[Senate Hearing 112-155]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-155
 
     NEW TOOLS FOR CURBING WASTE AND FRAUD IN MEDICARE AND MEDICAID

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


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT

                   INFORMATION, FEDERAL SERVICES, AND

                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON

               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE


                                 of the

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 9, 2011

                               __________

         Available via the World Wide Web: http://www.fdsys.gov

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs





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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
JON TESTER, Montana                  ROB PORTMAN, Ohio
MARK BEGICH, Alaska                  RAND PAUL, Kentucky

                  Michael L. Alexander, Staff Director
               Nicholas A. Rossi, Minority Staff Director
                  Trina Driessnack Tyrer, Chief Clerk
            Joyce Ward, Publications Clerk and GPO Detailee
                                 ------                                

 SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 
              FEDERAL SERVICES, AND INTERNATIONAL SECURITY

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 SCOTT P. BROWN, Massachusetts
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
CLAIRE McCASKILL, Missouri           RON JOHNSON, Wisconsin
MARK BEGICH, Alaska                  ROB PORTMAN, Ohio

                    John Kilvington, Staff Director
                  Bill Wright, Minority Staff Director
                   Deirdre G. Armstrong, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator Brown................................................     4
    Senator Klobuchar............................................     7
    Senator Coburn...............................................     8
Prepared statements:
    Senator Carper...............................................    43
    Senator Brown................................................    47

                               WITNESSES
                        WEDNESDAY, MARCH 9, 2011

Peter Budetti, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services.......................................................    10
Gregory Andres, Acting Deputy Assistant Attorney General, U.S. 
  Department of Justice..........................................    11
Daniel R. Levinson, Inspector General, U.S. Department of Health 
  and Human Services.............................................    13
Kathleen King, Director, Health Care, U.S. Government 
  Accountability Office..........................................    15
Helen Carson, Volunteer Coordinator and Case Manager, Delaware 
  Partners of Senior Medicare Patrol.............................    16

                     Alphabetical List of Witnesses

Andres, Gregory:
    Testimony....................................................    11
    Prepared statement...........................................    67
Budetti, Peter, M.D.:
    Testimony....................................................    10
    Prepared statement...........................................    48
Carson, Helen:
    Testimony....................................................    16
    Prepared statement...........................................   118
King, Kathleen:
    Testimony....................................................    15
    Prepared statement...........................................    88
Levinson, Daniel R.:
    Testimony....................................................    13
    Prepared statement...........................................    79

                                APPENDIX

Questions and responses for the Record from:
    Mr. Budetti..................................................   122
    Mr. Andres...................................................   129
    Mr. Levinson.................................................   135
    Ms. King.....................................................   140



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     NEW TOOLS FOR CURBING WASTE AND FRAUD IN MEDICARE AND MEDICAID

                              ----------                              


                        WEDNESDAY, MARCH 9, 2011

                                 U.S. Senate,      
        Subcommittee on Federal Financial Management,      
              Government Information, Federal Services,    
                              and International Security,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:33 p.m., in 
room 342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper, Begich, Brown, Coburn, and 
Klobuchar.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. I always rap my gavel like that and say 
that the hearing will come to order, but this one is already in 
order. This is a remarkably well behaved panel and audience, as 
well. The press is in line over there. It is nice to see all of 
you. Welcome. Thanks for coming today.
    Sometimes our hearings are fairly timely, sometimes less 
so. But this is actually a hearing that is more timely than 
most. We are going to be voting, starting in about 30 minutes, 
on a Republican proposal, H.R. 1, to reduce budget deficits in 
the next half-year or so and even beyond and a Democratic 
alternative to that proposal. So this is something that we are 
focused on a great deal. And what we are going to be talking 
about here today is Medicare and Medicaid and our ability to 
get better outcomes for less money. How does that actually 
affect our debate in the Senate today and the folks that are 
served by Medicare and Medicaid?
    We still face in this country considerable economic 
challenges. The economy is coming back. We added about 230,000 
private sector jobs last month and we are encouraged by that. 
That is the good news. The bad news is our national debt stands 
at about $14 trillion. It has pretty much doubled in the last 
decade or so.
    One of the things we look at is debt as a percentage of 
Gross Domestic Product (GDP), and if you look at our debt as a 
percentage of GDP, it is about 65 percent. I think the last 
time it was that high was maybe the end of World War II. That 
is the highest it has ever been, so we are on treacherous, 
treacherous ground.
    Some other countries that run very high debt as a 
percentage of GDP are places like Greece and Ireland, and we 
are reminded what happened to them and their economy. So we are 
on some thin ice here. We need, clearly, to work on that, and 
hopefully we will find a way today to help out.
    A wide variety of ideas have been put forward on how to 
reduce our budget deficit and begin whittling down our debt. 
Last fall, a majority of the bipartisan Deficit Commission 
appointed by the President--and it is known as the Bowles-
Simpson Commission for Erskine Bowles and former Senator Alan 
Simpson--provided us with a road map to reduce the cumulative 
Federal deficits over the next decade or so by about $4 
trillion. A number of the steps that we would need to take to 
accomplish this goal are going to be painful. And while most 
Americans want us to reduce the deficit, determining the best 
path forward is not going to be easy.
    Many Americans believe that those of us here in Washington 
are not capable of doing some of the hard work we were hired to 
do, and that is to effectively manage the tax dollars with 
which we have been entrusted. They look at the spending 
decisions we made in recent years and question whether the 
culture here is broken. They question whether we are capable of 
making the kind of tough decisions that they and their 
families--our families--have to make on a regular basis for 
their own budgets. I do not blame people around the country for 
being skeptical.
    I think we need to establish a different kind of culture 
here in Washington when it comes to spending. A lot of people 
think what we have here is a culture of spendthrift. We need to 
replace that with a culture of thrift. We need to look in every 
nook and cranny of Federal spending, whether it is domestic 
programs, defense programs, entitlements, oh, gosh, tax 
expenditures, tax credits, tax deductions, we need to look at 
all of that and ask the question, is it possible to get better 
results for less money? And if that is not possible, is it 
possible to get better results for the same amount of money?
    Today, we are here to examine the steps that have been 
taken and should be taken to save literally billions of dollars 
in waste and fraud in Medicaid and Medicare. Medicare and 
Medicaid are, two vital programs that provide health care for a 
lot of our Nation's seniors, people with disabilities, low-
income children, among others.
    I was surprised to learn a number of years ago that the 
majority of money that we spend in Medicaid is not just for 
largely mothers and their children. The majority of money spent 
in Medicaid is for folks that spend down the value of their 
money, their assets, and they are, in many cases, folks who are 
going to end up in a nursing home, and a lot of money that we 
put into Medicaid helps to pay for those bills.
    But last year, Medicare paid about $509 billion, over half-
a-trillion dollars, to care for some 47 million beneficiaries. 
Think about that. Over half-a-trillion dollars to pay for 
almost 50 million beneficiaries. Medicaid expenditures for the 
Federal Government and our States was an additional $381 
billion, almost $400 billion. Those numbers are expected to 
grow as our population grows older.
    Americans' increasing reliance over time on Medicare and 
Medicaid presents another opportunity for criminals to take 
advantage of lax anti-waste and anti-fraud controls, and they 
do try to take advantage, as we know all too well. Medicare 
made an estimated $47.9 billion in improper payments in fiscal 
year 2010. We have a chart that indicates that.
    One of our new laws that we passed last year, signed into 
law by President Obama, is one that says all Federal agencies 
have to keep track of improper payments, mostly overpayments. 
They have to report improper payments. They have to reduce 
improper payments. And they have to go out and recover the 
money from those improper payments.
    How much in Medicare last year alone? Almost $48 billion. 
How much in Medicaid last year alone? About $22.5 billion. So 
we are talking about real money here. And this does not even 
include an estimate for the Medicare prescription drug program. 
I think this is Medicare A, B, and C. I do not believe it 
includes Medicare Part D, which I am told could add even maybe 
another $5 billion to that total for improper payments. For 
Medicaid, the improper payments, again, totals about $22.5 
billion.
    Moreover, Attorney General Eric Holder estimates that 
Medicare fraud totals as much as $60 billion each year--$60 
billion just from fraud, criminal activities, largely--and 
Medicare and Medicaid continue to be on the Government 
Accountability Office's (GAO's) list of government programs at 
risk. The new At-Risk List has come out again just recently. 
They do it every year. But at risk for waste, fraud, and abuse. 
They have been on the list--Medicare, I think, and Medicaid 
have been on the list for maybe 20 years.
    As improper payments occur, as most of you know, when an 
agency pays a vendor for something it did not receive or maybe 
even pays them twice. It can occur when a doctor is reimbursed 
by Medicare for a procedure that never took place or perhaps 
one that was not necessary and should not have taken place at 
all. These kinds of mistakes occur every day across the 
country. What disturbs me about the problem here in the Federal 
Government is that we seem to make expensive, often avoidable 
mistakes at a rate much higher than a business or the average 
family would tolerate or could afford.
    So it is easy to see how urgent it is that we step up the 
pace of our efforts with Medicare and Medicaid, that we sharpen 
our pencils and eliminate to the best of our abilities the 
problems that lead to waste and fraud. Success in doing so will 
help us get closer to our deficit reduction goals.
    It will also lengthen the life of the Medicare Trust Fund, 
now forecast to run out of money, I think, in 2029. The changes 
we made in the health care reform law actually extended, if you 
will, the date that the Medicare Trust Funds run out of money 
by about another 8 years, I am thinking from 2017 to 2029, but 
we will get some confirmation of that.
    The good news is that we are seeing renewed commitment to 
curb waste and fraud in Medicare and Medicaid. President Obama 
and Secretary Sebelius have set a goal of reducing the Medicare 
fee-for-service improper rate by, get this, 50 percent by 2012. 
That is pretty ambitious, very aggressive. It represents the 
kind of goals that we need and we applaud that.
    Congress has also put Medicare waste and fraud in its 
sights. The Affordable Care Act, which was enacted about a year 
ago, includes a number of provisions aimed at enhancing our 
efforts to fight waste, fraud, and abuse in Medicare and 
Medicaid. Central to the new law is a goal to obtain better 
results in health care for less money. Eliminating avoidable 
mistakes and cracking down on fraudsters will be an important 
element in achieving that goal.
    The new Affordable Health Care law calls for dramatically 
improving screening of Medicare providers. The measure also 
aims to stop payment to providers before payment is made when 
there is credible allegations of fraud. This ends a practice 
often called pay and chase in which a provider is paid and then 
chased down later once an error or fraud was detected. So the 
idea is to do something before we actually make that payment 
and have to begin the chase.
    The new law also extends Recovery Auditing Contracting 
(RAC), which involves the use of private contractors who comb 
agency books for improper payments and then seek to recover 
them. CMS has had considerable success with this tool in the 
past, recovering roughly $1 billion in Medicare fee-for-service 
improper payments in just five States, I believe, during a 
pilot project. That effort is now being expanded to all of 
Medicare and Medicaid and to all 50 States.
    CMS is also working to implement other program changes, 
such as increased support for the Senior Medicare Patrol (SMP) 
and the strengthening of controls over the Medicare 
prescription drug program. The men and women who run Medicare 
and Medicaid are making strides in fixing many of the problems 
in those programs that lead to waste and fraud, but we have a 
long way to go.
    Today, we have been joined by a number of witnesses--five 
of them, in fact--who are each trying to do their part in the 
efforts underway. We have witnesses from law enforcement to 
describe how we catch fraudsters. We have witnesses to describe 
how we can prevent waste and fraud before it happens. We are 
also pleased to welcome this afternoon someone who works 
directly with seniors in Delaware to identify fraud through the 
Senior Medicare Patrol.
    We are here today in large part because I believe that we 
have a moral imperative to ensure that our Medicare and 
Medicaid beneficiaries have access to quality care and at the 
same time that the scarce resources that we put into those 
programs are well spent. Eliminating waste and fraud is the 
right thing to do, as well, both for the health of those two 
programs and for our Federal budget as a whole. Each and every 
one of us can agree on that point, and I hope on a great deal 
more.
    Now, with that having been said, let me turn, if I may, to 
Senator Brown, our Ranking Member on this Committee, for any 
comments that he would like to make. Senator Brown, welcome. 
Thanks for joining us.

               OPENING STATEMENT OF SENATOR BROWN

    Senator Brown. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here again and look forward to the hearing.
    Just looking at your chart, it is just amazing to me that 
we can have that amount of improper payments, because when you 
look at--I mean, just an example, you take the credit card 
industry, which has over $2 trillion in transactions per year, 
which is nearly the size of the health care sector, and there 
are more than 700 million credit cards in circulation, there 
are millions of vendors and countless items that can be 
purchased with a credit card, yet the credit card fraud is a 
fraction of one percent.
    And I am shocked that the government cannot do it better. I 
mean, in doing the research and being on the Committee with 
Senator McCaskill, we dealt with a lot of these things and you 
hear--if you go through the historical records, you actually 
see that we are doing the same thing, like, 10 years later. 
There has been no change, really, substantial change. The 
numbers are bigger, and now here we are. We are expanding the 
program to the point where the opportunity for improper 
payments and waste, fraud, and abuse is just so much greater, 
it is scary.
    I have very deep concerns that--and we just keep talking 
and talking and talking about this stuff instead of somebody 
putting their foot down and saying, oh, yes, before we send the 
money out the door, we are going to find out if they are 
actually entitled to it. Oh my goodness. Is that not a novel 
idea.
    And I want to thank you for your leadership on this because 
I intend to make the oversight of our entitlement programs the 
primary objective of my tenure here on the Subcommittee. And as 
waste, fraud, and abuse undercuts the vitality of these 
programs. The people that need it most are not getting the 
money. I mean, just that alone--and that is just the tip of the 
iceberg.
    And I want to thank you, as we have spoken privately on 
this issue. I know how dedicated you are on these, and Senator 
Coburn and others. We care very deeply, Senator Klobuchar. That 
is why we are here to kind of bang away at this problem and fix 
it, especially when the dollars are so sparse.
    And experts estimate that there are potentially upwards of 
$100 billion in fraud, waste, and abuse in Medicare and 
Medicaid combined. This is more than the Gross Domestic Product 
of three-quarters of the world's countries, to put it in 
perspective, and with any large government program, Medicare 
and Medicaid are prime targets for those who want to commit 
waste, fraud, and abuse, and health care fraud is not a 
victimless crime, either. It inevitably translates into higher 
premiums and costs for everybody.
    The Patient Protection and Affordable Care Act (PPACA) 
expands Medicaid coverage, as we all know, by over 16 million 
people by 2019. That is a 32 percent increase over the current 
enrollment, and the cost of Medicaid expansion is expected to 
exceed $430 billion over the next 10 years. Well, if that 
happens, what happens to those numbers, Mr. Chairman? Are they 
going to stay the same? Are they going to go down? When does it 
get better? When do we start to focus on these things?
    I know there are a lot of good people here. They are new. 
But that is the problem. We just keep kicking the can down the 
road a little bit. It is very frustrating.
    I know the administration has introduced a variety of new 
program integrity measures into the law and I am greatly 
appreciative of that and it is intended, obviously, to reduce 
the amount of fraud in the health care program. Yet while an 
improvement, they are only a drop in the bucket in light of the 
incredible wave of health care spending, and the history of lax 
oversight in these programs does not give me much confidence 
right now and I believe that more needs to be done, and quite 
frankly, done very quickly.
    These issues, for example, the previous expansions of 
government health care benefits, such as those for Medicare 
Part D, also included new integrity measures for the Centers 
for Medicare and Medicaid Services (CMS). Unfortunately, their 
track record for implementing these new measures on a timely 
basis, I feel, and others, as well, that they are spotty, at 
best. Congress has extended the Part D prescription drug 
benefit in 2003, yet the GAO reported as recently as last year 
that the oversight of the $51 billion program was limited. I 
mean, we are talking billions.
    When I go back home and I say the numbers that we throw 
around here, they are just shocked that a billion is like a 
hundred bucks. Sometimes we lose track of what real money is. 
And when we are talking about cutting--what are we talking, 
Tom, about, $61 billion? Is that the House number? Well, it is 
right there, folks. It is right there. That is it right there. 
I mean, to put it into perspective, we would not have to do A 
if we could get B under control.
    Senator Coburn. We have to do both.
    Senator Brown. Yes, thank you. I knew you would say that. 
We have to do both. I do not disagree with that. But before we 
can do one, can we not do the other? We can do something.
    The 2010 Department of Health and Human Service (HHS) 
Financial Audit revealed shortcomings in both the Department's 
information technology (IT) and the financial systems. Now, 
there is a question whether they will be able to actually 
handle the robust increase of new demands placed on it by the 
Health Care Act. We cannot afford this wait and react approach 
any more. We have to be proactive, before the money gets out 
the door. I have never seen anything like it. Not only do we 
give them the money, then we have to pay someone to go chase 
the money. And then sometimes we will not only do that, we will 
renew their contracts and give them a bonus. What a job, if you 
can get it.
    So the implementation of an effective program integrity 
system must ensure effective deterrence against these potential 
criminals while also protecting providers from overly 
burdensome regulations. And this expansion of the government's 
role is already straining our Nation's already dire financial 
situation.
    I know that we have a lot of problems, folks, but I really 
do not want to hear today the same type of stuff. I mean, I 
have the historical records. I went down, and I am anxious to 
see what your testimony is so I can say, yes, back in 1992, 
they said the same thing, based on the previous report.
    So I appreciate the opportunity to speak and look forward 
to participating.
    Senator Carper. Yes. I am just grateful that you are 
sitting here and that we are going to work on this together.
    One of the things that was different, in 1992, we did not 
know how much the improper payments were from agency to agency 
across the Federal Government. In 2002, we did not know what 
they were, either. Today, we know that improper payments for 
last year in the whole Federal Government, as best we could 
tell, without the Department of Defense (DOD), without Medicare 
Part D, was about $125 billion. We know from Medicare, it was 
about $48 billion. That is not counting Part D. For Medicaid, 
it is $22.5 billion. We actually know that now.
    One of the things that is different, I would say to Senator 
Brown, my colleague----
    Senator Brown. Is you are here.
    Senator Carper. No, that we are here. And Tom Coburn is 
here and Senator Klobuchar is here.
    But the thing that is different now, the Federal 
Government, agency by agency, is required to report their 
improper payments. They are required to stop them. We are going 
to evaluate the performance of managers within these 
Departments by the kind of job that they do in reducing 
improper payments. We are going to evaluate by what kind of job 
they do in going out and recovering improper payments.
    And finally, we have had the Administration come here and 
say on the record, and the President has already said this on 
the record, we want to reduce, cut in half, improper payments. 
Cut this number in half by 2012. That is encouraging.
    And the other thing that I hope is encouraging is we are 
going to be providing whatever help we can to enable you to 
meet that goal. We are also going to be here to make sure that 
you do meet the goal to the best of your ability. Senator 
Klobuchar.

             OPENING STATEMENT OF SENATOR KLOBUCHAR

    Senator Klobuchar. Thank you very much, and I wanted to 
thank you, Chairman, for inviting me into this Subcommittee.
    Senator Carper. It is almost like you are a Member. We like 
that.
    Senator Klobuchar. Well, I feel quite at home, because 
looking at that fugitive chart, I feel like I am back in 
Judiciary, where we often have those charts, and I really 
appreciate the leadership you have shown in these areas.
    As we all know and as Senator Brown so strongly pointed 
out, one of the greatest contributors to wasteful government 
spending is fraud and abuse, and law enforcement authorities 
estimate that Medicare fraud costs about $60 billion every 
year. Last year, $4 billion was stolen from Federal health care 
programs, and that was recovered.
    As a former prosecutor, this really bothers me, and I also 
look at it as coming from a State that, while we have had some 
prosecutions--I actually worked on one where we secured the 
conviction of a woman for bribing a county official and 
fraudulently billing Medicaid for services that were never 
provided--but coming from a State that has a well-organized 
health care system with high quality, lower cost care, one of 
the things I know is that some of the hot spots--and I learned 
this term in Judiciary from some of our Justice Department 
people--the hot spots tend to be in areas where they have less 
organized health care systems. I know Florida has some hot 
spots down there.
    And that the answer to all of this is the work that we are 
going to be doing with Senator Carper and others, but it is 
also about doing a better job of having more organized health 
care systems, some of which we started out with in the health 
care bill, but a lot more work has to be done with how these 
delivery systems coordinate with each other so there are other 
watchdogs besides just the government. I believe that is why we 
have less fraud in Minnesota than in some of the other States.
    Another tool to use is that CMS must take steps to 
consolidate its databases, allowing for more data sharing and 
efficient use of technology. Creating these types of claims 
databases will help us better identify potential sources of 
fraud.
    I also introduced the Improve Act with Senator Snowe that 
requires electronic payments for Medicare and Medicaid. We were 
able to include this requirement for Medicare in the health 
care reform bill, but still more work needs to be done with the 
Medicaid bill, because you all know that if you have these 
electronic payments, you are not going to have these checks go 
to storefronts. Then you have to watch where the electronic 
payments go, but you can greatly reduce fraud with the 
electronic payments.
    So I want to thank the witnesses for being here. I look 
forward to hearing this update and look forward to working with 
Senator Carper and Senator Brown and others on this very 
important issue. Thank you.
    Senator Carper. Always happy to welcome you. Thank you for 
your good work.
    Senator Coburn, you have been working these vineyards for 
at least 6 years here and I have been pleased to work with you 
on a bunch of that stuff. We are always delighted to have you 
here, Tom. Welcome.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Well, it is an appropriate time, Mr. 
Chairman, to have the hearing. I have seen Dr. Budetti and 
Inspector General Levinson more than I have my wife in the last 
week. [Laughter.]
    I saw them before the Finance Committee, as well.
    I would mention to you that Senator Carper and I are 
working on a very substantive addition on fraud, and we have 
been working on it for about 5 months, I think, and hopefully 
we will put that in front of the GAO and get their comments and 
in front of you before we release it. But we all know there are 
areas to go.
    My big problem is Medicare as it is currently designed is 
designed to be defrauded. I mean, if you just set at it, you 
could not set up much of a better system than this one to 
defraud it. I applaud some of the changes the administration is 
making. I applaud the Justice Department, where they have been 
aggressive in going after some of this. The more aggressive we 
are and the greater the consequences for defrauding or abusing 
or wasting Medicare dollars will send a signal.
    So I am pretty pleased with the direction we are going. I 
think you still need some more tools and look forward to 
working with you and thank you for being here.
    Senator Carper. Dr. Coburn, thanks very, very much.
    Let me just briefly introduce our witnesses, if I may.
    Dr. Peter Budetti, no stranger to a bunch of us, is our 
first witness today. Dr. Budetti is the Deputy Administrator 
and Director for Program Integrity at the Centers for Medicare 
and Medicaid Services. He is responsible for program integrity 
policies and operations in both the Medicare and Medicaid 
programs. Dr. Budetti has a long history in the health care 
arena as a pediatrician, in government, and as Chairman of the 
Board of Directors of the Taxpayers Against Fraud, as well as a 
professor at the University of Oklahoma. We thank him for being 
with us today.
    I went to Ohio State. I understand you have an OSU in 
Oklahoma, too.
    Dr. Budetti. We have the real OSU. [Laughter.]
    Senator Carper. The guy who used to be President of Ohio 
State is now the President of Oregon State University. I like 
to tell him he has one more to go, OSU and U State, and he 
would have the hat trick, so we will see.
    Greg Andres, our second witness, is from the Department of 
Justice (DOJ) and the Acting Deputy Assistant Attorney General 
in the Criminal Division. Mr. Andres oversees the Fraud 
Section, the Appeals Section, the Capital Case Unit, and the 
Organized Crime and Racketeering Section. You are a busy man. 
Mr. Andres has been involved in prosecuting many of the bad 
guys we will talk about today regarding Medicare fraud during 
his distinguished career at the Department of Justice. I would 
also note that Mr. Andres served in the Peace Corps in West 
Africa, and we thank you for that and we thank you for joining 
us today and for your service.
    Inspector General Daniel R. Levinson. Mr. Levinson is the 
Inspector General of the Department of Health and Human 
Services. Mr. Levinson has been Inspector General of Health and 
Human Services for nearly 7 years, leading the important work 
overseeing Medicare and Medicaid and other Department programs. 
Mr. Levinson has a long history of public service. We 
appreciate very much your being with us here today.
    And next is Kathleen King. Ms. King is a Director of the 
Health Care Team at the U.S. Government Accountability Office, 
affectionately known as GAO. Ms. King is responsible for 
leading various studies of our health care system, specializing 
in Medicare management and prescription drug coverage. Ms. King 
has over 25 years of experience in health policy and 
administration. I am happy to note that we learned in a 
previous hearing that Ms. King grew up in Wilmington, Delaware, 
graduated from Ursuline Academy High School. We thank her for 
being here today. You could only turn out well with that kind 
of background.
    Finally, we are delighted to welcome Ms. Helen Carson, who 
is a Volunteer Coordinator and Case Manager at the Delaware 
Senior Medicare Patrol. Ms. Carson came to work at the Senior 
Medicare Patrol after first seeking help from the program, then 
decided to work as a volunteer and was later hired on to help 
other volunteers. She is one of the people on the front lines 
fighting fraud in Delaware, and there are a lot of people like 
her around the country--not enough, though, I would say. But I 
note that her home town, again, is Wilmington, and she now 
resides near New Castle, a place where I bought my first home 
when I was just a pup coming out of the Navy. Ms. Carson, we 
are pleased to have you here today.
    All of you, welcome. Your entire testimony is going to be 
made part of the record. Feel free to summarize. If you go much 
more than 5 minutes, we will try to rein you in. We will start 
voting probably around 3:00, but we will finish a couple of 
testimonies and then run and vote and come right back.
    Dr. Budetti, why do you not lead off. We are happy you are 
here. Thanks.

 TESTIMONY OF PETER BUDETTI,\1\ M.D., DEPUTY ADMINISTRATOR AND 
 DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE 
                     AND MEDICAID SERVICES

    Dr. Budetti. Thank you very much, Chairman Carper, Senator 
Brown, Senator Klobuchar, Dr. Coburn, for this opportunity. I 
appreciate this opportunity to come and discuss with you what 
we are doing in the Centers for Medicare and Medicaid Services.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Budetti appears in the appendix 
on page 48.
---------------------------------------------------------------------------
    Ever since I had the privilege of taking this job a little 
over a year ago, I have been asked two questions. Why do you 
let crooks into the programs? And why do you pay their claims 
when you think they are fraudulent? I am very pleased to be 
able to tell you that, with the tools that we have now and that 
we are putting into place under the Affordable Care Act and 
through other legislation, we are going to do things that will 
put a stop to both of those. We are going to keep out the bad 
guys without making things worse for the honest providers, and 
we are going to cut off payments that should not be made.
    Under the leadership of Secretary Sebelius, she reorganized 
the Centers for Medicare and Medicaid Services, realigned them 
into four Centers, one of which is the Center for Program 
Integrity. This consolidated Medicare and Medicaid Program 
Integrity together for the first time. This is a very important 
step, I believe, both organizationally and symbolically because 
it speaks to the seriousness of our anti-fraud efforts and it 
also provides notice to would-be fraudsters that we do, in 
fact, take this very seriously.
    Also, this reorganization has provided new opportunities 
for us to collaborate with our law enforcement partners, and so 
I believe we are indeed on the road that many of you alluded 
to, to making things different.
    I would like to draw your attention to our chart. I think 
you have copies of this. But this tells you exactly what we are 
doing in terms of moving from where we have been to where we 
are going.
    First of all, we want to move from what you mentioned, Mr. 
Chairman, the pay and chase mode, into preventing fraud, and 
the way that we are going to move to preventing fraud is to 
keep the people out of the program who should not be there and 
to cut off payments that we should not make.
    Second, we do not want to take a monolithic approach, a 
one-size-fits-all approach. We want to target our resources to 
the real problems, to identify the real problems, and to be 
focusing our efforts on the bad actors.
    Third, we are taking advantage of new technology and we are 
going to be moving quickly to take administrative action as 
well as referrals to law enforcement.
    Fourth, consistent with this administration's commitment to 
transparency and accountability, we are developing performance 
measures that will spell out what we hope to achieve, what we 
will achieve, and will lay out what our goals are and what we 
are going to accomplish.
    And five, we are actively engaging the private sector, our 
private partners, to work with us across the spectrum because 
we know that although the public programs are certainly 
targeted by scams and scam artists, so, too, are the private 
programs and we need to join together to fight against this.
    And finally, we are committed to coordinating and 
integrating the program activities across the Centers for 
Medicare and Medicaid Services in order to get more effective 
and more coordinated activities underway.
    To do this, we need to focus on several things. We need to 
do a better job of preventing bad actors from enrolling in 
Medicare. We need to act quickly in concert with our law 
enforcement partners to cut off payments that are fraudulent. 
And we need to do this--and I would stress this point--that as 
we crack down on those who would commit fraud, we are mindful 
of the necessity to be fair to health care providers and 
suppliers who are our partners in caring for beneficiaries, and 
to protect beneficiary access to necessary health care 
services. This requires striking the right balance between 
preventing fraud and other improper payments, but without 
impeding the delivery of critical health care services to 
beneficiaries.
    We will always respect the fact that the vast majority of 
health care providers and suppliers are honest people who 
provide critical health services every day to millions of 
beneficiaries and we are going to target our anti-fraud efforts 
on the people who would commit fraud while reducing the burden 
on legitimate providers and saving public funds.
    As this has proved to be a very good investment over the 
years. The Health Care Fraud and Abuse Control program (HCFAC) 
has had very substantial returns on investment over time. We 
know that the more that we look for fraud, unfortunately, the 
more we find, but the return on that investment has been very 
substantial and this year reached a new high.
    I appreciate this opportunity to discuss what we are doing 
with you and I look forward to working with you in the future. 
Thank you very much.
    Senator Carper. Great. Thanks, Dr. Budetti.
    Mr. Andres, please. And what we will probably do is, once 
you have completed your testimony, three or four of us will run 
and vote, make two votes, and come right back. Please proceed.

    TESTIMONY OF GREGORY ANDRES,\1\ ACTING DEPUTY ASSISTANT 
          ATTORNEY GENERAL, U.S. DEPARTMENT OF DEFENSE

    Mr. Andres. Chairman Carper, Senator Brown, and 
distinguished Members of the Subcommittee, thank you for 
inviting me to speak to you today about the Department of 
Justice's efforts to combat health care fraud. I am privileged 
to appear before you on behalf of the Department of Justice. 
The Department of Justice is grateful to the Subcommittee for 
its leadership in this area and we appreciate the chance to 
testify here today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Andres appears in the appendix on 
page 67.
---------------------------------------------------------------------------
    Health care fraud is a significant law enforcement problem. 
The Federal Government spends billions of dollars every day to 
fund Medicare and other government health care programs, and 
taxpayers rightly expect these funds to be used to provide 
health care to seniors, children, the poor, and the disabled. 
Most medical professionals work hard to comply with the rules, 
but too many doctors, nurses, and others in the health care 
industry devote their energies elsewhere, to schemes that cheat 
taxpayers and patients alike and defraud Medicare and other 
government programs.
    At the Justice Department, together with our colleagues at 
the Department of Health and Human Services, we are fighting 
back. We investigate, we prosecute, and we secure prison 
sentences for hundreds of defendants each year, and we are 
recovering billions of dollars in stolen funds. With the 
additional resources provided to us by Congress over the past 2 
years, we are making significant strides in this battle.
    In fiscal year 2010, we collectively recovered a record 
$4.02 billion on behalf of taxpayers, $2.86 billion of which 
was deposited back into the Medicare Trust Fund. This 
represents a $1.47 billion, or 57 percent increase over the 
amount recovered in fiscal year 2009, which was itself a record 
at that time. Indeed, over the past 3 years, we have 
collectively recovered an average of $6.80 for every dollar of 
funding that Congress has appropriated for health care fraud 
enforcement.
    The Justice Department has a multifaceted litigation 
approach to fighting health care fraud with the Criminal 
Division, the Civil Division, the Civil Rights Division, the 
U.S. Attorneys Offices, and the Federal Bureau of Investigation 
(FBI) all contributing substantial resources to this effort. 
Allow me for a moment to focus on our criminal enforcement 
efforts.
    Criminal health care fraud enforcement is aimed at holding 
accountable doctors, nurses, health care providers, and others 
who conspire to cheat government health care programs, 
including Medicare and Medicaid. Today, our criminal 
enforcement efforts are at an all-time high. In fiscal year 
2010, we brought criminal charges against 931 defendants, the 
most in any single fiscal year since the HCFAC program began, 
and approximately 16 percent more than in fiscal year 2009. 
Moreover, we secured 726 criminal health care fraud 
convictions, also the most in any year of the HCFAC program, 
and approximately 24 percent more than in fiscal year 2009. In 
short, the Justice Department is working hard and with great 
success to investigate and prosecute health care fraud wherever 
we find it.
    We have been fortunate to receive important new tools for 
fighting health care fraud. In the Patient Protection and 
Affordable Care Act of 2010, Congress made several important 
revisions and additions to Federal statutes that the Justice 
Department uses in health care fraud cases. These changes are 
likely to have and are already having a significant impact on 
our health care fraud enforcement efforts.
    For example, the Act clarifies that a defendant need not 
have been aware of a specific statutory provision in order to 
be convicted of violating the health care fraud statute or the 
Medicare anti-kickback statute. In addition, the Act directs 
the U.S. Sentencing Commission to make certain important 
changes to the Sentencing Guidelines that will increase 
sentences for health care fraud offenders. Finally, the Act 
provides significant additional funding for our collective 
health care fraud enforcement efforts.
    Prosecuting health care fraud is a high priority for the 
Department of Justice. Every day, every single day, Federal 
prosecutors and law enforcement agents at the Federal, State, 
and local levels are working hard to investigate and prosecute 
those intent on defrauding Medicare and Government health care 
programs, and we have been successful.
    Thank you for the opportunity to provide the Subcommittee 
with this overview of the health care fraud enforcement 
efforts. I look forward to answering any questions you may 
have.
    Senator Carper. Good. Thanks so much.
    Mr. Levinson, go ahead and give us your testimony and then 
we will run to the vote. Thanks. Please proceed.

  TESTIMONY OF DANIEL R. LEVINSON,\1\ INSPECTOR GENERAL, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. Levinson. Good afternoon, Chairman Carper and Members 
of the Subcommittee. Thank you for the opportunity to testify 
about the efforts of OIG and our partners to combat health care 
fraud, waste, and abuse. I appreciate your support for OIG's 
mission to protect the integrity of HHS programs and their 
beneficiaries.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Levinson appears in the appendix 
on page 79.
---------------------------------------------------------------------------
    OIG has been leading the fight against health care fraud 
for more than 30 years in collaboration with the Justice 
Department and CMS. Thanks in part to the HEAT Initiative, we 
are making strides in preventing fraud, catching and 
prosecuting criminals more quickly, and assisting well-
intentioned providers in complying with the law. Our efforts 
will be bolstered by the additional funding provided through 
the Affordable Care Act for the Health Care Fraud and Abuse 
Control, or HCFAC, program.
    The HCFAC program is a prudent investment of taxpayer 
dollars. In fiscal year 2010, this program's activities 
returned an unprecedented $4 billion in fraudulent and misspent 
funds. Over the past 3 years, for every dollar spent on the 
HCFAC program, the government has returned an average of $6.80. 
The Affordable Care Act further augments our program integrity 
efforts by addressing vulnerabilities, strengthening 
enforcement, and encouraging greater coordination among Federal 
agencies.
    Despite our successes, there is more to be done. Those 
intent on breaking the law are becoming more sophisticated and 
their schemes are more difficult to detect. Some fraud schemes 
go viral and they replicate quickly. They also migrate. As law 
enforcement cracks down on a particular scheme, the criminals 
may design it or relocate to a new city. When detected, some 
perpetrators have become fugitives, fleeing with stolen 
Medicare funds.
    To combat this fraud, the government's response must be 
swift, agile, and well organized. My written statement 
describes in more detail our collaboration with CMS and DOJ, 
enhanced program integrity tools in the Affordable Care Act, 
and OIG fraud fighting initiatives. This afternoon, I will 
highlight just a few of those initiatives.
    Our Medicare fraud strike forces are cracking down on 
criminals and fraud hot spots around the country. Since 2007, 
strike force operations have charged almost 1,000 individuals, 
involving more than $2.3 billion in Medicare billing. Just last 
month, strike force teams engaged in the largest Federal health 
care fraud take-down in history. The teams charged more than 
100 defendants in nine cities, including doctors, nurses, and 
health care company owners and executives for fraud schemes 
involving more than $225 million in Medicare billing.
    OIG has referred credible evidence of fraud to CMS to 
implement payment suspensions, helping to turn off the spigot 
to prevent dollars from being paid for fraudulent claims. OIG 
excludes fraudulent or abusive providers from Federal health 
care programs, cutting them off from Federal funds. We are now 
focusing on holding responsible those individuals who are 
responsible for corporate misconduct. This exclusion authority 
is a powerful deterrent to corporate fraud.
    However, enforcement alone is not enough. We are also 
engaging health care providers to help prevent fraud and abuse. 
For example, we are conducting free training seminars in six 
cities this spring to educate providers on fraud risks and 
share compliance best practices. We recently published a 
Roadmap for New Physicians. It provides guidance on how doctors 
should comply with fraud and abuse laws in their relationship 
with payers, vendors, and fellow providers.
    We are also asking the public to help us track down 
Medicare fraud fugitives. We have posted online OIG's Ten Most 
Wanted health care fraud fugitives, including photographs and 
details on their fraud schemes, and you can see our current 
``Most Wanted'' list on display here today. We hope the public 
will help us bring these individuals to justice by reporting 
any information about their whereabouts to our Web site or 
fugitive hotline.
    In conclusion, OIG is committed to building on our 
successes, employing all oversight and enforcement tools 
available to us, and maximizing our impact to protect our 
health care programs, the people served by them, and American 
taxpayers.
    Thank you for your support, Mr. Chairman, and I welcome 
your questions.
    Senator Carper. Thank you so much.
    We will take a break here. We will be back in about 15 
minutes and, Ms. King, you will be on. You are the batter on 
deck. Thanks so much. [Recess.]
    All right. I think that is the voting for a while. We will 
hopefully have a chance to maybe complete this hearing. I sure 
hope so.
    We are back in session, and Ms. King, you are recognized. 
Please proceed. Thank you.

  TESTIMONY OF KATHLEEN KING,\1\ DIRECTOR, HEALTH CARE, U.S. 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. King. Mr. Chairman, thank you for inviting me to speak 
with you today about provisions of recently enacted laws and 
agency actions that may help to reduce fraud, waste, and abuse 
in Medicare and Medicaid.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. King appears in the appendix on 
page 88.
---------------------------------------------------------------------------
    Fraud represents intentional acts of deception with 
knowledge that the action or representation could result in an 
inappropriate gain. Waste includes inaccurate payments for 
services, while abuse represents actions inconsistent with the 
acceptable business or medical practices. An improper payment 
is any payment that should not have been made or was made in an 
incorrect amount and includes both overpayments and 
underpayments.
    I was asked to address whether recently enacted laws could 
help CMS in preventing fraud, waste, and abuse. Congress has 
recently passed a few laws, as you mentioned, the Improper 
Payments Elimination and Recovery Act, the Patient Protection 
and Affordable Care Act, and the Small Business Jobs Act, which 
provide additional authority and resources and impose new 
requirements designed to help CMS reduce improper payments.
    In previous work, we have identified five strategies to 
reduce improper payments. They are: strengthening provider 
enrollment and standards; improving prepayment review of 
claims; focusing post-payment review on those most vulnerable 
areas; improving oversight of contractors; and developing a 
robust process for addressing identified vulnerabilities.
    The provisions in PPACA, if properly implemented, could aid 
CMS's efforts to reduce improper payments. We also note that 
CMS has not implemented some of our recommendations in this 
area, which we believe merit continued consideration.
    With respect to provider enrollment, the law contains 
multiple provisions designed to strengthen the enrollment 
process. It requires the Secretary of HHS to establish 
procedures for screening providers enrolling in Medicare, 
including assessing their potential risk levels. Moderate and 
high-risk providers may be subject to unannounced site visits. 
CMS has categorized home health agencies (HHA) and durable 
medical equipment (DME) suppliers as high-risk providers, which 
we believe is appropriate given our work in this area.
    The law also requires all providers to be subject to 
licensure checks, including across State lines, and it also 
authorizes the Secretary and the States to impose a moratorium 
on enrollment if they believe it is necessary to prevent fraud, 
waste, and abuse.
    With respect to prepayment review of claims, our work has 
shown that such reviews are essential to help ensure that 
Medicare pays correctly the first time. Conducting these 
reviews is challenging because of the volume of claims. 
Medicare pays approximately 4.5 million claims every business 
day and less than one percent of these claims are subject to 
review by trained medical personnel.
    The Small Business Jobs Act requires CMS to use predictive 
analytic technologies both to identify and prevent improper 
payments. By analyzing Medicare provider networks and billing 
patterns and beneficiary utilization patterns, these 
technologies may help CMS detect potentially fraudulent 
activity and conduct additional reviews before making payment.
    In addition, CMS is implementing a 2010 Presidential 
memorandum known as the ``Do Not Pay'' list, that directs 
agencies to consult these lists before making payments to 
ensure that payments are not made to providers who are dead or 
entities who have been excluded from Federal payment.
    We have also found that post-payment review is critical to 
identifying payment errors. Steps could be taken to improve 
post-payment review, including focusing these reviews on the 
most vulnerable areas and by adding recovery auditing. The law 
directed that CMS expand its Recovery Audit, or RAC program, to 
Medicare Parts C and D and to Medicaid.
    With respect to improving oversight of contractors, the law 
included new requirements for CMS to evaluate contractors 
receiving Medicare and Medicaid Program Integrity funding every 
3 years, and for these contractors to provide performance 
statistics to the OIG and HHS on request.
    One area where more progress is needed is having a robust 
process for identifying vulnerabilities that lead to improper 
payments. Our work on the Medicare RAC program found that CMS 
had not established an adequate process to address these 
vulnerabilities.
    In conclusion, the enactment of these laws as well as 
agency actions gives CMS new tools for fighting fraud, waste, 
and abuse, but effective implementation of them is critical.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to answer any questions. Thank you.
    Senator Carper. Great. Thanks so much. Thanks for your good 
work on this and all your help.
    Ms. Carson, welcome, Helen Carson.

 TESTIMONY OF HELEN CARSON,\1\ VOLUNTEER COORDINATOR AND CASE 
      MANAGER, DELAWARE PARTNERS OF SENIOR MEDICARE PATROL

    Ms. Carson. Good afternoon, Senator Carper and staff. Thank 
you for convening these hearings for the opportunity to present 
my testimony today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Carson appears in the appendix on 
page 118.
---------------------------------------------------------------------------
    The National Senior Medicare Patrol has been very busy 
since its inception in the mid-1990s. In Delaware, the Senior 
Medicare program began in 1999. Today, there are 54 Medicare 
Patrol programs, one in every State as well as the District of 
Columbia. Senior Medicare Patrol programs recruit and train 
senior volunteers and Medicare beneficiaries to conduct 
outreach and education to their peers, caregivers, and 
professionals about Medicare and Medicaid fraud prevention.
    The goals of Senior Medicare Patrol are twofold. First, to 
educate and motivate consumers on how to prevent, detect, and 
report health care fraud, errors, and abuse, and second, to 
receive and prepare to refer appropriate complaints of 
potential health care fraud.
    I would like to begin with my health care victimization 
story. After a history of cardiac issues, my husband had a 
heart attack in 2004 and was hospitalized. It was discovered he 
had a defective device controlling his heart. Costly errors by 
the hospital resulted in an original 2-day stay turning into 30 
days of multiple testing, a serious operation, and intensive 
care. As a result of this situation, the impact of our lives 
amounted to my husband not being able to work, leaving us with 
large copayments, private hospital bills, and costly 
medication. We had no other choice but to refinance our home 
and use credit cards with minimal payments. Another major 
decision I made during this time period was to personally 
forego a year without medication for chronic conditions so that 
my husband could get life-saving medication.
    It was this experience that inspired me to learn about 
billing, to read Medicare Summary Notice (MSNs), and to help 
others with issues of health care error, fraud, and abuse. 
Medicare Summary Notice is a quarterly statement of service and 
supplies that providers and suppliers bill to Medicare. While 
trying to cope with this situation, I watched a Senior Medicare 
Patrol segment on television on how to address some health care 
issues.
    As a result, I became a Senior Medicare Patrol volunteer 
and now a part-time Volunteer Service Coordinator Case Manager 
for Delaware Partners of Senior Medicare Patrol. I became a 
self-advocate and now assist others in recognizing hospital 
billing errors and questionable medical service. I used to be 
one of those seniors who threw away the Medicare Summary Notice 
because I thought my insurance would take care of anything. 
Now, I know better and realize that the Medicare Summary Notice 
can be a big help in assisting with cases of potential Medicare 
fraud.
    There are many Medicare rules that are complicated and, 
therefore, seniors often do not understand the Medicare system. 
That is why the Senior Medicare Patrol reaches out to Medicare 
beneficiaries to inform and educate so seniors can be self-
advocates, and report questionable health care issues back to 
the program.
    In Delaware, we are working on many complaints involving 
durable medical equipment providers. A senior resident 
contacted us about a durable medical equipment provider who was 
putting up flyers which advertised free durable medical 
equipment in a senior apartment building. The provider then 
came in and educated the seniors, pressuring at least one 
Medicare beneficiary to get an electric wheelchair for the 
future. This provider manipulated the individual to give out 
his Medicare number and supplementary insurance. As a result, 
this Medicare beneficiary has an electric wheelchair and fears 
that if he speaks with us, he may lose the wheelchair. This is 
potential fraud to the taxpayer and Medicare and a harm to the 
senior who feels caught in the fraudulent process.
    In another case, an assisted living beneficiary was billed 
for Medicare services not provided by a facility physician. 
These services included office visits to the physician and foot 
surgery. All the services were billed to Medicare and secondary 
insurance and the beneficiary. The beneficiary kept a log of 
services he received. He was then able to reconcile his record 
against the monthly Summary Notice. The beneficiary was fearing 
retaliation and charges from the assisted living facility and 
did not report the fraud until intervention by Senior Medicare 
Patrol staff. The case was referred to law enforcement for 
investigation.
    Working with Senior Medicare program as a volunteer, and 
now as a team member, is the most rewarding job I have ever 
had. I help people who suffer the same problems that I faced, 
and some are much greater than mine. But the greatest gift is 
to see the smile on their face after you have helped a Medicare 
beneficiary who was victimized by health care fraud, abuse, or 
waste. I should know, because I have been a victim and have 
felt that sense of hopelessness.
    SMP volunteers know they do this work for satisfaction and 
not pay, and the impact of these volunteers' efforts nationally 
has been impressive. Since it started in 1997, the Senior 
Medicare Patrol program has trained over 6,000 volunteers, 
handled over 141,000 beneficiary complaints, and educated 2.9 
million people to be self-advocates. In addition, the program 
has saved Medicare, Medicaid, and beneficiaries close to $106 
million through referral and resolution of beneficiary 
complaints.
    Thank you for inviting me to be a part of this panel.
    Senator Carper. Great. Ms. Carson, thank you so much for 
sharing that with us.
    I just want to start my first question with you, if I may. 
How many people did you say have been trained to be part of the 
Senior Medicare Patrol? Did you say 6,000?
    Ms. Carson. Yes.
    Senator Carper. That is across the country?
    Ms. Carson. No, 60. Sixty.
    Senator Carper. Sixty-thousand? That is across the country?
    Ms. Carson. That is across the country.
    Senator Carper. Over the last, what, dozen or so years?
    Ms. Carson. Seven years.
    Senator Carper. Over these last 7 years.
    Ms. Carson. Yes.
    Senator Carper. OK. Do you think that is enough?
    Ms. Carson. No.
    Senator Carper. What might be enough? What should be our 
goal in terms of recruitment?
    Ms. Carson. Well, what is going on in our State--I can only 
talk about Delaware--our senior population is growing in the 
Sussex County of Delaware.
    Senator Carper. That is Southern Delaware for those who do 
not know.
    Ms. Carson. Yes. Because we are a tax-free State, what is 
happening is that a lot of seniors are moving to the Sussex 
area of Delaware, and because of that, we are the seventh, I 
think--we have the seventh largest population of seniors in the 
Nation.
    Senator Carper. Any idea how many--we have got 60,000 that 
we have trained. How many folks could we use to be part of the 
Senior Medicare Patrol? Could we use a couple hundred thousand 
across the country?
    Ms. Carson. I think we can use that and more.
    Senator Carper. Yes. And how would you suggest we go about 
recruiting them?
    Ms. Carson. Well, first of all, actually putting our 
program more out there, that people are aware that we are 
there, and that we have volunteers that are lawyers. We have 
volunteers that were former chemists. We have volunteers that 
are former hairdressers. We have----
    Senator Carper. Any former Senators?
    Ms. Carson. Yes. [Laughter.]
    Senator Carper. You will take us, too?
    Ms. Carson. Yes, we will take you, too.
    Senator Carper. All right. It is all well and good that Dr. 
Budetti and his folks are taking advantage of the new laws we 
have, whether it is improper payments and the kind of resources 
that are provided in the Affordable Care Act. It is all well 
and good we have the Government Accountability Office, GAO, 
doing their oversight. We have the IG helping us out on this 
stuff, and we are trying to do oversight.
    But boots on the ground--we need boots on the ground, as 
well, and one of our jobs is figuring out how to grow this 
operation to get more--we have tens of millions of senior 
citizens in this country and some of them are looking for 
things to do, worthwhile things to do with their time, and most 
of them do not even know this program was there. Maybe we could 
do a better job of acquainting them with that and making sure 
they have the opportunity to do what you have done with your 
life. Good. Thanks.
    I have a question--we have been joined by Senator Mark 
Begich from Alaska, one of how many Marks in the U.S. Senate?
    Senator Begich. There are five now.
    Senator Carper. Five. There are more Marks in the U.S. 
Senate, ladies and gentlemen, than any other name. If you are 
not sure what a Senator's name is, call him Mark and there is a 
pretty good chance you will nail it. [Laughter.]
    Senator Begich. You can join the caucus. [Laughter.]
    Senator Carper. All right. We will see.
    My next question, if I can, is for Dr. Budetti. I want to 
talk about our work with the Medicare prescription drug 
program. We have a big problem with folks who were not supposed 
to be writing prescriptions to folks who should not have been 
getting them for controlled substances, and we, I think, are 
doing a better job of stopping that.
    Could you just talk about what we are doing? I think it is 
a success, something we have been very active in putting a 
spotlight on, and I think you all have reacted in a way that is 
appropriate. Would you just want to talk about it, please?
    Dr. Budetti. Yes, Senator. Thank you for that question. In 
the Medicare prescription drug program, we make our payments 
directly to the drug plans and then, of course, they pay for 
filling the actual prescriptions, and then they report to us 
certain information, which is what we use to oversee what they 
have been doing. In the reporting of that information, there 
have been identified problems with the identifiers that were 
used to track who it was that wrote the prescriptions.
    We have made a lot of progress in terms of shifting from 
less effective to more effective identifiers and we are very 
much interested in looking at making sure that we can track 
back to be sure who the prescriber was of the prescription that 
was filled and make sure that it was appropriately prescribed, 
because we are paying for it through the drug plan. And so we 
are actively considering a rule that would move towards 
requiring the National Provider Identifier (NPI) be provided to 
us for us to be able to track that back. We do recognize that 
this is an area that needs attention and we are working on it 
very diligently.
    Senator Carper. Good. Let me follow up by asking a related 
question to Mr. Levinson, if I could. Let me just ask you, do 
you believe that the new steps to control some of this fraud 
with respect to Medicare prescription use, do you think the 
things that Dr. Budetti has been talking about, are they on the 
right track? Are the things that he is talking about, are they 
the appropriate things that should be done? Are there other 
steps that ought to be taken?
    Mr. Levinson. Mr. Chairman, we think those are important 
steps, and indeed, the Part D program has vulnerabilities that 
need to be aggressively monitored and in many cases corrected. 
A very important part of our work is now and in the near future 
to look at how Part D sponsors, as well as the contractors who 
are supposed to oversee those sponsors, how they are doing 
their anti-fraud work to ensure that we can actually track the 
money better.
    Senator Carper. All right. Have any of you ever worked for 
a credit card company? Did anybody ever work for a credit card 
company?
    Ms. Carson. I have.
    Senator Carper. Is there anything we can learn from credit 
card companies in the way that they go after fraud? I remember 
when MBNA was a big credit card bank in our State, now part of 
Bank of America, but I remember talking to the CEO of the 
company maybe 10 years or so ago and saying, why do you keep 
hiring all these folks from the FBI, people retiring from the 
FBI and other law enforcement services? And I said, what do 
they know about credit cards? And he said, they do not know a 
lot about credit cards, but they are pretty good on fraud.
    One of the things that we talked about at another hearing 
where Dr. Budetti and Senator Coburn and I were at not long ago 
was the idea of maybe putting together what we call a 
roundtable, which is sort of a hearing but it is an informal 
hearing, and bring in folks from the credit card industry who 
actually do this stuff every day. This is what they do 24/7 and 
are pretty good at it, to see what lessons we can learn from 
them, share with them what we are doing. Might that be a good 
idea?
    Ms. Carson. I think it would be an excellent idea. 
Actually, I come from the credit card industry myself----
    Senator Carper. Do you?
    Ms. Carson [continuing]. But I find that Medicare fraud and 
Medicaid fraud are quite different than what we were dealing 
with. It is much bigger.
    Senator Carper. Yes. Maybe there are some lessons learned 
from the financial services, from the credit card industry that 
are transferable. We are going to try--Dr. Budetti, any 
comments, and then I am going to yield to Senator Brown.
    Dr. Budetti. Yes, Senator. As we have discussed, we are 
actively engaged with different private sector industries. We 
have looked at activities to fight fraud in the banking 
industry and in telecommunications. We are certainly interested 
in--we have a pilot project underway in DME where we are using 
swipe cards that will rely on credit card-like technology. We 
intend to build on that pilot to see what the results are and 
to move into this area in a way that we actually learn lessons 
first and then build on it. So this is something that we are 
delighted to continue this dialogue with you on, yes.
    Senator Carper. Great. OK. Let us do that.
    All right. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. It is good to be 
back.
    So I will just start with Mr. Andres, if we could. So you 
indicated that you, through the Justice Department, collected 
$4 billion of fraud through your Department and a couple of 
billion went back to, obviously, back into the program. Where 
did the rest of the money go?
    Mr. Andres. The difference between the $4 billion recovered 
and the $2.86 billion that went back to the Medicare fund is 
the question of how much has actually been collected. So the 
$2.86 billion is the amount. The $4 billion----
    Senator Brown. Oh, so you got judgments for $4 billion----
    Mr. Andres. Exactly.
    Senator Brown [continuing]. And you only collected that 
amount.
    Mr. Andres. That is correct.
    Senator Brown. So in looking at the chart that the Chairman 
provided, I mean, we have substantially more billions and we 
have only collected $4 billion. Where is the difference in 
terms of the collection versus the actual improper payments? 
How do we get a better return on our dollar?
    Mr. Andres. Well, I mean, in terms of prosecuting 
additional people for fraud, at the Justice Department, 
unfortunately, we are more on the back end of the process, 
where the fraud has already occurred, and we are prosecuting 
people. We are seeking forfeiture to the extent possible. But 
as you can imagine, it is not as though criminals, once they 
are able to defraud the program, keep that money locked in a 
bank or place where we can necessarily get at it. A lot of 
times, the funds have been dissipated. So while judges order 
restitution and we seek forfeiture----
    Senator Brown. Yes, typical collection issues.
    Mr. Andres [continuing]. We are not able to always collect 
after a prosecution.
    Senator Brown. So are you satisfied you have the tools and 
resources you need to continue on with your job? Is there 
anything that we in the Congress can do for you?
    Mr. Andres. So two things, Senator, and thank you for the 
question. In the Affordable Care Act, one of the provisions in 
the Act directed the Sentencing Commission to look at and 
revise the Sentencing Guidelines----
    Senator Brown. The Sentencing Guidelines to make it more--
--
    Mr. Andres. Exactly, to increase it, and the Sentencing 
Commission has since made proposals, and so we would ask 
Congress to support those proposals.
    And the second----
    Senator Brown. Have you reviewed those and you are 
satisfied with those?
    Mr. Andres. Yes, Senator.
    Senator Brown. OK. I will look at them.
    Mr. Andres. Just to give you an example, they raised the--
they will raise the jail time that is available for offenders 
in that category. So if you take an example of somebody who, 
for example, was involved in $23 million, or $20 to $25 million 
in fraudulent billing, the fact that they were involved in that 
amount of billing does not necessarily mean that they got that 
amount of money that they were actually paid. The guidelines 
now allow us to use the amount that they billed----
    Senator Brown. Right.
    Mr. Andres [continuing]. As opposed to the amount that they 
were paid----
    Senator Brown. OK.
    Mr. Andres [continuing]. And that is significant.
    Senator Brown. So noted. OK. Number two?
    Mr. Andres. The second thing is that in the President's 
budget, there is additional funding for our strike forces and 
for our health care fraud enforcement efforts. As one of the 
other witnesses mentioned, the return on investment is almost 
seven dollars for every dollar spent on health care fraud.
    Senator Brown. OK.
    Mr. Andres. We are returning seven dollars. So to the 
extent that we are able to continue our current efforts in the 
strike force process and able to expand where appropriate, we 
think that the strategy we have in the strike forces is 
working, and as was mentioned, we have arrested almost a 
thousand people since the inception of the strike force 
program.
    Over the last year, we have had significant national 
arrests, one in July 2010. We arrested almost 90--more than 90 
people. And then recently, in February, we arrested over 100 
people in nine different cities. The fraudulent billing related 
to those arrests was over $200 million. In that same week, we 
had made other arrests in Miami and arrested another 20-some-
odd defendants. And so the total billing related to the 
enforcement actions in that week alone was $400 million. So we 
think the strike force efforts are having great success, and we 
would like to be able to continue those efforts?
    Senator Brown. Is there an opportunity for my office to 
meet with somebody in your office to get kind of briefed as to 
what you are doing?
    Mr. Andres. Certainly, Senator.
    Senator Brown. All right. Thank you.
    So, Dr. Budetti, looking at--as I said, I went back. In 
1992, HCFA, now CMS, it was reported by the GAO, testified at 
the House hearing that the lack of vigilance over contractor 
payment safeguard activities has left the program funds 
inadequately protected from loss and waste. So that was back in 
1992. And currently, Medicare is designated by the GAO as a 
high-risk program and it has been so since the 1990s.
    Looking at the chart, once again, that I appreciate was 
brought forth, I mean, can you instill confidence that your 
organization will address these problems, and if so, like, what 
has been done that we can really--because we have four billion 
here, but is there not a mechanism--unless I am just totally 
lost here, is there not a mechanism to identify whether it is a 
legitimate claim and before it goes out the door so we are not 
chasing it? Is there not a way to do that?
    Dr. Budetti. Senator, thank you. We certainly share your 
concern about the magnitude of the issues that we are facing 
here----
    Senator Brown. And may I just interrupt one second----
    Dr. Budetti. Yes.
    Senator Brown [continuing]. And I will certainly let you 
answer.
    Dr. Budetti. Go ahead. Sure.
    Senator Brown. We just voted on a budget over there to cut 
$51, $61 billion. It is right there. As I said earlier, I do 
not get it.
    Dr. Budetti. So, Senator, we really need to address two 
aspects of this problem, and I will briefly describe them. One 
is the numbers you are looking at up there, improper payments. 
Improper payments really span a spectrum from honest billing 
mistakes to other kinds of reasons why a payment should not 
have been made, and that requires one set of activities to deal 
with and we are certainly actively pursuing those. The other--
--
    Senator Brown. In what way are you actively pursuing it?
    Dr. Budetti. OK. Well, we are doing that on a variety of 
levels. One is to work with the provider community to make sure 
that when they submit a payment, it is submitted in the right 
way, it is documented, the service is provided at the right 
site. The vast majority of the improper payments that we have 
been measuring are--often involve services that a legitimate 
provider provided to an eligible beneficiary, but perhaps at 
the wrong site of service, perhaps as an inpatient instead of 
an outpatient. It might have lacked the appropriate 
documentation----
    Senator Brown. So you are saying that the amount here 
really is not--it is not illegal or fraudulent payments, they 
are just done improperly. We have to get the accounting squared 
away. So if that is what you are saying-----
    Dr. Budetti. That is a big piece of----
    Senator Brown. All right. So how much out of that money is 
actually that scenario?
    Dr. Budetti. That is the second prong of what we need to 
address, which is the real fraud, and that is a major issue 
that we are addressing in a number of ways, and I would just 
like to touch on one aspect of what I believe you were getting 
at, which is the fact that we are now moving to use modern 
technologies, advanced analytics, to look at not just claims 
data, but to look at a wide range of data in a way that will 
allow us to predict where the problems are and to stop payments 
before they are made. That is what we need to do to really----
    Senator Brown. No, I agree.
    Dr. Budetti [continuing]. Put this to an end. We are in the 
process right now, and with the support that we got both from 
the Affordable Care Act and also the Small Business Jobs Act on 
the predictive analytics side, we are implementing programs and 
we are working with private contractors and using the best 
ideas from private industry, putting them into the context of 
the Medicare and Medicaid programs, Medicare at first, to be 
able to do exactly what you are getting at, Senator, which is 
to spot these problems and not to make the payments in the 
first place. That is the best way to stop an improper payment, 
is to not make it----
    Senator Brown. It has been almost 20 years. It has almost 
been 20 years that we have had this identified as high-risk 
designation by the GAO--20 years, and we are still talking 
about it.
    Dr. Budetti. It is a long time and I think we are turning 
the corner. I----
    Senator Brown. All right. How are you turning----
    Dr. Budetti. I have been here----
    Senator Brown. How are you turning the corner? Tell me how 
you are turning the corner so I can feel good tonight when I 
leave.
    Dr. Budetti. I hope you will feel good about this, Senator. 
We are turning the corner because we are implementing the 
authorities in the Affordable Care Act that really give us new 
and expanded tools that we are going to use very diligently. 
For example, the advance screening to keep the bad guys out of 
the program; to spot them when they are in the program and to 
get rid of them; and, the new authority that when there is a 
credible allegation of fraud, and we do that in consultation 
with our law enforcement partners, we determine when an 
allegation is sufficiently credible, we can suspend payments. 
We have additional authorities to declare moratoria where there 
is no evident need for new suppliers or providers to come into 
the program. We are coordinating the Medicare and Medicaid 
screening processes and other tools together. We are expanding 
the Recovery Audit Contractor program into Medicare Parts C and 
D as well as into Medicaid.
    And backing all of that up is our development of the 
application of modern predictive analytics, looking at many, 
many different aspects of a health care situation all at the 
same time in order to know which claims represent the highest 
risk of fraud and not to pay them, to make sure that the money 
is never paid. So we want to keep the bad guys out and we want 
to stop the payments before they are made.
    We also have a variety of measures that we are taking 
specifically to cut the Medicare fee-for-service improper 
payment rate in half by 2012. That is a commitment the 
President has made and we are going to carry that out----
    Senator Brown. In half from this number right here?
    Dr. Budetti. That is correct, from the Medicare fee-for-
service components of those numbers. That was the commitment. 
We are also, of course, working to cut the improper payments in 
the rest of Medicare as well as in Medicaid. But we have the 
specific commitment to--and in 2012, we will be accountable for 
reaching that goal.
    Senator Brown. OK. I appreciate it. I will turn it back and 
then get back at you.
    Senator Carper. Those are good questions.
    It is kind of confusing, because on the one hand we have 
the improper payments reports that come that are required under 
the legislation just passed and signed by the President last 
year while we have, I think, what Attorney General Holder says 
may be as much as $60 billion in fraud, criminal fraud. 
Improper Payments are not necessarily criminal fraud activity, 
maybe some element of it, but for the most part, that is not 
the case. So we are going here on two tracks.
    I think our job, I would just say to my colleague, Senator 
Brown, our job is to ask what resources are needed, what 
authorities are needed to do the best that we can. The payoff 
is seven-to-one. For every dollar we invest, we get seven 
dollars in recovery. That is a pretty good return on the 
investment, to make sure that we are doing that, to ask our 
friends at GAO and our IGs to advise us and the agencies as we 
go forward in this area to recruit a whole lot of people like 
Ms. Carson to go out there and help us to identify this fraud 
and stamp it out as best we can.
    And then our responsibility is oversight, oversight, 
oversight. We will be back here certainly before 2012 to see 
how we are doing. But as Senator Brown says, if we can cut that 
number, you all can cut that number in half, that is real 
money. That is real money, and that is one--people say, we 
cannot do anything to reduce the growth of entitlement 
spending. Well, maybe we can, and this is one of the ways we 
can do that.
    All right. Senator Begich, and then back to Senator 
Klobuchar. Mark, nice to see you.
    Senator Begich. Thank you very much, Mr. Chairman.
    Let me ask, Mr. Budetti and Mr. Andres, let me, if I can, 
first ask two simple questions. If the Affordable Care Act was 
repealed, would it crimp the ability for you to do the work you 
need to do?
    Mr. Andres. There are numerous benefits to our----
    Senator Begich. I do not need the detail, just the yes or 
no.
    Mr. Andres. Yes, and certainly in light of the changes to 
the sentencing and the funding.
    Senator Begich. Excellent. We just had a House resolution 
in front of us to reduce $57-point-some billion out of the 
Federal budget. Would that amendment affect either one of your 
divisions in any negative way for you to do the work you need 
to do on fraud?
    Mr. Andres. Senator, I do not know the specifics of that 
bill.
    Senator Begich. OK.
    Dr. Budetti. I would agree with that, but in commenting on 
the need for the Affordable Care Act provisions, Senator, 
certainly, as I have mentioned, those are very central to our 
efforts to fight fraud and abuse.
    Senator Begich. Excellent. Could you, just for the record, 
on H.R. 1 that we just rejected, could you have whoever in your 
appropriate divisions report back to us if that bill would have 
had an impact to you in the sense of ability to go after fraud 
and abuse?
    Mr. Andres. Certainly, Senator.
    Senator Begich. OK. Let me go to this number, if I can. The 
improper payments, my understanding is that it does not include 
Medicare Part D also in this, or does it?
    Ms. King. It does not.
    Senator Begich. It does not. OK. So let us assume--I do not 
know what that number is, but let me make sure I clearly define 
improper payments. Once you go through the process of 
determining that the paperwork is filled out for some of these, 
that is not necessarily recovered money, that is just 
clarification of the right--I mean, when it is improper 
payment, it could be like me, for example--not me, because I am 
not a provider, but when I go fill out my reimbursement to 
Aetna, they send back a form and say, you did not send us the 
right verification. Now, they may have sent me a check and 
still ask for the paperwork. That could be an improper payment 
on my end. But on the Medicare provider who may send in their 
information to get reimbursed but does not send in all the 
correct information, that is an example of a improper payment?
    Ms. King. Yes.
    Dr. Budetti. That is----
    Senator Begich. OK, either one.
    Dr. Budetti. Go ahead.
    Senator Begich. Yes. Nodding the head to say yes. So of 
this number, which may not be recoverable money because it is 
still paid, just they need to do their paperwork right, so it 
is not new money to the Treasury, but a percentage of this, if 
we go after the fraud that really is people who are abusing the 
system, what percentage would you guess of this number plus 
Medicare Part D is in that category of recoverable potential, 
knowing that some is--you can never squeeze it all out of 
someone when they have done it wrong because they have spent 
it. What is the percentage that you would estimate on this?
    Dr. Budetti. Senator, I would draw a little distinction 
here, which is improper payments are recoverable if they are 
identified and if there are resources to collect them. But the 
way that we measure improper payments right now is not designed 
to measure fraud. Fraud is elusive. Fraud is secretive. Fraud 
is hidden. Fraud is something that requires different ways of 
identifying it. So it really is not a question of what 
proportion of the improper payments are fraud. If the auditors, 
in measuring the improper payments, detect signs of fraud, they 
are required and they do report that to our anti-fraud 
contractors----
    Senator Begich. I understand. Here is the dilemma I am 
trying to solve, and that is we use these big numbers----
    Dr. Budetti. Yes.
    Senator Begich [continuing]. But that is not accurate.
    Dr. Budetti. It----
    Senator Begich. In other words, unless you are telling me 
that all of this is recoverable to the Federal Treasury----
    Dr. Budetti. It may be recoverable, but it does not mean 
that it will be avoided to be paid. Let me tell you what I 
mean. If, for example, if a beneficiary who is eligible for the 
program receives appropriate services from a legitimate 
provider----
    Senator Begich. Right.
    Dr. Budetti [continuing]. But they get those services in 
the hospital and they could have been provided in the 
outpatient setting----
    Senator Begich. Right.
    Dr. Budetti [continuing]. That money that was paid is 
recoverable. However, had those services been provided in the 
outpatient department, in other words, had they been a proper 
payment instead of an improper payment, we would have been 
responsible for making that proper payment good. And so the 
difference, if any, between the payment for the inpatient 
service and the payment for the outpatient service is what the 
net to the Treasury would be----
    Senator Begich. Right. I have got you.
    Dr. Budetti [continuing]. Or to the trust funds would be.
    Senator Begich. I have got you. Again----
    Dr. Budetti. We could still recover the amount if we went 
after it.
    Senator Begich. Right, but you may have only a differential 
that you are requiring recoverable because you may have paid 
that inpatient----
    Dr. Budetti. Under current rules, we recover the entire 
amount, but we are looking into exactly that and working on--
our main thrust, though, is to make sure that the services are 
provided correctly in the correct setting----
    Senator Begich. I understand that.
    Dr. Budetti [continuing]. And the documentation and the 
billing is proper in the first place to support this.
    Senator Begich. So let me--I am going to end this line, 
because----
    Dr. Budetti. Sure.
    Senator Begich [continuing]. Honestly, it is--then what we 
are going to still be using, just so we are clear, that there 
is $60 billion of recoverable money, because----
    Dr. Budetti. Yes.
    Senator Begich [continuing]. I think that is one of the 
struggles here for us, is what is--do we believe at the end of 
the day 30, 40 percent of this number is really the hard nut 
that we are going to crack and go after in the sense of 
returning back to the Treasury?
    Dr. Budetti. What we need to focus on, Senator, is the fact 
that because some of that--a substantial amount of that--may be 
due to improper documentation, or a lack of documentation 
entirely, or provided in the wrong setting, we are still going 
to be providing the right services. So there may be a 
differential between what we could pay and what we would need 
to pay if the service were provided and billed for properly----
    Senator Begich. The right way.
    Dr. Budetti [continuing]. But having said that, there is 
still the world of real fraud that we need to take on, and that 
is a major challenge to us and that is what we are intent on, 
as well, what we are intent on preventing.
    Senator Begich. You mentioned you are working with private 
contractors to try to go after the fraud and use new 
technology, which I think is great, and there is a ton out 
there. Credit card companies, as the Chairman indicated, they 
use a lot of it to figure out where there are situations 
occurring. What do you think your time table will be to really 
implement some of that new technology on the ground that has an 
impact, a real dollar impact?
    Dr. Budetti. We are in the process right now of looking at 
the solicitations that were out. The bids are in. We will be 
implementing the kinds of solutions that come in this year and 
we will have them integrated into our claims payment system, in 
part, this year. We will be phasing it in this year and the 
target is no later than the middle of next year that we would 
have it thoroughly integrated. So we are not just waiting until 
we get all the results.
    Senator Begich. Understood.
    Dr. Budetti. We are going to integrate the findings as we 
get them.
    Senator Begich. So from a Committee perspective, when would 
you be able to say to the Committee, here is some update. Here 
is what we are seeing. Here is some positive news or here is 
some negative news, depending on how we look at it----
    Dr. Budetti. Later this year, I think would be----
    Senator Begich. Later this year?
    Dr. Budetti [continuing]. Would be the first phase.
    Senator Begich. OK. And I will just ask two quick 
questions. In regard to medical schools and the education that 
is going on, are you engaged in helping folks that are coming 
through the system now that will soon be providers how to deal 
with improper payments and Medicare fraud and those kinds of 
elements? Do you go to that level, or do you kind of----
    Dr. Budetti. Senator, I think I will defer to my colleague, 
the Inspector General, on that count----
    Senator Begich. OK.
    Dr. Budetti [continuing]. Because I know they have a major 
initiative on that front, if he does not mind.
    Senator Begich. OK.
    Mr. Levinson. Yes, thank you. And indeed, we have published 
a Roadmap for New Physicians in which we actually provide a 
very good, succinct summary of the major laws that are 
implicated in the Federal health care programs, everything from 
the physician self-referral law, the Stark Law, the exclusion 
statute, to give the incoming medical profession a sense of 
what is at stake, how to go about conducting their business in 
a way that conforms with our requirements. It has been very 
well received in the medical schools in which it has already 
been presented and before the medical associations, and it is 
part of our Health Care Fraud Summits that we have conducted 
this past year and we continue to do so this year, in which we 
do this kind of outreach to the medical community. It is a very 
important initiative and I am pleased to say it has been very 
well received.
    Senator Begich. Very good. And I will just end, Mr. 
Chairman, and say I do not know whose Web site it was, but when 
I was able to review the Top Ten Most Wanted in the fraud of 
Medicare, I want to commend whoever did that, I do not know if 
it is--there we go--I think it is a great thing to do. I know 
as a former mayor, one of the things we did with people who did 
not pay their bills, we put them on the web. It actually was so 
popular, it crashed the system three times over a weekend--not 
that people wanted to see if they were on it, they wanted to 
see who else was on it. But of $20 million, we collected almost 
$9 million in the first year, because people are not happy when 
other people are cheating the system.
    And so I thank you for that. I think that is a great 
system. I think you should continue to do whatever you can to 
put those ``Most Wanted'' up, because people actually are 
intrigued by that and probably would be your best allies and 
your best enforcement arm.
    Thank you very much.
    Senator Carper. Thanks, Senator Begich. Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Mr. Chairman, and 
thank you to the witnesses.
    Dr. Budetti, many States are taking the initiative to set 
up all-payer claim databases similar to CMS's integrated data 
repository, and I am working on legislation that actually would 
create a standard for the process for these other States so 
that we can expand the use of these databases. Do you feel that 
having databases combined with predictive analytics and other 
tools are a good way to combat fraud and abuse in the health 
care system?
    Dr. Budetti. Yes, Senator, and certainly working with the 
States to enhance the Medicaid data and to enhance the use of 
those data is a priority for us and we would be very interested 
in talking to you about that.
    Senator Klobuchar. OK. Very good. Mr. Andres, you mentioned 
in your testimony that the average prison term for defendants 
convicted of health care fraud is over 40 months. How recent is 
that, over what span of time?
    Mr. Andres. I believe that is fairly recent, Senator.
    Senator Klobuchar. Mm-hmm, because I remember at a previous 
hearing that most people convicted were not sent to jail and I 
think they served less than 3 years, and I think it has gone up 
by a few months. Do you feel that the current sentencing limits 
are enough of a deterrent?
    Mr. Andres. As I mentioned earlier, Senator, the Affordable 
Care Act directs the Sentencing Commission to examine the 
sentences for health care offenses and those proposals have now 
come through and will significantly increase sentences, and we 
believe that--or we would ask Congress to support the 
Sentencing Commission's recommendations.
    If I could just address the 40-month issue in two ways. 
First, the average of 40 months may be a little misleading 
because the types of health care fraud cases that are included 
in that figure could vary widely----
    Senator Klobuchar. Mm-hmm.
    Mr. Andres [continuing]. From the beneficiary who was 
abusing the system to a health care provider who was billing 
$20 or $30 or $40 million. So there is a wide range there, and 
so that number may be misleading.
    Let me say this. Our prosecutors are asking for jail time 
in appropriate cases, and I believe in many cases, we are 
getting significant jail sentences. To give you an example, in 
November 2010, a defendant and owner/operator of a Miami clinic 
was sentenced to 10 years in prison for her role in a $22 
million fraud. A doctor in Detroit was sentenced to 72 months 
in prison for writing prescriptions for unnecessary and non-
rendered services. Another doctor was sentenced to 14 years in 
prison and ordered to pay $9.4 million in restitution for a 
scheme involving $18.3 million.
    So in appropriate cases, judges are certainly sending 
defendants to jail and they are sending them to jail for 
significant periods of time.
    Senator Klobuchar. And I, in my former life as a 
prosecutor, I found, especially with these types of white 
collar crime cases, that sometimes the best thing you can do is 
just the example and that you may not know of some other fraud 
going on, but then people get very nervous and either pay back 
money or change their ways, so thank you for that.
    Inspector Levinson, the OIG and DOJ's Medicare Strike Force 
has expanded to include nine total hot spots of health care 
fraud, leading with Miami, Los Angeles, Detroit, Houston, 
Brooklyn, Baton Rouge, Tampa, Dallas, and Chicago. Could you 
talk about what makes a city a hot spot, and does the mention 
that I made of coordination of care, does that have anything to 
do with the low incidence of fraud?
    Mr. Levinson. Well, I think that over time, through our own 
experience as well as that of the Justice Department, it is 
clear that there are concentrated areas around the country 
where either ethnic groups, organized sense a vulnerability in 
a particular part of the program--very often it is within the 
area of DME, infusion therapy, home health is becoming a 
popular scam area--where the same kind of scheme is hatched and 
becomes very, in a sense, viral.
    And, of course, South Florida several years ago emerged as 
the hottest of hot spots and we concentrated on South Florida 
years ago to try to especially focus on the DME area with 
tremendously good results, not only in terms of investigation 
and prosecution, but billings for DME are way down as a result 
of that activity, indicating that there is real value to 
getting the word out, even as you do the work-----
    Senator Klobuchar. How about the question I asked on 
coordination of care? And this is related to delivery system 
reform, where you know what is happening with a patient. You 
have maybe one primary care provider and you have a group that 
works together. This is the model we tend to use in Minnesota. 
And my argument is that in itself, outside of the government 
and the work that Mr. Andres and others are doing, that it 
polices itself some. You need the government, as well, but it 
polices itself because there are other private sector people 
that are working with a group of people.
    Mr. Levinson. I am not sure whether any examination or 
study has been done about the impact of that in terms of the 
fraud area. Again, I am talking about those who really do not 
belong in the program in the first place. The fraud part of 
this exercise has so much to do with cleansing the program, and 
then the next step, of course, is strengthening the program, 
and I think there are important provisions in the Affordable 
Care Act on coordination that perhaps my colleague, Dr. 
Budetti, can speak about.
    Senator Klobuchar. Right. I just--I want to point out that 
some of the areas that have the more coordinated care in our 
country are not included in your hot spot list, and there is 
more of a check on the system.
    Mr. Levinson, you mentioned the use of exclusion from 
Federal programs as a disincentive for executives and providers 
to commit fraud and corporate misconduct. In the consideration 
of whether or not someone should be excluded from the programs, 
are stronger civil and criminal charges also considered in 
addition to the exclusion?
    Mr. Levinson. Well, they do play a very, very important 
part in whether permissive exclusion goes forward. There are 
mandatory exclusions if someone is convicted of a felony, for 
example. But within the context of permissive exclusions, the 
record of executives, of managers, is very important.
    Senator Klobuchar. And your testimony also highlighted the 
steps CMS and OIG are taking to move away from the pay and 
chase model, focusing more on preventing fraud from occurring 
in the first place. How will CMS and OIG prevent a person who 
is denied payment in one area simply from relocating and doing 
it in another area? That is what we see with, like, Web sites 
and piracy. Do you want to answer that, Mr. Budetti?
    Dr. Budetti. I would be happy to, Senator. One of the 
provisions in the Affordable Care Act requires that if someone 
is excluded--is thrown out of the Medicaid program in one 
State, they also have to be similarly treated in all States. 
And, of course, if they are tossed out of the Medicare program, 
provided that the reasons for them being tossed out are the 
kinds of things that we are concerned about. If they just 
resigned without being under a cloud or they just decided to 
move from one State to another, that is not going to count. But 
if they are terminated in one State for cause, they are going 
to be terminated everywhere, and if they are terminated in 
Medicare, they are going to be terminated in all the States.
    And so we are working with the States to set up a system 
that will allow the identity of the people who are subject to 
this provision to be securely identified so that the right 
person will be identified across the country, so aimed at 
exactly what you are getting at.
    Senator Klobuchar. OK. And thank you, Ms. King--my time is 
done here--for your testimony, and also, Ms. Carson, for 
telling your story. And if I could just ask one question, it 
would be how do you think we can help seniors and Medicare 
beneficiaries become more aware of potential fraud schemes?
    Ms. Carson. Actually getting out and publicizing it, and 
also letting the seniors know that they do have forces on the 
ground that will help them. A lot of them that are in high-
rises and nursing homes are not aware of what is going on 
unless we come out. We do presentations and we are educating 
them on the frauds that are happening around the country and 
also in our State.
    Senator Klobuchar. Thank you very much.
    Senator Carper. Thanks so much for those questions and for 
your work, good work in a lot of areas, really, a lot of areas.
    I want to come back to, if I can, a question for you, Ms. 
King, before too long, but not yet. I want to come back to Dr. 
Budetti. On the issue of Recovery Audit Contracting, and for 
folks that are not familiar with that, I actually used to do 
this, at the time I was Governor of Delaware, we had people who 
worked in the Division of Revenue. Their job in Delaware was to 
collect revenues that were owed to the State. And some cases, 
particularly for difficult monies to collect that were owed to 
the State of Delaware, we would hire contractors and their job 
was to go out and collect the money. They kept a percentage of 
that which they collected and that was their compensation. It 
worked well, and the Division of Revenue, rather than providing 
worse service, ended up providing, I think, better service and 
won the Quality Award for the State of Delaware my last year as 
Governor, so we are very proud of that.
    I am going to go back in time 4 or 5 years when the idea of 
using a similar approach with contractors doing recovery with 
respect to Medicare, and I think the idea was to do a 
demonstration focused on three States, I want to say 
California, maybe Florida, maybe New York. I think those are 
the initial three States that we did the demonstration for a 
couple of years, and then I think we expanded to a couple more 
States, maybe five, and then before the demonstration was over, 
I think we might have gone to 19 States.
    Then I think we had like what we used to call in the Navy a 
stand-down. We used to have a safety stand-down in our Navy air 
squadrons and we would not fly for a day or a couple of days, 
just focus on safety. For recovery Audit Contracting we had 
what I would call a stand-down for, I think for a year, to do 
sort of lessons learned. What did we learn from the 
demonstration that would enable us to collect more money, that 
would enable us to cause less intrusion, less confusion among 
the provider community.
    And then we went back and said, we are going to do this in 
all 50 States. Now that we have learned from this 
demonstration, we are going to do it in all 50 States. My 
recollection was in the last year that we did the demonstration 
before the stand-down, we collected, or contractors collected 
over $300 million. I think it was over $300 million. And for 
the 4 years, I think they collected about maybe a billion 
dollars.
    And we are told that in the first year coming back, doing 
this in all 50 States that we can expect to collect less than 
$100 million. That just seems strange to me. And as we look at 
your improper payments of $48 billion, in order for us to get 
close to half of that, we are going to have to do a whole lot 
more, than the $100 million or $200 million. And I know that 
your focus is on prevention, so we do not pay and chase. But it 
seems to me we ought to be able to do a whole lot better in 50 
States, looking at improper payments, Medicare Part A, Part B, 
Part C, Part D. The numbers just do not add up.
    Dr. Budetti. Senator, we certainly appreciate your 
leadership in this area, and I think, the program was just 
expanded to the Nation as a whole in 2010. That was the first 
full year, and a lot of that year was spent in implementing 
many of the lessons that were learned from the pilot program, 
getting feedback from the provider community, doing exactly 
what you said, which was standing down in some ways long enough 
to make sure that the program was implemented in a way that 
benefited from the pilot.
    So much of 2010 was spent with the initial stages of 
improving operations, of working with our partners, making sure 
that the program was up and running. So we do see that the 
recoveries are going back up again and we believe that we will 
be on track to reach the goals that were established. We are 
also in the process of----
    Senator Carper. And what were the goals? Could you just 
talk about the goals that were established?
    Dr. Budetti. I do not have the numbers in front of me, 
Senator----
    Senator Carper. Just roughly.
    Dr. Budetti. They are in the--I believe they were in the--
for 3 years, in the $300 to $500 million a year range, and we 
believe that we are on track to getting there.
    We also believe, as you said, that as we implement--we have 
already signed a contract for a Recovery Audit Contractor to 
look at overpayments and underpayments in the Part D program. 
We are right now finished collecting public comments on how to 
implement the other aspects that were in the Affordable Care 
Act on the Part C and Part D programs. And we have also been 
working very closely and diligently with the States to 
implement the Medicaid RACs in the States.
    So we are on track, I think, to get the full benefit out of 
the Recovery Audit Contractor program and we will be happy to 
keep tabs with you on how successful we are.
    Senator Carper. We have had this conversation before, and I 
do not mean to beat a dead horse, but this is a lot of money. 
If we can collect through Recovery Audit Contracting a billion 
dollars in roughly 4 years out of anywhere from three to five 
States, and that was not Medicare Part A, Part B, Part C, Part 
D, but it was just maybe A and B, if we are adding C and D to 
that and we are adding another 45 States, we ought to be able 
to do a whole lot more than $300, $400, $500 million in the 
next several years. It just--it does not add up.
    Dr. Budetti. I certainly appreciate that, Senator. I think 
that some of the changes that were made in the program will 
take a while to be fully in place and to be implemented 
properly. And also, we are working with the provider community 
to correct many of the problems that led to the identification 
of an improper payment that could be recovered. Certainly, 
everybody's goal is to eliminate that problem in the first 
place, not just to recover the funds after the fact. But we 
will be happy to, as I said, keep tabs on this with you.
    Senator Carper. And we will keep tabs on it, as well.
    You mentioned Medicaid. Let me just touch bases on that. My 
understanding was that CMS will no longer require that States 
have Medicaid Recovery Audit Contractors in place by April 1 of 
this year. That is what I am told. And that the Medicaid 
program final rule will establish a new deadline, not April 1, 
but a new deadline. I am told that CMS has also dropped the 
March target for publishing the final rule and there has been 
no announcement of a new target date for the final rule. And I 
would just ask, when do you expect to see the final rule for 
Medicaid Recovery Audit Contracting?
    Dr. Budetti. Senator, we did publish the Notice of Proposed 
Rulemaking last fall and we did get a lot of feedback from both 
the States and from the provider community, in particular, on 
the way that the program would be implemented across the States 
and trying to assure that the Recovery Audit Contractors under 
Part A and B of Medicare, for example, were not completely 
different than the way that they are implemented under 
Medicaid. So we are taking a lot of considerations seriously as 
we design the program.
    But we are on track. We are working diligently, and 
although I can never talk about the exact date of a regulation 
that has not yet been published, I can tell you that we are 
working on getting this in final form very diligently and it 
will be forthwith.
    Senator Carper. And I would like to take more comfort. I am 
not sure, but is the beauty in the eye of--
    Dr. Budetti. It will be in the short term, Senator----
    Senator Carper. OK.
    Dr. Budetti [continuing]. But since we are in the process 
of rulemaking, I am just not in a position to specify exactly 
what the content or timing would be just yet.
    Senator Carper. Well, sooner rather than later. I hope you 
feel that sense of urgency and reflect it.
    Dr. Budetti. I feel that sense of urgency, sir.
    Senator Carper. All right. Let me yield to Senator Brown. I 
have a couple more questions, and then we will come back to--I 
have at least one question for you, Ms. King, so do not go 
away. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. I have been 
listening back at another meeting. The Chancellor of UMass-
Lowell came out.
    Mr. Budetti, just to kind of reengage a little bit, the GAO 
designated Medicaid a high-risk program, in 2003, and under the 
Affordable Care Act, the cost of the Medicaid expansion is $430 
billion over the next 10 years and the Federal Government is 
going to be responsible for 90 percent of that.
    On page ten of your testimony, you state that the return of 
the ROI for the Medicare Integrity program is 14 to one. Do you 
know what the ROI will be for the Medicaid Integrity program?
    Dr. Budetti. Senator, the Medicare Integrity program is 
something that we operate fully at the Federal level and the 
collections and the data are all something that is entirely 
under our purview. The activities in the Medicaid Integrity 
program itself and the various Medicaid activities that are 
designed to combat fraud and go after these kinds of problems 
are really a partnership between us and the States. We operate 
a number of activities. For example, we run the Medicaid 
Integrity Institute, which has trained a couple of thousand 
State employees in program integrity. And so that is one kind 
of activity that we do at the Federal level that is not really 
designed for us to have a direct return on investment like we 
can measure in the Medicare Integrity program. We also have, of 
course, auditors that do audit and do those audits based upon 
data that we collect from the States, but we do not have direct 
access to the kind of claims data that we do on the Medicare 
side.
    So it is really a partnership, and there are funds that are 
coming back to the States that we may or may not actually be 
able to identify easily for calculating our return on 
investments. But we are working on this. This is an issue 
before us. We are looking at the best way to go about 
calculating the return on investment on the Medicaid side. We 
firmly believe that what we have done is effective and is 
leading to recoveries, but it is much more complicated in the 
sense that it is a partnership with the States and there are a 
variety of activities that go on at the State level that we are 
not directly responsible for.
    Senator Brown. So do you think you are effectively able to 
figure out if the money is effectively being spent or not and 
if it is being allocated in the right integrity activities?
    Dr. Budetti. Well, that for sure. We certainly believe that 
we are engaging with our States. We are moving to get the 
States and ourselves, as Senator Klobuchar referred to, to have 
better data available for this process. We are working with 
them on looking to the ways to use the data. We are working 
with the States on clusters of States working on issues that 
are important to them. We are revisiting this entire issue 
because we believe that the States are effective partners.
    States have a variety of activities that go on that we are 
not directly overseeing. For example, the Medicaid Fraud 
Control Units that generally are in the Attorneys Generals' 
offices in the States are something that, although they are 
funded out of Medicaid operations, they are not directly 
controlled by us.
    Senator Brown. That being said, have you noticed any 
differences, because, for example, in Massachusetts, we have 98 
percent of our people already insured. Have you noticed any 
difference between the States like ours that are already kind 
of dealing with those issues and already have a health care 
plan in effect and, quite frankly, I think it is better than 
the Federal plan? Have you noticed a difference between our 
State and maybe other States that are not where we are?
    Dr. Budetti. I do not have any State-specific data at hand, 
Senator, but I would be happy to see whether we can find 
something for you----
    Senator Brown. No, just--not looking for anything. It is 
just a general, do you notice a difference, that is all. But if 
you cannot answer, that is fine.
    Dr. Budetti. I do not think I have anything to add to that, 
Senator.
    Senator Brown. All right. I was looking for an ``atta boy'' 
for Massachusetts. [Laughter.]
    Man, I cannot give any more softballs than that. Simply, 
``Yes, Massachusetts is doing great, Senator.'' OK. [Laughter.]
    Dr. Budetti. I am sure Massachusetts is doing great in 
many----
    Senator Brown. Oh, it is too late. [Laughter.]
    And just to follow up again, HHS's fiscal year 2010 agency 
financial report estimates the national improper payment rate 
for Medicaid is 9.4 percent, with the Federal share being an 
estimated $22.5 billion. The same report stated that CMS faced 
challenges with State payment systems that had paper-only and 
aggregate claims. Changes in information systems, IT, 
obviously, at the State level during the course of the 
measurement cycle and wide variations of system designs and 
capabilities vary, from State to State.
    I know CMS is working with the States to modernize their 
IT. How long and how much money do you think it will take 
before the States achieve and kind of get on the same sheet of 
music when it comes to dealing with these types of issues?
    Dr. Budetti. Well, Senator, as I am sure you are aware, 
some States are far more advanced than others----
    Senator Brown. Like Massachusetts. [Laughter.]
    I have you flustered, do I not? [Laughter.]
    Senator Brown. Good. I am trying to throw you off, so--I am 
obviously teasing. I am glad everyone has a sense of humor.
    Dr. Budetti. I am looking for something here, Senator.
    Senator Brown. All right. Good.
    Dr. Budetti. The States--the way that the States are 
running their programs does vary from State to State, and the 
way that the improper payments are measured in the States is on 
a three-year rotating cycle, so that 17 programs are studied 
and reported on annually. So when we reported the figure for 
this year, for the first time that we had 3 years of data to 
get a comprehensive national figure, that set the target for us 
for what we want to reduce.
    Now, what that means is that States typically have 2 years 
before the next time that they will be studied, because it is a 
three-year rolling cycle. So that is the cycle that we expect 
the States to implement their improvement plans in, and it is 
in that kind of a cycle that we will know whether the States 
are improving. So----
    Senator Brown. May I interrupt for one second?
    Dr. Budetti. Yes, sir.
    Senator Brown. So it is clear to me that the States are all 
different. It has been 40 years, basically, and we still do not 
have, like, a uniform national claims system where you can all 
be on the same sheet of music, same type of ``keep it simple, 
stupid'' type of philosophy where we just do it all the same 
and there is no miscommunication, there is no misunderstanding, 
there are no improper classifications. I mean, what type of 
problem, I guess, would it be to have a lack of uniform 
national claims kind of data system? Is there something you 
guys talk about at all, or----
    Dr. Budetti. Well, Senator, as I said, the Medicaid program 
is a partnership with the States and the States have 
substantial flexibility. They are the ones who end up paying 
the claims and having the claims data to analyze. So we do need 
to work individually with all of the States and to make sure 
that we are doing something that is appropriate for a given 
State.
    On the other hand, as you mentioned, we do want the States 
all to get the maximum possible return on their program 
integrity investments and that is why we do things like our 
Medicaid Integrity Institute. We also do a variety of ways of 
communicating with the States so that they know what each other 
is doing and can learn from each other best practices.
    Senator Brown. I have one final question. Thank you for 
your sense of humor. I appreciate it. It is not easy to come 
here. I appreciate everyone else laughing, too.
    So, Ms. King, I want to just touch base very quickly, 
because I know the Chairman has a question or two left. The 
expanded prescription Part D drug benefit program began in 
2006, but it was not until 2010 that GAO indicated that CMS has 
made progress in the $51 billion program for waste, fraud, and 
abuse. Due to the nature and size and complexity, how confident 
are you that CMS will be able to implement in a timely manner a 
vastly more complex system to make sure that we are not having 
any of the fraud, waste, and abuse that we are kind of 
discussing here today in that program?
    Ms. King. Well, if I could elaborate a little bit on the 
Medicare Part D situation, CMS, before Part D went into effect, 
required the sponsors and the plans to have compliance 
programs, and in effect, that is sort of self-policing. CMS put 
forth elements that you have to have in your required 
compliance plan, so the plan is supposed to police themselves 
and they were, in effect, and they were checked. But what CMS 
did not do as soon as they said they would do is audit whether 
the compliance plans were working.
    Senator Brown. Right.
    Ms. King. So there is a little bit of a nuance there.
    Senator Brown. No, I understand----
    Ms. King. And in the Affordable Care Act, there are 
requirements for providers to have compliance plans. So going 
forward, I think that there is going to be more on the provider 
community and providers as a group to take those things into 
account on the front end, so to share more in the 
responsibility.
    Senator Brown. Thank you, Mr. Chairman.
    Senator Carper. Thanks for all those questions and for 
helping, and your staff, as well, for helping us with this 
issue.
    This is not a partisan issue. We all know we have a huge 
debt. We need to bring it down. We have a problem with 
Medicare. We are running out of money somewhere down the line. 
We want to make sure that does not happen. And we want to put 
bad guys in jail and put the white hats, we want to make sure 
they get some credit. We appreciate the work that is being done 
on this.
    When I get to the end of my questions, the last question I 
will ask is for you to come back to us and give us advice and 
maybe one thing, and I will start maybe with you, Ms. Carson--
not now, but in 7 or 8 minutes--come back and say, if the 
Congress could do one thing, the Legislative Branch, what can 
we do? What should we do to try to make sure that we do a 
better job with respect to these issues? Just be thinking about 
that, everybody here.
    All right. A question, if I could, for Mr. Andres, if I 
could. I think our Attorney General, Eric Holder, has been 
quoted as saying maybe the fraud on Medicare is as much as $60 
billion. Let us just say it is half that. Let us just say it 
is, like, $30 billion. I do not think anybody knows what it is, 
but let us say it is only half that number, $30 billion.
    Last year, we reached a high-water mark, I think, the most 
recent year, where we recovered, what, about $4 billion, or we 
tried to recover as much as $4 billion, reported that. That 
would be the biggest recoveries we have ever made. Going 
forward, obviously, we want to stop the incidence of fraud in 
the first place, but can we expect next year--I think we have 
seen this growth, these recoveries grow from maybe $1 billion 
to $2 billion to $4 billion. Given the fact that there is a lot 
more out there, can we expect to see that number continue to 
rise?
    Mr. Andres. Senator Carper.
    Senator Carper. And what can you do, what can we do to make 
sure that happens? I think one answer might be, if you are 
getting seven bucks back for every dollar that you have to 
invest, maybe we need to make sure that you can get those one 
dollars so you can get to seven. Maybe we ought to double that. 
But what can we do, what do you need to do to make sure that we 
continue to increase that number of recoveries?
    Mr. Andres. Certainly support the President's budget, which 
asks for additional funding for the Department of Justice. A 
lot of the money on the recovery side comes from the tremendous 
work from the Civil Division. The Civil Division is involved in 
False Claims Act and other related lawsuits in which they are 
suing pharmaceutical companies and going after a variety of 
different actors in the field. So a lot on the recovery side 
comes from the civil side as opposed to on the criminal side.
    Our recovery numbers on the criminal side, as I mentioned 
earlier, are a little harder because, again, we are involved in 
the arrest and prosecution and jailing of these individuals, 
but it is harder for us to actually collect money in many 
instances because the money is simply gone or we cannot get to 
it.
    Senator Carper. All right. Ms. King, I have been saying I 
am going to ask you a question and the moment has come. Let me 
just see how I lead into this. I think--Dr. Coburn is gone now. 
He was instrumental in having GAO conduct a review, I think, 
that led to the release of a report that identified numerous 
duplicative government programs as well as ways that the 
Federal Government could cut costs and save money. I think we 
all realize that identifying duplication in the agency and 
improvements are critical at this time of economic challenge, 
at this time of high deficits, as well as trying to be better 
stewards.
    As an old recovering Governor, I understand the serious 
challenges that come along with running a major program like 
Medicare and Medicaid. We all know that our Medicare and 
Medicaid systems are not perfect. We have to find ways to make 
them better.
    So my question is basically this. We have discussed a 
number of the changes that are being made at CMS to fight 
fraud. As we look forward to the next steps, can you identify 
some best practices or other activities that CMS should 
consider to further prevent fraud, waste, and abuse in these 
programs? So beyond what is being done, how about some 
additional steps, next steps, to do even better? And are there 
additional statutory authorities that you need from Congress 
that would enable you, or enable them to do an even better job?
    Ms. King. I think one thing that we would suggest that they 
could do a better job on at the moment is, and especially 
following up on the RAC program, to aggressively identify a 
process to look at what happens with the vulnerabilities so 
that they do not happen again. When we evaluated the RAC pilot 
program, we found out that they did not have a process like 
that in place, and going forward in the national program, I 
think that would be important.
    In terms of additional authorities----
    Senator Carper. Dr. Budetti, would you briefly respond to 
that comment, please?
    Dr. Budetti. Yes, Senator. We appreciate the comment from 
GAO and we are looking to do exactly that, to follow up on the 
vulnerabilities. We believe that we should learn from the 
findings of the Recovery Audit Contractors to correct those 
problems.
    Senator Carper. All right. Thanks.
    Go ahead, Ms. King.
    Ms. King. I think in terms of new authorities, I think CMS 
has a really full plate at this point, so----
    Senator Carper. Is that true, Dr. Budetti? [Laughter.]
    Ms. King [continuing]. And they have testified before that 
they feel like they have the tools necessary. But effective 
implementation of those authorities is going to be really 
important.
    The other thing that I think that was pointed out in the 
Coburn Report is, as you probably know, the Congress sets a lot 
of the payment policies in Medicare in law and I think it is 
important to look carefully at those policies to see that they 
are providing the right incentives to provide care effectively.
    Senator Carper. All right. Thank you.
    Let me go to an issue involving contractor conflict of 
interest. Mr. Levinson, I think this involves some of the work 
that you all have been doing. But we are always trying to 
identify ways to incentivize government contractors for better 
performance as well as to try to remove some of the hindrances 
that they face. About a week or so ago, Senators Baucus, 
McCaskill, and I sent a letter to your office asking to review 
contracting oversight by CMS. The issues involved potential 
organizational conflicts of interest among the contractors 
hired, on one hand, to perform the Medicare claims 
reimbursements and those hired to oversee the process. I would 
just ask, is your office going to be able to examine the 
questions and the issues that we raised, and if you could 
respond to that, I would be very pleased.
    Mr. Levinson. Thank you, Mr. Chairman. We have received the 
letter and, indeed, we have ongoing work in the conflicts area 
that we believe overlaps to a certain degree with what the 
request is, and we look forward actually to working with your 
staff to see how we can align our work that was started some 
time ago with this fresh request, which we think in many 
respects will be very helpful, actually, in filling out our own 
work. So the answer is a very enthusiastic yes.
    Senator Carper. All right. Good.
    And a follow-up, if I could, Dr. Budetti. Do you have any 
thoughts on the steps that CMS could take to improve the 
oversight of your Program Integrity contractors?
    Dr. Budetti. Senator, we certainly, just as you do, we take 
any conflict of interest issues very seriously. We do have 
processes in place to screen for conflicts of interest before 
contracts are awarded. We are always willing to take a second 
look at something so important and we look forward to 
continuing to do so. So we do take this very seriously. We 
believe we have good processes in place, but if we need to 
learn something, we are open to learning it.
    Senator Carper. OK. Thank you.
    All right. Ms. Carson, I indicated I would have one last 
question for the whole panel and it is basically the same 
question. What can we do on the legislative side? This Federal 
Government, three branches, executive, judicial, and 
legislative, and we try to work together. I am actually quite 
pleased, in preparing for this hearing, to know as we try to 
reduce improper payments and try to reduce the incidence of 
fraud, as we try to recover additional monies that have been 
defrauded from these programs, my sense is we are actually 
working as a team. The team works actually pretty good.
    We have GAO out there being a watchdog and coming up with a 
bunch of recommendations and telling us maybe some things that 
we need to be doing or some things that the folks at CMS need 
to be doing.
    We have the Department of Justice chasing the bad guys, 
putting them in jail, fining them, sending out a real strong 
message to people who are doing this stuff that if they keep it 
up, we will catch you. You will not be happy. And that is an 
important message, as well.
    And for Ms. Carson over here to say we have not just tens 
of thousands of our senior citizens out there, but maybe 
hundreds of thousands we can put out on the beat, some new cops 
on the beat, and they are all 65 or over, but if we got them 
out on the beat and helping us to beat back the bad guys.
    But what I really want to hear from you is what more--not 
so much what should the folks at the table and those you 
represent be doing, but is there anything, any advice, good 
advice you have to close with what more the Legislative Branch, 
the Congress, can be doing to help us do a better job on this 
front?
    Ms. Carson. Well, when I was in banking, we had a tracking 
system called an Excessive Transaction Report.
    Senator Carper. Excessive transaction?
    Ms. Carson [continuing]. Report that we had, and what is 
going on in a day in which an alert is transmitted, with the 
fraud that is--and the new scams that are coming out in other 
cities? If we were alerted, we can educate the seniors to what 
is going on so that they can be best prepared to actually--they 
can be best prepared and we can be best prepared in educating 
them on what to look out for and also not to be taken in by any 
of the new scams that are coming about.
    Senator Carper. All right. Thanks. I think we are going to 
want to follow up with you back in Delaware and figure out 
how--maybe we can be a model in getting a whole lot more folks 
involved in this.
    During the time I served as Governor for 8 years, we 
focused a lot on recruiting mentors. I wanted to recruit 10,000 
mentors to work in our schools with kids on a voluntary basis 
and we hit the target. We actually still have thousands of 
people who mentor. I still mentor. That is something where we 
actually made a big difference in terms of quality of the 
education, students doing better in school, less disruption, 
just simply doing better academically. It did not cost really 
much money at all and we got a great return on that investment. 
Maybe we can figure out a way to leverage and get more of our 
seniors to sign up for the Patrol. Thank you.
    All right. Ms. King, I am always happy to work with all you 
folks at GAO. I had a nice chat with your new Comptroller 
General yesterday and it was very encouraging--a very 
encouraging conversation. But what else can we do at our end to 
help on this front?
    Ms. King. I think effective oversight is really critical at 
this juncture, such as you are doing now. The Congress has 
taken a really active role in oversight of late and I think 
that is critical going forward, as well.
    Senator Carper. All right. Thank you. Mr. Levinson.
    Mr. Levinson. Mr. Chairman, of course, it would be very 
helpful to have strong continuing support for the HCFAC 
program.
    Senator Carper. Talk about that.
    Mr. Levinson. Well, over the course of its history, it has 
been able to recover $14 billion, and as was pointed out 
earlier, those dollars are continuing to increase. The stakes 
are much larger and the HCFAC program really presents a very, 
very important vehicle for DOJ, OIG, CMS to work in a 
coordinated fashion to attack the fraud problem. So continued 
support of HCFAC, I would----
    Senator Carper. For the folks who are monitoring and 
following this hearing intently across the country, why do you 
not tell them what HCFAC actually means in words that they can 
understand.
    Mr. Levinson. It is the Health Care Fraud Account program 
that was established as part of the Kennedy-Kassebaum HIPAA law 
in the mid-1990s, and it created this dedicated account that is 
shared between the Departments of Justice and Health and Human 
Services to coordinate a multi-prong attack against health care 
fraud. And as I have said, it has produced very, very 
significant results. The return on investment continues to look 
even better.
    Senator Carper. Good.
    Mr. Levinson. As a second more particular matter, on 
(b)(15) exclusion authority----
    Senator Carper. Say that again?
    Mr. Levinson. On (b)(15) exclusion authority that OIG 
exercises, there is bipartisan interest in Congress now on 
giving us additional authority under (b)(15) that would allow 
us to pursue, in the context of sanctioned entities, to pursue 
parent or sister corporations that, in effect, control or are 
working with the entity that has been excluded for--as a part 
of the sanction.
    Senator Carper. OK.
    Mr. Levinson. We need to be able to pursue those who, in 
effect, are in or connected with the corporation that we have 
identified as committing a serious health care infraction. 
Giving us that authority would allow us to go up the corporate 
chain or be able to pursue other corporations in which 
individuals basically are working together.
    Senator Carper. Good. That is one that--I think that is new 
to me. That is not something I have thought about before, so we 
appreciate that idea.
    Mr. Levinson. Thank you.
    Senator Carper. Thanks. Mr. Andres, what can we do to help 
you guys do a better job?
    Mr. Andres. Chairman Carper, the President's budget seeks 
an additional $63 million in discretionary funding for the 
Department of Justice, and we would use those funds to continue 
our law enforcement efforts. As we have testified here today, 
investment in health care fraud enforcement is a sound one, one 
that generates revenue, and we believe that supporting the 
budget would be instrumental to us continuing those efforts.
    Senator Carper. All right. Thank you.
    Dr. Budetti, before you respond, let me just say, my 
colleagues and I have, frankly, asked a lot of questions, not 
easy questions, in some cases difficult questions. I am sure as 
we go forward there are going to be even more tough questions. 
But having said that, I just want to note that a very good and 
important step that you described. CMS implementing new 
requirements and controls will help curb waste and fraud from 
the Medicare prescription drug program. We are mindful of that. 
These steps directly address the findings of the IG that I 
released. That is just one of several in a series of solid 
progress. I just would like to say that.
    It is not enough just to pull somebody before a Committee 
and just say, well, why do you not do a better job? The 
important thing is, well, we have asked you to do a better job. 
We have provided the resources. We have asked you, how can we 
help you. We have provided the resources. And then we say we 
expect you to do a better job, and on a number of fronts, you 
are, and we want to make sure that continues and we are keeping 
up our share of the bargain.
    But any closing comment in terms of how we can help more?
    Dr. Budetti. Thank you very much for those kind words, 
Senator. I truly anticipate that we will be in the position to 
give you more reason to feel good about the investments that 
you have made.
    As far as going forward, well, first of all, we certainly 
appreciate everything that you and your colleagues in the 
Senate and in the Congress have done with providing us with the 
authorities and the expanded funding in the Affordable Care Act 
and other new authorities. Those are absolutely critical to 
what we are doing.
    Going forward, as my colleagues have said, the President's 
budget for 2012 does propose additional spending that promises 
to save another $30 billion or more over the coming decade. So 
we continue to believe that it would be an ongoing wise 
investment to make, for the Congress to make. So if there is 
any one thing that I would mention, it would be for you to 
support the President's budget request for 2012.
    But I also want to thank you, sir, for your leadership in 
this area and look forward very much to continuing to work with 
you.
    Senator Carper. We look forward to it, as well.
    My thanks to each of you for joining us today, for 
preparing today, for the good work that you and your teams are 
doing. Let us just keep it up.
    I will close with this. I say this probably once or twice 
every day. Everything I do, I know I can do better. The same is 
probably true for all of us. And if it is not perfect, we need 
to make it better, and while we are doing better, better yet, I 
know we can all do better still. Let us just make sure that we 
do.
    Thank you so much. This hearing is adjourned. [Whereupon, 
at 5:02 p.m., the Committee was adjourned.]


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