers have secured $1.6 billion in civil settlements 
and judgments. They have opened 886 new civil health care fraud 
matters and filed complaints or intervened in 283 civil health 
care fraud matters.
    The Civil Division's Office of Consumer Litigation 
prosecutes drug and device manufacturers and responsible 
individuals believed to be illegally promoting and distributing 
misbranded and adulterated drugs or devices in violation of the 
Food, Drug and Cosmetic Act.
    The Civil Division also houses the Elder Justice and 
Nursing Home Initiative to coordinate and support law 
enforcement efforts to combat elder abuse, neglect and 
financial exploitation.
    Finally, the Special Litigation Section of the Civil Rights 
Division ensures that the civil rights of persons who reside in 
public, State or locally run institutions are fully protected.
    In conclusion, the Department of Justice has made the 
prosecution of health care fraud a priority. Resources are 
dedicated to these activities and the President's budget seeks 
additional funding to expand our enforcement efforts.
    We look forward to working with Congress as we continue our 
important mission to prevent, deter and prosecute health care 
fraud. Thank you.
    [The prepared statement of Mr. Andres follows:]
                   Prepared Statement of Greg Andres






















                               __________

    Mr. Scott. Thank you.
    Mr. Menke.

  TESTIMONY OF TIMOTHY J. MENKE, DEPUTY INSPECTOR GENERAL FOR 
 INVESTIGATIONS, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
                         WASHINGTON, DC

    Mr. Menke. Good morning, Chairman Conyers, Chairman Scott, 
Ranking Member Gohmert and distinguished Members of the 
Subcommittee. I am Timothy Menke. I am the deputy inspector 
general for investigations at the Department of Health and 
Human Services Office of Inspector General.
    I thank you for the opportunity to discuss OIG's health 
care antifraud strategy, primarily focusing our law enforcement 
activities to combat Medicare and Medicaid fraud.
    OIG is an independent nonpartisan agency committing to 
protecting the integrity of more than 300 programs administered 
by HHS.
    OIG employs more than 1,500 dedicated professionals, 
including a cadre of nearly 400 highly skilled criminal 
investigators trained to conduct criminal, civil and 
administrative investigations.
    Thanks to the hard work of our employees in fiscal year 
2009, OIG's enforcement efforts resulted in 670 criminal 
actions, 362 civil actions and nearly $4 billion in monetary 
recoveries.
    We work closely with the Department of Justice, our 
Federal, State and local law enforcement partners, to include 
State Medicaid Fraud Control Units with whom we are working 
over 980 joint investigations.
    OIG's partnerships extend to one of the Administration's 
signature initiatives, the Health Care Fraud Prevention and 
Enforcement Action Team, known as HEAT.
    The HEAT initiative, established by Secretary Sebelius and 
Attorney General Holder in 2009, brings together senior 
officials from both HHS and DOJ with the goals of sharing 
information, spotting fraud trends, coordinating prevention and 
enforcement strategies, and developing new fraud prevention 
tools.
    OIG contributes its experience to HEAT by analyzing data 
for patterns of fraud, conducting investigations, supporting 
Federal prosecutions, as well as making recommendations to HHS 
to remedy program vulnerabilities.
    One of the investigative strategies promulgated by HEAT is 
the Medicare Fraud Strike Force. The Medicare Fraud Strike 
Force has changed the way health care fraud cases are 
investigated and prosecuted.
    Strike force cases focus on the development and 
implementation of a technologically sophisticated and 
collaborative approach. Strike force cases are data driven, 
using technology to pinpoint fraud hot spots through the 
identification of unexplainable billing patterns as they occur.
    The majority of subjects in strike force cases are engaging 
in 100 percent fraudulent activity, not providing any 
legitimate services to program beneficiaries whatsoever.
    Real-time access to data is critical to the success of the 
HEAT strike force initiative. Over the last several months, 
representatives from OIG, CMS and DOJ have explored ways to 
improve access to CMS claims data.
    Much of our attention has been focused on obtaining real-
time data. To date, we have established limited access to real-
time claims data, but we are continuing to work to improve our 
access to this data.
    It is also important that we expand our access to CMS 
systems offering advanced analysis and query tools that can be 
employed in mining a comprehensive national Medicare claims 
database.
    In addition to using data more efficiently, OIG is also 
using data to take a more strategic approach in identifying 
fraud. In 2009, OIG organized a cross-component data analysis 
team to support work of HEAT. The data team includes OIG 
special agents, statisticians, programmers and auditors.
    Together, the team brings a wealth of experience in 
utilizing sophisticated data analysis tools combined with 
criminal intelligence gathered from special agents to more 
quickly identify ongoing fraud schemes and trends.
    OIG is also capitalizing on cutting-edge electronic 
discovery tools to maximize investigative efficiency in the 
processing and review of voluminous electronic evidence 
obtained during the course of our health care fraud 
investigations.
    This technology is Web-based and has been made available to 
OIG investigators to increase investigative efficiency and 
effectiveness. OIG was the first Federal law enforcement agency 
to implement this technology. It enables OIG to analyze large 
quantities of mail or other electronic documents more 
efficiently and to associate or link e-mails contained in 
multiple accounts based on content or metadata.
    Recently, OIG has expanded the use of this technology by 
making it available to our external law enforcement partners 
for use in joint investigations. This effort strengthens OIG's 
relationships with partner law enforcement agencies and allows 
for much greater collaboration.
    Because the technology is Web-based and can be accessed 
securely over the Internet, investigators can use this tool 
from anywhere in the country.
    By attacking fraud vigorously wherever it exists, we all 
stand to benefit. Medicare trust fund resources will be 
protected and remain available for their intended purposes.
    Medicare dollars that have gone to fraudulent suppliers 
will instead be available for legitimate businesses whose 
purpose is to serve the critical health care needs of our 
program beneficiaries.
    And most importantly, we can assure that seniors and 
persons with disabilities receive the necessary supplies and 
care they need to stay healthy so as to enjoy enhanced well-
being and quality of life.
    Thank you for the opportunity to discuss our law 
enforcement efforts and strategies to protect the integrity of 
Federal health programs.
    And, Mr. Chairman, I would just like to add I brought a 
couple of exhibits along that may assist in our discussion a 
little bit later regarding fraud schemes. Thank you.
    [The prepared statement of Mr. Menke follows:]
                 Prepared Statement of Timothy J. Menke


















                               __________

    Mr. Scott. Thank you.
    Mr. Collins.

   TESTIMONY OF D. MARK COLLINS, ASSISTANT ATTORNEY GENERAL, 
DIRECTOR OF NEBRASKA MEDICAID FRAUD CONTROL UNIT, PRESIDENT OF 
   THE NATIONAL ASSOCIATION OF MEDICAID FRAUD CONTROL UNITS, 
                          LINCOLN, NE

    Mr. Collins. Thank you, Chairman Scott, Chairman Conyers, 
Ranking Member Gohmert, Members of the Committee. I am Mark 
Collins. I am director of the Nebraska Medicaid Fraud Control 
Unit in the Nebraska Attorney General's Office and also 
president of the National Association of Medicaid Fraud Control 
Units.
    As you all know, Medicaid is financed by both Federal and 
State funds and administered by each State. And although most 
taxpayer dollars go directly toward providing essential medical 
care to the intended beneficiaries of the program, there is a 
tremendous amount of money that is lost to fraud, waste and 
abuse.
    The Medicare and Medicaid antifraud and abuse amendments 
enacted by Congress in the 1970's established the State 
Medicaid Fraud Control Unit program and provided the States 
with the incentive funding to investigate and prosecute 
Medicaid provider fraud, and also to prosecute abuse and 
neglect of patients in Medicaid-funded residential health 
facilities, and to investigate fraud in the administration of 
the Medicaid program.
    Medicaid Fraud Control Units are law enforcement agencies, 
and they are primarily responsible for monitoring each State's 
Medicaid program. MFCUs have investigated and prosecuted some 
of the largest and most sophisticated frauds ever committed 
against the program.
    And they also work to identify and implement systemic 
reform initiatives in the administration of the Medicaid 
program by advocating for legislation, exposing emerging trends 
of abusive practices, and collaborating on technological 
solutions and safeguards against fraud.
    Since the inception of the National MFCU program in 1978, 
the 50 Medicaid Fraud Control Units have obtained thousands of 
criminal convictions and recovered hundreds of millions of 
dollars in restitution.
    Perhaps even more importantly, and more important than any 
specific prosecution, these units have demonstrably deterred 
the loss of many more hundreds of millions of dollars in 
Medicaid overpayment.
    The National Association of Medicaid Fraud Control Units, 
which we call NAMFCU, was established in 1978 to provide a 
forum for nationwide sharing of information concerning the 
challenges of Medicaid fraud control.
    NAMFCU fosters interstate cooperation on law enforcement 
and Federal issues regarding MFCUs, conducts training programs 
to improve the quality of Medicaid fraud investigations and 
prosecutions, gives technical assistance to our association 
members, and provides the public with information about the 
MFCU program.
    Beginning with the first global settlement case in 1992, 
NAMFCU has effectively coordinated State-Federal investigations 
of settlements, primarily involving pharmaceutical companies.
    In the past decade, State MFCUs have seen a rapid increase 
in both the number of fraudulent schemes targeting Medicaid 
dollars and the degree of sophistication with which they are 
perpetrated.
    Typical fraud schemes included--will include billing for 
services never rendered, double billing, misrepresenting the 
nature of services provide, providing unnecessary services, 
submitting false cost reports, and paying illegal kickbacks.
    MFCUs continually adapt their investigative and 
prosecutorial techniques to curtail and to anticipate new and 
innovative methods of thievery.
    The Office of Inspector General at the U.S. Department of 
Health and Human Services provides oversight to State MFCUs. 
One important feature of the MFCU oversight program is to 
cultivate close and effective working relationships between 
State and Federal agencies to combat fraud and abuse in the 
Medicaid programs of all the various States.
    All MFCUs work closely with the Offices of the United 
States Attorney in their respective districts and with Federal 
law enforcement agencies such as the U.S. Department of 
Justice, the FBI, HHS OIG, the IRS and the Postal Service.
    MFCUs actively participate in State-Federal health care 
fraud task forces and working groups that operate in virtually 
every State in the Nation.
    The Federal False Claims Act contains qui tam provisions 
that provide the authority and financial incentive for private 
individuals or relators to enforce the act on behalf of the 
government. Qui tam relators are often called whistleblowers, 
and they are generally current or former employees of target 
entities.
    Twenty-five States currently have false claims statutes 
with qui tam provisions. An increasing number of relators are 
filing their cases with the States as well as with the Federal 
Government, and this development has fostered a significant 
increase in State-Federal investigative partnerships.
    The National Association of Medicaid Fraud Control Units 
encourages States to look beyond their individual State 
perspectives and to participate in global cases. NAMFCU 
coordinates these multistate investigations, often appointing 
NAMFCU investigative and settlement teams.
    And if settlements are reached, per NAMFCU protocol, then 
all State recoveries are allocated to each State based upon 
their actual damages. Multistate cases in which the MFCUs have 
played a role have resulted in the recovery of over $5 billion 
to the Medicaid program.
    In an historic 2009 case against Pfizer, Pfizer and its 
subsidiaries agreed to pay Medicaid and Medicare and other 
Federal programs a total of $2.3 billion to resolve civil and 
criminal allegations against kickback and illegal off-label 
marketing campaigns.
    As we have done for the past 30 years, State Medicaid Fraud 
Control Units continue to play a national leadership role in 
investigating and prosecuting health care fraud and resident 
abuse and will continue to do so in the future.
    Thank you for your time today and allowing me to testify 
and would look forward to any questions that you may have.
    [The prepared statement of Mr. Collins follows:]
                 Prepared Statement of D. Mark Collins


































                               __________

    Mr. Scott. Thank you.
    Mr. Frogue. Thank you.

TESTIMONY OF JAMES FROGUE, VICE PRESIDENT AND DIRECTOR OF STATE 
    POLICY, CENTER FOR HEALTH TRANSFORMATION, WASHINGTON, DC

    Mr. Frogue. Thank you, Chairman Scott, Chairman Conyers and 
Ranking Member Gohmert. My name is Jim Frogue. I am vice 
president of the Center for Health Transformation here in town.
    Chairman Conyers, I would like to associate something you 
said in your opening statement about who should be sitting up 
here at perhaps your next hearing. People with street-level 
knowledge of how easy it is to steal from Medicare and Medicaid 
would make for a fantastic hearing at some point down the road. 
I think you are exactly right with that point.
    President Obama said in his speech to the joint session of 
Congress on September 9th that there are hundreds of billions 
of dollars in waste and fraud in our health care system.
    Secretary Sebelius said at the National Summit on Health 
Care Fraud on January 28th, ``We believe the problem of health 
care fraud is bigger than government, law enforcement or 
private industry can handle alone.'' And she is certainly right 
about that.
    Congressman Ron Klein of South Florida, which is a hot spot 
for health care fraud, said at the same summit, ``Constituents 
come to me repeatedly with fake billings and stories of 
solicitations for their Medicare I.D. number.''
    Senator Tom Coburn said at the White House Health Summit 
last week he believes 20 percent of government health programs 
are fraud. Senator Schumer from New York a few minutes later 
associated himself with those remarks.
    The scope of health care fraud is certainly vast. A Thomson 
Reuters study in October of last year said it could be as much 
as $175 billion a year.
    The Government Accountability Office and HHS OIG have 
literally issued hundreds of reports over the years warning how 
big and how serious the problem is.
    Law enforcement--the HEAT program, for example--does an 
excellent job, but they are up against an unwinnable battle. 
They are much like the mythical character Sisyphus trying to 
push the rock up to the top of the hill, only to have it 
collapse at the last minute. Law enforcement can't do it alone.
    James Mehmet, who is the former inspector general of New 
York Medicaid, said in 2005 that he thinks 40 percent--that is 
four zero--40 percent of Medicaid claims in New York State 
might be fraudulent or at least questionable. Now, that would 
be up to $20 billion in one State's Medicaid program in 1 year.
    Keep in mind that 1 percent of Medicare spending is $5 
billion. So identification and prosecution of fraud schemes in 
the tens or even hundreds of millions of dollars are very 
significant and very worthy, but they barely scratch the 
surface of how serious the problem is.
    It should be worth nothing that the credit card industry is 
a great example of pre-screening of payments, something that 
Medicare and Medicaid don't do in any significant degree.
    They actually check and make sure the vendor is legitimate 
and the claims are legitimate before they pay the money. That 
is a huge step in the right direction for Medicare and 
Medicaid, and adopting that technology would be hugely--would 
be hugely important.
    One-tenth of credit card spending is fraud--one-tenth of 1 
percent, I should say. And for an industry that is over $2 
trillion, that is more money than Medicare and Medicaid, so 
that would be an industry to learn from.
    A few quick bullet points on what can be done to make the 
difference. For one, although this sounds a little strange, 
there is no constitutional right to be a Medicare supplier.
    There is this attitude out there that if you fill out the 
application properly you have the right to supply Medicare, 
whether your services are needed or not. And I think there 
needs to be significantly better screening.
    One very easy solution is add the term--add the phrase 
``under penalty of perjury'' to the CMS 855 form, which would 
give prosecutors a much more important tool to go after people 
for committing crimes.
    Medicare and Medicaid should use private-sector standards 
for establishing how many suppliers should be in a defined 
area. California Medicaid has done this for almost a decade now 
and it has worked very well.
    Reduce the administrative red tape and lengthy appeals 
process that suppliers get to exploit. Often supplies can drag 
out for months their appeals process when they are trying to 
get kicked out of the program.
    The OIG identified 15--they did 1,500 unannounced site 
visits back in 2008, found 491 either didn't have an actual 
facility or were not staffed accordingly, so they revoked 
billing privileges of 491.
    Two hundred and forty-three of them appealed. Two hundred 
and twenty-two, or 91 percent, were reinstated. And 111 of 
those had their billing privileges revoked again.
    Authorize demonstration projects whereby authentication of 
new suppliers to Medicare fee-for-service is outsourced by and 
to an entity not CMS. Perhaps OPM would be a good place to try 
that.
    Data-sharing across departmental jurisdictions, which has 
been successful with the HEAT program, should be done with the 
vigor that it has been done with the national security agencies 
post-9/11.
    Another one is open up Medicare claims data to audits 
conducted by contingency-fee-based companies beyond the 
standard four recovery audit collection companies. I think that 
would bring a new set of eyes, a new set of techniques and some 
fresh ideas to that particular--those series of investigations.
    Create a Web site where payments to all Medicare suppliers 
are posted for public access. We all have a right to know, as 
taxpayers, where these dollars are going. If you are billing 
Medicare, what you bill Medicare should be available to anyone 
to see as soon as possible.
    Perhaps more radical is consider a way to post claims 
before they are even paid. In the spirit of President Obama's 
idea that all legislation should be posted for 72 hours before 
it is voted on, taxpayers should have a right to see what kind 
of claims are being paid before they are actually paid.
    This need not interfere with Medicare's prompt payment 
promise already for providers, but it would be an interesting 
way to take a look at some of the money being sent out.
    And hold hearings about the governance of CMS and its 
ability to be truly effective in fighting fraud and abuse. And 
I think Chairqman Conyers' opening statement made a lot of 
sense.
    And it would be my privilege, Mr. Chairman, to work with 
you and your staff to help identify some people who could 
testify that would give you stories that would be quite 
shocking.
    With that, thank you very much. I look forward to your 
questions.
    [The prepared statement of Mr. Frogue follows:]
                   Prepared Statement of James Frogue

















                               __________
    Mr. Scott. Thank you. Thank you very much.
    And I thank all of our witnesses for their testimony. We 
will now ask questions under the 5-minute rule. And I would 
like to start with Mr. Frogue.
    Is there a difference in the public and private sector in 
terms of processes to prevent fraud? I mean, is Medicaid and 
Medicare getting ripped off any more than private insurance 
companies?
    Mr. Frogue. Yes, they are, and I think when you look at 
Medicare and Medicaid specifically, I think a really important 
distinction is the fact that un-managed fee-for-service, 
particularly in Medicare and Medicaid, is much, much worse than 
it is where there is some sort of managed care involved.
    Secretary Sebelius sent a letter to Senator Cornyn just 
last week where they identified that the fraud in managed care 
was far, far less than it is where you have un-managed fee-for-
service. I mean, it is several times higher.
    But the answer to your question is absolutely yes. Where 
the right incentives are in place, fraud is a lot less.
    Mr. Scott. Mr. Menke, one of the problems that--one of the 
concerns that I have had addressed to me is that when you start 
going after Medicaid fraud, there is a difference between fraud 
and honest mistakes.
    In the inner city where the doctors have an error rate just 
the same as everybody else but their population is much more 
likely to be Medicaid, they get targeted for audits. And if you 
audit enough, you are going to find something. Many of these 
are minority physicians, and it has an unfortunate pattern to 
it.
    Can we be satisfied that when you target looking for 
Medicaid and Medicare fraud that you are not targeting--
essentially targeting minority physicians?
    Mr. Menke. Well, we have a body of work with our office of 
audit that takes a look at error rates across the board. And to 
my knowledge, they don't focus in on any particular group or 
group of physicians----
    Mr. Scott. And you don't look at volume?
    Mr. Menke. Yes, we look at volume.
    Mr. Scott. So that would end up disproportionately 
affecting people that practice in the inner cities.
    Mr. Menke. That could happen, yes.
    Mr. Scott. Well, that is not fair.
    Mr. Menke. Congressman, we have our Office of Audit 
Services, and I am--I have to admit that I am from the 
investigation side, not the audit side, and we would be happy 
to get you any information from our Office of Audit Services 
regarding error rates.
    Mr. Scott. And following through on that, we have--I have 
heard from this panel that unnecessary--medically unnecessary 
services being performed are performed for the purposes, 
effectively, of defrauding insurance companies.
    Mr. Menke. Yes.
    Mr. Scott. We have been told that those unnecessary 
services are there for some kind of defensive medicine or 
something like that. Can you comment on that? Is most of this 
just insurance fraud when people say that unnecessary services 
are being provided?
    Mr. Menke. Well, Mr. Chairman, I can give you an example. 
One is regarding wheelchairs. A prescription will be written 
for a power wheelchair for a person who has no need, medically 
unnecessary. And sometimes the wheelchair is delivered. 
Sometimes a substandard scooter is delivered instead.
    And the bottom line is the beneficiary doesn't need it 
because it is medically unnecessary, will never use it, and it 
basically sits in their apartment with clothes hanging over it 
until our agents show up and they basically say, ``You can take 
it.''
    Mr. Scott. And limiting attorneys' fees or capping damages 
on liability suits wouldn't affect the frequency of that kind 
of fraud.
    Mr. Menke. I wouldn't have expertise in that area, sir.
    Mr. Scott. Now, the cost of audits--I mean, it costs money 
to audit and do these investigations. Do you think you save 
more money than you spend on audits by saving money and 
reducing fraud and billing problems?
    Mr. Menke. Well, Mr. Chairman, I can refer to my specific 
budget in the Office of Investigations. I have a $92 million 
budget, and last year we recovered $4 billion in recoveries, so 
our return on investment is pretty high.
    Mr. Scott. Now, by recovering this, it seems that you don't 
need any new laws, no new criminal statutes. You just need 
new--more resources for investigations?
    Mr. Menke. That is a fair characterization, sir.
    Mr. Scott. We have heard practices where people go out and 
try to recruit and get people identification numbers that they 
can fraudulently bill. Is there any reward system for people to 
snitch on people who have made those kinds of contacts?
    Mr. Andres. Chairman, there is certainly instances where if 
someone comes forward with respect to information that is used 
for a prosecution there are different--there are certainly 
different rewards within the criminal justice system for people 
that come forward, whether it be judicial consideration at the 
time of sentencing or it be some sort of agreement with the 
prosecuting U.S. Attorney's Office for working proactively, for 
wearing a wire, for helping us uncover a greater degree of 
fraud or unveiling the other co-conspirators involved.
    Mr. Scott. I mean, with the widespread fraud, it looks like 
encouraging people to come forward would certainly have an 
effect.
    Let me just ask a general question to whoever wants to 
answer it. What are we doing now that we weren't doing before 
the ``60 Minutes'' report? Are we doing anything different now 
than when the ``60 Minutes'' report was describing widespread 
fraud where people are making tens of thousands of dollars a 
day without much resistance? Are we doing something different?
    Mr. Menke. Well, Mr. Chairman, if I could answer that, we 
are doing some things, and basically we are working with the 
Centers for Medicare and Medicaid Services to improve upon 
real-time access for law enforcement. That has improved. We 
have a long way to go in that area.
    In the bottom line, the importance of the real-time data 
access is to get the information pre-payment rather than post-
payment, which puts us--post-payment puts us behind the crooks. 
They have already been paid. That is the pay and chase method.
    What we are trying to do is get ahead of the curve. Within 
48 hours after it is submitted to the Medicare administrative 
contractor, they have about 15 to 30 days, by law, to pay the 
claim.
    And we are trying to get in 48 hours after that claim is 
submitted to flag any type of questionable provider numbers or 
beneficiary numbers, to throw red flags up, to hold payment 
before the money goes out the door. That has improved since the 
``60 Minutes'' piece.
    Mr. Scott. If you have made a payment, why can't you chase 
after it? You have got a money trail all the way to whoever is 
getting the money.
    Mr. Menke. We do that.
    Mr. Scott. I mean, just because you have paid the money 
doesn't mean--is there a problem--once you have paid the money, 
you can't track down people who have cheated you out of some 
money?
    Mr. Menke. Absolutely not. And we are the best at doing 
that. We are chasing them very well. But it is still a pay and 
chase. And what is important, I think, is prevention on the 
front side because, as Mr. Frogue had mentioned, law 
enforcement catching up after the fact is a daunting task.
    And if we can put preventative measures in on the front 
side, pre-payment, it can really make a difference in the 
amount of money going out the door.
    Mr. Scott. Okay. Now, do you have enough in resources to do 
what you need to do to reduce fraud? Or have you asked for 
money that Congress has not provided?
    Mr. Menke. This afternoon at 2 o'clock my boss, the 
inspector general, will be testifying with the deputy secretary 
on resource needs. There is a request for additional resources 
to expand strike force locations to a total of 20 cities.
    What I can tell you is last year in fiscal year 2009 we 
referred over 1,400 cases elsewhere because I didn't have the 
resources or the bodies to work them. And that amount of case 
work could have resulted in an additional billion dollars in 
recoveries.
    Mr. Scott. And so it is your testimony that if we give you 
more resources you will be able to save us much more money in--
through fraud reduction than we spend in the resources for your 
office.
    Mr. Menke. I would have to defer to my boss and chain of 
command--the inspector general, the secretary and the 
President's budget.
    Mr. Scott. But I mean, I think you have suggested that it 
is not even close. We will save a lot more money.
    Mr. Menke. We have a very good return on investment, sir.
    Mr. Scott. Mr. Gohmert?
    Mr. Gohmert. Chairman, if I could, Judge Poe has got to go 
to another hearing. With the votes, could I allow him to----
    Mr. Scott. Judge Poe?
    Mr. Gohmert [continuing]. Go in my place right now?
    Mr. Poe. Appreciate my friend the Ranking Member for 
yielding time.
    Thank you for being here.
    As Mr. Gohmert has mentioned, I used to be a judge in my 
other life, tried felons for 22 years, saw about 25,000 outlaws 
work their way to the courthouse, or the ``Palace of Perjury,'' 
as I refer to it.
    These are just among the worst. And people who steal from 
people who are sick or people who won't get medical attention 
are the worst of the lot. And I don't care whether it is a 
doctor, a nurse, an insurance company or another recipient of 
Federal aid, either Medicare or Medicaid.
    How many recipients illegally have received Medicare and 
have gone to jail for that, Mr. Menke?
    Mr. Menke. Well, I would actually have to defer to 
Department of Justice on the prosecution stats.
    Mr. Andres. I believe in my written testimony I speak about 
that, but there have been more than 500 individuals that have 
been convicted for these schemes. And certainly, there are a 
number of schemes that involve the beneficiaries themselves.
    Mr. Poe. Excuse me, because my time is limited. How many 
recipients who have claimed they want--they need Medicare--a 
patient, citizen--and they are lying, they are stealing from 
the system--how many people went to jail, like, last year?
    Give me a statistic that I can--because we got millions of 
people on the system. How many are going to jail for stealing 
from it?
    Mr. Andres. I can get back to you with a specific number. I 
know 94 percent of the defendants who are being tried are now 
receiving jail terms.
    Mr. Poe. Are you talking about the recipients? I am not 
talking about the providers. I am talking about the person who 
gets it.
    Mr. Andres. Again, I can get back to you, Congressman, with 
the specific numbers about that.
    Mr. Poe. Okay. I would appreciate that.
    Mr. Frogue, you mentioned some good ideas on how we could 
make the system better. Two things. What do you think about--
rather than--that we deal with some of these violations with an 
administrative process more than running them through the 
criminal justice system, that we restructure Medicare, 
Medicaid--that if you are going to come in the system, there 
are administrative penalties that will be administered to you?
    That would make it, it seems to me, a lot quicker, more 
effective. You are kicked off the list. Whatever. What do you 
think about that?
    Mr. Frogue. Well, getting in the system is exactly--that is 
the biggest problem. It is too easy to get in the system. And 
that is why it is important for someone other than CMS--maybe a 
credit card company, or a financial institution or insurance 
company; it could be anyone--to do some demonstration projects 
on authenticating some of these new suppliers, because once you 
are in the system, you can bill and bill and bill, and law 
enforcement will catch up with a couple of them, but the vast 
majority go undetected.
    But I think you are exactly making the right point. But I 
think the real key--and I think everyone on this panel has 
mentioned this--is it has got to be switched from a system--
Medicare and Medicaid--from reactive to proactive, where the 
payments are screened before they go out the door.
    Trying to capture them after they leave is--the horse is 
already out of the barn. You might be able to get some of it 
back, but you are not going to get all of it. The credit card 
industry does this extremely well, and we all know this.
    If we went to Fargo, North Dakota tomorrow and tried to buy 
a plasma screen TV, they would ask you for your I.D. It is not 
a real burden on you, but it--they check, and within seconds, 
if this is a legitimate purchase. There is none of that in 
Medicare fee-for-service.
    Mr. Poe. Well, I guess my real question is assuming there 
are violations in the system--somebody cheats--do you think 
that we could restructure Medicare and Medicaid to make the 
penalties--not all of them, but some of the penalties 
administrative, where you are cut off a list, you are not 
allowed to reapply for a period of time?
    I mean, not neglect due process, but readapt the whole 
model of Medicare and Medicaid to have administrative penalties 
where possible.
    Mr. Frogue. Yes, I think that is a fantastic idea, and I 
think there needs to be much better data-sharing between the 
agencies and the Federal, State and local in order to flag 
people.
    You know, it is like if a local police officer in Oregon 
pulls someone over for a speeding violation, they know if they 
have a criminal conviction in Virginia. There is not enough of 
that in the health care space. There needs to be a lot more.
    Mr. Poe. Well, I have never heard of anybody with a 
criminal record of Medicare fraud coming through the courthouse 
charged with something else. But there are those thieves out 
there.
    $60 billion is a lot of money of fraud. And I think if we 
had people, whether they are a hospital administrator, or an 
accountant, or a doctor or a nurse, or a citizen who applies 
for Medicare or Medicaid, carted off to jail in handcuffs, that 
might get the attention--because now it is just a cost of doing 
business.
    Last question, organized crime, how predominant is that in 
this whole system?
    Mr. Menke. Yes, sir. Organized crime is a problem. We are 
starting to see an increase in the infiltration because of the 
ease of getting into it. Why sell drugs and risk getting shot 
when you can click a mouse when you are an organized criminal?
    And we have seen different groups with similar schemes, but 
different groups, across the country. It is becoming more and 
more viral. And unfortunately, our agents are seeing--we are 
coming across more and more guns at every single search and 
arrest warrant. So they are bringing the tricks of the trade 
with them into health care fraud.
    We investigate health care fraud, and lo and behold, we 
come across organized crime. We don't do it the other way 
around.
    Mr. Poe. Thank you very much.
    Appreciate the gentleman for yielding.
    Mr. Scott. Thank you. We have just a minute and a half 
before the--run out of time on the floor. But the gentleman 
from Michigan wanted to ask a brief question. And then we will 
come back after the votes.
    Mr. Conyers. And I will try to come back, too, Mr. 
Chairman. Thank you.
    How many of you here know about or have been in touch with 
the Center for Health Transformation, between the Department of 
Justice and HHS? Have you ever heard of them?
    Mr. Menke. No.
    Mr. Conyers. You?
    Mr. Andres. No, sir.
    Mr. Conyers. How come we haven't talked about corporate 
crime here? We talked about individuals. Corporate crime sounds 
more serious and more criminal to me than individual hustlers.
    Mr. Collins. Mr. Chairman, I did mention in my remarks 
the--what had happened with Pfizer as far as the illegal 
marketing that they had engaged in. And that was pursued both 
civilly and criminally.
    Pfizer paid about a billion dollars in civil penalties and 
then----
    Mr. Conyers. A billion?
    Mr. Collins. Billion. And then $1.3 billion was paid by 
two--Pfizer----
    Mr. Conyers. What did they do?
    Mr. Collins [continuing]. Subsidiaries. They were engaged 
in illegal--what we call off-label marketing, where they were 
marketing drugs for a purpose that had not been approved by the 
Food and Drug Administration. And there was a criminal 
component to that case as well. Pharmacia and Upjohn, which 
are----
    Mr. Conyers. Okay.
    Mr. Collins.--Pfizer subsidiaries----
    Mr. Conyers. What other corporate crime investigations have 
you checked into?
    Mr. Andres. Mr. Chairman, the Pfizer case that was 
referenced is one that was handled by the Department of Justice 
both on the civil and criminal fronts. There are other cases as 
well.
    Mr. Conyers. Like what?
    Mr. Andres. Well, sir, I can provide the specifics--I think 
there are specifics in my written testimony, but I am happy to 
get back to the Committee with----
    Mr. Conyers. Well, what about the names? Name me some nice 
famous pharmaceutical names.
    Mr. Collins. Eli Lilly.
    Mr. Conyers. Right.
    Mr. Collins. Merck.
    Mr. Conyers. Merck?
    Mr. Collins. Yes.
    Mr. Conyers. Okay.
    Mr. Collins. And Ely Lilly are a couple more examples.
    Mr. Conyers. All right. More.
    Mr. Andres. There is a medical device manufacturer, Norian 
Corp, that was prosecuted in the Eastern District of 
Pennsylvania. That involved individuals who pled guilty to 
misdemeanor offenses as responsible corporate officers in July, 
and they are awaiting sentence.
    There is also the Serono Laboratories, a subsidiary of a 
Swiss drug manufacturer.
    Purdue Pharma was a case that was handled in the Western 
District of Virginia. And there are others.
    Mr. Conyers. Mr. Collins, did that cover what you had in 
mind?
    Mr. Collins. It is. I think if you would look at it, Mr. 
Chairman, most of the pharmaceutical companies in some way or 
another have, at one point or another, run afoul either of the 
criminal law or, more likely, of the Federal False Claims Act 
and been prosecuted civilly for those types of violations.
    Mr. Conyers. Please keep our Committee Chair and this 
Committee advised of these.
    Now, last, why do I keep seeing ads on television that say 
you can get a power wheelchair or scooter free and it will be 
paid for by the government?
    Mr. Menke. I believe you are talking about The SCOOTER 
Store, and we had a case and entered into a settlement with 
that particular----
    Mr. Conyers. They are still----
    Mr. Menke [continuing]. Company.
    Mr. Conyers [continuing]. Advertising.
    Mr. Menke. Yes, they are, sir.
    Mr. Conyers. Why?
    Mr. Scott. The time on the floor has expired some time ago, 
so there--I think we need to recess at this time, and we will 
come back right after the votes, so it will be about 15 
minutes.
    [Recess.]
    Mr. Pierluisi. [Presiding.] So the Subcommittee is back and 
in order, and we will continue with the hearing.
    Chairman Conyers was asking the panelists some questions 
before we went on our recess, so now it is your turn, Judge 
Gohmert.
    Mr. Gohmert. Thank you so much.
    And again, thanks for being here and particularly for your 
patience. I know the money we pay witnesses is not that good.
    People at home or whoever may not know that you don't get 
paid anything, so we know it is a sacrifice to be here and 
especially put up with questions from us. But we appreciate 
that.
    Let me start with my right, Mr. Frogue. And from a personal 
standpoint, I really appreciate all the insights that you had 
given me as I put together a bill and filed for health care 
reform.
    And I even appreciate the President last week and this week 
acknowledging that we have some Republican bills out there.
    But it was very clear to me from working with you in trying 
to craft effective health care options that you know your 
stuff, and you have seen and studied where the fraud is, what 
can be done about it, how it could be corrected.
    Let me go to the issue of the Center for Medicare and 
Medicaid Services. It appeared or it occurs to me from things 
that you have said here today and previously that that may be 
the weakest link in the process for detecting and preventing 
fraud. So would you elaborate on that, if that is, indeed, your 
feeling?
    Mr. Frogue. Sure, Congressman. Thank you for the nice 
compliment and the question.
    As I mentioned in one of my bullet points, I think it would 
be a very valuable experiment at the very least to outsource 
the authentication of new Medicare suppliers to someone other 
than CMS, because the weakest point is how easy it is to become 
a supplier.
    And as I said, there is no constitutional right to become a 
Medicare supplier, but that is how most people treat it. You 
fill out the application, you get to be a supplier, and you get 
to start billing away.
    And if you said, you know, Miami-Dade County, or Houston or 
Dallas, or Los Angeles or anywhere else--if you just said in 
this particular county, we are going to say, ``All right, 
someone other than CMS is both going to run a bidding process 
and win the contract,'' there is no way they could do worse.
    There is no way they could do worse, to see why it is that 
we have, as I said in my opening, 897 home health agencies in 
South Florida when there is fewer than that in the entire State 
of California. I mean, that kind of stuff is just crazy, and it 
happens all the time.
    The number of HIV infusion therapy centers in South Florida 
was just way disproportionate to the rest of the country. And 
these kind of things just aren't detected very often until 
well, well after the fact.
    Mr. Gohmert. Well, and you bring up infusion therapy.
    Mr. Menke, my understanding was that infusion therapy is 
not that widely used anymore, but from the information seen 
historically it has been a significant item for which Medicare 
still gets billed.
    Can you comment on that and how you deal with--how we 
should go about dealing with treatments that possibly should 
not be very frequently paid for?
    Mr. Menke. Thank you, Congressman. We have seen a reduction 
in the Medicare billing, in Part B billing, for HIV infusion in 
Miami. But these crimes are viral. We address it in Miami, and 
then all of a sudden HIV infusion starts increasing in Detroit.
    One other disturbing thing that we have seen recently is 
that beneficiaries that were getting HIV infusion which were 
not getting any infusion at all--it was outright fraud--are 
being de-enrolled from the Part B side, slid over to the Part C 
side in managed care, and the same scheme is going on.
    What I could suggest is the private sector has an 
opportunity to work with CMS in order to put appropriate 
technology so that edits can go across the board, from Part A 
right through Part D, instead of targeting one particular part 
of Medicare, and then only for high-volume fraud areas, because 
we shouldn't punish the people in Wyoming for delayed payments 
just because there is a hot spot--and I am just picking States 
out here--because there is a hot spot in Houston or Los Angeles 
or Miami.
    Mr. Gohmert. Well, and Mr. Collins, the shifting that Mr. 
Menke is talking about is something I understood you had seen. 
How do we deal with entities who are caught moving from one 
place to another, setting up shop? What is the best way, in 
your opinion, to deal with that?
    Mr. Collins. It can be kind of catch as catch can, 
especially if you have----
    Mr. Gohmert. But we got to get beyond that.
    Mr. Collins. That is true, and especially--it can be 
especially problematic in towns that straddle a State line, for 
example--Omaha, Nebraska, Council Bluffs, Iowa--something like 
that, where you have got a provider who might be excluded on 
one side in Iowa, and we might not know of an exclusion on the 
other. Now there is a national exclusion database that takes 
care of those issues.
    But as far as being involved in fraud on the civil side, 
which is handled as a civil matter, it is difficult to track 
those, except that--unless there is something put into the 
provider agreement when they first enroll in the State Medicaid 
program so that they can be screened and so that you can check 
to see what had happened in other States where they had 
operated.
    But what you have to understand is, especially if these are 
operating as corporations or as shells--you know, you can call 
it ABC Corporation in one place, and 123 Corporation in 
another, and it is run by the same folks who run the same scam, 
and it can be difficult to catch that way if they have just 
been pursued civilly.
    So it provides--excuse me--a really difficult situation 
when they move from State to State.
    Now, our national association keeps track of these things. 
When we see a trend where a certain company or a certain group 
of individuals has been engaging in improper conduct, that is 
something that we can kind of send out amongst all the Medicaid 
fraud directors in 50 States.
    But that is a more informal process. For example, we have 
had a situation where we had a provider in Colorado who the 
Colorado MFCU had basically run out of town, and it was thought 
that they would be headed to Nebraska. And when that was about 
to occur, the Colorado MFCU called us and said, ``Be on the 
lookout.''
    And so just like any State law enforcement agency or local 
law enforcement agency does, you cooperate that way and try and 
share information.
    Mr. Gohmert. Well, it seems like that has been a 
shortcoming when it comes to Medicare fraud. There hasn't been 
as much sharing.
    And I appreciate the indulgence of the Chair. My time has 
expired. But let me just remind the witnesses that they--there 
is so little time in this hearing. You have so much knowledge 
and information.
    And as the Chair pointed out earlier, this is really a 
bipartisan effort, and we want to get to the bottom in dealing 
with this widespread fraud. So any thoughts you have that you 
haven't been able to get out, that is not in your written 
testimony, things that you think of, ``You know what? Congress 
ought to do this. They ought to do that. You know, this might 
be able to stop this.'' Please get that to us.
    Don't think when the hearing is over we don't want to hear 
from you anymore. We need to hear from you. Thank you.
    Thank you, Chair.
    Mr. Pierluisi. Thank you.
    I will ask some questions myself. Actually, I have to say 
that the timeliness of this hearing is--it couldn't be better.
    At a time when we are all trying to improve the health care 
system in America, we should be looking at existing programs 
and making sure that there is no abuse, there is no waste, no 
fraud. And that is precisely what you all are doing. And I 
commend you for that and for appearing here before us.
    I want to ask a couple of questions about the statistics. I 
saw that Chairman Scott gave an estimate of about $60 billion 
being lost to fraud in both the public and private health 
sector.
    And then I believe Mr. Frogue mentioned--or used the figure 
of $70 billion at some point. I might get that wrong. Could you 
help me in understanding the size of this problem?
    I know that we are talking about estimates. But still, what 
is the size, maybe splitting it between or among Medicaid, 
Medicare and the private health plans?
    Mr. Frogue. Sure, Congressman. It is a great question, and 
the scope of it is bigger than most people can get their head 
around. Like I said in my opening, the Thompson Reuters study 
said up to $175 billion is just flat-out fraud, across the 
system.
    ``60 Minutes'' had asserted $60 billion a year just in 
Medicare fraud.
    And New York Medicaid--if 40 percent of all claims are 
questionable, that is $20 billion a year in one State's 
Medicaid program that might be going to places where it 
shouldn't go.
    But the biggest problem is that nobody actually knows, 
because the data collection is so non-transparent. I think that 
is the biggest issue.
    And I will let the other witnesses speak from their points 
of view, but all the data is out there but just not shared with 
the right agencies. It is just not shared with the general 
public.
    And it is shared with academics in some regard, like the 
Dartmouth Health Atlas and a bunch of others, so it can be 
shared in a way that protects patient privacy, which is very, 
very, very important.
    But the data is siloed between Medicare Part A and Part B 
and Part D, between Medicare and Medicaid. You can't get full 
pictures. And the fact that--I mean, this is actually stuff 
that really shouldn't cost very much, if anything at all, to 
solve.
    Just let CMS--force them to share data better so that you 
are not paying people that bill, you know, 500 wheelchairs in 
an area where there is not even 500 people who need 
wheelchairs.
    Mr. Pierluisi. Yes? Mr. Menke, yes.
    Mr. Menke. Thank you. Looking at some of the midrange 
estimates out there--and I know the $60 billion figure came 
from the National Health Care Anti-Fraud Association.
    If we take that midrange number and we take a look at 
Hurricane Katrina, we have had three Hurricane Katrinas in 
health care fraud in the past 5 years, looking at the payouts, 
if that puts it into perspective.
    And I know the numbers are all over the place. I think what 
I have seen personally, if you want to cut to the chase here, 
the biggest impact I have seen recently is cabinet-level 
attention to the fraud effort that has really brought CMS 
around to start focusing in on antifraud efforts and program 
integrity more than they have done so in the past.
    They are paid to cut checks. And if I am a legitimate 
provider, I would like to be paid on time, between 15 and 30 
days. What I have seen with Secretary Sebelius and Attorney 
General Holder making this a cabinet-level priority, we have 
seen people basically fall into line and change their attitude 
about how they look at fraud.
    I have seen much more cooperation from CMS in the past 9 
months than in all the previous time I have dealt with CMS. 
That is making a difference.
    Mr. Andres. If I----
    Mr. Pierluisi. That is good to hear.
    Mr. Andres. If I could just follow up on that because we 
are seeing that many of the fraud schemes are, in fact, viral: 
they moved from an area in Miami to an area in Detroit when 
enforcement in Miami was ramped up. This is one of the reasons 
why it is important that we continue the strike force model and 
why we have asked for additional money so that we can increase 
the number of strike forces up to 20, so that when a group of 
fraudsters moves from one area of the country to another and 
are, in effect, perpetrating the exact same fraud scheme--
whether it is the HIV infusion, or it is the DMEs--we are ahead 
of the game. We have learned that is an issue, that is an area 
that is going to be exploited within the system, and we need be 
prepared to move forward with prosecution.
    Mr. Pierluisi. Yes. On the enforcement side of this, I am 
intrigued about--how are you picking these new 20 cities in 
which you will have this strike force working?
    Mr. Menke. We have put together a data analysis team, and 
they take a look at trends nationwide. They do mapping on--we 
see spikes in some areas of the country where it is 2,000 
percent above the national average. We call that a clue.
    And what we start doing then is narrowing down the region, 
the city and even a zip code, and we do mapping, and we work 
with our partners at the Department of Justice who are also 
involved in this process, as well as analysts from Centers for 
Medicare and Medicaid Services.
    And we can narrow down hot spots not only regionally but 
also in particular billing areas. And that helps us in our 
conversations in the HEAT operations subcommittee on 
identifying future cities to put strike forces in.
    Mr. Pierluisi. And on the prevention side, Mr. Frogue came 
up with a good list of ideas, initiatives. I particularly like 
the pre-screening of claims and adding the ``under penalty of 
perjury'' to a lot of this paperwork that is submitted by the 
suppliers.
    I wonder, though, whether any of you, the other three 
panelists, can add to that conversation--prevention side. What 
can we do better prevention-wise?
    Mr. Menke. Thank you, Congressman. Vetting on the front end 
is absolutely essential for prevention to keep the crooks out 
from getting in.
    Even though it doesn't specifically address perjury, I have 
got an enrollment claim form here that I would be happy to 
provide to the Subcommittee. In section 14, it doesn't address 
perjury, but it has multiple different areas where the person, 
if they are committing false statements on the form, is subject 
to criminal penalty.
    But prevention is absolutely key, in vetting with CMS' 
implementing surety bonds as well as accreditation processes on 
the front end to keep the crooks out.
    We have two different types of patterns here. We have the 
outright 100 percent fraud. Crooks come into health care 
because it is easy. And then we have legitimate providers who 
cross over the line and put their hand in the cookie jar type 
of a deal. Those are the two different types that we are 
seeing.
    We need to keep the outright crooks out from the beginning, 
and that is--that is what the strike force is addressing.
    Mr. Pierluisi. Well, I have exceeded my time, and I am 
afraid Judge Gohmert will start overruling me. So I will let 
you take over, Judge--or, I am sorry, Mr. Goodlatte, if you 
would like to question the witnesses, you are welcome.
    Mr. Goodlatte. Well, thank you, Mr. Chairman.
    Mr. Menke, I would like to follow up with your conversation 
with Chairman Scott about the wheelchairs and the scooters. Can 
you tell me some more about that?
    Are you actively investigating fraud? Are you taking any 
measures? Have you recommended to CMS that they take any 
measures to tighten up their screening process for who gets 
those?
    Mr. Menke. Yes, Congressman, we have. We entered into a 
civil settlement with The SCOOTER Store specifically regarding 
the scooters and wheelchairs.
    Mr. Goodlatte. Is The SCOOTER Store a manufacturer or do 
they sell a variety of products manufactured by other entities?
    Mr. Menke. I am not sure. We can get back to you on that, 
sir.
    Mr. Goodlatte. All right.
    Mr. Menke. The SCOOTER Store did enter into a corporate 
integrity agreement for establishing a compliance monitoring 
within as well as training, and our Office of Counsel at the 
Office of Inspector General worked on that corporate integrity 
agreement.
    The commercials continue. And I think sophistication with 
language and how they say certain things in the commercials--
sometimes you can dance around corporate integrity agreements 
and still be in compliance. So we are monitoring the situation 
very closely.
    Mr. Goodlatte. And how do they get people who are not 
eligible medically for these devices to get them? Don't they 
have to have the cooperation of some physicians, or----
    Mr. Menke. Yes, sir. We see a combination, either forged 
prescriptions through identity theft, where someone purports to 
be a physician, or they pay a physician kickbacks in order to 
write prescriptions for medically unnecessary equipment such as 
a power wheelchair.
    A power wheelchair runs around $5,000. The scooter runs 
around $1,900. But the power wheelchair is almost like a car. 
You can get a stripped-down version of it, and then they add 
all the extras, the balancing equipment, inflatable chair--
inflatable seat, all kinds of extra things that they can bill 
on top of the basic model.
    And their profit margin--if they do deliver something, 
their profit margin, even if they deliver the power wheelchair, 
sometimes $2,500. Some areas----
    Mr. Goodlatte. Do you get involved in that aspect of it at 
all, the pricing of it, or is that strictly something made by 
regulators at CMS, the decisions about what is Medicare going 
to pay for these devices?
    Mr. Menke. Those are decisions made by CMS.
    Mr. Goodlatte. All right. And what about the repairs? I had 
a constituent dealing with the Hoveround Corporation who was 
charged $2,114 for repairs, which were mostly related to, like, 
replacing an arm and fixing the seat. It wasn't even the 
mechanical aspects of it.
    And the breakdown of these charges were astonishing--
several hundred dollars to replace the arm or fix the--one of 
the arms on the chair, almost half the price of the device, 
based upon what you just told me.
    And we are getting kind of vague responses from CMS on 
that. Have you looked into that area at all, what the companies 
are charging? Some of these people have had these chairs for a 
long time now. Obviously, they are going to wear. They are 
going to need repairs.
    But in this instance, $2,114 was charged. Medicare approved 
$1,553 of that and paid $1,227. My constituent was billed $306 
of that.
    And we have written letters--Congressman Camp, who is the 
Ranking Member of the Ways and Means Committee, has written 
letters--and not gotten really any definitive response on 
anybody looking into whether these repair items are not a scam 
in themselves.
    Mr. Menke. I am not familiar with the repair angle. We may 
have ongoing cases in that area. We have about 5,000 open cases 
a year. But once again, I would suggest to the American public, 
if it doesn't pass the smell test, let us know about it.
    Mr. Goodlatte. Yes.
    Mr. Menke. There is common sense involved with this.
    Mr. Goodlatte. We will let you know, but I think we are 
writing to CMS. But I will send you this information as well. 
If you could look into it, and if you would let the Committee 
know not about this specific case, but about what your 
experience is in general, I would appreciate it.
    And then, Mr. Chairman, with a little forbearance, if I 
might ask each of the other panelists if they have any 
experience with this issue of fraud either in the purchase, in 
the approval process, or in the repair of these devices.
    Mr. Andres?
    Mr. Andres. Sadly, we are more often dealing with the 
people that are given wheelchairs that have no medical 
necessity for them, so most of the fraud schemes either involve 
cases where the beneficiaries and the doctors are themselves 
complicit in the fraud and the devices are simply not medically 
necessary, or the instances where there is identity fraud, 
where individuals' and doctors' information is being stolen for 
a different scam.
    And obviously, in those cases as well, the services are 
never rendered.
    Mr. Goodlatte. And you are prosecuting people for that type 
of fraud?
    Mr. Andres. Absolutely.
    Mr. Goodlatte. Is a physician getting a kickback? Is that 
the----
    Mr. Andres. That is correct. Those individuals, the 
physicians, the nurses, are being prosecuted for those crimes.
    Mr. Goodlatte. And when you answer your questions to 
Congressman Poe, who asked you earlier about those who had 
receive jail time, would you let us know if there are any who 
have actually been imprisoned for fraud related to these power 
devices?
    Mr. Andres. To the repair or to the----
    Mr. Goodlatte. Either one.
    Mr. Andres. Okay.
    Mr. Goodlatte. I am as interested in the sale as in the 
repair, but I just wondered whether there was anything being 
done about these repair charges.
    Mr. Andres. Certainly.
    Mr. Goodlatte. Mr. Collins? Mr. Frogue?
    Mr. Collins. I do know that in the District of Nebraska 
that one of the scooter stores was the subject of a criminal 
prosecution federally in the last couple of years.
    Due to, you know, the rural nature of our State, that is 
the only case that I am aware of that we have had to deal with 
the scooter issue.
    Mr. Frogue. Congressman Goodlatte, I would just make two 
broader points. One is this article that someone sent me this 
morning from the South Florida Business Journal. It says, 
``Like bugs scurrying out from under an overturned rock, the 
perpetrators of health care fraud in South Florida are finding 
new schemes to hide behind to siphon off public dollars.''
    So even if you ended all fraud in wheelchairs tomorrow, 
they would be off to something else before you even know it. 
And I am happy to give this to anyone who wants to see it. But 
it was HIV infusion therapy, which is still a problem, but home 
health now is a huge, huge issue.
    The other quick comment I would like to make is so much of 
this flies under the radar screen. You hear about the large, 
you know, pharmaceutical settlements and all that, and that is 
very significant.
    But as long as it is under a certain threshold, whether it 
is a few hundred thousand dollars or a few million dollars, law 
enforcement just doesn't have the resources and time to go 
after the small guys. And so if you are--as long as you keep 
your crimes to $50,000, $80,000 a year, you are probably going 
to get left alone.
    So the signal to criminals is just don't get too greedy and 
you won't have a problem. And ``Tony'' in the ``60 Minutes'' 
piece made the point, ``There are thousands of people like 
me.'' He just got a little too greedy and a little bit unlucky. 
But if you keep it under a certain level, you can--these things 
will go on forever.
    And that multiplied by all the people doing it across the 
country is actually much, much bigger that the marquee 
settlements you hear about.
    Mr. Goodlatte. What is the solution to that?
    Mr. Frogue. The solution is to have the data out there--the 
biggest solution of all, and I think I speak for everyone on 
the panel, but please correct me if I don't. The biggest 
solution is to pre-screen the payments before they go out the 
door.
    And that is what the credit card industry does. And the 
credit card industry is bigger and arguably as complex as 
Medicare and Medicaid, and they do it, because we all know it. 
If you travel somewhere and make a big purchase, they ask you 
for I.D. There is nothing like that in Medicare fee-for-
service. That is the biggest problem.
    It is very simple. We all understand it, because it has all 
happened to us, and it is not a big deal. If we would add that 
to Medicare, the potential savings are easily into the 
billions.
    Mr. Goodlatte. I agree, and I would just add that I also 
agree with Congressman Poe that we would like to see some of 
these folks, large and small, serving some jail time and a lot 
of other people hearing about the fact that they are in prison 
for these outrageous ripoffs of the public.
    Mr. Pierluisi. Okay. Chairman----
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Pierluisi.--Chairman Scott is back with us, so he will 
probably want to continue his line of questions.
    Mr. Scott. [Presiding.] Let me just ask a question on 
recommendations. We have had a lot--what we would like to hear 
from you are specific recommendations on how to do audits, 
policies and procedures, fraud detection, and whether or not we 
need legislation to do that or whether it can be done 
administratively, and also what--whether or not we are 
providing the Administration sufficient resources for 
investigations and prosecutions.
    And if the ball is in our court, put the specifics in our 
court so we know what we are dealing with. And I think the 
testimony is clear that if we put more money into 
investigations and prosecutions, we would get more back than we 
are spending.
    So we should not be shy--with the level of fraud and crime 
going on, we should not be shy in going after it and curing the 
problem.
    Mr. Andres. The Department of Justice is asking for 
additional resources so that we can increase the number of 
strike forces in different cities.
    As I explained, since some of these schemes are viral and 
they move from one city to another, we need to be in a position 
to anticipate that and to be in the areas where they are--where 
the fraud will occur so that we can deal with those 
prosecutions and have the deterrent effect of these people 
going to jail and serving significant jail sentences.
    That in and of itself will serve some deterrent effect 
after the fraud has happened.
    Mr. Scott. And if there is some procedures we can go 
through, research or best practices that we can disseminate in 
the private sector that could apply to the Medicaid and 
Medicare, if you could help--if any of the panelists can help 
us on that--and if it costs money to try to implement them that 
Medicare and Medicaid presently doesn't have, perhaps we need 
to authorize expenditures in those areas.
    But whatever we need to do. I think after the Ranking 
Member showed the clip from ``60 Minutes,'' obviously, we are 
in an embarrassing situation that we want to cure.
    Mr. Collins. Well, one thing, Congressman, that is an issue 
on the Medicaid side of the house and provides an obstacle to 
Medicaid fraud units being able to pursue some of these 
providers is Federal regulation that prohibits Medicaid fraud 
units from engaging in data mining.
    We have been in discussion with folks from the U.S. 
Department of Health and Human Services and with the Justice 
Department concerning this prohibition. But the current rules 
break down the process so that data mining is to be done by the 
program integrity unit of each State's Medicaid program, which 
is kind of the State equivalent of CMS.
    But a lot of times, those program integrity units in State 
Medicaid programs are understaffed and don't have the time and 
the resources to do the data mining. Medicaid fraud units would 
love to be involved in data mining, but the the Code of Federal 
Regulations----
    Mr. Scott. Who funds the----
    Mr. Collins [continuing]. Prohibits us from doing that.
    Mr. Scott [continuing]. State offices--fraud detection 
offices? Who funds these State fraud detection--you are in 
Nebraska, right?
    Mr. Collins. Yes, sir.
    Mr. Scott. Who funds your office?
    Mr. Collins. In the MFCUs?
    Mr. Scott. Yes.
    Mr. Collins. Okay. Medicaid fraud units across the country 
are funded 75 percent with Federal dollars and 25 percent with 
State dollars throughout the duration of their operation.
    Mr. Scott. And I suspect that with the budgets that States 
have, there is not going to be much increase in the 25 percent.
    Mr. Collins. I would be surprised, sir.
    Mr. Scott. So if we want to do something, we might have to 
do it with no match or a better match than that. And Medicaid 
will do--would save more money than we spend in that area.
    Mr. Collins. I think so, Congressman, but I don't even know 
that it is necessarily an issue where resources have to be 
expended.
    But I think it is--if we were--if we would be allowed to 
engage in data mining ourselves rather than relying upon 
Medicaid agencies doing the data mining for us, I think that we 
would reap the benefits of that for both the State governments 
and the Federal Government.
    Mr. Scott. Wait, wait a minute. The data mining that you 
are talking about is being done but by doing--somebody else, so 
we are not talking about new invasions of privacy. That is not 
the issue?
    Mr. Collins. No.
    Mr. Scott. It is who does it.
    Mr. Collins. It is who does it. The way the rules are 
written now, the folks in the Medicaid program have a program 
integrity unit that does the data mining. Medicaid Fraud 
Control Units are not inside of the Medicaid program. Most of 
us who have an MFCU operate within a State attorney general's 
office.
    The rules do not allow us to be involved in data mining, in 
what they call random statistical analysis. If we were able to 
do that ourselves, we would have more cases that we could 
pursue.
    Mr. Frogue. Mr. Chairman, if I might just emphasize his 
point even more, that is exactly right. That wouldn't 
necessarily cost a penny to let them do data mining.
    And I talked to one State attorney general who said, ``I 
would go even one better than that--is allow for contingency-
fee-based outsiders to come in at, say, 20 percent and also 
look at the data,'' with full protections for patient privacy, 
of course, which can absolutely be built in, and should be.
    But the more eyes that are looking at this, the better. No 
one program integrity unit is going to be as good as all the 
other people who could look at this and find better ideas.
    Mr. Pierluisi. [Presiding.] I believe Ranking Member 
Gohmert has a couple of questions.
    You may proceed.
    Mr. Gohmert. Thank you.
    And it really is just a follow up of what Chairman Scott 
was talking about, what you have each been alluding to, but 
this discussion about CMS sharing information--I was staggered 
to find out by virtue of this hearing that CMS just has not 
been good about sharing information.
    And I understand, as Mr. Frogue was just saying, we have to 
ensure patient confidentiality so that someone's medical 
records are not just all over the place. But that can surely be 
done--that information could be protected. We do that--DOJ 
does--I mean, that is done in so many areas. It doesn't seem 
like it would be a problem.
    For Mr. Menke to find out that HHS I.G. has trouble getting 
information from CMS in the past is just staggering to me. If 
there is anybody that should have been able to just say, ``We 
need to see this,'' have adequate protection for patient 
protection and get it, my goodness, it ought to be you.
    So we need to know what we need to do to help you do your 
job. And of course, I think people on both sides of the aisle, 
when it comes to DOJ, we recognize the balance that there is 
between protecting society and not being too much--too invasive 
into society, like--was thinking about--while there was talk 
here about, you know, if we can anticipate.
    You don't want to get to the point that that Tom Cruise 
movie did, where you arrest people because you figure they are 
going to commit a crime in the future, so arrest them now. We 
don't want to get there.
    But it seems that if CMS could share information with HHS 
I.G., and then when you see these patterns, man, that stuff 
ought to be going to DOJ. We don't want you out there actively 
recruiting, you know, in case somebody might commit a crime.
    But when there is patterns that could just be provided--and 
of course, that is what we have seen from a law enforcement 
standpoint when it comes to the courts having said that a pen 
register, for example, is not protected and you don't 
necessarily have to get a warrant for a pen register.
    But for any information that goes with it, whose it is, you 
know, all that kind of stuff, that is when we require a 
warrant. But it seems like there ought to be a way to data mine 
without getting into personal information that picks up when 
you have got somebody that is, you know, billing for five 
chairs out of the same house, or whatever it is.
    Those things ought to be able to be picked up. So any 
thoughts you may have--you will think about it after the 
hearing--ways that we can effectively pass not regulation, but 
just a law saying, ``This is what you got to do.''
    We are going to protect personal data, but we have got to 
do a better job of sharing information with the people that can 
use it and do something about it. So please keep that in mind. 
Forward us any information you have.
    I know Chairman Scott--I know all of us would like to see 
that and try to craft something to make your job not only 
easier but far more effective than you--it just seems like you 
got your hands tied. And we have got to unburden you so that 
you can do your jobs.
    So thank you very much.
    Mr. Pierluisi. On behalf of Chairman Scott and all the 
Members of the Committee or the Subcommittee, I would like to 
thank the witnesses for their testimony today.
    Members may have additional written questions which we will 
forward to you and ask that you answer as promptly as you can 
so that they may be made part of the hearing record.
    The record will remain open for 1 week for submission of 
additional material.
    Without objection, the Subcommittee stands adjourned. Thank 
you.
    [Whereupon, at 12:24 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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