[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
RED TO BLACK: IMPROVING COLLECTION OF DELINQUENT DEBT OWED TO THE
GOVERNMENT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT ORGANIZATION,
EFFICIENCY AND FINANCIAL MANAGEMENT
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MARCH 11, 2011
__________
Serial No. 112-12
__________
Printed for the use of the Committee on Oversight and Government Reform
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
__________
U.S. GOVERNMENT PRINTING OFFICE
67-369 PDF WASHINGTON: 2011
____________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). E-mail, gpo@custhelp.com.
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Government Organization, Efficiency and Financial
Management
TODD RUSSELL PLATTS, Pennsylvania, Chairman
CONNIE MACK, Florida, Vice Chairman EDOLPHUS TOWNS, New York, Ranking
JAMES LANKFORD, Oklahoma Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
FRANK C. GUINTA, New Hampshire ELEANOR HOLMES NORTON, District of
BLAKE FARENTHOLD, Texas Columbia
C O N T E N T S
----------
Page
Hearing held on March 11, 2011................................... 1
Statement of:
Lebryk, David, Commissioner of Financial Management Service,
U.S. Department of Treasury................................ 4
Letters, statements, etc., submitted for the record by:
Lebryk, David, Commissioner of Financial Management Service,
U.S. Department of Treasury, prepared statement of......... 8
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 3
RED TO BLACK: IMPROVING COLLECTION OF DELINQUENT DEBT OWED TO THE
GOVERNMENT
----------
FRIDAY, MARCH 11, 2011
House of Representatives,
Subcommittee on Government Organization, Efficiency
and Financial Management,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:24 a.m., in
room 2247, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the subcommittee) presiding.
Present: Representatives Platts, Amash, Gosar, Guinta,
Towns, and Norton.
Staff present: Ali Ahmad, deputy press secretary; Drew
Colliatie, staff assistant; Linda Good, chief clerk; Beverly
Britton Fraser, minority counsel; Kevin Corbin, minority staff
assistant; and Carla Hultberg, minority chief clerk.
Mr. Platts. This hearing of the Subcommittee on Government
Organization, Efficiency and Financial Management will come to
order.
First, I want to apologize to my colleagues, our witness,
and others for the delay in starting. We typically have about
an hour and 40, hour and 45 minute commute; today it was about
2 hours 40, 2 hours 45 minutes. Thankfully, I hope all the
individuals who were in the accidents that I passed are safe
and glad I was not in them, but apologize for keeping you
waiting. But we are glad to be here today for this important
oversight hearing.
I want to thank our witness for being here today to discuss
efforts to collect delinquent debt owed to the Federal
Government. While this is certainly a financial management
issue, it also is an accountability issue. Part of
accountability is making sure that people fulfill their
obligations, whether those obligations are to pay a fine, a
penalty, or to repay a Federal loan or to pay child support.
Each and every day the people at Treasury's Debt Management
Service do all they can to demand accountability, while being
sensitive to the rights and circumstances of debtors.
This hearing coincides with the release of the Fiscal Year
2010 Annual Debt Report, which provides a detailed look at
Treasury's activities. We look forward to discussing that
report, as well as some of the proposals in the President's
budget.
We are honored here today to have Mr. David Lebryk with us.
Commissioner Lebryk is Commissioner of the U.S. Department of
the Treasury's Financial Management Service. As Commissioner,
he provides leadership, policy direction, and guidance for
financial management programs, including payments, collections,
debt collection, and governmentwide accounting and financing
reporting.
Commissioner Lebryk, I appreciate your submitting your
written testimony here today and I have had the chance to
review that, as well as the report. I also appreciate your
reference to our joint predecessor for former Chairman Towns
and myself in referencing Chairman Horn. It was quite an honor
to serve with him when I first came to Congress in 2000, and he
was a great leader of this subcommittee, as well as on a number
of efforts, as you reference in your statement. As the author
of the Debt Collection Improvement Act, Chairman Horn certainly
worked tirelessly on this issue that we are going to talk about
here today, and certainly honored to follow in his footsteps
and continuing his efforts in partnering with three of my
colleagues.
Also want to thank you for your service in general. As one
who believes in the ideals of public service, appreciate what
you give back to our country and our fellow citizens. The
ranking member and I look forward to working with you, along
with our subcommittee colleagues, and being partners in this
important effort of achieving accountability for the American
people.
I now recognize the ranking member, Mr. Towns from New
York, for the purpose of an opening statement.
[The prepared statement of Hon. Todd Russell Platts
follows:]
[GRAPHIC] [TIFF OMITTED] T7369.001
Mr. Towns. Thank you very much, Mr. Chairman, and thank you
for arranging this hearing.
As this Congress continues to debate the Nation's budget,
we are looking to identify sensible cost-cutting measures and
ways to increase revenue to the Federal Government. This
hearing considers the collection of debt owed to the
Government, which is an important revenue stream in these tough
economic times. I thank the chairman for holding this hearing.
Collection of Federal Government and State debt is an
essential way to help fund Government operations, maintain key
programs, and help reduce the Federal deficit. It is also an
extremely effective method of collecting delinquent child
support obligations to help meet the needs of the children who
depend on that support.
In the years since this subcommittee began examining debt
collection, there has been great improvement. The Treasury
Department has taken the tools that the Congress provided in
the Debt Collection Improvement Act of 1996 and has expanded
its reach to increase the volume of delinquent debt the
Government recoups. From 1996 to the end of fiscal year 2010,
Financial Management Service has collected more than $49.7
billion for Federal and State agencies. This is a commendable
result compared to the collection level before 1996.
Treasury continues to improve its offset and cross-
servicing programs. FMS has ramped up its efforts in collecting
delinquent tax and non-tax debt owed by Federal employees. The
doctors and hospitals who receive Medicare payments and Federal
contractors are working on identifying other payments that the
Government can target for collection. There is more than $625
billion in outstanding debt to the Government. We are actively
collecting $422 billion of that balance. In fiscal year 2010,
we actually recovered $5.3 billion.
It is clear, Mr. Chairman, that there is much more work
that needs to be done, and I am looking forward to the
testimony today of our witness and, as a result of this, I hope
we can continue to move forward as we have done over the last
few years. I thank very much, Mr. Chairman. I yield back the
balance of my time. I am anxious and eager to hear from our
witness.
Mr. Platts. Thank you, Mr. Towns.
We will now proceed to Commissioner Lebryk. Commissioner,
as the practice and rule of the House, we swear in every
witness, so if I could ask you to stand and raise your right
hand.
[Witness sworn.]
Mr. Platts. The clerk will note that the witness answered
in the affirmative.
We would like you to proceed. We have 7 minutes on the
clock, but if you need a little more, as the only witness, we
are certainly glad to give you some additional time.
STATEMENT OF DAVID LEBRYK, COMMISSIONER OF FINANCIAL MANAGEMENT
SERVICE, U.S. DEPARTMENT OF TREASURY
Mr. Lebryk. I will try to stay within that timeframe.
Thank you, Chairman Platts, Ranking Member Towns, and
distinguished members of the subcommittee, thank you for the
opportunity to testify before you today on something which we
take very seriously, and that is the collection of delinquent
debt owed to the Federal Government. I ask that my entire
statement be read into the record.
Mr. Platts. Without objection.
Mr. Lebryk. Thank you.
Chairman, Congressman Horn was a tremendous champion of the
Debt Collection Improvement Act in 1996, so I want to spend a
moment and pay our respects to him for the efforts that he did.
We had a lot of spirited conversations with Chairman Horn
during those early years and we all shared a very common
objective, and that was to make sure we were doing the best
interest of the American taxpayer. He was quite a champion of
this act and the work that we are doing at FMS, and we are very
much appreciative of that.
This marks the 15th anniversary of the Debt Collection
Improvement Act and a lot has been accomplished in that time. I
want to thank you again for holding this hearing to demonstrate
Congress's interest in the Federal Government's activities. I
also want to commend the leadership of you, Chairman Platts and
Mr. Towns, for your interest in our operations. We look forward
to that continued partnership and working together to improve
the things that we do.
We are proud of the role that we play in providing this
essential service to the Federal Government and to the citizens
that we serve. We take that responsibility quite seriously and
we place a great deal of importance on demonstrating value to
the American public in carrying out our responsibilities.
FMS collects delinquent debt on behalf of Federal and State
agencies in accordance with the Debt Collection Improvement Act
and other applicable laws. We embrace the goals of the DCIA to
maximize collections, while minimizing the cost to the
Government in that effort. We carry out the statutory
responsibilities effectively and efficiently, with seriousness
of purpose. Collecting debt is part of our core mission. I
think we are one of the few Government agencies that has, if
maybe the only agency that has debt collection as part of its
core mission.
We are constantly looking for ways to improve our efforts
and the centralization of collection of debt owed to the
Federal Government, and I will go into a little bit later some
of those efforts that we have ongoing right now to do even
better than what we have been doing in the past.
The DCIA requires agencies to refer most of their debts to
FMS with 180 days of delinquency. We encourage agencies to
refer debts to us sooner. We have two major mechanisms with
which we collect the debt. One is something called the Treasury
Offset Program, which is effectively a means of matching
Federal payments against delinquent debt files. So it is a
highly automated, highly efficient process; the premise being
that we shouldn't be making payments to someone who owes debt
to the Federal Government. The attempt is to intercept those
payments before they are actually made and, as I mentioned,
that is a highly efficient mechanism.
The second mechanism that we use is called cross-servicing,
and that is more actively working the debt. We do things like
write letters to debtors; we refer debts to private collection
agencies; we refer debts to the Department of Justice for
litigation; we use administrative wage garnishment to attach
the wages of working debtors; and we report debts to credit
bureaus.
While we strive to collect the maximum number of dollars
possible, we are also aware of the needs of the debtors to be
treated fairly. We are mindful that not every debtor is
financially able to repay their debts, and debtors are provided
the appropriate due process rights allowed to repay debts over
time. We take great care to protect the privacy rights of
individuals and have robust measures in place to guard the
security and sensitivity of financial and private data.
Also part of our very core mission in our values within our
organization is that we treat debtors as we like to be treated
ourselves, and that is something that permeates all of our
workers and the process of their efforts. We recognize that we
have to be serious and tough at times, but we also realize we
need to treat people respectfully and as we would like to be
treated ourselves.
Since 1996, FMS has collected more than $47.9 billion on
behalf of the Federal and State agencies. We have collected
$5.4 billion in delinquent debt in 2010, including $2.1 billion
of delinquent child support. In fact, that child support is
something that, while we are quite pleased to help the Federal
agencies and the U.S. Government, it does give us some sense of
strong purpose of what we do is important and adds value to the
American families and children.
We are also on track this year to increase our collections
over last year. At this point, we are approximately 8 percent
ahead of where we were last year at this time with respect to
our collections. We expect to continue growth in the coming
years and we have a 7-point strategy plan in order to increase
those collections, which I would like to get into a little bit
later, and we expect a strong period of sustained growth. We
also have a couple legislative proposals in place which, in
totality, will bring an additional $5 billion in collections to
the Federal Government over the course of the next 10 years.
One key area of delinquent debt I know oftentimes of
interest is Federal debt owed by Federal employees. Since the
passage of the Debt Collection Improvement Act, FMS has
collected $340 million from Federal employees, including $277
million in delinquent tax debt. In 2010, FMS collected $85
million from delinquent Federal employees, an increase of 6\1/
2\ percent from 2009.
The second area which has received a fair amount of
attention recently is Medicare payments. FMS intercepts
Medicare payments to doctors, hospitals, and other providers
who owe delinquent tax and non-tax debts. Since 2008, FMS has
collected $136 million from payments to Medicare providers who
owe delinquent debts, including $107 million in tax debts.
A third area that we have been increasing our efforts is
debts owed to States. We have the ability to help States who I
think are very much in need right now of revenues, so we use
the Treasury Offset Program as a way to collect funds on behalf
of States. Most recently, Kentucky just joined the program, and
in the first week of the program they collected close to $2
million. In the first month they collected $4.7 million through
the State reciprocal program.
We also, most recently, based on legislation passed by
Congress, are working to collect State unemployment
compensation debts where there has either been overpayments or
fraud in the unemployment program. New York was one of the
first programs to sign on to the program recently, and in the
first 2 days of the program collected $2.8 million. Wisconsin,
the second State to sign on, collected $640,000 in its first
day. So we see a lot of opportunity to help States and assist
States in fulfilling and getting repayment for either
overpayments or fraud in various programs that are out there.
I mentioned the seven-point strategy that we have at FMS to
increase collections over the course of the coming years. Those
strategies I think include increasing our call center
capability. Last year we handled 4.3 million calls from debtors
trying to resolve debts. We are implementing state-of-the-art
collection tools, we are increasing the effectiveness and
efficiency of our debt collection processes, and we are also
reaching out and establishing an agency council with which we
can work with our sister agencies to improve and look at best
practices and sharing of more information to improve
governmentwide collections.
With that, I see I have just hit exactly 7 minutes, so I
will end where I started, to once again thank you for allowing
me to testify in front of you. I want to emphasize again that
we are very proud of the role that we play in providing
essential services to the people and to the Federal Government,
and we place great importance on demonstrating value to the
American people and fulfilling these responsibilities, and we
very much look forward to working with this committee to
fulfill those responsibilities. Thank you.
[The prepared statement of Mr. Lebryk follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Platts. Thank you, Commissioner. Appreciate your
testimony, as well as, again, your written information you
provided. I will start with a couple questions myself.
In fact, rather than starting myself, because of being the
one that was last in the room, I am going to go to my ranking
member first, and then to my colleagues, who have been very
patient, and I am going to go last, actually. So, Mr. Towns, if
you are ready, I will yield to you for purpose of questions.
Mr. Towns. Thank you very much, Mr. Chairman, but you don't
have to punish yourself for being last.
Why is it that the Government, after 2 years, delinquent
debt, you stopped pursuing it? In the private sector, it is
seven or nine. I think it is 7 years. So why would they be able
to pursue it much longer than the Government?
Mr. Lebryk. Well, in many cases the Government, for
example, on student loan debt, it does not ever get
extinguished, so the capability exists for the Federal
Government to continue to pursue that debt really through the
life of a debtor and, as a result, we often talk about if we
are not able to collect that debt during the working years, as
one reaches Social Security, we have the ability to offset
Social Security payments up to a certain level to continue to
collect on those debts. So those debts stay on the books for a
long time.
There are some debts that are actually--and there is maybe
some distinction here. The Federal Government will write a debt
off, and that is really an accounting entity; it basically, in
accounting purposes, you are required as an entity to say what
is the fair value of an asset or a liability on your books. It
doesn't mean that we stop collecting the debt. OK?
So there is a distinction there which is you can write
something off and show on your books that it has a value of,
let's say, 10 cents on the dollar. On the other hand, we, as
the Federal Government, will continue to collect on that debt
and hopefully collect 100 cents on the dollar, unless it has
been written off entirely as not collectible.
So a fairly small percentage of the number. So if you look
at the numbers, I think it is roughly $25 billion has been
written off, but only about $4\1/2\ billion has been considered
not collectible and truly extinguished as no longer being
pursued for debt collection purposes; and that is usually
something that someone has been in bankruptcy and the entity no
longer exists and therefore is not being collected against.
Mr. Towns. Thank you very much. I understand that direct
and guaranteed loans account for most of the delinquency:
Education Department, the SBA and the USDA. These loans are no
doubt necessary because they are often made in private sector
where credit is unavailable to maybe inadequate. And the
Federal objective needs to be achieved, I understand that, for
example, some education loans, small business loans, and
support for farmers. But what I don't understand, and maybe you
can explain to me, is the type of debt that is owed to Social
Security Administration and the Department of Defense. I don't
understand why we have loans there.
Mr. Lebryk. The Social Security debt is really about
overpayments, it is about improper payments and overpayment. So
what ends up happening is Social Security will work those
improper payments up to a point. When they no longer have a
sense that they can collect it up to that point, they will
refer it to us and it becomes a delinquent debt. So there are
situations where, particularly in the SSI program, which is
income-based, there are situations where someone will have some
income which will push them out of eligibility but still,
nevertheless, the payment has been made. Do SSA will go back
and try to retrieve that overpayment and, if they can't, then
it ends up in the delinquent debt portfolio.
Mr. Towns. What about the Department of Defense?
Mr. Lebryk. I am less familiar with the delinquencies that
are in DOD. Conjecture here. I wonder whether they are contract
debts. I am just not sure. Perhaps they could be overpayments
in some of the medical programs too. But I can look into that
more fully for you.
Mr. Towns. Will you do that and get back to us on it?
Mr. Lebryk. Because I could understand the others, but
those two. And now that you explained the Social Security one.
Are there a lot of overpayment situations?
Mr. Lebryk. I think every day 3,000 people pass away, and
as a result of that Social Security has to have systems which
look at if you have been making a payment to someone for years
on end, they are required to get that information and to stop
those you are required to report that information immediately.
Sometimes that doesn't happen. And there are various data bases
which they try to call to see whether they have actually
captured that payment that shouldn't be made, but it is not a
perfect process. Also in the case of SSI, where the rules can
sometimes be confusing about eligibility and non-eligibility,
you can have situations where there are the overpayments.
Mr. Towns. Who is sort of responsible for notifying Social
Security that the person has expired? What is the process?
Mr. Lebryk. It is the family that is required to report it
immediately to Social Security.
Mr. Towns. Thank you very much, Mr. Chairman.
Mr. Platts. Thank you, Mr. Towns.
Mr. Guinta.
Mr. Guinta. Thank you, Mr. Chairman, very much.
And thank you, Commissioner Lebryk, for being here. I have
a few specific areas of concern. First of all, could you just
let me know what area for FMS provides the most challenge, the
greatest challenge in terms of debt collection? Is there any
one area that is more difficult than another?
Mr. Lebryk. The Debt Collection Improvement Act has been
enormously successful in getting agencies to participate. In
the early years and some of the hearings we had with Chairman
Horn at that time was really getting tough on the agencies
because they weren't referring debts to us. I think that
process has really, we have had a success there in terms of
agencies now referring debts to us, for the most part, at the
180 days. We also, in some of the early years, had challenges
getting all the payment streams in. So DOD makes payments and
the Postal Service makes payments, and we had challenges making
sure those payment streams were being offset. That process now
I think is working very, very well.
I wouldn't necessarily point in any one particular area
except to say that I think that we are not as sophisticated in
the Government as we should be with respect to how we are
looking at delinquent debt. The private sector is much further
along than we are right now in looking at how you work debts in
the portfolio.
So when I mentioned the seven strategies earlier about
where FMS thinks that we need to go, we need to do a better job
of analyzing the debts and which debts are more collectible,
which is debt scoring; a better job of making sure, when we
have partial information, that we have the capability of
cleaning that information up in an automated fashion. I think
that there are other practices that the agencies could be doing
which we need to be working with them on the pre-180 day about
how do you interact with a debtor.
Mr. Guinta. Right now you don't see until 180 days. What
would be the agency process for the mechanism at 60 or 90 days?
Mr. Lebryk. They would have their own internal processes.
To answer your first question, I think that there is a lot of
opportunity for agencies to be more scientific and disciplined
in what they are doing pre-180, and part of it what I would
say, this gets to, I think, the value of the DCIA and
centralization, is we think about this everyday. That is our
job. We think about debt collection practices and how you are
going to manage your debt portfolio.
I don't necessarily think that it is probably as widespread
across Government that is their core mission. So I think that
there is a lot of opportunity to do a better on that, and that
pre-180, for obvious purposes, the sooner you try to collect
the debt, the better chances you have of collecting it.
Mr. Guinta. And then when you write off, does it vary when
you are going to write that debt off based on your assessment
of the likelihood of collection, or is it just at a date
certain you are essentially writing it off?
Mr. Lebryk. OMB encourages agencies to write off debts at 2
years. As I mentioned, though, there is a distinction there,
which is writing off is different than stopping collection
activity.
Mr. Guinta. Right.
Mr. Lebryk. So, really, those that are really being written
in sort of what our sense of the word written off means is a
fairly small percentage, and that is usually in the case of
either bankruptcy or the entity doesn't exist anymore and you
can't really go after anything anymore.
Mr. Guinta. But that is happening roughly at the 2-year
mark for that uncollectible written off debt?
Mr. Lebryk. I don't know this for certain, but my guess is
if you really went back and looked, it is probably happening
further out than 2 years, that agencies are continuing to hold
these things for a long period of time and really doing
everything that they can, and really probably in a much longer
period of time are actually making that assessment, unless they
know for a fact that the entity no longer exists or the person
doesn't exist.
Mr. Guinta. Do you have data on a 1-year, 2-year, 3-year,
4-year debt and the ratios at which you are collecting and the
costs it is for us and for the agency for that collection at
those different periods?
Mr. Lebryk. One of the seven strategies is for us to have
better analytical capability in looking at the debts, and we
have some rough information about that, but not information
that gives me a lot of confidence that I can say that this is
the percentage that we are doing at 180 to 360. I think we need
to do more work in that area, and that is one of the areas that
we are applying more resources within FMS to really help
agencies understand that better.
Mr. Guinta. I think it would be fair to say that if we
could improve the collection rate anywhere between the 60 to
360, we would probably have a greater percentage of debt
collected and you would have, obviously, a lower write-off.
Mr. Lebryk. Correct.
Mr. Guinta. Obviously, you are spending the best or you are
maximizing our resources at the earlier period. So anything
that can be done to improve that and allow agencies, whether it
is educating agencies or whether it is an oversight issue for
us, please feel free to convey that so we can give you the
tools that you need to improve in those particular areas.
Mr. Lebryk. Thank you.
Mr. Guinta. Thank you.
Mr. Lebryk. We have looked at private sector experience in
this area on consumer debt, which is a little bit different
than some of the debt that we have, and your assessment is
absolutely right that when you are working at debt in that 60,
90 to 180 day period, you have a much higher chance of
collectibility than when you are working at debt in the 2-year
or the 3-year timeframe. That is something that we have been
talking to the agencies about, is whether it is instances where
they should be referring to us sooner for that reason.
Mr. Guinta. Thank you, Mr. Chairman.
Mr. Platts. Thank you, Mr. Guinta.
Dr. Gosar.
Mr. Gosar. Yes, thank you.
I kind of want to go back to what you said to my colleague,
Mr. Guinta. The cross-servicing program is used by agencies
required to report that delinquent debt to the Treasury for
recovery efforts. In fiscal year 2010, Treasury was able to
recover roughly about $123 million out of $107 billion. Can you
tell me why that is so low? I mean, we are talking about a
penny on the dollar.
Mr. Lebryk. I mentioned the two programs that we have. One
is the offset, the automated offset. So that full amount that
you referenced, 107, is actually being hit against offset, the
payment streams, and that is where you are getting a high bulk
of that $5.4 billion that we collected.
For a variety of reasons, we don't use cross-servicing on
the full amount, and part of that is there are a number of
exemptions that apply that don't allow us to do cross-servicing
on all the debts that are referred to us, and that is the
active working of those debts. So there are a variety of
exemptions that include bankruptcy, forbearance, debt in
litigation. There is also an important category where that
number of 104 is. There are approximately $36 billion of it
which is being cross-serviced at Education and HHS.
So while the number I am going to tell you is that we are
only working at cross-servicing on that portfolio around $14
billion, it has gone up a little bit in the last couple of
months, now closer to 16, education is working $36 billion of
that through their cross-servicing mechanism that they have on
student debt portfolio. They collected, last year, close to
$600 million on that portfolio, so there is another number that
is there.
The second thing which I would say is that we only report
what we captured in cash. One of the things on our cross-
servicing program is administrative wage garnishment. So when
you look at administrative wage garnishment and repayment
agreements, there is roughly another $500 million that we have
in the pipeline that we are getting bits at a time, whether
they be payments that are being done on a monthly basis, along
the way from a debtor. So there is some excess there.
And the final reason is the nature of Federal debt is not
great debt, and we are oftentimes the last resort of people
getting loans that they can't get someplace else. So the
collectibility on that portfolio is much lower than it would be
if you had a better quality of debt, for example, consumer debt
in many ways has a higher collectibility than much of the debt
that we have given the nature of our debtors.
Mr. Gosar. Isn't there a way that we can report that, then?
I mean, it seems to me like you want to itemize this. If I am
looking at delinquencies, I want to look at, if I have a
payment plan, shouldn't I have a number that I am looking at
that are end payment in lieu that are up to standard? That
gives me another parameter, because if I have payments coming
in lieu of, then I don't have to spend as much time into that
area; it is just a maintenance type issue.
Mr. Lebryk. Yes.
Mr. Gosar. Then I can concentrate my efforts more into the
other areas of the problem. And it seems to me like the
advantage would be to share all this information start to
finish, not at 180 days. Am I right?
Mr. Lebryk. Sharing the information with respect to?
Mr. Gosar. All debt.
Mr. Lebryk. Interagency should be this will real time
watching this. It is no different than the private sector is
looking at this categorically across a business.
Mr. Gosar. Yes.
Mr. Lebryk. Was it coming from this area, this area, this
area, and we can concentrate it. Many hands make light work.
Mr. Gosar. Yes.
Mr. Lebryk. And that is one of the reasons why, when we go
through our seven strategies in terms of analytical tools, this
is some area which I think there is a lot of work that can be
done within the Federal Government that we are pursuing, and
that is looking at that portfolio and saying which debt has a
greater likelihood of collectibility than another debt.
Also, I think a very important set of tools that we have in
place right now, or we are putting in place right now is we
have something called partial matches. If a debt comes in that
says John Q. Public that lives on Main Street and the payment
file says John S. Public on Main Street, we kick that debt out
because we are not 100 percent sure it is the same person.
We now have more automated tools in which we can say John
Q. and John S. living at this same address are probably the
same person. So we should be doing that offset rather than what
we are doing right now is returning that debt to the agency and
saying you need to clean it up.
So the centralized value of that is that we FMS can be
doing a better job of that in the front end. Last year there
were close to 150,000 partial matches. We are estimating that
if we were able to clean those partial matches up, that we
would have $100 to $200 million more in collections simply by
doing that.
So this is my point about us being smarter and more
analytic and using more modern tools to do the things about
segmenting that portfolio and working it in a more disciplined
way.
Mr. Gosar. One more question. I am looking at your chart in
regards to delinquent collections, particularly of the $47.9
billion. You are collecting 48 percent of that as delinquent
child support. How much of that has actually been in dialog
with law enforcement, support with law enforcement? Because I
know in Arizona it is huge, and that is where we are getting a
lot of delinquent child support being picked up.
Mr. Lebryk. Yes. We do the child support program on behalf
of the States. So the child support obligations that we are
collecting for are State obligations. So with respect to when
the State or the locality is working with local law
enforcement, it would be done at that level rather than at the
Federal level.
Mr. Gosar. OK. One last question. Do you prioritize each of
these debts? You know, in the private sector we look at low-
hanging fruit and what is the hardest to get. Do you
prioritize? And which one do you find easiest; which do you
find the worst?
Mr. Lebryk. The answer right now, we treat all debts
equally, which is not the right answer. What we really need to
be doing right now is looking at that portfolio more
systematically and strategically and saying what is the low
hanging fruit.
Mr. Gosar. Can we have a proposal to you as to how we
prioritize that? I would love to see that.
Mr. Lebryk. It is, and it comes down to the tools that we
are putting in place right now, and one of the tools is
actually looking at the portfolio and doing debt scoring and
saying, OK, based on these characteristics, you have a much
greater likelihood of collecting this kind of debt than you
would another kind of debt, and your efforts would be more
useful spent here than it would be like we are doing right now,
which is everything is the same. So we chase a lot of dead ends
right now.
Mr. Gosar. And when you are doing that, can we also see the
percentage what our costs are? As a consumer and advocating for
the consumer, we would like to see what the costs are to
recover.
Mr. Lebryk. Yes.
Mr. Gosar. Because sometimes you are spending a lot more
than you are actually getting in return, and we have to be more
fiscally responsible.
Thank you.
Mr. Lebryk. The one thing I would say on that last point is
we are very proud of this statistic, which is for every dollar
that we spend on debt collection, we return $53 in collections.
That is the efficiency element that we are very proud of, which
is a pretty good return.
Mr. Gosar. But you can get better, right?
Mr. Lebryk. We can get better, and that is exactly what I
was going to, we can do better than that.
Mr. Platts. Thank you, Dr. Gosar. You earned the extra time
by your patience and my late arrival.
I will yield to myself now.
Commissioner, again, appreciate your work and your staff
and the serious approach that you are taking. I guess an
initial question I have is when you look at your numbers and
you shared in your testimony where you jumped 7.3 percent from
2009 and 67 percent over the years back to 2005, if you had to
point to most significant change or actions that resulted in
that 67 percent jump, what would you reference?
Mr. Lebryk. Everyone is playing together now, in a way that
they were not playing before.
Mr. Platts. Meaning departments and agencies? Internally
within your department or across the spectrum of the Federal
Government?
Mr. Lebryk. I think maybe it is everyone is hitting stride
now. I would just say that we now are getting the payment
streams in that should be in; we are getting the debt referrals
that we should be getting in. I think that plays a significant
role. I also think that the amount of delinquent debt has grown
too, so there is an element there of there is more volume to go
against.
But I also think it really speaks to this is why I think we
are really at a stage to go to another level now. I think that
we have a very strong infrastructure in place to do what we
need to do, and now we need to be smarter than what we are
doing.
Mr. Platts. And that goes to Dr. Gosar going from $52 to
$60, $70. Sky is the limit, right?
We appreciate that you reference a number of specific
legislative proposals, both pretty straight forward, both on
the 100 percent collection, you know, on basically vendor
payments, Federal contractors, Medicare providers, and then
also to assist with State collection being able to collect even
if the person is now residing outside the State they owe.
I guess the first question on those proposals is those
aren't new. I know they were in the 2011 budget proposal as
well. And I know our committee staff started working with your
office on legislative efforts along the route of these
proposals. What would you say would be the biggest opposition
to those proposals, and what have you heard, if anything, for
those who don't support either of those?
Mr. Lebryk. The legislative process is never easy, and one
of the things that we have learned over the years is that we
have frequently submitted legislative proposals in multiple
years, and they ultimately get done, but they tend to get done
over time. So I really would be surprised if there would be a
lot of opposition to either of those two, except from those who
are delinquent on their Medicare or contractor obligations,
because they do make a lot of sense.
Mr. Platts. And I agree and, again, we look forward to
working with you and your office on trying to speed up that
legislative process a little bit. In the 2011 budget proposal,
there were some additional legislative proposals, and I don't
believe they were accomplished yet, at least not all. Do you
want to highlight any of those additional proposals that we
should have on our radar in addition to the ones specifically
in the 2012 proposal?
Mr. Lebryk. One of the things is dealing with incentives. I
think, for the most part right now, when a debt is delinquent
and we collect on it, the fee that is attached to that, whether
it be from the private collection agency or the fee that we
charge, is added on to the debt. There is an negative incentive
for Medicare debt in which that fee is not legally eligible to
be taken added on to the debt and, therefore, it either has to
be absorbed by the trust fund or by the appropriated moneys
from the agency. That is a real negative incentive for
referring debts, and I think that----
Mr. Platts. For Medicare referring it to you because of
this.
Mr. Lebryk. Yes. The cost to Medicare, since they can't
recoup it. That is right.
Mr. Platts. OK.
Mr. Lebryk. That would be one. I think, other than that, we
have made some progress on some of those other ones. I think
some of the other ones have actually moved through several
committees and we are hoping that they will come to conclusion
in this session.
Mr. Platts. On the fee that is, what type of fee amount,
roughly? Is it a percentage of the debt?
Mr. Lebryk. There are two fees that potentially could be
attached to that. One would be our offset fee, which is roughly
$17 per offset. The other fee is if we refer it to a private
collection agency, the fee is usually around 28 percent or so
on that.
Mr. Platts. That is what is being paid to once you get to a
PCA?
Mr. Lebryk. Exactly.
Mr. Platts. OK.
Mr. Lebryk. And on most other debts, we add that on to the
debt. So if there is a $100 debt, it becomes $128 debt and the
debtor is the one beating the responsibility. On Medicare debts
presently that is not the case.
Mr. Platts. OK. One more question here, then we will go to
another round for Members, if they would like. On
administrative wage garnishment, in your testimony you talk
about the 25 agencies that are participating now and you
continue to work with nonparticipating agencies to encourage. I
guess my question is why isn't everyone participating? Why
aren't they taking advantage of this opportunity to collect
what is owed their agency, the American people?
Mr. Lebryk. This is one of those areas where, as we have
gotten more mature in the Debt Collection Improvement Act, it
is clear that there are barriers for the agencies to do their
work. Administrative wage garnishment has a--there is a sense,
right or wrong, that you need to go to a court in order to get
that garnishment. One of the things the DCIA did was say that
the Federal Government can do an administrative wage
garnishment without a court.
Now, you have to allow a hearing if someone wants to appeal
the amount owed or whether their ability to pay. That has
turned out to be a barrier to the agencies. It is not part of
their core mission. You know, they are not going to want to set
up hearings like that and they are uncomfortable with the
administrative wage garnishment process.
Mr. Platts. And that hearing process is individual to every
agency?
Mr. Lebryk. Yes, it is. It is. So one of the things we are
looking at FMS is whether we should be providing that as a
centralized service to remove that barrier to use of
administrative wage garnishment.
I think Chairman Horn was looking at that the record said,
from his perspective, any debtor who had an income stream
should be subject to some sort of agreement before they are
made a payment by the Federal Government when he was talking
about the administrative wage garnishment provision, and I
think there is a lot of validity to that, that we should be
doing more as the Federal Government.
The other thing what has happened right now is that we have
left administrative wage garnishment with each agency, so they
have to put a regulation in place in order to do the program,
which we have given them a model language and we provide it to
them and it is something that is fairly easy for them to do
but, nevertheless, it is a hurdle.
So I think that our ability to provide more of a
centralized service is something which is an area that is worth
exploring more fully.
Mr. Platts. And I would encourage that because it would
make sense, because it is going to vary by some agencies like
Department of Ed having a lot of debt that may relate to
student loans. But another smaller department or agency having
small amount of debt or not that often, perhaps, to have their
own administrative hearing process versus a centralized. I
think that is something where Treasury could play an important
role and that we get everybody participating.
Mr. Lebryk. And there is a second piece on that we have
found in our own dealings, is that if a file doesn't have good
information in it, it is hard for the agency to track that
information down. So if you are looking for a good phone
number, you are looking for a good address, and one of the
areas where we think we can provide a more centralized service
is providing that service to agencies, saying if you are
looking for a debtor, you can run it through our process so
that you can find that person, get a phone number, get the
information that you need in order to move forward more
efficiently.
Mr. Platts. Yes. And having just sat through the hearing
with GAO on the duplicative programs that the Federal
Government has from last week in the full committee, I think it
is a good example. Whenever we can eliminate administrative
overhead by eliminating duplication, we want to, and these are
areas that I think would be very helpful.
Mr. Towns, do you have other questions?
Mr. Towns. Yes, I do, Mr. Chairman.
Just thinking in terms of the Social Security overpayment,
I guess the first thing, would you need additional legislation
to support above and beyond what you have already proposed? And
the reason I ask that question, why couldn't we ask the
undertaker to give the Social Security number when a person
expires?
Mr. Lebryk. Social Security does maintain a death data base
or a post-death data base.
Mr. Towns. How does that work?
Mr. Lebryk. I am not familiar. I do know that they looked
at the exact proposal that you are referencing, and that is,
should the funeral homes be required to submit the data to a
data base, and they did a pilot a couple years ago in which
they actually paid the funeral homes for the information, every
time they submitted the information.
I think what they found at that point was that they didn't
have the money to continue with that and that if in fact it was
required, you could have a more, getting to your point, you
could have a much better data base, a more perfect data base,
which would go a long way toward avoiding those payments to
someone who shouldn't be getting it. So I think it is an area
that deserves further attention.
Mr. Towns. Yes, because I think just leaving it to the
family to report, I am not sure that is going to work to be
able to cut down on the overpayments.
Mr. Lebryk. And to clarify one other point, the financial
institutions also report back into the system as well when
someone has been deceased. So if they are aware of the
information from a bank, it will come back in as well.
Mr. Towns. Oh, OK. The other thing is you mentioned state-
of-the-art tools. What do you mean by state-of-the-art tools?
Mr. Lebryk. The private sector has done a lot more with
segmentation of the portfolio, different mechanisms and tools
that are more effective than others of how you actually reach
certain debtors. But also more, I think, to the point is that
business intelligence tools and looking at data bases and
mining those data bases for certain characteristics is an area
that the private sector is doing a lot more of than what we are
doing in the Federal Government, and it is an area which I
think has a lot of opportunity for us to be doing better.
So it is really looking at these data bases and looking at
lots of different data and saying there are certain debtors
here with certain characteristics that would lead us to believe
that we have more collectibility on one kind of debt or
another. It is also those automated tools I mentioned to you
before about when a debt comes in and the information may not
be perfect, can you, in a highly automated way, clean that data
up more effectively about addresses and phone numbers and those
kinds of things within the file; and the private sector is much
more advanced.
I would also say that with respect to our working in the
cross-servicing side, that we should be more systematic in
scripts that we are using so that when a collector is working a
list of debts, that they are given the information in automated
fashion so when the automated phone call is made or the
automated outreach is made, that they have, based on that debt,
they have scripts that they are using to be more efficient on
how they are collecting the debts; they are not spending 10
minutes on a debt, that the better way would be to spend 1
minute on that debt if they are more concise and disciplined in
that approach.
So those are the kinds of things that we are looking at in
terms of our call centers and our opportunity to collect debt
in those state-of-the-art tools.
Mr. Towns. Do you need additional legislative support above
and beyond what has been proposed? Do you need additional?
Mr. Lebryk. For the moment I would say no. I do think,
however, that as we pass the 15th anniversary of the Debt
Collection Improvement Act, that there are opportunities for us
to discuss whether there is more that can be done more
generally. So we don't have anything more than what we have in
the 2012 budget, but we are always looking at the 2013 budget
and we are looking beyond about other ways that we might be
able to have other pieces of legislation that would help us,
and we are happy to work with the committee on that.
Mr. Towns. Thank you very much.
On that note, I yield back, Mr. Chairman.
Mr. Platts. Ms. Norton, did you have any questions for the
witness?
Ms. Norton. Not at the moment.
Mr. Platts. OK, thank you.
I have a long list, so I will yield back to myself.
On the reciprocal arrangements with States, and you
referenced Kentucky being the newest one and how quickly they
reaped the benefits of participating, I wanted to make sure I
understood the process. States beyond the four that are
currently signed up, are we still collecting debts for any that
are not signed up to help us collect Federal debt?
Mr. Lebryk. Our terminology gets complicated, but we are
actually collecting State income tax debt for a lot of States,
more than those four. So we do have, on the State income tax
side, there is work that is being done for when a Federal
income tax payment is made, that it can be offset and given
back to a State.
The state reciprocal program gets a little bit more narrow
and allows--I am sorry, it broadens the types of payments that
we can offset, so we include vendor payments at that point so
that the State can participate that way. And, vice versa, we
actually collect debts from the States, we collect them from
the States when they are making payments. So it is reciprocal,
we both get benefits from the arrangement.
Mr. Platts. Once they are participating in that program.
Mr. Lebryk. Yes, they are.
Mr. Platts. Currently, though, there are States that were
collecting State tax, income tax owed and sending it back. I
will use Pennsylvania, my home State. But Pennsylvania is not
collecting Federal income tax owed to us from any payments they
are making.
Mr. Lebryk. Right now I think that we did do a test run
with Pennsylvania and found that if they were participating in
the State reciprocal program using vendor payments, I think
that they could collect an additional $29 million to $30
million a year based on that program. I do believe, and my
staff can correct me if I am wrong, though, that we are
actually offset on tax information with the State of
Pennsylvania right now, and I don't know what that number is in
terms of what has been sent back.
Mr. Platts. But I guess what I am focused on is if we are
helping States out, whether they are in the reciprocal program
or not, with their State income tax, it sounds like we are
still helping them collect State income tax, even if they are
not helping us collect Federal income tax.
Mr. Lebryk. I believe that is correct. They can correct me
if I have that wrong.
Mr. Platts. They are shaking their heads yes, that I have
it right.
Mr. Lebryk. Good, OK.
Mr. Platts. I think. IRS does that, correct.
Mr. Lebryk. I would say on the State reciprocal last year,
I think of the two States that were participating at that time,
I think that we sent $16 million in their direction and they
sent $12 million in our direction.
Mr. Platts. I think getting all the States participating
would be great. And if they don't want to, then they need to
understand I guess what I am getting after is we are not going
to keep helping to collect State debt if they are not going to
help collect Federal debt.
Mr. Lebryk. Right.
Mr. Platts. So they have an incentive to be part of the
program.
Mr. Lebryk. Yes.
Mr. Platts. And I don't know within the Department if you
have that authority to send that message or that is something
we need to look at legislatively and saying that you can go to
the State saying as of a year from now we are not going to be
able to help you unless you help us, something maybe we want to
look at.
On certain types of debt that are exempt from participating
top or the cross-servicing, I notice one of them is debts owned
by foreign sovereigns. Can you expand on that? What type of
debt would be owed us by a foreign sovereign and what type of
payment would we be making that we couldn't then attach even
though they owe us money?
Mr. Lebryk. I will have to get back to you on that one, I
don't know the rates or the debts that are in there.
Mr. Platts. OK. Our focus is about Americans that owe a
debt, and we are trying to collect it. Well, if there are
foreign entities that owe America a debt, they shouldn't be
getting a payment from us for something else, in my opinion. So
if we could look into that a little deeper, that would be
great.
Mr. Lebryk. OK.
Mr. Platts. Let me catch up on my notes here. When I get
the testimony ahead of time, it gives me less time to review
and make notes. On the issue of debts that are not going to be
written off, how do you go about--and it was kind of addressed
a little bit earlier, but--in determining--I mean, obviously
some, death, you know, the person is deceased, the debt is not
going to be collected. But in other ones where you reference
financial hardship or other reasons, how do you assess that to
say, hey, no, we are going to give up, as Mr. Towns referenced,
2 years versus, hey, we are going to keep it and 4 years from
now, hey, that person who was having a hardship might be in the
money now and, hey, we still want them to pay what they owe.
Mr. Lebryk. We rely heavily on the program agency to make
that determination, in large measure because they are more
familiar with the program characteristics, as well as the debt
is actually on the agency's books, so they are the ones who are
ultimately responsible for the debt.
Mr. Platts. OK.
Mr. Lebryk. So we have not spent a lot, we don't really get
behind what those decisions are other than that we know that
they are usually based on bankruptcy or the entity no longer
existing.
Mr. Platts. Give me 1 second here. On the report that was
submitted about your debt collection efforts, in there it
references in the executive summary that you, in essence, are
reporting what the head of each Federal agency provides you to
then compile, in essence, and then forward to Congress. Are
there agencies that are not complying and not providing their
debt collection effort information to you?
Mr. Lebryk. The good news is we feel pretty good that we
are getting most of the debts that are referred to us. I think
it is hard for us to say that we are getting 100 percent,
because every now and then we learn about some part of a
program that is not being referred to us.
Our agency council that we are establishing, that is one of
the areas where we want to make sure that we are working with
agencies more closely to make sure we understand that they
really are referring all the debts that they should be
referring to us. But, as I said, it is really one of the great
success stories of DCIA is that in the early years it was very
difficult to get the referrals to us for a variety of reasons,
whether the debts were in the format, whether they were
documented the right way, whether we had the automated systems
in which to transfer information. And we really made a lot of
progress in that area.
I wish I could say with complete confidence that we are
getting 100 percent. I know we are doing pretty well; we are up
in the high 90's. I can say that with some degree of
confidence. But whether we are getting every single one, I
think there is some more work that we can do on that.
Mr. Platts. I will wrap up, and then, Ms. Norton, I will
yield in just one moment.
As you are working with departments and agencies, if they
are reticent, for whatever reason, to cooperate and participate
in either being more proactive on the wage garnishment or just
in providing the information in a timely manner to you to
pursue, this subcommittee certainly stands ready to bring some
added leverage to your efforts. I know you are, as a
department, kind of a peer department agency to many of these
entities, but sometimes just the fact that the subcommittee is
interested in looking at a certain agency that they are not
fully going after debt as they should be, we are glad to do
that, and again in a partnership way. We just want to make sure
we are all on the same page.
I am maybe not the only, but one of few that paid my last
student loan to the Federal Government as a Member of Congress.
It took 11 years, but my wife and I didn't miss those payments
because it was our debt and we were glad to fulfill it. It
allowed us to advance ourselves, so we expect others to fill
their obligations as well.
With that, I will yield to the gentlelady from the District
of Columbia, Ms. Norton.
Ms. Norton. Well, Mr. Chairman, you weren't glad to fulfill
it, but you knew that it was your duty to fulfill it.
Mr. Platts. Actually, I was glad to fulfill it so I could
get it off the books and start putting that money toward my
kids' education in the years to come.
Mr. Towns. He knew we were going to have a hearing.
[Laughter.]
Ms. Norton. I have a question about doctors and Medicare.
There had been a doctor who was delinquent--and I need to know
what delinquent means--in Federal tax obligations could have 15
percent of the payments withheld, and now there is a proposal
in the 2012 budget for 100 percent.
Now, at first blush, that seems par for the course; you
know, they are doctors, they ought to be able to pay their
taxes. On the other hand, there is huge concern in the Congress
about the rapid attrition of physicians even willing to see
Medicare patients. So I am obliged to ask you what your view is
of this 100 percent that would include Medicare, apparently all
contractors.
And, again, on the face of it the fairness of it is clear,
but what do you think that would do for doctors who, in fact,
are seeing Medicare patients, getting, they will tell you, a
few cents on the dollar, getting very little of what they
believe they are entitled to, and they will only point to what
in fact they can get if they jettison Medicare and take only
people who are willing to come without Medicare, so much so
that some elderly are willing, in order to keep their
physicians when they jettison Medicare, to pay for the entire
amount themselves. So there will be many elderly who could not.
First of all, what does delinquent mean? Do you think the
2012 budget legislative proposal is in effect now? Because it
is a legislative proposal; I don't know if it is in the
appropriation or what. The word delinquent is not clear to me.
Would you explain, one, how this would operate? I am
particularly interested in Medicare doctors. I understand why
they would be folded in with other contractors, but I would
like to know what delinquency would in fact result in this 100
percent and what effect you think it would have on Medicare
providers willing to continue to provide Medicare to the
elderly.
Mr. Lebryk. Thank you. We are very supportive of the
proposal; it would yield close to $750 million over the 10 year
period, which is a sizable amount. With respect to the
underlying program issues, as we----
Ms. Norton. Why was it at 15 percent? That didn't work? Did
the 15 percent, which does seem to be a fairly low amount, why
was the number increased from 15 percent to 100 percent?
Mr. Lebryk. I suspect it has to do with the $750 million
over 10 years.
Ms. Norton. Somebody wanted the money.
Mr. Lebryk. Which is the ability to collect the money
sooner.
Ms. Norton. It was coming in too slowly. OK.
Mr. Lebryk. Yes. With respect to delinquency, agencies and
debtors have due process rights, so to the extent that a
Medicare provider has a delinquency, they would be notified and
have the ability to either have a hearing or some sort of
discussion about whether that is the appropriate amount which
they are being charged. They also have, in most cases, the
ability to say whether there is financial hardship, whether
they have the ability to repay and whether there are other
repayment agreements that they can get into to satisfy that
delinquency.
Ms. Norton. So even with this 100 percent, do you believe a
physician could in fact work out something with the IRS the way
the average citizen does to pay a certain percentage, or would
he nevertheless, because he is ``delinquent,'' have to abide by
the 100 percent?
Mr. Lebryk. At FMS, for example, when these debts are
referred to us, we do oftentimes have compromise authority in
which we work with the agencies to say, you know, is there a
better way to collect this debt? Is there a more reasonable way
to have either repayment agreements or some sort of mechanism
to make sure that we have better collectibility. And the
process has to be working with the debtor to do that.
With respect to the impact on the program, one of the
things which we don't have a lot of expertise in, because there
are so many programs out there, is the underlying purpose of a
program and the underwriting standards that are given. So why a
payment is made, under what circumstances is not something that
we at FMS or Treasury would have a very good feel for. I
think----
Ms. Norton. Would a delinquent, let's say, physician be one
who had ignored the opportunity after a hearing to work out
something for himself and finally gets on this list. The only
way he can get the money is to get on this list to get 100
percent from you?
Mr. Lebryk. Yes. And so when the debt is referred to us at
180 days, we will do a variety of things. We will then do a
process of our own in terms of contacting the debtor and making
sure that they know that they are either going to----
Ms. Norton. So he gets another chance.
Mr. Lebryk. He gets another chance on it, yes. And then we
would be working with the agency to say, you know, is this the
right thing to be doing in this particular circumstance?
Ms. Norton. Can I take it, since this is in fact the law
now, is that the fact?
Mr. Lebryk. The 15 percent is the law right now.
Ms. Norton. No, no, the 100 percent, when does that become
effective?
Mr. Lebryk. If the legislation passes.
Ms. Norton. So this is not yet law?
Mr. Lebryk. It is proposed legislation.
Ms. Norton. But you all strongly support it.
Mr. Lebryk. Yes, we do.
Ms. Norton. The administration strongly supports it.
Mr. Lebryk. Yes.
Ms. Norton. Have there been hearings?
Mr. Lebryk. I don't believe there has been.
Ms. Norton. Thank you, Mr. Chairman.
Mr. Platts. Thank you, Ms. Norton.
The effort in helping to move this legislation is something
that we are very involved with and want to help make happen,
and I think--and I apologize I didn't hear all of the answer
because of a conversation here, but when we talk about Medicare
providers, the type of debt that we are talking about--you may
have referenced this and I apologize--is the story where you
have a doctor who got student loans, paid their way through
school with the help of the American taxpayers, is out making a
good or whatever income, but is not paying back those loans.
Once that is discovered, Medicare can say you are getting
paid by the taxpayers; we are going to take some of that to pay
off that debt you owe. That would be an example of a delinquent
debt that a doctor has. It is not related to their medical
provision of services, it is related to the education they got.
Mr. Lebryk. Correct. Or whether it be tax debt, in the case
of delinquent tax debt. Correct.
Mr. Platts. OK.
Mr. Lebryk. Yes.
Mr. Platts. Mr. Towns, did you have anything else?
Mr. Towns. Just a quick question.
Mr. Platts. Yes.
Mr. Towns. We want to be helpful, I want you to know that,
in every way, but I didn't feel comfortable with your answer in
reference to if a person moves from one State to another, in
terms of the collection process. I didn't feel comfortable with
your answer. Help me.
Mr. Lebryk. OK. Well, right now what happens is we don't
have the ability that if you incur a debt in one State and then
you move to another State, because of certain restrictions, we
no longer can actually pursue that debt, or the State can no
longer pursue that debt against someone who has moved from,
let's say, Pennsylvania to New York. And so the provision that
we are asking for is that you can in fact continue to pursue
that person if they move to another jurisdiction.
Mr. Towns. The last part of that is, you know, in some
instances people might not have the resources to pay at a given
point, but then at a later date they come in to a lot of money
or something. How do you deal with that?
Mr. Lebryk. That is one of the reasons why very few debts
are extinguished in our process and why they stay in the data
base for a long period of time and will continue to be worked
for a long period of time. We do actually, with respect to
debtors who are under financial hardship, we do try to work out
repayment agreements. We do try to make sure that we put terms
in there.
As I mentioned under cross-servicing, close to $500 million
of repayment agreements are in there, administrative wage
garnishment orders are in there to allow us to collect that
debt over a period of time. An administrative wage garnishment
is at 15 percent, so you are not garnishing someone's entire
wages; you are garnishing a percentage that allows us to
collect small pieces of that debt until it is satisfied.
Mr. Platts. Thank you. We are going to keep the record open
for 7 days, and I know two specific issues, one with the
Defense debt that Mr. Towns referenced and then my inquiry on
the foreign sovereigns and what type of debt we would be
talking there versus payments that we are making to these
foreign sovereigns; and if there is any other materials that
you think would be relevant.
I will conclude with one, again, appreciation for your
patients and my colleagues' patience with my late arrival, and
especially our interest and willingness to partner with you and
your agency in really improving the process to make sure that
what is owed the American people is paid and that we make sure
you have the tools to be able to do that.
Mr. Lebryk. Thank you for your leadership and thank you for
allowing us to testify today.
Mr. Platts. Thanks for being here.
The record will be open for 7 days and this hearing stands
adjourned.
[Whereupon, at 11:30 a.m., the subcommittee was adjourned.]