[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


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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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

                              ----------                              
                                                                   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.]
    [Material submitted for inclusion in the record follows:]

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