[Senate Hearing 111-634]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-634
 
    A PRESCRIPTION FOR WASTE: CONTROLLED SUBSTANCE ABUSE IN MEDICAID

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


                                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
                                 ------                                

 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

                                 ------                                
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

                              ----------                              


                     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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.]


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