[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





                  U.S. GOVERNMENT PRINTING OFFICE
66-547 PDF                WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001






                    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:]





                                 
