[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
CUTTING WASTE, FRAUD, AND ABUSE IN MEDICARE AND MEDICAID
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 22, 2010
__________
Serial No. 111-158
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COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan JOE BARTON, Texas
Chairman Emeritus Ranking Member
EDWARD J. MARKEY, Massachusetts RALPH M. HALL, Texas
RICK BOUCHER, Virginia FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida
BART GORDON, Tennessee NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York ROY BLUNT, Missouri
GENE GREEN, Texas STEVE BUYER, Indiana
DIANA DeGETTE, Colorado GEORGE RADANOVICH, California
Vice Chairman JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania GREG WALDEN, Oregon
JANE HARMAN, California LEE TERRY, Nebraska
TOM ALLEN, Maine MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York PHIL GINGREY, Georgia
JIM MATHESON, Utah STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin
Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
Subcommittee on Health
FRANK PALLONE, Jr., New Jersey, Chairman
JOHN D. DINGELL, Michigan NATHAN DEAL, Georgia,
BART GORDON, Tennessee Ranking Member
ANNA G. ESHOO, California RALPH M. HALL, Texas
ELIOT L. ENGEL, New York BARBARA CUBIN, Wyoming
GENE GREEN, Texas JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado STEVE BUYER, Indiana
LOIS CAPPS, California JOSEPH R. PITTS, Pennsylvania
JANICE D. SCHAKOWSKY, Illinois MARY BONO MACK, California
TAMMY BALDWIN, Wisconsin MIKE FERGUSON, New Jersey
MIKE ROSS, Arkansas MIKE ROGERS, Michigan
ANTHONY D. WEINER, New York SUE WILKINS MYRICK, North Carolina
JIM MATHESON, Utah JOHN SULLIVAN, Oklahoma
JANE HARMAN, California TIM MURPHY, Pennsylvania
CHARLES A. GONZALEZ, Texas MICHAEL C. BURGESS, Texas
JOHN BARROW, Georgia
DONNA M. CHRISTENSEN, Virgin
Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
C O N T E N T S
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Page
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 1
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 2
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 3
Prepared statement........................................... 5
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, opening statement..................................... 11
Hon. Diana DeGette, a Representative in Congress from the State
of Colorado, opening statement................................. 12
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 12
Hon. Charles A. Gonzalez, a Representative in Congress from the
State of Texas, opening statement.............................. 13
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 14
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, opening statement..................................... 15
Hon. Donna M. Christensen, a Representative in Congress from the
Virgin Islands, opening statement.............................. 16
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 17
Hon. Bruce L. Braley, a Representative in Congress from the State
of Iowa, opening statement..................................... 18
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 19
Hon. Joe Barton, a Representative in Congress from the State of
Texas, prepared statement...................................... 74
Witnesses
Hon. Peter Roskam, a Representative in Congress from the State of
Illinois....................................................... 20
Prepared statement........................................... 22
Hon. Ron Klein, a Representative in Congress from the State of
Florida........................................................ 26
Prepared statement........................................... 28
Hon. Daniel Levinson, Inspector General, Office of the Inspector
General, U.S. Department of Health and Human Services.......... 30
Prepared statement........................................... 32
Peter Budetti, M.D., Deputy Administrator for Program Integrity,
Centers for Medicare & Medicaid Services, U.S. Department of
Health and Human Services...................................... 42
Prepared statement........................................... 44
Answers to submitted questions............................... 108
Submitted Material
Statement of American Association for Homecare, submitted by Mr.
Shimkus........................................................ 80
Statement of Mary Kay Owens, submitted by Mr. Shimkus............ 81
Statement of Qmedtrix, submitted by Mr. Shimkus.................. 90
Statement of FIS, submitted by Mr. Shimkus....................... 98
Statement of On-e Healthcare, submitted by Mr. Shimkus........... 100
Statement of HealthCare Insight, submitted by Mr. Shimkus........ 105
CUTTING WASTE, FRAUD, AND ABUSE IN MEDICARE AND MEDICAID
----------
WEDNESDAY, SEPTEMBER 22, 2010
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:08 a.m., in
Room 2322 of the Rayburn House Office Building, Hon. Frank
Pallone [Chairman of the Subcommittee] presiding.
Members present: Representatives Pallone, Dingell, Green,
DeGette, Gonzalez, Christensen, Castor, Sarbanes, Braley,
Waxman (ex officio), Shimkus, Burgess, Blackburn, and Gingrey.
Staff present: Karen Nelson, Deputy Committee Staff
Director for Health; Andy Schneider, Chief Health Counsel; Ruth
Katz, Chief Public Health Counsel; Brian Cohen, Senior
Investigator and Policy Advisor; Katie Campbell, Professional
Staff Member; Tim Gronniger, Professional Staff Member; Alvin
Banks, Special Assistant; Brandon Clark, Professional Staff
Member, Health; and Sean Hayes, Counsel, O&I.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. I call the meeting of the Health Subcommittee
to order. Today we are having a hearing on Cutting Waste,
Fraud, and Abuse in Medicare and Medicaid. And I will recognize
myself initially for opening statement. What we are doing is
examining how the Department of Health and Human Services is
using available statutory tools to reduce waste, fraud, and
abuse in the Medicare and Medicaid programs. While estimates of
the total cost of health care fraud are difficult to obtain, it
is estimated that all health care fraud costs patients,
taxpayers, and health care providers billions annually. For
every dollar put into the pockets of criminals a dollar is
taken out of the system to provide much needed care to millions
of patients, including our nation's most vulnerable
populations, children, senior, and the disabled.
Fraud schemes come in all shapes and sizes. We heard just
last week in this subcommittee about how durable medical
equipment companies set up sham store fronts and appear as
legitimate providers. They bill Medicare for millions and then
close up their stores only to find a new location and do it all
over again. And then there are the legitimate businesses that
bill for services that were never provided and pay kickbacks to
physicians which treat criminals trafficking in illegally
obtained drugs. In the end, it all has the same result
undermining the integrity of our public health system and
driving up health care costs.
I think we can all agree that health care fraud is a
serious longstanding problem that will take aggressive long-
term solutions to reverse. We made a strong commitment to
combat these issues when Congress passed and President Obama
signed the Affordable Care Act earlier this year. That bill
contained over 30 anti-fraud provisions to assist CMS, the OGI,
and the Justice Department in identifying abusive suppliers and
fraudulent billing practices. The most important provisions
change the way we fight for it by heading up the bad actors
before they strike and thwarting their enrollment into these
federal programs in the first place, and this way we aren't
left chasing a payment once the money is already out the door.
Some other important measures in the legislation include
significant funding increases to the health care fraud and
abuse fund, the creation of a national health care fraud and
abuse data base, and new and enhanced penalties for fraudulent
providers.
CMS and OIG have important roles to fulfill and along with
the Justice Department and state and local Medicaid programs
they are better equipped today because of the Affordable Care
Act to safeguard the health and welfare of Medicare and
Medicaid patients. I want to welcome Peter Budetti, a former
staff member of this committee. I know that you are no stranger
to these issues or our hearing proceedings. I also want to
welcome or special welcome to Daniel Levinson, who had the
lucky privilege of being in front of this subcommittee just
last week and joins us again today. I am going to thank both of
them again for their testimony.
And I would obviously like to thank our first panel,
Representative Ron Klein and Representative Peter Roskam for
joining us today. Your participation basically illustrates the
importance of this issue within the Congress, so we look
forward to your testimony on the first panel. But now I will
recognize my ranking member, Mr. Shimkus, for an opening
statement.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman. We have long
struggled with combating the issue of waste, fraud, and abuse
in the Medicare and Medicaid debate. Criminals take billions of
dollars out of the system that could be spent on patient care
and reducing cost. And with entitlement programs growing at an
unsustainable rate, we simply cannot afford to let these
taxpayer dollars go to waste any longer. I am glad to see the
progress that HHS and the Department of Justice have made in
recent years with additional resources but we can and must do
more. Thanks to the efforts from our colleagues, Mr. Klein,
from Florida, and my good friend, Peter Roskam, from Illinois,
attention remains on new innovative ways to improving the
system. In Peter Roskam's case, H.R. 5546 address an issue that
I have talked about in the committee a long time, addressing
the issue prior to sending the checks. That is what we do a
very poor job at.
We would rather address the issue before that money goes
out the door than trying to gather up the dollars after they
have gone fraudulently to places for years, numerous, numerous
years. And so that is why I am very excited about it. And I
know that Peter has done a good job engaging the Administration
and has received pretty good feedback from the Administration.
We all know he is a close friend with the President, former
Illinois Senate buddies in the days gone by. This also, for Mr.
Levinson, I apologize. He gets a chance to hear my rant and
rave about the inability to get the Secretary to testify before
us on the health care law. We are now close to 6 months. I
guess 6-month anniversary will be tomorrow. She is already
engaged in the debate on premium increases, and I think now
would be the time to bring her to the committee, Mr. Chairman,
so we can have a full and fair and free debate about the good,
the bad, and the ugly on the health care law and move in a
direction and try to fix some of the major provisions.
We know the high risk pools are at risk themselves. We know
premium increases are going up. We know the cost curve was not
bent down but it is bent up. We will continue to raise these
issue until we all leave for the election break, which we are
trying to figure out when that might be. Thank you for this
time. Before I yield back, I have, I think they have been
shared with your majority staff, 4 letters for submission to
the record that I ask unanimous consent to insert.
Mr. Pallone. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Pallone. I am shocked that you are actually handing me
paper now that I see your computer device there.
Mr. Shimkus. I am trying to be as cool as you, Mr.
Chairman.
Mr. Pallone. Without objection, so ordered.
I will now recognize the chairman of the full committee,
Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Chairman Pallone, for
calling this hearing, and I am pleased to welcome our 2
colleagues who have introduced legislation. We all want to stop
the Medicare-Medicaid waste, fraud, and abuse, those of us who
support those 2 programs, and we know that millions of
Americans rely on them. We want to make sure that the money we
spend for Medicare and Medicaid services are going for those
services and not for waste, fraud, or abuse. This is an
important hearing. The Medicare and Medicaid programs, if there
is fraud against them they are bilking taxpayers and they are
undermining public health, and whether it is a street corner
criminal illegally trafficking in pharmaceutical drugs or a
large multi-national corporation paying illegal kickbacks to
health providers the bottom line is the same. Billions of
dollars are stolen from the taxpayer-funded programs that
provide health care to seniors, children, and the disabled.
This kind of fraud costs more than money. It corrodes the
quality of care. It weakens Medicare and Medicaid. And I must
say that I have heard from providers over the years that a lot
of them feel that trying to figure out how to game the system
becomes very much part of what they do because everybody else
is doing it. The rationale isn't very comforting when we hear
it from our kids, but I have heard it over and over again
throughout the years. We want to hear from the Administration,
and I am glad that Mr. Budetti who once served on the staff of
this committee and the Oversight Committee when I chaired it is
here to talk about the Administration's effort as well as Mr.
Levinson who is the Inspector General at HHS. You both play a
very important role in combating waste, fraud, and abuse. I
hope this hearing today will lead to a greater commitment and
realistic provisions to stop the fraud, waste, and abuse before
it takes place and not try to wait till afterwards to collect
the money back. Thank you, Mr. Chairman. I yield back my time.
[The prepared statement of Mr. Waxman follows:]
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Mr. Pallone. Thank you, Chairman Waxman. Next is the
gentleman from Georgia, Mr. Gingrey. It is nice to see so many
members here today. I was afraid that since we didn't go in
until this evening we wouldn't get that many, so it is good to
see so many.
OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Gingrey. Mr. Chairman, I am glad to be here. Each year
at least 3 percent of our country's annual health care
spending, that would be $68 billion, is lost to fraud. In fact,
the FBI estimates that the number is much higher, as much as 10
percent or 226 billion, so clearly this is a problem in need of
a fix, and an immediate fix if at all possible. On the one
hand, I am pleased to see that Medicare fraud is not a partisan
issue. The members who will testify here today before us, both
Republican and Democrat, they symbolize that bipartisan
interest, and I applaud them for their efforts, both
Representative Klein and Representative Roskam, and we look
forward to their testimony on their specific bills that they
have introduced.
American taxpayers deserve to know that their money is
being safeguarded here in Washington and preventing Medicare
waste, fraud, and abuse is one way to protect their precious
resources. While I may support many of these efforts to curb
Medicare waste and fraud, including in Obama Care Patient
Protection and Affordable Care Act of 2010, March 23, it is
unfortunate that these provisions were enacted in the bill that
I think is proving so harmful to both patients and businesses
here at its 6-month anniversary. The legislation promised to
reduce the cost of health care on patients by an average of
$2,500 a year. This, some proponents argue, was worth the cost
of turning the health care system over to the federal
government and spending almost a trillion dollars in the
process.
The bill proponents spent about 18 months blaming insurance
companies for the high cost of care and they told the American
people that Obama Care could fix the problem. Here we are 6
months later and insurance costs are going up by as much as 20
percent. The reason for these increases, Patient Protection and
Affordable Care Act of 2010. I have asked this committee
repeatedly to call a hearing in order to find out what in the
world is going on. To support this request, Secretary Sebelius
has taken the unusual step of publicly denouncing these costs,
as she says, unjustified rate increases. If that is the case,
Mr. Chairman, then I believe that the Secretary should come
before this committee and explain her reasons. The American
people certainly deserve answers.
Another promise was that every American would have health
care if the bill was passed, which when you read the fine print
means the federal government can now tax and penalize any
American who doesn't buy insurance regardless of whether they
have the ability to pay for it. With the 6-month anniversary of
Obama Care tomorrow, I think it is safe to say the early news
is not good. The 18 months the President and your majority, Mr.
Chairman, spent on selling Obama Care instead of getting people
back to work has not only let many Americans without jobs but
with higher health care costs as well. Put simply, Obama Care
has been proven to be no way to solve a health care crisis. Mr.
Chairman, with that, I am going to yield back. I do look
forward to both panels, and thank you for calling this hearing.
Mr. Pallone. Thank you, Mr. Gingrey. Next is the
gentlewoman from Colorado, Ms. DeGette.
OPENING STATEMENT OF HON. DIANA DeGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Thank you very much, Mr. Chairman. Mr.
Chairman, I think I never met a politician who believed in
waste, fraud, and abuse, and I think that it is great that we
are having this hearing on how we can continue efforts to cut
waste, fraud, and abuse in Medicare and Medicaid. I, frankly,
can't believe that actually we are having such partisanship in
some of these opening statements because I think we can all
agree on a bipartisan basis that we should eliminate waste,
fraud, and abuse, and as proof we have 2 of our colleagues from
both sides of the aisle here to testify this morning.
Eliminating these issues is an important goal and it sounds
like it should be easy to do, but, in fact, these fraudulent
practices are becoming increasingly more sophisticated. And
what I would like to do today is really sit down and talk about
how we can put together sophisticated responses to address the
sophisticated fraudulent practices.
Let me give you an example. In Denver, we had a woman who
was arrested by the HHS DOJ strike force in 2009. It was a
nationwide sweep that involved a Medicare kickback scheme in
Michigan. So the woman was from West Virginia. She was arrested
in Denver for a kickback scheme in Michigan, and this was the
level of sophistication that we are dealing with with this
fraudulent activity. This is why we really have to put together
some sophisticated responses. I am looking forward not just to
hearing from our colleagues today but also from the experts who
can talk to us about really what we can do to actually cut
waste, fraud, and abuse instead of just talking about it in an
election year. And I will yield back.
Mr. Pallone. Thank the gentlewoman. Next is the gentlewoman
from Tennessee, Ms. Blackburn.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman. I thank you for
the hearing, and it is an important issue, one that we need to
focus on. I welcome our colleagues, and I want to especially
commend Mr. Roskam for a bill that takes a proactive approach
and looks at how we address this issue before the payments are
out the door. I think that is important, you know. One of the
things we have to realize when we look at the Medicare
component of this is that our seniors have pre-paid their
access to Medicare. The government has been taking that money
out of their paycheck for years, and they do expect to get the
services that are there. And Mr. Waxman and I actually agree on
something, which may surprise some of you who are regular
attendees in this room, and we have to make certain that we
look at the delivery systems but that the services are there
for the people who are entitled to those services, to our
nation's seniors.
The Medicaid component of this, I would like to highlight
with this committee that in '03 we did a field hearing, one of
the first field hearings on Medicaid fraud. This was in
Bartlett, Tennessee. It was done on the TennCare Program, and
many of you have heard me talk about TennCare, which was the
experiment for the Clinton health care program, for Hillary
Clinton's health care program in the preamble to Obama Care.
What we found was rampant waste, fraud, and abuse in this
program, so much so that TennCare has its own investigative
bureau in trying to capture and quantify and then recapture
those dollars, so it is a problem, and we know it is a problem.
I want to say a little bit about Obama Care since this is
the 6-month anniversary of that passage, and I think that right
now we are beginning to see the aftermath or maybe it is the
lack of math, if you will. The law is costing Americans and
families with children undue hardships and is a financial
burden. We are beginning to see this. There has not been a
single oversight hearing in this committee. There is no
transparency in the budgetary operations and processes.
Americans are losing coverage. They are losing patience. Our
focus need to be turned to that. The real cost of Obama Care
goes much deeper than the government's pockets. We are seeing
estimates that it is going to cost hard-working citizens who
are hanging on to their jobs on average $899 per year in
premium contributions, an increase of more than 15 percent than
last year. The percentage paid by workers for individual and
family coverage rose for the first time in over a decade.
Individual premiums average over $5,000 and family premiums
average nearly $14,000. Additionally, Obama Care will lead to a
51 percent reduction in current health coverage for the
American work force over the next 3 years. To keep American
workers employed and healthy, this is an absurd statistic. Nine
regulations are included in the health care reform that will,
in fact, raise premium cost for individuals and employers.
These facts are alarming for a country facing uncertain times
and economic hardships. Prominent health insurance have even
stopped issuing, they are stopping issuing the child-only plans
instead of meeting the new requirements of accepting children
with pre-existing conditions. What happened to the promise that
if you like what you have, you can keep it? Now the most
vulnerable are losing their coverage. We should be focusing on
this. There were a lot of lessons to be learned from TennCare.
We in my state have been down this road. Mr. Chairman, we need
to be putting some oversight and some attention on this. I
yield back.
Mr. Pallone. Thank you. Next is the gentleman from Texas,
Mr. Gonzalez.
OPENING STATEMENT OF HON. CHARLES A. GONZALEZ, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Gonzalez. Mr. Chairman, you can stop my practice of
generally not to make opening statements but I am going to have
to agree with Ms. DeGette. We can take up an hour on campaign
rhetoric. I would simply like to reserve that for the time that
we are not trying to conduct hearings and listening to
witnesses. We go back and forth. The truth is the health care
bill passed. Its major provisions will not take effect for
another couple of years. If anyone on the other side of the
aisle wants to basically rescind what has already taken place
and the benefits that are being enjoyed by millions of American
families, then say so. Don't speculate on what may or may not
happen in a year or two or so. But what about the immediate
benefits? Do you really want to deny families the ability to
obtain health insurance for their child who may have a pre-
existing condition? Do you really want the insurance companies
to be able to rescind your policy when you get sick?
Those are the benefits, and we will go on and on with this.
The only thing is I am hoping that we can get to an issue that
we should all have some concurrence and that is not let the
taxpayers of this country lose money due to fraud. And with
that, I yield back.
Mr. Pallone. Thank you. Next is another gentleman from
Texas, Mr. Burgess.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman. Of course, it is my
policy to make opening statements in this committee and I will
do so. I don't think the federal government has done enough to
address the issue of inappropriate transfer of funds for
several years, even as reports indicate that our nation's
government-run systems needlessly waste hundreds of billions of
dollars each year through these activities. So eliminating the
problems that cause the hemorrhage of billions of dollars in
our country's government-run health care programs should have
been a priority actually before we began to think about
expanding the role of the federal government in health care,
but we didn't do that. Fraud analysts and law enforcement
officials estimate that 10 percent of the total health care
expenditures are lost to fraud on an annual basis. If we are
serious about bringing down the cost of health care and
protecting the patient, not just reducing but eliminating fraud
is where we need to go.
In Medicare, the government pays providers in practically
an automatic fashion without review or scrutiny of the claims
submitted. In north Texas, Fox channel 4, Becky Oliver, an
investigative reporter, reported on a home health agency
operator who is now behind bars. The records show that Medicare
paid her over $8 million in 2 years time to care for home bound
patients. The woman's patients included a man seen moving
furniture, a lady seen running errands, and a man seen enjoying
a barbecue. Even worse than that, she had multiple provider
numbers, and after they shut down one provider number they
continued to pay other provider numbers to the same post office
box. This is unacceptable. Currently, the Center for Medicare
and Medicaid services oversees a network of private contractors
that conduct various program integrity activities in
conjunction with the Office of Inspector General at Health and
Human Services and the Department of Justice that were still
losing billions of dollars annually to fraud.
We must improve oversight of these contractors and the
Center for Medicare and Medicaid Services needs to take a more
proactive role in assuring that contractors are using the
utmost scrutiny in reviewing their activities. Further, I will
raise a point that I raised numerous times. How much fraud are
we willing to tolerate? The answer should be none but in
reality the lack of prosecutors with a background in health law
cripples our ability to go after everyone or in fact anyone.
Are we comfortable with that, and, if not, this committee
should work with our colleagues in Judiciary to correct it.
Under the Patient Protection and Affordable Care Act, and I
would submit that affordable should be stricken from the title,
but our current system is to prevent improper payments and we
know it is inadequate. How can you assure that millions of
dollars in funding in the PPACA and the Reconciliation Act will
solve the problem. If more needs to be done, and it does, it
should be a priority in this committee. I have introduced
several fraud-fighting amendments during the consideration of
our health care bill 3200. As ranking member of Oversight and
Investigations, I am working with ranking member Barton to
build off these suggestions for forthcoming legislation. As
health care expenditures continue to rise developing new and
innovative approaches to fight fraud becoming increasingly
important, and I look forward to the testimony of our
colleagues today as well as the representatives of the federal
agencies, and I yield back.
Mr. Pallone. Thank you, Mr. Burgess. Next is the
gentlewoman from Florida, Ms. Castor.
OPENING STATEMENT OF HON. KATHY CASTOR, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Ms. Castor. Thank you, Chairman Pallone, very much for
calling this hearing, and I would like to welcome my
colleagues, Congressman Roskam and Congressman Klein. Ron Klein
especially has been a real leader for our Florida delegation
when it comes to Medicare and fighting fraud, and rightfully so
because south Florida often has many shady dealers down there.
So, Ron, thank you very much for your terrific leadership on
the issue. In Florida, Medicare and Medicaid is a real life
line for our families and our seniors, and folks simply expect
that the folks in charge of administering these initiatives
keep a close eye on fraudulent practices, and I think we are
going to continue to improve when it comes to that.
I am also very sensitive to the issue just in 2007. The FBI
raided a major health insurance company in Tampa and that
provider had stolen over $600 million from Medicaid and
Medicare through fraudulent claims to CMS and ripping off the
State of Florida. Subsequent to that, the Obama Administration
thankfully cited one of their new health care fraud,
prevention, and enforcement teams, the HEAP teams, in Tampa and
our local U.S. Attorney's Office is very appreciative of the
new tools that will allow us to continue to weed out these
fraudulent practices in Medicare.
I am also very optimistic over the new robust commitment to
anti-fraud in the Affordable Care Act. The Affordable Care Act
clearly outlines a strategy to combat fraud in Medicare and
Medicaid, and these new tools are really going to help us
prevent shady practices and recoup billions of dollars that
rightfully belong to the health services of families across the
country. So this is a good news week when it comes to health
care because not only are we going to highlight the robust new
commitment to weeding out Medicare fraud, we can celebrate a
lot of important consumer protections that are taking effect
just this week. No longer will health insurance companies be
able to say to families with children with diabetes or asthma
that they can't get coverage. That is fundamental in this great
country. Also, I know many of you are hearing from families
like I am back home. They are so appreciative that kids can
stay on their parent's insurance policies until the age 26.
That takes effect this week.
Also, this week the law will prevent health insurance
companies from cancelling coverage when you get sick or if you
made a mistake on your application. And one of the things we
have been fighting for for years is a new emphasis on wellness
and preventative care, and this week families across America
will receive their preventative care without having to pay
significant out of pocket expenses for services like mammograms
and colonoscopies, immunizations, and prenatal and well baby
care. This is something we have been working on for a long time
that is going to help us save money just like fighting Medicare
fraud will. Also, on Monday I hope you saw Blue Cross and Blue
Shield announce that thanks to the Affordable Care Act over
200,000 customers will receive refunds totaling over $150
million, and just yesterday we learned, and Congressman Klein
is going to like this because he has been such a champion for
making sure Medicare Advantage works, we learned yesterday that
on average premiums for seniors enrolled in Medicare Advantage
will decrease.
So this is a good news week when it comes to health care,
and again thank you, Mr. Chairman, for convening this hearing.
I look forward to hearing from our witnesses.
Mr. Pallone. Thank you. The gentlewoman from the Virgin
Islands, Mrs. Christensen.
OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A
REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS
Mrs. Christensen. Thank you, Chairman Pallone, for this
hearing where we get a chance to focus on the improvements that
the Patient Protection and Affordable Care Act is making on
reducing waste, fraud, and abuse in CMS programs, and
potentially all government-run health care programs. The
willful fraud and abuse and the waste that we often see in this
program costs not just the taxpayers but all who depend on this
system for care immeasurable damage. And the savings that will
be realized from reducing or eliminating them will serve to
improve and expand services to the beneficiaries and others. I
also want to thank my colleagues, Congressman Roskam and
Congressman Klein for the legislative offerings to make the
Affordable Care Act provisions even stronger. As a physician
who struggled with then HCFA, I have to say that also an
important part of the CMS armamentarium ought to be fair and
adequate reimbursement, and the Affordable Care Act does make
some important steps in that regard.
As a provider physician, I also want to thank both the
Inspector General and the Deputy Administrator for including a
statement, either this particular statement, or one similar,
that the vast majority of health providers are honest people
who seek to do the right thing and provide critical care
services to millions of CMS beneficiaries, and I would add
others, every day. Too often that is not the message that we
hear or the premises that guides legislation. It is a daunting
task or set of tasks that the law has set out and you have
before you. I am glad that you see providers as well as
beneficiaries as your partners, and the key here are clear
guidelines and appropriate education on how we can best be
that.
These and all the other provisions of the Affordable Care
Act provide a strong blueprint for turning what despite all the
wonderful technological, pharmaceutical, and biotech advances
is a dysfunctional and inequitable system into a world class
system that would be the envy of the world. I look forward to
all of the testimony and the discussion to follow, Mr.
Chairman, and I yield back the balance of my time.
Mr. Pallone. Thank you. Next is our Chairman Emeritus, the
gentleman from Michigan, Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, thank you. I want to commend you
for this hearing. The topic before us is a very important one.
Each year the taxpayers are losing billions of dollars because
of intentional fraud to the Medicare and Medicaid systems.
Criminals who defraud these programs not only steal from the
taxpayers but they do it at the expense of American seniors and
families. The Administration has taken many positive steps to
fight fraud. This committee has been immediately involved in
many of these, and the fight goes back a long way. These
actions show why it is a very much needed government action.
People in Michigan have seen first hand the work of the
Medicare Fraud Strike Task Force. Their work led in July to the
arrest of 94 people who had defrauded the Medicare system. Two
of these scam artists were from Detroit and were convicted in a
$2.3 million fraud scheme.
These people not only broke the law but they took advantage
of the most vulnerable members of our society, the elderly and
poor, and they harmed programs that are vital to that
particular community and to this country. This is only a
beginning, and the health care reform law does a number of good
things, but some of the lesser known benefits of it included
the unprecedented set of tools it gives the Administration to
squeeze out waste, fraud, and abuse. Because of the Affordable
Care Act, the Administration can now move from a pay and chase
model of fighting fraud to a much better one, one that prevents
fraud from happening in the first place. Now criminals will not
be accepted into these programs in the first place, and those
that slip in will not get paid.
For example, the new law requires stronger rules and
sentences for people who commit health care fraud, better
screening tools to prevent fraud from happening, requirements
for providers and suppliers to establish plans on how they will
prevent fraud and enhance data collection that allows CMS, the
Department of Justice, and the states and other federal health
programs to share information. The new law does something else
that is also important. It creates enhanced oversight of
private insurance abuses. Waste, fraud, and abuse are not
confined exclusively to Medicare and Medicaid. In fact, some of
the most egregious examples of waste of beneficiary dollars
happen in the private sector. Beginning tomorrow, it will be
illegal for insurance companies to rescind policies once a
person gets sick. Children with pre-existing conditions can no
longer be denied coverage. Young adults up to age 26 can remain
on their parent's health care plan, and lifetime limits on
health care coverage will be a thing of the past.
Furthermore, insurance companies will be required to
publicly disclose and justify minimum increases. They will have
to provide rebates to customers if their non-medical costs
exceed 15 percent of the premium cost in the group market or 20
percent in the small group and individual market. Despite all
the doomsday predictions that we have heard during the health
care reform debate these waste, fraud, and abuse provisions are
proof that the new law is working and is in the interest of the
American people. Mr. Chairman, again I thank you for
recognizing me, and I commend you for your leadership in this
matter and yield back the balance of my time.
Mr. Pallone. Thank you, Chairman Dingell. Our next member
for an opening statement is the gentleman from Iowa, Mr.
Braley.
OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF IOWA
Mr. Braley. Thank you, Mr. Chairman. Since I joined this
subcommittee, I have focusing on the importance of addressing
the enormous problem of waste, fraud, and abuse not only in
Medicare and Medicaid but also in the private sector as the
Chairman Emeritus noted. The problem of fraud gets the lion's
share of public attention, and that 60 Minutes program on
October 28 of last year is a good example of that. It showed
people who were leaving careers as drug dealers in Florida
because they could make more money in Medicare fraud. And they
talked in that program about the enormous financial cost of
Medicare fraud, and they use the figure of $60 billion a year.
But the real elephant in the room, pun intended, is the problem
of waste in health care delivery, and one of the most important
books ever given to me was by a doctor in Cedar Falls, Iowa
named Jim Young, and the book is Over Treated by Shannon
Brownley, why too much medicine is making us sicker and poorer.
And in this groundbreaking publication she cites many
health care researchers including many medical economists, and
she speaks specifically of the work done at the group at
Dartmouth Atlas where they estimated that as much as 30 percent
of medical care paid by Medicare as well as private insurers is
useless, unneeded, a waste. As of 2006 when the total health
care budget reached $2 trillion, Americans were spending as
much as $700 billion a year on health care that not only did
them no good but caused unnecessary harm. And one of the
biggest driving factors in this waste and over utilization
problem is the provision of unnecessary care. One of the
biggest problems we have is the enormous cost of prescription
drugs in this country.
Americans consume about $200 billion worth of prescription
drugs a year, and it used to be that the drug industry itself
advocated against direct consumer marketing. In fact, our
Chairman Emeritus held hearings on this in 1985 and had the
leading pharmaceutical manufacturers testify in response to his
questions, and they were on record as saying direct to consumer
advertising would make patients extraordinarily susceptible to
product promises. We believe direct advertising to consumers
introduces a very well possibility of causing harm to patients
and advertising would have the objective of driving patients
into doctor's offices seeking prescriptions. Guess what? That
is exactly what is happening. The drug industry has completely
changed their position on direct to consumer and direct to
physician marketing.
So we have an enormous challenge, and that is why I commend
both of my colleagues. We need to make this a bipartisan focus
of our work in Congress because the American taxpayers can't
afford to continue to sustain wasteful and fraudulent spending
with their tax dollars. And I yield back the balance of my
time.
Mr. Pallone. Thank the gentleman. And I think our last
member is the gentleman from Texas, Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman. Hearing so many opening
statements, my opening statement is basically the same as other
members. None of us support fraud or abuse in the Medicare-
Medicaid programs. It is so important to our constituents to
have this option. But following my Republican colleagues, I
would say in 2003 a number of us on our side didn't vote for
the prescription drug bill because of the flaws in it, but I
don't remember saying we were going to defund it. We wanted to
fix it. And there are things I would like to fix in the health
care bill that I would hope we could work across the aisle and
do it, but to start out every hearing we have on trying to deal
with health care to say that the health care bill that is now
the law, it is the law of the land, and we are going to work to
make it happen because it is something that has been needed for
at least my whole lifetime. So with that, Mr. Chairman, I would
like to place my full statement in the record and look forward
to hearing from our witnesses.
Mr. Pallone. Thank the gentleman. Any member who seeks to
put their statement in the record is certainly entitled to do
so and so ordered. I think we have heard from all the members,
so we will now go to our witnesses, and our first panel is, of
course, the congressional panel. We have the Honorable Peter
Roskam from Illinois, and the Honorable Ron Klein from Florida.
And I appreciate you taking your time today to appear before
us, and I guess it shows us this is an important issue the fact
that you are here. So we will start with Congressman Roskam.
STATEMENTS OF HON. PETER ROSKAM, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ILLINOIS; AND HON. RON KLEIN, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
STATEMENT OF HON. PETER ROSKAM
Mr. Roskam. Thank you, Mr. Chairman, and Ranking Member
Shimkus. I really do appreciate the opportunity to just spend a
couple minutes with you. I want to tell you a quick story. Ten
years ago or so, my wife and I were traveling overseas, and I
decided to save a couple of bucks and we were going to take the
subway in Budapest, which upon reflection is a very foolish
thing to do. So I am in a Budapest subway and I get pick-
pocketed. Now from the time that I got out of the subway to the
time I got back to the hotel room, I had gotten a notice from
the credit card company that said there is $10,000 that is
poised on your card. Did you put stereo equipment on the street
an hour ago? And, of course, I didn't, and they shut it off.
Now Chairman Pallone in his opening statement said a phrase
that I think really encapsulates this whole drama, and the
question is he said what we need to do is to concentrate on
heading off bad actors before they strike. Now I understand the
drama, the back and forth about the current health care law.
One of the things that I think that is in the current health
care law that is a gesture in the right direction even though I
opposed it is some of the things, some of the anti-fraud
elements of it, some of the enhanced penalties, and so forth,
and that is an area where there is really a lot of common
ground. My hunch is that based on these very, very large
numbers that we are talking about that we need a larger
gesture.
And let me walk through a piece of legislation that I have
introduced. It got sort of a favorable mention by Nancy Ann
DeParle in the White House. We had a good conversation and
meeting about it. It was in President Obama's outline that he
sent up to the Hill. It didn't make it through on final
passage. But I think it is an area where there is a lot of
interest and a lot of common ground, and even with meetings
that I have had with HHS, I haven't sensed any defensiveness.
It is more a sense of how do we actually implement something
like this and how do we go about doing it? Let me just go back
one quick second. The Administration reports that about a
little over 7 percent or $24 billion in improper payments in
Medicare fee for service is paid out, and that is sort of in
the range of all your analysis that you have been talking
about. But I think there is a weakness in the analysis in that
it is really only looking at overpayments and underpayments. It
is not looking at the type of fraud that you were all
addressing in your opening statements.
So I think the President to reach this goal that he set
out, which is an excellent goal of cutting fraud in half by
2012, he is going to need more tools, and I think that we can
help to get more tools. The increased data sharing, some of the
things that Mr. Dingell mentioned, the reorganization of
program integrity efforts, greater compliance efforts,
additional funding for enforcement efforts, every dollar that
goes in on the enforcement side comes out as about $17 saved so
this is an area that is ripe for investment. But my bill is
H.R. 5546, which is called the Fighting Fraud with Innovative
Technology Act, and it uses this predictive modeling, and
essentially it doesn't wait for the bills to go out the door
but it uses the same type of technology that the credit card
companies have used. Let us put this into context. Credit card
companies right now within the global economy, there is $11
trillion of credit card transactions every year. Just let that
number sink in for a second.
The type of fraud that they are dealing with is .047
percent. Contrast that with the type of numbers we have been
talking about this morning on the order of 10 percent. OK. CMS
currently uses a limited application of prepayment screening,
editing, and selector review of claims conducted by Medicare
administrative contractors. Most resources are utilized on
post-payment review activities by zone program integrity
contractors and recovery audit contractors. But the fraudsters
continue to be one step ahead of our current ruled and edits-
based automated claims processing. Predictive modeling this
approach can detect fraudulent claims that traditional rule-
based edits simply can't identify. CMS is currently developing
an integrated data repository that will eventually contain all
provider data that can be mined but this will still be post-
payment. Predictive modeling scores a claim to identify claims
that have a high probability of fraud.
A predictive model creates an estimated score on claims
using historical data, and that estimate is then applied to new
claims that are being submitted. The predictive model is always
evolving, improving, and adapting to provider and patient
behavior. So, in other words, highly suspicious claims are
subject to manual review to provide false positive and to
provide self audit appeal process, which is encouraged.
Following successful implementation to the Medicare program you
could contemplate rolling this out for other elements of
federal health care claims but my suggestion is let us creep
and crawl and walk and let us start with focusing in on
Medicare. That is basically this bill in a nutshell. And my
sense is that there is an opportunity for us to come together
and really to give the Administration the tools they need, to
give a whole host of folks the tools they need because the
approach that we have taken up until now has just under
performed, and I think even in the health care law there are
things that are going to be beneficial from an ant-fraud point
of view but I think it is going to be beneficial on the
margins.
I think the heart of this is to change the entire paradigm
and to change that entire paradigm we need to do the type of
predictive modeling. And it is not like it is open field
running. In other words, it is not as if this hasn't been tried
and this is a fool's errand. This is something that has been
tried and demonstrated, and I think toward that end I submit my
bill for your consideration as you are moving forward for
possible solutions. Thank you.
[The prepared statement of Mr. Roskam follows:]
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Mr. Pallone. Thank you. Congressman Klein.
STATEMENT OF HON. RON KLEIN
Mr. Klein. Thank you, Mr. Chairman. And I would like to
thank the ranking member and Chairman Waxman and Chairman
Emeritus, Mr. Dingell, for leadership in Medicare over the
years as well. I join Mr. Roskam and all of you in trying to
find some solutions to this big issue. The bill that I am
submitting for your consideration is drawn up with Ileana Ros-
Lehtinen from Miami. It is H.R. 5044. It is called Medicare
Fraud Enforcement and Prevention Act. As Ms. Castor mentioned,
she and I both represent large areas of south Florida and west
Florida, which include large numbers of Medicare participants.
And, unfortunately, in particular there have been large
concentrations of Medicare fraud. You know the story about go
where the money is, and this seems to be one of those areas
that it absolutely follows through.
I think we all have had constituents, and I can share with
you the stories of constituents that come to my office with
sheets of billing which is just outrageous, repetitive, false
information, all sorts of things, and literally just pages and
pages of the same services in some cases billed over and over
again. I am not suggesting this is the norm but we know that
there are lots of cases and the billions and billions of
dollars which add up to this, and the question is why and how
can we address it. I think we know it is deplorable for all of
us to allow our seniors to be preyed upon by these criminals.
And, by the way, they are not all small time criminals. There
is organized crime behind this. It is large scale in this type
of approach. We know who loses from Medicare fraud. It is
obviously the people who provide the services whether they be
doctors, hospitals, legitimate providers, people who are on the
receiving end who want to get the best benefit for the dollars
that they have contributed, and taxpayers. All of us are
taxpayers. We are all paying in every year with a view that
Medicare will be there for us.
So in short we all are losers when a criminal commits
Medicare fraud and we have an obligation to fight back. Our
bill takes a comprehensive approach at attacking criminals who
seek nothing more than ripping off Medicare, as I said, and
preying on seniors. And the way we are approaching it picks up
on some of the things that Mr. Roskam said. We had a chance to
meet with a number of the strike force people down in Florida.
We met with the FBI, we met with law enforcement, we met with
the Inspector General's Office, we met with committee staff to
try to really get a comprehensive view on what are the specific
things that can be done. And what we have come up with are a
number of things. Number one, on the law enforcement side to
make much more significant the criminal penalties for
committing these acts. That is a very commonsense approach here
but a slap on the wrist is unacceptable.
If someone is going to commit this kind of fraud,
obviously, it is fines and criminal penalties, but for the same
reason we know that many of the people who commit the fraud
many times are gone, and those of us who live in areas where
they are bordering under parts of other countries they are out
of here. I mean once they collect their checks, they are
leaving the country or they are going somewhere else. So, yes,
it is good to have a deterrent factor in place and have a much
more substantial way of setting out a deterrence and saying if
you do this you will be in prison for a long time and you will
pay significantly. That is appropriate, and that is part of
this bill. But the second part of it is what we all know is the
pay and chase issue and that is what we have been talking
about, and that is people get this Medicare provider number in
a very simple way.
The due diligence, the checking, the verification is
unfortunately not what it should be. So what we have done is we
have put a number of things in place in our proposal which gets
to the point of providers and suppliers before they can get
their Medicare number and go off to the races of having a much
more thorough pre-screening measure through use of technology
and a lot of other things. And this is the way to stay ahead of
the criminals. Once they get the number, they are getting the
checks. And even to the point where our bill makes it a much
more significant crime to be a part of this whole process by
selling your number to others. Unfortunately, in south Florida
you have heard the cases where lots of senior citizens are
getting paid to have their number used. And, again, 20, 30
bucks, and obviously that individual number is being used for a
significant multiplier.
Another issue that we found is a flaw in the system, the
unnecessary gaps in time when a fraudulent claim is submitted
and when the law enforcement agency is alerted. That is a time
squeeze that needs to be reduced down to nothing. We met with a
local Medicare administrator contractor for Florida and though
they chose to have some sophisticated computer system to check
for anomalies, they only download this information once a week.
Well, only downloading once a week it goes to the point of
credit card information, this isn't rocket science. This can be
done. It can be done in real time. It is all technology-based
and it can be done in real time. So, again, it is just another
specific solution to the problem.
And, of course, this whole notion of providing law
enforcement with more resources, more persons on the ground, I
am a big believer in this case to spend a little more money to
save substantially more money I think is an appropriate
investment here. So these are some of the ideas in our bill
that we would ask you to take a look at. Time is of the
essence. Every day that passes millions more goes out the door
into criminals' hands, and, more importantly, it doesn't go the
people who need to provide those services and to the people who
are paying for them. As we said before, this is a bipartisan
issue. I am very proud to work with Ileana Ros-Lehtinen, Mr.
Roskam. And many of you I know have already talked about in
your opening statements and you have lots of ideas from back
home. So we look forward to working with you, Mr. Chairman, and
the whole committee in working and creating some legislation
whether it is mine or his or anybody else's to pass something
as we are going to pass a piece of our bill and a piece of
these bills this week on dealing with Medicare, and we are very
proud to be participating in that. But we look forward to
working with all of you on this.
[The prepared statement of Mr. Klein follows:]
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Mr. Pallone. I want to thank both of you, and certainly
going to keep your legislative initiatives in mind as we move
forward. That is what this is all about, and so I appreciate
your coming today. Our practice is not to have questions of
members, so I am going to proceed. Thank you for being here. I
really appreciate it.
And we will ask the next panel to come forward. Thank you
both. Let me introduce the two of you. On my left is the
Honorable Daniel Levinson, who is Inspector General, Office of
the Inspector General, U.S. Department of Health and Human
Services, and to my right is Dr. Peter Budetti, who is Deputy
Administrator for Program Integrity at the Center for Medicare
and Medicaid Services, again with the U.S. Department of Health
and Human Services. I want to welcome you. Thank you for being
here today. We try to have you limit your comments to 5
minutes, if possible, and then we will take some questions. I
will start with Mr. Levinson.
STATEMENTS OF HON. DANIEL LEVINSON, INSPECTOR GENERAL, OFFICE
OF THE INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND HUMAN
SERVICES; AND PETER BUDETTI, M.D., DEPUTY ADMINISTRATOR FOR
PROGRAM INTEGRITY, CENTER FOR MEDICARE AND MEDICAID SERVICES,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
STATEMENT OF DANIEL LEVINSON
Mr. Levinson. Good morning, Chairman Pallone, Ranking
Member Shimkus, and members of the subcommittee. Thank you for
the opportunity to testify about those tools in the Affordable
Care Act that will help to combat fraud, waste, and abuse in
the Medicare and Medicaid programs. OIG has been leading the
fight against health care fraud, waste, and abuse for more than
30 years in collaboration with the Department of Justice and
our colleagues at CMS. Although there is no precise measure of
health care fraud, we know that it is a serious problem
demanding an aggressive response. Over the past fiscal year,
OIG has opened over 1,300 health care fraud investigations and
obtained over 500 convictions. OIG investigations also have
resulted in nearly $3 billion in expected civil and criminal
recoveries. Despite such successes there is more to be done.
Those intent on breaking the law are becoming more
sophisticated and the schemes more difficult to detect.
Fraud is migratory and adaptive. Criminals quickly modify
and relocate their schemes to evade enforcement efforts. In
response, the government is working to stay ahead of these
schemes. Fraud will never be completely preventable so we must
investigate and prosecute before the criminals and stolen funds
disappear. New tools and resources provided in the Affordable
Care Act will help us to do just that. My written testimony
describes more fully how provisions in the Act will support the
government's efforts. For example, OIG's work has demonstrated
that it is too easy to obtain billing privileges and defraud
the system. Anyone who wants to keep their home safe begins by
doing something very simple, locking the front door.
We need to do the same with Medicare. The Affordable Care
Act strengthens the screening process to prevent criminals from
enrolling as Medicare providers and suppliers. It also provides
OIG new authority to respond to enrollment fraud. For example,
entities that provide false information on an application to
enroll or participate in a federal health care program are now
subject to monetary penalties and exclusion from the federal
health care programs. When criminals make it through the front
door and suspected theft occurs the action of payment
suspension authority strengthens Medicare's ability to curb
taxpayer losses. In addition, the Act authorizes longer prison
terms and stiffer penalties for health care fraud. Put simply,
criminals who commit health care fraud are going to be cut off
from the Medicare trust funds faster, face longer prison terms,
and be subject to larger criminal fines.
The Act includes new transparency requirements that will
shine light on financial relationships and potential conflicts
of interest. Public disclosure of ties between drug and device
manufacturers and physicians will help the government and the
public monitor financial relationships and should deter
kickbacks. The Act also requires nursing facilities to report
ownership and control relationships. This will make it harder
for unscrupulous corporate owners to avoid responsibility for
substandard care in their nursing homes. The Act also empowers
honest providers to do the right thing. Under the Act providers
and suppliers will adopt compliance programs that meet a core
set of requirements. Well-designed compliance programs can be
an effective tool for preventing fraud and abuse. OIG has
provided compliance guidance to providers for more than a
decade. We will also conduct compliance training programs for
providers, compliance professionals, and attorneys across the
country in 2011.
The training will empower well-intentioned providers to
identify fraud risk areas and best practices to avoid fraud
schemes that may be targeting their communities. Finally, the
Affordable Care Act provides new funding, $350 million over the
next 10 years, that will expand and strengthen the government's
program integrity efforts. Thank you for your support of OIG's
mission, and I would be happy to answer your questions.
[The prepared statement of Mr. Levinson follows:]
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Mr. Pallone. Thank you, Mr. Levinson. Dr. Budetti.
STATEMENT OF PETER BUDETTI, M.D.
Dr. Budetti. Chairman Pallone, Ranking Member Shimkus,
Chairman Emeritus Dingell, and other distinguished members of
the subcommittee, I am Peter Budetti, and I am privileged to
hold the new position at the Centers for Medicare and Medicaid
Services as the Deputy Administrator for Program Integrity
where I have the opportunity to address many of the issues that
have been raised this morning. The Centers for Medicare &
Medicaid Services is very pleased to have the new tools to
fight fraud and reduce waste and abuse in the Medicare and
Medicaid programs that were given to the Secretary, to the
Department of Health and Human Services in the Affordable Care
Act of this year, and I am delighted to be here to discuss
those with you. I am very pleased to share this panel with my
distinguished colleague in fighting health care fraud, the
Honorable Dan Levinson, Inspector General of the Department of
Health and Human Services. We are committed to enhancing the
collaborative working relationship between CMS and the Office
of the Inspector General, and I believe we have made
significant progress in doing so since we embarked on this
endeavor.
On a personal note, I am honored to be appearing before the
subcommittee that I had the distinct privilege of serving as
counsel for some 6 years. The Affordable Care Act is the most
far-reaching health care law since the inception of Medicare
and Medicaid. We greatly appreciate the new and expanded
authorities and are excited about using the tools that Congress
has provided to CMS in the Affordable Care Act. Most important,
with the implementation of these provisions that were provided
by Congress is that CMS is looking, as many of you have
mentioned this morning, to fundamentally shift program
integrity activities beyond pay and chase to fraud prevention.
Even as we apply new technologies and methods to detecting
and pursuing the fraudulent activities of dishonest or phony
providers or suppliers, and as we continue our efforts to
recover overpayments made for false claims, CMS is focused on
preventing either of these events from ever occurring in the
first place. Our goal is to turn off the pipeline of fraudulent
activity before it develops. We will do this in 2 ways, working
with legitimate providers and suppliers to ensure compliance
with the program requirements and taking new measures to keep
dishonest ones out of the programs and to avoid paying
fraudulent claims. Our fraud prevention initiatives stem from
our first priority which is to help provide our beneficiaries
with the health care that they need. Precious public resources
must not be diverted from that core purpose.
To that end, working with states and law-abiding providers
and suppliers to protect beneficiary access to needed health
services, medicines, and supplies is the number one goal of our
program integrity work. With beneficiary interests in mind as
we continue the process of implementing these authorities and
improving our program integrity, we must do so in a way that is
fair and transparent to health care professionals, other
providers and suppliers who are our partners in caring for
beneficiaries. Maintaining this partnership is an important
aspect of our program integrity work. As we implement these new
authorities, we have a significant opportunity to build on our
existing efforts to combat waste, fraud, and abuse. The new
authorities offer more front-end protections to keep those who
are intent on committing fraud out of the programs and new
tools for determining wasteful and fiscally abusive practices,
identifying and addressing fraudulent payment issues promptly,
and ensuring the integrity of the Medicare and Medicaid
programs.
We also now have the flexibility to tailor our resources
and activities in previously unavailable ways which we believe
will greatly support the effectiveness of our work. As an
example of this, on September 17, CMS posted a Notice of
Proposed Rulemaking that will implement several of the key
anti-fraud authorities in the Affordable Care Act that go a
long way towards enabling us to keep the bad actors out and to
avoid paying fraudulent claims. This includes new measures to
screen providers and suppliers before they are allowed into the
program to build the programs, new authorities to declare a
temporary moratorium on enrollment for high risk areas of fraud
in our program, authority to suspend Medicare and Medicaid
payments for providers and suppliers pending investigation of
credible allegations of fraud.
Since this is a proposed rule, we look forward to receiving
comments and feedback from all interested stakeholders and to
working with the providers, suppliers, beneficiaries, law
enforcement, and other key groups as we work to finalize this
rule. This proposed rule builds on existing authorities and
also on the rulemaking that we issued earlier this year that
implemented the Affordable Care Act requirement for physicians
and other professionals who order or refer Medicare-covered
items or services to be enrolled in the Medicare program.
Health care fraud is a national problem. The loss of taxpayer
dollars through waste, fraud, and abuse diverts those funds
from supporting needed health care and drives up health care
costs. Reversing this problem will require a sustained
approach, which brings together federal and state and local
governments and law enforcement, beneficiaries, health care
providers, and the private sector in a collaborative
partnership effect relationship.
This Administration is strongly committed to minimizing
waste, fraud, and abuse in federal health care programs. The
President demonstrated this commitment with his executive order
in setting a target to reduce improper payment rates in half by
2012, and we are committed to meeting the President's goal. The
Administration has made a firm commitment to reigning in fraud
and wasteful spending and with the Affordable Care Act we have
more tools than ever to implement important and strategic
changes. CMS thanks the Congress for providing us with these
new authorities, and we look forward to working with you in the
future as we continue to make improvements in protecting the
integrity of federal health care programs and safeguarding
taxpayer resources. Thank you, and I look forward to answering
your questions.
[The prepared statement of Dr. Budetti follows:]
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Mr. Pallone. Thank you both, and now we will have some
questions, and I will start with by recognizing myself. In the
health care reform bill there is provision, you know, to
improve Medicare and Medicaid's fight against fraud, as both of
you said, in many different ways. Dr. Budetti, in your
testimony you described the shift in fraud-fighting tactics
that will come about as a result of these new approaches as
moving away from pay and chase towards a more preventive
approach. And, of course, the hallmark of health care reform is
prevention. So I wanted to ask each of you in Dr. Budetti's
case, what do you mean when you talk about shifting away from
the pay and chase approach to reducing or towards a more
preventative approach?
Dr. Budetti. Mr. Chairman, the 2 questions I have been
asked most frequently since I took this position are the ones
that I am sure that will come as no surprise to anyone, which
is why do you let those crooks in the program and why do you
pay them when their claims are fraudulent? And our approach to
moving away from pay and chase recognizes the fact that we now
have people getting into the program, billing the program who
disappear before they can be chased and who have no assets when
we track them down. Pay and chase evolved from the core purpose
of the Medicare and Medicaid programs which was, and is, to
provide services to beneficiaries and to do that we need to get
providers into the program quickly and we need to pay them
promptly, but that speaks to legitimate providers and
legitimate claims for the correct services.
What we need to recognize now is that not everyone who is
getting into the program and who is billing the program will be
there when we chase after them. So moving from the traditional
approach, which is always going to be necessary, to go beyond
that to preventing the problems in the first place will mean
two things in particular. Number one, keeping people out, and
to do that we are implementing new screening techniques, new
screening measures. The Notice of Proposed Rulemaking that we
just published speaks to this by putting providers and
suppliers following the terms of the statute into different
categories of risk and applying different levels of screening
to different levels of risk, and that is an important step
forward.
And then in terms of not paying fraudulent claims, we are
implementing the--proposing to implement, the new authority
that allows us to withhold payments when there is a credible
allegation of fraud, which we work closely with the Inspector
General on determining what a credible allegation of fraud is.
So moving away from pay--moving beyond pay and chase, I should
say, to preventing these problems in the first place is an
important aspect of what we are doing at the Center for
Medicare and Medicaid Services.
Mr. Pallone. Let me ask Mr. Levinson, can you tell us about
some of the benefits you expect to see when these provisions
are put into effect?
Mr. Levinson. Mr. Chairman, I think it is going to be
especially helpful to strengthen the enrollment standards. As I
said in my opening statement, to lock the front door. So much
of the problem that we have experienced in so many parts of the
country have to do with the ease with which historically you
have been able to get a provider number. And I would only
elaborate on Dr. Budetti's answer just by noting that my
understanding is that historically when the program was much
smaller and simpler, perhaps the government even knew who it
was doing business with, there was an emphasis on ensuring
prompt payment to providers to make sure that doctors and
others would want to participate in the Medicare program. And
what has occurred over time is that the government has not kept
pace with the enormous change, the explosion in size of the
program, the increased sophistication of health care delivery
and services, and certainly in the modern era too often the
government doesn't know who it is doing business with.
And it has been an interesting experience for us in south
Florida, just to give you one example, in the year following
our anti-fraud strike force work in the south Florida area, DME
billing dropped $1\3/4\ billion in south Florida alone just by
virtue of people getting the signal that the government was
actually watching. So the strengthening of enrollment
standards, it would be hard to exaggerate the importance that
that will play, I think, in making sure that those masquerading
as health care providers don't get in the program in the first
place. It is not a panacea. And there are many other fraud,
waste, and abuse issues that occur in other aspects of the
system. But I would certainly emphasize first and foremost the
importance of strengthening the enrollment standards that is
included in the ACA.
Mr. Pallone. I appreciate this. I think it is interesting
because I was talking about prevention and preventative care in
the context of health care reform. I hadn't thought about
prevention in terms of the fraud aspect so much but obviously
that is really crucial, and so I am glad to hear that what we
are doing has the real potential to make a difference. Thank
you both. Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. I appreciate our
panel today. It is a very important issue. Before I go on to
this, let me just again put on the record 6-month anniversary,
no Secretary Sebelius, no CMS Administrator Berwick, no CMS
actuary to give us an analysis on the new health care law. We
are more than willing to talk about the good and the bad, the
good policies. Republicans repeal and replace, does talk about
a lot of the positive things that went on through the law. But
we still have to continue to make the point that we are 6
months into a new law without a hearing on the law. Maybe some
specific provisions like this one so that is why it is
important, but this is our only venue. So people have to
understand. Other than 1-minute speeches or 5-minute speeches
or special orders, which is not really the venue for talking
policy. I know my colleagues get frustrated but we are just
doing our job.
This is a really great discussion, and it is a great
discussion because it really highlights the health care debate
in the aspect of--let me just ask a simple question first. If
we go after this process and try to clean it up before the
checks go out the door, do our admin costs go up? I am just
talking about the administrative costs to be able to have a
cleaner system to protect the system for sending fraudulent
checks out the door. Mr. Levinson?
Mr. Levinson. Mr. Shimkus, I think you have put your finger
on a very important question concerning the whole role of IT in
being able to really master the system as opposed to simply
respond to it, and our office will certainly be looking very
closely as this more consolidated and integrated system
actually unfolds over the course of the next year or the next 2
years. We certainly have been able to use real time data just
by coordinating better with CMS, with the Department of
Justice. Our strike force teams have been operating in multiple
cities now----
Mr. Shimkus. Let me interrupt because my time is real
short, but administrative costs are going to go up. New IT
programs, new surveillance. I mean there is a higher cost for
this on the admin side, is that safe to say?
Mr. Levinson. Well, I mean from an audit side, which is
certainly part of our office, we will look back to see, you
know, exactly how costs have been accounted for but----
Mr. Shimkus. But we got to change the way we are doing
business now because we don't have the folks to audit on the
front end. Dr. Budetti.
Dr. Budetti. Thank you, Mr. Shimkus.
Mr. Shimkus. It is not a trick question.
Dr. Budetti. No, I understand. I think it is very
important, I think, for us to keep in mind that the
expenditures that have been made over the years since the
health care fraud and abuse control program was established
have been wise investments by the Congress.
Mr. Shimkus. The question is to clean up the system, is
there more admin cost?
Dr. Budetti. I am not sure whether----
Mr. Shimkus. Here is my point. I only have a minute left or
2 minutes left. Here is my point. In this whole health care
debate we have always demagogued the health insurance companies
because they do what you want to get to. They have higher
administrative costs which is what has been demagogued for
years here. Why do they have higher admin costs? Because they
are trying to make sure that the checks don't go out the door.
We send the checks out the door and then we take a 3 or 4 or 5-
year process of trying to figure out who stole the money. So
what we are saying in reforms here, and I am with you, OK, we
have to spend more money. We are going to have to update our
IT. We have to have a process to stop the checks before they go
out the door and, guess what, this is part of the opening
statement, what is going to happen?
And I agree, it is because we pushed prompt payment and we
want early enrollment. We don't want anybody--every time we
spend money fast here whether it is Iraq, whether it is
Katrina, any time we are throwing money at a problem we find
fraud and abuse. So we want to have a quick response to get
people their money because it is a fee for service system but
this is how we responded. We may end up withholding payments
until we have an idea of whether--that is what happens now in
the insurance industry and people are frustrated to heck
because they are saying, oh, the evil insurance. I can't get my
payment. Well, they are doing it to make sure that--so now part
of our reforms will probably take some of the practices that
the profitable evil insurance companies are doing and roll it
into government services to make sure we are not ripped off. So
that is my take away. I think it is important to do. My time
has expired, Mr. Chairman, and I yield back.
Mr. Pallone. Thank you. Chairman Dingell.
Mr. Dingell. Thank you, Mr. Chairman. Gentlemen, we
appreciate your testimony here. These questions relate to
funding to fight fraud. The Affordable Care Act increased
mandatory funding for the health care fraud and abuse control
fund by $300 million and index funding for the health care
fraud and abuse control fund and the Medicare and Medicaid
integrity programs to make sure it keeps up with inflation.
Overall funding to fight fraud will increase by about $500
million over the next decade. Gentlemen, can you each discuss
the need for the increased funding to fight fraud and can you
give us some examples of how you will spend these new
resources.
Mr. Levinson. Mr. Dingell, it has been exceedingly helpful
to see a rise in funding for the health care fraud, anti-fraud
control program after many years of essentially plateau
expenditures for this vital program that really partners our
office with the Department of Justice and with CMS to fight
health care fraud in both the Medicare and the Medicaid
program.
Mr. Dingell. When will you be able to spend these
additional funds and what benefit will that occur to the
public?
Mr. Levinson. Some of the dollars we are looking to enhance
and expand the strike force operations, some of which you
actually spoke to in your statement earlier this morning. In
Detroit, the July strike force operations, just to give an
example, resulted in 94 indictments in 5 cities, including
Detroit that involved $250 million in false billing for DME,
home health, infusion, physical and occupational therapy. These
strike force operations require resources. They require
resources at the investigative end----
Mr. Dingell. Which they have not had till now.
Mr. Levinson. Well, as the programs have expanded over the
course of the last 10 or 15 years, and Congress was well aware
of the need to structure a program to fight health care fraud
when in the mid-1990s as part of HIPA the health care fraud
account was established, that account simply did not take into
account, if you will, the explosion of dollars, the much larger
programs that we have seen since the mid-1990s. So this is
important both catch up to be able to devote resources at both
the investigative and prosecutorial end as well as take into
account the added cost of being able to handle this in a
sophisticated, technologically savvy way that the 21st century
really requires.
Mr. Dingell. Thank you. Dr. Budetti, what comments do you
have, sir?
Dr. Budetti. Yes, Chairman Dingell. We are going to be
spending this--we are very grateful to the Congress for making
this investment in fighting fraud. This is an important step
forward, an important increment over the monies that were
already scheduled to be in the health care fraud and abuse
control program. We are going to be spending it responsibly to
improve our enrollment and screening activities and processes
to consolidate many of our contracting activities. We are going
to be coordinating Medicare and Medicaid policies to the
maximum extent that we can. And we will be implementing many of
the advanced data and analytic techniques that have been
discussed this morning as well as improving our data system so
we view this as an important step forward in terms of being
able to support the kinds of activities it will take to move
beyond pay and chase to prevention.
Mr. Dingell. Thank you, Doctor. Now, Mr. Levinson, it
allows the Inspector General to exclude affiliates and officers
of affiliates if a parent or sister company is found guilty of
health care fraud. What advantage is this going to confer on
you and the taxpayers and why is it necessary?
Mr. Levinson. Mr. Dingell, it has been problematic for us
to be able to actually pursue those who have engaged in
wrongdoing in defrauding the system. It has been simply too
easy for corporate officials to simply resign, to leave their
corporate office. The laws right now are in the present tense
so that the ability to exclude those found to have defrauded
the system only work when they actually stay in place. Once
they leave, we are not really able to pursue them. The ability
to actually exclude and go beyond any particular corporate
entity allows us in effect to pursue those who actually have
engaged in the defrauding of the program and therefore will
strengthen our ability to actually capture the people who are
taken advantage of.
Mr. Dingell. Thank you. Just do this, would you, please?
Submit to the committee about other legislative changes or
additions that you in your agency, and, you, Dr. Budetti, need
to address the problems of fraud. For example, piercing the
corporate veil of subsidiaries or affiliate companies, being
able to seize assets of these corporations, being able to
address the officers as opposed to just the corporation because
getting the officer makes paying where it is most necessary and
most needed, so if you would submit that to the record, I would
appreciate it. Mr. Chairman, I thank you for your courtesy to
me.
Mr. Pallone. Mr. Dingell, you asked them to follow up with
some written comments? I didn't hear you. Absolutely, any
member who wishes to do so. The gentleman from Georgia, Mr.
Gingrey.
Mr. Gingrey. Mr. Chairman, thank you. I think we can all
agree that there is no room for waste, fraud, and abuse in the
Medicare program and to put taxpayer dollars at risk. It
jeopardizes the integrity of our seniors' health care program.
However, it seems that President Obama and the Democratic
majority have a different view about what constitutes waste,
fraud, and abuse. On July 30, 2009, President Obama promised
that the health plan was funded by eliminating, and I quote,
this is his quote, ``the waste that is being paid for our of
the Medicare trust fund.'' And then on September 10, 2009,
Speaker Pelosi said that Congress will pay for half of Obama
Care by ``squeezing Medicare and Medicaid to wring out waste,
fraud, and abuse.'' I want to ask the Inspector General, Mr.
Levinson, do you feel that the $137 billion cut in Medicare
Advantage in the bill is rooting out waste and combating fraud
in the Medicare fund?
Mr. Levinson. Mr. Gingrey, that is beyond my portfolio to
opine on.
Mr. Gingrey. Let me ask you to opine on one other then. The
CMS actuary says those cuts will cost 7.5 million seniors to
lose their Medicare plan by 2017, and the benefit reductions
that will result are expected to cost seniors on average $250
in extra cost per month. Is charging seniors $250 more a month
on average for their Medicare ending waste or combating fraud?
Mr. Levinson. I would be happy to defer to Dr. Budetti if
he wants to answer that question.
Mr. Gingrey. Well, let us let you do that. I will be happy
to seek a response from Dr. Budetti on that particular
question.
Dr. Budetti. I believe comments by the actuary are also not
part of my portfolio.
Mr. Gingrey. All right. Well, let me shift back to Mr.
Levinson then. Hospital reimbursement for Medicare seniors are
being slashed by $155 billion. This is to the hospital. The CMS
actuary projected those cuts could drive about 15 percent of
the hospitals and other institutions into the red and
jeopardizing access to care for seniors. Is slashing hospital
payments to the point where you threaten their ability to stay
open and you are threatening seniors' ability to be able to
find more that will treat them, is this ending waste or
combating fraud, either Mr. Levinson or Dr. Budetti?
Dr. Budetti. Speaking to our efforts to reduce waste and
combat fraud, I mentioned in my opening remarks that our core
commitment is to our beneficiaries, and to do that we need to
have the legitimate providers and suppliers in the system as
partners with us. We need to work with them and we need to
support them. So our approach at our end of the spectrum
working on the fraud, waste, and abuse is certainly to keep in
mind the critical importance of beneficiary access and the fact
that----
Mr. Gingrey. I understand. My time is limited. I will ask
one more question, and I will just ask it rhetorically because
I understand what the answer would be from both Mr. Levinson
and Dr. Budetti. The President and Speaker Pelosi also slashed
billions of dollars for home health care and hospice. Hospice,
as you know, provides the patients in the last 6 months of
their life, those who are suffering in many cases from
metastatic cancer. These cuts threaten the quality of health
care for patients in the last stages of their lives. And,
again, I would ask in your opinion is cutting hospice payments
ending waste or combating fraud in the Medicare program, and
our witnesses have already said to the previous questions this
is not really in their jurisdiction.
But, Mr. Levinson, this question, I think, is in your
jurisdiction. These 30 provisions in Obama Care that result in
$6 billion, and this is the Congressional Budget Office
estimate, not mine, $6 billion in savings over 10 years, that
is about half of one percent, and we are estimating here that
we are wasting $68 billion a year. In fact, the FBI says $226
billion a year. We got 30 provisions in the bill that saves $6
billion. Mr. Levinson, didn't you make recommendations to the
Senate Finance Committee and indeed maybe even to this
Committee on Energy and Commerce regarding the bill as it was
being developed a lot more recommendations in regard to cutting
waste, fraud, and abuse that would amount to much more than $6
billion a year in savings, and why weren't they included in the
bill?
Mr. Levinson. Mr. Gingrey, it is certainly true that our
office has provided technical assistance to both the House and
the Senate over the course of the last year or year and a half
as the legislation went through, and that is a very important
part of our job. We report to the Secretary but we also report
to the Congress, and we endeavor to try to provide the best
technical assistance. That assistance was directed towards the
health care fraud provisions, Title 6 mostly, although perhaps
not entirely. I think there might be elements in other titles,
but primarily Title 6, title assistance, and it was a matter of
responding to member requests on how to handle, how to phrase,
how to craft particular initiatives. And if there are added
questions from Congress and certainly we will be looking at how
the law unfolds over the course of the next couple of years
much as we did with MMA when it was passed in 2003. Our office
has done significant work on Part D to try to understand where
the possible problems are there. We certainly will be doing the
same with the Affordable Care Act.
Mr. Gingrey. Mr. Chairman, I yield back. I realize I have
gone beyond my time and I thank you for your patience, and I
request that Mr. Levinson would submit his annual
recommendations in combating waste, fraud, and abuse to the
committee. I would appreciate that for the record.
Mr. Pallone. Is that something that is already out? OK.
Thank you. We ask you to do so. Chairman Waxman.
Mr. Waxman. Thank you, Mr. Chairman. The Affordable Care
Act included a series of program integrity provisions that CBO
estimates will save federal taxpayers $6 billion over the next
10 years. The Act provides CMS and the Inspector General with
dozens of new tools to prevent fraud and keep fraudulent
providers out of Medicare and Medicaid. It has new civil and
criminal penalties. It has new data-sharing requirements and it
provides $500 million in new funding to fight fraud. Dr.
Budetti, some have called for repealing the Affordable Care
Act. What effect would repeal have on your agency's ability to
detect, stop, and prosecute fraud against Medicare and
Medicaid?
Dr. Budetti. Mr. Chairman, the Affordable Care Act has so
many strong provisions in it that are the central part of our
initiative to move forward to keep people out of the program
who don't belong in the program and to avoid paying claims that
are fraudulent. It also provides the support for us to do
that----
Mr. Waxman. Keep people out of the program, are you talking
about beneficiaries or providers?
Dr. Budetti. To keep fraudsters out of the program, to keep
scam artists, to keep people who would enter the program simply
to be able to submit bills and not provide legitimate services,
to keep those people, the bad guys, out of the program. And the
Affordable Care Act provides us new and expanded authorities
that are absolutely central to our ability to do that going
forward. It also provides the increased financial support that
is important to us. It provides a new level of flexibility in
how we go about this so that we can be nimble and adapt to the
changing problems that we see all the time. These are very
important provisions in terms of the ability to protect
Medicare and Medicaid resources, Mr. Chairman.
Mr. Waxman. Well, some have called for repealing the Act
but others have called for defunding the agencies that
implement the Affordable Care Act. What effect would defunding
have on CMS' ability to fight fraud?
Dr. Budetti. The activities that we are doing to implement
the Affordable Care Act, the new provisions, are on top of a
very, very large array of activities that have been going on
for some time. All of those are demanding on staff and on our
resources. Any serious limitations on our ability to carry out
these programs would mean that the likelihood of getting a
return on investment would go down. The less we invest in
fighting fraud the less of return on that investment that we
would see over time.
Mr. Waxman. Mr. Levinson, what is your view, would
eliminating and defunding the new anti-fraud provisions in the
health care reform bill impact the work of the Inspector
General to reduce fraud?
Mr. Levinson. Mr. Chairman, that is beyond my portfolio to
opine on. We take the law as passed by Congress and we try to
make the laws most effective and----
Mr. Waxman. If you didn't have this law, do you think that
your anti-fraud efforts or the Department's anti-fraud efforts
would be weakened?
Mr. Levinson. Well, we think that many of the provisions,
especially in Title 6 that strengthen the enrollment standards,
are very helpful in being able to create much greater controls
over the program so that fraudsters are not able to gain entry.
We think that mandated compliance programs, which also is
included in the Act, will be very helpful in getting so many of
the lawful providers the kind of assistance and the kind of
incentives to structure their program so that they are not
either advertently or inadvertently in violation of Medicare
and Medicaid rules and guidance. So unquestionably there are
many features of this Act that I included in my opening
statement that are very beneficial to ensuring that the
programs will run with far less exposure to fraud, waste, and
abuse.
Mr. Waxman. Mr. Chairman, there are plenty of good reasons
why repealing the Affordable Care Act is a terrible idea
including the fact that repeal would increase Medicare and
Medicaid fraud. I just want to make that statement very clear
because when we hear people on the other side of the aisle
complain they don't like the Act, they want to repeal it, they
want to stop the agency from getting funded, what they are in
effect saying as it relates to today's hearing is that they are
going to increase Medicare and Medicaid fraud when the
policeman on the beat, which is the department, and others in
this area are not given the tools to fight fraud and abuse. I
think it is clear that fraud and abuse would be increased
rather than decreased. I yield back the balance of my time.
Mr. Pallone. Thank you, Mr. Chairman. Next is the gentleman
from Texas, Mr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman. Just to reference the
chairman of the full committee's remarks, I would submit that
the bill itself is a fraud that has been perpetrated on the
American people but it is what it is, and we got to make the
best of it. So the Patient Protection and Affordable Care Act
predicts a drastic cost savings from fraud prevention to cover
the $500 billion in cuts to Medicare, as well as allocating 10
million annually for the fiscal years 2011 through 2020. The
Reconciliation Act that was passed right after the bill
provides an additional $250 million for the period 2011 through
2016 for health care fraud and abuse program. In order to
combat fraud and use the money in the most effective manner, do
you think--I will actually direct this question to either or
both of you, in order to combat fraud and use the money in the
most effective manner, do you believe it would be beneficial to
hire more federal prosecutors as I referenced in my opening
statement with a background in health care fraud to combat this
problem as opposed to hiring prosecutors with no previous
health care experience?
Mr. Levinson. Mr. Burgess, we have had over the course of
years a very, very good and productive relationship with the
Department of Justice, the civil division, the criminal
division, United States Attorneys in all 94 districts.
Unquestionably, I think there is more focus on health care
fraud in some parts of the country and in some districts than
in others. We certainly want to encourage as much expertise to
be imbedded in the Department of Justice as possible. We know
that they rely upon the expertise of our investigators, our
agents, for a lot of the work that we do as well as the FBI.
Mr. Burgess. I don't mean to interrupt, but we had this
discussion, of course, last week as well. In my area in Texas,
in the north Texas area, I asked people from HHS, Office of
Inspector General, as well as Department of Justice to come and
talk to me about some of the problems we were having with
foreign nationals who were setting up sham operations and
literally just ripping the government off. The figure I
reported was over a million dollars from one individual who is
now in jail thankfully. But I was told by both your folks in
the Office of Inspector General and as well as the Department
of Justice that they lack prosecutorial manpower to go after.
In fact, there were certain levels where they wouldn't even
bother to bring a case. I forget what the level was, but I was
startled by the size of the number. And I recognize that
terrorism is important and I recognize that there are lots of
other places we need to spend our money but this is important
as well.
Mr. Levinson. Absolutely, and I am not trying to dodge the
question. The question really is best posed in the first
instance to the Justice Department because they are the ones
who need to take responsibility for their resources. I can say
though clearly that it is a testament to how hand in glove we
work with out partners at DOJ that you can meet with folks from
both of these departments and get whatever picture they are
giving you about your neighborhood and what is going on and
what needs to be done. And it is absolutely true that no matter
how many investigators you have if you don't have the
prosecutorial backup then you have cases that are simply
lingering and really not doing enough for the system.
Mr. Burgess. I understand. And you referenced in your
opening statement about you have to lock the front door. You
know, we go after a lot of this stuff for post-payment review
and the figure I have here that fewer of 700 of the 8.7 million
claims were reviewed. That is a pretty small number. Is there
any way to prospectively--we never hear of Aetna, United Health
Care, Blue Cross/Blue Shield having these types of problems.
Sure, there is probably improper utilization with those payers
as well but it is never to the order of magnitude that it is
with the public programs. Is there a way to do it
prospectively?
Mr. Levinson. Mr. Burgess, I think that the National Health
Care Anti-Fraud Association, those who actually deal with anti-
fraud efforts in the private sector, might be able to provide
some useful detail on what is going on on the other side of the
ledger, and health care indeed is a hybrid system in the
country where you have both robust, private and public sector
involvement. We deal at the IG's office with the system that we
have, and we certainly try to encourage our partners in the
department to try to clarify and make more transparent what is
going on so that we can do our job better and indeed they can
do their job better.
Mr. Burgess. That figure of 10 percent, if you think of any
company, any private company, publicly held company in this
country that had a 10 percent loss rate due to theft would
certainly try to get its arms around that. Two things that do
concern me, the anti-kickback statute and the health provisions
of the criminal mail fraud statute. I am concerned that we may
turn innocent coding errors into federal cases. What are you
doing to kind of protect what may be simply an innocent mistake
from someone who then receives the full force of the federal
prosecutorial force?
Mr. Levinson. Yes. That is a very important question, and
indeed I think just looking at the improper payment problem is
kind of a good macro example of what we are talking about
because the programs do suffer from a lot of improper payments.
In many cases, that has to do with documentation that for one
reason or another is not fully exposed on the record. It simply
is a failure of documentation. That might be hiding fraud. But
in many cases, probably in most cases, it isn't. There is
something else going on. There is still a failure to document
but improper payment does not equate with fraud and proper
payment doesn't equate with lack of fraud.
It is very possible to get the payment system looking right
and indeed what it is doing is it is masquerading some
fraudulent scheme. So when it comes to health care and some of
the sophisticated kinds of scams that are occurring it really
requires an information technology system and the cooperation
of a lot of different parties to be able to tease out the kinds
of very serious issues that you are raising and that need to be
done as a result certainly of the added dollars that are being
provided now for health IT. Those dollars need to be focused in
significant part, in my opinion, on making sure that we don't
fall into those kinds of problems where you do have genuine
providers who are then being questioned on a very fair record
because we have gotten the IT piece wrong.
Mr. Pallone. We are over time here. Thank you. Next is the
gentlewoman from Florida, Ms. Castor.
Ms. Castor. Thank you, Chairman Pallone, very much. Dr.
Budetti, on October 1 the private health insurance companies
will begin to market to seniors all across the country for
private Medicare plans. I have been concerned for many years
about some of the marketing practices and have direct
experience with this with some insurance company sending agents
to assisted living facilities or nursing homes to try to sign
up seniors. Often times if they were on traditional Medicare
they would lose access to their trusted doctor. I have seen
them camped out in front of senior apartment complexes to try
to get them to sign up and use high pressure sales tactics. The
problem is a few years ago the Medicare Modernization Act took
away the authority of our state insurance commissioners to go
after these fraudulent practices so now the burden is wholly on
HHS and the federal government.
In the House version of the health reform bill, I had an
amendment, it was a bill I had, to restore the authority of our
state insurance commissioners and consumer advocates to go
after those practices. And that didn't make it in the final
package unfortunately, but these abusive tactics remain, and I
am very concerned because they prey on seniors that often lack
the wherewithal to withstand the high pressure tactics or may
suffer from dementia or Alzheimer's. And what can you do, what
tools do you have where you can work with the states to make
sure that you are taking action against those type of marketers
and what--I really want to understand what you can do, what
authorities you have, what else do you need? Obviously, we have
got to return some authority to the state insurance
commissioners. Consumer advocates are strongly behind this
proposal, but in the mean time until we do that, what can you
do to work with states to make sure we are going after those
folks?
Dr. Budetti. Thank you for that observation and question.
One of our priorities at the Center for Program Integrity has
been to expand our work with beneficiaries to help them become,
really, partners in spotting and preventing scams from
occurring in the first place. We are working closely with the
Administration on Aging to expand the Senior Medicare Patrol,
which trains seniors to review their Medicare statements. We
have been rewriting those Medicare summary notices so that they
are more user friendly. We have been encouraging people to use
My Medicare system so that they can review their claims on an
immediately up-to-date basis, and we have had a lot of outreach
and consumer education that we have been doing.
I think you are aware that we have been holding regional
fraud prevention summits around the country. We held one in
south Florida, the first one in south Florida. In fact, at that
summit a major piece of it was to work with beneficiaries and
interact with beneficiaries on how they could help in
preventing and fighting fraud. So one major aspect of what we
are doing is to get the beneficiary community more aware and
give them more tools to work on this. In south Florida, in
fact, we have established a separate hotline specifically for
that purpose because of the problems that we see, but also
because we are promoting the awareness down there. So
beneficiary outreach and involvement in education is a very big
piece of what we are doing.
We also, of course, have our oversight of the Part C
Medicare Advantage plans. And we do have our responsibilities
to oversee them and to look closely at whether they are
complying with the requirements that are imposed on them and
also with respect to the way that their funding is working.
Ms. Castor. Mr. Levinson, do you have a comment and what
happens if someone gets caught, if the company gets caught with
these high pressure tactics or coming into a nursing home when
they are not allowed? What is the penalty?
Mr. Levinson. Well, I wouldn't want to speculate, I will
put it that way, Ms. Castor, on exactly what would happen given
that we have 400 investigators who really follow up very
conscientiously on health care fraud allegations of a wide
variety and depending upon the particular facts of what
happened there could be very serious penalties.
Ms. Castor. I just think that this should be a shared
responsibility, that our states have additional tools that can
help protect seniors from these high pressure tactics that
often result in seniors not being able to see those other
doctors. And under the Medicare Advantage plan oftentimes you
are signed up, you can't get back out. It is a pain to try--if
there has been some fraud committed to actually switch back out
of a private plan back to the coverage you had.
Mr. Pallone. I have to ask the gentlewoman--we are a minute
over.
Ms. Castor. OK. Thank you.
Mr. Pallone. Thank you. The gentlewoman from the Virgin
Islands, Mrs. Christensen.
Mrs. Christensen. Thank you, Mr. Chairman, and, thank you,
Dr. Budetti and Mr. Levinson. Dr. Budetti, CMS is requiring
providers to enroll in the provider enrollment chain and
ownership system, and the deadline has effectively passed
although you haven't started rejecting the claims. In your
testimony you said that over 800,000 providers have enrolled.
Do you have any idea how many of those are minorities or how
well those practicing in poor or rural areas are represented?
Many minority doctors, for example, practice in poor
communities, and Medicare and Medicaid make up a large part of
the patient's payment form. So what special outreach, if any,
has been done or is being planned and do you plan to track
enrollees by racial, ethnic, geographical or any other data?
The Affordable Care Act has placed a lot of emphasis on
diversifying our work force reaching out to under represented
minorities and making sure that the programs reach rural areas.
Dr. Budetti. Dr. Christensen, I am not aware that we have
any data on the backgrounds, demographic backgrounds, of the
enrollees to that extent. I do know that we are making major
efforts to conduct outreach to all the providers who are
required to enroll and to improve our systems to be able to
handle the enrollments more efficiently, and I will be
delighted to look into that issue and see whether there is an
opportunity for us to do exactly what you suggest.
Mrs. Christensen. My office will be working with MMA and
some of the other organizations to try to make sure that they
understand some of the provisions and are able to take
advantage of the benefits. Mr. Levinson, as a physician who
interacts with pharmaceutical reps during my practice, although
it was a while ago, I am interested to know what would be
considered a transfer of value, transfer of value, sample meds
which we use to help poor people get their medications, pens,
trinkets, CMEs with a meal, none of those really influenced me
and I am sure don't influence the majority of providers who are
really just trying to do what is best for their patients and
help them to get a better health outcome. So what do you think
would be considered a transfer of value which is required to be
reported under Section 6002?
Mr. Levinson. I would respectfully ask that my counsel
provide you a legal definition, and I say that in part because
some of the examples that you were alluding to based on your
own practice and experience don't strike me as the kinds of
things that are actually being targeted by that law, so I think
it would be helpful to get not my off the cuff, off the top of
my head, definition of that but for you to get our counsel's
explanation of what exactly that includes.
Mrs. Christensen. Thank you. And I guess, Mr. Budetti, you
talked a little about the outreach to beneficiaries, and I
remember beneficiaries getting their notices of information
from Medicare and coming in and my having to sit down and
interpret them for them. Again, you have a lot of people who
don't have a lot of education working in low level jobs who are
now Medicare beneficiaries and are going to have a lot of
difficulty not only understanding the information that is sent
out but even going through their bills. And they have such an
important role to play along with both of your offices and the
Department of Justice so how do you plan to help these
beneficiaries understand what their role is and how do you plan
to reach them?
Dr. Budetti. Dr. Christensen, when I first started thinking
about how we were going to go about this, I asked my colleagues
if any of them had tried to read their explanation of benefits
recently.
Mrs. Christensen. It hasn't changed.
Dr. Budetti. And I was reassured that that was a
challenging task to put it mildly. So one of the first things
that we did was to start working with Medicare beneficiaries to
have focus groups and specifically work with them on how to
make the Medicare summary notices more user friendly and more
readable, and we also want to highlight in the summary notices
what we are looking for, what we want them to look for by way
of potential problems. So we are working on it on that end to
try to get the documents that we are sending to them to be more
usable, but we are also working, as I mentioned, with the
programs that are in place, the Senior Medicare Patrol, who
educate beneficiaries, and it is a train the trainer approach
where they will go out. So we are addressing this, I think, on
2 fronts and I am optimistic that this will pay off.
Mrs. Christensen. Thank you. Thank you for your answers.
Thank you, Mr. Chairman.
Mr. Pallone. The gentleman from Maryland, Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman. There is a good
piece of legislation on the floor today, H.R. 6130, the
Strengthening Medicare Anti-Fraud Measures Act of 2010, which
will give you all some additional tools in terms of combating
fraud. In particular, this would provide more clarity on the
rules for excluding individuals and companies from the program
based on findings of fraud and associations they have with
companies that have been fraudulent, and I just wanted to make
sure for the record I assume you all are very supportive of
this additional set of tools.
Mr. Levinson. Mr. Sarbanes, we don't explicitly endorse
bills but I do want to note that 6130 closes a statutory
loophole that allows corporate officials to escape liability
simply by resigning their job. And current law is written in
the present tense so an executive of a corporation that engaged
in criminal fraud can evade exclusion simply by resigning
before the corporation is convicted. And 6130 would hold
responsible those individuals that are ultimately in charge of
the corporations that defraud the health care programs and
taxpayers. The legislation would also help in the shell game in
which large corporations resolve criminal liability by pleading
guilty through a shell subsidiary. Under current law if a
single entity within a chain of entities is sanctioned our
office can exclude the sanctioned entity's subsidiaries but
cannot exclude its parent or sister corporations regardless of
whether they are related entities or operator-owned by the same
people. So by reaching affiliated entities the legislation will
provide new incentives to corporations to promote compliance
and police the activities within their corporate families.
Mr. Sarbanes. Great. Thank you for those comments. Let me
ask you this question. There was a discussion about
administrative overhead and I assume that when it comes to
combating fraud both prevention measures would be part of
administrative overhead as well as the pay and chase or really,
I guess, the chase element of it, right, is going to be counted
as administrative overhead, would it not?
Dr. Budetti. I think that is an important consideration,
Mr. Sarbanes. We have to take a look at the entire spectrum of
what it will take on the one hand to implement these provisions
and on the other hand where the savings will be in terms of
things that we might not have to do down the road.
Mr. Sarbanes. So it is conceivable that the administrative
costs, the net administrative costs, could go down if you are
more effective in the prevention side of things and have to
spend less money chasing folks after they have been paid. That
is, I guess, the point I was making. The other thing was
Congressman Shimkus raised an interesting point which is, you
know, comparing the overhead and administrative costs on the
private side with the public side in Medicare, and, you know,
noted that there is sort of the evilness of the insurance
companies in terms of their administrative costs as often
pointed to by the critics as the way the insurance companies
operate. My own sense, and I am not asking you to necessarily
respond to this, but my own sense is that the evilness is not
so much that they have got good warranted prevention efforts on
the front end that may add something to their administrative
costs, it is that with respect to providers that have already
been vetted and are providing legitimate services and are
legitimate providers that there is a whole part of the
operation that is dedicated to denying payment and wearing
those folks down, and that actually consumes a tremendous
amount of administrative costs that don't have to be part of
the equation.
I am going to run out of time in about a minute, so let me
ask you something else. What amount of the fraud, would you
say, is attributable, saying you can quantify it at all, to
providers that are just completely non-existent? In other
words, it is just a paper provider, right, who managed to get
hold of a provider number and has figured out a way to
completely create out a whole cloth of documentation and other
things that get submitted to be paid versus--and in that case
you are talking about harming the system and harming
beneficiaries in an indirect way and the huge amount of dollars
that could be going for legitimate services are going to non-
existent providers, so there is that category of fraud and
abuse. Versus situations where the provider exists but they
really set up shop to push through services that are
unnecessary in which case you are talking about a direct effect
on the patient as a result of that fraudulent activity because
they are being put through tests and other things that they
don't need. Do you have sense of kind of the percentage in each
of those areas?
Mr. Levinson. Quite honestly, Mr. Sarbanes, I cannot give
you percentage. Health care fraud is perpetrated on the street,
in corporate 500 offices, by doctors, by pharmacies, by
beneficiaries, but of course the great majority of all of those
categories are not engaging in health care fraud, but we see it
pop up in such a wide variety of context it is rather difficult
to be able to sort out given that----
Mr. Sarbanes. Well, I am out of time.
Mr. Levinson. But I would like to finish by noting that
when, and I made allusion to this earlier, during the year
after our strike force work in south Florida DME billing went
down by 63 percent, and it is so crucial to get control of
enrollment because enrollment fraud is the kind of problem
where people masquerading as health care providers are getting
into the program. Take care of the enrollment issue and
unquestionably you have resolved a certainly important
percentage. I can't give you the number but a significant
problem has been eliminated.
Mr. Sarbanes. Thank you.
Mr. Pallone. Thank you. Let me thank both of you. I mean,
obviously, this has been very helpful to us.
Mr. Shimkus. Mr. Chairman.
Mr. Pallone. Yield to the gentleman.
Mr. Shimkus. This has been vetted to the majority, another
letter in support of Peter Roskam's bill. If we could submit
that for the record, I would appreciate it.
Mr. Pallone. Without objection, so order.
[The information appears at the conclusion of the hearing.]
Mr. Pallone. I just wanted to thank you because I think
this has been very helpful, not only in terms of what you are
doing under the health care reform bill but other ideas that
might be useful. We had the two members of Congress testify
before and they have some legislation. I guess Ron Klein's or
part of it is actually on the floor today. That is what Mr.
Sarbanes was talking about, so this is helpful to us as we move
forward. Thank you very much. As you notice, some members had
asked some questions and you may get additional ones within the
next 10 days, and we would ask you to try to get back to us
with a response as soon as possible.
But without any other objection, this hearing of the
subcommittee is adjourned.
[Whereupon, at 12:10 p.m., the Subcommittee was adjourned.]
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