    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

      WASTE, FRAUD AND ABUSE: A CONTINUING THREAT TO MEDICARE AND MEDICAID

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

                                    HEARING

                                   BEFORE THE

                  SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 2, 2011

                                   __________

                               Serial No. 112-13

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    HENRY A. WAXMAN, California
      Chairman Emeritus                    Ranking Member
    CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
    MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
      Vice Chair                         DIANA DeGETTE, Colorado
    JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    BRIAN P. BILBRAY, California         JAY INSLEE, Washington
    CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
    PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
    STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
    ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
    CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
    GREGG HARPER, Mississippi            JOHN BARROW, Georgia
    LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
    BILL CASSIDY, Louisiana
    BRETT GUTHRIE, Kentucky
    PETE OLSON, Texas
    DAVID B. McKINLEY, West Virginia
    CORY GARDNER, Colorado
    MIKE POMPEO, Kansas
    ADAM KINZINGER, Illinois
    H. MORGAN GRIFFITH, Virginia

                                     _____

                  Subcommittee on Oversight and Investigations

                             CLIFF STEARNS, Florida
                                     Chairman
    LEE TERRY, Nebraska                  DIANA DeGETTE, Colorado
    JOHN SULLIVAN, Oklahoma                Ranking Member
    TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
    MICHAEL C. BURGESS, Texas            MIKE ROSS, Arkansas
    MARSHA BLACKBURN, Tennessee          ANTHONY D. WEINER, New York
    SUE WILKINS MYRICK, North Carolina   EDWARD J. MARKEY, Massachusetts
    BRIAN P. BILBRAY, California         GENE GREEN, Texas
    PHIL GINGREY, Georgia                CHARLES A. GONZALEZ, Texas
    STEVE SCALISE, Louisiana             JOHN D. DINGELL, Michigan
    CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex
    H. MORGAN GRIFFITH, Virginia             officio)
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Cliff Stearns, a Representative in Congress from the State
      of Florida, opening statement..................................     1
        Prepared statement...........................................     3
    Hon. Joe Barton, a Representative in Congress from the State of
      Texas, opening statement.......................................     4
        Prepared statement...........................................     4
    Hon. Diana DeGette, a Representative in Congress from the State
      of Colorado, opening statement.................................     5
        Prepared statement...........................................     6
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................    10
        Prepared statement...........................................    11
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, prepared statement...................................   148
    Hon. Cory Gardner, a Representative in Congress from the State of
      Colorado, prepared statement...................................   150
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, prepared statement................................   152

                                   Witnesses

    Kathleen King, Director, Health Care Division, Government
      Accountability Office..........................................    13
        Prepared statement...........................................    15
    Gerald T. Roy, Deputy Inspector General for Investigations,
      Office of the Inspector General, Department of Health and Human
      Services.......................................................    29
        Prepared statement...........................................    31
    Omar Perez, Assistant Special Agent in Charge, Office of the
      Inspector General, Department of Health and Human Services.....    41
        Prepared statement...........................................    43
    John Spiegel, Director, Medicare Progam Integrity Group, Center
      for Program Integrity, Centers for Medicare and Medicaid
      Services, Department of Health and Human Services..............    50
        Prepared statement...........................................    52
        Answers to submitted questions...............................   153
    R. Alexander Acosta, Dean, Florida International University
      College of Law.................................................    98
        Prepared statement...........................................   101
    Craig H. Smith, Partner, Hogan Lovells U.S., LLP.................   111
        Prepared statement...........................................   113
    Sara Rosenbaum, Hirsh Professor and Chair, Department of Health
      Policy, George Washington University School of Public Health
      and Health Services............................................   124
        Prepared statement...........................................   126

                               Submitted Material

    Subcommittee exhibit binder......................................   162

      WASTE, FRAUD AND ABUSE: A CONTINUING THREAT TO MEDICARE AND MEDICAID

                                  ----------

                            WEDNESDAY, MARCH 2, 2011

                      House of Representatives,
          Subcommittee on Oversight and Investigations,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:02 a.m., in
    room 2322 of the Rayburn House Office Building, Hon. Cliff
    Stearns (chairman of the subcommittee) presiding.
        Members present: Representatives Stearns, Terry, Myrick,
    Murphy, Burgess, Bilbray, Gingrey, Scalise, Gardner, Griffith,
    Barton, DeGette, Schakowsky, Gonzalez, Dingell and Waxman (ex
    officio).
        Staff present: Stacy Cline, Counsel, Oversight/
    Investigations; Todd Harrison, Chief Counsel, Oversight/
    Investigations; Sean Hayes, Counsel, Oversight/Investigations;
    Debbee Keller, Press Secretary; Peter Kielty, Senior
    Legislative Analyst; Carly McWilliams, Legislative Clerk;
    Andrew Powaleny, Press Assistant; Krista Rosenthall, Counsel to
    Chairman Emeritus; Ruth Saunders, Detailee, ICE; Alan Slobodin,
    Chief Investigative Counsel, Oversight; Sam Spector, Counsel,
    Oversight/Investigations; John Stone, Associate Counsel,
    Oversight/Investigations; Kristin Amerling, Democratic Chief
    Counsel and Oversight Staff Director; Phil Barnett, Democratic
    Staff Director; Brian Cohen, Democratic Investigations Staff
    Director and Senior Policy Advisor; Karen Lightfoot, Democratic
    Communications Director and Senior Policy Advisor; Ali
    Neubauer, Democratic Investigator; and Anne Tindall, Democratic
    Counsel.
        Mr. Stearns. Good morning, everybody, and let me welcome
    everybody to the Subcommittee on Oversight and Investigations
    of Energy and Commerce.

     OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Mr. Stearns. We convene this hearing of the Subcommittee on
    Oversight and Investigations today to examine the efforts of
    the Department of Health and Human Services and the Centers for
    Medicare and Medicaid Services to address fraud, waste and
    abuse in the Medicare and Medicaid programs.
        This issue is of great importance to us. During this
    Congress and the last, I introduced the Medicare Fraud
    Prevention Act, which would increase the criminal penalties for
    those convicted of defrauding the Medicare program. As a Member
    of Congress from Florida, I have personally seen how this issue
    can greatly impact my State and its citizens. During my town
    hall meetings last week, many of my constituents shared their
    concerns with stories about waste, fraud and abuse in Medicare.
        Recently, the Government Accountability Office listed the
    Medicare and Medicaid programs as ``high risk.'' High-risk
    programs are identified as having greater vulnerability to
    fraud, waste and abuse and mismanagement. As much as $60
    billion is lost to Medicare fraud every year. This is an
    estimate because the exact number is unknown. When my staff
    asked the folks from CMS how much fraud was being carried out,
    they had no idea.
        So it is hardly news that the Medicare and Medicaid
    programs are at high risk. GAO has listed Medicare as high risk
    since 1990 and Medicaid as high risk since 2003. Over the
    years, this committee has had countless hearings on this
    subject and yet nothing seems to change. The volume of Medicare
    fraud and the corresponding cost to the taxpayer continues to
    go up and up.
        Meanwhile, the stories we hear from States like Florida
    continue to horrify taxpayers. News reports have indicated that
    Medicare fraud is rapidly eclipsing the drug trade as Florida's
    most profitable and efficient criminal enterprise. With
    Medicare fraud, the penalties are lower and the threat of
    violence is nonexistent. Meanwhile, seniors who notice that
    their Medicare number is being used for fraudulent schemes
    often find themselves begging the government to do anything
    about it, often with no results.
        The types of fraud we are seeing run the gamut from
    fraudulent billing schemes to the actual creation of fake
    storefronts to sell durable medical equipment and then bill it
    to Medicare. Once the criminals get their money from Medicare,
    they close up shop and open a new storefront in a new location
    and start the scam all over again.
        The Administration says that additional measures are being
    put in place to screen Medicare providers and suppliers, and
    halt payments when there are credible allegations of fraud.
    These are good and these are necessary steps to take, but only
    if they work, and GAO has said that there is much more work to
    be done.
        In 2014, the Administration's health care bill will
    implement massive changes. Medicare will be cut and Medicaid
    will expand. According to the Chief Actuary of Medicare and
    Medicaid, 20 million people will be dumped onto the Medicaid
    rolls and $575 billion will be cut from Medicare. While we are
    all committed to repealing this onerous law on this side, we
    also must do our best to end fraud before 2014. If we can't
    stop fraud now, how are we going to do so while simultaneously
    adding 20 million people to Medicaid?
        We have to make sure that the focus remains on preventing
    fraud and abuse. Unfortunately, CMS uses a pay first, check
    later system. That must change. We need to check first, and pay
    later before taxpayers' funds are wasted. CMS needs to fix its
    verification system to prevent these kinds of crimes or we will
    never get a handle on this problem.
        Every dollar that is lost to fraud is one that is not spent
    on medical care for those in need. Fraud raises the costs of
    health care for all Americans. Since Obamacare will raise those
    costs even further, it is absolutely necessary that we get a
    handle on Medicare and Medicaid fraud.
        So I look forward to hearing what the Federal Government is
    doing to get Medicare and Medicaid fraud and abuse under
    control.
        [The prepared statement of Mr. Stearns follows:]

                    Prepared Statement of Hon. Cliff Stearns

        We convene this hearing of the Subcommittee on Oversight
    and Investigations today to examine the efforts of the
    Department of Health and Human Services and the Centers for
    Medicare and Medicaid to address fraud, waste, and abuse in the
    Medicare and Medicaid programs.
        This issue is of great importance to me-during this
    Congress and the last I introduced the ``Medicare Fraud
    Prevention Act'', which would increase the criminal penalties
    for those convicted of defrauding the Medicare program. As a
    Representative from Florida, I have personally seen how this
    issue can greatly impact my State and its citizens.
        Recently the Government Accountability Office (GAO) listed
    the Medicare and Medicaid programs in its ``High Risk'' report.
    High risk programs are identified as such due to their
    ``greater vulnerability to fraud, waste, abuse, and
    mismanagement.'' Indeed, as much as $60 billion is lost to
    Medicare fraud every year. This is a massive amount of fraud,
    although apparently the exact number is not even known.
    Recently, when my staff asked the folks from the Center for
    Medicare and Medicaid Services how much fraud was being carried
    out, CMS had no idea.
        It is hardly news that the Medicare and Medicaid programs
    are at high risk for fraud, waste, abuse, and mismanagement.
    GAO has listed these programs as high risk for over 20 years,
    beginning in 1990. Congress' interest in Medicare fraud and
    abuse isn't new either. Over the years, this Committee has had
    countless hearings on the subject. And yet, nothing seems to
    change. The volume of Medicare fraud, and the corresponding
    cost to the taxpayers, continues to go up and up and up.
    President Obama has repeatedly promised that he would somehow
    SAVE taxpayer money and fund health care reform by eliminating
    Medicare fraud, but in the last two years, under his watch,
    Medicare has remained on the GAO's list as a ``high risk''
    program for fraud. Estimates of fraud remain in the $60 billion
    a year range, despite President Obama's commitment to fight
    Medicare fraud.
        Meanwhile, the stories we hear from States like Florida
    continue to horrify honest taxpayers. News reports have
    indicated that Medicare fraud is rapidly eclipsing the drug
    trade as Florida's most profitable and efficient criminal
    enterprise. The penalties are lower and the threat of violence
    is nonexistent. Meanwhile, honest seniors who notice that their
    Medicare number is being used for fraudulent schemes often find
    themselves begging the government to do anything about it,
    often with no results.
        The types of fraud we are seeing run the gamut from
    fraudulent billing schemes to the actual creation of fake
    store-fronts to allegedly sell durable medical equipment and
    bill it to Medicare. Once the criminals get their money from
    Medicare, they close up shop and open a new store-front in a
    new location, and start the scam all over again.
        Now the Administration says that additional measures are
    being put in place to screen Medicare providers and suppliers,
    and halt payments when there are credible allegations of fraud.
    I agree that these are good--and necessary--steps to take,
    assuming that they work.
        Yet, GAO found that there is still much more that can be
    done in both Medicare and Medicaid. Considering that Obamacare
    puts the federal government on the hook for 90 percent of these
    increased costs to Medicaid alone, I sincerely hope we move to
    do more to combat fraud sooner rather than later.
        In 2014 massive changes will take place because of
    Obamacare. Medicare will face drastic cuts and Medicaid will
    drastically expand. According to the Chief Actuary of Medicare
    and Medicaid, 20 million people will be dumped onto Medicaid
    rolls while $575 billion will be cut from Medicare. While we
    are committed to repealing this onerous law, we also must do
    our best to end fraud before 2014.
        If we can't stop fraud now, how are we going to do so while
    simultaneously adding 20 million people to Medicaid?
        I hope the witnesses at today's hearing will help us
    understand the challenges CMS will face as it prepares for the
    full implementation of health care reform, and how it plans to
    combat fraud and waste in the system.
        We have to make sure that the focus remains on preventing
    fraud and abuse before it takes place. If CMS is not setting up
    the right systems and checks to prevent these kinds of crimes,
    we are never going to get a handle on this problem.
        Every dollar that is lost to fraud is one that is not spent
    on medical care for those who need it. Fraud raises the costs
    of health care in America, and since I believe that Obamacare
    will raise those costs even further, it is absolutely necessary
    that we put and end to Medicare and Medicaid fraud.
        I look forward to the testimony of the witnesses today and
    learning what the federal government is thinking of doing to
    get Medicare and Medicaid fraud and abuse under control.

        Mr. Stearns. My remaining 1 minute I will give to the
    gentleman from Texas, Mr. Barton.
        Mr. Barton. Thank you, Mr. Chairman.

       OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Barton. The easiest thing in Washington to do is talk
    about waste, fraud and abuse and the hardest thing in
    Washington to do is to actually do something about it. As
    Chairman Stearns just said, on both sides of the aisle we have
    had numerous hearings about waste, fraud and abuse in Medicare
    and Medicaid and yet the problem still obviously persists. We
    can't even get a direct answer as to what the scope of the
    problem is. It is an $800 billion combined program. Is it 10
    percent? Ten percent would be $80 billion a year. Is it 5
    percent? That would be $40 billion. Is it 1 percent? That would
    be $8 billion. Nobody knows.
        Mr. Chairman, I hope on a bipartisan basis this
    subcommittee and the full committee under your leadership and
    under the leadership of Ranking Member Waxman and Chairman
    Upton in this Congress actually do something about it. With a
    $1.5 trillion budget deficit annually, there is no question
    that money spent here will be money that we get a huge return
    on investment.
        I look forward to hearing from our witnesses and I hope
    that they have some solutions in addition to helping us define
    the scope of the problem.
        With that, Mr. Chairman, I yield back.
        [The prepared statement of Mr. Barton follows:]

                     Prepared Statement of Hon. Joe Barton

        Thank you Mr. Chairman for holding this hearing in an
    attempt to discuss, expose, and potentially prevent wide-spread
    waste, fraud, and abuse in the Medicare and Medicaid systems.
        I welcome all of our witnesses and I hope they can answer
    the hard questions this Committee has for them. In particular,
    I want to know why the Centers for Medicare and Medicaid
    Services (CMS), a federal agency that has a budget of almost
    $800 billion a year and a Center dedicated to Program Integrity
    can not give us an estimate on how much money is lost to fraud
    each year.
        It is frustrating that we all agree fraud is a problem, we
    all want to solve the problem, and yet, we still don't even
    know the scope of the problem. Now why is that important? I
    believe that if you don't know what the problem is, you can't
    set goals on how to solve it. So let's say it's a 10 percent
    problem which would be $80 billion. Maybe a reasonable goal
    then would be to cut that by 25 percent in a given year, which
    would be $20 billion. Maybe it's only a 40 billion problem a
    year. But if you guys can't help us determine what the problem
    is, it is hard for us to decide how to set goals to solve it.
        This inability is deeply disappointing considering in less
    than three years, under the Affordable Care Act, this agency
    will take over much of the healthcare system and President
    Obama has repeatedly stated that one of the ways he plans to
    fund Obamacare is by saving billions of dollars by identifying
    and preventing this fraud.
        Mr. Chairman, the hearing today highlights just one of the
    many flaws of expanding huge entitlement programs that are
    currently unmanageable, unsustainable, and highly susceptible
    to waste, fraud, and abuse.

        Mr. Stearns. I thank the gentleman, and I recognize the
    ranking member from Colorado, Ms. DeGette.
        Ms. DeGette. Thank you very much, Mr. Chairman.

     OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF COLORADO

        Ms. DeGette. Mr. Chairman, Medicare and Medicaid fraud have
    been persistent problems that have plagued both Democratic and
    Republican Administrations, as you have said, and it costs
    Americans billions of dollars every year. It affects health
    care providers at every level in the programs themselves and
    also in the private sector.
        Today's hearing will focus on a very worthy target of
    oversight: waste, fraud and abuse in these two systems.
    Medicare and Medicaid provide millions of people with access to
    medical services and so it is a vital concern to this committee
    that we maintain their integrity.
        Fortunately, as you said, it is important to try to get a
    handle on Medicare and Medicaid fraud, and that is also a high
    priority for President Obama. Beginning in 2009, the Obama
    Administration made fighting fraud a priority. These efforts
    expanded even more after passage of the Affordable Care Act,
    which contains dozens of provisions designed to help fight
    Medicare and Medicaid fraud.
        The Administration asked for and received additional
    funding to fight health care fraud in both 2009 and 2010. They
    have reorganized within HHS and they have started several new
    collaborations with law enforcement authorities to uncover and
    prevent health care fraud.
        In May of 2009, HHS and DOJ announced the creation of the
    Health Care Fraud Prevention and Enforcement Team, or HEAT,
    designed to coordinate Cabinet-level agency activities to
    reduce fraud. Under the HEAT program, HHS and DOJ have expanded
    the use of dedicated strike force teams, placing law
    enforcement personnel in locations that are identified as
    health care fraud hotspots. These teams carried out the largest
    health care fraud takedown in U.S. history last month, netting
    over 100 arrests in just one day. The work undertaken by the
    strike force teams has led to criminal charges against 829
    defendants for defrauding Medicare of almost $2 billion. There
    is an answer to your question about the extent of this.
        The Administration's efforts have been a huge success for
    taxpayers, with a return on investment that would make most
    hedge fund managers jealous. And thanks to landmark health care
    reform law passed by Congress last year, HHS and law
    enforcement authorities now have a host of new tools and new
    funding to fight fraud.
        The Affordable Care Act contains dozens of new provisions
    to fight Medicare and Medicaid fraud. The most important
    changes allow CMS to apply a preventative model in its
    antifraud efforts. For years, CMS employed, as you said, a
    ``pay and chase'' model of enforcement, simply paying
    fraudsters' claims, then attempting to recover its losses. Now,
    CMS has new authority to keep fraudsters out of Medicare and
    Medicaid in the first place.
        The Affordable Care Act contains stiffer enrollment
    requirements for all providers, mandates enhanced background
    checks, adds new disclosure requirements, and calls for onsite
    visits to verify provider information. It requires that
    providers create internal compliance programs, and it contains
    several provisions aimed directly at fighting fraud in, as you
    mentioned, the high-risk durable medical equipment and home
    health programs.
        The government's ability to act once it has uncovered fraud
    or the possibility of fraud is also enhanced by the Affordable
    Care Act. The Secretary now has authority to enact moratoria on
    enrolling new providers if she believes that such enrollments
    will increase fraud risks, and she can suspend payments to
    providers where there is a substantiated allegation of fraud.
    Once fraud has been proven, the Affordable Care Act provides
    stiffer monetary penalties and expands the HHS Inspector
    General's authority to exclude violators from the Medicare and
    Medicaid programs.
        Data sharing and collection between CMS, States, and other
    federal health programs are modernized under the Affordable
    Care Act, and the Affordable Care Act provides an estimated
    $500 million in increased funding over the next 5 years to
    fight fraud, money that will return billions of dollars to the
    taxpayers. This expanded authority, combined with the
    coordinated and focused attention of the Obama Administration,
    has laid the groundwork for a new era in the Federal
    Government's response to fraud.
        Mr. Chairman, as you said, the GAO first designated
    Medicare a high-risk program in 1990, and Medicaid joined the
    high-risk list in 2003. I look forward to hearing from the GAO
    about why this is the case and what can be done. I am hoping
    that these new commitments that I just talked about can really
    substantially reduce fraud and ultimately produce the result
    that all of us want.
        Mr. Chairman, if there is more than we can do to reduce
    waste, fraud and abuse on a bipartisan level, I would be eager
    to hear it and I would be happy to work with you and your
    colleagues on both sides of the aisle to make sure that we can
    do that because I think one thing we can agree on in a
    bipartisan way is, nobody wants to see money wasted and we
    certainly do not want to see fraud, waste and abuse in Medicare
    and Medicaid.
        And with that, I yield back.
        [The prepared statement of Ms. DeGette follows:]

                    Prepared Statement of Hon. Diana DeGette

        Health care fraud costs Americans billions of dollars every
    year. Fraud affects health care providers at all levels, in
    Medicare and Medicaid, and in the private sector.
        Today's hearing will focus on a worthy target of oversight:
    waste, fraud, and abuse in the Medicare and Medicaid programs.
    Medicare and Medicaid provide millions of people with access to
    essential medical services, and the integrity of these programs
    is a vital concern of this Committee.
        Fortunately, fighting waste, fraud, and abuse in Medicare
    and Medicaid is also a high priority for President Obama.
    Beginning in 2009, the Obama Administration made fighting fraud
    a priority. These efforts expanded even more after passage of
    the Affordable Care Act, which contained dozens of provisions
    designed to help fight Medicare and Medicaid fraud.
        The Administration asked for and received additional
    funding to fight health care fraud in 2009 and 2010. They have
    reorganized within HHS and started several new collaborations
    with law enforcement authorities to uncover and prevent health
    care fraud.
        In May of 2009, HHS and DOJ announced the creation of the
    Health Care Fraud Prevention and Enforcement Team (or
    ``HEAT''), designed to coordinate Cabinet-level agency
    activities to reduce fraud. Under the HEAT program, HHS and DOJ
    have expanded the use of dedicated strike force teams, placing
    law enforcement personnel in locations that are identified as
    health care fraud hotspots. These teams carried out the largest
    health care fraud takedown in U.S. history last month, netting
    over 100 arrests in a single day. The work undertaken by strike
    force teams has led to criminal charges against 829 defendants
    for defrauding Medicare of almost $2 billion.
        The Administration's efforts have been a huge success for
    taxpayers, with a return-on-investment that would make most
    hedge fund managers jealous. And thanks to the landmark health
    care reform law passed by Congress last year, HHS and law
    enforcement authorities now have a host of new tools and new
    funding to fight fraud.
        The Affordable Care Act contains dozens of new provisions
    to fight Medicare and Medicaid fraud.
        The most important changes allow CMS to apply a preventive
    model in its anti-fraud efforts. For years, CMS employed a
    ``pay and chase'' model of enforcement, simply paying
    fraudsters' claims, then attempting to recoup its losses. Now,
    CMS has new authority to keep fraudsters out of Medicare and
    Medicaid in the first place.
        The Affordable Care Act contains stiffer enrollment
    requirements for all providers, mandates enhanced background
    checks, adds new disclosure requirements, and calls for on-site
    visits to verify provider information. It requires that
    providers create internal compliance programs. And it contains
    several provisions aimed directly at fighting fraud in the
    high-risk durable medical equipment and home health programs.
        The government's ability to act once it has uncovered fraud
    or the possibility of fraud is also enhanced by the Affordable
    Care Act. The Secretary now has authority to enact moratoria on
    enrolling new providers if she believes that such enrollments
    will increase fraud risks, and she can suspend payments to
    providers where there is a substantiated allegation of fraud.
    Once fraud has been proven, the Affordable Care Act provides
    stiffer civil monetary penalties and expands the HHS Inspector
    General's authority to exclude violators from the Medicare and
    Medicaid programs.
        Data sharing and collection between CMS, States, and other
    federal health programs are modernized under the Affordable
    Care Act.
        And the Affordable Care Act provides an estimated $500
    million in increased funding over the next five years to fight
    fraud--money that will return billions of dollars to the
    taxpayer.
        This expanded authority, combined with the coordinated and
    focused attention of the Obama Administration, has laid the
    groundwork for a new era in the federal government's response
    to health care fraud.
        The Government Accountability Office first designated
    Medicare a ``high-risk'' program in 1990, and Medicaid joined
    the ``high-risk'' list in 2003. For two decades, the programs
    have been on GAO's high priority list. We will hear today from
    GAO about why this is the case, and what can be done. I am
    hopeful that the Obama Administration's commitment to reducing
    fraud, and the substantial anti-fraud boost provided by the
    Affordable Care Act will ultimately produce the result that
    preceding Republican and Democratic Administrations have been
    unable to achieve: removal of Medicare and Medicaid from the
    GAO high-risk list.
        Waste, fraud, and abuse in Medicare and Medicaid are bi-
    partisan problems, and I believe there is bi-partisan
    commitment to combating them. I hope there is also bi-partisan
    recognition of the commendable anti-fraud efforts undertaken by
    the Obama Administration and the vital anti-fraud authority
    granted by the Affordable Care Act. 5
        I thank the witnesses for joining us here today and look
    forward to hearing their testimony on this important topic.

        Mr. Stearns. The gentleman from Texas, Mr. Burgess, is
    recognized for 3 minutes.
        Mr. Burgess. I thank the chairman and I thank our witnesses
    for being here today. I know several of you we have seen before
    and several of you we have seen several times before, which
    just underscores the problem that at the federal level we have
    really not done enough to address the issue of fraud, and as
    the reports that we have in front of us indicate that our
    Nation's government-run health care system needlessly does
    waste billions of dollars each year through programs that are
    ineffective and unfocused.
        Fraud analysts and law enforcement officials estimate, and
    we have heard the figures already, 10 percent, as Mr. Barton
    did the math for us on an $800 billion public program. That is
    a substantial sum of money every year, and over a 10-year
    budget window, it is really astounding. But 10 percent of total
    health care expenditures are lost to fraud on an annual basis.
        The point has been raised by others, I have raised it
    numerous times before, how much fraud is enough for us to take
    notice? The answer that we all expect to see in the amount of
    fraud is none, zero, zero tolerance, but in reality, sometimes
    it is even as simple as just the lack of a prosecutorial force
    with the background in prosecuting health care laws cripples
    our ability to go after the people that need to be gone after,
    and certainly that has been true in my communities in north
    Texas where repeated violations by some of the same people who
    have multiple provider numbers but a single post office box,
    you can bust someone in the morning but we are sending out
    payments to the same post office box under a different provider
    number that afternoon. Clearly, that has to stop.
        Now, the Government Accountability Office has been able to
    identify areas where they may have made recommendations to the
    Centers for Medicare and Medicaid Services to prevent improper
    payments, some really dating back almost a decade, and they
    failed to fully implement them and that in fact has caused
    fraud to rise. If we are serious about bringing down the cost
    of health care and protecting the patient not just reducing but
    eliminating fraud, that needs to be the goal for which we
    strive.
        Medicaid expansion under the landmark health care
    legislation passed last year that has already been referenced
    but Medicaid expansion under the Affordable Care Act is
    estimated to exceed $430 billion over the next 10 years. Under
    current standards, taxpayers would be losing over $40 billion a
    year to fraud.
        Now, we also talk about the medical loss ratio and how we
    are going to control costs in the private sector but I would
    just simply ask, what is a more cogent indicator of medical
    loss ratio than dollars that are lost to fraud? Maybe we ought
    to include that in our calculation.
        I realize the clock is misbehaving. Let me yield back to
    the chairman because I think he has others he wants to
    recognize.
        Mr. Stearns. Thank you, Mr. Burgess.
        Mr. Bilbray of California is recognized for 1 minute and
    then Mr. Gingrey.
        Mr. Bilbray. Thank you, Mr. Chairman.
        Mr. Chairman, I think there are many ways of addressing the
    potential or the existence of the fraud issue. I think that one
    of the concerns that a lot of people had when we were talking
    about expanding health care coverage last year was the
    President stood on the podium and said I assure you that those
    who are illegally in this country will not have access to this
    system, though when the bill was passed there was no
    requirement for verification, the same verification required
    almost of every other federal program wasn't included in that
    expansion of health care service. I would like to make sure
    that we all address the fact that if you do not verify, if you
    do not use the check system, you cannot straight face in the
    American people and tell us that people who are not qualified
    are going to be kept out of this system. Just by saying they
    are not allowed to participate in the system is as logical as
    saying that providers will not create a fraud because we have
    said that they shouldn't do it. There has got to be some checks
    and balances here.
        And just as much as need to make sure that we are on top
    and checking the providers of the services, we also have a
    responsibility, especially after the President promised the
    American people that they would not participate is to make sure
    that we check and have a verification system for those who are
    providing the services and those who are being provided to
    those services, and I think not until we are willing to do that
    across the board with all of our health care system can we
    truly have our President stand up and assure the American
    people with a straight face that no, we are doing everything
    possible to make sure we fighting fraud in this country and we
    make sure that every dollar spent on health care in this
    country is going only to those who qualify and only being
    provided under a legal system.
        I yield back.
        Mr. Stearns. The gentleman yields back.
        The gentleman from Georgia, Mr. Gingrey, is recognized for
    1 minute.
        Mr. Gingrey. Mr. Chairman, thank you. I am very pleased to
    welcome the witnesses on both the first and second panel. I
    look forward to hearing their testimony.
        I practiced medicine for 31 years, 26 of those years in the
    specialty of obstetrics and gynecology, so this issue of waste,
    fraud and abuse, particular in our Medicare and Medicaid
    systems, is something that really, really gets to me, and some
    of the comments that I have heard already this morning,
    particular from the other side, you would almost think that one
    of the reasons for adopting Obamacare or the Affordable Care
    Act was so that we could succeed in combating waste, fraud and
    abuse. I certainly don't agree with that, and if it is true,
    then it will be more successful than the bill has been in
    lowering the cost of health care to individuals who are now
    uninsured. It will do more than it has done in regard to
    medical liability reform that was promised. It will do much
    more than providing a sustainable rate of reimbursement to our
    hardworking health care providers that was promised. So it kind
    of remains to be seen what is in this bill that is going to
    make us more successful in combating waste, fraud and abuse.
        But in any regard, I look forward to hearing from the
    witnesses and we do need to get a handle on this problem, and I
    yield back.
        Mr. Stearns. I thank the gentleman, and Mr. Waxman, the
    ranking member of the full committee, is recognized for 5
    minutes.
        Mr. Waxman. Thank you very much, Mr. Chairman.

    OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Waxman. Well, this hearing is a very useful one already
    because we have the opportunity to educate two of our
    Republican members about the accuracy of the legislation that
    we just adopted. One of the reasons I am so proud of the
    Affordable Care Act, the historic health care reform law signed
    by President Obama last year, is that it contains dozens of
    antifraud provisions. This legislation has the most important
    reforms to prevent Medicare and Medicaid fraud in a generation.
    According to the Congressional Budget Office, these new fraud
    provisions will save over $7 billion for taxpayers.
        The health care reform law shifts the prevailing fraud
    prevention philosophy from pay and chase where law enforcement
    authorities only identify fraud after it happens to inspect and
    prevent. It allows CMS to impose moratoria on enrolling new
    providers if the Secretary believes that such enrollments will
    increase fraud risk. It allows the HHS Secretary to close the
    barn door before the horses have left.
        The new law also contains new penalties for fraudulent
    providers and new data-sharing provisions to catch criminals,
    and it provides hundreds of millions of dollars in new funding
    to help CMS, the Inspector General and the Department of
    Justice fight Medicare and Medicaid fraud, and we will hear
    today about how the CMS and Inspector General have already put
    these funds to work. I am proud of these efforts to reduce
    fraud.
        The second thing I want to point out is that the
    legislation does not allow undocumented aliens to access
    Medicare or Medicaid or the exchanges, and it is not just on
    their self-affirmation that they are not here illegally, it is
    based on an inspection that is required under the law. That can
    be done in two ways. They can either check with Social
    Security, get all the information to be sure that the claimant
    is accurately stating his or her status, or they can require
    the birth certificates and passports and other information to
    be produced to show that they are not taking advantage. So
    these oversight hearings have a real opportunity to educate
    people.
        I can't tell you how much I think this is an important
    reason for our hearing. When we have health care fraud, it robs
    the taxpayers of funds, affects the quality of care provided to
    program enrollees and saps public confidence in the Medicare
    and Medicaid programs. And that is why I see fighting Medicare
    and Medicaid fraud as a critical need and an issue where we
    should be able to achieve bipartisan consensus.
        But I am wary of those who use the existence of fraud in
    these programs for the express purpose of undermining support
    for them. I do not believe we should attempt to exaggerate the
    scope of the problem just to foster ideological efforts to cut
    or eliminate them. When I hear estimates of the amount of
    Medicare and Medicaid fraud that have no basis in fact, or when
    members confuse Medicare and Medicaid improper payment rates
    that consists mostly of simple paperwork or clerical errors
    with the rate of intentional fraud against the programs, then I
    become concerned that members are just using fraud as an excuse
    to bash these programs, not to improve them.
        The vast majority of Medicare and Medicaid providers are
    compassionate and honest. The vast majority of beneficiaries of
    these programs desperately need the care that is provided. We
    need to be tough on fraud and tough on criminals who take
    advantage of these programs and their beneficiaries, but we
    cannot and should not blame the victim.
        In January, every single Republican Member of Congress
    voted to repeal the entire Affordable Care Act, including
    essential antifraud provisions. In February, as part of the
    Continuing Resolution, every single Republican voted to ban the
    use of funds to implement the Affordable Care Act, including
    the funds needed to implement the antifraud provisions. That
    vote was penny-wise and pound-foolish.
        We are going to hear from CMS, from the HHS Inspector
    General and from GAO about the new authority and new funding
    they have to eliminate Medicare and Medicaid fraud, thanks to
    the Affordable Care Act, and I hope this testimony will make
    some members reconsider their views. If we truly care about
    protecting the taxpayer, we should support, not defund, the
    Administration's initiatives to reduce Medicare and Medicaid
    fraud.
        I yield back the balance of my time.
        [The prepared statement of Mr. Waxman follows:]

                   Prepared Statement of Hon. Henry A. Waxman

        Mr. Chairman, I want to thank you for holding this hearing
    today, and for focusing on the important topic of Medicare and
    Medicaid fraud.
        I have dedicated much of my career in Congress to improving
    the Medicare and Medicaid programs and the quality of care they
    provide and pursing waste, fraud, and abuse in government
    spending. This hearing combines both subjects.
        Health care fraud robs taxpayers of funds, affects the
    quality of care provided to program enrollees, and saps public
    confidence in the Medicare and Medicaid programs. That's why I
    see fighting Medicare and Medicaid fraud as a critical need--
    and an issue where we should be able so achieve bipartisan
    consensus.
        But I am wary of those who use the existence of fraud in
    these programs for the express purpose of undermining support
    for them. I do not believe we should attempt to exaggerate the
    scope of the problem just to foster ideological efforts to cut
    or eliminate them.
        When I hear estimates of the amount of Medicare and
    Medicaid fraud that have no basis in fact . or when members
    confuse a Medicare and Medicaid ``improper payments'' rate that
    consists mostly of simple paperwork or clerical errors with the
    rate of intentional fraud against the programs . then I become
    concerned that members are just using fraud as an excuse to
    bash these programs, not to improve them.
        The vast majority of Medicare and Medicaid providers are
    compassionate and honest. The vast majority of beneficiaries of
    these programs desperately need the care they provide. We need
    to be tough on fraud and tough on criminals who take advantage
    of these programs and their beneficiaries--but we can and
    should not blame the victim.
        One of the reasons I am so proud of the Affordable Care
    Act, the historic health care reform law signed into law by
    President Obama last year, is that it contains dozens of anti-
    fraud provisions. The legislation has the most important
    reforms to prevent Medicare and Medicaid fraud in a generation.
    According to the Congressional Budget Office, these new fraud
    provisions will save over $7 billions for taxpayers.
        The health care reform law shifts the prevailing fraud
    prevention philosophy from ``pay and chase''--where law
    enforcement authorities only identify fraud after it happens--
    to ``inspect and prevent.''
        It allows CMS to impose moratoria on enrolling new
    providers if the Secretary believes that such enrollments will
    increase fraud risks. This allows the HHS Secretary close the
    barn door before the horses have left.
        The new law also contains new penalties for fraudulent
    providers and new data sharing provisions to catch criminals.
        And it provides hundreds of millions of dollars in new
    funding to help CMS, the Inspector General, and the DOJ fight
    Medicare and Medicaid fraud. We will hear today about how the
    CMS and the Inspector General have already put these funds to
    work.
        I am proud of these efforts to reduce fraud.
        In January, every single Republican member of Congress
    voted to repeal the entire Affordable Care Act, including these
    essential anti-fraud provisions. In February, as part of the
    Continuing Resolution, every single Republican voted to ban the
    use of funds to implement the Affordable Care Act, including
    the funds needed to implement the anti-fraud provisions. That
    vote was penny-wise, pound-foolish.
        We will hear today from CMS, from the HHS Inspector
    General, and from GAO about the new authority and new funding
    they have to eliminate Medicare and Medicaid fraud, thanks to
    the Affordable Care Act. I hope this testimony will make some
    members reconsider.
        If we truly care about protecting the taxpayer, we should
    support--not defund--the Administration's initiatives to reduce
    Medicare and Medicaid fraud.

        Mr. Stearns. I thank the gentleman.
        At this point we will go to our witnesses, and we have our
    witnesses at the table. The first is Kathleen King, Director of
    Health Care Division, Government Accountability Office. She is
    the director of this health care team at the U.S. Government
    Accountability Office, which is responsible for leading various
    studies of the health care system, specializing in Medicare
    management and prescription drug coverage. She has more than 25
    years' experience in health policy and administration. She
    received her M.A. in government and politics from the
    University of Maryland.
        We have John Spiegel, who is Director of Medicare Program
    Integrity, Centers for Medicare and Medicaid Services. He has
    worked in various components of the Centers for Medicare and
    Medicaid Services. After several years working outside the
    public sector, he returned to federal service in 2010 as the
    Director of the Medicare Program Integrity Group.
        Then we have Gerald Roy, who is Deputy Inspector General
    for Investigations, Department of Health and Human Services. He
    has served in OIG since 1995. He was also instrumental in
    increasing OIG's civil and criminal conviction record and a 25
    percent increase in OIG's monetary recoveries from $3 billion
    in 2008 to over $4 billion in 2009.
        And then we have Omar Perez, Assistant Special Agent in
    Charge, Health and Human Service Office of the Inspector
    General, Miami Regional Office. He joined the department in
    July 1998 and he has been promoted to special agent in January
    1999. He has led a number of successful criminal and civil
    investigations and orchestrated Project Ghost Rider to address
    fraudulent ambulance companies, Bad Medicine to address Puerto
    Rico's Medicaid equivalent, and the First Child Support Round
    in the U.S. Virgin Islands.
        So I welcome our witnesses, and let me swear you in first
    of all.
        [Witnesses sworn.]
        Mr. Stearns. Ms. King.

     STATEMENTS OF KATHLEEN KING, DIRECTOR, HEALTH CARE DIVISION,
        GOVERNMENT ACCOUNTABILITY OFFICE; GERALD T. ROY, DEPUTY
     INSPECTOR GENERAL FOR INVESTIGATIONS, OFFICE OF THE INSPECTOR
     GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES; OMAR PEREZ,
    ASSISTANT SPECIAL AGENT IN CHARGE, OFFICE OF INSPECTOR GENERAL,
      DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND JOHN SPIEGEL,
     DIRECTOR OF MEDICARE PROGRAM INTEGRITY, CENTERS FOR MEDICARE
     AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

                       STATEMENT OF KATHLEEN KING

        Ms. King. Mr. Chairman, members of the subcommittee, thank
    you for inviting me today to speak about our recent high-risk
    report, specifically about Medicare. We have continued to
    designate Medicare as a high-risk program because of its
    complexity and susceptibility to improper payment added to its
    size. This has led to serious management challenges.
        In 2010, Medicare covered 47 million elderly and disabled
    beneficiaries and had estimated outlays of $509 billion, making
    it the third largest federal programs in terms of spending.
        Currently, Medicare remains on a path that is fiscally
    unsustainable in the long term. This heightens the urgency for
    the Centers for Medicare and Medicaid Services to address our
    recommendations, effectively implement new laws and guidance
    and improve its management in four areas. Broadly, these areas
    include reforming and refining payments, improving program
    management, enhancing program integrity and overseeing patient
    care and safety. Today I am going to focus my oral comments on
    payments and program integrity.
        With regard to reforming and refining payments, CMS has
    implemented payment reforms such as for Medicare Advantage,
    inpatient hospital and home health services. It has also begun
    to provide feedback to physicians on their resource use, which
    is positive but which could benefit from additional refinement,
    and is developing a new payment system that accounts for the
    cost and quality of care. But more could be done. For example,
    we have recommended to CMS that they consider implementing more
    front-end approaches to controlling the growth of imaging
    services. In addition, we recently found that although payments
    for home oxygen have been reduced or limited several times in
    recent years, further savings are possible.
        In regard to program integrity, Congress recently passed
    laws including the Improper Payments Elimination and Recovery
    Act, the Patient Protection and Affordable Care Act and the
    Small Business Job Act that provide authority and resources and
    impose new requirements designed to help CMS reduce improper
    payments.
        The Administration has also issued executive memoranda
    including one that requires agencies to check certain databases
    known as the Do Not Pay List before making payments to ensure
    that payments are not made to individuals who are dead or
    entities that have been excluded from federal programs. CMS is
    taking steps to implement these laws and memoranda through
    regulations and other agency actions. In 2010, it created a new
    Center for Medicare and Medicaid Program Integrity to better
    coordinate efforts to prevent improper payments. CMS has been
    tracking its improper payment rates in Medicare fee for service
    and Medicare Part C and has established performance goals for
    reducing those rates in the future. However, the agency has not
    reported a single error rate for Part D and has not been able
    to demonstrate sustained progress in lowering its improper
    payment rates. So continued oversight is warranted.
        Having a corrective action process in place to address
    vulnerabilities that lead to improper payments is also
    important to managing them effectively. Our work on recovery
    auditing, which reimburses contracts on a contingency basis to
    uncover payments that should not have been made found that CMS
    had not developed an adequate process to address the
    vulnerabilities that had been identified by the contractors.
    Since it is important to address these issues going forward, we
    recommended that CMS develop a robust corrective action
    process.
        Further, we issued a report in February 2009 that indicated
    that Medicare continued to pay some home health agencies for
    services that were not medically necessary or were not
    rendered. To address this, we made several recommendations
    including that CMS direct its contractors to conduct post-
    payment reviews on home health agencies with high rates of
    improper payments. CMS has not implemented this and several
    other recommendations to improve its program safeguards.
        In conclusion, although CMS has taken many actions to
    improve the integrity of the Medicare program, further action
    is needed to ensure that payments are proper and
    vulnerabilities to improper payments are addressed. We are
    beginning new work to address some of these issues to determine
    if additional agency or Congressional action might be helpful.
        Mr. Chairman, this concludes my statement. I would be happy
    to answer any questions.
        [The prepared statement of Ms. King follows:]

        Mr. Stearns. Thank you.
        Mr. Roy.

                        STATEMENT OF GERALD ROY

        Mr. Roy. Good morning, Chairman Stearns, Ranking Member
    DeGette and distinguished members of the subcommittee. I am
    Gerald Roy, Deputy Inspector General for Investigations at the
    U.S. Department of Health and Human Services, Office of
    Inspector General. Today I am privileged to have with me OIG
    Assistant Special Agent in Charge Omar Perez of our Miami
    Regional Office.
        OIG is an independent nonpartisan agency committed to
    protecting the integrity of more than 300 programs administered
    by HHS. The Office of Investigations employs over 450 highly
    skilled special agents who utilize state-of-the-art
    investigative technologies and a wide range of law enforcement
    actions including the execution of search and arrest warrants.
    We are the Nation's premier health care fraud law enforcement
    agency. Our constituents are the American people, and we work
    hard to ensure their money is not stolen or misspent. Over the
    past fiscal year, OIG investigations have resulted in over 900
    criminal convictions and civil actions and over $3.7 billion in
    recoveries.
        Today I will discuss three critical aspects of OIG's work:
    the Medicare fraud strike force model, corporate fraud
    investigations and tools employed by OIG. The Medicare fraud
    strike force model is a critical component of one of the
    Administration's signature initiatives known as HEAT. This is a
    joint effort by HHS and DOJ to leverage resources and expertise
    to prevent fraud and abuse. Strike forces concentrate antifraud
    efforts in geographic areas at high risk for fraud. Strike
    force teams consisting of OIG agents and our law enforcement
    partners are assigned to dedicated prosecutors. Strike force
    cases are data driven, which allows us to catch criminals in
    the act. We operate in nine locations and we plan to expand to
    other high-fraud areas. Last month, HEAT strike forces engaged
    in the largest federal health care fraud takedown in our
    history, arresting over 100 defendants in nine cities
    associated with more than $225 million in fraud. More than 300
    OIG special agents led this operation. The photos you see here
    today show our special agents engaged in search and arrest
    activities.
        We are also aggressively pursuing major corporations and
    institutions that commit health care fraud on a grand scale.
    Corporate fraud often involves complex kickbacks, accounting
    and illegal marketing schemes. Some of these companies play
    such a critical role in the health care delivery system that
    they may believe that the OIG would never exclude them. Some
    executives consider civil penalties and criminal fines just the
    cost of doing business. As long as the profit from fraud
    outweighs the cost, abusive corporate behavior will continue.
    OIG plans to alter this cost-benefit calculus of executives by
    more broadly employing one of the most powerful tools in our
    arsenal: the authority to exclude individuals and entities from
    participating in federal health care programs. When there is
    evidence that an executive knew or should have known of the
    underlying criminal misconduct of the organization, OIG plans
    to exclude that executive from our programs.
        Recently, we assigned a special agent to the International
    Criminal Police Organization, INTERPOL. INTERPOL facilitates
    international investigative cooperation between 188 member
    countries and more than 18,000 law enforcement agencies in the
    United States. HHS OIG is the first in the Inspector General
    community to have a special agent assigned to INTERPOL. We have
    over 170 fugitives running from health care fraud charges. We
    will leverage the resources of INTERPOL's worldwide partners to
    bring them to justice.
        In February, OIG launched our most-wanted fugitive Web
    site. The individuals you see on our top 10 fugitive poster
    allegedly defrauded taxpayers of more than $136 million. We
    have partnered with America's Most Wanted and INTERPOL to
    feature our Web site and actively spread the word. We are
    asking the public to help us bring these fugitives to justice.
        The bottom line: We are sending a clear message that fraud
    will not be tolerated and our success represents a prudent
    investment of taxpayer dollars. For every $1 spent on our
    health care fraud programs, we return over $6 to the Medicare
    trust fund.
        Thank you for the opportunity to discuss our law
    enforcement efforts and strategies. We are committed to serving
    and protecting the Nation's most vulnerable citizens and the
    federal health care programs on which they rely.
        [The prepared statement of Mr. Roy follows:]

        Mr. Stearns. Thank you.
        Mr. Perez, welcome.

                        STATEMENT OF OMAR PEREZ

        Mr. Perez. Good morning, Chairman Stearns, Ranking Member
    DeGette and distinguished members of the subcommittee. I am
    Omar Perez, Assistant Special Agent in Charge with Human and
    Health Services Office of Inspector General. I am stationed in
    Miami and currently supervise agents assigned to the Medicare
    strike force, and prior to assuming my position, I was a member
    of one of the strike force teams. I am honored for the
    invitation and opportunity to discuss our efforts in combating
    health care fraud.
        This morning, I am here to tell you what our agents and I
    experience as criminal investigators on the front line in this
    fight against health care fraud. Although the vast majority of
    Medicare providers are honest, my job and our job is to focus
    on those intent on stealing from the program. My squad is
    actively engaged in criminal investigations, testifying before
    grand juries, executing search and arrest warrants and seizing
    bank accounts.
        Medicare fraud is discussed openly on the streets of south
    Florida because it is accepted as a safe and even way to get
    rich quick. Now, the money involved in staggering. We see high
    school dropouts making anywhere from $100,000 to millions a
    year. Typically, we see business owners, health care providers,
    doctors and Medicare patients participate in the fraud but now
    we see drug dealers and organized criminal enterprises joining
    in.
        Today I will describe the typical fraud scheme, highlight
    Miami's investigative model, share success stories, and finally
    discuss the evolution of fraud in south Florida.
        Now, prior to the state of the strike force, Miami was
    riddled with sham DME companies whose owners had one idea in
    mind: steal from the program. In order to perpetrate the fraud,
    nominee owners were recruited to place their names on corporate
    documents, lease agreements and corporate bank accounts, and in
    exchange were paid between $10,000 to $20,000. Stolen patient
    information was obtained from corrupt employees at hospitals,
    clinics and doctors' offices. They also obtained lists of
    stolen physician identifiers, and with these two key pieces of
    information submitted fraudulent claims to Medicare for
    equipment that was never provided. Once the money was deposited
    into the account, it was withdrawn within days. The idea was to
    deplete the account so that by the time Medicare even realized
    that there was a fraud, there was no money left to recover.
        These schemes are executed within a matter of months so we
    developed a streamlined investigative approach to HEAT
    investigations. The model includes the following steps to help
    identify our targets: quickly obtain and analyze Medicare
    claims, identify and obtain banking information, obtain the
    corporate documents, and identify the medical billing agent.
        Now, the following examples highlight the successes of our
    model. Two months ago, one of our agents received information
    from a confidential source that a DME company was submitting
    fraudulent claims. Through data analysis, we saw that $1.5
    million was billed in just 3 weeks after a corporate change of
    ownership. Further data analysis showed that this company and
    another that we had under investigation was billing for about
    the same 100 patients, so within 30 days the agents
    corroborated that fraud was taking place and we were able to
    arrest the target. Using this model, he got zero money. When we
    arrested him, we found a fake driver's license and learned that
    he was about to purchase yet another company under this assumed
    identity.
        In another example, a source alleged a corporation owning
    several community mental health centers was paying patients to
    allow them to bill for services they were not receiving. Data
    analysis and other investigative techniques led to five
    individuals being indicted and arrested and seven search
    warrants being executed simultaneously. Now, 2 weeks ago, we
    indicted and arrested another 20 individuals associated with
    this corrupt corporation and those arrested included center
    directors, physicians, therapists, patient recruiters and money
    launderers. The photographs you see are of the lavish estate of
    a patient recruiter who also laundered money for the corrupt
    corporation. We are finding that criminals have migrated to
    other services within the Medicare program including home
    health, community mental health centers, physical and
    occupational therapy. Historically, Medicare patients and
    doctors were not involved but now we are finding that in many
    cases both are getting paid to participate in the fraud.
        Additionally, not only are we seeing criminals migrate to
    other parts of the State but we know that they have migrated to
    States adjacent to Florida and other parts of the country like
    Georgia, North Carolina, Tennessee, West Virginia and Michigan.
        Thank you very much for the opportunity to discuss strike
    force operations in the south Florida and the investigative
    model that we utilize to protect the taxpayers interest, and I
    certainly welcome the opportunity to address any questions the
    panel has.
        [The prepared statement of Mr. Perez follows:]

        Mr. Stearns. Thank you, Mr. Perez.
        Mr. Spiegel.

                       STATEMENT OF JOHN SPIEGEL

        Mr. Spiegel. Thank you. Chairman Stearns, Ranking Member
    DeGette and members of the subcommittee, thank you very much
    for the invitation to discuss the Centers for Medicare and
    Medicaid Services' efforts to reduce fraud, waste and abuse in
    the Medicare, Medicaid and Children's Health Insurance programs
    and the new tools and authorities provided in the Affordable
    Care Act. I am happy to be here today appearing on behalf of
    Peter Buddetti, who is the Director of the Center for Program
    Integrity where I work as the Director of the Medicare Program
    Integrity Group.
        Dr. Buddetti said from the beginning of the time on his job
    that people are asking two questions repeatedly: why do you let
    the perps into Medicare and Medicaid and why do you continue to
    pay fraudulent claims? Well, I can tell you that with the new
    authorities provided in the recent laws and the commitment of
    the Administration in fighting fraud, we are making progress on
    both fronts. Our approach will be keeping people who don't
    belong in the programs out and we will be kicking out
    fraudulent claims before they are paid. We now have the
    flexibility to tailor resources to address the most serious
    problems and quickly initiate activities in a transformative
    way.
        Under the leadership of Secretary Sebelius, CMS has taken a
    number of administrative steps to better meet emerging needs
    and challenging in fighting fraud and abuse. For example, CMS
    consolidated the Medicare and Medicaid Program Integrity Groups
    under a unified Center for Program Integrity to pursue a more
    strategic and coordinated set of program integrity policies and
    activities across both programs. This change in structure and
    focus served our program integrity well and has facilitated
    collaboration on antifraud initiatives with our law enforcement
    partners in the HHS Office of Inspector General and in the
    Department of Justice and State Medicaid fraud control units as
    well. And just last week we restructured the center to provide
    some additional concentrated focus on the new initiatives that
    I will be talking about in a little bit, some examples being
    increased focus on data development and uses of analytics that
    will help bolster our work.
        The Affordable Care Act enhanced this organizational change
    by providing an opportunity to develop policies across all of
    our programs jointly. The act's division such as enhanced
    screening requirements for new providers and suppliers apply
    across all the programs, not just for Medicare and not just for
    Medicaid. They are uniform across the board. This ensures
    consistency obviously as one of the goals that we try to pursue
    in our fraud and abuse activities.
        So many might argue that just rearranging the boxes doesn't
    have much of a value but we think that having created a Center
    for Program Integrity, it is on a par with other major
    operating components within CMS. It sends a powerful message
    that the Administration is seriously committed to fighting
    fraud and it puts the bad actors on notice, and because most
    success in anything comes from clarity of purpose, we have made
    certain that our sights are firmly fixed on the goal of
    ensuring correct payments are made to legitimate providers for
    covered, reasonable and appropriate services for eligible
    beneficiaries.
        I would like to take a little time today to explain how we
    have been transforming our fraud detection and prevention work
    through the new approach on the poster over there. So first,
    central to our goal is the shift away from identifying fraud
    before it happens. We want to prevent things from taking shape.
    We want to move away from ``pay and chase'' that we have relied
    on so heavily in the past. Second, we don't want to be limited
    to a monolithic approach to fighting fraud. Instead, we want to
    focus our efforts on the bad actors who pose elevated risk.
    Third, we are taking advantage of innovation and technology as
    we move quickly to take action focused on prevention when
    possible. And fourth, consistent with the Administration's
    commitment to being transparent, we are developing performance
    measures that will specify our targets for improvement. We are
    actively engaging public and private partners from across the
    spectrum because there is obviously much to learn from others
    who engaged in the same endeavor of fighting fraud. We know the
    private sector is victimized by the same schemes we see in
    public programs in collaboration and communication among all
    parties. And finally, we are committed to coordination and
    integration of our activities across all the programs in CMS
    based on best practices and lessons learned.
        So as we move away from the old ways to more modern and
    sophisticated successful approaches, we are continuing to
    concentrate our actions----
        Mr. Stearns. Just if you can, sum up. Your time is over.
        Mr. Spiegel. OK. Sorry.
        Mr. Stearns. Thank you.
        Mr. Spiegel. Let me just get through this one particular
    part and I will be finished.
        Mr. Stearns. Can you just summarize?
        Mr. Spiegel. Sure. We want to do a better job of keeping
    people out before they get in. We want to move quickly when we
    see those who have gotten in that are potentially improper
    bills and take steps to reduce claims payment error by 50
    percent and get people out who don't belong.
        [The prepared statement of Mr. Spiegel follows:]

        Mr. Stearns. Thank you. With that, I will open up with
    questions. Let me start with you, Mr. Spiegel. When I looked at
    your resume, it looks like you have been on the job less than a
    year. You started June 2010. So you have really been the man
    who is Director of Medicare Program Integrity for less than one
    year. Is that correct?
        Mr. Spiegel. That is correct.
        Mr. Stearns. And you came from the private sector?
        Mr. Spiegel. Most immediately.
        Mr. Stearns. OK. You might not have a handle on this, but
    how much money, in your opinion, is lost to fraud each year in
    the Medicare program precisely?
        Mr. Spiegel. Well----
        Mr. Stearns. Just precisely.
        Mr. Spiegel. I would have to answer that question and say
    that there is no actual one number----
        Mr. Stearns. So you don't know? Is that fair enough?
        Mr. Spiegel. That is correct.
        Mr. Stearns. Now, 60 Minutes in September had an expose on
    Medicare, and they indicated it was $60 billion, and they had
    one witness who indicated it would be $90 billion. Do you think
    it is fair to say that it is anywhere from $60 billion to $90
    billion based on what 60 Minutes said?
        Mr. Spiegel. Like all of us, I have heard the estimates
    that have come from private groups as well as government----
        Mr. Stearns. Why is it so difficult to understand what the
    figure is? If 60 Minutes has come up with it and witnesses have
    come up with it, we had the Justice Department give an
    estimate, why is it that you are the man in charge of Medicare
    Program Integrity, why can't you give us an estimate of what it
    is, approximately?
        Mr. Spiegel. Well, because a lot of the estimates that you
    cite and others cite contain information that deals with things
    that aren't necessarily fraud. Some of them turn out to be
    improper payments, things we want to know about but they are
    really not fraud and it is not necessarily----
        Mr. Stearns. All right. Mr. Waxman indicated in his opening
    statement that these new requirements that are in the Obamacare
    prevention will save us $7 billion. Do you think that is an
    accurate statement?
        Mr. Spiegel. I believe Mr. Waxman cited CBO estimates.
        Mr. Stearns. OK. Now, the problem is, it is a $650 billion
    program and they are saving $7 billion. That is probably about
    less than 1 percent. How can you effectuate eliminating waste,
    fraud and abuse when you cut the program $550 billion like
    Obamacare does? So it is a question for Ms. King. If you are
    actually cutting Medicare program, wouldn't that make it
    difficult to prevent waste, fraud and abuse just by axiomatic?
    Wouldn't it be self evident that you can't cut a program that
    amount of money and still reduce waste, fraud and abuse?
        Ms. King. Mr. Chairman, I think that the reductions in
    Medicare spending are reductions off the rate of growth and not
    overall reductions in the size of the----
        Mr. Stearns. Well, that is not how we understand it. But
    Mr. Spiegel, let us go to Medicaid. How much is lost to
    Medicaid, not Medicare, because you say you don't know. What
    about Medicaid? What is the loss to fraud?
        Mr. Spiegel. Well, it is the same issues that surround
    trying to come up with a number for fraud in Medicare.
        Mr. Stearns. So you have no idea, not even approximate? OK.
        Now, Ms. King, they are expanding Medicaid by another 20
    million people they are going to add, and so if you are going
    to expand and increase it, and Medicaid has a lot of fraud,
    wouldn't that indicate that you are going to have increased
    fraud?
        Ms. King. I think it depends on what happens with the new
    authorities that CMS was given in the Affordable Care Act and
    how they are implemented.
        Mr. Stearns. Let me say, the Republicans on this side would
    be very glad to vote for any legislative measure to prevent
    fraud. Any fraud measures, we would be glad to implement. It is
    just we are worried about some of the things I mentioned about.
        So Mr. Spiegel, my concern is, before we expand Medicare
    and Medicaid, we still don't know how much we lost to fraud and
    you are the man in charge less than a year, so you are saying
    at this point we just have no idea how much it is, how much
    fraud, waste and abuse. So it seems to me that if you don't
    even have a handle on what the amount is, it is going to be
    very difficult to penetrate it down.
        Let me ask a question to Mr. Roy and Mr. Perez. I
    appreciate, Mr. Perez, I said in my opening statement, I just
    said that Medicare fraud is rapidly eclipsing the drug trade as
    far as most profitable and efficient criminal enterprise
    system. This was comments based on the 60 Minutes expose. Do
    you think that is true?
        Mr. Perez. Well, we certainly have seen some of our
    investigations that individuals that used to participate in the
    drug trade are now certainly involved in health care fraud.
        Mr. Stearns. Have you seen a lot of organized crime
    involved in Medicare and Medicaid fraud, Mr. Roy?
        Mr. Roy. Yes, sir. We are seeing----
        Mr. Stearns. Just bring the mic just a little closer to
    you, if you don't mind.
        Mr. Roy. My apologies. We are seeing an uptick in organized
    crime elements engaging in health care fraud, whether it is in
    structured organizations like Eurasian organized crime that we
    see out in Los Angeles to more loose--knit organizations that
    we see in Texas and the Miami, Florida, area.
        Mr. Stearns. Mr. Roy, this is probably putting you on the
    spot but do you or Mr. Perez and your colleagues, have you come
    up with what is a figure of how much fraud? Would you venture a
    guess?
        Mr. Roy. No, sir, I cannot.
        Mr. Stearns. Would you venture a guess it is more than $7
    billion a year?
        Mr. Roy. Yes, sir, I would.
        Mr. Stearns. And Mr. Perez, would you venture a guess that
    the fraud in Medicare is more than $7 billion a year?
        Mr. Perez. I know we recovered $3.7 billion, so certainly I
    think----
        Mr. Stearns. So what I am trying to say, Mr. Spiegel, is
    here you have no idea what the fraud figure is and the people
    to your right, one has indicated that he has found just in
    Florida $3.5 billion, so you have--it is just incomprehensible
    to me how you can come here this morning and say you have no
    idea how much the fraud when the man to your right has
    indicated that he can track $3.5 billion himself and so I think
    when Mr. Waxman mentioned $7 billion, that is just the tip of
    the bucket. That is just the tip, and there is so much more
    there and I think Mr. Roy and Mr. Perez have confirmed that.
        My time is expired. I will turn to the ranking member, Ms.
    DeGette.
        Ms. DeGette. Thank you so much, Mr. Chairman.
        Let me follow up on that, Mr. Spiegel, with you. I believe
    the CBO estimated that the provisions of the Affordable Care
    Act will save the taxpayers $7 billion over the next 10 years.
    Is that correct?
        Mr. Spiegel. I believe that is what it says.
        Ms. DeGette. Is that the only money that the Administration
    intends to save on fraud in Medicare and Medicaid?
        Mr. Spiegel. No.
        Ms. DeGette. Could you explain, please, why that is not
    the--I don't want this to be misinterpreted that the
    Administration, that these are the only efforts that are going
    to be made. What other efforts are being undertaken to
    eliminate fraud, waste and abuse, briefly?
        Mr. Spiegel. First of all, however much the number is for
    fraud that is going on is too much.
        Ms. DeGette. Right. What other efforts are being undertaken
    to avoid fraud, waste and abuse, briefly?
        Mr. Spiegel. So we are implementing the new provisions of
    the Affordable Care Act that allow us to do a better job----
        Ms. DeGette. OK. What other--Mr. Perez, do you have an
    answer? Oh, you are just trying to move the mic.
        Mr. Spiegel. I mean----
        Ms. DeGette. What I am saying is, the provisions of the
    Affordable Care Act are not the only provisions of law that
    help----
        Mr. Spiegel. Right. That is true.
        Ms. DeGette [continuing]. Us to avoid waste, fraud and
    abuse. What other provisions in law that may be separate and
    apart from the $7 billion are going to help us avoid fraud,
    waste and abuse?
        Mr. Spiegel. OK. So in addition to the things that I was
    talking about with regard to provider screening, we have a
    whole range of activities that we do now and that we are going
    to do to oversee proper payments----
        Ms. DeGette. OK. If you can supplement your answer in
    writing, that would be helpful.
        Mr. Spiegel. I would be happy to do so.
        Ms. DeGette. But in essence, what you are saying is, the $7
    billion is in addition to efforts that are being currently
    made?
        Mr. Spiegel. That is right.
        Ms. DeGette. Now, Mr. Perez, the efforts that you are
    undertaking, those are being undertaken under current law,
    right? Because the Affordable Care Act hadn't been implemented
    yet, correct?
        Mr. Perez. Yes, ma'am.
        Ms. DeGette. OK. Now, Mr. Spiegel, perhaps you can talk
    about the enrollment screening requirements in the Affordable
    Care Act. Will they work to prevent enrollment by fraudulent
    providers?
        Mr. Spiegel. Yes.
        Ms. DeGette. And how are they different than previous
    requirements?
        Mr. Spiegel. Well, the new enrollment screening provisions
    allow us to focus on providers based on the risk that they
    pose, the risk of fraud that they pose. We have new and
    enhanced screening that we would be applying to those that pose
    the greatest risk like criminal background checks, database
    checks, fingerprinting for those that are posing the greatest
    risk. We have new approaches to consolidating our data and
    sharing data across Medicare and Medicaid so that both programs
    have access to information about, for example, providers that
    have been terminated from Medicaid that may be terminated from
    Medicare as well and vice versa. The particular provision
    that--one of the particular provisions in the provider
    screening rule we just published that may have the most effect
    is the Secretary's authority to impose temporary enrollment
    moratoria when she determines that there is a need to do that
    to combat fraud, waste and abuse.
        Ms. DeGette. Ms. King, do you believe that some of these
    new provisions that we have talked about today will add to our
    arsenal in being able to target waste, fraud and abuse and to
    eliminate it?
        Ms. King. Yes, we do. We have previously identified several
    areas where increased enforcement and action would be helpful.
    One of those is enrollment. One is them is in prepayment edits.
    One is in postpayment edits, contractor oversight, and the
    other is, the last is a robust process for corrective action,
    and the Affordable Care Act has provisions in several of these
    areas designed to enhance CMS's ability, and some of the key
    ones I think are on the enrollment side because preventing
    fraud is a lot better and easier than chasing after it when it
    has been committed so----
        Ms. DeGette. Correct, and these are new tools.
        Ms. King. Yes, they are.
        Ms. DeGette. But would you agree that some of the existing
    tools that CMS has could also be used in a robust way?
        Ms. King. Yes. Congress starting in 1997 in HIPAA created a
    program, a Medicare integrity program that was designed to
    focus on reducing improper payments and fraud and abuse, and
    that is what some of these activities that have been discussed
    today are funded from----
        Ms. DeGette. Thank you.
        Ms. King [continuing]. Before the Affordable Care Act.
        Ms. DeGette. I yield back.
        Mr. Stearns. The gentlelady's time is expired. The
    gentleman from Texas, Mr. Barton, is recognized for 5 minutes.
        Mr. Barton. Well, thank you, Mr. Chairman.
        Let us start off by saying that everybody on the dais here
    is anti fraud and abuse. John Dingell is anti fraud and abuse.
    Jan Schakowsky is anti fraud and abuse. Diana DeGette is anti
    fraud and abuse. The chairman is anti fraud and abuse. All of
    our freshmen down here in the front row are anti fraud and
    abuse on the Republican side. Dr. Murphy is anti fraud and
    abuse. I mean, we are all anti fraud and abuse, so this is not
    a partisan issue. But we are very frustrated. I have chaired
    hearings on this, John Dingell has chaired hearings on this,
    Diana DeGette has chaired hearings on this, Waxman has chaired
    hearings on this. I mean, it is so frustrating that we all
    agree it is a problem, we all want to solve the problem, and
    yet we still don't even know the scope of the problem.
        Now, why is that important? I believe that if you don't
    know what the problem is, you can't set goals on how to solve
    it. So let us say it is a 10 percent problem, which would be
    $80 billion. Maybe a reasonable goal then would be to cut that
    by 25 percent in a given year, which would be $16 billion or
    $20 billion. Maybe it is only a $40 billion a year. But if you
    guys can't help us determine what the problem is, it is hard
    for us to decide how to set goals to solve it.
        So I am going to go through a series of questions here and
    they are kind of sophomore 101 questions, and hopefully you
    have got great answers to every one of them. My first question
    is--and I am going to ask Mr. Perez because you seem to be the
    guy at the table that actually can do something about it, not
    just study it or whatever but you can actually make things
    happen. Do you have the ability to seize assets of folks that
    you arrest and accuse of Medicare and Medicaid fraud?
        Mr. Perez. Well, first, Congressman, thank you very much
    for the vote of confidence. I certainly appreciate that. And
    the department does not have, or OIG does not have seizure
    authority but we do work in tandem with the Federal Bureau of
    Investigation or other entities that do you have the seizure
    authority.
        Mr. Barton. Does anybody within HHS have the ability to go
    out and actually seize physical assets, seize cash, seize
    equipment, or do you have to go to the FBI to do that?
        Mr. Perez. Currently, we have to use the FBI unless it is a
    civil proceeding.
        Mr. Barton. Would you like to have the authority, if
    Congress gave you the authority to seize assets?
        Mr. Roy. Sir, if I could respond to that? We would be more
    than happy to have that authority, but you have to understand
    that the size of our organization, taking on full seizure
    authority entails taking on a tremendous amount of additional
    assets to be able to seize that and care for that property and
    then liquidate that property. It is a tremendous undertaking
    that is probably----
        Mr. Barton. Right now I just want to know if you want to
    have the authority. Mr. Perez seems to think he would like it.
    You seem to think it is more trouble than it is worth.
        Mr. Roy. Well, Mr. Perez is in lockstep here. We will take
    any additional authority that comes our way and utilize----
        Mr. Barton. I only have another minute and 25 seconds. Are
    there currently under existing programs taxpayer hotlines where
    people can phone in or mail in or Internet in tips on people
    they think are defrauding the government on billing claims? Do
    you have that?
        Mr. Roy. Yes, sir. OIG has 1-800-HHS-TIPS as our hotline.
        Mr. Barton. What about my friend here, Mr. Spiegel? Do you
    have those hotlines?
        Mr. Spiegel. We do. We have 1-800-Medicare. We have special
    hotlines in south Florida.
        Mr. Barton. Do you pay bonuses or some sort of a cash
    payment if the tip is followed up and actually proves to be
    correct?
        Mr. Spiegel. We have a set of rules around that, and yes,
    we have.
        Mr. Barton. How often is that used?
        Mr. Spiegel. It depends. Well, there is a number of
    criteria that define it. It hasn't been used all that often but
    it has been just recently actually.
        Mr. Barton. Do you have within your agency the ability to
    check internally for people that are employees that are part of
    scams in terms of credentialing people that shouldn't be or
    checking for folks that are paying bills that they shouldn't
    pay? Is there an internal ability to check within the system?
        Mr. Spiegel. There are. There is a number of contracting
    requirements in place to make sure that the people who actually
    make decisions on our behalf are following the rules.
        Mr. Barton. My last question. If it is not proprietary, how
    often does that type of investigation actually produce
    fraudulent activity within the system? In other words, 10
    percent of the time that you check?
        Mr. Spiegel. I don't know the exact number. I would be glad
    to get back to you with that, though.
        Mr. Barton. OK. Thank you, Mr. Chairman. And I will have
    some questions for the record.
        Mr. Stearns. Thank you, and recognize the chairman
    emeritus, Mr. Dingell from Michigan, for 5 minutes.
        Mr. Dingell. Mr. Chairman, I thank you and commend for this
    hearing. It is a very important matter, and I would note, I was
    one of the people who went with our very fine investigators
    when they were conducting the nine community raids on these
    malefactors that we are discussing today, and I want to commend
    you down there for the work that you are doing on this matter.
    I also want to commend the people from the Inspector General's
    Office, from the GAO and our friend, Dr. Spiegel.
        I would like to observe one thing very quickly. No
    environmental impact statements are filed by these criminals
    and they don't file any 10Ks or 10Qs so we can know what they
    are up to, and I want to say, Mr. Chairman, I commend you for
    having this hearing because moving this process forward is
    extremely important and there is a lot of money in the recent
    health care reform legislation which will make available to us
    the ability to make significant savings. I am not about to
    criticize our witnesses today or anybody else for not having
    the cost of these things. These criminals don't operate by the
    clear light of day.
        These questions are to Dr. Spiegel and to Ms. King. Dr.
    Spiegel and Ms. King, do you believe that the new tools
    included in the Affordable Care Act will help CMS to meet its
    goal? Yes or no.
        Ms. King. Yes, if they are implemented properly.
        Mr. Spiegel. Yes.
        Mr. Dingell. Again, if you please, funding for the health
    care fraud and abuse control program includes mandatory and
    discretionary funding. It is divided by CMS's integrity
    programs and law enforcement programs at the Office of the
    Inspector General and DOJ. The President's 2012 discretionary
    request is $581 million. If this funding is not provided, will
    CMS be able to hire the personnel necessary to implement the
    antifraud provisions included in the Affordable Care Act? Yes
    or no.
        Mr. Spiegel. Until we find out exactly how much would in
    fact be appropriated, we won't know exactly what we would be
    able to do but we know that are limited in our ability to plan
    right now.
        Mr. Dingell. If you don't get the money, you can't plan and
    you can't hire----
        Mr. Spiegel. And we wouldn't be able to----
        Mr. Dingell [continuing]. People to support the program
    work?
        Mr. Spiegel. We would have to ratchet back.
        Mr. Dingell. All right. Now, the Affordable Care Act
    requires high-risk providers and suppliers who want to enroll
    in Medicare, Medicaid CHIP to undergo a higher level of
    screening. This increases scrutiny will be critical in rooting
    out fraud, waste and abuse in susceptible programs. If the
    requested discretionary funding is not provided, will CMS be
    able to fully implement and utilize enhanced screening? Yes or
    no.
        Mr. Spiegel. Again, it would depend on the levels of
    funding that ended up----
        Mr. Dingell. The simple fact of the matter is, if you don't
    get that, you aren't going to be able to move forward. You
    aren't going to be able to move forward until you know that you
    are going to get it, and until you get it, you aren't going to
    be able to do the hiring and the other things that are
    necessary to bring your enforcement program up to date. Isn't
    that right?
        Mr. Spiegel. It would have a severe effect on that, yes.
        Mr. Dingell. Very good. Now, again, Dr. Spiegel, the
    Affordable Care Act requires data sharing among federal
    agencies to monitor and assess risk levels in program areas
    that improve identification of fraud. If the requested
    discretionary funding is not provided, will CMS be able to
    implement full data-sharing technology needed to coordinate
    monitoring and identifying sources of fraud across the federal
    agencies? Yes or no.
        Mr. Spiegel. No.
        Mr. Dingell. Now, again, Doctor, the goal of the antifraud
    provisions in the Affordable Care Act is to move CMS away from
    that wonderful practice of ``pay and chase'' and preventing
    improper payments from happening in the beginning. While some
    improper payments may be due to honest mistakes, many, many
    criminals have made Medicare and Medicaid their targets and
    also the other programs of this character. CMS has already
    begun testing risk-scoring technology to predict and prevent
    fraud. If the requested discretionary funding is not provided,
    will CMS be able to fully test and pursue the technology? Yes
    or no.
        Mr. Spiegel. No.
        Mr. Dingell. This to Deputy Inspector General Roy. This
    last summer, as I had mentioned, I was fortunate enough to
    attend a ride-along with the Detroit Medicare's fraud strike
    force. That is nine communities. And I saw some of the most
    extraordinary practices by the criminals in making money at the
    expense of Medicare that you could ever believe possible. And
    so as the first Member to ever join Medicare strike force on a
    ride-along, I have enormous respect for the fine work that the
    strike forces are doing. They have the difficult task of not
    only rooting out fraud in our health system but protecting our
    neediest populations, the poor, the elderly and the sick, from
    the criminals seeking to make money from the most vulnerable.
    Do you believe that the Medicare strike forces have the
    staffing resources they need to be effective? Yes or no.
        Mr. Roy. Yes, I do.
        Mr. Dingell. You believe they do now?
        Mr. Roy. Sir, right now in the cities we are operating,
    yes. If we want to expand, I will need additional funding.
        Mr. Dingell. So your answer is that they don't have the
    resources and you are hoping to get them. Is that right?
        Mr. Roy. Absolutely.
        Mr. Dingell. Now, do you agree on that, Ms. King?
        Ms. King. I don't have the basis of evidence to answer that
    question.
        Mr. Dingell. Any other witness like to make a comment on
    that? Very well.
        This goes to you again, Inspector General Roy. If the
    requested discretionary funding for the health care fraud and
    abuse control program is not provided, will the health care
    fraud prevention and enforcement action team be able to expand
    the Medicare strike force? Yes or no.
        Mr. Roy. No, sir.
        Mr. Dingell. All right. Now, I guess that completes my time
    and I thank you for your kindness and generosity, Mr. Chairman.
        Mr. Stearns. I thank the gentleman.
        Mr. Burgess, the gentleman from Texas, is recognized for 5
    minutes.
        Mr. Burgess. Thank you, Mr. Chairman.
        Mr. Spiegel, so I don't get lost in all the numbers that we
    are hearing this morning, let me walk through some things and
    you tell me if the thinking is generally correct. Now, if I
    understand correctly, the Congressional Budget Office score for
    the entirety of the Patient Protection and Affordable Care Act
    that the provisions in that act would save about $8 billion
    over the 10-year budgetary cycle. Is that correct?
        Mr. Spiegel. That is my understanding.
        Mr. Burgess. And the HHS estimate of the error rate in the
    payments, the payment error rate, is just under 10 percent at
    9.4 percent a year. Is that correct?
        Mr. Spiegel. Yes.
        Mr. Burgess. Now, Medicaid expenditures are going to
    increase of necessity under the Patient Protection and
    Affordable Care Act. The number I calculate for that is about
    $430 billion over 10 years. Does that sound about right?
        Mr. Spiegel. I am not an expert on that Medicaid budget.
        Mr. Burgess. Does GAO have an opinion on the amount that we
    are going to spend additionally in Medicaid over the life cycle
    of the 10-year budgetary window?
        Ms. King. I actually don't have that number off the top,
    either.
        Mr. Burgess. Well, it is----
        Ms. King. But it certainly----
        Mr. Burgess [continuing]. A part of the GAO report that we
    have that the cost of Medicaid expansion is estimated to exceed
    $430 billion over the next 10 years. So I am going to assume
    the answer from GAO is yes.
        So just in Medicaid, just in the expansion of the Medicaid
    system that we are doing, we have an error rate that will lose
    $43 billion over the 10-year budgetary cycle but we have
    safeguards in the act that are going to save us $8 billion, so
    we are not netting out very much in that exchange, are we? And
    that is your division of CMS, right? I mean, that is what you
    are going to fix, right?
        Mr. Spiegel. I am in the Medicare Program Integrity Group,
    and yes, we are focused keenly on preventing fraud, waste and
    abuse in our program.
        Mr. Burgess. But in fact, the numbers just don't add up. I
    mean, this is going to cost us a tremendous--I am all for the
    antifraud provisions that are in the Patient Protection and
    Affordable Care Act but there is no way in the world they are
    going to pay for the expansion that is occurring even just in
    the Medicaid part of this, let alone other areas.
        In my area in Dallas-Fort Worth, we have got a very
    aggressive--Mr. Roy and Mr. Perez, I am basically directing
    this question to you. We have got a very aggressive
    investigative reporter. She is very, very good. Becky Oliver is
    her name, and you just never know when she is going to walk up
    behind you and put a microphone 2 centimeters away from your
    face and ask a very, very tough question, and most of those
    tough questions have to do with Medicare and Medicaid fraud,
    and I referenced some of that in my opening statement. It
    almost seems as if organized crime and organizations from
    outside the continental United States, offshore organizations,
    are getting involved. This business is so lucrative and so easy
    and the risks are so slight that they are really going after
    this money aggressively. And she was the one that pointed out
    to me that there was a Nigerian national who had several home
    health agencies opened under various provider numbers and a
    single post office box. I guess she wants to be cost-effective
    so she wasn't spending much on overhead, a single post office
    box, and yet after one of our provider numbers was busted, CMS
    keeps sending payments to the same post office box. I mean, you
    say you are doing stuff with the electronics and getting better
    at this, but oh, my God, that is the sort of stuff, the
    American people look at and they just don't understand. Is
    there a way to get at that?
        Mr. Roy. Well, first and foremost, that is the scheme, to
    have multiple provider numbers and set those up.
        Mr. Burgess. So you know that, right?
        Mr. Roy. Yes, sir. We are addressing it. In your city of
    Dallas, that is our brand-new strike force city and we are
    bringing the resources to there to adopt that model to address
    this issue.
        Mr. Burgess. I am going to run out of time. I referenced in
    my opening statement about the prosecutorial force. You guys
    are doing the job we asked you to do and we are grateful for
    that, but when you bring these folks to light, are we able to
    actually get justice on these criminals or do they end up back
    out on the street to sin again?
        Mr. Roy. Now more than ever, I am seeing sentences and
    people go to jail that is more than I have seen before in the
    past. People are being prosecuted. They are going to federal
    prison for stealing from Medicare.
        Mr. Burgess. How comfortable are you with the prosecutorial
    manpower, the strength of the prosecutorial force that is
    available to prosecute this?
        Mr. Roy. Getting better all of the time. In your particular
    city, the resources coming from the Department of Justice are
    some of the best health care fraud prosecutors in our country.
        Mr. Burgess. Well, I appreciate that, and of course, I have
    had several meetings with HHS and the Department of Justice on
    this issue after being asked the tough questions by Becky
    Oliver, so I credit her with having put some pressure on that,
    but I have to tell you, we have got to do a lot more in this.
    It is going to overwhelm the system.
        Thank you, Mr. Chairman. I will yield back.
        Mr. Stearns. I thank the gentleman.
        Ms. Schakowsky from Illinois is recognized for 5 minutes.
        Ms. Schakowsky. Thank you.
        Do you have a strike force in Chicago, Mr. Roy?
        Mr. Roy. Yes, ma'am, we do.
        Ms. Schakowsky. Can I go on a ride-along?
        Mr. Roy. Yes, ma'am, you can.
        Ms. Schakowsky. Thank you. The Affordable Care Act
    increased mandatory funding for the health care fraud and abuse
    control fund by about $350 million, and indexed funding for the
    health care fraud and abuse control fund and the Medicare and
    Medicaid integrity programs to make sure that funds keep up
    with inflammation. Overall funding to fight fraud will increase
    by about $500 million over the next 5 years. The House
    Republicans voted to repeal the health care reform bill, and
    that would cut off the funds the law provided for antifraud
    activities, so I do want to ask you, Mr. Roy, could you
    describe the impact of cutting off this funding and what it
    would do to antifraud initiatives that the Administration is
    implementing under the Affordable Care Act?
        Mr. Roy. Well, right now, as I stated, from the perspective
    of strike force, we were in nine cities. I would ultimately
    like to expand that using data to justify and find our
    hotspots. I will say without additional funding at this point
    in time, I don't think I am going to be in a position to open
    up additional strike force locations. I need the resources. I
    need the additional bodies to put in fraud hotspots across the
    country.
        Ms. Schakowsky. Thank you.
        Mr. Spiegel, would you want to answer that?
        Mr. Spiegel. Sure. I mean, we had planned to expand the
    strike force locations from where they were to a total of 20
    because they are so effective in what they do, and we are
    obviously not going to be able to go there with the adequate
    resources to do that.
        Ms. Schakowsky. Thank you.
        Ms. King, the Affordable Care Act includes provisions to
    provide more transparency in nursing home ownership and
    operating structures and to require training, compliance and
    ethics. Ensuring that we have complete and accurate information
    on ownership allows not just more transparency but provides
    tools to allow regulators to hold any wrongdoers accountable.
    How important is it to have this data, in your view, or in
    GAO's view?
        Ms. King. I think that we believe it is always important to
    have good data about the people who are participating in the
    program so that you can track what is going on.
        Ms. Schakowsky. Mr. Roy, you had mentioned the importance
    in your written testimony, I didn't hear it orally necessarily
    but of whistleblowers in identifying possible wrongdoing. Last
    month, a Florida long-term-care ombudsman asked for information
    on nursing home structure, the same information that will be
    required in the Affordable Care Act, and was subsequently fired
    by Governor Scott. Without getting into the specifics of the
    case, do we need to provide whistleblower protections for long-
    term-care ombudsmen and others who seek information about fraud
    and abuse? And in the nursing home area, do we need to look at
    special protections for long-term-care ombudsmen?
        Mr. Roy. I am certainly in favor of some type of protection
    for all our whistleblowers. I am not familiar too in-depth with
    the matter you are speaking about.
        Ms. Schakowsky. Mr. Perez, are you, being in Florida now?
        Mr. Perez. No, ma'am.
        Ms. Schakowsky. And so the protection for whistleblowers,
    is that an important source for you?
        Mr. Roy. It is, specifically with corporate fraud.
    Whistleblowers often file what we refer to as qui tam lawsuits,
    which are lawsuits on behalf of the Federal Government. They
    are usually corporate insiders with in-depth knowledge of
    corporate fraud. From a corporate standpoint, they are
    essential to our work.
        Ms. Schakowsky. And do we have those protections in the new
    act? Are we going to do better to make sure we protect those
    people?
        Mr. Roy. In the new act, I do not--I am not familiar with
    anything that would point toward whistleblower protection but I
    am certainly not an expert on everything in that Affordable
    Care Act.
        Ms. Schakowsky. OK. Thank you very much. I yield back.
        Mr. Stearns. The gentleman from Nebraska, Mr. Terry, is
    recognized for 5 minutes.
        Mr. Terry. Thank you, Mr. Chairman.
        I like the strike force, or HEAT. It seems to be a common
    theme on both sides of the aisle probably because it is
    positive news of success. I am trying to get my arms around
    what resources CMS has right now to fight fraud and abuse.
    Under the PPACA, I understand there will be an additional $35
    million per year, as Dr. Burgess said, that won't even come
    close to what will fight fraud and abuse from the expansion of
    Medicare, but that is the CBO number. I don't know what the
    base is right now. What does CMS set aside per year for
    investigating and prosecuting fraud and abuse? Do you know that
    number?
        Mr. Spiegel. I don't know right offhand but the
    investigating and the prosecuting takes place to my right.
        Mr. Terry. All right.
        Mr. Spiegel. But the identification and the looking for in
    dealing with the improper payments and fraud at the front end
    would be us, and it is----
        Mr. Terry. Will you please provide that number to the
    committee, please?
        Mr. Spiegel. Yes.
        Mr. Terry. And why I wanted that is so I can get a picture
    of what percentage of your budget is being used for policing
    purposes, and then I would like the opportunity to compare that
    to private sector health insurance who seems to be able to do a
    lot better job in weeding out and finding insurance fraud and
    abuse and what they spend in policing. I think that is a good
    opportunity to figure out if you have enough resources or not.
    Obviously I would say you don't have enough resources.
        Mr. Spiegel. Well, one of the things about the way the
    private sector does things versus the way we do it is, they
    have different----
        Mr. Terry. I didn't ask that, and I only have 2 minutes.
        Mr. Spiegel. Sorry.
        Mr. Terry. But I am curious about it.
        Let me talk to Mr. Roy. With your strike forces and the
    work with Justice in being able to prosecute these, if you had
    the perfect world and Congress came to you and CMS came to you
    and said what do you need to get $50 billion a year recovered,
    what would you need?
        Mr. Roy. It would have to be a joint effort between us and
    Department of Justice. I can hire as many agents as possible to
    address the fraud but I also need prosecutors to prosecute that
    case. The perfect world is that we utilize the models we are
    using now, looking at data to find these hotspots and then have
    the ability to put agents in those particular hotspots and the
    prosecutors to prosecute the cases as well.
        Mr. Terry. Would you be able to provide us information if
    we set a goal of $50 billion per year? And by the way, I think
    it was the testimony, I don't know if it was you or Mr. Perez
    said you already have 300 agents working in HEAT and these
    strike forces.
        Mr. Roy. That was just the agents--I do not have 300 agents
    assigned to strike force locations. When we did that operation
    2 weeks ago, I took 300 out of my 420-plus agents and detailed
    them if they weren't already on the ground to the cities where
    we had strike force operations take place.
        Mr. Terry. Can I assume that not all 420 of your agents are
    dedicated to fighting CMS fraud and abuse?
        Mr. Roy. That is correct, sir. Eighty percent of our time
    is spent in the realm of health care fraud but we over see the
    300-plus programs of the department, and I am certainly engaged
    in oversight activities, criminal activities in those other
    departments as well.
        Mr. Terry. Mr. Perez, being on the streets and getting
    information, it sounds like fighting drug distribution on the
    streets. What do we need in communities and on the streets to
    be able to obtain this? The gentlelady from Illinois mentioned
    whistleblowers. I think that is probably an important part of
    this. How much of it, and how much of it comes from just
    hearing on the street?
        Mr. Perez. I unable to quantify exactly how much we get
    from the street but I think one of the things, to underline
    your question or at least answer it, is one of the things that
    I think we would like to see in the field, at least as agents,
    are two things, one, an ability to access the claims data
    directly, in other words, be able to have--sit outside of a
    business who we believe fits all the mold of a fraudulently run
    company and actually open up a laptop, log on and actually to
    be able to see whether or not a claim is being submitted by
    that company now, whether or not there are any payments that
    are on the payment floor, if they have already submitted
    claims, and we can make phone calls and actually start doing
    the investigation from right outside of the parking lot. That
    would be helpful.
        Mr. Terry. And that is not available to you today?
        Mr. Perez. Not today.
        Mr. Terry. Thank you.
        Mr. Stearns. The gentleman from Texas, Mr. Gonzalez, is
    recognized for 5 minutes.
        Mr. Gonzalez. Thank you very much, Mr. Chairman.
        My question will be to Mr. Spiegel and Mr. Roy. I am trying
    to get at percentages of fraud. I know GAO did a study on
    Medicare and CMS estimated that it could be as much as $48
    billion in improper payments. What I don't follow here is
    equating fraud, waste and abuse with improper payment.
        Mr. Stearns. Does the gentleman have your speaker on?
        Mr. Gonzalez. Thank you very much, Mr. Chairman.
        I do not want to equate fraud, waste and abuse to improper
    payment, which may be a billing error or a good-faith mistake.
    So can you--taking that into consideration, and I think that
    Dr. Burgess asked if it was an accurate--I think he quoted a
    percentage of 10 percent of payments on Medicaid can be
    attributed to fraud, but that wouldn't be accurate. Is that
    correct? I think it was Mr. Roy or Mr. Spiegel may have
    responded to Dr. Burgess's question.
        Mr. Spiegel. That is--what you said is accurate. It is not
    fraud, it is improper payments, and it is important to make
    that distinction as we try and calculate what the elusive
    number is that everybody is going after. Some of the numbers
    tend to have a lot of improper payments or just billing errors
    or things that aren't anything more than a mistake included in
    them. They are not fraudulent. And so we are reluctant to say
    things like that but the Medicaid number is improper payments.
        Mr. Gonzalez. Mr. Roy, obviously you are not going to go
    and prosecute and seek some sort of legal action against
    someone who made a good-faith mistake, yet that number is going
    to be taken into consideration when we are trying to look at
    payments, overpayments and so on. What I am saying is, it is
    not all criminal activity so that when you take Jan out there
    in your car and you are making all the big busts, you are not
    going to be going to providers that have simply made a good-
    faith mistake on a billing statement?
        Mr. Roy. That is correct, sir. In the strike force model
    for the most part, these providers that we are going after are
    involved in almost 100 if not 100 percent fraud.
        Mr. Gonzalez. But you have limited resources, and I
    understand that, and you are going after the true wrongdoers
    and such, because I think there are some participants out there
    that make good-faith mistakes. I don't want to make excuses for
    anybody out there that is billing the government again
    fraudulently and so on and no one is for that, and my colleague
    from Texas, Mr. Barton, pointed that out.
        What about the private sector? Let me ask Mr. Roy and even
    Ms. King, has there ever been a comparison--or Mr. Spiegel--as
    far as what is happening when it comes to fraud, waste and
    abuse with the private sector? What is the percentage there
    that is being suffered as a result of the same actors or
    similar actions by individuals that are defrauding obviously
    the private sector? Do we have numbers there? Is there a
    percentage that we can estimate, guesstimate as to how much is
    the private sector suffering as a result of fraud or criminal
    activity?
        Ms. King. To my knowledge, there is not a number out there
    about that and one of the difficulties I think on fraud is that
    you don't know what you don't know, and part of the reason I
    think that Medicare doesn't know the number about fraud or we
    don't know about that, if someone does something fraudulently,
    for example, they submit a claim on behalf of a beneficiary who
    is deceased or they buy a beneficiary's number and they submit
    a clean claim, that claim is paid and that is not going to show
    up as fraud or improper payments because it slipped through the
    system, so that is part of the difficulty about estimating a
    number on fraud.
        Mr. Gonzalez. And I appreciate that. Whether it is in the
    private sector or public sector, you are still faced with the
    same dilemma, and I think that is important to point out rather
    than saying that this is something distinct and unique to
    Medicaid or to Medicare.
        Mr. Roy, I am just curious, and I have got about 32 seconds
    but quickly, what is the State's obligation when it comes to
    Medicaid fraud? Because we had an incident in Texas--I don't
    know if you are familiar--that the governor did relieve the
    doctor that basically was managing or the head of looking at
    the Medicaid contracts with providers as well as the attorney
    that was charged with prosecuting. Are you familiar with that
    case?
        Mr. Roy. No, sir. I believe this might be a question that
    is probably better posed to Mr. Spiegel than myself.
        Mr. Gonzalez. Mr. Spiegel, what is the role of the State
    government?
        Mr. Spiegel. Well, the State government has a
    responsibility to have fraud control, a Medicaid fraud control
    unit, and they do and they look at instances where they can
    take action to both identify and prevent fraud. There is data
    systems in place in most--and again, I am not an expert on this
    but there are data systems in place in most all State Medicaid
    programs that allow a fairly robust analysis of things that
    appear to be aberrant or improper. They have----
        Mr. Gonzalez. You can complete your answer, Mr. Spiegel.
        Mr. Spiegel. Sorry. That are similar to the way we do
    things in Medicare where they make sure that they are paying
    for people who are properly enrolled in Medicaid in a proper
    amount for a provider that is eligible to provide the service.
        Mr. Gonzalez. Thank you, Mr. Spiegel. So that is a shared
    responsibility then?
        Mr. Spiegel. Yes.
        Mr. Gonzalez. Thank you.
        Mr. Chairman, thank you for your indulgence.
        Mr. Stearns. Thank you.
        Mr. Gingrey from Georgia is recognized for 5 minutes.
        Mr. Gingrey. Mr. Chairman, thank you.
        I want to go back to Ms. King in a follow-up on the
    question that Mr. Gonzalez from Texas just asked you, because I
    think it is a real important, pertinent question. Ms. King, you
    are director of the Health Care Division of GAO and if you
    don't have this information here today, you ought to be able to
    get it for the committee, and the question that he asked in
    regard to comparing the amount of waste, fraud and abuse in the
    private sector versus the government sector, and primarily we
    are discussing Medicare and Medicaid, I think is of paramount
    importance and I want, Mr. Chairman, to ask Ms. King, maybe she
    can answer that right now and I will gladly give you the
    opportunity to do so.
        Ms. King. You know, we would be happy to look into it and
    see if we could get an answer to it, but as a practical matter,
    we don't have a right of information from the private sector so
    we would have to ask them to provide that information to us as
    opposed to on the government side where we have a right to
    information.
        Mr. Gingrey. Well, yes, and I appreciate that and certainly
    I think that you ought to use every tool that you do have
    available to get that information because quite honestly, a lot
    of us feel that the big government and the bigger it gets, the
    more expansive it gets, and 15 million additional people on the
    Medicaid program and we have got 47 million now on the Medicare
    program of aged and disabled, and that number is just going to
    grow as all the Baby Boomers are maturing, and, you know, you
    expand this Obamacare program, another entitlement program, in
    fact.
        Let me ask you a specific question about that. On July 30,
    2009, President Obama stated that his health plan--that is why
    I refer to it as Obamacare--was funded by eliminating the waste
    that is being paid out of the Medicare trust fund, and then on
    September 10, 2009, Speaker Pelosi said that Congress will pay
    for half of Obamacare, $500 billion, by squeezing Medicare and
    Medicaid to wring out the waste, fraud and abuse, and I will
    ask you, Mr. Spiegel, as well, was cutting $137 billion out of
    the Medicare Advantage program in any way, shape or form
    cutting out waste, fraud or abuse?
        Ms. King. I don't have the exact numbers off the top of my
    head but we in MedPAC have done work that has shown that
    payments to Medicare Advantage plans are higher than those that
    are made in fee for service.
        Mr. Gingrey. Well, Ms. King we know that. We understand
    that. It is 112 percent. That is not an arguable--the point is,
    you overpaid them. That is not waste, fraud and abuse. It may
    be waste but it is certainly not fraud and abuse.
        Ms. King. It is not fraud and abuse but it could be
    considered waste by some.
        Mr. Gingrey. Mr. Spiegel, any comment on that?
        Mr. Spiegel. I am just trying to identify and prevent fraud
    in my job. You know, to respond to the questions about----
        Mr. Gingrey. You are going too slow for me. I am going to
    give you a pass.
        Let me go to Mr. Perez and Mr. Roy. Can you tell us what
    you are seeing in terms of organized crime involvement in
    Medicare and Medicaid fraud? That poster over there, I keep
    looking at it. It looks like Murderers Row. But you know, what
    is going on in Miami and is organized crime involved heavily in
    Medicare and Medicaid fraud and abuse, and why?
        Mr. Roy. I will answer the first portion of that question
    about the overall scope of organized crime because it is
    geographical in nature. For instance, in the Los Angeles area
    you are seeing very organized criminal structures, in essence
    Eurasian organized crime entities heavily involved in Medicare
    fraud. They are involved in many street-level crimes as well.
    They are also involved in things such as credit card fraud and
    identity theft but what we are seeing is that in order to get
    to the upper echelons of these organized criminal elements, you
    have to go through health care fraud. That is where they make
    their money and that is different from what we would in Texas
    and in Miami, and with respect to what we see in Miami, I will
    turn that over to ASAC Perez and he will give you an idea of
    what is going on there.
        Mr. Gingrey. Mr. Perez, thank you.
        Mr. Perez. Thank you for the question. A lot of the things
    that we are seeing are a group or groups of individual that
    have tiers underneath them and for all intents and purposes
    there is even another subset of cells that work underneath that
    second tier and one cell won't necessarily know what the other
    cell is doing but they all kind of report to the same few folks
    in the top.
        Mr. Gingrey. I see my time has expired, Mr. Chairman, and
    thank you, panelists, for your response, and I yield back.
        Mr. Stearns. I thank the gentleman.
        Mr. Scalise, the gentleman is recognized for 5 minutes.
        Mr. Scalise. Thank you, Mr. Chairman. I appreciate the
    panelists for coming.
        We are talking about waste, fraud and abuse. I want to
    first go back to something I saw in our State and ask you to
    comment on some of the things that we saw and how it is being
    dealt with at the federal level. In 1996 when I started in our
    State legislature, our governor appointed a 24-year-old to run
    our health department. At the time it was the largest
    department in State government, and there was a lot of waste,
    fraud and abuse and the governor made it a priority. And we
    talk about zero tolerance against waste, fraud and abuse, it is
    an attitude. It can't just be rhetoric. It has got to be
    followed by real action. And so the governor set out on a
    mission to root out that waste, fraud and abuse. He appointed,
    as I said, back in 1996 a 24-year-old to run that department
    and to go and seek it out, and in fact, that new head of our
    department was very aggressive. People went to jail. They shut
    down programs. There were Medicare mills, a lot of things that
    were going on that got rooted out. We cut out almost a billion
    dollars in waste, fraud and abuse in our department. I say that
    to make a point, that person that 24 years old at the time is
    now called the Governor Bobby Jindal. He is now the governor of
    our State, but he was very aggressive then as the head of our
    Department of Health and Hospitals in rooting out that waste,
    fraud and abuse and he is still aggressive today.
        I want to know, what coordination do you all have with our
    governors who are aggressive in rooting out whether you find
    Medicare fraud or Medicaid fraud, if you are finding Medicare
    care by a provider that is maybe doing business in other States
    and Medicaid, how do you coordinate those things with the
    States who are specifically dealing with Medicaid because they
    do have real jurisdiction there? I will you all kind of down
    the list. Ms. King.
        Ms. King. There is one provision in the Affordable Care Act
    that gives CMS the authority to revoke Medicare enrollment if
    Medicaid enrollment has been revoked in a State, so if someone
    is a bad actor in Medicaid and they are excluded from Medicaid,
    Medicare can follow the lead on that, and that is a new
    authority.
        Mr. Spiegel. And that is addressed in our most recently
    published final rule with the new screening authorities.
        Mr. Scalise. Do you coordinate with the governors when you
    do find--let's say you find Medicare fraud or even, you are
    working on Medicaid fraud, are you all coordinating with those
    governors in those States who maybe have some enforcement that
    they are trying to do as well?
        Mr. Roy. Sir, from a law enforcement perspective, we are
    working very closely with our Medicaid fraud control units,
    which obviously the governor, that would be their
    representative from a fraud level. We are doing great work
    there. Over the last 3 years we have probably increased our
    joint cases with the Medicaid fraud control units by upwards of
    25 percent.
        Mr. Scalise. Thanks. And I need to move because we are
    limited on time. I apologize.
        One of the components we really haven't talked about a lot
    is the waste component of waste, fraud and abuse, and you know,
    when you talk to doctors, and I have talked to a lot of
    doctors, especially over the last few years since I have been
    in Congress and we have been working on ways to actually reform
    health care as opposed to what I think President Obama did,
    doctors will tell you the biggest area of, you can call it
    waste--I would--the biggest area of work that they do that
    doesn't really relate to improving patients' health but it is
    defensive medicine. They run tests that everybody knows they
    don't have to run but they do it because they are afraid of
    frivolous lawsuits. In many cases they have had to fight
    frivolous lawsuits but it costs them a lot of money so it is
    just something that every doctor will tell you they do. Do you
    all consider--first of all, do you all consider defensive
    medicine to be part of waste in the definition that we are
    discussing today, Ms. King? Yes or no.
        Ms. King. I don't know. I don't honestly know the answer.
        Mr. Scalise. Have you done any kind of research to know how
    much this does cost?
        Ms. King. Defensive medicine? We have not done any direct
    work on that.
        Mr. Scalise. Mr. Roy or Mr. Perez?
        Mr. Roy. I don't have a direct comment to that but I want
    to say that we are putting people in jail that are committing
    fraud, not necessarily involved in----
        Mr. Scalise. Mr. Spiegel?
        Mr. Spiegel. I don't know the answer to that.
        Mr. Scalise. I can't believe that, you know, especially Mr.
    Spiegel and Ms. King, would say that you don't know the answer
    to what doctors will tell you is the biggest area of
    unnecessary spending but something they have to do because they
    will get sued if they don't run the test but they will tell you
    probably a third of those tests are done not because they think
    it is in the best decision for care of the patient but because
    they are afraid of getting frivolous lawsuits, and in fact, the
    President's bill does absolutely nothing to address that
    problem, and doctors will tell you that people in the medical
    profession across the board will tell you that topic was
    completely ignored, the topic that doctors will tell you is
    probably the biggest cause of waste in health care. And so when
    we talk about adding another 20 million onto the Medicaid
    rolls, at least, I would hope you all would go back and look at
    just how much more we are going to waste in making these
    doctors run these tests, because in our bill, in our real
    reform bill after we have done repeal, we are including medical
    liability reform where you get dramatic savings in waste in
    health care. But I would ask if both Ms. King and Mr. Spiegel
    would go back and include defensive medicine and come back to
    us with some real costs. Will you get the committee that
    information on what you estimate are the costs that it adds to
    the system to have these defensive medicine practices that
    weren't addressed in the President's bill?
        Ms. King. We can certainly look into it. I think it is a
    difficult question because what someone considers defensive
    medicine may be, you know, an unnecessary test on someone's
    part----
        Mr. Scalise. But you can estimate the cost of that?
        Ms. King. Well, there is a lot of variability in how
    physicians practice medicine.
        Mr. Scalise. As there is with anything that you give
    estimates on.
        Mr. Spiegel?
        Mr. Spiegel. I mean, I would say the same thing Ms. King
    said. We could look into it but the definitions of what falls
    into the category that you are trying to get a handle on vary,
    depending upon to whom you are speaking.
        Mr. Scalise. Thank you. I yield back.
        Mr. Stearns. The gentleman's time has expired.
        Mr. Griffith from Virginia is recognized for 5 minutes.
        Mr. Griffith. Mr. Spiegel, how many claims does CMS get a
    day? Do you know?
        Mr. Spiegel. I don't.
        Mr. Griffith. But it would be millions, would it not?
        Mr. Spiegel. It would.
        Mr. Griffith. And do you have any idea what percentage of
    them you are able to review before payment is made?
        Mr. Spiegel. Well, we do a substantial amount of review on
    virtually all of them before they get paid.
        Mr. Griffith. And I saw somewhere, I know that there was
    some testimony earlier that there was some indication that we
    didn't really know what the private sector's rate was but I had
    seen somewhere or have information that their rate is about 1-
    1/2 percent lost to fraud, and I am just wondering if you have
    seen that, A, and B, if you have studied what the private
    sector is doing to eliminate fraud so you could see maybe if
    there are better ways for eliminating or preventing Medicare
    fraud.
        Mr. Spiegel. Sure. I have seen some numbers for the private
    sector, and we did look into what it is about them that makes
    them different from us in the way they approach this. So in the
    private sector, they have a different approach to how they deal
    with approval of services that we don't do in Medicare because
    we are designed as a program to get beneficiaries needed
    services and not to impose restrictions at the point of
    service. But private insurance can have prior authorization for
    a whole range of things that we don't, and so they can
    eliminate things that may have an impact on someone's need for
    services or at least impose a barrier there that we don't
    operate that way.
        Mr. Griffith. Since there appears to be some intent to pay
    for all of this new health care by getting rid of this fraud,
    have you all considered going to a preapproval process?
        Mr. Spiegel. Well, we have had discussions about that among
    ourselves but right now it is not consistent with I guess our
    statutory authorities to be doing that.
        Mr. Griffith. And let me switch----
        Ms. King. Sir?
        Mr. Griffith. I am sorry.
        Ms. King. If I might point out something else that is a key
    difference between the private sector and Medicare is that
    Medicare is an ``any willing provider'' program so the private
    sector has much more ability to restrict the providers who are
    coming into the program than Medicare does. Now, with some of
    the new authorities in the ACA, CMS is going to have more
    authority to take a closer look at providers and keep out
    providers who are not good actors.
        Mr. Griffith. Let me claim back my time. Let me ask,
    switching, something that is kind of interesting, it is my
    understanding that the Medicare number, and I don't care
    whether it is Ms. King or Mr. Spiegel, but the Medicare number
    is the same as your Social Security number. Is that correct?
        Ms. King. That is correct.
        Mr. Griffith. And then if somebody steals your identity,
    you can't just go out and change your Social Security number.
    Wouldn't it be a better policy to have each patient have a
    separate Medicare number and then when somebody steals that
    number the patient can get a new number just like you do with
    your credit card if you lose it or it is stolen by somebody?
        Ms. King. Certainly there have been proposals made to that
    effect.
        Mr. Spiegel. And we are doing a substantial amount of work
    right now to eliminate all the compromised numbers that we have
    identified through both providers and suppliers as well as
    beneficiaries.
        Mr. Griffith. Doesn't that have the impact on the one hand
    of making it very difficult for the patient and then I guess I
    would ask, what is your opinion of that? You said it had been
    talked about but what do you think? Don't you think that would
    be a better policy, Ms. King?
        Ms. King. I think it probably would be. There would be a
    question, I think, in our minds about what it would cost to
    effect that transition and how long that would take and what
    would be involved with that because you have every living
    beneficiary and then new beneficiaries as they come on the
    rolls.
        Mr. Spiegel. And we agree with that.
        Mr. Griffith. New ones would be a lot easier. That wouldn't
    probably very much at all.
        Ms. King. Yes, they would.
        Mr. Griffith. But anyway. All right. I yield back my time,
    Mr. Chairman.
        Mr. Stearns. The gentleman yields back his time. The
    gentlelady, Ms. Myrick, is recognized for 5 minutes.
        Mrs. Myrick. Thank you, Mr. Chairman. Thanks to all of you
    for being here and thank you, you two who do the investigative
    work for what you are doing and the way you are going about it.
        My question I guess is to Mr. Spiegel. I am not real sure.
    On States, is there a requirement that States report fraud to
    you, to CMS? Because I understand that maybe half the States
    don't even report data.
        Mr. Spiegel. I don't know what the requirement is for----
        Mrs. Myrick. Would you mind finding out and getting back?
    Because I would like to know.
        Mr. Spiegel. Sure.
        Mrs. Myrick. And then the next question is relative to
    States, do they have their counties report? Does it
    individually vary by State to State? In North Carolina,
    counties are responsible for reporting the fraud to the State.
    Is that something that happens across the country? You know,
    when you get right down to the local level where they have
    better control on it maybe than the whole State does. It is
    more efficient?
        Mr. Spiegel. I don't know about the efficiencies, and it
    would really depend on how each State is set up its operational
    structure.
        Mrs. Myrick. So each State is in control of how they report
    that?
        Mr. Spiegel. I would think so.
        Mrs. Myrick. But why do some States not report? Do you
    know?
        Mr. Spiegel. I don't know the extent to which they don't. I
    mean, I know we have fraud investigation databases and we
    collect information from States, and I think we--what I was
    trying to say before is, I didn't know what the requirement
    was. I know we get reporting from States about the fraud cases
    that they uncover and I am sure they coordinate closely with--
    --
        Mrs. Myrick. I would be curious to know.
        And then the second part of that, are there any minimum
    standards that States have to meet relative to, you know, the
    waste, fraud and abuse, whatever you want to call it, to
    receive their FMAP?
        Mr. Spiegel. Well, again, I am not a Medicaid expert but
    there are requirements that States have to meet, you know, to
    have a proper State plan in place, they have certain
    administrative requirements they have to meet. They have to
    have a single State agency with authority. They have to have
    Medicaid fraud control units and things.
        Mrs. Myrick. And is there a follow-up on that to make sure
    that gets done? And I guess that goes back to my first
    question, do the States all report? Anyway, if you don't know--
    --
        Mr. Spiegel. Well, I know there is follow-up on how the
    States organize themselves and there is constant interaction
    between the folks in CMS who oversee Medicaid around that.
        Mrs. Myrick. But all of you pretty much agree that there
    needs to be more of an effort on this relative to dollars that
    come from what you said before to the different people and you
    have all responded that if there were more dollars into the
    program for what you are doing, you would have a better ability
    to do it, particularly with the two in the middle and what you
    do with the inspection work.
        Mr. Spiegel. We have found that for every dollar we are
    spending, we are getting a substantial return on investment,
    6.8 percent, I believe.
        Mrs. Myrick. But yet in the new health care bill, there is
    only, in my understanding, $350 million in there for any fraud
    activities, which, if that is divided up across all the
    agencies, you know, it is less than one-tenth of 1 percent of
    what we are spending on the health care bill. So it seems like
    it is a very small amount that is being dedicated to what
    really is getting at the crux of so much of the waste that
    everybody talks about is going to pay for all this. It just
    doesn't seem to make sense. It seems like there should be more
    effort put into what you are doing from the standpoint that you
    are actually seeing results and you are getting to the bottom
    of the issue.
        Mr. Spiegel. I mean, I guess we would welcome the
    opportunity to have more resources to do more of the things
    that we have embarked on.
        Mrs. Myrick. But I know Mr. Terry asked a question about
    actually if we could do this what would it take type thing, so
    you all are going to get back to him with that?
        Mr. Spiegel. Yes, ma'am.
        Mrs. Myrick. I appreciate it. No more questions.
        Mr. Stearns. The gentleman, Mr. Murphy from Pennsylvania,
    is recognized for 5 minutes.
        Mr. Murphy. Thank you.
        I want to go over this list here and I wonder if you can
    tell me if you have any idea where these fugitives are. Carlos
    Benitez, do you know where he might be? Do we know what country
    he is in?
        Mr. Roy. Sir, I may indeed know the general whereabouts of
    some of these individuals but----
        Mr. Murphy. Cuba?
        Mr. Roy. Probably not, sir.
        Mr. Murphy. Are any of these folks in Cuba?
        Mr. Roy. Probably not.
        Mr. Murphy. I understand that some of them actually may be.
        Mr. Roy. Sir, I correct myself. There may be several of
    those that are in Cuba, yes.
        Mr. Murphy. Because my understanding is there may be as
    many as six, and the question is what the Cuban government is
    involved in here. According to some reports, ``In a discussion
    with a high-level former intelligence official with the Cuban
    government who asked to remain unnamed,'' and this is from
    University of Miami report. He states, ``There are indeed
    strong indications that the Cuban government is directing some
    of these Medicare frauds as part of a desperate attempt to
    obtain hard currency.'' The source notes that the Cuban
    government is also assisting and directing other instances of
    Medicare fraud providing perpetrators with information with
    which to commit fraud. They go on to say in the instance where
    the Cuban government is not directing or facilitating the
    fraud----
        Ms. DeGette. Mr. Chairman?
        Mr. Murphy [continuing]. It does provide Cuba as a place
    for fugitives to flee. This gives the Castro regime a
    convenient and carefree way to raise hard currency. Are we
    doing anything about that?
        Mr. Roy. I have actually inquired before about what are the
    ties to Cuba, and nothing has been brought to my attention that
    would substantiate what you are saying. I am more than happy to
    take a name and a number or if you can get me in touch with
    that individual to follow up on that.
        Mr. Murphy. This was a report----
        Ms. DeGette. Mr. Chairman, will the gentleman just yield
    briefly?
        Mr. Murphy. Not on my time.
        Ms. DeGette. I would like to make----
        Mr. Murphy. I didn't yield yet, because I really only have
    a couple of minutes----
        Mr. Stearns. Does the gentlelady request a personal
    privilege or a point of order?
        Ms. DeGette. I just want to make sure----
        Mr. Stearns. Is this a request for a point of order?
        Ms. DeGette. It is a request for a point of order.
        Mr. Stearns. OK. The gentlelady is recognized.
        Ms. DeGette. I just want to make sure, and I know that you
    are not intending to ask Mr. Roy any information that would in
    any way undermine an ongoing investigation.
        Mr. Murphy. Absolutely.
        Ms. DeGette. I just wanted to clarify that. Thank you.
        Mr. Murphy. Absolutely.
        Ms. DeGette. He looked a little uncomfortable when you
    asked that question.
        Mr. Murphy. I am just asking if----
        Ms. DeGette. Thank you very much.
        Mr. Murphy. Thank you. I appreciate that.
        This is a report from the University of Miami. I would be
    glad to let you read that. It is just something I wanted to
    bring attention because it does bring to light there has also
    been concerns about how things happen by other countries where
    they may be doing this as part of an organized-crime issue,
    recognizing the ability to have false claims with Medicare
    actually may be easier, less risk and lower penalties than it
    would be, for example, with cocaine trafficking where you have
    long mandatory sentences. And so I am wondering along these
    lines if you are also looking to see-I mean, I appreciate the
    work you are doing. This is great. I am glad you are pursuing
    this. The American people appreciate that. As Mr. Barton talked
    before, we are all in favor of this. I just want to make sure
    we are also looking at this as a mechanism to see if you think
    we need more enforcement, do you need more funding, do you need
    more personnel, or do we need stiffer penalties, or all of the
    above?
        Mr. Roy. We need all of the above, sir.
        Mr. Murphy. Do you think the level of penalties is a factor
    in terms of people are willing to risk the risk and consider
    jail time as the price of doing business?
        Mr. Roy. Well, I certainly felt that way probably 5 to 10
    years ago but in the recent years I have seen across the board
    sentencing guidelines go up and I have seen perpetrators of
    health care fraud go to federal prison for longer periods of
    time. If I had my way, they would go there longer but that is
    not the perfect world but I see a movement toward the
    punishment fitting the crime, sir.
        Mr. Murphy. Thank you. Anybody else want to comment on
    that, Mr. Perez or Mr. Spiegel?
        What additional tools then do you think that Congress can
    give all of you with regard to helping investigate Medicare and
    Medicaid fraud and abuse cases? Are there any other tools you
    want from us?
        Mr. Roy. First and foremost, the funding aspect of it. The
    funding has to be continuous. It has to be long term to ensure
    that I can keep bodies on the ground. It can't be a one shot in
    the arm type of a situation. Our organization is human resource
    driven, and the more agents I have in the field and the more
    support staff I have, the better job I am going to be able to
    do.
        Mr. Murphy. I appreciate that. Anyone want to comment? Yes,
    Mr. Perez.
        Mr. Perez. Just from an investigative standpoint, and I
    mentioned this earlier. I apologize if I am repeating myself at
    least to you. But we certainly would like to have real-time
    data access so that we can see the claims as they are hitting
    them. We currently don't have that. And there is another system
    that is out there that we would also like access to that
    actually gives us the profile of the providers that are in so
    that we know once they are in, all of the makeup of that
    particular provider and then we can initiate investigations.
        Mr. Murphy. Do you have that profile access now or that is
    something you are asking for in addition?
        Mr. Perez. We do not have it now.
        Mr. Murphy. So to be able to get that profile information
    on the providers and the real-time data so you could I guess
    more or less profile as people are submitting claims that there
    are things that appear to not match standard billing procedures
    with durable medical equipment or services, that would show up
    and you could hit on that right away, would that help you?
        Mr. Perez. I think that certainly would help us, yes.
        Mr. Murphy. Mr. Spiegel, do you have a comment on that?
        Mr. Spiegel. Sure. And what I would say is, the President's
    budget has laid out a number of things that we would want to do
    in 2012, and for now, we need to have a little bit of time to
    gauge the impact of all the things that we started doing in the
    last year to refocus our efforts on the front end and to take
    prompt action on the folks who need to have action taken
    against them.
        Mr. Murphy. Thank you. I think if any of you had any other
    details of how that work would out to let the committee know.
    Thank you so much.
        Mr. Stearns. The gentleman's time has expired. The
    gentleman, Mr. Gardner, from Colorado is recognized for 5
    minutes.
        Mr. Gardner. Thank you, Mr. Chairman, and thank you to the
    witnesses for being here today. I appreciate your work on
    something that obviously everybody is concerned about.
        In Colorado, we were able to do a couple of things to
    detect fraud, to fight back against those who would abuse the
    system. We passed legislation that would freeze--you know, pair
    up benefits, the public pension fund. If it was a public
    employee that was involved, it allowed the board to freeze
    those assets. We also tried to pass legislation that said if
    you were a contractor, a provider that had been convicted of
    fraud elsewhere, that after a certain point you were barred
    from dealing with the State of Colorado and so I want to get
    into that a little bit for a couple of questions.
        Mr. Spiegel, I wanted to follow up on one of your responses
    to Mr. Griffith. I believe Medicare receives about 4.5 million
    claims a day, and you substantially review every single one of
    those claims?
        Mr. Spiegel. In some way. We verify that the person who
    sends in the bill, for example, is enrolled in Medicare and
    that the person who received the services is an eligible
    beneficiary. I mean, there are automated claims edits that are
    in place that look at that.
        Mr. Gardner. How many would you say you substantially
    review that you are actually able to really look at? Because
    that is all automated. I mean, what percentage are you able to
    actually look at to detect----
        Mr. Spiegel. If what you are talking about is do we take an
    opportunity to collect medical records and make a judgment
    about the clinical conditions that were present and things like
    that, I don't know the exact percent. I could get back to you
    with that.
        Mr. Gardner. That would be great if you would get back to
    me on that. Thank you.
        And then Mr. Spiegel, we have heard that in terms of both
    durable medical equipment and home health, both are highly
    susceptible to fraud. What other areas lose a substantial
    amount to fraud?
        Mr. Spiegel. Well, in our recent screening rule, the ones
    that we put in the high-level-risk category were newly
    enrolling suppliers and newly enrolling home health agencies
    and those individuals or entities that hit some of the triggers
    that we put in the rule. There are examples of other provider
    and supplier types that we have uncovered and that the
    Inspector General's work has identified that maybe not as a
    class but as individuals have had some problems.
        Mr. Gardner. And I see in your testimony where you talk
    about delivery system reform, you talk about inflated prices
    that could lead to increased fraud but you have only made
    reforms in, I believe it was nine areas. Why did you just add
    those reforms in nine areas? If you are overpaying somebody,
    shouldn't we reform them all?
        Mr. Spiegel. The nine areas were in statute.
        Mr. Gardner. So if they are being overpaid and it is
    causing fraud, do you have an ability to add to those nine
    areas?
        Mr. Spiegel. I don't know the answer to that. Over time we
    have an opportunity to add to that based on what we learn from
    our work.
        Mr. Gardner. And the President's budget 2012 said we are
    going to recover about $32 billion in fraud. Is that how much
    fraud there is? What percentage of fraud total are we
    recovering?
        Mr. Spiegel. Well, as I mentioned before, we don't know the
    exact number because the estimates that we have all seen
    contain things that are in addition to fraud. They contain
    improper payments, they contain administrative errors, they
    contain both public and private sector estimates. Until we can
    get to one number that identifies fraud, which is in a sense a
    legal determination, we are not going to be able to----
        Mr. Gardner. At what point is a provider barred from doing
    business with a Medicare and Medicaid provider?
        Mr. Spiegel. Well, it would depend on the circumstances.
        Mr. Gardner. After one time they have been found
    fraudulent?
        Mr. Spiegel. Well, it would depend on, you know--we don't
    determine fraud at CMS. That is a law enforcement decision. And
    if somebody has been convicted of fraud, the Inspector General
    has the opportunity to exclude them from the program for a
    period of time.
        Mr. Gardner. So if somebody is convicted of fraud, are they
    automatically barred?
        Mr. Spiegel. Sir, yes, they are.
        Mr. Gardner. And then are States using that then to bar
    them from their Medicaid programs?
        Mr. Spiegel. We are working on that issue right now. I am
    not sure how in depth the State goes with respect to who they
    exclude from their programs.
        Mr. Roy. We have provisions in our recently published rule
    to implement that so that when someone is excluded from
    Medicare, States will be doing the same thing as well as States
    excluding from Medicaid entities or individuals that have been
    excluded by other State Medicaid programs.
        Mr. Gardner. What happens to the money that you are
    recovering from fraud? Does that go back into fraud-fighting
    efforts?
        Mr. Roy. By law, the money that we recover goes right back
    in the Medicare trust fund.
        Mr. Gardner. So it does not go into additional fraud
    prevention?
        Mr. Roy. No, sir.
        Mr. Gardner. I yield back my time.
        Mr. Stearns. I thank the gentleman, and I thank the first
    panel for their indulgence and forbearance here.
        Ms. DeGette. Mr. Chairman?
        Mr. Stearns. Just let me finish and I will be glad to
    recognize you.
        There was a question, Mr. Spiegel, that was asked of you
    and you did not know the answer concerning the claims per day.
    I thought I would put in the record that Health and Human
    Services' Bill Corr testified in front of the Senate Finance
    Committee in October 2009 that CMS gets 4.4 million claims a
    day with a requirement to pay within 14 to 30 days and they are
    only able to review 3 percent of the prepayment.
        The gentlelady from----
        Ms. DeGette. I would just ask unanimous consent to follow
    up on one question.
        Mr. Stearns. Sure. Go ahead.
        Ms. DeGette. Mr. Perez, someone asked you if you needed
    more powers and you said you would like to be able to access
    claims data directly when you are on these investigations. Do
    you need--is this a matter of more authority to be given to you
    by Congress or is it just the procedures that your office is
    using?
        Mr. Perez. I believe it may be an internal issue with the
    department working with CMS and allowing OIG then to have
    direct access to that.
        Ms. DeGette. If you need more powers, let us know because
    it would seem to us to be good information for you to be able
    to access. Thank you.
        Mr. Stearns. I thank the gentlelady. We have another member
    who has joined us. The gentleman from California, Mr. Bilbray,
    is recognized for 5 minutes.
        Mr. Bilbray. Thank you.
        Mr. Perez, we were talking about the ability to impound.
    IRS has been given that power to impound so why wouldn't we--if
    we are as serious about making sure that taxpayer funds are
    going out inappropriately, wouldn't we at least give you the
    authority that we give to the people who make sure that revenue
    comes in to the Federal Government appropriately?
        Mr. Roy. If I could, sir?
        Mr. Bilbray. Go ahead.
        Mr. Roy. I am more than willing and happy to look at that
    particular issue in terms of the ability to impound. We do
    seize bank accounts. It is more in the matter of physical
    assets but I am more than willing to take any additional
    resources that come my way.
        Mr. Bilbray. I am just concerned, because you see the
    disconnect that we take income of the revenue very seriously
    but traditionally we haven't put as much weight on reviewing
    and oversight and recapturing of assets coming back.
        Ms. King, I appreciate your kind words about the wrongful
    payment bill. I was one of the authors of that bill, one of the
    few bipartisan bills that got passed last year, but I don't
    think that weight has been traditionally applied and I would
    like to make sure that we do it.
        Speaking of the IRS, the fact is, a lot of these people are
    engaged in fraud and abuse. I have to believe as a former tax
    consultant that once they get in the habit of filling out
    applications for revenue from Medicare and Medicaid
    inappropriately, I have to believe there has got to be more
    opportunity in there to engage the IRS to be able to be
    involved with this. Remember, it wasn't the FBI that got Al
    Capone, right?
        Mr. Roy. Sir, you are correct. We work joint cases with
    IRS/CID all the time just for that purpose.
        Mr. Bilbray. Mr. Spiegel, I have a concern with something
    you said. I know that this is waste, fraud and abuse in here
    but you appear to take wrongful payments as being sort of
    separate and apart from waste, fraud and abuse.
        Mr. Spiegel. Well, from fraud.
        Mr. Bilbray. From fraud? OK. And that is why I want to
    clarify because you will admit the impact to the taxpayer and
    to the federal family is financially the same between wrongful
    payment and fraud.
        Mr. Spiegel. We are against all of us. We are against
    improper payments and fraud and waste and abuse.
        Mr. Bilbray. OK. So the fact is, is that we need to fast-
    track those items and get it there.
        One of the items that has been brought up is the fact of
    the use of false documentation, identify theft. Now, we usually
    talk about identify theft in different fields, and we have gone
    around with individual the use of identify fraud to falsify
    employment opportunities, illegal presence in the country and
    everything else. But the identity fraud issue that we have seen
    here with your enforcement of the ability of somebody to get a
    driver's license, get a document and use it fraudulently, that
    has been documented in your enforcement as a vehicle that
    organized crime or these bad guys are using in implementing
    their fraud to the health care system.
        Mr. Perez. Certainly, and in Miami I know that in those
    instances where we are able to prove that beyond reasonable
    doubt, we certainly are including those in----
        Mr. Bilbray. Has Florida implemented the REAL ID bill yet?
    Do you know?
        Mr. Perez. That I do not know, sir.
        Mr. Bilbray. Mr. Chairman, I just think we need to point
    out that that is one bill that we passed how long ago which was
    basically the number one request of the 9/11 Commission, but we
    still have States that are looking at dragging their feet about
    using biometrics, and biometrics is one way we could catch
    these guys. You have biometrics through a driver's license
    under one name, you do the other. Anybody who watches NCIS
    knows that, you know, we have got that computer technology. We
    have had it in California since 1978. That they will get busted
    coming in, one guy coming in as Smith, another guy coming in as
    Martinez, and we cross-reference those biometrics. So I just
    want to point out that I think that the federal bureaucracy
    needs to be sensitive that the States are the people that
    provide the IDs in lieu of a federal ID, that REAL ID is a way
    we can secure the system without having to have a federal ID
    and make sure--you know, there is one reason why we have got to
    be serious as federal agents to push that the States have to do
    their part down the line.
        And maybe, Mr. Chairman, our committee can recommend to
    Homeland Security that before we send money to States for
    homeland security projects that we require that the first
    priority that if States haven't implemented REAL ID and secured
    this identification issue that should be the first project used
    with federal funds on Homeland Security, and with that, I yield
    back, unless anybody has a comment on that.
        Mr. Stearns. All right. I thank the gentleman. That could
    be your piece of legislation.
        So I want to thank the first panel again. We will move to
    our second panel and ask the Hon. Alex Acosta to come up and
    Mr. Craig H. Smith and Ms. Sara Rosenbaum, and I invite all my
    members to stay for the second panel.
        The Hon. R. Alex Acosta is a native of Miami and the
    current Dean of the College of Law at Florida International
    University. He received his law degree from Harvard. He served
    as a law clerk to Justice Samuel Alito, then a judge on the
    U.S. Court of Appeals for the 3rd Circuit. He has been the
    longest serving U.S. attorney in south Florida since 1970,
    sitting as a Senate-confirmed United States Attorney for the
    Southern District of Florida.
        Our second panelist is Craig Smith. He is a partner of
    Hogan and Lovells. He rejoined the firm in 2008 after serving
    as General Counsel for the Florida Agency for Health Care
    Administration. While serving as the chief legal officer of one
    of the Nation's largest Medicaid programs, he coordinated
    frequently with the federal officials at the Centers for
    Medicare and Medicaid Services and the Department of Justice.
        Our third panelist is Sara Rosenbaum, who received her J.D.
    from Boston University Law School. She has played a major role
    in design of national health policy in areas such as Medicare
    and Medicaid, private health insurance and employee health
    benefits, access to health care from medically underserved
    persons, maternal and child health, civil rights in health care
    and public health. She also worked for the White House Domestic
    Policy Council.
        So I thank all three of you, and we welcome the Hon. Mr.
    Acosta for your opening statement of 5 minutes. Thank you for
    staying with us.

       STATEMENT OF R. ALEX ACOSTA, DEAN, FLORIDA INTERNATIONAL
       UNIVERSITY COLLEGE OF LAW; CRAIG H. SMITH, PARTNER, HOGAN
     LOVELLS, LLP; AND SARA ROSENBAUM, HIRSH PROFESSOR AND CHAIR,
    DEPARTMENT OF HEALTH POLICY, SCHOOL OF PUBLIC HEALTH AND HEALTH
       SERVICES, THE GEORGE WASHINGTON UNIVERSITY MEDICAL CENTER

                      STATEMENT OF R. ALEX ACOSTA

        Mr. Acosta. Thank you, Mr. Chairman, Ranking Member DeGette
    and distinguished members of the committee. I appreciate the
    opportunity to appear before you to discuss waste, fraud and
    abuse in Medicare and Medicaid. As the chairman mentioned----
        Mr. Stearns. Let me just swear you in. If you don't mind,
    please stand and raise your right hand.
        [Witnesses sworn.]
        Mr. Stearns. Sorry. Go ahead.
        Mr. Acosta. As the chairman mentioned, I served as the
    United States Attorney for the Southern District of Florida
    from 2005 to 2009.
        Early in my term, I made the prosecution of health care
    fraud a top priority in my district. I organized in 2006 the
    South Florida Health Care Fraud Initiative. As a result, we
    became home to the first Medicare fraud strike force in the
    Nation. The results were spectacular but they were also very
    sad. By 2008, we accounted for 32 percent of the Nation's
    health care fraud prosecutions.
        From fiscal year 2006 through May 2009, we charged more
    than 700 individuals responsible for more than $2 billion in
    fraud. That is actual fraud charged in criminal indictments. I
    have heard this morning that figure now stands at 3.5 billion.
    Put differently, those $2 billion, which is sometimes hard to
    imagine so I put it in per-beneficiary terms. That is $1,900-
    plus per beneficiary in south Florida.
        Numbers alone, though, don't tell the story. I was very
    happy to hear that some Members are going to do ride-alongs. I
    wish more Members could visit the strike forces. If I was U.S.
    Attorney and if you visited south Florida, I would take you to
    our facility. There we have a wheelchair that we have shown to
    other interested individuals. That wheelchair was billed again
    and again and again, the same wheelchair not used by patients.
    We call it the million-dollar wheelchair because it was billed
    that many times. We have boxes after boxes of evidence. We have
    pictures of a pharmacy, and that pharmacy is billing thousands,
    perhaps millions of dollars in expensive brand-name inhalation
    products. In fact, the pharmacy was a broom closet and there
    was nothing there.
        That level of fraud should absolutely disgust each and
    every one of us. We enjoy one of the world's best health care
    systems but we often hear of the skyrocketing costs of health
    care and we worry that one day we will not be able to afford
    quality care. Reducing fraud, as you have already mentioned,
    is, in public parlance, a no-brainer. It should be a bipartisan
    effort.
        Now, let me say I am proud of the work we did in south
    Florida prosecuting fraud but prosecution is not the solution.
    We need to prevent fraud from happening in the first place.
    Prosecutions have limited deterrence. The sentences, while
    increasing, are not sufficient. Prosecutions are resource-
    intensive. Prosecutions rarely recover taxpayer dollars
    wrongfully paid out in fraudsters. The fraudsters for the most
    part spend the money or send the money overseas. Prevention is
    the preferred approach.
        Think of this as perhaps, analogize fraud to a busy
    intersection. How do you prevent accidents at a busy
    intersection? Do you post a police officer at that intersection
    and ticket cars after they commit accidents or do you put a red
    light at that intersection and prevent accidents in the first
    place? In the same way, we need to prevent fraud in the first
    place. Prosecutions are not the solution.
        Now, effective prevention requires a lot more than front-
    end screening. Effective prevention requires continuous and
    proactive efforts to identify and stop fraud as it happens. The
    gentleman from Virginia, Mr. Griffith, mentioned the issue of
    unique IDs. Well, Mr. Chairman, Ranking Member DeGette, I
    assume both of you have credit cards. Imagine if you call--you
    use that credit card and you call American Express and you say
    I just lost my card and they say thank you very much, we can't
    issue a new card with a new number; when you get fraudulent
    charges, let us know and continue to let us know in the future
    because we cannot cancel your card. How long would American
    Express stay in business? But that is the system that Medicare
    uses. Your Medicare number is your Social Security number, a
    number that is easily found and a number that can then be used
    to bill in your name and that number cannot be changed.
        Effective predictive modeling is another tool that can
    assist with fraud prevention. An example of how effective this
    can be comes out of south Florida. South Florida in one year
    was responsible for $92 million in Budesonide billings. This is
    an expensive inhalation drug, and inhalation drugs are a large
    problem in south Florida. Well, the Office of Inspector General
    did a study to look at these billings. Seventy-four percent of
    the beneficiaries for this drug submitted claims that exceeded
    the 90-day coverage maximum. Any private insurance company
    would say if you exceed a coverage maximum, we are not going to
    pay. Sixty-two percent of those that allegedly submitted claims
    for these drugs in fact hadn't seen a prescribing physician in
    3 years. Ten doctors in south Florida were responsible for more
    prescriptions for this drug than all the doctors in Chicago
    combined. Chicago is the next highest billing city.
        These are the kinds of issues that predictive modeling can
    catch. These are the kinds of issues that should be caught.
    Experience shows that prepayment prevention computer models
    that identify billing patterns that stop payments when you see
    spikes like this are the preferable approach. Post-payment pay
    and chase does not work.
        Now, I have heard this morning that CMS is moving away from
    pay and chase, and I think that is a wonderful idea. It is an
    important issue because we need to catch this before it
    happens. After the fact my former colleagues and good friends
    at OIG can prosecute with DOJ but that is not going to solve
    the problem. Thank you.
        [The prepared statement of Mr. Acosta follows:]

        Mr. Stearns. I thank the gentleman.
        Mr. Smith, you are recognized for 5 minutes.

                      STATEMENT OF CRAIG H. SMITH

        Mr. Smith. Thank you, Chairman Stearns, Ranking Member
    DeGette and distinguished members of the committee. Thank you
    for inviting me to testify today.
        I do want to say at the outset that I am here in my
    personal capacity and that my views are not necessarily the
    views of my law firm, Hogan Lovells, or any of the firm's
    clients.
        I was asked to appear today to share with you my views of
    ways we can detect and prevent Medicare and Medicaid fraud and
    abuse based principally on my time serving as General Counsel
    of Florida's Medicaid program which as you have heard operates
    one of the Nation's largest Medicaid programs in this country.
        Now, we have certainly heard this morning about the serious
    problems that have plagued the Medicare and Medicaid programs
    in terms of fraud, waste and abuse. The real concern is that
    the expenditures under both programs as shown by the chart that
    is on the screen before us today are set to significantly
    increase over the next 10 years, and this means that there is
    an even greater number of bad actors who will look for ways to
    defraud these programs.
        In the past 10 to 12 years, Florida officials realized that
    the rapidly rising costs of the Medicaid program were
    threatening the State's long-term financial health, and they
    began focusing on prepayment fraud and abuse prevention. That
    is going to be a recurrent theme you are going to hear with me
    as you heard from Mr. Acosta and others today.
        Florida officials also began administering the Medicaid
    program more like a private health insurer would do. Medicare,
    in contrast, has for the most part continued along the ``pay
    and chase'' approach, as we have heard, and that made Medicare
    an especially easier target for fraudsters, especially in south
    Florida, as compared to Medicaid.
        The recent sting operation involving 700 federal and State
    law enforcement officials across the country to apprehend 111
    suspected health care fraud criminals was impressive but it
    shows that at a rate of about seven law enforcement officials
    to every one person arrested, the postpayment is inefficient
    and highly expensive.
        In the written remarks I submitted to the subcommittee, I
    offered several recommendations for preventing fraud and abuse
    in these programs. For purposes of my testimony today, I would
    like to highlight three of those that have been very effective
    in Florida's Medicaid program. Number one, the first
    recommendation is that the programs need to better control the
    provider enrollment process and provider network process. You
    heard Ms. King testify this morning from the GAO that the
    Medicare program is an ``any willing provider'' program. This
    is a problem because bad actors should not be able to gain
    access to the program. One of the most egregious stories
    involves a Miami man who served 14 years in prison for murder
    and then recently purchased a medical supply business for
    $18,000 and proceeded to bill the Medicare program for over
    $500,000 in false claims. Now, he was eventually arrested but
    that was only after he was charged with murdering another
    person and dismembering that person. This is the type of person
    we should not have in any of these programs and a better
    provider screening and enrollment process would catch that.
        The other thing I want to highlight about the provider
    network process, going back to this ``any willing provider''
    approach in Medicare is despite some misconceptions, there is
    no constitutional right for anyone to be a Medicare or Medicaid
    provider. There are entitlements for the beneficiaries but
    there is not a constitutional right to be a provider in these
    programs. Florida understands that in its Medicaid program and
    has added ``without cause'' termination provisions in its
    Medicaid provider agreements. These allow the program to very
    quickly get bad actors out of the program or people we don't
    need in the program whereas the Medicare program has really
    struggled expelling bad actors.
        The second recommendation I have for the subcommittee is
    that the programs should consider shifting away from fee-for-
    service reimbursement methodologies that are ripe and very
    susceptible for fraud and abuse and move toward other payment
    systems including managed care. Risk-based managed care
    companies have a financial incentive to detect and prevent
    provider fraud and abuse in these programs. They could be a
    helpful partner to the government in stopping provider fraud
    and abuse and saving taxpayer dollars.
        My third recommendation is that the programs, as Mr. Acosta
    said, should use predictive modeling and other analytical
    technologies. Prepayment predictive modeling has been used to
    analyze health care claims for many years but in the past its
    effectiveness has been hampered by the inability to limit false
    positives and produce focused, actionable results. Well, those
    technologies have significantly improved and so today, just as
    the credit card industry is able to send its cardholders an
    instant text message or alert if there is a suspected fraud
    transaction, the Medicare and Medicaid program ought to be able
    to do that up front, and as Agent Perez testified this morning,
    it would be great if they could do that in real time as the
    claims are coming in. In 2008, Medicare paid home health
    agencies in south Florida over $550 million just to treat
    patients with diabetes, and that is more than was paid to every
    other locale in the entire country combined. Predictive
    modeling can stop that.
        So we have heard that the fraud, waste and abuse program is
    very real and I applaud the committee for having this hearing
    today. If we focus on prepayment for prevention, that is the
    way to best protect taxpayer dollars, and I welcome any
    questions you might have. Thank you.
        [The prepared statement of Mr. Smith follows:]

        Mr. Stearns. Thank you.
        Ms. Rosenbaum, you are welcome for 5 minutes your opening
    statement.

                      STATEMENT OF SARA ROSENBAUM

        Ms. Rosenbaum. Thank you, Mr. Chairman, Ranking Member
    DeGette, committee members.
        You have heard so much information this morning that what I
    would like to focus my comments on has to do with a question
    that arose during the question-and-answer period that I think
    merits a closer look, which is the extent to which fraud and
    abuse are issues in private insurance, not only in private
    insurance but actually fraudulent and abusive activities by
    private insurers.
        One of the great things, in my view, about the Medicare and
    Medicaid programs is that they are public programs and so we
    are able to know a lot as evidenced by the testimony this
    morning about the extent to which fraud, waste and abuse may be
    happening in the programs. They are extensively studied. There
    are many, many reports. You have made many incredibly important
    investments in curbing fraud, waste and abuse in Medicare and
    Medicaid and those investments have begun to yield real
    benefits. We know very little actually about fraud, waste and
    abuse in private insurance. We do know that since 1995,
    according to at least some studies, 90 percent of health
    insurers have begun to institute more significant antifraud
    efforts. Clearly, they have concluded that they are
    experiencing some of the very same problems in their payment
    systems that Medicare and Medicaid are experiencing in their
    payment systems.
        I would note that one factor about the Medicare and
    Medicaid programs that may make them slightly more susceptible
    to fraud and waste and something that I think would be very
    hard to remedy, even were the entire Medicare and Medicaid
    system changed, is the nature of the beneficiaries. A lot of
    studies show that fraud generally is more concentrated in
    communities and among populations who are extremely poor,
    extremely disadvantaged and much more vulnerable to fraud.
    Whether they were given public insurance or a voucher to buy
    private insurance, in communities with high concentrations of
    poor and vulnerable populations, this is an issue and the
    investment of federal resources and State resources in
    protecting them against fraud is enormous.
        I think there is something else that is worth mentioning,
    and that is when we see fraudulent behavior by the insurance
    industry itself, and there are actually three kinds of fraud
    behaviors that I think are worth thinking about as you
    contemplate further efforts to try and reduce and prevent
    fraud. The first of course is Medicare Advantage marketing
    abuses. They are extensively documented. A simple Google search
    of Medicare Advantage marketing abuses shows thousands of
    reports. One of the most interesting is a study in rural
    Georgia. A group of public health students, near and dear to my
    heart, since I am a professor of public health, took on as a
    summer project in an effort to try and uncover marketing abuses
    in rural Georgia by Medicare Advantage salesmen going door to
    door. I would note that one of the best Web sites on the
    problem and what can be done about it is found in the Texas
    Department of Insurance, so this is something the State
    insurance departments are aware of.
        A second kind of abuse is an abuse in which a health
    insurer negotiates deep, deep, deep provider discounts, fails
    to disclose those discounts among its network providers to
    enrollees who then instead of paying what they think is a 20
    percent coinsurance rate are paying coinsurance rates that are
    in some cases actually even more than the fee that was paid to
    the provider. And a third type of abuse, one that was disclosed
    by Attorney General Cuomo, is the abuse that we saw in the
    Ingenix cases in which out-of-network-provider payment
    standards are manipulated, reduced and enrollees who thought
    they had out-of-network coverage are in fact gouged and made to
    pay very high balance bills.
        Now, these issues, I think, are important to focus on as we
    move into a time when tax subsidies are flowing into the
    purchase of private insurance products and health insurance
    exchanges and other locations, and so my strongest
    recommendation to the committee would be to consider further
    steps to empower investigation of insurer fraudulent and
    abusive behavior. Thank you.
        [The prepared statement of Ms. Rosenbaum follows:]

        Mr. Stearns. Thank you.
        Now I will start with questions. I just note, Ms.
    Rosenbaum, that you had indicated your strong support of the
    public sector but the public sector, Mr. Spiegel could not tell
    us at all how much fraud is in the Medicare system but I can
    assure you that in the private sector they would go out of
    business if they couldn't answer that question on a continual
    basis. They would go out of business.
        Mr. Smith has outlined three ways he thinks he can prevent
    waste, fraud and abuse, and of course, the predictive modeling
    using computers was one that you mentioned, Mr. Acosta, too. Do
    you agree or would you add to the three that Mr. Smith
    mentioned I thought were pretty incisive? Are there any other
    ones you would suggest?
        Mr. Acosta. I would agree with that and I also would like
    to support a prior comment made about the importance of data
    access. One of the ways that we were able to bring as many
    cases as we did in south Florida is, we employed a nurse
    practitioner that had access to not real-time data because we
    couldn't obtain that but fairly recent data to look for billing
    spikes, and we did that ourselves rather than have the HHS OIG
    agents defer to CMS. That kind of integrated data is very
    important and I would like to support Mr. Perez's request.
        Mr. Stearns. Mr. Acosta, Mr. Smith, do you think we should
    have Medicare issue something besides a Social Security number
    so that they could actually, when a person calls and said
    listen, there is fraud in my billing here, instead of saying
    well, just keep alerting us, do you think we should change
    that? Because that was not one that either one of you suggested
    and that has been mentioned.
        Mr. Acosta. Well, let me--you know, let me apologize
    because I thought I had referenced that. I think it is
    absolutely critical. As U.S. Attorney, we would get calls on a
    weekly basis from individuals saying we have two legs yet
    Medicare is paying for a prosthetic leg. Medicare says they can
    do nothing about it.
        Mr. Stearns. In the 60 Minutes expose, there is a woman
    there who said for 6 years she called for artificial limbs,
    artificial legs, 6 years and Medicare did nothing.
        Mr. Acosta. Mr. Chairman, how long would American Express
    be in business if----
        Mr. Stearns. That is what I mean.
        Mr. Acosta [continuing]. When you would call and say I lost
    my card, they say we can't help you.
        Mr. Stearns. Are either one of you concerned that here we
    are expanding the Medicaid program by 20 million people under
    Obamacare and federal spending on Medicare and Medicaid will
    rise from $900 billion in 2010 to almost $2 trillion in 2019?
    Are you concerned that, you know, unless we implement these
    things that obviously we are going to have more fraud?
        Mr. Acosta. From my perspective, I think, you know, it is
    critical that Medicare and Medicaid spend money to modernize
    their system. That involves unique IDs, not the Social Security
    number. That involves predictive modeling. Again, credit cards,
    if your spending patterns deviate at all, they call you up. Why
    can Medicare not do the same thing?
        Mr. Stearns. Are you familiar with what the Medicare
    prevention fraud in the ACA does? Are either one of you, Mr.
    Smith or Mr. Acosta? Do you think they would help pay for the
    cost of this Medicare expansion and Medicaid expansion just
    based upon what you see in the bill, or do you know what is in
    the bill?
        Mr. Smith. I certainly am aware of some of the provisions
    in the bill. I think one of the big concerns is we heard
    testimony today from the OIG saying that the current problem,
    current Medicaid and Medicaid fraud problem with the current
    population of beneficiaries we have exceeds, in his estimate,
    $7 billion. So even if you took the CBO's suggestions that the
    additional funding in the federal health reform legislation
    could help save $6 billion or $7 billion, that is barely enough
    to get close to the estimates of what the OIG says is the
    problem today.
        Mr. Stearns. Excellent point.
        Mr. Acosta, anything you would like to add?
        Mr. Acosta. Yes. I would add to that that most of the--I
    assume you are referring to the ACA, most of the ACA focuses on
    screening measures, licensure checks, background checks, site
    visits, which are important. But, you know, it is not enough.
    You need to actually review claims as they come in using
    predictive modeling. You need to have prepayment screening of
    claims.
        Mr. Smith. And Chairman, I would echo that and say that
    that is why I really think it is important as part of the Small
    Business Jobs Act, that is where the predictive modeling
    legislation was added. It is not part of the original federal
    health reform legislation and so I think that predictive
    modeling and analytical technology----
        Mr. Stearns. It is hard to believe. So the predictive
    modeling using computers is not part of the prevention program
    in Obamacare right now. Is that the way you understand it?
        Mr. Smith. Well, I think that the federal health reform
    legislation does ask and does provide for additional
    technologies to be used but the predictive modeling piece and
    the key piece for prepayment----
        Mr. Stearns. Is not there. I am just going to close by
    asking you quickly, in your opinion, do you think organized-
    crime involvement in Medicare and Medicaid has been, you know,
    pretty prevalent in south Florida? Have you seen a lot of
    organized-crime figures engage in Medicare fraud?
        Mr. Acosta. I certainly have. If I could just clarify a
    small point. The Small Business Jobs Act of 2010 did have
    authorization for predictive modeling. HHS is looking at this.
    But the authorization was put in a separate provision.
        With respect to organized crime, I think it is a clear
    method by which organized crime makes money. It is highly
    profitable. We are talking not millions but billions of
    dollars, $2 billion in actual charged criminal indictments.
    That is not all of it that is on the street. That is simply
    what we proved in court in south Florida alone. One of the
    frustrations is when you take down an operation, when you do
    these national stings, you get the nominee owners, the
    individuals that are being paid a little bit of money so their
    name can be used but they are not really the brains behind the
    operation and so you need to go up the chain just like you do
    in organized crime.
        Mr. Stearns. All right. My time is expired. The gentlelady
    from Colorado.
        Ms. DeGette. Thank you so much, Mr. Chairman.
        So Mr. Acosta, what you are saying is, in fact Congress did
    pass the predictive modeling, the prepayment information, it
    was just not in the same bill as Affordable Care Act, correct?
        Mr. Acosta. Correct. If memory serves, I believe Senator--I
    don't know in the House but the Senate side Senator LeMieux
    added it----
        Ms. DeGette. So it is in the law now, we can do that,
    right?
        Mr. Acosta. HHS has the authorization if they choose to use
    it.
        Ms. DeGette. The authorization. Now, both of you, I
    really--well, actually I want to thank all three of you for
    your testimony because I thought it all gave good, different
    perspectives on how we can target waste, fraud and abuse, and
    as we said with the last panel, we are all interested in
    rooting out waste, fraud and abuse in every part of the system.
    One of the new tools that we talked about that is in the
    Affordable Care Act and that CMS and HHS are using is this
    preventative approach so that we are moving away from the ``pay
    and chase'' model to the model that emphasizes keeping
    criminals out of the system to begin with, and I would assume,
    Mr. Acosta, you would agree with that approach, correct?
        Mr. Acosta. I entirely agree that the ``pay and chase'' is
    a bad approach and that we need to move----
        Ms. DeGette. Thank you.
        Mr. Smith, would you agree with that?
        Mr. Smith. Absolutely agree that is not a good approach.
        Ms. DeGette. You don't think that the preventative approach
    is a good approach, or you don't think that ``pay and chase''
    is a good approach?
        Mr. Smith. ``Pay and chase'' is a terrible----
        Ms. DeGette. Is a bad approach?
        Mr. Smith. Yes.
        Ms. DeGette. And what about you, Ms. Rosenbaum?
        Ms. Rosenbaum. I agree that prevention is the best
    approach.
        Ms. DeGette. OK. Now, Mr. Smith, you testified, this was
    really quite shocking to me. You said that there is ``any
    willing provider'' rule which would allow even people with
    murder convictions to become a provider. Here is my question.
    Is that under statute or is that just under practice?
        Mr. Smith. Well, Ms. King testified this morning referring
    to the ``any willing provider'' rule.
        Ms. DeGette. Yes.
        Mr. Smith. Basically, CMS's approach historically has been
    to let providers in unless they clearly had an issue in the
    screening process that CMS caught, and they weren't very good
    historically at catching those problems.
        Ms. DeGette. OK. So do you think that there are some
    criteria that we could pass that would be absolute barriers,
    like, for example, a felony conviction where you would say, you
    know, you are just--because I know they use their discretion so
    they could reject somebody for having a felony conviction. Are
    you saying that it would be a good idea for us to pass a bright
    line of certain criteria that they just couldn't consider
    somebody if they met those criteria?
        Mr. Smith. Certainly, and there are certain criteria in
    statute that are bright lines but I would say that it goes
    beyond just felony convictions. It also goes to operating your
    provider network like an insurance company would, which is, if
    we have too many home health agencies in Miami-Dade, regardless
    of whether we think a particular provider is fraudulent, we
    shouldn't let more agencies in the program.
        Ms. DeGette. Yes, I agree with that, but that is not a
    bright line, that is sort of a discretionary criterion, and
    that is what I am asking you. So if any of you actually think
    that there are additional bright-line criteria we should put in
    statute, we would appreciate it if you would supplement your
    answers and provide that to us because I agree too, those kind
    of outrageous things should not happening and sometimes I do
    think they slip through the cracks.
        Now, Mr. Acosta, you testified that one thing that would be
    really helpful would be using these unique IDs, not using
    Social Security numbers, correct?
        Mr. Acosta. Correct.
        Ms. DeGette. Mr. Smith, do you agree with that, that that
    would be a good way to improve the system and to decrease
    fraud?
        Mr. Smith. Yes.
        Ms. DeGette. And Ms. Rosenbaum, do you agree with that too?
        Ms. Rosenbaum. I do.
        Ms. DeGette. I think that is a really great idea, and I
    appreciate you bringing that up. I guess that is all the
    questions I have. I yield back.
        Mr. Stearns. I thank the gentlelady.
        Mr. Murphy from Pennsylvania is recognized for 5 minutes.
        Mr. Murphy. Thank you, and thank you to the panel. This is
    very enlightening.
        Mr. Acosta, you were talking about--a couple of you, you
    and Mr. Smith were talking about issues involved with
    prevention versus chasing. Do we have any estimate of the costs
    involved with bringing a Medicare or Medicaid fraud case to
    justice, from bringing charges to jail time?
        Mr. Acosta. The costs, well, I can tell you that in my
    office, I received a line item of about $1 million that I
    supplemented with about $2.5 million of my own discretionary
    spending and so I spent about $3.5 million per year to
    prosecute cases. Now, that does not include the costs of the
    agents from HHS, OIG and FBI.
        Mr. Murphy. Do you have any kind of ratio to make decisions
    with regard to whether or not to prosecute a case, if it is
    less than $1 million or so and it is going to cost you $3.5
    million?
        Mr. Acosta. We have cutoffs all the time. We don't like to
    discuss them publicly but obviously you have more cases than
    you can imaginably prosecute and so you go after the larger
    cases, and that is a problem and every now and then we
    prosecuted some smaller fraudsters because you don't want to
    send the message that if you stay below a certain number you
    get away with it.
        Mr. Murphy. What would the cost of prevention be?
        Mr. Acosta. The costs of prevention at the end of the day I
    think are much lower and much more effective. Computer programs
    that screen, for example, inhalation drugs in south Florida.
    Budesonide that I mentioned is just one but there are a number
    of other inhalation drugs. In one year, Miami-Dade County
    received $93 million in billings. The next highest billing city
    was Cook County with $2.7 million. That is a red flag if I have
    ever heard one. That is the kind of issue that should be caught
    by a computer program, and if you can prevent those $93 million
    and reduce it to the size of Chicago of $2.7 million, that is
    $90 million that you are preventing right there.
        Mr. Murphy. Thank you.
        And Mr. Smith, on the ``any willing provider'' issue, how
    do you recommend we define providers? Obviously we don't want
    to stop people who want to start a business who are legitimate
    about it but should it involve such things as the ranking
    member was talking about something alone the lines of a
    criminal background check requirement or would these be people
    who would be at a higher level of screening for their first
    year or two? Would they be specifically licensed on some other
    level to begin with, probationary? Do you have any
    recommendations for that?
        Mr. Smith. There already exists in law provider screening
    requirements that would look at convictions, different things
    in the person's past, and CMS did just recently come out with a
    final rule regarding provider screening enrollment and what
    they have done is try to tier the risk areas so a provider
    seeking or a person seeking to open up a new Medicare-certified
    durable medical equipment company, a home health agency or
    perhaps an infusion clinic would be tiered in a higher risk
    category and perhaps be screened closer than someone hoping to
    open up a new hospital, and I think that is a wise idea.
        Mr. Murphy. Do you think with regard to these issues, and
    you are familiar with Florida. I don't know if you heard my
    questions before regarding the questions of the Cuban
    government's role in this. Would we have picked up on this? Is
    there any thought that we might pick up when another country is
    involved perhaps in organized crime?
        Mr. Smith. I think from a Medicaid perspective, part of it
    goes to not only to making sure you screen for certain bad
    actions in their past but also making sure you collect enough
    data to get the people on the applications so that you know
    what the links are, and one of the things that is beneficial
    about the predictive modeling is not just the claims analysis
    but also it has the capability of doing what I call social
    network analytics so you can basically see which people who
    have had an experience with a fraudulent enterprise have links
    to other people that you might not be aware of, might not have
    their names in any applications but they are operating in
    clusters and they sort of swarm around like bees with patients
    and defraud the program. That type of technology has great
    opportunities for us to save money.
        Mr. Murphy. Mr. Acosta?
        Mr. Acosta. Congressman Murphy, thank you. If I could, you
    asked earlier, you referenced the list of OIG's most wanted,
    and based on public information, my understanding is that a
    majority of these individuals are in fact in Cuba. One of the
    issues that we had early on was that defendants were being
    granted bond by federal judges on the theory that because they
    were Cuban nationals, they could not return to the island of
    Cuba, and in fact, they were then jumping bond and we had a law
    enforcement problem. Since then federal judges have actually
    stopped using the fact that someone may not flee to Cuba as a
    reason to grant bond because of reduced risk of flight because
    in fact the risk of flight to Cuba is high because Cuba
    welcomes the hard currency that they receive from these
    individuals.
        Mr. Murphy. Thank you very much.
        Thank you, Mr. Chairman.
        Mr. Stearns. The gentleman from Virginia is recognized, Mr.
    Griffith, for 5 minutes.
        Mr. Griffith. Thank you, Mr. Chairman. I do think that is
    very interesting. So even if the Cuban government is not
    involved, they still welcome these folks in because they are
    bringing cash with them?
        Mr. Acosta. They certainly welcome them in. There is some
    evidence that shows that there is governmental involvement as
    well but that is based on University of Miami reports.
        Mr. Griffith. Interesting.
        Professor Rosenbaum, I am just trying to do some things on
    background, and I would just ask you some questions, if I
    might. I see that you have listed some government contracts on
    your Truth in Testimony form, and I am just wondering if you
    could tell me what those contracts involve.
        Ms. Rosenbaum. Sure. I am a law professor at George
    Washington University and I am the chair of the department of
    health policy in the medical center, and I am the principal
    investigator on a contract that provides analytical support to
    what is now I guess the center--as opposed to DCIIO, it's
    CCIIO--to review and summarize the comments for the requests
    for comments and the notices of proposed rulemaking related to
    health insurance exchanges.
        Mr. Griffith. OK. And so they don't have somebody in-house
    that is doing that?
        Ms. Rosenbaum. Oh, I am sure they must review as well but
    we do policy support work for the department and have under
    federal contracts for administrations since 1991.
        Mr. Griffith. Yes, ma'am. And is there anything else you
    are working on with HHS or CMS in regard to the Affordable Care
    Act and the regulations?
        Ms. Rosenbaum. I have no other contracts in which I am the
    investigator, no.
        Mr. Griffith. All right. I appreciate that. Thank you,
    ma'am.
        Mr. Chairman, I yield back my time.
        Mr. Stearns. The gentleman yields back his time. I think we
    are all through. I am getting ready to close. I did have one
    follow-up for Mr. Smith. I think you talked about, or maybe it
    was Mr. Acosta, about using a data access process to cut fraud.
    I wasn't quite sure, because Inspector General and GAO can go
    in and look at these statistics to get--who were you talking
    about when you talked about data access?
        Mr. Acosta. One of the issues that we had early on in south
    Florida for the health care fraud initiative that later became
    the strike force, we set up a separate location where we
    collocated the agents and the prosecutors to focus on this. At
    the time I had requested that everyone have access to the
    billing data so they could look for aberrant billing patterns.
    We were finally able to obtain access to some data and that was
    restricted in appropriate ways at the time.
        Mr. Stearns. So you want law enforcement agents----
        Mr. Acosta. Absolutely.
        Mr. Stearns [continuing]. And the prosecutors to have
    access to this data prior to--while they are investigating a
    crime?
        Mr. Acosta. As the data comes in, give law enforcement
    access to the CMS systems, protect privacy but give us access
    to the billing patterns so we can catch the fraudsters in the
    act.
        Mr. Stearns. Would you need to go to a judge to get access?
    Or you just want to be able to have access to it?
        Mr. Acosta. Correct. Yes.
        Mr. Stearns. So you could call up the Health and Human
    Services and say we have this particular case, this particular
    modeling, we want you to give us access so we can look at the
    data?
        Mr. Acosta. Not call up HHS but actually put your
    investigators, have the--we have a facility in south Florida.
    We would like a computer terminal there where we can go and see
    billings for X drugs spiked by 300 percent in the past month
    for these five providers. Well, maybe that is a reason we
    should investigate those five providers.
        Ms. DeGette. Will the gentleman yield?
        Mr. Stearns. Sure. I would be glad to yield.
        Ms. DeGette. Is that a legal barrier that you couldn't get
    the data or is that an agency policy that prevented you from
    getting the data?
        Mr. Acosta. In all candor, I am uncertain whether it is
    legal or bureaucratic. I just know it is a barrier.
        Ms. DeGette. As I said to the previous panel, I think that
    is some data that would be really helpful in these
    investigations, so if you can try to figure that out and
    supplement your answer, then we can know what we need to do to
    help expedite that.
        Thank you, Mr. Chairman.
        Mr. Stearns. Thank you. Let me conclude by--oh, good. We
    have another member came back. The gentleman from Texas, Dr.
    Burgess, is recognized.
        Mr. Burgess. Thank you, Mr. Chairman. Actually, I have been
    watching off the floor. I have a couple of constituents that
    are here. They are both serving their country, so I am making
    some time for them while this hearing is going on.
        Let me just ask a question, Ms. Rosenbaum--well, actually I
    want to ask it of Mr. Smith, but Ms. Rosenbaum made an
    observation that we should empower more investigation of
    fraudulent insurance behavior but Mr. Smith, some of your
    testimony to me indicated that you didn't feel that it was
    necessary to have the same focus. Would you care to expound
    upon that?
        Mr. Smith. I think what I said came at maybe a slightly
    different angle. I said one of my recommendations was that the
    Medicare and Medicaid programs continue to move away from a
    fee-for-service-based system and more toward other payment
    systems such as managed care and also to operate the programs
    more like a private insurer would. I guess it might be
    interesting historically to hear what percentage private
    insurers have suffered in fraud and abuse but that goes to
    their bottom line, it doesn't go to taxpayer dollars. What the
    Medicare and Medicaid programs need to do is focus on
    protecting taxpayer dollars, and if you engage an outside
    managed care company and you pay them risk-adjusted rates, they
    have the financial incentive to stop provider fraud and abuse.
    If they don't, it goes to their bottom line. It doesn't hurt
    taxpayer dollars any further.
        Mr. Burgess. Yes, and that is interesting that you say
    that. When was this? June of 2009, you may be familiar with an
    article published in the New Yorker by Atul Gawande, and it was
    important to me because he was talking about Texas. I should
    point out that Texas today is 175 years old. It was 175 years
    ago this morning that Texas declared its independence and
    became an independent country. But that is another story.
        Part of Dr. Gawande's investigation in south Texas led
    him--I don't know that he came right out and said it but he
    certainly implied that overutilization and overbilling of
    Medicare was rampant within the medical community in McAllen.
    So it bothered me. I know a lot of doctors, or I know some of
    the doctors who work there. We work together on border issues.
    So I took a trip down to McAllen to see for myself on the
    ground if I could what was going on, and just the point you
    make, Mr. Smith, was you don't see the headlines in the paper
    that Aetna Life and Casualty has been defrauded of 15
    wheelchairs. It just doesn't happen. It is always Medicare,
    Medicaid and SCHIP. It is always the public side.
        Now, Ms. Rosenbaum has some issues with private insurers,
    and I get that, but here we are talking about the actual
    delivery of care, and appropriately, it never seems to happen
    on the private sector, or if it does, perhaps they just don't
    talk about it the same way we do on the public side. But is
    that your observation as well?
        Mr. Smith. It has certainly been a prevalent problem in
    both programs. There was a report recently that in 2009 the
    Medicare program paid for over 420 million claims for mental
    health in Florida alone, which was four times higher than the
    amount paid in Texas and 635 times higher than the amount paid
    in Michigan, and to paraphrase Carl Hiaasen, who is a funny
    novelist out of Florida, he said no matter what you think of
    Floridians, there is no way that we are four times crazier than
    Texans, respectfully, Congressman.
        Mr. Burgess. Well, exception taken. Yes, I was going to
    suggest perhaps they need to move to Texas and that would solve
    our problem.
        Well, it is just--you know, it raises an important issue.
    What is happening on the private side that prevents the same
    problems that are happening on the public side. Now, we talked
    a little bit about the payment error rate, and Ms. Rosenbaum,
    some of that is truly just a coding error. Someone makes a
    mistake when someone comes in and they write the code down and
    that goes into the payment error rate, correct?
        Ms. Rosenbaum. Absolutely.
        Mr. Burgess. But that error rate of 9.4 percent or whatever
    was quoted to us, that is not predominantly made up of honest
    mistakes made in tallying up the office visit. Is that correct?
        Ms. Rosenbaum. I am not sure I understand the question.
        Mr. Burgess. Well----
        Ms. Rosenbaum. You mean of the total amount?
        Mr. Burgess. Yes. How much is just simple coding errors
    that----
        Ms. Rosenbaum. I couldn't begin to answer the question.
        Mr. Burgess. It wouldn't these two guys that were on the
    panel earlier with their handcuffs and nightsticks? Just
    wouldn't be involved, right? The amount of the error rate that
    is just attributable to simple coding errors is likely pretty
    small out of that 9.4 percent?
        Ms. Rosenbaum. I truly don't know. I have only seen the
    numbers aggregated.
        Mr. Burgess. Well, let us even say this. Let us say it is
    that high for just simple coding errors. Doesn't that tell us
    something about how we should be approaching this problem, that
    if nothing else, perhaps some education of doctors and nurses
    and clinics about how to code properly would be part of what
    should be happening at the level of CMS?
        Ms. Rosenbaum. Yes. I think anything and everything that
    can be done to clarify how to bill, how to file appropriate
    claims----
        Mr. Burgess. I don't have any data on it but I would
    suspect that number is very low, because as you recall in the
    late 1990s, there were all of these compliance audits, and I
    know because I was in practice at the time, and they were very,
    very severe, and yes, you could be put in jail, so I am just
    telling you I think that number of actual coding errors of that
    9.4 percent is in fact very small because most physicians and
    nurses and nurse practitioners do not want to undergo that type
    of scrutiny because we all had to go through those compliance
    audits, we all had to put forward what we were doing in our
    offices to prevent that from happening.
        Mr. Chairman, I see I have gone over my time. Thank you for
    the indulgence.
        Mr. Stearns. All right. I thank the gentleman.
        By unanimous consent, we would like to put the document
    binder into the record, and I will conclude by saying the
    purpose of Oversight and Investigations is to ferret out
    details. You have done an excellent job, the second panel here.
    We are going to recommend to the Health Subcommittee on Energy
    and Commerce a lot of the recommendations that have come out of
    this hearing and that is the purpose, and hopefully they will
    have a hearing and follow up with legislation. I know the
    Democrats think a lot of these suggestions you have made are
    part of Obamacare but I am not sure they all are, and obviously
    changing the Social Security number so a person can have a
    Medicare ID number that you seem to all agree upon is something
    that we should look at quickly.
        So with that, the----
        Mr. Burgess. Mr. Chairman, just a point of personal
    privilege, can I recognize two of my constituents?
        Mr. Stearns. Sure.
        Mr. Burgess. Captain Dambravo and Captain Dambravo were
    visiting me today during the hearing, and I want to thank them
    for their service to their country. If I can further relate, my
    relationship with Captain Dambravo goes back some time. Without
    violating HIPAA, I delivered him 27 years ago. Thank you both
    for being here with us today.
        Mr. Stearns. Thank you for being here.
        And with that, the subcommittee is adjourned.
        [Whereupon, at 1:02 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]