[Senate Hearing 111-634]
[From the U.S. Government Publishing Office]
S. Hrg. 111-634
A PRESCRIPTION FOR WASTE: CONTROLLED SUBSTANCE ABUSE IN MEDICAID
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HEARING
before the
FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
INFORMATION, FEDERAL SERVICES, AND
INTERNATIONAL SECURITY SUBCOMMITTEE
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
of the
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 30, 2009
__________
Available via http://www.gpoaccess.gov/congress/index.html
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware JOHN McCAIN, Arizona
MARK L. PRYOR, Arkansas GEORGE V. VOINOVICH, Ohio
MARY L. LANDRIEU, Louisiana JOHN ENSIGN, Nevada
CLAIRE McCASKILL, Missouri LINDSEY GRAHAM, South Carolina
JON TESTER, Montana ROBERT F. BENNETT, Utah
ROLAND W. BURRIS, Illinois
PAUL G. KIRK, JR., Massachusetts
Michael L. Alexander, Staff Director
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Trina Driessnack Tyrer, Chief Clerk
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SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION,
FEDERAL SERVICES, AND INTERNATIONAL SECURITY
THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan JOHN McCAIN, Arizona
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri JOHN ENSIGN, Nevada
ROLAND W. BURRIS, Illinois
John Kilvington, Staff Director
John Collins, Professional Staff Member
Bryan Parker, Staff Director and General Counsel to the Minority
Deirdre G. Armstrong, Chief Clerk
C O N T E N T S
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Opening statement:
Page
Senator Carper............................................... 1
Prepared statements:
Senator Carper............................................... 31
Senator McCain............................................... 34
WITNESSES
Wednesday, September 30, 2009
Gregory D. Kutz, Managing Director, Forensic Audits and Special
Investigations, U.S. Government Accountability Office.......... 6
Penny Thompson, Deputy Director, Center for Medicaid and State
Operations, Centers for Medicare and Medicaid Services......... 8
Ann Kohler, Executive Director, National Association of State
Medicaid Directors............................................. 10
Joseph Rannazzissi, Deputy Assistant Administrator, Office of
Diversion Control, U.S. Drug Enforcement Agency, U.S.
Department of Justice.......................................... 12
Alphabetical List of Witnesses
Kohler, Ann:
Testimony.................................................... 10
Prepared statement........................................... 67
Kutz, Gregory D.:
Testimony.................................................... 6
Prepared statement........................................... 36
Rannazzissi, Joseph:
Testimony.................................................... 12
Prepared statement........................................... 72
Thompson, Penny:
Testimony.................................................... 8
Prepared statement........................................... 52
APPENDIX
Questions and responses for the Record from:
Mr. Kutz..................................................... 79
Ms. Thompson................................................. 86
Ms. Kohler................................................... 89
Mr. Rannazzisi............................................... 91
Charts submitted for the Record by Senator Carper................ 93
A PRESCRIPTION FOR WASTE: CONTROLLED SUBSTANCE ABUSE IN MEDICAID
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WEDNESDAY, SEPTEMBER 30, 2009
U.S. Senate,
Subcommittee on Federal Financial Management,
Government Information, Federal Services,
and International Security,
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 3:13 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Subcommittee, presiding.
Present: Senator Carper.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. The hearing will come to order.
Thank you for your patience. It is one of those days that I
wish, as I have talked about in years past, about cloning
people, so I could be in two places at once.
Actually next door in the Hart Building, we are marking up
health care reform legislation in the Finance Committee, and I
would very much like to be there. I need to be here, but I also
want to be there. The topics of what we are doing over there
and actually what we are going to be talking about here kind of
overlap, so there is a fair amount of synergy.
Sometimes I joke that until we get this cloning thing down
pat, so I can be in two places at once, what we ought to do is
use cardboard cutouts. I joke about getting the cardboard
cutout, not the kind that stands up, but the kind that you
could sit down.
Then I could cut out the mouth, my mouth in the cardboard
cutout. I could sit here, and somebody on my staff could be
right behind the cardboard cutout and speak the words: The
Committee will come to order and next witness and stuff like
that.
At the end, folks in the audience would probably say, ``He
seemed kind of stiff today.''
We decided not to pursue that. So I will have to ask you to
bear with me.
We are going to start voting on the floor around 4:30 p.m.
So my goal is to have a chance to hear from all the witnesses
and ask some questions and get some answers. Probably one or
two of our colleagues will show up as well.
Over the past several months, the American people and those
of us in Congress have engaged in an unprecedented conversation
about our Nation's health care system. In fact, it may be, I
think, the most important issue that I will work on during the
time that I am privileged to serve here in the U.S. Senate.
While there are a few things that we disagree on, and the
media is always very good to focus on those, I think almost
everyone agrees that our system is broken, as it is. We spend
more and more money on health care than any other country. We
do not get better results. We could demonstrate in a lot of
cases, we do not get better results. A lot of folks do not have
health care coverage at all.
We can do better than that.
The focus for me has been, and continues to be, not just
extending coverage to people who do not have it, not just
improving the quality of health care, but making sure that as
we improve the quality of health care, improve outcomes, we
actually rein in the growth of costs.
When you have a country where we are spending almost 16,
17, 18 percent of our GDP for health care, then I think the
next closest country is maybe 10 percent of GDP. That isn't
good. And, when our health care costs are growing by two or
three times the rate of inflation and most other countries are
not, that isn't good either.
I have a chart over here that our staff member, John
Collins, has prepared for us. As you can see, we look at health
care expenditures per person. We go back to about 1960, and we
run it up at least through 2007.
According to the information, I think they are using the
Centers for Medicare and Medicaid Services (CMS) as the source,
but we start in 1960, with about $148.\1\
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\1\ The chart referred to appears in the Appendix on page 95.
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Today, the idea that we are spending more than $7,400 or
$6,400 or something in between, a huge amount of money--the
idea that if we continue to go ever upward, we are doomed. We
are not only doomed at the Federal level with Medicare costs
and Medicaid costs. The States are in huge trouble, and our
employers are in trouble, so are a lot of folks who do not have
coverage today and, frankly, will not have coverage in the
future if we do not do something about it.
While there are a number of reasons for the rise in health
care over the past couple of decades, it is clear that
prescription drugs are one of the main drivers of this
increase.
We have another chart here,\2\ and we look at the average
cost of pharmaceuticals per person, starting again in 1960,
about $14 for every one of us.
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\2\ The chart referred to appears in the Appendix on page 94.
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It is hard to believe, but as 2007 was coming to an end, we
were between $700 and $800 in prescriptions per person, and
that is obviously an unsustainable increase. I am told it is an
increase of about 740 percent. That is just not sustainable.
The way medicine is practiced today has changed over time,
as we know. Drugs are now offered to patients who just a few
years ago may have been recommended for surgery or received no
treatment at all. The whole new generation of painkillers has
been developed to bring comfort to patients who, before, may
have had to simply live with their pain.
Their benefits have been proven but so have some of their
potential dangers, and that is the dangers of the painkillers.
While these drugs bring relief, they also have the potential
for patients to become dependent or even addicted to their
powerful effects.
The next chart gives us a chance to look at the growth from
1994 to 2004.\1\ During this period of time, the population
grew by about 12 percent. Use of drugs grew by about 68
percent, and the abuse of drugs grew by about 80 percent.
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\1\ The chart referred to appears in the Appendix on page 93.
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More Americans abuse prescription drugs than the number who
have used cocaine, heroin, hallucinogens, Ecstasy and
inhalants, all combined.
The Drug Enforcement Administration classifies drugs that
are most likely to be abused into a specific category they call
controlled substances, a term we have all heard.
A few months ago, we asked the Government Accountability
Office to see whether some Medicaid beneficiaries might be
abusing the system to obtain these powerful drugs to fuel their
own addictions or maybe to sell those drugs on the street.
GAO investigated controlled substance prescription claims.
They looked at five States. They looked at North Carolina. I
think they looked at California, Texas, New York, and Illinois.
In total, those States, if you add up their populations, it is
about 40 percent of our Nation's population. I think they also
made up about 40 percent of the controlled substances claims
that were paid for by Medicaid.
What GAO found were tens of thousands of Medicaid
beneficiaries and providers involved in fraudulent or abusive
purchases of controlled substances through the Medicaid
program.
GAO found three major sources of fraud and abuse involving
controlled substances.
The first included beneficiaries engaged in a practice
commonly known as doctor-shopping. Over 65,000 Medicaid
beneficiaries in the five states that GAO examined were going
to six or more doctors for the same type of controlled
substance. In one case, GAO found two beneficiaries working
together to acquire Oxycodone, a powerful prescription
painkiller, from over 25 prescribers and nine different
pharmacies. In these types of cases, beneficiaries were either
feeding their addiction or selling the extra pills on the
street.
Drug dealers made the profit while guess who floated the
bill--Medicaid. And, who is Medicaid? Well, it is us. The
States pay basically about half of the cost and the Federal
Government the rest.
Fraud and abuse of the Medicaid system also appears to be
going on beyond the grave. Comparing Medicaid claims to Social
Security data, GAO discovered thousands of controlled substance
prescriptions were received by dead beneficiaries or they were
written by dead doctors. In one case, a beneficiary submitted a
Medicaid application using the Social Security number of a
person who died in 1980. This beneficiary stayed on the
Medicaid rolls for 3 years and during that time received
thousands of controlled substance pills and over $200,000 in
medical treatment.
GAO's report also found more than 65 doctors and pharmacies
that the government knew were bad apples but were not taken out
of the Medicaid system. Providers who were barred from Federal
health care programs for fraud and abuse convictions were still
writing or filling prescriptions through Medicaid. In one
specific case, a physician who had been banned after being
convicted for writing fraudulent controlled substance
prescriptions was still having his prescriptions paid for by
Medicaid nearly 2 years after the incident.
The problems outlined in GAO's report have fairly simple
solutions that, in many cases, already exist. Proper data-
sharing agreements and basic fraud prevention controls would go
a long way in stopping much of the abuse that we will be
discussing here today.
Unfortunately, each State has developed its own individual
approach without regard for the best practices and models
available to them, and this has resulted in programs full of
holes.
It is clear that the Centers for Medicare and Medicaid
Services needs to do a better job of providing guidance and
regulatory enforcement for the States. At the same time, States
need to take greater responsibility for preventing and rooting
out fraud, waste, and abuse from their own backyards.
As a recovering governor, that is how I describe myself, a
recovering governor, I understand the unique challenges that
come along with running a State Medicaid program.
And, as many of you know and have heard me say before, if
it is not perfect, make it better. That is one of my core
values. We all share a responsibility to do just that with
Medicaid.
GAO's findings are troubling, and I look forward to an
honest and frank discussion here today about what needs to be
done to make sure that these abuses do not continue and to make
sure that we recover some funds here for Federal taxpayers and
for State taxpayers and reduce the likelihood that we will be
tapped again.
As a member of the Finance Committee, we have had a lot of
discussion about how to pay for health care reform. I share the
President's belief that any plan we pass in Congress this year
should not add a dime to our deficit going forward. It actually
should reduce deficits. One of the ways that we can do that is
through cutting the fraud, waste, and abuse in our current
public health care systems.
We can go a long way in paying for health care by
eliminating this sort of abuse we will be discussing today.
This is just the tip of the iceberg. There is a whole lot more
that goes on beyond this.
Before I close and turn to our witnesses, we have one more
chart I want us to take a look at. I used to be the father of
two teenage boys. One is now still 19; the other is 21. But we
learned that one out of five teenagers has abused controlled
substances--one out of five.\1\ That is a number that troubles
me, and my guess is it troubles everybody in this room, as it
should.
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\1\ The chart referred to appears in the Appendix on page 96.
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The dangers of prescription drug abuse have become better
known in the past few years as celebrities and other public
figures succumb to their lethal effects. However, less widely
publicized are the millions of American teenagers who abuse the
same drugs. Unfortunately, they are doing so at a rate that
causes alarm for me, and I suspect for many others.
I make this point so it is clear, while there is a
financial cost to this fraud and abuse of controlled substances
paid for by Medicaid, let's not forget there is a human cost as
well. Prescription drug abuse is the fastest growing addiction
in the United States today. The difference between a street
drug like cocaine and a prescription pain pill is that in many
cases the Federal Government is paying to feed this addiction
with taxpayer money. Aside from our financial responsibilities,
we have a social responsibility to ensure that our public
health care system is not used to further intensify and
subsidize a public health crisis.
With that in mind, I want to thank our witnesses for
joining us today. I especially want to thank GAO for the work
that you all have done to help put a big spotlight on this
problem and this challenge that we can confront.
Our first witness today is from GAO, Greg Kutz. He has been
before us on other occasions. He is the Managing Director of
GAO's Office of Forensic Audits and Special Investigations
unit. He has served GAO since 1991 and is responsible for
overseeing high-level forensics audits and investigations on
fraud, waste, and abuse in our National Government. He has
plenty of work to do, and we are glad you do it. Thanks very
much for joining us.
Our second witness is Penny Thompson, Deputy Director for
the Center for Medicaid and State Operations within the Centers
for Medicare and Medicaid Services (CMS). Ms. Thompson recently
joined CMS after 8 years in the private sector and has over 20
years of direct Medicare and Medicaid program experience.
We thank you for your service and welcome you back to the
government, at least for today.
I also want to acknowledge the presence of Ann Kohler,
Executive Director of the National Association of State
Medicaid Directors. Ms. Kohler has spent over 20 years in the
health care administration field, including 4 years as a
Medicaid Director for the State of New York, the largest
Medicaid agency in the country.
One of your colleagues or former colleagues from New York
was actually very helpful in helping us fashion an amendment
that helped us, in the health care markup, helped us actually
change the incentive system to better incentivize States to
work with the Federal Government to do post-audit recoveries
particularly in cases of fraud. So we can go out and get that
money and share the money with the States and with the Federal
Government in ways that made sense for both the State and the
Federal Government.
New York, through Medicaid programs, past and present, is
actually helping us again today.
The final witness is Joe Rannazzisi, Deputy Assistant
Administrator for the Office of Diversion Control in the U.S.
Drug Enforcement Administration (DEA). Mr. Rannazzisi began his
career as a special agent with DEA in 1986. In his current
position, he oversees major pharmaceutical investigations for
the Agency.
And, we thank you for joining us. We thank all the
witnesses for joining us.
I think we have indicated to you that we ask you to hold
your statements to about 7 minutes. If you run a minute or so
beyond that, we will let you slide. We will go start voting, a
series of three or so votes, at 4:30. I want to make sure
everybody has a chance to present their thoughts and give me a
chance to ask some questions and give you a chance to answer
them.
Again, Mr. Kutz, you are welcome to proceed. Your full
statement will be made a part of the record. So, please
summarize as you see fit. Thanks.
And, again, to all of you, thank you for being here. This
is important. It is not important just for our kids, and it is
important for them--not just important for health care concerns
in this country, that is important.
But also in terms of in a day and age when you are running
huge budget deficits, where we just finished the last 8 years
running up more debt than we did in the previous 208 years of
our Nation's history, and in a year when we are on track to run
up the biggest budget deficit ever, and looking ahead for the
next 10 years we are looking at the prospect, if we do nothing,
of accumulating another $9 trillion worth of debt, it is
important that we look under every rock and find ways that we
are spending money inefficiently, inappropriately or, in some
cases, fraudulently and stop that and recover the money as much
as we can.
This is just a great place to do that kind of work. So we
appreciate your help in enabling us to do that. Mr. Kutz.
TESTIMONY OF GREGORY KUTZ,\1\ MANAGING DIRECTOR, FORENSIC
AUDITS AND SPECIAL INVESTIGATIONS, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Kutz. Mr. Chairman, thank you for the opportunity to
discuss the Medicaid program.
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\1\ The prepared statement of Mr. Kutz appears in the Appendix on
page 36.
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Today's testimony highlights the results of our
investigation into fraud and abuse related to controlled
substances paid for by Medicaid. My testimony has two parts.
First, I will discuss the results of our investigation, and,
second, I will discuss our recommendations.
First, we identified Medicaid dollars fraudulently used by
drug addicts and for the sale of addictive drugs on the street.
Specifically, 65,000 individuals received prescriptions for the
same controlled substance, as you mentioned, from six or more
doctors. And, as you also said, this practice is referred to as
doctor-shopping.
Our testimony today focuses on an investigation of five
States and 10 frequently abused controlled substances. Medicaid
paid $63 million for these prescriptions. We recognize that
some of the 65,000 individuals may not have been doctor-
shopping. However, we believe the $63 million estimate is
understated. For example, this amount excludes the substantial
cost of unnecessary office visits and trips to emergency rooms
by addicts to get their drugs.
Examples of doctor-shopping that we found include an
Illinois drug felon using her child to obtain ADHD medication
from 25 doctors. She admitted her addiction to Ritalin and
using her child in a doctor-shopping scheme to satisfy this
addiction.
A New York woman using a scheme involving 10 doctors to
satisfy her addiction to Ambien. The monitor on my left,\1\ and
for those in the audience, on my right, shows monthly
prescriptions from two of these doctors that, as you can see,
were filled within 5 days.
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\1\ The chart referred to appears in the Appendix on page 00.
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And, an Illinois woman selling Vicodin and Duragesic
patches on the street. One user of these drugs died of an
overdose. The prescribing physician has been indicted for
contributing to the fatal overdose of at least three
individuals.
Again on my left shows the street values of Ambien,
OxyContin and Adderall as reported by the National Drug
Intelligence Center.\1\ As you can see, the sale of just one
prescription of OxyContin can result in a profit of over $2,700
for a drug dealer.
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\1\ The chart referred to appears in the Appendix on page 00.
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As an estimated $87 billion of the stimulus package
represents increased Federal payments for Medicaid. These
increased payments started retroactive to the beginning of
fiscal year 2009. Unfortunately, it appears that fraud and
abuse related to several of our cases continued into fiscal
year 2009. As a result, millions of dollars of stimulus money
is likely paying for the types of fraudulent doctor-shopping
schemes that I just described.
We also identified 65 Medicaid providers and pharmacies
barred from Federal health care programs that wrote or filled
$2.3 million of controlled substance prescriptions.
Examples include a New York physician barred for submitting
false Medicaid claims. This physician prescribed 350,000
controlled substance pills to 773 individuals, costing
$764,000.
And, a California physician barred for incompetence,
malpractice and negligence. This physician prescribed 142,000
controlled substance pills to 600 individuals, costing
$109,000.
We also mentioned that Medicaid, as you said, paid for
prescriptions written either for dead beneficiaries or
submitted by pharmacies using the names of dead doctors.
For example, one California man was accepted into the
program, using the identity of the individual that the monitor
shows he died in 1980.\2\ Medicaid paid for $200,000 of claims
for this identity theft scheme, including prescriptions for
Vicodin.
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\2\ The chart referred to appears in the Appendix on page 00.
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And, in New York, a man fraudulently received 1,000
Methadone, Xanax, and other pills that were prescribed for his
deceased wife.
The problems we identified were caused by weaknesses in the
Medicaid fraud prevention program. One of the key controls is
to make sure that the known fraudsters and criminals are
properly excluded from this program. However, we found that
none of the States screen providers or pharmacies against the
GSA Federal Debarment List.
The 65 providers and pharmacies that should have been
excluded from Medicaid had felony convictions for controlled
substances, welfare fraud, grand theft, grand larceny, and
Medicaid fraud. We recommend that the States periodically scrub
their data to make sure that these fraudsters are kept out of
the Medicaid program.
We also found that Medicaid paid for controlled substances
for 1,800 individuals after they had died. Medicaid also paid
for prescriptions submitted using the names of 1,200 dead
doctors. We recommend that beneficiary and provider data be
periodically matched against death records and the results used
to prevent fraud.
In conclusion, our work clearly shows fraud and abuse in
the health care program designed to help our Nation's poorest
and most vulnerable citizens. Perhaps more troubling is the use
of taxpayer dollars to finance drug abuse in our Nation. I am
hopeful that CMS and the States will use the results of this
investigation to improve their fraud prevention programs.
Mr. Chairman, that ends my statement, and I look forward to
your questions.
Senator Carper. Good. Thanks for that statement, Mr. Kutz,
and thank you very much, to you and your colleagues at GAO who
have done this work and all five States to help point out the
very troubling findings, but not just to point out the
findings, but also to help point out a way that we can attack
them.
Thanks so much.
Mr. Kutz. Thank you.
Senator Carper. Ms. Thompson, please proceed. Again,
welcome.
TESTIMONY OF PENNY THOMPSON,\1\ DEPUTY DIRECTOR, CENTER FOR
MEDICAID AND STATE OPERATIONS, CENTERS FOR MEDICARE AND
MEDICAID SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Ms. Thompson. Thank you, Mr. Chairman. I am very pleased to
be here and have an opportunity to sit with my colleagues and
discuss this important topic, and I thank GAO for the work that
it has done. We have agreed with all the GAO recommendations
and look forward to working with the Agency as we implement
those corrective actions.
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\1\ The prepared statement of Ms. Thompson appears in the Appendix
on page 52.
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I have submitted written testimony for the record, but in
my oral remarks I would like to draw your attention to what
are, I think, the most critical points I would like to make
about protecting the Medicaid program from fraud and abuse, not
only with respect to controlled substances but also with regard
to the hundreds of billions of dollars we pay out every year
for health care services of all kinds.
First, commitment is critical. This Administration has
placed program integrity at the very center of its management
agenda. The Secretary of Health and Human Services (HHS) has
stressed to us that we literally cannot afford to allow scarce
health care dollars to be diverted to unproductive purposes or
for unlawful means. She has asked us to step up our game and
work closely with our Federal and State colleagues to ensure
that we do everything that we can to prevent, detect, and
respond to fraud and abuse in the Medicaid program.
Second, like any other program expending hundreds of
billions of dollars each year, virtually millions and millions
of transactions, tens of millions of beneficiaries, the last
data that I looked at showed that we had about 60 million
unique eligible individuals served by Medicaid in fiscal year
2007. We are making payments to very large numbers of providers
and entities, and we have the challenge of protecting that
program from fraud and abuse, and it is substantial.
In order to be successful, it is critical for the Federal
and State governments to work effectively together. States will
always be the first line of defense, and they have obligations
to meet in that regard. At the same time, the Federal
Government can do a lot to help.
We have had some good success in using Federal dollars
designated for Medicaid program integrity, to support seminars
and training for both State and Federal staff, focused on
Medicaid program integrity.
We have sent Federal employees onsite to work alongside
State staff as they addressed specific vulnerabilities or
problems within their State borders.
We spent time and effort reviewing State processes and
procedures and providing feedback to States on their
performance.
We have invested in data analysis and data-mining and
algorithm development to identify areas in which we think we
can work more effectively with States to address
vulnerabilities.
We are also a few weeks away from releasing our 2008
Medicaid Payment Error Measurement. This is the annual
measurement that we do, that shows us where we stand with
regard to payment errors in Medicaid, and that is an important
benchmark for us to use as we look at where we need to promote
program improvement, particularly with regard to payment
accuracy.
We look forward to accelerating our analysis and audit
activities to help inform and expand State efforts and to
testing some new ideas and tools with our State partners.
Third, a number of the issues that GAO raises in this very
good piece that they are releasing today are really examples of
systematic issues that we have in the larger Federal and State
enterprise, in which critical data are housed inside various
databases, sometimes different formats and different data
models and sometimes different fields, codes, and definitions.
While we can ensure that we are accessing this data and
incorporating into our payment systems today, our ultimate
challenge is to unlock that data from their silos and to enable
the exchange of that information across the enterprise in an
automated and real-time or near-time fashion.
Within Medicaid, CMS and the States have been working on
systems modernizations to get our processing environments more
modular, more standardized and more interoperable, so we can
more easily set up interfaces to and from internal and external
data sources and feed that data into the production flow,
eliminating the need for manual downloads, data
transformations, and rekeying.
Fourth, the specific issue of controlled substances
illustrates an area in which we have to pay close attention
nationally. To the extent that some of the health care products
we pay for on behalf of beneficiaries can be abused or have
street value, we must be especially vigilant. I have noted in
my testimony that we plan some additional actions to ensure
that we are all paying very strict attention to the
possibilities of doctor-shopping and diversion, and we look
forward to talking more with GAO, DEA, and NASMD about their
ideas.
I look forward to today's hearing and continuing our
conversations in the future, and I would be happy to answer any
questions you might have.
Senator Carper. Great. Thanks so much for that testimony
and, again, for joining us today. Ms. Kohler, you are
recognized.
STATEMENT OF ANN KOHLER,\1\ EXECUTIVE DIRECTOR, NATIONAL
ASSOCIATION OF STATE MEDICAID DIRECTORS
Ms. Kohler. Good morning and thank you for having me here.
I represent the 50 States, the District of Columbia, and the
territories Medicaid programs.
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\1\ The prepared statement of Ms. Kohler appears in the Appendix on
page 67.
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When discussing fraud, waste, and abuse in Medicaid, it is
really important to remember that it is a joint program. The
State and the Federal Government pay for the program.
And, we also welcome GAO's work and because States are just
as anxious to reduce these problems as the Federal Government
is, as Ms. Thompson points out, we cannot afford to spend a
single State dollar in error, or Federal dollar. So we are very
anxious to work together on this.
Abuse of controlled substances clearly is not just a
Medicaid issue. Some of the data you pointed out earlier shows
that it is a real national issue. We want to work with our
Federal partners and the other insurance companies to help
reduce these problems.
Medicaid has spent over $200 million, the States, in their
fraud activities, but they recovered over $1.3 billion.
Senator Carper. For every dollar spent, how much did we
recover?
Ms. Kohler. Usually, it is like a one in 10 ratio overall.
I just want to share a few activities that States have
done. Of course, I agree with you totally that it is not
perfect. We are going to continue to work on it.
The first is tamper-resistant prescription pads. I was also
Medicaid Director of New Jersey, and this was found to be an
incredibly effective tool, and we thank Congress for putting it
into the Deficit Reduction Act. Having a prescription pad that
cannot be erased or whited out and copied has been very
effective in New Jersey. I think we would certainly hope that
Congress would consider, right now it is only a mandate for
Medicaid, but in New Jersey we implemented it for all payers,
and it really has been very helpful.
We are also doing a lot of work on E-prescribing, to have a
computer system do a lot of the work, and we have drug
utilization boards that will match against these to prevent the
kinds of things that you saw where people were able to go to
multiple doctors and get multiple prescriptions filled.
We have secret shoppers that go in and present, make
believe they are a client and try and identify problem doctors.
We do lock-in programs where we limit the client to one
doctor and one prescription if we have found that they appear
to be doctor-shopping.
Data-mining is critical to our ability to identify fraud,
waste and abuse, and we will expand our use of that. And, we
want to work, as Ms. Thompson said, each data silo, we need to
break them down and have them work together and find better
ways to work across States and share our data.
But we still have issues and things we have to work on. We
thank CMS for the Medicaid Integrity Program. The training that
they have given to the States has been incredibly helpful to
us.
We recognize that State budgets are very strained right
now. As I am sure 48 States are in deficit, which makes it
difficult to hire the auditors that we need to hire. Again, we
thank the Medicaid Integrity Program for providing some Federal
staff to do some of this work.
Senator Carper. Let me interrupt again. You mentioned
hiring State auditors. Is any of the collection work being done
on a contingency basis?
Ms. Kohler. No.
Senator Carper. OK.
Ms. Kohler. We have Federal rules on contingency.
Senator Carper. We will come back to that. Thank you.
Ms. Kohler. OK. One issue that gets raised frequently, and
I spoke to your staff about, is what we affectionately call the
60-Day Rule which says that States need to give the Federal
Government their share of any overpayment within 60 days of
identifying it even if they can never collect it. That has had
a bit of a damper on States because they are concerned.
Senator Carper. I bet it has. Somebody should do something
about that.
Ms. Kohler. We hope so, and Senate Finance is talking
about.
Senator Carper. No, we are not just talking. We actually
adopted the amendment.
Ms. Kohler. Oh, wonderful.
Senator Carper. We just did it earlier this week.
Ms. Kohler. Well, thank you very much because that is a
very big issue for States. So we are very glad.
Senator Carper. It is hard to say to States, you ought to
go out and follow up on fraudulent cases and where you think
the money is being fraudulently misspent. By the way, even if
you have not concluded the investigation, you have not
recovered the State's share, you have to cough up the Federal
share after 60 days. We should not be surprised we do not get a
lot of money by doing that.
Ms. Kohler. Right. Let me give you an example of one State.
They have been very aggressive in suing manufacturers over the
issue of best price when Medicaid is supposed to get the best
price, and they have won some pretty significant judgments
against them, but they are all on appeal. So probably the State
will not be getting any money anytime soon, but, under the
rule, they have to give the Federal Government half of these
very large judgments.
So we thank you very much for that change in the 60-Day
Rule.
So, in conclusion, let me just say that----
Senator Carper. Did you say, in collusion?
Ms. Kohler. No. In conclusion, fraud is not just a Medicaid
issue. It is one that our health care system needs to deal with
entirely, and we are committed to working with the States and
the Federal Government and GAO to help identify ways to reduce
fraud, waste, and abuse in the Medicaid program.
So, thank you very much.
Senator Carper. Thank you. Mr. Rannazzisi.
TESTIMONY OF JOSEPH T. RANNAZZISI,\1\ DEPUTY ASSISTANT
ADMINISTRATOR, OFFICE OF DIVERSION CONTROL, U.S. DRUG
ENFORCEMENT ADMINISTRATION, U.S. DEPARTMENT OF JUSTICE
Mr. Rannazzisi. Good afternoon, Mr. Chairman. On behalf of
Acting Administrator Michelle Leonhart, I want to thank you for
the opportunity to provide testimony today regarding the
problem of prescription drug abuse, the illegal distribution of
controlled substance pharmaceutical and associated Medicaid
fraud.
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\1\ The prepared statement of Mr. Rannazzisi appears in the
Appendix on page 72.
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The mission of the DEA Office of Diversion Control is to
maintain the close system of distribution as envisioned by
Congress when it enacted the Controlled Substances Act. To
accomplish this task, DEA must balance the need to prevent,
detect, or investigate the diversion of controlled substances
and listed chemicals while ensuring there is an adequate supply
to meet the legitimate medical, commercial and scientific needs
of the country. All controlled substance diversion ultimately
weakens the integrity of the closed system of distribution.
Though DEA does not have a direct role in investigating
health care fraud, we do review paper copies of debarment
orders from CMS on a monthly basis, and we use that information
from those debarment orders to obtain voluntary surrenders of
DEA registrants or seek orders to show cause against the
registrations where appropriation.
DEA continues to review its methods of operations in an
effort to enhance its ability to help identify or prevent
fraud, waste, and abuse of resources. We work to ensure that
all of our resources are being utilized in a most efficient and
effective manner possible.
I would like to take this opportunity to discuss a few
examples of how we have developed systems that are secure,
efficient, and available for use by health care professionals
and registrants.
We have implemented an E-commerce initiative, CSOS, which
is the Control Substance Ordering System. It allows businesses
to order controlled substances electronically. The system
improves efficiency by reducing costs, errors, and paperwork
while providing a secure platform to help prevent diversion.
The system has been upgraded and now uses state-of-the-art
technology and reduces operating costs by more than $6 million
annually.
A registrant is required to report to DEA any significant
loss or theft of a controlled substance. DEA recently improved
this system to allow for a more efficient electronic reporting
system where registrants will help identify breaches in the
closed system of distribution.
We are finalizing a rule that will allow for electronic
prescribing of controlled substances. The proposed system is
anticipated to reduce errors, trim costs, and improve health
care delivery while increasing security.
And, our Office of Diversion Control is working internally
on integrating various electronic database systems that
traditionally have been stovepiped. Once completed, the total
integration of these systems will allow DEA to better identify
areas of diversion.
DEA recognizes that State also play a significant role in
curbing waste, fraud, and abuse of Medicaid reimbursements. To
assist in this endeavor, DEA makes its registrant database
available in a variety of ways:
First, registrants can perform an online check of the
current status of another registrant's DEA registration via the
DEA web site.
DEA also provides on a weekly basis a download of the
registrant database to 28 specific States that have requested
it for use in their health care fraud investigations.
Additionally, DEA provides the registrant database to the
National Technical Information Service (NTIS), under the U.S.
Department of Commerce. NTIS, in turn, sells this information
to the general public.
As pointed out by a recent GAO study, there are several
independent systems currently in use that, if paired with other
systems' agencies, may be able to better identify potential
avenues of fraud, waste, and abuse. To this end, DEA is already
working with the Social Security Administration to obtain data
that would identify deceased practitioners and reconcile that
information with DEA's registrant database.
DEA has reached out to the Centers for Medicare and
Medicaid Services for electronic access to databases that
identify individuals who have been debarred from participation
in the Medicaid program. DEA is reviewing its ability to modify
the registration process and inquire whether or not an
applicant has ever been convicted of Medicaid or Medicare fraud
and whether they have ever been currently debarred from
receiving reimbursements from Medicaid and Medicare.
Finally, representatives of DEA and HHS Office of Inspector
General have met within the last several weeks to discuss the
sharing of information as well as forging a strong
investigative partnership that involves controlled substance
diversion and health care fraud.
Although health care fraud is not specifically within the
statutory authority of DEA, these crimes are often linked to
other crimes that do fall under DEA's investigative authority.
To become more efficient and to have a greater investigative
reach, DEA is establishing a total of 62 Tactical Diversion
Squads across the United States which will be deployed in two
phases. These groups will utilize investigative talents of
diversion investigators, special agents and task force officers
from Federal, State, and local law enforcement, and State
regulatory agencies.
The primary mission of the Tactical Diversion Squads will
be to conduct criminal investigations involving the diversion
of controlled substances, pharmaceuticals, or listed chemicals.
These investigations frequently identify criminal acts that can
be the root cause of debarment actions under Title 42. These
investigations often result in criminal, civil, and
administrative action against DEA registrants.
One method that currently helps States identify the causes
of waste, fraud and abuse is the use of the Prescription Drug
Monitoring Program (PDMP). Currently, there are 33 States that
use some type of PDMP. DEA is a strong and long-supporting
advocate of the PDMP. Timely reporting prescriptions to PDMPs
and the greater use by participants within those States will
only improve the usefulness and success of such systems.
In conclusion, DEA will continue to detect, prevent, and
investigate the diversion of controlled substance
pharmaceuticals. We will continue to refine our methods and
processes to identify and address controlled substance
diversion.
I want to thank you for holding this hearing and the
opportunity to testify, and I look forward to addressing any
questions you may have, sir.
Senator Carper. Mr. Rannazzisi, thank you very much.
The first question I want to start off with is each of you,
I do not know if you have had a chance to read the testimony of
your colleagues. Some of you have, maybe some of you have not.
But let me start with Mr. Kutz. As you listened to the
comments of our other witnesses, did anything kind of pop out
to you that says, you know that makes a lot of sense and why do
we not do that or maybe that does not make a lot of sense?
From each of our three witnesses, what kind of raises its
head for you as something that maybe we should work on?
Mr. Kutz. The use of electronic records and data-sharing to
prevent the doctor-shopping. I think we saw these drug
utilization review programs in place in theory. In practice,
they did not all work as effectively as each other. In some
cases, you had information available for the pharmacist, for
example, that could have actually been used to deter people
from doctor-shopping, but they had soft edits in place, and it
was easily overridden.
Senator Carper. You said they had soft edits in place?
Mr. Kutz. In other words, it was not mandatory that you
rejected what was clear doctor-shopping, so you could override,
whereas other States had more of a hard edit where the
prescription was denied. So that issue of giving the pharmacist
a point of sale, electronic information that can determine
doctor-shopping has promise to address this issue, in my
judgment.
Senator Carper. All right. Ms. Thompson, the same question,
what did you hear from your colleagues at the witness table
that said, that is a good one?
Ms. Thompson. Well, if I can follow up on the point that
Mr. Kutz just made, data inside of silos is killing us--the
fact that people do not have access to important information
because it does not happen to reside in their own production
systems.
Senator Carper. When you say people do not have access in
their own production systems, what kind of people?
Ms. Thompson. Whether it is the pharmacist looking at the
data inside of a pharmacist's environment, whether it is a
State individual who is looking at a drug utilization review
but does not have access to the law enforcement data, whether
it is the sanctioned data that has to be gotten and pulled down
rather than simply moving automatically in the background into
the processing environment, it is one of the reasons why we are
making such significant investments in things like systems
modernization and modularity and exposing business processes so
that data can be better shared across those organizational
divisions and systems divisions.
The other thing that I would build on from Ms. Kohler is
this notion that the problems that we face in Medicaid are not
much different than the problems that we face in Medicare and
not much different than the problems that we face in private
insurance. I think that the need to collaborate
organizationally and to attack some of these problems as a
health care enterprise is also a point that I would build on as
well.
Senator Carper. All right, thank you. Ms. Kohler, same
question.
Ms. Kohler. OK. Well, I could not agree more with what has
been said already.
Senator Carper. You can say it again, if you want.
Ms. Kohler. OK. We need to build technology that can
provide real-time information to the providers, to the
patients, so that we know Ann Kohler has been to five doctors
over the past month and gotten prescriptions for these five
drugs.
We need to be able to link that data. We need to be able to
send it across State lines. And, we need to be able to find a
way to better automate matches so that we could, for example,
match Medicaid against vital statistics every month and
identify.
Senator Carper. Now do you think some States are doing a
better job of that than others?
Ms. Kohler. Some States have been able to put more
resources in it than others. I know New York has a very active
Medicaid Inspector General. New Jersey has just appointed one,
so they are a little bit further behind. But it is an area that
is very important to States. The State of Washington is very
active, and all States really want to find ways to reduce
fraud.
Electronic health records are very important to the
Medicaid directors, and a number of States have been working
diligently to implement records. I always bring up the State of
Alabama who has 98 percent of their people in their database.
Ninety-eight percent of all Alabamians are in the electronic
health record system maintained by Medicaid, so that they are
able to share information back and forth.
Senator Carper. That is pretty amazing--98 percent of all
Alabamians.
Ms. Kohler. That is very amazing.
Senator Carper. We are proud of the work we are doing in
Delaware, but I do not think we are 98 percent. That is pretty
amazing for Alabama.
Ms. Kohler. Yes. For the electronic health records.
Senator Carper. All right, Mr. Rannazzisi.
Mr. Rannazzisi. I believe that the information-sharing
piece is important, and I agree with my colleagues about the
drug utilization review.
I would like to concentrate more on the use of Prescription
Drug Monitoring Programs, though. Prescription Drug Monitoring
Programs, in the States that they are operating in, work very
well. It is the ability of a doctor to get into a system and
see if his patient is actually seeing multiple doctors within a
certain time period or visiting multiple pharmacies.
The key with the Prescription Drug Monitoring Programs is
all the prescriptions have to be placed in that program, but
all the doctors are not accessing the program. If you are a
Medicare or Medicaid doctor, maybe the time is to mandate that
because the fact of the matter is you have great systems, but
if only 5 or 10 or 15 percent of the doctors are using those
systems, it is being under-utilized.
A system like the system in Kentucky, the KASPER system, is
a perfect example, or the Ohio system, where the doctors, the
pharmacies and the regulatory boards are using the systems to
the best of their ability, and they are finding things.
Senator Carper. Who is?
Mr. Rannazzisi. Kentucky, under the KASPER system and Ohio,
I do not remember the name of their system, but those two. The
Kentucky system is basically the gold standard system within
the Prescription Drug Monitoring Programs, and Ohio has a very
good system as well.
Senator Carper. OK.
Mr. Kutz. If I could comment on that too because we saw the
doctors were not using that database, and so really if you want
to step back in the process, I said the drug utilization
reviews (DURs) because it was the last line of defense. But,
here, you could prevent the doctor from writing the
prescription in the first place which means they never get to
the pharmacy and do not have a chance to do the doctor-
shopping.
If that could ever work, which we did not see it working by
the way--if it could work, and it did not work because people
were not using it. I mean that is what we saw. It could be
better.
Senator Carper. It did not work because?
Mr. Kutz. The doctors were not looking. I mean they were
prescribing. All the doctors we interviewed said I did not know
that this person has gone to 50 other doctors, but they could
have had, in some States, the data available to see in fact
that person had gone to 50 other doctors for Ambien or
OxyContin or whatever the case may be.
So that would mean to me earlier in the process, if you
could get it done there, the prescription would not be written
in the first place.
Senator Carper. Let me go back to I do not know who it was.
Maybe it was you, Ms. Kohler. Somebody was talking about
tamper-resistant prescription pads.
Ms. Kohler. Yes.
Senator Carper. I think you were, and I think you also
mentioned the E-prescribing. There is a big piece of funding in
the stimulus package, about $20 billion.
Ms. Kohler. Yes, and we thank you for that.
Senator Carper. It is designed to help move us toward
electronic health records for a lot more folks.
To the extent that at some point in time we have a majority
of people in this country having electronic health records for
them, and we move toward closer to 100 percent, to what extent
does that help fix this problem?
Ms. Kohler. Well, I think it is going to be very helpful.
As a matter of fact, before we started, Ms. Thompson and I were
talking about that and our work together.
We thank Congress for that money that is going to be
critical to States to get them off the ground. Some States have
gotten transformation grants earlier from CMS, and they have
been working on their electronic health records, which is how
Alabama came to have such a high percent in their database.
It will give providers an opportunity, like the drug
diversion, drug monitoring program. Before you prescribe, you
will be able to see what the person has received.
So I think the first wave of them will be driven off the
claims processing systems that are in place, like Alabama's is
right now, but eventually States will get more sophisticated
and be able to add enhancements to their programs. I think it
will be very important.
Senator Carper. I was in Cleveland, Ohio, about 3 weeks ago
to visit the Cleveland Clinic, not as a patient but as a
student. My staff and I went to better understand how Cleveland
Clinic, like Mayo Clinic, like Geisinger in Pennsylvania, like
Intermountain Health and Kaiser Permanente and the big health
co-op, Group Health in Washington State, how they provide
better health care, better outcomes, for less money.
One of the things that we spent a fair amount of time
talking about was their IT, information technology, and how
they have harnessed that into the delivery of health care. They
talked about the inability of doctors.
We will say you have a patient who is seeing several
doctors in their system. Each of the doctors may be prescribing
more and more medicines, and a doctor decides to prescribe yet
another medicine. Before the prescription can be filled, their
system, the technology is such that it can actually say this is
a new drug that is being prescribed, these are the five that
this patient is already taking, and if this drug does not work
in concert with the other five, that prescription will not be
written or filled.
It would seem to me that kind of technology might really
help us in a situation where we have somebody trying to get the
same prescription filled by a bunch of doctors, dead or alive.
That could go a long ways toward fixing the problem.
Let me follow up with Mr. Rannazzisi. I want to go back to
something you were saying just a minute ago, but according to
your testimony 33 States have operational Prescription Drug
Monitoring Programs, eight more States have passed legislation
to put such programs in place. I might be wrong, but I think
that Delaware is not on either list.
In States like Delaware that apparently do not yet have
these programs, who is responsible for monitoring controlled
substances, and, in your view, what can be done to get these
monitoring programs active in every State, including the First
State. That would be Delaware.
Mr. Rannazzisi. Yes, sir. Well, I do not know. Whenever we
go out to talk to the States, the regulatory bodies, the State
associations, we always tout how wonderful the Prescription
Drug Monitoring Programs are, and there is money available.
Between the Harold Rogers Grant program and then the NASPER,
there is more than enough money available.
I think certain States just do not want to jump into the
program because one thing we hear over and over again is
privacy issues. People feel that data are somehow going to get
out to non-authorized personnel. I believe that is what
Florida's biggest problem was before they passed it, was
privacy issues.
Law enforcement in most cases does not have direct access.
I know the Drug Enforcement Administration definitely does not
have access unless we request access on a case-specific basis.
So I do not really understand why a State would not jump into
the program. It just seems like the next step to prevent
diversion, nationwide.
Senator Carper. I was just talking with our staff member,
John Collins, about finding out which States have not gotten on
board and just sending a friendly letter, maybe one that
Senator McCain would join me in signing, to the governors of
the States where they are not doing it and just encourage them
to do so. Maybe that would be helpful.
Mr. Rannazzisi. Thank you.
Senator Carper. I want to go back to financial incentives.
States are, as more and more of our witnesses said, finding it
very difficult to balance their budgets. They are running huge
deficits in a lot of cases.
We are fighting a tough battle in Delaware, and I think I
heard on the radio the other day Pennsylvania, 3 months into
the new fiscal year, still had not adopted a budget, and a lot
of States are struggling.
How do we, given the plight of States, the rising cost of
Medicaid, the inability to fund education programs and a
variety of other programs that flow from runaway health care
costs, runaway Medicaid costs, how do we better incentivize the
States to do what they need. One, to reduce the abuses that are
going on but, two, to reduce the outflow of funds that
represent their share, the 50 percent share of Medicaid costs?
How do we do this better? How do we get them to do what is
in their own best financial interest?
Obviously, one of them is the 60-Day Rule, which we have
taken steps to address and fix in the health care markup, where
now States can go up to a year to identify fraud in Medicaid,
not have to cough up the Federal share after 60 days, even when
the States do not have the money. I think that goes a long
ways, I hope, in incentivizing the States.
But, hopefully, that will be in the final bill that the
President signs into law this year. Beyond that, what do we
need to incentivize the States?
I went to Ohio State as an undergraduate. I studied
economics, not nearly enough, but one of the things that has
always intrigued me, not only as an undergrad but a graduate
student, and now to this day I have always been intrigued by
how do we use economic incentives, how do we use financial
incentives to shape good public policy behavior. As we do our
health care legislation, we are trying to find all kinds of
ways to do that.
But how do we use financial incentives, economic
incentives, to shape the kind of behavior from States or from
providers or doctors or whomever? How do we do that better?
Ms. Kohler. Well, a number of States are doing pay for
performance right now, that they are actually paying you more
money if you have a good outcome.
Senator Carper. They are paying money to whom? I am sorry.
Ms. Kohler. To the providers.
Senator Carper. And, in this case, the providers being the
doctors, the pharmacies?
Ms. Kohler. The physicians, mainly.
In the case of fraud, waste, and abuse, right now, the
Federal Government funds the Medicaid program 50-50 for their
activities. They fund the attorney general's office 75-25. So,
certainly a change of that and allowing States to have a 75-25
match would help them.
Senator Carper. I am sorry. Say that again.
Ms. Kohler. The Medicaid fraud staff in the attorney
general's office of every State, the Medicaid Fraud Control
Units are matched at 75 percent Federal dollars, 25 percent
State dollars. The same staff doing the same kind of work but
in the State Medicaid agency is matched at 50-50.
Senator Carper. OK. Now in terms of when the investigations
recover money that has been fraudulently spent or misspent and
it is recovered, is it returned to the States and is the
distribution of the recovery?
If the State and the Federal Government are 50-50 on
Medicaid, I presume half would go to each. In some States'
cases, the States are putting up 40 percent, the Federal
Government, 60 percent. I think in some cases it is as much as
70-30, Federal-State.
Ms. Kohler. That is how it is returned to them, according
to what your match rate is.
Senator Carper. Thank you.
Others talk to me about, again, using financial incentives
to shape good public policy behavior. We know what we have in
place. We know how we are trying to improve on that. What else
can we do, should we do, anyone?
Mr. Kutz. Well, I would just say that the doctor-shopping
and other things here we talked about, there is the other
savings you get if you eliminate some of this, of the trips to
the emergency rooms and the unnecessary office visits, which we
did not calculate how much those are, but they may very well be
more than the cost of the drugs.
Senator Carper. Oh, yes. Did you not mention that in your
study? I thought you did.
Mr. Kutz. Yes, I did, and I think that is important. That
is not an additional financial incentive, but if you fix some
of the doctor-shopping, you will have the added benefit of
savings with less office visits and possibly trips to emergency
rooms.
Senator Carper. That is a good point. Any other ideas,
please?
Ms. Thompson. I would also just add, following up on the
point that Ms. Kohler made.
Typically, the way that the Federal Government supports
States and their activities is through the Federal match, and
we do have various levels of matching for different kinds of
activities. We have had good success when we provided 90
percent funding for development of IT systems. We provide 75
percent funding for skilled medical professionals as well as
the 50 percent funding for general administrative activities.
And, it is true that we have a 75 percent match--again,
these are statutory match amounts--for the Medicaid Fraud
Control Units.
I also think that it is true that by providing some of the
technical assistance and training, sometimes these are matters
of I do not know what to do or I do not know if I have the
problem. And so, the idea of sharing information is very
important--the idea of providing measurement, so people have
quantifiable information to understand where they stand, either
in terms of error rates or in terms of things like performance
measures, as we go through and look at program integrity
operations.
I think then being able to follow back up on corrective
actions and assess whether or not those corrective actions have
been taken. That is an important element of this as well in
order to achieve the success that we want to achieve.
Senator Carper. OK. I have several questions I want to get
to before we adjourn around 4:30, but this would be a question
probably for Ms. Thompson and for Ms. Kohler.
I bet a lot of people are going to read the report that GAO
has graciously provided for us. They are going to wonder why
some fairly common-sense things were not done, have not been
done. It sounds like some are being done, but give us a better
idea.
Why would States not require a Social Security number or
other basic information on a claim before it was paid?
Second, why is basic data-sharing between Federal or State
agencies not happening or not happening enough to stop this
sort of fraud?
Ms. Thompson. I will go first and then jump in with any
other thoughts.
Ms. Kohler. OK.
Ms. Thompson. With regard to Social Security numbers, we do
allow States to enroll individuals without a Social Security
number as long as the individual can demonstrate that they have
applied for a Social Security number.
It is also true that there are some beneficiaries who have
religious objections to providing Social Security numbers, and
we allow them to use a Medicaid identification number.
And, there are a couple of waiver programs in which we
allow States to, for very narrow program purposes, not collect
Social Security numbers, but in those cases we actually make
some adjustments to the Federal match to account for the fact
that they are not doing that part of the process.
So, generally speaking, we would expect very much to see
Social Security numbers as part of the determination process
and as part of the beneficiary file.
Is there anything else that you wanted to mention about
Social Security numbers?
Ms. Kohler. Yes. I think the main thing is that you cannot
deny Medicaid eligibility if the person has not given you a
Social Security number. So States try to get them as much as
they can, but they cannot deny eligibility if the person does
not give you one.
And, remember, a lot of Medicaid clients are children. We
are adding babies every day. We are adding them before they get
their Social Security number and then hoping that the parents
will come back and give us one.
Senator Carper. Good luck.
Ms. Kohler. It is a challenge. It is an enormous challenge,
and we recognize that.
Senator Carper. That is called the triumph of man's hope
over experience or woman's hope over experience.
Ms. Thompson. With regard to going and getting the
exclusion data and going and getting the death data, we were
having conversations about this. I think we have provided
guidance around how to do this and when to do it.
Actually, not long ago in 2008, we provided some
information around Arizona's process for looking at vital
statistics. The IG's office in HHS actually had done a report
looking at death data and had identified Arizona as one of
those States that seemed to have a handle on this. They seemed
to be doing it right. They actually had looked at a number of
different States, and Arizona was the one State that had zero
errors with regard to some of that death data. So we circulated
that information and made States aware of what Arizona was
doing.
In that particular case, Arizona had made the investment.
They had found the resources and made the investment to combine
a lot of that vital record data in one place and make it
available to a number of their State program offices, and that
was working quite well.
I think what we need to do is follow up more forcefully,
and we will plan to do that in the coming months, to really ask
for information from each State about what their controls are
and how they access these data, whether they know that they are
available, whether they access them, who accesses them, how do
they come into their systems, how often do they access those
data.
Then I think once we have that kind of a report card across
the States, to really sit down with others and talk about what
is it that we need to do to improve this, so we have more
consistency and avoid these gaps and problems.
Ms. Kohler. I agree 100 percent.
Senator Carper. The National Governors Association has a
Center for Best Practices. It is really a clearinghouse for
good ideas, and some you probably have heard, maybe used. In
the 8 years I was governor, we really sought in the NGA to
strengthen it and to make it a more effective tool for all the
States.
I used to say most of the problems we face in Delaware,
some other State had grappled with, and we figured out how to
solve those problems. What we needed to do was to learn from
the other States.
Some of you talked about silos. States can be silos too.
But a lot of the best ideas are out there. We just need to
identify them, be able to find contacts in other States who
have been working on a problem, and get their help. We find a
lot of States are proud of what they have done and more than
willing to provide that assistance.
Not only do we have the National Governors Association,
which includes all the governors of all 50 States and the
territories, but we also have a National Association of State
Budget Directors. These are men and women who go to wake up
every morning, worrying about budget deficits, and go to bed at
night, maybe sleepless nights, and worry about what to do about
their budget deficits.
To what extent are we using entities like the National
Governors Association, like their Center for Best Practices,
that clearinghouse?
To what extent might we be using the National Budget
Directors organization, to take these ideas and to infuse these
ideas that in some cases are being incorporated or working, to
better inform the other States and to, frankly, get people
excited about addressing social problems but also addressing
their budgetary shortfalls?
Just think out loud on that, if you will.
Ms. Thompson. We do work very closely with them and share
information back and forth, to share with our respective
members, both the NGA and NASBO.
Senator Carper. NASBO stands for?
Ms. Thompson. National Association of State Budget
Officers.
Senator Carper. Thank you.
Ms. Thompson. I worked in OMB for a while, in New Jersey.
So I worked with all the organizations. I worked with NGA,
NASBO and NASMD at points in my career.
It is getting the State people to talk too, among
themselves. Sometimes there are silos, and hopefully they are
working on that too.
We do also spend a lot of time with NGA as well as NASMD.
Senator Carper. What is NASMD?
Ms. Thompson. National Association of State Medicaid
Directors.
Senator Carper. Thank you.
Ms. Kohler. In fact, we were down speaking with the budget
officers just a few weeks ago. So we try to maintain those
connections and ensure that we are talking with all the
constituencies in the States that can help us solve these
problems.
Senator Carper. All right. Any other thoughts on this
before we move on?
OK, we have about 10 minutes to go, and I would like to ask
a couple more questions. This one is for Mr. Rannazzisi.
Mr. Rannazzisi, prescription drug abuse is the fastest
growing addition. As I said earlier, prescription drug abuse
may be the fastest growing addiction in this country of ours.
In my own State, there has been a rash of pharmacy and home
break-ins with thieves looking specifically for controlled
substances. I doubt that Delaware is the only State where that
is taking place.
How widespread is the use of public health programs like
Medicare and Medicaid in acquiring these sources of drugs by
addicts or by dealers and do you have any hard numbers on how
many pills on the street might actually be paid for by the
government?
You do not have to say this is the number but like some
idea of a percentage. Less than 10 percent, I presume, but just
some idea of how widespread this problem is. Any idea at all?
Mr. Rannazzisi. How widespread is the use of Medicaid and
Medicare?
Senator Carper. Yes, Medicaid and Medicare dollars being
used to fraudulently acquire drugs. I know that we use Medicare
and Medicaid legally to acquire a lot of drugs, but without
using dead doctors, dead patients, and that sort of thing. But
how widespread is the problem?
Mr. Rannazzisi. Sir, I do not think we have statistics that
I could go to, to determine that. That is something we could
look into.
As you have said before and as the testimony has revealed,
the prescription drug abuse problem is out of control. I think
in 2007 we had 6.9 million non-medical users of prescription
medication, psychotherapeutic. I cannot pare that down to how
many of those people were using medications obtained illegally
through Medicaid and Medicare, but it is something I could look
at.
Senator Carper. OK, fair enough.
This is a question for Mr. Thompson, and I do not know if
Mr. Thompson is in the audience.
Ms. Thompson. I did not bring him along today.
Senator Carper. But, since he is not here, I am going to
ask Ms. Thompson, his wife, to respond for him.
Ms. Thompson, what are the consequences for those
beneficiaries who are caught defrauding the Medicaid program
and can their actions ever cause them to be removed from the
program?
Ms. Thompson. This is a thorny question. If a beneficiary
is convicted and incarcerated, then they are disenrolled from
the program because they are no longer covered by Medicaid, and
that really is the trigger for that kind of an action. There is
actually today no specific exclusion authority for a
beneficiary, per se.
There are enforcement actions that can be taken to control
beneficiaries in terms of how they get their services and from
whom--the lock-in provisions that Ms. Kohler mentioned, where
we direct beneficiaries to particular providers, and we will
only allow for services to be delivered and paid through those
particular providers. So that is a way that we address
beneficiaries that we believe are abusing the program.
Senator Carper. OK. If you were able to design a system
from the get-go, right from the start, redesign it, any
thoughts on how you might do that, on this front?
Ms. Thompson. With regard to beneficiaries?
Senator Carper. It sounds like we do not remove somebody
from the program until they have been maybe arrested, charged,
convicted, put in jail. Then we take them off. I do not know if
that is the right approach or not. If you think it is not, any
ideas what might be a better approach?
And, if you want to answer that for the record, you are
welcome to do so.
Ms. Thompson. I will take that opportunity to give you an
answer for the record.
[The information supplied by Ms. Thompson follows:]
INFORMATION SUBMITTED FOR THE RECORD
Fighing fraud is one of the Obama Administration's top priorities.
However, at this time, the Administration is still analyzing the
advisability of Medicaid exclusion authority for a beneficiary who
participates in Medicaid fraud activities. From a program perspective,
the Administration would need to consider numerous factors prior to
supporting an exclusion policy, including:
The existing legal system and due process and whether
exclusion of a beneficiary should be contingent upon a conviction and/
or civil court judgment and service time for such a conviction and/or
judgment.
The clear definitions needed to determine that a
beneficiary knowingly participated in an activity that warrants such an
exclusion and how such exclusion may or may not apply to beneficiaries
who are unknowingly caught up in a fraudulent scheme.
The population Medicaid serves, in that the Medicaid
population has particularly high mental health needs. Exclusing a
beneficiary with such a need may put the beneficiary at risk for a
mental health or substance use relapse.
The scope of a beneficiary exclusion and whether certain
hardship factors, including permanent loss of public or private
insurance, should be included in determining whether to apply the
exclusion and tow hat degree.
The Administration's goal to ensure coverage for all
Americans to lower health care costs and consideration of whether
Medicaid exclusion authority may deny Medicaid coverage to some of the
most vulnerable and medically needy individuals in our country.
Aside from Medicaid beneficiary suspension or exclusion uthority,
States can address beneficiary fraud through Surveillance and
Utilization Review Sysems, pre-authorization of services, and a
restricted recipient or ``lock-in'' program.
Mr. Kutz. Can I just say something on that?
Senator Carper. OK.
Mr. Kutz. I mean I think the perception of the risk of
getting caught and prosecuted is very low, and that does
encourage people to do this. I mean, first of all, the drugs
are free, and so you are getting controlled substances for
free. So whether you are an addict or a dealer, your cost of
goods sold is one or two dollars possibly for a co-pay.
But I think that issue is we saw a lot more activity on the
provider and the pharmacy side than the beneficiary with
respect to people that were committing fraud. There is not a
lot done to those committing fraud on the beneficiary side.
Ms. Thompson. I will, if I could, just add a point, though.
Senator Carper. Sure.
Ms. Thompson. I will, in drawing back to some of the
initial remarks that you made about the human cost here. To the
extent that beneficiaries are suffering from addiction problems
and that is causing their drug-seeking behavior, I think part
of what we want to do is find those beneficiaries not just
because of the financial cost that they are imposing on the
program but because they in fact have a health issue that we
need to intervene and address.
And so, I would say that with respect to that kind of
behavior, that does represent a health program that the
Medicaid program is there to try to help address.
Senator Carper. Back to Mr. Kutz, Mr. Kutz, earlier this
year, a representative from Health and Human Services reported
to us that for Medicaid the improper payment rate estimate for
2008 was 10.5 percent. Are today's findings relating to doctor-
shopping, deceased beneficiaries, deceased doctors, likely to
be part of the 10.5 percent estimate of fraud in the Medicaid
program?
Mr. Kutz. I expect many would not be because the improper
payment rate has errors, and it has fraud in it, but it also
has things in it that are not necessarily fraud, and there is a
lot of fraud that is not in the improper payment rates.
So, if you are talking about doctor-shopping, unless you
actually did data-mining around the case picked, that is
probably a statistical sample that projects that, you would not
know because there was a legitimate beneficiary, a legitimate
provider, a legitimate prescription and everything else looked
good on paper. So it may be a lot of these would be outside of
the actual calculation of an improper payment rate because
fraud is very hard to detect even when you pull a transaction.
We had to go out and interview the pharmacist, the doctor,
the prescriber to determine these cases. Plus, we had to have
all the data available to look at how many pharmacies and
doctors that they had gone to for these drugs. So, unless you
did that for each case that was projecting out the 10.5 percent
rate you described, it would be hard to get them all.
Senator Carper. OK. Last question, Ms. Thompson, in your
testimony, you say CMS conducts reviews of State Medicaid
Integrity Programs every 3 years. I think that is what you
testified. Why is there such a long time between these reviews?
Could more frequent exams help create better programs in the
States?
Ms. Thompson. Well, I think in part that is the initial
program that we established after we received the authority
under the Medicaid Integrity Program, that gave us dedicated
resources including the ability to hire Federal staff to
provide that kind of oversight and technical assistance.
I think one of the things that we need to do in addition to
looking at the periodicity of those reviews is really focus
them on performance. We have really focused on structure and
process, I would say, more so than outcomes and performance.
I think I see us moving towards an approach in which we are
testing some of the propositions that we are talking about here
today--what are your controls for different kinds of issues--
and really ensuring that the actual operational environment is
sound from a program integrity perspective.
Senator Carper. I am going to just ask us to recess for a
moment. I am going to check and see if I need to run to my
Finance Committee markup. I will be right back.
So we are going to recess for about 3 minutes. I will be
right back.
[Recess.]
Senator Carper. I think we have time maybe for one more
before we start voting in the Senate.
Mr. Rannazzisi, according to GAO, one long-term care
pharmacy dispensed controlled substances to over 50
beneficiaries after they died because the nursing homes did not
notify the pharmacy that they died before the drugs were
delivered.
How does DEA ensure that there is no diversion of drugs at
a nursing home for such situations and why cannot the nursing
homes return the drugs back to the long-term care pharmacy?
Mr. Rannazzisi. Let's start off, a lot of nursing homes are
not DEA registrants. So we have no inspection authority, so we
cannot actually enter the premises with a notice of inspection.
Senator Carper. When you say a lot, would that be most?
Mr. Rannazzisi. Many. A lot of States do not, States do not
generally license them for controlled substances, and therefore
we do not license them for controlled substances.
As far as the destruction, since a nursing home is
considered basically a caretaker, they coordinate or they
maintain the medicine for the patient. When that patient
expires and the medication is there, the problem is since they
are not registrants, the Controlled Substances Act has given
them no vehicle to return those medications to a registrant
which would be a reverse distributor.
There is no mechanism within the Controlled Substances Act.
Anytime a non-registrant turns around and distributes to a
registrant, that is an illegal distribution under the law. It
is going to require some type of statutory change for us to
change that.
But, in the meantime, we have offered through regulation
the ability for nursing homes to do different things in order
to prevent an accumulation of those drugs. For instance,
automatic dispensing machines within the nursing homes, that
way, they do not have to maintain a large amount of controlled
substances. They could just go to the automatic dispensing
machine, take what they need, and that is a secure machine.
For Schedule II medications, we are allowing for Schedule
II medications pharmacies to partial fill. That way, they do
not have to have 100 tablets. They could fill every day, every
2 days, every 3 days without expending that prescription. A
normal Schedule II prescription, once it is filled, it is done,
and you cannot partial fill. In this case, we are giving them
the opportunity to do partial fills.
We are allowing doctors to fax Schedule II prescriptions
into the pharmacy for small amounts. Schedule II prescriptions
normally not allowed to be faxed, but for a patient in a long-
term care facility we are giving the doctor the opportunity,
instead of prescribing a large amount, prescribing smaller
amounts via fax. That way, it can maintain a very small amount
onsite, on-premise, rather than maintain a large amount.
It is a difficult situation with the nursing homes, and I
understand what they are going through right now. We are
attempting to work with Congress to figure a way for a
statutory change.
Senator Carper. This has been a good hearing. We would not
have as good a hearing as we have had without the good work
done by GAO. Again, we want to express our thanks to everyone
from GAO who has participated in the work that has been done on
this. Thanks very much.
Plenty of work still to do, and what you have done at GAO
helps inform us and gives us a better path forward, actually
several paths forward.
In terms of takeaways, I always ask for takeaways from
hearings like this, and I probably should ask that before we
leave.
But, in terms of what we ought to be doing, the people who
sit on this side of the dais, in the Senate and the House and
our staffs, what should we be doing to help address the
problems of the abuse, the idea that Federal taxpayers through
Medicaid are literally coughing up a lot of money that none of
us have at the State or Federal level, to help facilitate the
purchase of controlled substances, illegal substances, in some
cases to make money for drug dealers, in other cases just to
feed habits.
We talked a little bit about what we are doing at the
Federal level. A lot of money we have provided through the
stimulus package, $20 billion for IT programs, to extend those
in States across the country. Obviously, from what I have heard
here today, that is a very good idea.
The notion that we ought to give States more than 60 days
in cases of fraud before they have to pay over to the Federal
Government our share of whatever might have been defrauded
would give States the opportunity to actually investigate,
recover the money and to incentivize them to do what they ought
to be doing.
Those are some ideas that are my takeaways.
But, in terms of what else we should be doing and our
staffs and people that serve on this Subcommittee, what should
be our takeaways, really to add to our to-do lists? Mr. Kutz.
Mr. Kutz. Well, I think hearings like this are good, and
certainly the things that we do, my unique unit that does the
forensic audits and investigations, coming with these real-life
case studies of fraud is useful to you and the other witnesses
at the panel here today, just to help with concrete solutions.
You are not talking at a real high level. Now you are talking
down at a real fraud level and how did they actually get into
the system and what can be done to prevent this in the future.
So I think that is a healthy discussion, and it is good for
you to understand what is going on, Members of Congress, and I
think it helps the people sitting at the table just to see what
we have actually found on the cases in particular.
Senator Carper. The idea of States doing more and us trying
to work through the National Governors Association, the Center
for Best Practices there, also the idea of working with the
State Budget Officers and maybe Medicaid managers--I had not
thought until just now that every State has an attorney
general, and they have some interest in these issues as well.
If we are smart, we will reach out to them, too.
Ms. Thompson. The only other item that I would add is that
I think that we should take a look at how available and costly
are some of the data feeds that we are asking States to access
and if we can make that easier. If we can facilitate some of
that access through free data and even create some hubs of that
data to make it easier for a single point, for them to come in
and get all of that information, I think that would be
something we should take a look at.
Senator Carper. All right, thank you.
Ms. Kohler, again, takeaways for what my colleagues and I
and our staffs ought to be doing?
Ms. Kohler. I think everything that was said here. Some,
perhaps, changing the Federal match to make it consistent with
what the attorney generals get would help States also.
Senator Carper. OK, thank you. Mr. Rannazzisi.
Mr. Rannazzisi. As far as the Prescription Drug Monitoring
Programs, anything that you could do to promote those because
it really helps us, helps the States identify diversion and
ferret out diversion.
I just want to bring your attention back to the nursing
home program. There is S. 1292 and a companion bill, H.R. 1359
in the House, that addresses that issue on disposal.
Senator Carper. S. 1292.
Mr. Rannazzisi. S. 1292 is a Senate bill.
Senator Carper. Do you know whose bill that is?
Mr. Rannazzisi. Ms. Klobuchar and Mr. Grassley, and Mr.
Stupak in the House.
Senator Carper. All right, good.
I understand that we have about a 15-day comment period
that is open if some of my colleagues have additional questions
to share with you. If you get those questions, please respond
to them promptly and fully.
I appreciate the efforts that all of you have made in your
various roles to address the challenge we have discussed today
and others that I am probably not even mindful of.
There is something for all of us to do here and to do
better. As I said earlier, everything I do I know I can do
better, and I think the same is true for all of us, and we need
to do better here. We are doing better in some results, in some
respects, but we need to do better still.
I will close with this. I shared this with my colleagues as
we were marking up in the Finance Committee, on the issue of
the 60 days for States to begin turning over money to the
Federal Government for frauds, fraudulent funds that the States
have not even recovered and trying to explain why that was a
good idea.
When I led off introducing my amendment, I said that a
number of years ago, earlier in this decade though, the
Congress adopted and President George W. Bush signed into law,
legislation creating the Improper Payments Act. We said in the
Improper Payments Act, we want States to start identifying
improper payments, overpayments, or underpayments and not only
to identify improper payments but to report them, and not only
to report them but to try to reduce them, and then not only to
reduce them but to try to recover monies that have been
improperly paid, especially when monies were overpaid.
So it had three things: Identify the improper payments,
stop making them, and eventually recover the improper payments.
Last year, using contract auditors in three States, some
$700 million worth of improper payments in the Medicare program
were recovered--$700 million, and that is a lot of money.
What we are doing now through the work of CMS and others,
contract auditors that they have retained, is we are going
after not just improper payments or overpayments in those three
States. We are going to turn to all 50 States. If we can
collect $700 million in three States, what do you think we can
do in 50 States?
I think, as I understand it, we were not doing all of
Medicare A, B, C, D. It was not the full nine yards, but it was
part of Medicare. But now I think we are going to go back, and
it is even in the legislation we were just working on, that
says let's do the cost recovery in all parts of Medicare,
including the Medicare Prescription Drug Program.
And, using what we have learned in Medicare, let's see if
we cannot do a better job in Medicaid.
At the end of the day, we are going to recover a lot of
money. In a day when States are going broke practically and
Medicaid is the big cost driver there, we are going to help, I
believe. In the Medicare program which is supposed to go bust
in about 7 years, 8 years, we are going to make a difference
there too.
So this is real important work, and we just want to
continue to build on the good work that is being done and do it
even better.
We are going to be sending letters to all of the governors.
I think we said about 10 or so governors that were not
participating in one of the programs, including my State, to
make sure they are aware of it and the opportunities lost.
I think we might want to mail letters to the attorney
generals and share with them maybe some best practices and draw
to their attention what is being done.
I want to share in the letter to the governors, the best
practices in Alabama. It is still almost too good to be true,
but I will shame the other States. If Alabama can be doing
this, why are you not? We have some outreach to do.
I do not know that I am going to ask that we reconvene this
group, maybe with somebody from CBO, but we might want to do
that within less than month, where our staff has the
opportunity to talk with you again, maybe even with me, or with
the Republican staff too, to come back and revisit what we
discussed here and after we have some follow-up questions.
I do not want this just to be a one-time only discussion. I
want to make sure this is not just an ongoing discussion but
really that we have built an action plan and get more good
work. I think CBO should be a part of that, going forward.
All right, well, I am out of time and you probably are as
well. My thanks to everybody for being with us, again, for the
great work by GAO, and I will look forward to continue work
with you in the months to come. Thanks so much.
This hearing is adjourned.
[Whereupon, at 4:42 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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