[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
IS GOVERNMENT ADEQUATELY PROTECTING TAXPAYERS FROM MEDICAID FRAUD?
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JOINT HEARING
before the
SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF
COLUMBIA, CENSUS, AND THE NATIONAL ARCHIVES,
and the
SUBCOMMITTEE ON REGULATORY AFFAIRS,
STIMULUS OVERSIGHT AND GOVERNMENT SPENDING
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
APRIL 25, 2012
__________
Serial No. 112-151
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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74-889 PDF WASHINGTON : 2012
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Washington, DC 20402-0001
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 Health Care, District of Columbia, Census and the
National Archives
TREY GOWDY, South Carolina, Chairman
PAUL A. GOSAR, Arizona, Vice DANNY K. DAVIS, Illinois, Ranking
Chairman Minority Member
DAN BURTON, Indiana ELEANOR HOLMES NORTON, District of
JOHN L. MICA, Florida Columbia
PATRICK T. McHENRY, North Carolina WM. LACY CLAY, Missouri
SCOTT DesJARLAIS, Tennessee CHRISTOPHER S. MURPHY, Connecticut
JOE WALSH, Illinois
Subcommittee on Regulatory Affairs, Stimulus Oversight and Government
Spending
JIM JORDAN, Ohio, Chairman
ANN MARIE BUERKLE, New York, Vice DENNIS J. KUCINICH, Ohio, Ranking
Chairwoman Minority Member
CONNIE MACK, Florida JIM COOPER, Tennessee
RAUL R. LABRADOR, Idaho JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee BRUCE L. BRALEY, Iowa
FRANK C. GUINTA, New Hampshire
MIKE KELLY, Pennsylvania
C O N T E N T S
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Page
Hearing held on April 25, 2012................................... 1
WITNESSES
The Honorable Charles E. Grassley, a U.S. Senator from the State
of Iowa
Oral Statement............................................... 2
The Honorable Michele Bachmann, a Representative in Congress from
the State of Minnesota
Oral Statement............................................... 4
Written Statement............................................ 6
Gabriel E. Feldman, M.D., Local Medical Director for the Personal
Care Services Program, New York City
Oral Statement............................................... 15
Written Statement............................................ 18
Christine Ellis, D.D.S., M.S.D., Orthodontist, University of
Texas Southwestern Medical Center
Oral Statement............................................... 25
Written Statement............................................ 28
David Feinwachs, M.H.A., M.A., J.D., PH.D., Former General
Counsel, Minnesota Hospital Association;
Oral Statement............................................... 36
Written Statement............................................ 38
Ms. Claire Sylvia, J.D., Partner, Phillips & Cohen, LLP
Oral Statement............................................... 46
Written Statement............................................ 48
Ms. Lucinda Jesson, J.D., Commissioner, Minnesota Department of
Human Services
Oral Statement............................................... 71
Written Statement............................................ 74
Ms. Cindy Mann, J.D., Director, Center for Medicaid and State
Operations, Centers for Medicare and Medicaid Services
Oral Statement............................................... 90
Written Statement............................................ 93
Ms. Carolyn L. Yocom, Director, Health Care, U.S. Government
Accountability Office
Oral Statement............................................... 106
Written Statement............................................ 108
APPENDIX
The Honorable Dennis J. Kucinich, a Member of Congress from the
State of Ohio, Subcommittee on Regulatory Affairs, Stimulus
Oversight and Government Spending, written statement........... 137
Mr. David Feinwachs, Attorney and Counselor at Law, submittance
of responses to additional questions to Chairmen Gowdy and
Jordan......................................................... 139
Levy, Phillips and Konigsberg, LLP, responses to the supplemental
questions posed in connection with Chairman Issa's letter...... 145
Ms. Carolyn L. Yocom, responses to the questions posed by The
Honorable Trey Gowdy........................................... 152
Ms. Cindy Mann, responses to the questions posed The Honorable
Trey Gowdy and The Hoonorable Jim Jordan....................... 154
IS GOVERNMENT ADEQUATELY PROTECTING TAXPAYERS FROM MEDICAID FRAUD?
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Wednesday, April 25, 2012
House of Representatives,
Subcommittee on Health Care, District
of Columbia, Census, and The National
Archives, joint with the Subcommittee
on Regulatory Affairs, Stimulus
Oversight and Government Spending,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittees met, pursuant to call, at 9:37 a.m., in
Room 2154, Rayburn House Office Building, Hon. Jim Jordan
[chairman of the Subcommittee on Regulatory Affairs, Stimulus
Oversight and Government Spending] presiding.
Present from Subcommittee on Health Care, District of
Columbia, Census, and The National Archives: Representatives
Gowdy, Gosar, DesJarlais, Davis, and Murphy.
Present from Subcommittee on Regulatory Affairs, Stimulus
Oversight and Government Spending: Representatives Jordan,
DesJarlais, Kucinich, and Speier.
Also Present: Representatives Issa, Burgess, Cummings,
Ellison, Cravaack and McCollum.
Staff Present: Michael R. Bebeau, Majority Assistant Clerk;
Brian Blase, Majority Professional Staff Member; Molly Boyl,
Majority Parliamentarian; Drew Colliatie, Majority Staff
Assistant; John Cuaderes, Majority Deputy Staff Director; Adam
P. Fromm, Majority Director of Member Liaison and Floor
Operations; Linda Good, Majority Chief Clerk; Tyler Grimm,
Majority Professional Staff Member; Christopher Hixon, Majority
Deputy Chief Counsel, Oversight; Sery E. Kim, Majority Counsel;
Mark D. Marin, Majority Senior Professional Staff Member; Tegan
Millspaw, Majority Research Analyst; Mary Pritchau, Majority
Professional Staff Member; Laura L. Rush, Majority Deputy Chief
Clerk; Jaron Bourke, Minority Director of Administration;
Yvette Cravens, Minority Counsel; Ashley Etienne, Minority
Director of Communications; Susanne Sachsman Grooms, Minority
Chief Counsel; Devon Hill, Minority Staff Assistant; Jennifer
Hoffman, Minority Press Secretary; Carla Hultberg, Minority
Chief Clerk; Adam Koshkin, Minority Staff Assistant; Una Lee,
Minority Counsel; Suzanne Owen, Minority Health Policy Advisor;
Rory Sheehan, Minority New Media Press Secretary; and Safiya
Simmons, Minority Press Secretary.
Mr. Jordan. All right, the Committee will come to order. We
are pleased today to have a hearing on, Is Government
Adequately Protecting Taxpayers from Medicaid Fraud? We are
excited about our first panel, two individuals who worked
tirelessly on this issue and a host of issues. True great
public servants. We are glad to have the Senator from Iowa, Mr.
Grassley, with us today. We will start with him and then
followed by Representative Bachmann from Minnesota's 6th
District.
Senator, take all the time you want, and the floor is
yours.
WITNESSES STATEMENTS
STATEMENT OF THE HONORABLE CHARLES E. GRASSLEY
Senator Grassley. Well, I appreciate very much the
opportunity to be here and to be with the famous congresswoman
from Minnesota. And thank you for this very important work you
are doing to help measure this along and get our money's worth
out of Medicaid and other programs.
I appreciate the opportunity to be invited. I will have a
very long statement, but I have a shorter statement, so I hope
my entire statement will be put in the record.
Mr. Chairman, members of the Committee, for over 10 years
the Federal and State government in the future will be spending
roughly $7 trillion in combined dollars to run Medicaid
programs. A very significant percentage of the Medicaid program
will be run through what is called managed care.
Essentially, the States will take the Federal dollars that
they receive, merged with their own dollars, and hand them over
to a third party, a managed care company, to provide services
for Medicaid beneficiaries. The Federal Government has
encouraged States to do so, and certainly the current trend is
for more and more managed care.
It is also Federal policy that States are supposed to
conduct due diligence and oversight by knowing where Medicaid
dollars are being spent. And CMS, likewise, is supposed to
confirm that States are properly overseeing where the Medicaid
dollars are being disbursed.
In August 2010, the Government Accountability Office issued
a report that highlights the inconsistency of CMS's oversight
of State rate setting. My ongoing investigation into Federal
and State oversight of managed care contracting leaves me
gravely concerned that accountability is severely lacking in a
program that is spending $7 trillion of combined Federal and
State taxpayer dollars
Today this hearing will focus largely on what has occurred
in the State of Minnesota. There are allegations that the
States systematically overpaid managed care companies to cover
Medicaid beneficiaries while underpaying the same plans for
coverage of individuals paid for with State-only dollars. This
appears to be another example of the old game of States pushing
the bounds to maximize Federal dollars received while
minimizing State dollars spent.
If that isn't bad enough, when one of the plans tried to
return the overpayment, documents show that the State schemed
to keep the Federal Government from receiving its share of
overpaying to one specific company, UCare. My investigation has
turned up troubling questions that I am very pleased your
committee will be able to explore further with relevant
witnesses today.
Lucinda Jesson, of the State of Minnesota, has very
difficult questions to answer, and some of these questions are:
So, was the State systematically overpaying managed care
plans on Medicaid while underpaying the same plans to provide
care for individuals covered by State-only dollars?
Documents show that at least once before a managed care
company returned funds in 2003. So, how long has systematic
overpayment been occurring in Minnesota?
Documents from the four plans in Minnesota prove that each
one consistently showed excess revenues derived from Medicaid
while showing losses to State-only plans. So, was the State
aware of this disparity?
And while the State now trumpets the fact that they collect
repayments for excess revenue over 1 percent, so does the State
have any auditing mechanism in place to confirm that the
amounts reported by the managed care companies are accurate?
Cindy Mann of CMS also has some very difficult questions to
answer. In 2010, the Government Accountability Office raised
significant questions about CMS's oversight of rate setting.
So, what have you done, Ms. Mann, to assure beneficiaries and
taxpayers that rates are being appropriately set?
In your March 21, 2011, letter to the State of Minnesota,
you ask, ``If the State included reserve fund requirements in
calculating actuarially sound managed care rates``? So, isn't
it the job of CMS to actually know that answer?
So, what assurance can you give us that what has gone on in
Minnesota has not gone on all over the United States?
Mr. Chairman and Mr. Chairman, my investigation should not
be interpreted as questioning the role of managed care in
Medicaid. Quite to the contrary. I think having a risk-based
outcome-driven role for managed care in Medicaid has tremendous
potential to produce high-quality care to Medicaid
beneficiaries. However, for this to happen, CMS and the States
have to live up to their responsibilities in overseeing
contracts with managed care.
So, in closing, Mr. Chairman, while my investigation is
ongoing, one specific solution is fairly clear to me: States
should be required to know the medical loss ratio of every
managed care company they contract with specific to the
Medicaid beneficiaries they serve. That medical loss ratio
should be clearly defined by CMS and consistently implemented
across every State that uses managed care. That medical loss
ratio should be based on independently audited, verifiable
encounter data and expense data.
That medical loss ratio should make clear what
administrative expenses are related to the provision of
Medicare benefits and what administrative expenses are not.
That medical loss ratio should be transparent for CMS, the
States, and the public to see.
So, let me be very clear. I do not support a federally-
defined minimum threshold for medical loss ratio that requires
all plans below a certain threshold to refund dollars. Instead,
I believe the purchasers, in this case the States, using
transparent information about how their dollars are being
spent, are best suited to make decisions about the value
provided for managed care companies.
We have legitimate disagreements about many issues in
Congress, but on this issue it seems to me there can be no
disagreement. We must have a better understanding of where $7
trillion will be spent over the next period by Medicaid
programs.
Thank you.
Mr. Jordan. Thank you, Senator, for your good work and for
your testimony. Your entire written statement will be made part
of the record.
Before recognizing the gentlelady, I would ask unanimous
consent that Mr. Burgess, Mr. Cravaack, Ms. McCollum, and Mr.
Ellison be allowed to participate in today's hearing. Without
objection, so ordered.
The gentlelady from Minnesota, where some of this activity
took place, is now recognized for as long as she would like to.
Senator Grassley. Mr. Chairman, I want to go because we
have an oversight hearing with the Secretary of Homeland
Security and I have a lot of questions I want to ask him.
Mr. Jordan. We understand. Go ask your questions, Senator.
Thanks for being with us.
The gentlelady from Minnesota is recognized.
STATEMENT OF THE HONORABLE MICHELE BACHMANN
Ms. Bachmann. Good morning. Thank you, Chairman Jordan and
Ranking Member Kucinich. Thank you, also, Chairman Gowdy and
also Ranking Member Davis. It is a privilege to speak before
the Committee today.
It was about a year ago when my office became aware that
there was a problem going on in Minnesota. We actually had
providers contacting our office and telling us they were not
receiving the amounts of money under Medicaid, their
reimbursements, they thought they were being due and, as a
result, they were no longer taking Medicaid patients. So poor
people in Minnesota who deserved and needed the Medicaid help
weren't able to receive it anymore.
We began looking into the issue and we were shocked at what
we found. What we found is that in the last 20 years there had
been no verifiable, independent, third-party audit done of
Medicaid money. This is unbelievable. There were audits
conducted on Medicare money, but not under Medicaid money.
We started to look a little further. We investigated and we
found this isn't just a Minnesota problem; this is a problem
that appears to be happening all across the Country, that CMS,
at the Federal level, which is tasked with auditing and
supervising how the Medicaid monies are spent throughout all 50
States, has been remiss in doing their job on two counts:
number one, we found there was no verifiable data, no standards
of data, of meaningful data that CMS could look at to see if
the charges that the Federal Government was being charged were
even legitimate. So there wasn't any decent data, so to speak,
to look at to see if the monies were spent right. But, number
two, there weren't any independent third-party audits.
Now, let me just give you an example. And I should ask,
first, that the Committee would receive my testimony in its
written form that I presented for you today. I am just giving
you my off-the-cuff remarks right now.
Probably an analogy would be if anyone would go to a
grocery store and buy a grocery cart full of food, they would
go up to the grocery store counter, they would run it all
through the scanner, and then the grocery store clerk would
say, ``I would like to have $150 for your groceries.'' And you
would write out the check, hand it to the person at the
counter, and then you would say, ``I would like my grocery tab,
I would like to have my receipt so I can know if you charged me
for three cans of peas or one can of peas''; and they would
say, ``Well, we are not going to give you the grocery tape.''
In other words, we are not going to itemize what it is that you
owe.
So it appears that maybe a game has been played where
managed care organizations can charge virtually anything they
want for any expense they want because there is no one to make
sure that the organizations are charging what they will.
And that brings us to the fact that Senator Grassley
brought up, that over the next 10 years $7 trillion will be
spent on this program. Now, if we don't have an accurate pulse
on where this money is going today, under the new rules under
ObamaCare, which is coming forward, in my State of Minnesota
alone, Medicaid will expand 21 percent. If we have no
accountability, no transparency of these monies, then what will
we do when it is 21 percent more?
We are a relatively small population in Minnesota; we are
less than 5 million people. Imagine how that would translate in
a highly populated State such as California or New York or
Illinois or Florida. This is something that has to end, because
we know the budget constrictions that we are up against. This
isn't way off in the future; this is in the near term. And the
people who will be most at risk in the future, I believe, will
be poor people who are in need of Medicaid money. For them we
need to have accountability.
And that is why, in the coming weeks, I will be introducing
the Medicaid Integrity Act of 2012. This is not a partisan
issue in any way; this is a complete bipartisan issue. Both
Democrats and Republicans believe in accountability. We believe
in transparency. We all want to make sure that the patients get
the care they deserve and that providers get the reimbursements
they deserve so that we can continue this program.
If we are to have any hope of having a viable program going
forward, we have to have standards and we have to have
accountability. This is something we can all agree, both
chambers, Senate and House, both Republicans and Democrats, and
I intend to reach out to my Democrat colleagues across the
aisle because this is not partisan in any way; this is about
making sure we all carefully watch over the taxpayers' money.
And I thank the Committee.
[Prepared statement of Ms. Bachmann follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Jordan. I want to thank the gentlelady for her hard
work on this issue and a host of others, and for being here and
testifying. And, as I said, we will make your full statement
part of the record.
Ms. Bachmann. Thank you, Mr. Chairman.
Mr. Jordan. Now we will get ready for our second panel. So
if we can just take a short little break here while the
Committee staff prepare the table for our next set of
witnesses.
[Pause.]
Mr. Jordan. We will be back in order here. I want to thank
our witnesses. We will swear you in here just a second, but you
know the typical routine is you have to listen to us talk for a
few minutes. That is the way we do things. And today, because
it is a joint hearing, you have to listen to four of us talk.
But we will get to you as quickly as we can. So we will do our
opening statements.
Today's hearing focuses on the serious problem of waste,
fraud and abuse, and mismanagement in the Medicaid program.
These problems are not new. In fact, in 1982, the House Select
Committee on Aging issued a report concluding that ``State
enforcement of the Medicaid program has been an unmitigated
disaster.'' Unfortunately, 30 years later, government's ability
to safeguard taxpayer money in Medicaid is still an unmitigated
disaster, but the actual dollar amount of waste, fraud, and
abuse is much, much greater.
Over the past 20 years, Federal Medicaid spending has grown
from $75 billion to $450 billion a year. And as our witnesses
in the first panel indicated, it is slated to be $7 trillion
over the next decade. No one knows how much this spending
consists of waste, fraud, and abuse, but it may exceed $100
billion each year.
As Americans struggle to pay their bills and make ends
meet, the Federal Government borrows 40 cents of each dollar it
spends. Fraudsters are collecting tens of billions of dollars
from Medicaid every year.
At the root of all the waste, fraud, and abuse is the open-
ended Federal reimbursement of the Medicaid program. If the
typical State identifies and recovers $1 of fraud or abuse in
its program, it only keeps about 40 cents. Rather than
protecting taxpayer dollars, the Federal reimbursement
encourages each individual State to grow their programs
unsustainably. When most States behave in this manner, there is
waste, fraud, and abuse on a massive scale.
Most States employ a contingency fee to consultants to
figure out how to maximize Federal Medicaid money. Rather than
focusing on improving efficiency of the State programs, these
consultants, who are highly compensated out of the funds that
are supposed to go to the poor, as Representative Bachmann
indicated, many poor were left untreated because of the
situation in Minnesota, they spend their time figuring how to
make Federal taxpayers pay for State spending.
For example, what we have learned about Minnesota's
Medicaid program suggests that there is a new and creative way,
a State scheme, to maximize Federal dollars. Information
obtained through Senator Grassley's investigation shows that
Minnesota's insurance companies were making large profits on
Medicaid. One of the witnesses at today's hearing, David
Feinwachs, has independently obtained information that shows
the State was deliberately inflating Medicaid rates in order to
leverage the Federal reimbursement.
In response to this controversy, Minnesota's governor has
admitted that past contracts between the State and the
insurance companies were ``too generous with taxpayer money.''
The response to this is, of course, you have been too generous
with taxpayers' money, but how long has this been going on and
what are you going to do about it? And how many other States
are in on the same game?
GAO and the IG have made numerous recommendations to
improve program oversight. Regrettably, many of their
recommendations have been ignored by CMS.
Today's hearing will shed light on some of the flagrant
examples of waste, fraud, abuse, and mismanagement in the
program. It is both shocking and disheartening that the
Government failed to catch any of these cases. If it were not
for the work of whistleblowers and investigative reporters, CMS
may never have uncovered the problem.
At a more fundamental level, when a program becomes as big
and complex as the Medicaid program, waste, fraud, and abuse
are inevitable. The magnitude of taxpayer dollars wasted
through Medicaid signifies the need for policymakers to
immediately reform the program. Our Nation's limited tax
resources must be targeted at individuals who genuinely need
the public assistance, and cannot be used to provide huge
windfall profits for large insurance companies and corporate
dental practices, as took place in Texas.
Tragically, for both taxpayers and individuals who
genuinely need public assistance, ObamaCare does not reform the
Medicaid program; rather, it expands it by 20 million people
and by nearly $1 trillion over the next 10 years, as
Representative Bachmann pointed out. It also contains a feature
that will undoubtedly make waste, fraud, and abuse in the
program much worse. And as a sweetener to the States, ObamaCare
makes the Federal Government reimburse at least 90 percent of
State spending on newly eligible populations. It does not take
an expert to realize that State manipulation of the Federal
Medicaid reimbursement will become much worse.
While today's hearing will shed light on problems in the
current program, I expect it will also provide some insights on
a better way forward for the Medicaid program.
With that, I would yield to the gentleman from Ohio, the
Ranking Member, Mr. Kucinich.
Mr. Kucinich. Thank you very much, Chairman Jordan,
Chairman Gowdy, for holding this hearing.
According to Harvard University scholar Malcolm Sparrow,
the health care industry's complexity and volume of health care
payments presents a business opportunity for a few bad actors
suitably placed to steal hundreds of millions of dollars from
Medicare and Medicaid.
The Government Accountability Office estimates that in 2010
Medicare and Medicaid made about $70 billion in improper
payments. Improper payments include overpayments,
underpayments, and fraudulent payments. Fortunately, the Center
on Medicare and Medicaid Services, under Director Cindy Mann,
and the U.S. Department of Justice are taking the threat of
health care fraud very seriously.
CMS has moved quickly and aggressively to stand up its
Office of Medicaid Program Integrity, utilize high speed
computing and data analysis to identify patterns of fraudulent
billing in real time, and adapt to Medicaid's successful anti-
fraud initiatives developed to deal with Medicaid.
The Department of Justice has increased health care fraud
prosecutions since fiscal year 2008 by nearly 75 percent. In
fiscal year 2011, DOJ and the Department of Health and Human
Services recovered a record $4.1 billion from health care fraud
statements and settlements. Almost $600 million of that came
from Medicaid anti-fraud efforts.
The Affordable Care Act made a significant contribution to
Federal anti-fraud efforts both in terms of increased resources
and authority to enhance oversight and screening measures,
clarifying law enforcement access to claims and payment data,
and expanding key anti-fraud programs to Medicaid, among other
things.
But Federal anti-fraud efforts face a number of threats. At
this very moment, the U.S. Supreme Court is considering
striking down the Affordable Care Act. If they do, aggressive
Federal anti-fraud activities authorized and financed by the
Act will be compromised.
The House Republican budget also targeted the Affordable
Care Act, calling for its repeal and banking on cuts of $106
billion in new Medicaid spending created by the law. The budget
also would change the financing of Medicaid to block grants,
which would lead the States to manage all aspects of Medicaid,
including the bulk of anti-fraud efforts.
As one health care fraud expert testified to the Senate
last year, health care fraud is an exceptionally complex crime.
The perpetrators of this crime have proven themselves to be
creative, nimble, and aggressive. Therefore, investing in and
employing the most effective fraud prevention and detection
techniques is critical to achieving success.
That level of investment can only come from the Federal
Government. Today, Federal Medicaid, the Inspector General for
the Department of Health and Human Services, and Justice
Department prosecutors are mounting anti-fraud efforts with
more success than ever before. Yet, unfortunately, my friends
on the other side of the aisle have a budget and we have a U.S.
Supreme Court which poses great threat to the continued
existence and development of initiatives that would actually
help to cut fraud.
So, with that, respectfully, I yield back.
Mr. Jordan. I thank the gentleman for this statement.
We will now yield to the Chairman of the Subcommittee, the
gentleman from South Carolina, Mr. Gowdy.
Mr. Gowdy. Thank you, Mr. Chairman.
More than $450 billion will be spent on the Medicaid
program this year and, for context, there are only two
companies in the world that have larger worldwide revenue than
Medicaid's budget.
Medicaid spending is actually 40 percent larger than the
entire economy for a country we have heard a lot about lately,
Greece.
So, Mr. Chairman, while it is hard to quantify with
certainty, some experts believe waste, fraud, and abuse
constitute more than $100 billion a year. And as we see time
after time after time, we are all too willing to overlook the
waste of other people's money more so than we would if the
money were our own.
I actually prefer a little different perspective. I think
we should zealously protect the public treasury because the
money was collected as part of a sacred trust. And as the money
flees, Mr. Chairman, due to waste, fraud, mismanagement, or
simply because we just don't seem to care, so too goes trust in
the institutions of government.
Problems within Medicaid's Federal and State Medicaid
partnership are the focus of today's hearing. We will hear from
expert witnesses with firsthand knowledge of how the government
is failing to prevent waste, fraud, and abuse in the program.
Specifically, there will be witnesses who will share testimony
regarding problems in New York's Medicaid home health program,
Minnesota's Medicaid managed care program, and Texas's Medicaid
dental program. We will examine how these problems occurred,
why they remained undetected for so long, and whether States or
local jurisdictions were complicit in the fraud and abuse.
But if all we do, Mr. Chairman, is have yet another hearing
where we perform an autopsy on some program or initiative that
failed, we are not doing our jobs. Something concrete must come
from this. Accountability for fraud in the form of license
revocations, debarment, indictments, restitution, seem to me to
be an appropriate place to start.
When problems are identified, the people we are supposed to
work for expect corrective measures to be taken immediately.
When money is mismanaged, the people we work for expect us to
seek a full recovery, not settling for cents on the dollar.
When a fraud is suspected, the people we work for do not
understand why it takes multiple prompts to see any real action
taken and, frankly, Mr. Chairman, neither do I.
I lived in Texas for four years, Mr. Chairman, and I
absolutely love that State. But it doesn't, or shouldn't, take
an IG investigation to notice more money was being spent on
orthodontia in Texas than the rest of the States combined.
Either people are gaming the system or there is some genetic
malady which leads to more crooked teeth in Texas than the rest
of the Country put together. And I highly suspect it is the
former and not the latter.
Which leads to this question, Mr. Chairman: Has the money
been paid back? Do we know how this occurred? Or is it just
another exhibit in the trial entitled this is what you get when
give perverse incentives to spend more, you talismanically get
more spending.
In New York City, the city failed to comply with State and
Federal regulations and unlawfully enrolled thousands of people
in a Medicaid personal care service's program without regard to
their need for the program. The statistical expert hired for
the lawsuit estimated the total damages caused by the City's
conduct were between $1 billion and $3 billion. And this total
included only the fraud in one relatively small program in New
York City's enormous Medicaid budget.
Over the past 10 years, Mr. Chairman, the Inspector General
for the Department of Health and Human Services has conducted
19 audits. Ten of the 19 audits and 5 of the 6 audits with the
largest findings, each of which exceeded $170 million in
improper State receipts of Federal Medicaid dollars, were the
result of problems in just one State, New York.
So, Chairman Jordan, it strikes me that we can keep doing
autopsies once the patient is dead to confirm what we already
know, or we can practice preventive medicine. And the way to
practice preventive medicine is to put everyone on notice,
State officials, service providers, customers, and especially
those who seek to take advantage of the generosity of our
fellow citizens, that there will be consequences.
This is not a game to see how much money we can get from
the Federal Government to run our State; this is a program
designed to provide a safety net for the poor and the disabled.
If you abuse this safety net and turn it into a trampoline, you
will be prosecuted, barred from participating, and exposed as a
fraud. Perhaps then we will have fewer hearings on what went
wrong.
Mr. Jordan. I thank the gentleman. Spoken like a
prosecutor. We appreciate that opening statement.
The gentleman from Illinois, the Ranking Member of the
Subcommittee, is recognized, Mr. Davis.
Mr. Davis. Thank you very much, Chairman Jordan, Chairman
Gowdy, and Ranking Member Kucinich for holding this hearing.
Making sure that laws are carried out the way we intended
for them to be carried out and making sure that money spent is
spent the way we intended for it to be spent are great parts of
our responsibilities as members of Congress.
Reducing health care fraud is a policy shared by both
Democrats and Republicans. We must be vigilant in locating
potential waste of precious Federal dollars. The amount of
Federal dollars expended for managed care make oversight and
limiting abuses of Federal dollars critically important.
Medicaid is a complex, high risk designated program, and I
want to take this opportunity to encourage CMS to fully utilize
all of the tools provided for in the Affordable Care Act. I am
certain that these advancements will be invaluable to program
integrity and have already begun to show great promise.
I am encouraged by the Federal efforts to stop fraud in the
Medicare and Medicaid programs. Last year, the Government
recouped more than $4 billion. Between 2009 and 2011, the
Federal Government recovered more than $7 for every $1 spent on
fraud prevention and recovery activities. The return on
investment is about $2 higher than the historical average, and
increased coordination between the State and Federal
Governments will yield even greater results.
Yes, we want to ensure that every dime designated for
beneficiaries, the elderly, the disabled, and the children, is
spent exactly where it was intended to be spent, how it was
intended to be spent, and for the purposes which it was
intended to be spent.
So I want to thank our panel of witnesses that have come
today to share issues related to their State programs. I
appreciate your presence and I am certain that at the end of
this hearing and other inquiries we will find a way to make
sure that waste, fraud, and abuse is rooted out of these
valuable programs and exist only to a minimum.
So I thank you, Mr. Chairman, and yield back.
Mr. Jordan. I thank the gentleman for his statement.
We now yield time to the gentlelady from Minnesota, Ms.
McCollum. We have a couple of Minnesota members with us and Ms.
McCollum has asked to make an opening statement, so the
gentlelady is recognized.
Ms. McCollum. Thank you very much, Mr. Chair. And I would
like to thank you all for including me in this hearing today.
In this Congress, the safety net which protects millions of
Americans, elderly, children, and the disabled, is under
attack. While tax cuts for millionaires and billionaires are
being protected, critical services for our most valuable
citizens are being slashed. Medicaid provides a critical health
service, keeping people in their homes, and contributes to a
society that values human dignity. There should be no confusion
about the current Republican plan, which was voted on in the
chamber a week or two ago regarding Medicaid: they want to cut
it and they want to block grant it.
Today's hearing, as far as it relates to Minnesota's
Medicaid program, is about accusations of fraud under the
administration of a former Republican, and the story of today
is about the Democratic successor who made reforms to the
program. Whether it is Medicaid or any other government
program, I, along with the members of this Committee, want the
dollars to be spent wisely and effectively. If waste, fraud,
and abuse is taking place, it must be investigated and the
responsible company, individual, or State needs to be held
accountable. Mrs. Bachmann, Mr. Ellison, and I are here because
of the focus today on Minnesota.
I think it is terrific. Our State is delivering high-
quality, low-cost, better care than anywhere else in the
Country. Last month, the Commonwealth Fund released a scorecard
comparing all local health care regions in the United States.
St. Paul, Minnesota, my home, ranked number one in the Nation
for best overall health care system; Rochester ranked number
three; Minneapolis number four; St. Cloud was number seven.
Minnesota is a model for delivering quality health care and I
applaud our doctors, nurses, hospitals, and health care
professionals and policymakers for their partnership that works
better than anywhere else.
Minnesota has long been committed to expanding health care
coverage, containing costs, improving quality. We are unique in
requiring HMOs to be nonprofit organizations. Quality health
care for our State is to be a priority, not profit-taking. In
1992, we created Minnesota Care to provide access to services
to more than 148,000 children and working parents who had no
other insurance that they could turn to.
Clearly, I know Minnesota is not perfect and we have more
work to do, but I ask this Committee to show a State that has a
better performing record in providing quality health care.
However, for eight years the Republican administration of
Governor Tim Pawlenty negotiated Medicare contracts with health
plans with little or no transparency, and the terms of these
contracts were negotiated poorly. If they allowed fraud, waste,
and abuse to take place, then this Committee has an obligation
to investigate those claims. But, unfortunately, those members
of the Pawlenty administration responsible for negotiating
those very contracts on behalf of taxpayers, they are the ones
who are not here to testify.
Starting January 11th, Democratic Governor Mark Dayton's
administration took bold action to increase transparency and
accountability for taxpayers. Here are some of the reforms that
have been implemented by Governor Dayton and Commissioner
Jesson: enacting competitive bidding for managed care
contracts, saving the State and Federal taxpayers millions of
dollars; committing the Office of Inspector General and
Department of Human Services to rid out waste, fraud, and
abuse; and launching a single website with managed care
contracts and reports, financial data, and quality measurements
available to the public, a truly unprecedented level of
transparency that the Dayton administration engaged in.
In addition, Governor Dayton and Democrats and Republicans
in the State House and Senate have worked bipartisan to require
third-party financial audits of managed care plans going
forward, and I am glad Ms. Bachmann has seen this as a way
forward for the Federal Government to move on. Mr. Ellison and
I couldn't agree more, and the State of Minnesota has already
done it.
But I do say if this Committee is serious about
investigating Medicare fraud, for-profit and nonprofit health
plans must be required to open their books and let the public
see if profit-taking at taxpayer expense is going on.
Other States and Congress must follow Minnesota's lead for
transparency. I am proud of the health care system we have in
Minnesota and we will continue to make it better for the people
we serve and for the taxpayers we are responsible for. I
believe that we can lead in being an example for the rest of
the Country.
And again, Mr. Chair, thank you so much for the courtesy of
allowing me and Mr. Ellison to be here today.
Mr. Jordan. Great. I thank the gentlelady for her
statement. I would just make one point about the Republican
plan dealing with Medicaid. Our plan is to not cut Medicaid,
but it is to block grant it back to the States. We actually
think if you take away the incentive for States to try to
leverage Federal dollars and say, no, here is the amount of
money you are getting, now you manage it, that is what you get,
and you serve your population; we think it takes away this
perverse incentive that exists in the current program and would
better help those individuals who may have not got treatment
because of all the fraud that was going on.
With that, we would ask----
Ms. McCollum. Mr. Chairman, just a point of clarification.
You know how all of us sometimes slip up and say Medicaid and
Medicare?
Mr. Jordan. Medicaid.
Ms. McCollum. I would like my statement to reflect
Medicaid. Thank you.
Mr. Jordan. Okay.
We have, first, with us Dr. Gabriel Feldman. He is the
Local Medical Director for New York City's Personal Care
Services Program. We also have with us Dr. Christine Ellis, an
orthodontist and a member of the faculty of the University of
Texas Southwestern. Mr. David Feinwachs is the former general
counsel of the Minnesota Hospital Association; and Ms. Claire
Sylvia is an attorney at Phillips & Cohen.
The practice of this Committee is we actually swear you in,
so if you would stand and raise your right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[Witnesses respond in the affirmative.]
Mr. Jordan. Let the record show that everyone answered in
the affirmative.
Thank you.
We will start with Dr. Feldman and we will just go right
down the line. Dr. Feldman, you are recognized for five
minutes.
STATEMENT OF GABRIEL E. FELDMAN
Dr. Feldman. Good morning. My name is Dr. Gabriel Ethan
Feldman and I am a whistleblower.
I would certainly like to start by thanking Senator
Grassley, Congresswoman Bachmann, Congressman Issa, Gowdy, and
Congressman Jordan, of course, and the other Committee members
for convening this important hearing and for inviting me to
discuss my role in helping the Federal Government recover $70
million that was improperly billed for New York City's Personal
Care Services Program. I would also like to make very clear
that all my comments here today are my own and do not reflect
my employer, my colleagues, or any other entity.
I was born in Brooklyn, New York, and have lived on
Manhattan's Upper West Side in a small studio apartment for
most of the last 20 years. I am a registered Democrat. I
received my medical degree from the Sackler School of Medicine
in Tel Aviv, Israel. I have a BA from Brandeis University, a
Master's degree in Public Health from New York Medical College,
an MBA and a Master's in Health Administration from Georgia
State University in Atlanta. I am board certified in both
preventive medicine and public health, and I hold an active
medical license in New York.
I began working as a New York City PCSP, or Personal Care
Services Program local medical director in 1990, worked through
1993, and returned to work there in 2006, and hopefully I will
be still working there tomorrow.
As an LMD, I am responsible for impartially evaluating a
client's home health care needs and appropriateness for the PCS
program. Not every State has a PCS program. The Federal
Medicaid Act was amended in 1990 to permit States to offer PCS
as an optional home health care benefit. States that choose to
implement the PCS program are required to set forth
``reasonable standards'' for determining individual eligibility
and benefits.
New York State has always offered the most generous and
comprehensive safety net, including the most comprehensive
Personal Care Services Program in the world. New York State
regulations mandate that personal care services should only be
provided if they are medically necessary and only if the
patients have physical and medical conditions that are
``stable.''
The PCS program has two levels: one is limited to basic
housekeeping and chores; the other includes assistance with
daily functions such as bathing, dressing, feeding, grooming,
walking, and toileting. The PCS program aides do not provide
any sort of skilled nursing care or monitoring.
While the State is ultimately responsible for overseeing
the PCSP and for providing a fair hearing appeals process, the
program is run day-to-day at the county level. Thus, PCS is run
quite differently in New York City than it is in upstate or
rural counties.
My false claims case involved Medicaid clients who received
PCS around the clock, either on a sleep-in or split shift
basis. Sleep-in refers to an assistant that sleeps in the home;
split shift refers to two separate, always awake assistants who
provide care to the client in separate shifts. Sleep-in costs
about $75,000 a year; split shift costs twice that.
In 2009, the year my qui tam complaint was filed, New York
spent about $50 billion on Medicaid. About $20 billion of this
was on long-term care, of which about $10 billion was home
health and personal care services. These figures are by far the
highest in the Country and partly reflect the fact that,
nationwide, Medicaid now spends most of its funds on long-term
care and not on primary, acute, or preventive care.
For the last 20 years, Medicaid clients in New York City
have received far more PCS service hours than any other group
in the Country, and I believe that this was likely due in part
to poor oversight at both the State and local levels.
New York State does have a dense set of regulations that
dictate criteria for admission to and reauthorization of its
PCS benefits, yet I frequently found myself at odds with city
level staff and my own supervisors regarding the determination
of level of service.
In New York State, those of us who work in the PCS program
are under tremendous pressure from advocacy groups,
politicians, administrative law judges, and family members of
clients to rubber-stamp service requests.
I have found my independent and very well supported
recommendations regarding home care needs routinely overridden
by the City's powers that be, or by administrative law judges,
who are not required to even have any formal medical, nursing,
or disability training. When I would suggest that a client was
no longer appropriate for the PCS program or appeared to be
unstable, I was taken to task as being one of those unfeeling
bureaucrats.
Until recently, a pervasive culture of non-accountability
and non-compliance to PCS State regulations made it simply far
too easy for local social service offices in New York City to
spend billions in taxpayer money without regard to common sense
oversight, regulations of the State, or patient safety
concerns.
Despite my complaints to appropriate internal parties,
little seemed to change. I grew tired of seeing so much waste
in the Medicaid system while hundreds of thousands of poor
children in my State had no health insurance at all. As Justice
Brandeis said, sunshine is the best disinfectant. So I
contacted Levy Phillips & Konigsberg and decided to become a
whistleblower.
My complaint was filed under seal and I hoped the issue
would be resolved quickly and quietly. After the case was
unsealed, however, New York City still defiantly proclaimed
that they would win their fight and the case in the end. The
case was heavily litigated before Judge Rakoff in the Southern
District. I continued to show up for work each day and was
grateful that family, friends, and coworkers supported me. The
case was finally settled just a few months ago.
In sum, New York City's Medicaid program is still in dire
need of reform. Many providers simply refuse to accept
Medicaid. The cost growth is unsustainable and a million people
in New York City have no health insurance at all. Higher
spending simply had not led to better outcomes, higher patient
satisfaction, or to better access to care. In New York City,
Medicaid simply does not excel with regard to quality, access,
cost, or oversight. This simply must change.
I would also like to suggest much stronger oversight and
independent auditing of ALJ, administrative law judges, who
hear appeals.
Mr. Jordan. Doctor, can you close up?
Dr. Feldman. Yes.
While Governor Cuomo has taken bold steps to redesign
Medicaid in New York State, the Medicaid industrial complex is
thriving, especially in New York City. I hope today to make
some sort of impact on this situation.
Thank you very much.
[Prepared statement of Dr. Feldman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Jordan. Thank you, doctor, for your testimony and for
your courage in stepping forward and bringing this to our
attention.
Dr. Ellis, you are recognized.
STATEMENT OF CHRISTINE ELLIS
Ms. Ellis. Thank you very much for inviting me to speak
today.
In Texas, Medicaid has provided funding for the orthodontic
treatment of severe handicapping malocclusions, which are
defined as an HLD index score of 26 points. In plain English, a
severe handicapping malocclusion is found in the mouth of a
child whose teeth are so far out of position that they cannot
do normal things like eat and talk without difficulty.
Everyone who knows them knows that these kids desperately
need braces. Children born with a cleft lip and palate are an
example. So are kids born with craniofacial syndromes and
certain special needs. The handicapping malocclusion exists
because of their medical diagnosis. They are in need of
orthodontic treatment if they are to have any hope of having
teeth in a position remotely approaching normal.
In many cases these kids depend on Medicaid for the funding
of their orthodontic treatment.
On screen 1 is an example of a child with a cleft lip and
palate.
While I certainly appreciate the value of an attractive
smile, it is important to recognize the difference between the
crooked teeth of an otherwise healthy child and a handicapping
malocclusion. Unlike a healthy child with crooked teeth,
children with handicapping malocclusion must be treated as they
are growing up. Postponing orthodontic care until adulthood
risks devastating consequences like speech that is difficult to
understand, premature loss of teeth, and greater surgical risk.
Braces for these kids are not optional and they are definitely
not just for aesthetics. But in Texas these kids are at risk of
losing the orthodontic providers who are most capable of
providing care.
As they say, everything is bigger in Texas, and thanks to
the investigative reporting of WFAA's Byron Harris, we now know
that orthodontic Medicaid fraud is no exception. Since
September of 2011, Texas OIG has been investigating high volume
providers suspected of Medicaid orthodontic fraud. I have
consulted with them by auditing the patient records of these
offices.
The flagrancy of the fraud that I found is truly
unbelievable. It was not accidental; providers submitted
falsified HLD index forms to obtain preapproval for their care.
These scores weren't off by just a point or two; they were
inflated by all 26 points in some cases. If scored accurately,
at best, only 10 percent of the cases would have qualified.
These providers didn't want to put braces on the kids that
Medicaid was designed to help, they were only interested in
treating children without any real problems. Once they had them
in braces, they delivered inefficient care and a whole lot of
additional unnecessary appliances to increase their payment
from Medicaid.
Amazingly, Texas is making a bad problem worse. In March,
the administration of Medicaid-funded orthodontics was
outsourced to three dental managed care companies. The
complexity of the approval process increased and provider
reimbursement was cut. This is the wrong response and will only
attract unqualified orthodontic providers, if anybody at all,
to help these kids.
The corrective measures needed are: one, ensure that only
children who qualify for orthodontic care are approved and,
two, ensure that they are adequately funded.
In supporting increased Medicaid reimbursement of
orthodontics, I am in no way advocating for greater amounts of
public money to be spent on braces. Elective orthodontic
treatment should not be funded by Medicaid. The eligibility for
orthodontics should be limited to children with a medical
diagnosis and an accompanying dental deformity. It is not just
my opinion, but also that of the American Association of
Orthodontists. These recommendations will help ensure that
children truly needing orthodontic treatment will have access
to high quality care.
As you are aware, there is significant disagreement between
dental policymakers on how best to ensure access to care.
Policy groups like the Pew Dental Campaign and Kellogg
Foundation advocate for greater public spending for pediatric
dental care. To these groups, numbers define success; they
advocate for greater numbers of dental procedures performed,
patients treated, and dollars spent. I do not question their
good intent. But as a boots on the ground provider, I am here
to warn of the side effects that accompany some of their
recommendations. Texas has learned a painful and expensive
lesson in the folly of simply increasing public funds in hopes
of increasing access to care.
Several years ago, Texas settled the long-running Frew
class action lawsuit. It claimed, among other things, that
children covered by Medicaid did not have access to care
mandated under EPSDT. Part of the settlement mandated the
increased spending of $1.2 billion to increase their access to
care. While Medicaid dental spending took off, Texas looked at
the increasing numbers and they thought that they had achieved
success.
Things did not work out as they had planned. Five years and
over half a billion dollars later, Texas has spent a lot of
money straightening basically already straight teeth and has
gained a lot of fraudulent orthodontic providers, including
many private equity-owned dental clinics that are engaged in
the illegal practice of dentistry.
The sad conclusion to this entitlement-driven transfer of
money is that, in Texas, we have used the mouths of children to
enrich unethical providers and private equity investors. While
access to care has increased, access to quality care remains a
problem. In fact, it is possible that these children are more
at risk of receiving unneeded poor quality care than they were
before the changes mandated by Frew took effect.
In conclusion, we all realize that public dollars must be
carefully allocated to the areas of greatest need. Even though
I am an orthodontist, I know that crooked teeth do not prevent
one from enjoying life, liberty, and the pursuit of happiness.
However, for a child with a true handicapping malocclusion,
it is good and proper to craft public policy that addresses
their deformity through Medicaid-funded orthodontic treatment.
You can ensure their public safety net by clearly defining
these children as the only patients who are eligible for well
funded Medicaid orthodontic treatment. You can help ensure the
public that their dollars are well spent by clearly defining
dentists as the only people qualified to own and operate a
dental business.
Thank you for your time.
[Prepared statement of Ms. Ellis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Jordan. Thank you, Doctor.
Dr. Feinwachs, you are recognized for five minutes.
STATEMENT OF DAVID FEINWACHS
Mr. Feinwachs. Thank you. Mr. Chairman, distinguished
members, thank you for the privilege of being allowed to
participate in the process today and for asking me to be here.
My name is David Feinwachs. I was, for 30 years, the
general counsel of the Minnesota Hospital Association. In 2010,
I was fired from that position. The reason I was fired is
because I asked the wrong question. The question I asked was:
Was the State of Minnesota using Federal Medicaid dollars for
purposes other than Medicaid, or are we using it to cross-
subsidize non-qualified programs, maybe even prop up commercial
insurance products, or other things which were clearly
impermissible? That was the wrong question.
Minnesota, in 2010, did in fact seek legislation to provide
for a medical loss ratio for these public programs. During the
course of that time, one of the fascinating things was that our
Department of Human Services produced a fiscal note that
discussed why that proposal would never yield any savings for
either the State or the Federal Government. They said that any
assessment on one of our HMOs in Minnesota, any payment of a
penalty, a fine, a clawback, a give-back would never benefit
the government because it would simply be built into the rate
calculation for the subsequent years and be returned to the
HMOs.
This is a strange assertion because, number one, it flies
in the face of the notion that these companies are assuming
insurance risk in their administration of these programs and,
number two, it raises the question of why do these companies
reserve, in massive amounts, against what appears to be non-
existent risk. So the fiscal note raised a number of questions.
In July of that same year I reported to the management of
the Hospital Association that I believed that we had uncovered
a substantial and massive fraud against the Federal Government.
In August, on August 13 of 2010, I was asked to participate in
a conference call involving our State Department of Human
Services, an employee named Karen Peed. Ms. Peed was the
Director of Medicare Managed Contracting.
During the course of that conference call, Ms. Peed made
the following statement: If you can't keep a secret, you have
to leave the room, but we have been adjusting the reserve
amount for State-only funded programs by making it essentially
zero, and increasing the amount for PMAP Federal programs,
blending the rate, and returning it to the insurers.
Upon hearing this statement, I believed that all the pieces
of the puzzle had now been assembled. We suspected that there
was a massive fraud; Ms. Peed's statement explained the
mechanism by which the fraud was being accomplished.
I again went to the management of the Hospital Association
and told them what had been discussed and urged them to do
something. They did something: within 60 days I was terminated.
Following my termination, I continued my advocacy on this
issue; I returned to our State capital and continued to lobby.
In 2011, a number of bills were introduced, but the most
interesting thing that happened in 2011 is one of our HMOs,
UCare, said that they were going to give a donation to the
State of Minnesota of $30 million, a give-back. This,
coincidentally, was exactly the amount that the year before we
had claimed would be owing as a clawback or return because of
the elimination of one of the programs in Minnesota that was
not a federally qualified program.
When UCare announced the donation, as it was called and
attributed, they distributed to a select group of legislators a
letter explaining the reason for the donation, and the letter
said that the money was being returned because Medicaid rates
had been inflated to subsidize the program, which was now being
eliminated, and, therefore, since the Medicaid rates had not
been lowered, they were returning what they characterized in
their own words as an overpayment.
Now, clearly that is not a donation.
If we fast-forward another year, to 2012, our media in the
State of Minnesota got hold of this letter, as well as
documents related to Ms. Peed's statement and some other
things, and began to take a close look and to scrutinize the
statements which were made by UCare and, in fact, the
statements which were made by the State of Minnesota saying
that this was in fact a donation and that the Federal share was
not required to be returned.
During the course of these investigations, the media went
to Commissioner Jesson and presented to her the Karen Peed
statement, as well as other documents and, of course, the
letter that UCare had written, and they asked her if this would
be defrauding the Federal Government. Commissioner Jesson
responded as follows: Let me say two things. Let me be very
clear. We are not doing it that way anymore and Karen Peed is
no longer in charge of contracting with the health plans.
Now, this is an interesting and simultaneously troublesome
statement because currently we are, in part, celebrating the
return of $15 million to the Federal coffers. But the
celebration is a little premature, and let me explain why.
Mr. Jordan. Dr. Feinwachs, can you close up here in just a
few seconds?
Mr. Feinwachs. In the last year, this return has been
called a donation, a refund, and now an administrative expense,
and it is the last that is most important. As an administrative
expense, it is going to be billed into the rate certification
and you are going to return half to the State and the HMOs next
year. The $15 million they are giving you, you are going to
give them back next year because there are no audits, there are
no accountability, and there is no verification.
Thank you.
[Prepared statement of Mr. Feinwachs follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Jordan. Thank you, doctor.
Ms. Cohen, you are recognized.
Ms. Sylvia, go ahead.
STATEMENT OF CLAIRE SYLVIA
Ms. Sylvia. Chairman, Ranking Members, members of the
Committee, thank you for the opportunity to speak with you
today. My name is Claire Sylvia. I am a partner with Phillips &
Cohen, which specializes in representing whistleblowers under
the Federal and State False Claims Acts.
Much of the discussion today has been about auditing and
oversight, and as important as those efforts are, even if they
worked perfectly, and they don't always work perfectly, there
would still be waste, fraud, and abuse. As many have
acknowledged, that is sort of inevitable. And I would like to
talk about a different way of addressing waste, fraud, and
abuse, also a preventive method.
The Government's most important tool in fighting fraud
against the Government is the Federal False Claims Act, with
its qui tam whistleblower provisions, which provide incentives
to private citizens to pursue lawsuits on behalf of the Federal
Government to redress fraud.
The Act, first enacted in 1963, was substantially amended
25 years ago, when Senator Charles Grassley and Representative
Howard Berman led successful efforts to amend it and to provide
additional incentives for whistleblowers. The changes Congress
made in 1986, which provided whistleblowers the opportunity to
play an ongoing role in the cases that they initiate and
enhance the resources of the Federal Government in pursuing
these cases, have proven phenomenally successful in addressing
fraud, including Medicaid fraud. The Department of Justice
reported that more than $30 billion has been recovered under
the False Claims Act since 1986.
The reason the Act is so successful and the State Acts are
also successful is that they address two key problems in
addressing fraud that are a problem for the Government, and the
first is a lack of information. No matter how much auditing you
do, what whistleblowers provide that the Government doesn't
have is information about fraud.
As Congress recognized when first enacting the False Claims
Act and again amending it in 1986, it is very difficult to
detect fraud without the cooperation of close observers of the
activity. The False Claims Act provides incentives to persons
with knowledge of the fraud to report that information to the
Government. Those incentives include not only the possibility
of a reward, but the opportunity to have an ongoing role in the
case, as well as protections against retaliation.
Without those incentives, few individuals would be willing
to risk the cost to their careers of the type that we have
heard about today. Other oversight methods, such as data mining
and audit programs, can also serve an important role in
detecting fraud, but the ability to harness the information of
insiders has proven especially effective.
The False Claims Act qui tam provisions also address
another important problem that the Government has in fighting
fraud, and that is resources. The Government would never have
enough resources to pursue fraud. As Government recognized in
1986, large corporations that are the subject of fraud
investigations are often able to devote significant resources
to these cases and often outmatch the Government. The False
Claims Act addresses that problem by providing incentives to
whistleblowers and their lawyers to assist the Government.
Cases under the False Claims Act can take a very long time,
many years to develop and pursue, and typically require
tremendous investment of legal resources. The combined efforts
of the Federal Government and private resources have been
uniquely effective in pursuing fraud.
The recent changes in Federal law will actually assist
further in addressing Medicaid fraud. Congress amended the
False Claims Act in 2009 to clarify a number of provisions of
the Act that were inconsistent with Congress's original intent.
The Affordable Care Act provided additional tools and,
importantly, the Deficit Reduction Act in 2006 provided
incentives to States to adopt their own False Claims Act acts
and a number of done so, and together with the Federal
Government they have been very effective in pursuing Medicaid
fraud.
The success of these provisions in addressing Medicaid
fraud is undeniable. According to the Department of Justice, in
the fiscal year ending 2011, recoveries under the False Claims
Act reached a record $3 billion, and the year before also was
close to $3 billion. Of that amount, $2.8 billion in recoveries
was attributable to claims brought under the whistleblower
provisions of the False Claims Act and $2.4 billion of that
amount involved fraud against Federal health care programs,
including Medicaid.
Medicaid fraud takes a variety of forms and we have heard
about a few of them today. They can be as simple as a single
provider addressing Medicaid fraud, but they can also be
incredibly complex. They can include things like unlawful
pricing schemes offered by marketing and other types of
complicated frauds, and all of those take resources beyond
those that the States have to address them.
Not to be lost in all of this is the deterrence value that
these suits can have on preventing future fraud.
So, in summary, this is a bipartisan effort, fighting
fraud. Everyone wants to make sure that the money is spent on
the people that it was intended to help, and the False Claims
Act is one way to do that.
[Prepared statement of Ms. Sylvia follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Jordan. Thank you, Ms. Sylvia.
I now recognize the Chairman of the full Committee for a
statement and his questions.
Mr. Issa. I thank the Chairman. Thank you for going to me
first.
Ms. Sylvia, since you were last, you shall be first. Three
billion sounds like a lot of money. GAO indicates that Medicare
alone, $100 billion; probably about $35 billion in Medicaid or
greater; and a huge amount in dual eligibles. Is it really that
effective if we are talking about small single digit
percentages of the overall problem?
Ms. Sylvia. Well, the $3 billion is only a part of the
amount that is being recovered. That is the dollars and cents
that you get back to the Treasury, but it is unknown how
significant the deterrent effect is, how much fraud is being
prevented.
Mr. Issa. And I appreciate that, except the deterrent
doesn't seem to be working if you have more than $100 billion
in Medicare alone, according to the General Accountability
Office. So, again, isn't it true that, in fact, qui tam looks,
quite frankly, for cases. These cases often are about financial
return to the law firms and to the individual, and that one of
the challenges we have is we have lots of Federal workers and
lots of people who are paid through Federal dollars who aren't
living up to their basic responsibility to call foul when there
isn't any money involved or when the money is unknown. And I
think Dr. Feldman would be a good example of, yes, there were a
lot of dollars involved, but ultimately the question is do we
have the protections for the whistleblower who comes to us
simply to stop a wrong.
Ms. Sylvia. Most whistleblowers, I assume, come to the
Government to stop the fraud. Most of the money isn't returned
to the whistleblowers and the law firms, it is returned to the
Government. So the qui tam provisions do provide an important
role in addressing fraud. It is not perfect; there is always
going to be more fraud, but they do provide an important
deterrent effect.
Mr. Issa. Dr. Feinwachs, I think you would say that we have
a more rampant expansive problem that is not being addressed
even at State level, wouldn't you?
Mr. Feinwachs. Yes, sir, I would say exactly that. What we
have discovered in Minnesota is a situation where there is a
collaboration between the private parties to defraud and
elements of State government.
Mr. Issa. The Chairman was kind enough to come to me first.
I will be brief.
This week we are going to be marking up on the House Floor
the Data Act, literally changing the way reporting goes on so
that every dollar, including Medicare, Medicaid dollars, the
intention is the service providers will in fact be reported in
a transparent way so that the public and the government, once
and for all, will be able to see in real time, across all
government services, where the money is being spent with a set
of reporting. One of the challenges we are going to face is how
do we leverage--and I am not asking for an answer here, but it
is a challenge--how do we balance the private whistleblower's
participation in this vast amount of new data versus cost
effectiveness of employing Federal workers, if you would
inspector general types, whose primary job will be to try to
find most of that $100 billion in Medicare and probably half a
trillion dollars in unnecessary spending, not the least of
which would be GSA conferences throughout the Country.
With that, Mr. Chairman, I respect the fact that you went
to me first, and I yield back.
Mr. Jordan. I thank the gentleman.
We will now recognize the Ranking Member of the full
Committee, the gentleman from Maryland, Mr. Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Issa. You can have an opening statement and or your
time.
Mr. Cummings. I will be brief.
First of all, I want to thank all of our witnesses for
being here. I think this is a very important hearing. I want to
thank those who find it important to talk about the things that
you see that are wrong.
Dr. Ellis, as you were talking, I could not help but think
about a young man who you are probably familiar with from my
State, who is now dead, the 12-year-old, Deamonte Driver, who
died five years ago because he had an infected tooth that would
have taken $80 worth of treatment, but could not find a
Medicaid dentist to treat him. He is dead at 12.
And as I sat here and I listened to what we were saying, I
could not help but think about something that Mr. Gowdy said,
about and I agree with him, doing autopsies, but not coming up
with results; doing autopsies, but not figuring out how to make
sure we don't have to do future autopsies. We are going to have
to address this issue and the False Claims Act may be a good
tool. We need to figure out, Dr. Sylvia, how we make it even
more effective. And I guess that is the one question that I
would ask.
But I also want to be in fairness to the folks there in
Minnesota. Dr. Feinwachs, you just said something that was very
interesting. I am always very careful about when we say things
that may be harmful to anyone. The reason why I am going to ask
you this question is because Ms. McCollum talked about the
differences in the administrations. She talked about the
previous administration there in Minnesota and the present
administration, and you just said something that I just want
you to clear up. You said that you felt that the--and correct
me if I am wrong--that some government people, employees, were
working with some providers and causing some of these problems.
Is that right? In other words, some of this fraud. I am not
trying to put words in your mouth, it is just that I want to
make it clear. You are going to be on national TV and we are
making accusations, and I want to make sure we are clear as to
who we are accusing of what. You can go ahead.
Mr. Feinwachs. Mr. Chairman, Congressman, yes, it does
appear from what has occurred in Minnesota that some public
employees and our HMOs were in fact collaborating, if I may use
a kind word, in the conduct that we are questioning today.
Mr. Cummings. And that is under the previous administration
and this administration, is that what you are saying?
Mr. Feinwachs. Mr. Chairman, Congressman, it appears this
has been going on for some years; it looks to me like at least
from 2003.
Mr. Cummings. Until the present day?
Mr. Feinwachs. That is correct, sir.
Mr. Cummings. I understand. Well, I just wanted to make it
clear, and I am sure somebody will ask you some questions
because we will be interested to know who these people are
since you made this accusation. And if they are doing this as
government employees, they ought to be fired, but, more
importantly, they need to go to jail. That is why I am very
careful with those kind of accusations.
Finally, let me say this. The reason why I started out by
talking about Deamonte Driver is because when these resources
are going places that they should not go, that is, in the
pockets of other folks who are probably rich, and every time I
think about this stuff it makes me mad because I live in the
inner city of Baltimore, and if somebody steals a $30 bike, a
bike for $30, they are probably going to go to jail, but at
least they are going to get a record. So I want to make sure
that some of these folks who are stealing hundreds of
thousands, if not millions, get their chance to see their
picture on a mug shot.
My simple question, Ms. Sylvia, is what can we do to
enhance the False Claims Act?
And I am finished, Mr. Chairman. I just want to know the
answer to the question.
Mr. Jordan. She can answer the question.
Ms. Sylvia. I think the Act is working quite well. One of
the most important developments has been the adoption of the
State Acts to create coordination between the States and the
Federal Government. So I don't have recommendations for how to
address it other than to have more States follow the lead of
the ones that have already adopted their own False Claims Acts.
Mr. Jordan. Thank you.
I now turn to the dentist on the panel, Dr. Gosar, the
gentleman from Arizona, is recognized for five minutes.
Mr. Gosar. Thank you, Chairman. Thanks for allowing me to
go here.
As you know, before I came to Congress, I was a general
dentist for 25 years. In fact, I was a dentist that served
cleft lip and cleft palate for a number of years early on in my
clinical life. I owned my own practice. I hired my own staff
and cared for my own patients.
I also want to commend you, Dr. Ellis, for coming forward,
because that is what we have to do; we have to police our own.
This is not unusual, what we see in raiding Medicaid and
false providing accounts, but we need more people to do that.
And it is not just limited to corporate entities, either; it is
also community health centers, WIC reimbursements and stuff
like that. So it across the board. You know, when you sit down
with one child and do a procedure only on one tooth because
that is all we are going to afford them, that is also
disrespectful to the patient and that is fraud. Compensation
through encounter forms, where it takes a woman seven or eight
times to see a physician is also fraud on seven or eight
different visits on seven to eight different weeks.
But I am also not surprised at the corporate dentistry's
aspect and dental clinics as a central player. In Arizona,
where I am from, we have had a number of problems. But a lot of
that is State laws and how we actually empower that. In fact,
laws are worthless unless you have enforcement.
And that is where I come to you, Dr. Ellis. In your
testimony you say that All Smiles Clinic in Dallas area is a
majority owner by a private equity firm. Is that correct?
Ms. Ellis. That is correct as far as I know.
Mr. Gosar. Is that legal under the Texas law?
Ms. Ellis. My reading of the Texas law is it is not.
Mr. Gosar. I agree with you, I don't think it is.
Ms. Ellis. I think there is a big debate over that issue
right now in Texas.
Mr. Gosar. Okay. So if a dental clinic, no only operating
illegally, but collecting $10 million in 2010 for Medicaid,
which is more than half the entire State of California
collected in the same year, is that true?
Ms. Ellis. They collected $10 million in orthodontics. They
also--and I would say their primary business is actually in
pediatric dentistry, so I do not know the numbers that they
collected total for dental care.
Mr. Gosar. And what was done about it?
Ms. Ellis. What was done about it? Nothing. That is the
problem.
Mr. Gosar. So I am curious how many laws does one have to
break before the State Dental Board and CMS cracks down. This
is just one of the examples of a clinic that stole millions.
I just want to point out one more thing while I have some
time. Part of the problem has to do with our oversight, and I
think Ms. Sylvia may be able to answer this. Until we actually
empower the private sector, the patients, we are not going to
truly have reforms, are we?
Ms. Sylvia. Well, I think the False Claims Act is one way
of empowering patients to report fraud that----
Mr. Gosar. But actually allowing patients to be selective
in their care and empowering them, I think that is what is
going to be necessary to get some total reform, would you not
say that?
Ms. Sylvia. I am not sure that I would say that that is the
key to addressing fraud. I think the patients are an important
part of it, but it is the providers that we are most focused
on, their efforts to abuse the system.
Mr. Gosar. Well, I may go a step further. I think that in
Arizona we have a very active Dental Board, one of the most
active in the Country. So this doesn't go passed very easily.
We actually have empowered them to actually have oversight over
corporation clinics because it puts providers in double
jeopardy in many cases, particularly when they are brought in
front of the board.
But State legislatures have been part of the problem. They
have raided professional licensing fees, basically additionally
taxing them. So what happens is it further restricts State
boards into having that oversight. So in many cases it is the
State board, and in our State of Arizona that is exactly what
they have done, is they have raided those accounts, making it
very, very impossible for them to have the financial funds, the
manpower to actually go after them. And it is a form of
additional taxation. So we have to have the ability for them to
do that.
Second of all is also empower carveouts. Dentistry is very
proud of their track record, and what carveouts basically do is
give them better oversight of that population. And I think the
States that have those types of carveouts, and I think Texas is
now going through the process of doing a carveout so that they
have better management of their funds, but you also need to
have the funds to have that type of oversight as well.
So, Dr. Ellis, thank you for stepping forward. We need a
lot more of you to do the same thing because we have to police
our own.
I yield back the balance of my time.
Mr. Jordan. I thank the gentleman.
I would now recognize the gentleman from Minnesota, and I
apologize, I did not realize that the representative wanted to
make an opening statement. So, Mr. Ellison, you are recognized.
Mr. Ellison. Thank you, Mr. Chairman. Just one quick
question. Is the time for opening statements or for questions?
I can consolidate both.
Mr. Jordan. If you can consolidate, that would be great.
Mr. Ellison. All right. Thank you.
I would simply like to just say that I applaud this
Committee, Mr. Chairman, and, of course, our Ranking Members
for looking into the good use of the public dollar. The more
efficiently we can use dollars for Medicaid, the more people we
can help, and that is very important to me.
I do want to point out, however, that my State, Minnesota,
is a leader in health care, providing in access one great
example is of a Minnesota program is a program called Hennepin
Health, run by Hennepin County in my district. This is an
innovative program which integrates care for individuals with
the highest need by identifying the holistic needs of the
individual, whether those needs are medical, housing, mental
health treatment, or finding a job. By combining social
services with health care, Hennepin Health is making promising
steps to reduce costs, while also providing better care.
Another example of the great work being done in Minnesota
is the opening of the health plan contracts to competitive
bidding. This has provided savings of over $500 million to
taxpayers. In addition, the Dayton administration has
negotiated a voluntary 1 percent cap on profits companies keep
for reserves, resulting in a return of about $73 million to the
State.
So right now we are spending time, as we should, regarding
allegations of fraud in Minnesota under previous
administrations for a program that doesn't exist anymore and
for which both the Minnesota legislative auditor in 2008 and
the current State administration have found no proof. I still
support this process, but I will note that there are many
important and innovative steps being made to improve the
quality of health care in Minnesota of which I am very proud.
So that would lead me to a few questions I would like to
ask, if I may.
Mr. Feinwachs, the current administration in Minnesota has
made a number of changes to health plan reimbursement. For
instance, Minnesota used to have one set of rates for the plans
in each county, looking at factors such as historic rate
claims. Now the State has implemented a successful competitive
bidding process that has achieved over $500 million in taxpayer
savings. Do you agree that Minnesota's move to a competitive
bidding has been beneficial?
Mr. Feinwachs. Mr. Chairman, Congressman Ellison, no, sir,
I do not. Minnesota's competitive bidding process began with
four predominant HMOs controlling the market, and after the so-
called competitive bidding the winners were the four
predominant HMOs. The competitive bidding, as it has been
initiated, appears to be nothing more than a market allocation
among these four HMOs to maintain the mechanism that has been
employed for many years.
Mr. Ellison. Also, the State negotiated a voluntary 1
percent cap on profits for 2011, and this resulted in $73
million being returned to the State. Do you agree that the 1
percent voluntary cap was a win for the taxpayers?
Mr. Feinwachs. Mr. Chairman, Congressman Ellison, I believe
that the return of money is a good start, but I disagree with
the characterization as a 1 percent cap. Last year the current
administration asked the plans to follow the lead of UCare in
giving back money that had been received from a clearly
inflated Medicaid rate. They didn't want to do that, so an
agreement was negotiated whereby it would be called a voluntary
cap. The voluntary cap, of course, is subject to manipulation
of administrative expenses in order to achieve the cap and to
limit the amount. My characterization of what has occurred in
Minnesota is because we said the word audit, we have recovered
$103 million. Imagine what would happen if we did an audit.
Mr. Ellison. You point out in your testimony that a 2008
report by Minnesota's legislative auditor found the State's
payment rates to be high compared to other States. Do you agree
that the State's recent efforts have improved its payment
rates?
Mr. Feinwachs. Mr. Chairman, Congressman Ellison,
Minnesota's payment rates to the plans are high. Minnesota's
payment rates to its providers are dismal. I don't think
anything in recent history has changed that.
Mr. Ellison. No further questions.
Mr. Jordan. I thank the gentleman.
Now recognize the Chairman of the Subcommittee on Health
Care, the gentleman from South Carolina, Mr. Gowdy.
Mr. Gowdy. Thank you, Chairman Jordan. I want to thank all
of our witnesses.
Dr. Ellis, you used the word fraud twice. That word has
legal consequences, it is not just a term of art. And then Dr.
Gosar asked you about whether there had been any consequences.
I think you used the phrase police your own, which is fine,
although I probably don't trust somebody's own group to
administer the punishment. Has there been any punishment, any
consequences for what happened in Texas?
Ms. Ellis. I will be the first to say there is probably a
person better qualified to answer that. As far as I am aware,
there have not been any consequences.
Mr. Gowdy. Who should I ask whether anyone has had their
license to practice suspended, whether they are suffering the
threat of criminal liability, civil liability, disgorgement of
their profits? Who would be the proper person for me to ask?
Ms. Ellis. The Texas State Board would be the one that
handles the licensure of dentists, and they would be the ones
that would take away the license of a dentist. Part of the
problem is the Texas State Board has said that they do not find
any ability to bring any kind of action against a corporation
because a corporation does not hold a license; that they can
only bring action against the individual dentist. The
allegations that I have made are against All Smiles as a
corporation and not the individuals at All Smiles.
Mr. Gowdy. So dentists----
Ms. Ellis. So I would guess it would be the attorney
general. I am sorry, the short answer would be is the attorney
general would probably be the place to go.
Mr. Gowdy. Which the frustration, which I do not mean to
take out on you because you did the right thing, the
frustration is that when poor people steal they go to prison;
and when rich people steal, they keep their title, sometimes
they get promoted, if they work for GSA, and every now and
again they get invited to testify before a congressional
committee. So it is this two-track justice system that the more
you steal, the less likely you are to have any consequences at
all. These were orthodontists or dentists who had to certify
that it met the criteria for--I saw a sign that said free
braces. I can't help but smile when I see the word free. Free
to whom, I am not sure. But somebody had to certify that this
case fit the program, didn't it?
Ms. Ellis. Yes. The HLD index sheet that I referenced does
require a provider signature, and the orthodontist or the
dentist that holds the license would have signed that
paperwork.
Mr. Gowdy. So dentists or orthodontists were certifying
that something met the strictures of a program when in fact it
did not.
Ms. Ellis. That would be correct.
Mr. Gowdy. That just doesn't seem to be a hard case to win.
Ms. Ellis. I don't disagree with that.
Mr. Gowdy. There are no studies that suggest there are more
crooked teeth in Texas than there are other States, are there?
Ms. Ellis. No.
Mr. Gowdy. And there certainly wouldn't be any studies that
suggest there are more crooked teeth in Texas than all other
States combined.
Ms. Ellis. No.
Mr. Gowdy. And yet it took a reporter to unlock this
mystery? No one at CMS happened to notice, gosh, we are
spending more money on crooked teeth in Texas than we are the
rest of the Country?
Ms. Ellis. That is right. It is unbelievable.
Mr. Gowdy. Well, it may also come as something as a
surprise to you, it did to me. We spend $500 billion a year to
investigate and prosecute fraud in the health care system, and
here we missed something that my 15-year-old daughter could
have detected.
Mr. Feinwachs, I want you to help me understand an email,
if you can, even though you didn't send it and you didn't
receive it. In order to have a good chance of keeping all this
money, it must be characterized as a donation. I find the word
characterized to be interesting. The writer did not say it must
be a donation, it just must be characterized as a donation. Am
I putting too much emphasis on the word characterized?
Mr. Feinwachs. Mr. Chairman, no, I do not believe that you
are. The donation was accompanied by a letter describing it as
the refund of an overpayment, so to call it a donation would
require some modification or recharacterization of the event.
Mr. Gowdy. Which then instructs the next line in the email,
which is if a refund, Feds clearly get half. Can you work with
Scott on redrafting? And then the final sentence is the one
that I find most interesting: Also, I thought we were going to
handle this through phone calls. I can't imagine why someone
would prefer phone calls over emails unless perhaps it were to
avoid a trail. Am I too cynical, Dr. Feinwachs?
Mr. Feinwachs. Mr. Chairman, no. Let me say that what I
have trouble imaging is why anyone would put a directive not to
put things in writing in writing. But that is not for me to
answer. The point you raise is quite interesting because
redrafting suggests that there was in fact an original draft,
and it would be fascinating to know what the original draft
said.
Mr. Gowdy. And if we had a team of investigators who also
were not in some way complicit or desirous of a State keeping
the money, perhaps they would be just a tad bit more aggressive
in finding out the answer to that question.
Thank you, Mr. Chairman.
Mr. Jordan. I thank the Chairman for his good questions.
We will now recognize the Ranking Member of that same
Health Committee, the gentleman from Illinois, Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman, and again I
want to thank all of the witnesses for being here.
I have always thought of myself as being sensitive to the
question of waste, fraud, and abuse. But I have also attempted,
in my own thinking, of trying to make sure that I wasn't guilty
of throwing out the baby with the bath water, that is, throwing
out things that might work, might be necessary.
So, Dr. Feldman, I am interested in hearing a little bit
more about what the State of New York has done, or New York
City, to try and ensure compliance with PCS regulations as was
outlined in the settlement that you had mentioned.
Dr. Feldman. The City and the State have taken great
measures to improve the program and to comply with regulations.
I know because I work there every day; I will be there
tomorrow. I see that folks are getting completely retrained.
They are bringing in new staff. People were let go; many people
retired. Many people who were in high positions are no longer
there.
In fact, in some ways the program is run even closer to the
regulations that I had anticipated. What I usually tell folks
is that now the program that I work in is a little bit like
working for the Green Bay Packers a couple of years after
Lombardi came, because now it is extremely careful about how we
approach each case and how PCS services are provided.
Throwing the baby out with the bath water, I really need to
say very clearly I am not here to advocate slashing Medicaid
spending or eliminating necessary Medicaid services, or even
shrinking Medicaid or privatizing it, or throwing the elderly
into nursing homes or to throw disabled children into snake pit
institutions. These are the kids of things that I get hit with
all the time. What I am trying to do here is to help both sides
of the aisle realize that if we are going to have reasonable
cost growth, we need reasonable oversight, so that people get
better care.
The problem in New York City is not the same as in
Minnesota. Minnesota has a wonderful reputation for providing
health care; it is always known as a model. New York City is
not. We spend the most in New York State; we spend $50 billion
a year. I cannot tell you how much of that money is wasted; I
can only assure you that in my program specifically I am fairly
comfortable in knowing that in the old days we wasted more than
$823,000 every day.
Mr. Davis. You know, you caused me to remember the days of
the Medicaid meals that were rampant in many places, especially
in inner city communities throughout America that I have spent
a great deal of time in, and I certainly think that we have
made progress since then and things have become more
sophisticated, more complex.
So, Ms. Sylvia, can I ask you the schemes that you have
mentioned that pharmaceutical companies sometimes might use,
could you share what some of those may be and may have been?
Ms. Sylvia. Sure. A lot of the emphasis at today's hearing
has been on sort of simple frauds, but a lot of the frauds that
affect Medicaid are things like off-label marketing. And we
have several cases involving that, which would include using
kickbacks and promotions to doctors and hospitals to recommend
and use devices and drugs that are approved for those
particular uses. And that costs Medicare and Medicaid money
because they wouldn't pay for those goods or services if they
had known that those practices were going on. And no amount of
oversight is going to produce information about those practices
that whistleblowers who actually work on the inside and can
report the types of emails or the types of things that aren't
being written down that whistleblowers can report.
Mr. Davis. Does the utilization of samples as promotional
activity fall into any of this, to your knowledge?
Ms. Sylvia. Well, use of kickbacks to encourage or induce
the use of goods or services provide or paid for by Federal
health care dollars can be a violation of law and can be a
violation of the False Claims Act, so there are circumstances
where samples could fit that model.
Mr. Davis. Thank you very much.
Thank you, Mr. Chairman. I yield back.
Mr. Jordan. I thank the gentleman for his questions.
We now yield to the gentleman from Texas, Dr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman. Thank you for letting
me be part of your hearing today. I sit on the Committee on
Energy and Commerce, which does have a lot of jurisdiction over
the Medicaid program, and I will just tell you that I have had
a personal interest in this for some time because, Dr. Ellis, I
have seen the billboards back home. My home is not too far from
where you work, so I have been aware of there being some type
of problem because generally, in my experience in the practice
of medicine, it was not necessary to advertise for Medicaid
patients, they found you if you were willing to see them, and
many providers, of course, will not because of the low
reimbursement rates.
So generally how would a clinic like this, how would they
go about patient recruitment?
Ms. Ellis. Well, the billboards apparently worked pretty
well. There have been offices accused of having solicitors go
out and recruit business from places such as where they go to
receive their food stamps or their State benefits. I have heard
of the same thing going on at areas where children will be,
like CC's Pizza; other areas wherever they feel that they can
target a Medicaid population.
Mr. Burgess. And let me just ask you this, because Mr.
Gowdy asked a very important question about the enforcement
action of all of this. Have you been contacted by the Attorney
General's Office of the State of Texas regarding the things
that you have brought to light?
Ms. Ellis. I was contacted by both Texas OIG and the
Attorney General within about a week's period after one of
Byron Harris's stories ran and was basically told that I needed
to work with just one, and the decision was made that OIG was
the place where I could be best of service.
Mr. Burgess. So that is the State Inspector General.
Ms. Ellis. Yes, Texas OIG.
Mr. Burgess. Has the Office of Inspector General at the
Department of Health and Human Services talked to you?
Ms. Ellis. The Federal?
Mr. Burgess. Yes.
Ms. Ellis. No.
Mr. Burgess. Region 6 is down in Downtown Dallas, they are
right next door to where you work at Children's Medical Center,
but you have not talked with them?
Ms. Ellis. No, I haven't talked with them.
Mr. Burgess. And as far as anyone from the Fraud Division
at the Department of Justice, have they visited with you?
Ms. Ellis. No.
Mr. Burgess. But it sounds like there may be a significant
number of dollars that have been fraudulently transferred, so
just to the man on the street it would seem likely that this
would be something that would be of interest to the Fraud
Division at Department of Justice, would it not?
Ms. Ellis. I would agree with that, yes.
Mr. Burgess. And, again, just following the reasonable
person concept, I don't see how they have missed that. And you
make such an important point about the risk and potential
damage from unnecessary care. I mean, this is not a question of
denying care to a needy child or a child who has a diagnosis
that compels the care, but when you indiscriminately apply care
across a population that is not in need, there is also the
possibility that you are going to be causing future
difficulties for these kids, is that not correct?
Ms. Ellis. That is true.
Mr. Burgess. And that is why it is so important that, yeah,
people do the right thing, but not only that; if they are doing
the wrong thing, that they be stopped and that they be held
accountable. When I was in the practice of medicine, and I
grant you it has been a few years that I have been in active
practice, but it seems to me you had a law on the book that
prevented the corporate practice of medicine in the State of
Texas. Now, that may have changed in the last legislative
session, I am not sure. Is there also a similar prohibition on
the corporate practice of dentistry in Texas?
Ms. Ellis. There is a paper that has been provided to this
Committee, and I can make it available to you, that actually
summarizes the corporate practice of dentistry in all 50
States. The basic answer to your question, no, it is not legal.
Mr. Burgess. And, again, since that is a State statute, it
would appropriately be the attorney general's office that would
prosecute those cases, would it not?
Ms. Ellis. I don't know how to answer that.
Mr. Burgess. You know, I am not asking this to be
contentious, but we need to get the people who should be
enforcing the law to be interested in enforcing the law. In all
sincerity, that is the purpose in asking the question. I want
this to happen. During the time I was in practice, I always
felt that if I broke the law, something serious would happen to
me; it would happen quickly, and I wasn't sure what would
happen, but I knew it would likely be bad.
Now you have the situation completely turned on its head,
where no one seems to care that it is illegal because not only
is no one looking, but if it is put right in front of someone,
there is no enforcement action. And, again, not just picking on
the State here, because we are going to be hearing from the
Center of Medicare and Medicaid Services in a little bit. They
also bear a tremendous responsibility here about not just
allowing the money to go out the door inappropriately, money
that should be going to good purposes and taking care of people
that we are obligated to care for, but people are being damaged
in the process; and it is their dime that is allowing it to
happen.
So, again, I am just frankly stunned that the Center for
Medicare and Medicaid Services--I mean, what is involved in an
audit? When I get audited by the IRS, again, I know that it is
going to be pretty dreadful. What is involved in these audits?
Is no one noticing the flight of dollars out the door? I
realize Texas had some problems in the initiation of SCHIP, and
when President Bush was a candidate back in 2000, he received a
lot of criticism because his State spent less than other
States. But in the process of trying to deal with that, we have
now created the nightmare scenario for a lot of families in
Texas that are receiving care that, again, not only
unnecessary, but likely to be damaging to their future health.
Mr. Chairman, I appreciate the time that you have allowed
me and appreciate the generosity. I am going to yield back, but
we haven't heard the end of this, and this story is one that is
important and we need to get the people who are supposed to be
in charge of watching the hen house back to doing their job.
Mr. Jordan. I thank the gentleman.
Before yielding to the gentleman from Connecticut, let me
just ask Dr. Feldman and Dr. Feinwachs has anyone from CMS, the
Inspector General from CMS or HHS, or anyone from the Justice
Department contacted officials in New York City or State
officials in Minnesota? And we will start with Dr. Feldman.
Dr. Feldman. I have encouraged them to; I have given them
plenty of names and fodder. I don't know exactly what the
follow-up was.
Mr. Jordan. But, to your knowledge, no one has contacted
the City of New York officials regarding the issue, Dr.
Feldman?
Dr. Feldman. No.
Mr. Jordan. Okay.
Dr. Feinwachs?
Mr. Feinwachs. Mr. Chairman, in mid-year 2011, when the
State of Minnesota's 1115 waiver came up for renewal, we
contacted CMS and implored them not to renew the demonstration
waiver because of problems. But our concerns, to the best of my
knowledge, have not been addressed.
Mr. Jordan. And no one from the Justice Department has
contacted officials in the State of Minnesota, to your
knowledge?
Mr. Feinwachs. To my knowledge, no, sir.
Mr. Jordan. All right, thank you.
We will now yield to the gentleman from Connecticut, Mr.
Murphy.
Mr. Murphy. Thank you very much, and thank you all for your
testimony and for your courage in bringing all of this forward.
I think it is appropriate, Dr. Ellis, that a lot of the
questioning has focused on the revelations that you have
brought to light because it speaks to this much larger issue of
an explosion of for-profit institutional care in this Country.
It is not just for-profit dental clinics; we, today, have more
for-profit hospitals than ever, more for-profit hospices, for-
profit nursing homes, dialysis centers, outpatient surgical
centers, walk-in clinics. And you have hinted at this in some
answers to questions, but I might ask you sort of a broader
one, which is that you speak to one of the solutions here being
a crackdown on the private equity ownership of dental
practices. In response to Mr. Burgess's question, you were
talking about some of their innovative recruitment methods.
Let me ask you this question. What is that you think is
unique about private equity ownership of a dental clinic or,
frankly, of any other institution that makes it more likely
that fraud will occur in that setting versus a nonprofit
setting?
Ms. Ellis. In my opinion, there is a conflict of interest
in who holds the doctor's interest. Is it his employer and
their investors or is the doctor's patients? There are plenty
of private practitioners who are guilty of what has been going
on in Texas as well. They just aren't able to leverage the
dollars that the private equity companies are.
In my written statement I hope I don't throw all the blame
on just private equity, but certainly they are part of the
problem. But it just comes down to a conflict of interest. If
you are the doctor and the patient is your patient, and you are
interested in maintaining the integrity of your private
practice, you have to make sure that you are delivering care or
your reputation within the community is going to become not
that that will attract patients to your business.
The private equity groups tend to operate by name, they
don't identify themselves by dentist. The patient comes to the
company. They are coming to an image, they are not coming to an
individual. And the dentists that are in their employment are
under a contract, and in a lot of these companies they will
have bonuses tied to production. The production is expected to
be in the patient's best health, but the corporation is clearly
in the interest of pursuing greater and greater profits.
Mr. Murphy. Bonuses tied to production, not necessarily
bonuses tied to quality.
Ms. Ellis. Exactly.
Mr. Murphy. Dr. Feinwachs, in Connecticut we have had a
long history with Medicaid managed care, and I won't go through
the song and dance of all the problems that we had, but
eventually, last year, we decided to bring our Medicaid program
back in-house, and that has resulted in a pretty substantial
savings to taxpayers. Representative Ellison hinted at this
question, I think, but can you talk about this broader issue of
whether fraud is more likely under a Medicaid managed care
system and whether, ultimately, we have a guaranty that we are
saving taxpayer dollars by continuing to manage Medicaid
dollars in a private HMO system versus a system run by a State
government?
Mr. Feinwachs. Mr. Chairman, Representative Murphy, let me
say, first, before I address that question, I may have
misspoken previously. While I have no personal knowledge, I
believe there is a deal, a Department of Justice inquiry going
on in Minnesota. I think there have been stories run about it
in the newspaper. So I don't mean to suggest that that is not
happening, but I know what I read about it.
Having said that, sir, let me address your question. I
don't think that there is any guaranty of efficiency, network
adequacy, or any of the hallmarks that we would attribute to a
properly and efficiently run Medicaid system because of the
presence of managed care, so-called. I think in Minnesota we
have a tremendous health care system, which is due to the
commitment and dedication of our health care providers;
hospitals, physicians, dentists, podiatrists, chiropractors,
across the board. That is the fuel which moves the engine of
health care forward in our State.
What we need to do is to engage in auditing designed to
answer exactly the question you have raised: What is the value
of managed care in its involvement in this system, does it add
value, does it add expense, what exactly does it do and how
does it do it, in order to reach an intelligent conclusion to
that very important question.
Mr. Murphy. I know my time has expired here. I asked the
question because the budget that we just voted on here proposes
effectively doing the same thing for Medicare that we do in
most State systems for Medicaid, essentially handing the system
over to the private sector. And I think it is useful to look at
both the equality experience and the fraud experience of States
that have done the same thing with their Medicaid programs.
Mr. Chairman, thank you very much for the time.
Mr. Jordan. I thank the gentleman.
Let me just start with you, Dr. Feinwachs. The overpayment/
donation, the $30 million that was referenced several times in
the hearing, that was just one company, right, that was UCare?
You had four companies involved in the Medicaid managed care
program, correct?
Mr. Feinwachs. Mr. Chairman, that is correct, there are
four companies and UCare is the smallest, and smallest by quite
a----
Mr. Jordan. Okay. So in your judgment, in your estimation,
in your professional opinion, what is the potential
overpayment/donation concerns if you factor in the other three
managed care companies?
Mr. Feinwachs. In the absence of complete data, it is
somewhat difficult to answer, but assuming that the overpayment
was for UCare alone, that would have been $30 million relative
to six months for that company. If you work that math
backwards, you come out with about a half a billion dollars. If
the overpayment was to----
Mr. Jordan. Half a billion dollars in a six month time
frame?
Mr. Feinwachs. No, sir, half a billion dollars----
Mr. Jordan. Over several years.
Mr. Feinwachs. --back to 2003.
Mr. Jordan. All right.
Mr. Feinwachs. If the $30 million was to represent the
overpayment for six months to all companies, the result will be
different. The problem is we have no audit trail, we have no--
--
Mr. Jordan. Safe to say that it is significantly more than
$30 million.
Mr. Feinwachs. Much, much more.
Mr. Jordan. Okay. Let me just ask. I assume you are all
involved in some national association, with the hospital
association. You probably travel to national events,
conventions, or what have you. Dr. Feldman, Dr. Ellis, the same
thing. When you are at those events or when you get a chance to
interact with your colleagues from around the Country talking
about this issue may come up, to what extent do you think this
is across the Country, so it is not just isolated in Minnesota,
Texas, and New York? And let me start with Dr. Feldman.
Dr. Feldman. I have no doubt whatsoever in my mind that if
you go to the top five States--New York, Ohio, Florida,
California, Texas--where a third of all Medicaid money is
spent, you will find similar patterns. I think New York is
probably the most egregious situation because of our
sociopolitical situation, but I am very confident that you will
find similar schemes, similar problems all across the Country.
The point is to go where the money is, and, as you said, this
program is going to cost over $7 trillion whatever time period
you want to use. But it is important to understand most of that
money over the next 10, 20, and 30 years is going to be spent
on long-term care and custodial care and nursing home care. So
you better be prepared to be lambasted by advocacy groups who
are constantly saying you are just doing this because blah,
blah, blah, blah, blah. So I would urge you all to start where
the money is, in long-term care and personal home health care.
Mr. Jordan. And if I could--and I will get to Dr. Ellis and
Dr. Feinwachs, but while I have you, Dr. Feldman, you talked
about the Medicaid industrial complex. Is that what you are
referring to in those----
Dr. Feldman. Yes. I think that this is an absolutely
terrific example of a joint situation; it is nonpartisan. I
talked about the military industrial complex. Well, let me tell
you something, in 1970 we spent about 6 percent of our GDP on
defense and we spent about 6 percent of our GDP on health care.
We now spend maybe 3, 4, 5 percent on defense and we spend 17
percent on health care. This is what the voters want and I
support it. I am a physician. All I am asking is to understand
and accept the fact that whenever there is money out there that
is labeled Medicaid, and whenever you have deserving
beneficiaries, it is so easy to defraud people.
Mr. Jordan. And let me just ask you, and all those concerns
and potential problems are exacerbated by the fact that if in
fact the ObamaCare legislation becomes law and takes effect,
approximately 20 million more individuals are going to be part
of the Medicaid program.
Dr. Feldman. Yes. And I think both side of the aisle should
be aware of this. If it passes, we are going to expand Medicaid
greatly. And, believe me, you guys are going to be very busy
and CMS will have to probably two, three times the amount of
money worrying about fraud. And if it doesn't pass, I think the
right side of the aisle is quite naive to think that that 17
percent GDP number isn't going to go to 25 percent in the next
25 years.
Mr. Jordan. No, that has to be changed.
Dr. Ellis, while Texas, you understand the situation there,
but in your opportunities where you have had to interact with
colleagues around the Country, while it may not be as
widespread as what you have seen in your State, do you think it
exists in other States as well?
Ms. Ellis. Well, Texas blows every other State away by a
mile.
Mr. Jordan. I understand that.
Ms. Ellis. So, quite honestly, I don't--my feeling is that,
no----
Dr. Feldman. I resent that. New York is far above everyone
else in this.
[Laughter.]
Ms. Ellis. When it comes to orthodontics, it is just such
an obvious no-brainer. I just don't think that if it is not
stopped, surely it will spread to other States, but right now I
don't feel that that is the case.
Mr. Jordan. Okay.
Dr. Feinwachs, quickly?
Mr. Feinwachs. Not to be outdone, Minnesota's fraud is more
massive and more clever than yours.
Mr. Chairman, I do believe the problem is widespread across
the Country. I also believe that it is a bipartisan issue
because whether your issue is deficit reduction or expansion of
access to health services, our system is terribly broken and we
have to repair it.
Mr. Jordan. Great point. As Dr. Ellis and I think you have
all pointed out, there are people who needed care and qualified
for the care who didn't get the care because of the fraud that
was taking place, and then there is just the waste and the
unfair treatment of taxpayers. So I think that is well said.
And we have the gentlelady from Minnesota.
Ms. McCollum. Thank you, Mr. Chair. And I think you
summarized why we need to address this really well, watch out
for taxpayers and make sure that people who deserve access to
these health care opportunities have them.
Mr. Feinwachs, I want to thank you for all the years of
service. I remember when I was on Health and Human Services in
Minnesota, you testifying; always straightforward, always
answer questions directly like you are today, so thank you very
much for everything that you have done.
I have three questions, and I am just going to put them out
there altogether for you.
Minnesota's nonprofit, we have some things written into the
law which has a little more transparency than other States do
as to what is going on with their Medicare contracts. The
State, right now, it will be at the governor's desk to provide
a third independent party audit. If you can kind of give us
some pointers of where you think we should be going as a
Committee for looking for what type of audits.
The second point I would like to bring up, I am very
concerned about block granting Medicaid because when you block
grant it, it is just a dispersal out there; there aren't as
many strings attached. And even with the strings that we have
attached now, we are not doing a good job of watching
taxpayers' dollars, making sure that those individuals have
providers who can afford to give them treatment that they
needed.
And I know Senator Hahn I believe was here promoting block
grants. He stopped by our office, I believe, and it is
something I am very skeptical of.
And then my third point is I agree, and I know that the
Chair is going to ask a little more about the email and the
returning of the money between the Federal and the State. I
guess the State should, as a resident of Minnesota, we have a
shortfall. If it gets returned to the State coffers, that is
one thing, but we also have a shortfall here in the Federal, so
having it returned to the Federal Government is as good as
well. But the fact is that it was even caught in the first
place. So if you can just talk a little bit about audits and
maybe your opinion of block grants, it would be very helpful to
me to hear from a fellow Minnesotan.
Mr. Feinwachs. Mr. Chairman, Representative McCollum, I
would be happy to try to address those questions.
First, let me say something about nonprofit status in
Minnesota. Our HMOs are required by statute to be not-for-
profit. In my estimation, corporate nonprofit status confers
tax exemption, not sainthood. What is important in any
organization is the integrity of its management and codes of
ethics that are present in order to provide proper service and
accountability.
To the issue of audits, the audit question I believe is
relatively straightforward. You need rigorous oversight and
audits by independent third parties. We also need to determine,
in Minnesota and elsewhere, if the consulting actuary to the
State has been permitted to consult with the State's vendors.
This would seem to raise a problematic issue, a red flag, if
you will.
We know now that in Minnesota that such things have been
permitted in the past, historically, and even now the argument
is made that it is not occurring anymore, but the safeguard I
believe that is being proposed now is that different employees
from the same firm will consult both with the State and the
State's vendors, and that seems less than well advised.
So these audits need to be truly independent; they need to
be accountable to the Federal Government; and, above all, they
need to enforce the standards we have because all of the
practices that you have heard described today, not only in
Minnesota, but elsewhere, are in fact unlawful and should be
addressed and dealt with.
So audits retrospective, prospective, and ongoing need to
occur. In Minnesota we just enacted an audit bill. First audit
won't start until 2015. And unless I miss my guess, because of
funding problems in the future or arguments related to less
accountability, perhaps due to block grants, perhaps not, but
like all things political, when there is a delay, there is time
to dismantle the good work that has been proposed. So our need
for audits are immediate and prospective and retrospective, and
done by a truly independent third party.
Ms. McCollum. Mr. Chair, in the time that is remaining, it
used to be our county, we had a county system that delivered
care to people who found themselves in the gap, and we were
told that the private sector could deliver it better. And now I
think we have to question as to, without proper oversight and
penalty for defrauding taxpayers, if in fact a private sector
business model is in the best interest of the taxpayers.
Mr. Jordan. I thank the lady.
Now I will yield to the gentleman from Ohio, the Ranking
Member in the Subcommittee.
Mr. Kucinich. I am going to wait for the next panel.
Mr. Jordan. We appreciate that.
We want to thank you all for----
Mr. Davis. Mr. Chairman?
Mr. Jordan. Mr. Davis?
Mr. Davis. Can I just make a clarification?
Mr. Jordan. Sure can.
Mr. Davis. One, I just need to clarify that there is
current investigation taking place in Minnesota by the
Department of Justice. There has been a settlement in the
allegations in New York. Also, the CMS has no authority to
determine or prosecute fraud; that falls to the Office of the
Inspector General or to the Department of Justice, and CMS can
only take financial action related to the Medicaid matching
programs. I just wanted to make those clarifications.
Mr. Jordan. Yes, but it is also true that CMS has to
approve the waiver when a State decides that it is going to
operate under this plan, the rate reimbursement that they are
going to receive.
And they did in fact approve the request by the State of
Minnesota, isn't that correct, Dr. Feinwachs?
Mr. Feinwachs. Mr. Chairman----
Mr. Jordan. They approved it after several provider groups
had written and said, hey, you need to take a look at this and
maybe think twice about doing this, and yet they went right
ahead. Isn't that correct, Dr. Feinwachs?
Mr. Feinwachs. Mr. Chairman, Representative Davis, that is
correct. Also, we do something called Medicaid rate
certification. We certify, we attest to the Government that the
rates are correct. And even though CMS may lack enforcement,
they should be verifying and looking at that process to make
sure that those certifications----
Mr. Jordan. But don't they have to sign off on it before
they have to pay it?
Mr. Feinwachs. They do, sir.
Mr. Jordan. So that took place, correct?
Mr. Feinwachs. Correct.
Mr. Jordan. Okay. I thank the gentleman.
I thank the gentleman from Illinois.
We want to thank our first panel for being here and for
your work.
We will now ask the staff to prepare for our second panel.
[Pause.]
Mr. Jordan. The Committee is in order.
We want to thank our second panel for being here. It is
still this morning. We have with us Ms. Lucinda Jesson, who is
the Commissioner of Minnesota's Department of Human Services;
we have Ms. Cindy Mann, Director of Center for Medicaid State
and Operations for the Centers for Medicare and Medicaid; and,
of course, Ms. Carolyn Yocom, who is the Director for Health
Care at the U.S. Government Accountability Office.
We have to do the same routine, so if you will stand up and
raise your right hand.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[Witnesses respond in the affirmative.]
Mr. Jordan. Let the record reflect that all of our
witnesses answered in the affirmative.
You get five minutes. You guys know the drill. We will
include all of your written testimony in the record, but if you
can keep it to five, approximately five, that would be great,
because I know that Mr. Gowdy, Mr. Kucinich, and Mr. Davis, we
have some questions for you.
So, Commissioner, we will go right down the list and you
are up first.
STATEMENT OF LUCINDA JESSON
Ms. Jesson. Thank you, Mr. Chair. Mr. Chair and members, my
name is Lucinda Jesson. I am Commissioner of the Department of
Human Services for the State of Minnesota. Thank you for the
opportunity to discuss Minnesota's Medicaid program.
You know, Minnesota is a leader, and has been, in using
managed care to serve its Medicaid population, and I was happy
to accept this invitation because, as more and more States move
Medicaid populations into managed care, there are a lot of
lessons to be learned from Minnesota; lessons about what works
and lessons about what needs to be done differently, both types
of lessons.
First let me talk about what works. Access, quality,
innovation, delivery models. Minnesota has placed a high
priority over many years in providing good access to health
care for its low income citizens, and managed care is available
to enrollees statewide through our nonprofit HMOs and county-
based health plans. And let me be clear. Managed care has been
critical to providing access to health and long-term care
services for our Medicaid population. You often hear in other
States that having public insurance doesn't mean much if you
can't see a doctor. Not in Minnesota. Overall, our enrollees
have access to quality care.
What needs improvement? Better contracting, being a smarter
purchaser of health care, and, frankly, increased oversight.
And let me address each of these concerns and briefly outline
the steps Minnesota has taken over the past 15 months, since
Governor Mark Dayton took office, to address them.
When Governor Dayton and I took office last year, we had
serious concerns about how the Department of Human Services
under the previous administration had purchased health care for
its Medicaid managed care program. We also had concerns about
the transparency and oversight of the contracting process
itself. Our concerns stemmed from increasing profit margins
that health plans earned from public programs, the particularly
high level of health plan reserves--and I attached some charts
on these things to my written testimony--which resulted in
part, these reserves, from profits on public programs, and we
had concerns about the contracting process itself.
We were struck that the contracts we inherited from the
previous administration offered few incentives for improving
quality and reducing costs. Moreover, at a time when the
private sector was making considerable progress on payment
reforms, doing more creative things, the State contracts
remained stuck in the old way of doing business.
We also felt that the actuarial soundness requirement was
inherently inflationary, because you ended up setting rates in
the future based upon primarily what had happened in the past,
and we questioned where the incentives were for more
efficiency.
So while there are and were many positive aspects to
managed care, there was also a lack of creativity and a lack of
focus on value on how health care was purchased in Minnesota,
and we moved very quickly to address those. First, we addressed
the 2011 contracts we inherited by asking all four major health
plans to voluntarily agree to cap their 2000 earnings at 1
percent of operating margins for our programs, and I want to
thank the plans for agreeing to that.
Earlier this month we announced that an estimated $73
million will be returned to the Federal and State governments
due to this cap on excess profits. And when you add to the $30
million from UCare, which we have agreed with CMS to treat
under that 1 percent cap so that the Federal Government is
returned its share, when you add those two together, you have
over $100 million we recovered for Federal and State taxpayers
from the previous administration's 2011 contracts.
But we didn't stop there. Just a little over a month after
I took office, we put the major health plan contracts for the
Twin Cities metropolitan area out for bid. In the past, DHS,
working with its actuaries, basically set the capitation rates,
and any plan could participate if they accepted those rates.
Those rates were approved by CMS. But under competitive
bidding, we changed the incentives. Plans had an incentive to
give us their best proposal in terms of cost and quality.
And there were winners and losers among the health plans,
but the real winners were the Federal and State taxpayers who,
under the new contracts, had $175 million in savings to the
State and an equal $175 million to the Federal Government. When
you combine this with our other managed care reforms that we
passed with strong legislative support, our managed care
reforms totaled over $600 million, and that is in addition to
the $100 million from the cap, in savings to the State and
Federal Government.
But we need to not only be a smarter purchaser of health
care; we need to increase the oversight of these large
contracts, and no one believes that more than I do. In
Minnesota, there are, as you have heard, very real questions
and some mistrust over where these billions of dollars are
going, and that is why Governor Dayton, just two months into
office, ordered additional audits of the health plans, and
those audits started this month. They are being conducted by
outside vendors contracted by the Minnesota Department of
Commerce.
Additionally, at DHS, I created the Office of Inspector
General to enforce increased program fraud detection and
prevention efforts. We also changed the contracts we had with
the health plans to have better compliance, and we added
reporting requirements about what they were doing on their own
program integrity office.
Finally, as someone mentioned, the Human Services Bill,
which just passed our legislature and is headed to Governor
Dayton's desk, requires a requirement for third-party financial
audits in addition to the ones the governor has ordered. These
audits will strengthen our oversight that we have conducted
through our legislative auditor's office and Governor Dayton
strongly supports this requirement.
Minnesota has long been a leader in how managed care plans
serve our Medicaid enrollees, but changes needed to be made in
the way we do business now and in the future. We have made an
unprecedented number of them just in the last 15 months, and we
are not done.
Thank you.
[Prepared statement of Ms. Jesson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Jordan. Thank you, Commissioner.
Director Mann?
STATEMENT OF CINDY MANN
Ms. Mann. Good morning, Chairman Gowdy and Gordon, Ranking
Members Davis and Kucinich, and members of the Committee. Thank
you for the invitation to discuss Medicaid's financial
management.
No matter could be more central or important to the
Medicaid program, or indeed to any health care program.
Medicaid, as you all know, is the primary source of medical
assistance for millions of low income, disabled, and elderly
Americans, children and adults alike. In fiscal year 2012, an
estimated 56.6 million people will receive their health care
coverage through the Medicaid program.
The Medicaid program establishes, at the Federal level, we
establish minimum requirements. States design, implement,
oversee their Medicaid programs and federalism is the hallmark
of the program. Our basic financial management arrangement
works as follows: States pay for the health care benefits
provided to eligible individuals and the Federal Government, in
return, matches qualified State expenditures at a rate that
varies between 50 and 75 percent. On average, States are
responsible for about 43 percent of program costs. The matching
structure ensures that both the States and the Federal
Government have a very strong fiscal interest in assuring that
the program operates efficiently.
I am going to use my time this morning to briefly describe
our methods of financial oversight that relate specifically to
the issues raised at this hearing, but let me first make a few
quick observations.
Medicaid, like other payers, is very interested in
supporting new ways of delivering and paying for care to
promote better care at lower costs. Fortunately, we have at our
side something most payers don't have, which is 50 State
partners. We have a number of States that have been approved to
operate and create health homes that are looking for shared
savings arrangements with their providers, and States as
diverse as Texas and Massachusetts that are redesigning in
fundamental ways their Medicaid delivery systems.
Second, because Medicaid, like the marketplace, generally
is experiencing significant change, our goal is not just to
manage the issues that were identified last year or five years
ago, but, rather, to develop new tools and methods to respond
to and, indeed, to anticipate the changing landscape.
Therefore, like many prudent purchasers, we value in our
investing in data and measurement to assess what is working, to
rapidly adjust when things aren't working, and to rapidly scale
when things are going well. Improved data and measurement will
take a while for us to fully implement, but it will allow us to
better track costs, utilization, integrity, and quality.
Third, nothing that has been talked about today is unique
to Medicaid. Orthodontists doing improper billing, health plans
overcharging, those aren't unique to the Medicaid program,
sadly. The work that the Attorney General of the United States,
that Secretary Sebelius have done to aggressively fight health
care fraud with the private sector, has focused on health care
fraud more broadly and the notion that it is a broad issue that
affects public, as well as private payers. We have a major
responsibility to do so, but it is not a problem that is unique
to either Medicaid, Medicaid, or commercial payers.
I am going to now turn to a general description of our
methods for overseeing the payment of Federal matching funds.
States report their expenditures to us on a quarterly basis
through an online system, and a team of accountants and
financial management specialists review those States'
submissions of expenditures. They review them carefully and
approve them or defer them before we pay our Federal matching
payments.
Our teams also coordinate with State auditors and with the
HHS Office of Inspector General to ensure that State
expenditures and corresponding claims for Federal funds are
allowable, and every year we also establish with our regional
offices a work plan for an in-depth financial management review
that reflects our assessments or risk. We might follow up with
an OIG report that suggest a problem that might be widespread;
we might focus on an area of spending that we think is prone to
abuse. When we question expenditures, we defer payment; we
defer the Federal funds to the States pending resolution, and
then we disallow the funds for claims for which adequate
documentation or justification is lacking.
We are not, as Congressman Davis pointed out, we are not
the fraud office; we are not the law enforcement office. But
we, of course, work very closely with those offices as
appropriate. And I might say, in that regard, that the Office
of Inspector General, the HHS Office of Inspector General, the
Department of Justice has been involved in each and every one
of the matters that we have discussed today, both in New York,
in Minnesota, as well as in Texas.
Let me turn next to our oversight of plans and provider
payment rates. Under Federal Medicaid law, States are
responsible for setting their rates to providers and plans in a
fair and efficient manner, and assuring that plans and
providers are paid enough so that Medicaid beneficiaries have
access to care. Both of these elements of the equation are
really critical. We and States must have measurement systems in
place to assure that rates are sufficient to provide our
beneficiaries with access to care.
This relates directly to the matter that Representative
Cummings mentioned earlier with respect to Deamonte Driver, who
died for lack of being able to find dental care in the State of
Maryland. We issued proposed rules on how we might monitor
access last year and plan to finalize that rule later this
year.
At the same time, plans and providers must not be paid more
than what is fair and efficient, or else the program is wasting
money or spending money inappropriately. As a result, we set
outer bounds in the Medicaid program. For example, we won't pay
more than the upper limit of what Medicare would pay for
certain classes of providers, and we require rates paid to
plans to be actuarially sound and certified.
And one very important control that is embedded in the
structure of the program itself is that because States are
spending their own money, as well as the Federal Government's
money, they will take every opportunity to act as prudently
purchasers. We know, of course, that States also will seek to
maximize Federal funding, and so we have measures in place to
ensure that States in fact pay their State share of costs.
Turning specifically to the payment rates in managed care,
we are grateful to the GAO for its work over the years and its
recommendations specifically in 2010. We have taken those
recommendations very seriously and we are working towards
implementation. We have made good progress, but more needs to
be done. We have supported our regional offices through
training and guidance; we are creating a stronger database for
the evaluation of rates; we are developing an online system of
contract review; and we are planning to strengthen our
financial management and oversight to move more toward a risk-
based approach, modulating the depth of review based on risk
factors.
With respect to Minnesota--and I will just be a moment--we
are pleased to report, as the Commissioner noted, that
Minnesota determined that it will provide, appropriately, we
believe, the Federal Government with its share of the UCare $30
million that was received by the State, and we also have added,
contrary to, I think, the implications earlier, in the terms
and conditions to the waiver in Minnesota, very specific
provisions to assure that there is increased oversight in the
Minnesota plans, and we continue to work very closely with the
State as we move forward.
Thank you.
[Prepared statement of Ms. Mann follows:]
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Mr. Jordan. Thank you, Director.
Director Yocom?
STATEMENT OF CAROLYN L. YOCOM
Ms. Yocom. Chairman Jordan and Gowdy, Ranking Members
Kucinich and Davis, and members of the Subcommittee, I am
pleased to be here today as you discuss oversight of the
Medicaid program.
The Medicaid program has been on GAO's list of high-risk
programs for nearly 10 years, in part because of concerns about
the program's fiscal management. CMS and its State partners
continue to face challenging finding the proper balance between
Federal oversight and States' flexibility to administer their
Medicaid programs. Both the States and the Federal Government
must take responsibility for managing program finances
efficiently.
My remarks today summarize some of GAO's prior work on
CMS's oversight of three areas of the Medicaid program: States'
rate setting methodologies for capitated managed care,
supplemental payments, and program integrity. Overall, our
prior work has shown that that CMS has faced challenges with
the fiscal management of Medicaid in these three areas.
First, with regard to rate setting methodologies, in August
of 2010, we reported on CMS's oversight of States' compliance
with actuarial soundness requirements which govern the process
used to develop capitated managed care rates. At the time of
our reporting, we found significant gaps in CMS's oversight of
two States. In particular, CMS had not reviewed one State's
rate setting for multiple years, nor had it completed a full
review of another State's rate setting since the actuarial
soundness requirements became effective, which was in August
2002. Beyond these two States, we identified additional
inconsistencies in oversight, raising concerns that CMS was not
ensuring other States' compliance with actuarial soundness.
In this same report, we noted that actuarial certification
does not ensure that the data used to set the rates are
reliable because actuaries may not audit or independently
verify these data. CMS's efforts to ensure the quality of the
data used to set the rates were generally limited to requiring
assurances from States and health plans. From GAO's
perspective, these efforts do not provide enough information to
ensure the quality of the data used to set rates. With limited
information on data quality, billions of Federal and State
dollars are at risk for misspending.
Second, for over a decade we have reported on various
financing arrangements involving supplemental payments that
shift the cost from the States to the Federal Government. Our
work has found that while a variety of congressional and CMS
actions have helped curb such arrangements, gaps in oversight
remain. Statutory changes have resulted in recent regulations
that have the potential to improve oversight of some, but not
all, supplemental payments.
Effective in 2011, there are improved transparency and
accountability requirements for supplemental payments to
hospitals that treat large numbers of low income and Medicaid
patients. However, these requirements, such as facility-
specific reporting, are not in place for other types of
supplemental payments, which appear to be increasing. Because
such financing arrangements effectively increase the Federal
Medicaid share above what is established by law, they threaten
the fiscal integrity of the Medicaid program and they damage
the Federal-State partnership.
Last, in December 2011, we testified that a key challenge
CMS faced in implementing its Medicaid Integrity Program was
ensuring effective coordination to avoid duplicating States'
program integrity efforts, particularly in the area of auditing
provider claims. The largest component of the Medicaid
Integrity Program, the National Provider Audit Program, has had
disappointing results, as these overpayments identified by its
audit contractors were not commensurate with its contractors'
costs.
For example, CMS's audit contractors identified about $15.2
million in overpayments in fiscal year 2010, but the combined
cost of the National Provider Audit Program is over twice that
amount, about $36 million. CMS has announced plans to redesign
this program, but it remains to be seen if this redesign will
achieve improved results.
CMS's other core activities are broad in scope and raise
similar concerns regarding duplication.
On a more positive note, its collaborative efforts on
auditing with States and CMS's Medicaid Integrity Institute, a
national training program for State program integrity
officials, both show promise. In particular, these efforts
appear to promote effective State coordination and
collaboration, and show more promising results.
Mr. Chairman, this concludes my prepared remarks.
[Prepared statement of Ms. Yocom follows:]
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Mr. Jordan. Thank you. Thank all the witnesses.
I will now yield five minutes to the Chairman of the
Subcommittee, the gentleman from South Carolina, Mr. Gowdy.
Mr. Gowdy. Thank you, Chairman Jordan.
Director Mann, since 9:30 this morning we have learned, in
that whopping less than three hours, that there is an expert
witness who will testify that perhaps as many as 90 percent of
the cases in Texas were outside the guidelines. We have
providers who were certifying otherwise in writing. You have
before and after pictures. You have photographs of providers
who were advertising free braces. So it would not be tough, I
don't suspect, to send an investigator to these free braces
clinics to find out what percentage of patients they actually
denied, as opposed to accepted. You have no study showing any
hirer rate of malocclusion in Texas than any other State.
So, with that bevy of evidence, what has CMS done about the
Texas orthodontia scandal?
Ms. Mann. Well, several things that I would like to note.
First, there is an HHS Office of Inspector General is
conducting an investigation now, as well as the Department of
Justice. They are deeply involved and actually just made an
announcement about some agreement----
Mr. Gowdy. Have you talked to the attorney general recently
about this case to get an update on its status?
Ms. Mann. I have not talked to the attorney general
recently.
Mr. Gowdy. Have you talked to the United States attorney
and the appropriate district in Texas to get an update on the
status of the case?
Ms. Mann. Yes. We have been in touch with the Office of
Inspector General. Our regional office has been in touch with
them and I have been in daily, well, regular contact, I should
say, with the State Medicaid director and with the
commissioner----
Mr. Gowdy. Have any orthodontists lost their license to
practice medicine?
Ms. Mann. I don't know that. You asked that earlier and I
thought that was an important question, and I have sought the
answer to that. We don't oversee that, but I don't know the
question. I do know that the orthodontists, if they have bilked
the Medicaid program, not properly billed the Medicaid program,
they should be terminated not just from that Medicaid program,
but from any Medicaid program across the Country.
Mr. Gowdy. Which would be debarment, right? That is the
phrase we use, debarred.
Ms. Mann. Well, our jurisdiction is to terminate them form
participating in the program. We don't honestly control----
Mr. Gowdy. How about to disgorge them of the profits? Has
there been any attempt at restitution or disgorgement of the
profits?
Ms. Mann. My understanding--you will have to talk to the
Department of Justice, we can get you that information, but my
understanding is, at least as to the corporation for whom they
worked, some of them, that is part of it. Certainly from our
point of view--again, we are not the law enforcement arm----
Mr. Gowdy. I understand that. That is why----
Ms. Mann. From our point of view----
Mr. Gowdy. That is why I haven't asked you who has gone to
jail. But you do have a role in getting restitution, do you
not?
Ms. Mann. That is exactly right. And we will----
Mr. Gowdy. So all I can ask you about--I will just ask you
how much money you have collected in restitution.
Ms. Mann. We are looking at which claims were improperly
paid and we will defer all those claims and any that were
improper----
Mr. Gowdy. How long do you think that will take? Because it
just doesn't strike me as being that difficult of a case, to be
honest with you.
Ms. Mann. Generally, when the Department of Justice is
involved in an investigation, we usually wait until their
investigation is complete so that we don't get in the way, but
we will defer the claims pending the investigation.
Mr. Gowdy. So you are going to insist that restitution be
part of any criminal settlement with any of these orthodontists
or corporations?
Ms. Mann. I can't comment on what will happen with respect
to the criminal actions----
Mr. Gowdy. But you are going to ask for it?
Ms. Mann. I can commit that our authority is, and we will,
defer and disallow any claims that were improperly paid.
Mr. Gowdy. All right, Commissioner Jesson, do you know a
Christopher Ricker?
Ms. Jesson. Mr. Chair, that name sounds familiar, but I
don't know who it is.
Mr. Gowdy. Well, I don't either, but this is what he wrote
in an email: We do not want to give any appearances that the
money might be coming to DHS, parenthetically, it bolsters our
argument with CMS that this wasn't a provider return and,
therefore, doesn't need to be shared with them. I guess them
being CMS, which may go to why you want to have telephone calls
as opposed to emails.
So I will ask you why your preference for telephone calls
and not emails.
Ms. Jesson. Mr. Chair, actually, that email was talking--if
you look at the whole chain of them, about two things. One of
them, I was correcting a draft press release, and that was
where I said it should be a donation. But it was also in my
emails----
Mr. Gowdy. Well, let me ask you about that. The context of
it is in order to have a good chance of keeping all this money,
it must be characterized as a donation. It doesn't read in
order to keep the reader of our press release from getting the
misapprehension, it must be corrected, it clearly is calculated
to be able to keep all the money, agreed?
Ms. Jesson. Mr. Chair, UCare, when they came to tell me
about this call to the donation, I was trying to characterize
it the same way they characterized it to me----
Mr. Gowdy. Well, if it were just to correct a press
release, why would you say, if a refund, Feds clearly get half?
Why wouldn't you say we just have to get the press release
right?
Ms. Jesson. Mr. Chair, there is, as you know, a difference
between a bona fide donation, which I believe this was, and a
return of money, and I was trying to make that clear.
Mr. Gowdy. Is there a strict policy on emailing press
releases? Is that why you asked for telephone calls instead of
emails?
Ms. Jesson. No, Mr. Chair. Actually, the reference to
telephone calls was going back to an earlier part of that email
where we were talking about informing the chairs of the
legislative committees----
Mr. Gowdy. You certainly can understand how it might read
otherwise, can't you, Commissioner?
Ms. Jesson. If you only read that portion of the email
chain and not the entire one, I understand that.
Mr. Gowdy. Well, what I am reading is in order to have a
good chance of keeping all this money, it must be characterized
as a donation; not that it must be a donation, it must be
characterized as a donation. If a refund, Feds clearly get
half. Can you work with Scott on redrafting? Also, I thought we
were going to handle this through phone calls. Surely you can
see how a casual reader might get the impression that this was
calculated to keep the full $30 million, and not to correct
some press release, can't you?
Ms. Jesson. What I was doing, Mr. Chair, was what I think
my job calls for when someone makes a donation, and I think
have a good faith basis that it is a donation.
Mr. Gowdy. Do you have a lot of people making $30 million
donations?
Ms. Jesson. That is a really good point, sir.
Mr. Gowdy. So how many $30 million--if it is a good point,
what is a good answer? How many $30 million donations did you
have that you sent emails to make sure they were characterized
correctly?
Ms. Jesson. Congressman, I think that is an excellent
point, because this was a very unique situation, and one which
we didn't have a play book for, where there wasn't a clear
answer. We took one position; CMS took another. And I am glad
we are able to resolve this by basically----
Mr. Gowdy. Well, I don't know that we have resolved it. The
only thing that has been resolved to me is that there is a
perverse incentive to keep as much of other people's money as
you possibly can, even if it means re-characterizing something.
That is the impression I got.
Mr. Chairman, I am out of time.
Mr. Jordan. I thank the gentleman for his important
question.
Before going to the Ranking Member, Mr. Kucinich, let me
just ask you, Director Mann, when did you first learn about the
situation in Texas? Was it through the media, through the press
accounts?
Ms. Mann. It was----
Mr. Jordan. After it had become public knowledge, is that
when you first learned about it?
Ms. Mann. After it had become public knowledge----
Mr. Jordan. What about the situation in Minnesota, when did
you first learn about the----
Ms. Mann. Through the commissioner also of Texas; we talked
about the problem.
Mr. Jordan. After it had become public. What about the
situation in Minnesota, when did you first learn about that,
was it after it had become public knowledge through the efforts
of Mr. Feinwachs and others?
Ms. Mann. Yes, after it had become public knowledge.
Mr. Jordan. How many people work at Health and Human
Services?
Ms. Mann. I don't have that number off the top of my head,
but I would be happy to give you----
Mr. Jordan. I think it is 65,000 is what I have been told.
How many people work at CMS?
Ms. Mann. A little over 300.
Mr. Jordan. So of that 65,000 folks, 300 folks at CMS, do
you have anyone who--I mean, it would seem to me someone would
be watching particularly the Texas situation, where you have
one State doing more of this than the rest of the Country
combined, and yet the first time you found out about it is when
the press broke a story on it?
Ms. Mann. Chairman, we do not pay claims directly; we----
Mr. Jordan. Do you have anyone who does oversight at HHS?
Ms. Mann. The State pays claims and then we would look and
see what happens to those claims and whether those claims are
legitimate claims. There were $200 million, as I understand it,
in orthodontia claims in an account of about $2 billion spent
for dental care that was rising. It should have been detected;
it was clearly an outlier claim. The State did not, in its
surveillance of outlier claims, did not specifically look at
the coding for orthodontia claims. It expected----
Mr. Jordan. So it was the State's problem?
Ms. Mann. It is certainly in the first----
Mr. Jordan. It was their fault that it wasn't recognized
and no fault rests with CMS, even though we just heard from
Director Yocom, who had all kinds of concerns about what goes
on at CMS and how you fail to audit, how you----
Ms. Mann. I think we have joint responsibility. What I am
saying is that in the first instance----
Mr. Jordan. It sounded like what you were saying is you
were blaming Texas.
Ms. Mann. I am saying we have joint responsibility. In the
first instance the State had----
Mr. Jordan. You have 65,000 employees----
Ms. Mann. I don't have 65,000 employees.
Mr. Jordan. Sixty-five thousand employees at HHS and you
just said it was joint responsibility, even though you said
Texas has the responsibility.
Ms. Mann. We have joint responsibility.
Mr. Jordan. Okay. Sixty-five thousand employees and no one
could see this? No one saw this coming? Until it was public, no
one knew about it?
Ms. Mann. We did not know about it until it was revealed.
We are working in many States and many States are doing
predictive modeling, where you can track the expenditures on
different codes and you would identify outliers. That was not
done in this circumstance.
Mr. Jordan. We will be generous for the time for the
Ranking Member. We now recognize Mr. Kucinich from Ohio.
Mr. Kucinich. Thank you very much, Mr. Chairman.
I want to follow up on a line of questioning that my
friend, Mr. Gowdy, began of Commissioner Jesson.
Commissioner, until just the day before yesterday you
maintained that the Federal Government was not entitled to any
part of the $30 million UCare transfer, isn't that right?
Ms. Jesson. That is correct.
Mr. Kucinich. Okay. Now, after CMS pursued this matter with
you, you have apparently changed your mind and you intend to
give the Federal Government its share of the UCare transfer. I
have questions about how you got to the point of believing and
acting to keep all of the UCare funds from Minnesota, when many
believed at the time, and you now concede, that the funds
needed to be divided with the Federal Government.
Now, you note in a letter to CMS a discussion of the
donation announcement with Ms. Mann while you were attending a
conference in Baltimore in March of 2011. Is it your testimony
that you provided Ms. Mann with full information on the matter
at that encounter and that Ms. Mann then gave you an approval
of your intention to keep all the funds from Minnesota?
Ms. Jesson. No, Congressman, that is not what I am saying.
I did--Nancy Feldman, who is CEO of UCare, came to my office
and told me on March 14th that they were going to make this
donation. I was in Baltimore on the 16th and 17th of that week;
during that time I met with Cindy Mann and people from CMS, and
it was more of a here is a heads-up; we are issuing a press
release today about this donation.
Mr. Kucinich. So when this discussion occurred, were you at
a reception, was it a formal business meeting, were either
present? Did you present a legal analysis? Help me understand
this. How did that come up?
Ms. Jesson. This came up during, it was a scheduled
meeting; we were there for what was called a pace car event and
we were meeting with CMS about exchange-related matters about
the health exchange. So there was a group of people from
Minnesota and a group of people with CMS. It was not on the
agenda of the meeting; I just said it to let her know what was
going on. I have never said that she said that is fine. As a
matter of fact, I believe when I said it I said something along
the lines of----
Mr. Kucinich. So you are saying now that you didn't believe
that you had some form of approval from Ms. Mann, or indirectly
from CMS, of your characterization of the funds as a donation
solely to the State be placed in the Minnesota general fund, is
that right?
Ms. Jesson. That is right.
Mr. Kucinich. Where did you get the idea, then, that it was
a donation? How did that come up?
Ms. Jesson. Congressman, it came up because UCare, when
they came in, they said, we are making a donation to the State
of Minnesota of $30 million from our reserves; and that was
really just two days before I talked to Ms. Mann, and that was
what I knew. I did look at the contracts myself to see did they
owe us this money? They didn't owe us this money under the
contract and we hadn't asked for the money. So from my
perspective----
Mr. Kucinich. They didn't owe you the money, you hadn't
asked for it, but you wanted $30 million to go to the general
fund of Minnesota. How does that happen? I don't understand.
Ms. Jesson. Congressman, what UCare told me when they came
to meet with me was Minnesota had a historic budget deficit of
$5.3 billion. They felt like they had the money available in
the reserves; they made a donation. But, if I may, Congressman,
I just want to be clear, as far as changing my mind. We
believed we had a bona fide donation, and there are
disagreements----
Mr. Kucinich. But what is a bona fide donation? I don't
understand that. I mean, the rule is you would have to give
half to the Federal Government. Now, in fact, as early as July
2011, according to what we have, Ms. Mann began to question
you, asking you for your justification in keeping the entirety
of the UCare transfer for Minnesota. Now, to me, that doesn't
seem consistent with this notion that somehow CMS had known,
signed off. Help us with this. Help us understand this.
Ms. Jesson. Congressman, we took the position that it was a
donation. CMS took the position that it was a refund and had to
be shared with the Federal Government. After we got the
donation, we provided additional information to CMS. We have
differences with CMS over large amounts of money often.
Sometimes if we don't----
Mr. Kucinich. Really? Such as what? Give me another example
of a difference you have with CMS on a large amount of money,
and are you withholding that money from CMS?
Ms. McCollum. Mr. Chair, if the Commissioner could finish
the thought, please.
Mr. Kucinich. Excuse me. The gentlelady from Minnesota, I
have a line of questioning here which is important for the work
of this Committee, and I would ask the gentlelady to suspend.
Would you answer the question, please?
Ms. Jesson. Congressman, it is frequent that we will have
disagreements where there are unique situations, which this
was, or ambiguity in interpretations. For example, just a
couple of examples, in 2006 CMS disallowed over $19 million in
the Federal match regarding a supplemental payment to nursing
homes. We disagreed about that; we couldn't resolve it. We went
to the appeals board and that board found in favor of the
State. In 2008 there was a disagreement about $8 million in
Federal funds, which we, once again, went to the appeals board
and the appeals board came down somewhere in the middle between
the Feds and the State.
These are discussions that frequently happen. What I am
happy about here is that we were able to, because of the one
percent cap, resolve this, I think, appropriately with CMS.
Mr. Kucinich. So there was nothing unusual about the kind
of exchange where the State claims $30 million as a donation,
you go back to CMS and you work it out, is that what you are
saying?
Ms. Jesson. A $30 million donation, Congressman, is
certainly unusual.
Mr. Kucinich. Well, this is why we are here to discuss it.
I think it is unusual, but I am just trying to find out how it
happened and I am still not sure.
I just would like to conclude, Mr. Chairman, and say that
based on the testimony that is presented here and other
information given to the Subcommittee, I think that the
chronology of events went like this: the commissioner or the
State claimed all $30 million of a transfer from a Minnesota
Medicaid managed care organization; the Federal Center for
Medicare and Medicaid Services questioned the justification for
claiming the entire amount for the State, rather than returning
to the Federal Government its share of the transfer; and
ultimately you, Commissioner, reversed yourself and you are now
returning about $15 million to the Federal Government.
Now, I am not saying that you did any wrong, perhaps you
thought you were doing the right thing; somebody else is going
to have to determine that. But I think in this instance the
Federal Center for Medicare and Medicaid Services did something
right, and it is important to go over the sequence to sustain
that view.
So I thank the gentleman for his indulgence with time here.
Mr. Gowdy. [Presiding.] I thank the gentleman from Ohio.
The Chair would now recognize the gentleman from Illinois,
Mr. Davis.
Mr. Davis. Thank you very much, Mr. Chairman.
Commissioner Jesson, let me just ask you did you seek a
legal opinion relative to the status of the contribution?
Ms. Jesson. Congressman, after we got the July letter from
CMS taking the position that this was not a donation, I did
seek a legal opinion about this.
Mr. Davis. This was afterwards that you sought it.
Ms. Jesson. After we got the July letter, but it was still
before we actually received the donation, Congressman.
Mr. Davis. Let me just say that I think there has obviously
been some mistake in judgment in terms of this whole matter.
But I also want to indicate that I have been looking at
Minnesota for a long time in terms of its health care, and
there is a great deal that is right with Minnesota. It has been
a model for efficiency as a result of this tremendous nonprofit
health care system efficiency that I have observed. But I would
like to hear about improving the contracting operation. Can you
speak to us about the competitive bidding process now and what
it is that you have done to improve that?
Ms. Jesson. Thank you, Congressman. Actually just a month
and two weeks after I started in the governor's budget,
Governor Dayton proposed competitive bidding for really half an
area that included half of our Medicaid enrollees, and the
reason we did that is because, as I said earlier, we had
serious questions about the excess money that the health plans
were making and we really wanted to reset and get the best rate
we could, but also looking at quality.
So what we did was issued an RFP, request for proposals,
for all the health plans to bid on our Medicaid population by
county. They had to give us both the cost bids, but also,
importantly, include a lot of quality information. And when we
sat back to judge those bids, we judged them half on their
quality and half on their cost, and after doing that we ended
up reducing the number of health plans that served most of the
counties. So we took the best bids and we reduced the projected
cost to the State and the Federal Government for those plans by
I think it was almost 7 percent and saved over $300 million
just on the competitive bidding.
But then what we did was we took what we learned about the
fact that obviously these rates could be a lot lower than
people had thought in the past, a lot lower.
Mr. Davis. So you recouped $73 million this year and you
have shared that with the Federal Government?
Ms. Jesson. Correct.
Mr. Davis. Can I ask why were the UCare funds of 2011
initially handled differently?
Ms. Jesson. Congressman, they were initially handled
differently because we were told and believed it was a
donation. But once we looked at the one percent cap, we
realized that if UCare hadn't made that donation, then they
would be paying back $38 million, instead of just $8 million,
to the State and Federal Government. So we thought it was only
fair to share that $30 million with the Federal Government, as
well as the $73 million, as well as the over $600 million that
we have saved in our managed care reforms.
Mr. Davis. So this transaction came as a result of prior
contractual relationships under the former administration?
Ms. Jesson. Yes, Congressman, the one percent cap did
because we inherited the contracts. We thought they were too
generous, so we negotiated a cap with the health plans.
Mr. Davis. Did you have the feeling that there had been any
cross-subsidizing of Minnesota's program by improperly
inflating the Medicaid costs?
Ms. Jesson. The program, General Assistance Medical Care,
that is being accused of--it is a State-funded program, so the
allegation, as I understand it, is they were paying more for
Medicaid to pay less for the State-funded program. That program
is no longer in existence when I started as commissioner, so I
didn't work at the department, so I do not have firsthand
knowledge of whether that happened; and actually, Congressman,
when I started, I brought in a whole new team in this part of
the department because I thought we needed to change direction.
But I will say I very clearly thought that the State of
Minnesota and the Federal Government were paying too much money
under our Medicaid contracts. That is why I put them out for
competitive bids.
Mr. Davis. Thank you very much.
Director Mann, can I ask you if there is a separate office
of CMS responsible for fighting fraud?
Ms. Mann. Yes, there is. Also, let me try and be clear on
my answer on numbers before. CMS itself has 4500 full-time
employees; Medicaid office, which I oversee, has about 350; and
we have the Center for Program Integrity, Congressman, about
150 people. They are primarily responsible for fraud, but
really it is--I would certainly, as the director of the program
itself, see it as also good strong financial management as my
responsibility, as well as the Center for Program Integrity.
Mr. Davis. So you have 150 people fighting fraud. That is
for the entire Country?
Ms. Mann. Well, that is for the Center for Program
Integrity, that is actually Medicare and Medicaid.
Mr. Davis. Yes.
Ms. Mann. There are about 60 within that for Medicaid.
Mr. Davis. Thank you very much.
And thank you, Mr. Chairman. I yield back.
Mr. Gowdy. I thank the gentleman.
The Chair would now recognize the gentleman from Texas, Mr.
Burgess.
Mr. Burgess. I thank the Chairman for the recognition and
again appreciate the opportunity to be here with you.
Obviously, I am on another committee, but this issue is so
important that I wanted to participate today.
Ms. Mann, we have heard three specific cases here today,
every one of which is startling in and of its own right, but
tell us what you are doing and going to do at CMS to prevent
this from happening and to deal with the issues that have
already occurred.
Ms. Mann. Well, in terms of the issues that have already
occurred, there are investigations going on in all three
situations. Actually, reports have already been issued in the
New York case and investigations going on in both Minnesota and
Texas by the HHS Office of Inspector General and the Department
of Justice involved.
To the extent that we determine that there are questions
about any particular expenditures, we defer those expenditures;
we won't pay until there has been full resolution, and then we
disallow if we do not feel that there is justification for
paying for those----
Mr. Burgess. How many payments have you disallowed so far
in Texas on dental procedures?
Ms. Mann. We have not taken the disallowance yet; it is
still within the regional office to consider the disallowance.
Mr. Burgess. So these clinics are still being paid?
Ms. Mann. I believe the State has moved forward and the
clinics are not being paid. So I don't think the problem is
continuing. The State has taken a number of different steps to
change their process; they had a prior authorization, a company
that did prior authorization to review those claims. That
company should have screened out and not allowed the kind of
claims that went in. They obviously didn't do their job.
The State has changed that contract. The State has also
changed its method of payment for orthodontia services so you
weren't getting the situation where, if you came in 22 times,
you got paid 22 times, but has moved to a global payment.
So there have been a number of changes that the State
itself has made to stop the problem going forward, but we still
need to see what claims were paid that should not have been
paid.
Mr. Burgess. Well, I certainly appreciate the work that the
State is doing and of their understanding of the fact that they
had a problem. But you had a problem.
Ms. Mann. Correct.
Mr. Burgess. And I guess my interest at the Federal level
is what is being done right now to correct that problem and to
prevent it from happening again.
Ms. Mann. Well, what we first do is make sure that the
problem stops going forward. So that is an important part----
Mr. Burgess. So the State guys are doing that.
Ms. Mann. State does that in consultation with us, but yes.
That was our first line of----
Mr. Burgess. Forgive me, but it just seems like there was a
big failure at whoever was in charge of oversight, the OIG.
This is OIG 101. Mr. Gowdy pointed out that his 15-year-old
daughter could have probably picked up the problem here. This
was not obscure. There is plenty of fraud that is obscure, but
this was not; it was out in the open for all to see. And we
talk about audits and we talk about actuarial soundness, but
really that never came into play, did it? All we got were
assurances that, hey, we are okay; we are doing everything the
right way, and the checks continued to go out. That is a
massive failing on the part of the Federal partners who were
responsible for providing those funds.
Ms. Mann. We do do audits of State Medicaid programs. We do
look at outlier claims of State Medicaid programs. We do not do
audits of every single claim in every State.
Mr. Burgess. Why wouldn't these have, then, come to the top
of the radar screen? I mean, they seem pretty obvious.
Ms. Mann. Because they were not separately coded. What was
growing overall was the dental account in Texas because of
major changes that the State did in its dental account. These
were basically hidden claims within that. So neither we nor the
State identified them as an outlier. We do that in many
instances. It is a lesson learned in terms of how to break out
certain codes and make sure we are all examining those codes in
a very particular way.
Mr. Burgess. I will be the first to admit that Texas used
to be its own country and in many ways we behaved that way. But
here you had Texas charging or paying more than the rest of the
Country combined. Seems like that had to get someone's
attention at some level, because that is just such a stark
difference. I mean, Texas was paying more than Florida. Texas
was paying more than California.
Ms. Mann. And the problem, which is a lesson learned in
terms of moving forward, is that it was not pulled out as a
separate code, but inside the broader dental claiming, and so
neither Texas nor CMS identified it in a timely way as to
something that we should all look at.
Mr. Burgess. Two years ago the president identified
McAllen, Texas, as an outlier with Medicare spending and
criticized the State because of that. And this was happening
right under your noses and no one said anything about it. Where
was the integrity at the Office of Inspector General?
Consequently, why has the Department of Justice been so slow to
get involved in this?
I respect the fact that a lot of the problems were State
specific, but you had a duty, you had an obligation as well, as
the steward of these funds, that were going out. I mean, here
you have the dentists testifying that there were recruitment
activities going on at a pizza parlor to get patients to be
inappropriately referred, to have procedures they might not
have needed on children. I mean, that should be assault and
battery. People should be going to jail for this, not just we
are looking into it and we hope to have some better answers for
you in the future.
I am stunned by the revelations that we have had today. You
have spent enormous money and press time focusing on a public
hospital in Dallas, Texas, and this was happening right under
your nose. You criticized the hospital because it wasn't
following procedures, because it wasn't doing things correctly,
and your own procedures aren't being followed. I mean, this is
a classic case of take care of your own problems first, before
you start criticizing someone else. This is an enormous
problem. We are not, obviously, anywhere near the end of it,
and I am just so grateful to the Committee for initiating this.
I promise you that this will continue to get my full attention
in my office and at our Committee. We have to do right by the
taxpayers. We have to do right by the people who have, in fact,
been harmed by these activities.
Mr. Chairman, you have been indulgent. I will yield back
the balance of my time.
Mr. Gowdy. I thank the gentleman from Texas.
The Chair will now recognize the gentlelady from Minnesota,
Ms. McCollum.
Ms. McCollum. Thank you.
Commissioner, this was an unusual thing to have UCare come
and say we would like to give you $30 million, and it was a
contribution. There is Federal money that goes into Medicare
disbursements and there is State taxpayers' money. So I am glad
you had a discussion with CMS. And as a resident of Minnesota
and as a person who looks after the Federal purse strings, I
think we have come to a good conclusion with that. So thank you
to everyone for their work on that. But I don't think we are
going to see many donations coming forward again in the future.
Could I maybe shift this a little bit to CMS and to GAO
while we have them here? And I am going to combine two
questions and then just ask your professional opinion.
The Affordable Care Act, which was just passed into law,
will streamline Medicaid eligibility as part of the health
exchanges. It is going to standardize quality measurements for
adults; it is going to provide new tools to provide fraud,
waste, and abuse. So if you could maybe tell me a little bit
about how you two can see, and, Commissioner, if you have
anything to add, how these tools included in the Affordable
Care Act, will improve State and Federal oversight in the
Medicaid program.
And then to GAO specifically, has GAO ever looked at the
differences between for-profit and nonprofit health plans in
respect to fiscal management and quality outcomes within
Medicare managed programs?
And then to GAO--this also goes to CMS--150 employees.
Every Medicare contract is different between it is different
between the two States, they are constantly being renewed and
refreshed, so can you provide me maybe a little more
information about the challenges that you have? Maybe some of
the successes that you can identify in CMS's Medicaid Integrity
Institute, especially as it relates to States investigating and
prosecuting Medicaid fraud? Or perhaps this is grossly
understaffed, grossly staffed so that we can't do the very
things that I agree with Chairman Gowdy on, we need to be
handing things over for prosecution. A hundred and fifty
employees for 50 States, all the contracts different and
constantly changing.
And I yield my time to you to have a discussion.
Ms. Mann. Well, thank you, Congresswoman. Let me just
respond to the first part of your question about what the
Affordable Care Act does in terms of providing some new tools.
Let me identify a few of them that I think are really directly
relevant to some of the issues we have discussed here. First,
it requires that every State have a RAC program to look at
fraud and have modeled after the Medicare program, which has
been successful in terms of bringing in a rate of return that
is effective now. States are implementing that requirement as
of January 2012 and it allows payments of basically dollars for
collections identified by the contractors. So it is an
encouragement for States to move forward and a new method for
them to identify and pursue improper payments.
Secondly, we have a new provider enrollment requirements in
the Affordable Care Act that assure that if a provider has been
terminated, for example, in Texas, for improperly billing in
the Texas program, that they can't start billing in Oklahoma;
that we have set up a system so that States know about
terminations from one State to another, as well as from
Medicare to Medicaid, so that if we have problems in South
Florida in the Medicare program, the Medicaid program in
Florida or elsewhere also takes action to ensure that that
provider is no longer participating in the program.
We also have, in the Affordable Care Act, an emphasis on
program analytics to be able to detect fraud, improper payments
before it occurs. That is certainly all of our goal; not just
to detect it afterwards and get repayment, but to avoid it
going forward.
Ms. McCollum. Thank you. I have about 42 seconds left for
GAO. And all that oversight disappears with repeal of the
Affordable Care Act.
If GAO would like to comment
Ms. Yocom. To my knowledge, we have not done work that has
looked specifically at profit versus nonprofit, so I can get
that question out quickly.
With regard to the Medicaid Integrity Institute, some of
the promising practices that we have heard from States is
really just a chance to be educated on ways to detect improper
payments, ways to recover, ways to analyze; and that has been
an extreme benefit. State Medicaid programs are widely varied
in size and in support, so having a Federal role to provide
instruction and oversight has been helpful.
Lastly, I want to underscore something that Director Mann
said, which is being able to look across States. That
capability is quite limited right now in the Medicaid program
and it needs to be developed. Until this program has good data
and strong data that allows for comparisons that can be more
easily done, we won't be successful in combating improper
payments and other types of fraud.
Mr. Gowdy. I thank the gentlelady from Minnesota.
I want to follow up on something the gentlelady from
Minnesota made reference to. I think she said that we would not
be having anymore donations in the future. My question is a
little different, which is how many had you had in the past.
How many $30 million donations from corporations had you had in
the past?
Ms. Jesson. Mr. Chair, this is the only one I am aware of.
Mr. Gowdy. So there is only one, and we are left to
conclude that it was either donated out of the beneficence of
the corporate heart, which isn't that likely, or maybe there is
another alternative explanation, which leads me to ask this:
Was there a letter that accompanied that check or was it just a
check in the mail? Did they offer any explanation in writing as
to why they may make a $30 million donation?
Ms. Jesson. Mr. Chair, there was a letter from the CEO in
July, I believe, she sent to the State of Minnesota. The check
actually we received in November.
Mr. Gowdy. And what was the explanation that the giver of
the donation actually gave?
Ms. Jesson. That it was just that, a donation to help the
State during this budget crisis.
Mr. Gowdy. Right. Is there any evidence that perhaps UCare
had been overpaid in any way by the State of Minnesota?
Ms. Jesson. Mr. Chair, as I said, I believed that the
contracts that had been negotiated during the previous
administration were too generous. I don't think they were
overpaid in the sense that those were not actuarially sound
contracts----
Mr. Gowdy. So there is no evidence that UCare was overpaid
and that maybe a State health plan may have underpaid.
Ms. Jesson. Mr. Chair, I think the evidence would say that
those contracts were actuarially sound and approved by CMS, so
I don't think there was an overpayment. But I do understand
that the health plans historically have said--this is, once
again, before I was commissioner--that they lost money on the
State-funded program.
Mr. Gowdy. So they lost money on the State. Okay. Well, can
you understand at all the cynicism of maybe questioning the
motive behind the corporate heart making a once in a lifetime
$30 million donation?
Ms. Jesson. Mr.----
Mr. Gowdy. Am I the only one that has any amount of
cynicism about that?
Ms. Jesson. Mr. Chair, I was certainly surprised when they
came into my office to tell me about the donation; it was
highly unusual.
Mr. Gowdy. Director Yocom, do you have any experience with
the beneficence of the corporate heart making a $30 million
donation simply because a State was unable to manage its
finances appropriately?
Ms. Yocom. No, sir, I don't.
Mr. Gowdy. Do you happen to have a copy of the letter that
accompanied the $30 million donation?
Ms. Jesson. Mr. Chair, I don't have a copy of the letter
here. As I said, I know that there was a letter in July and we
got the donation in November.
Mr. Gowdy. And is there any chance that letter referenced
overpayments?
Ms. Jesson. I----
Mr. Gowdy. Actually, I think there is a really good chance
that letter referenced overpayments. I think there may be like
a 100 percent chance it referenced it. So given the fact that
the donation was for overpayments, why would there be any
argument that CMS wasn't entitled to half of it?
Ms. Jesson. Mr. Chair, they characterized it as a donation.
They were not--under the contract, they were not required to--
--
Mr. Gowdy. Well, I mean, it doesn't----
Ms. Jesson.--pay it back to us.
Mr. Gowdy. Does it really matter what you call something? I
mean, I could call the check I just had to write the IRS a
donation. It is not a donation. I mean, come on, it is $30
million. No corporation is ever going to give a State $30
million out of the benevolence of their shareholders' hearts.
Ms. Jesson. Mr. Chair, it's a nonprofit corporation. I
thought it was very generous. I acknowledge there are
reasonable positions on both sides of that----
Mr. Gowdy. Well, would you acknowledge that it may very
well have been because they had been overpaid systematically?
Isn't that a little better explanation than beneficence?
Ms. Jesson. Mr. Chair, I believe they were paid according
to the terms of the contract----
Mr. Gowdy. Well, then why would they----
Ms. Jesson.--but I believe those contracts were too
generous.
Mr. Gowdy. Why would they say they were overpaid?
Ms. Jesson. You would have to ask UCare about why they
phrased it that way. They told me it was a donation. They
weren't required to make it.
Mr. Gowdy. Okay.
The gentleman from Minnesota.
Mr. Ellison. Thank you, Mr. Chairman.
Commissioner Jesson, could you talk a little bit about what
Minnesota has done in the Dayton administration to try to be
more efficient and to give greater value to the taxpayer vis-a-
vis the Medicaid program?
Ms. Jesson. Certainly, Congressman Ellison. I spoke earlier
about competitive bidding and really trying to get better value
and recovering a lot of money for the taxpayers through that,
and the 1 percent cap where we, in addition to the $600 million
through our managed care reforms, about $73 million through the
1 percent cap, there are some additional things that go beyond
just money, but that we believe will save money as well, that
we are doing in Minnesota.
You mentioned one of them, our Hennepin health projects.
That is where we are contracting with Hennepin County on a
capitated basis to serve some of the poorest people who make
less than $8,000 a year, those who use a lot of our social
services. We just started that in January, just one year after
the governor took office, but preliminarily we believe they
will better serve those folks and save money, because we are
actually integrating social services with our health care.
We are starting health care demonstration projects, where
we will, by the end of the year, we hope, have contracts with
nine different provider groups, where we are directly
contracting with providers, changing the incentives once again
so that they share any savings that they get, as long as they
meet our quality measures. And those are providers that are
agreeing to care for populations, kind of Medicaid ACOs, all
around our State, very different types of populations. We
believe there is a lot to learn from what we are doing.
Mr. Ellison. Now, earlier on, one witness, when I asked
him, do you agree that Minnesota's move to competitive bidding
is beneficial, that witness's response was no. It was a pretty
flat no. I guess my question is do you agree with that? And do
you think that the competitive bidding process can be improved
even more by maybe even allowing more bidders? I think the
witness said that it was limited to the four HMOs. I think I
got that right. So could it be improved if there were more
bidders and allowed access to the program?
Ms. Jesson. Congressman, I think that the competitive
bidding was a success. It was a success for quality care. I
know it was clearly a success for taxpayers.
Mr. Ellison. Five hundred million dollars, right?
Ms. Jesson. Yes. But I think we can improve it, and we are
going to be expanding it. We are expanding it into Greater
Minnesota, where there is enough competition, and we are
opening it up. Those who won the bids, and there were typically
two in each county, were some of the major health plans, but we
are opening this up. We want to increase competition because we
think it is a good way to get better value for taxpayers.
Mr. Ellison. Commissioner, I have a little less than two
minutes. I was hoping to get your impression on this question.
I believe that the witness that I was referring to, Mr.
Feinwachs, and I do want to thank him for being a vigilant
steward of the public dollar; we want to encourage people to
step up. But I am trying to understand this, so I just want to
get your opinion. He pointed out in his testimony that a 2008
report by Minnesota's legislative auditor found the State's
payment rates to be high compared to other States. What do you
think about that? Are we doing better? Are they high? Are they
getting lower? Could you comment on that?
Ms. Jesson. Congressman, I agree, actually, with what the
legislative auditor said in that report, which is that
Minnesota's rates are higher, but they are probably higher
because we cover more people with disabilities in Minnesota
than in many other States, and that is more expensive; and we
also cover a lot more benefits. That is a choice our
legislature in Minnesota has made, to have broader coverage,
and that is, I think, a major reason that it is more expensive.
Mr. Ellison. Okay.
I yield back, Mr. Chair.
Mr. Gowdy. The gentleman from Minnesota yields back.
On behalf of all of us, we want to thank our panel of
witnesses for taking time out of their busy schedules to appear
before us. We look forward to seeing you again soon, either at
this Committee or another.
With that, the Committee stands adjourned.
[Whereupon, at 12:49 p.m., the subcommittee was adjourned.]
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