[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]


                  IDEAS TO IMPROVE MEDICARE OVERSIGHT
                    TO REDUCE WASTE, FRAUD AND ABUSE
=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 30, 2014

                               __________

                          Serial No. 113-HL11

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
PETER J. ROSKAM, Illinois            EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania            BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska

                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 30, 2014 announcing the hearing................     2

                               WITNESSES

Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services, Department of Health and Human Services..............    47
Gloria L. Jarmon, Deputy Inspector General for Audit Services, 
  Office of Inspector General, Department of Health and Human 
  Services.......................................................     6
Kathleen M. King, Director, Health Care, Government 
  Accountability Office..........................................    19

                       SUBMISSIONS FOR THE RECORD

Jim McDermott, Ranking Member, Subcommittee on Health, Committee 
  on Ways and Means, submission..................................    87
AARP, statement..................................................   329
ACHCI, statement.................................................   331
AFSCME, statement................................................   333
AMCP, statement..................................................   337
AMRPA, statement.................................................   345
AOPA, statement..................................................   353

 
                  IDEAS TO IMPROVE MEDICARE OVERSIGHT
                    TO REDUCE WASTE, FRAUD AND ABUSE

                              ----------                              


                       WEDNESDAY, APRIL 30, 2014

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 1:58 p.m., in 
Room 1100, Longworth House Office Building, Hon. Kevin Brady 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, April 23, 2014
No. HL-11

              Chairman Brady Announces Hearing on Ideas to

      Improve Medicare Oversight to Reduce Waste, Fraud and Abuse

    House Ways and Means Health Subcommittee Chairman Kevin Brady (R-
TX) today announced that the Subcommittee on Health will hold a hearing 
on Medicare waste, fraud, and abuse, with a focus on the policies that 
address these problems. This hearing will allow the Subcommittee to 
hear directly from the U.S. Office of the Inspector General at the 
Department of Health and Human Services (OIG-HHS), the U.S. Government 
Accountability Office (GAO), and the Centers for Medicare and Medicaid 
Services' Center for Program Integrity (CPI) about the different 
recommendations and approaches to curb abuses within Medicare. The 
Subcommittee will hear testimony from Gloria Jarmon, Deputy Inspector 
General for Audit Services at OIG-HHS; Kathleen King, Director, Health 
Care at GAO; and Dr. Shantanu Agrawal, Deputy Administrator and 
Director of CPI. The hearing will take place on Wednesday, April 30, 
2014, in 1100 Longworth House Office Building, beginning at 2:00 p.m.
      
    In view of the limited time available to hear from the witnesses, 
oral testimony at this hearing will be from the invited witnesses only. 
However, any individual or organization not scheduled for an appearance 
may submit a written statement for consideration by the Committee and 
for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    According to the 2014 March Medicare Payment Advisory Commission 
(MedPAC), the Medicare program paid out approximately $574 billion each 
year to more than 1.5 million doctors, hospitals and medical suppliers, 
and citing a GAO report estimates that about $44 billion a year is lost 
to fraudulent activity within the system. There are many methods 
utilized by perpetrators of fraud, including false billing and identity 
theft.
      
    CMS has primary responsibility for paying providers appropriately 
for furnishing services to beneficiaries and preventing fraud, waste, 
and abuse. The agency partners with numerous entities to carrying out 
these important functions, including contracts with:

          Medicare Administrative Contractors (MACs) perform 
        prepayment medical reviews to ensure services provided to 
        Medicare beneficiaries are covered and medically necessary, 
        among other activities;
          Zone Program Integrity Contractors (ZPICs), located 
        in seven zones throughout the country, are auditors that 
        perform a wide range of medical review, data analysis, and 
        evidence-based policy auditing activities;
          Recovery Audit Contractors (RACs) aim to reduce 
        Medicare improper payments through the detection and collection 
        of overpayments, the identification of underpayments, and the 
        implementation of actions that will prevent future improper 
        payments. Many of these activities involve data-mining 
        activities based on billing information. Most of the data 
        analysis is done after Medicare has made payment, but some work 
        is now also being done before on a pre-payment basis. The 
        Affordable Care Act established RACs for Medicare Part C and 
        Part D and for Medicaid.
      
    The OIG-HHS and GAO monitor efforts by CMS and its contractors to 
evaluate performance and identify vulnerabilities. OIG-HHS and GAO 
reports, often requested by Members of the Committee, provide valuable 
insight and information to assist the Congress in oversight of the 
Medicare program.
      
    The Federal Government devotes significant resources and employs 
numerous entities to curb inappropriate and excessive payments. While 
significant improvements in fraud detection have been made, such as 
enhanced screening of certain provider types before Medicare pays them, 
the most recent Comprehensive Error Rate Testing (CERT) contractor 
report to Congress shows additional improvements can and should be 
made. The report states that the payment error rate for the Medicare 
program was 8.5 percent for FY2012, the most recent data available, 
representing $29.6 billion in payment errors. This hearing will give 
Members the opportunity to assess if resources are being used 
efficiently and identify how to improve a system in need of 
transparency and upgrade.
      
    In announcing the hearing, Chairman Brady stated, ``It is very 
clear that problems with Medicare waste, fraud, and abuse persist. The 
Medicare trust fund is already headed toward insolvency and every 
dollar of fraud is a dollar not dedicated to providing quality care for 
our Nation's seniors. It's a double whammy for seniors, threatening 
their access to necessary care while also hitting their pocketbook. 
More action, stronger oversight, and true transparency is needed. This 
hearing will find areas of improvement by looking honestly and 
thoroughly at the problem. We must move beyond the unacceptable status 
quo and work to enact bipartisan bills to strengthen anti-fraud 
programs to protect the Medicare program for generations to come.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the different agencies roles and missions 
in curbing the fraud, waste, and abuse within the Medicare program.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, May 14, 2014. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman BRADY. This Subcommittee will come to order. Good 
afternoon, everyone.
    Every dollar lost to Medicare fraud is a dollar stolen from 
America's elderly and every dollar lost to improper payments, 
intentional or not, robs from the solvency of this important 
program. Today's hearing will examine the issue of Medicare 
fraud. This is a bipartisan concern shared by our seniors, the 
Medicare program and lawmakers on this Committee.
    The Office of Inspector General, which is testifying here 
today, cites that nearly $50 billion is lost to improper 
Medicare payments each year. That is an alarming amount. I am 
most alarmed by how often I open the Houston Chronicle back 
home to find stunning investigations of Medicare fraud that 
runs into tens of millions of dollars, involving doctors, 
ambulance companies, mental health clinics and even patient 
advocates, those who are tasked with protecting the sick and 
elderly.
    Last Friday brought news of a 13-count indictment of 
providers in Florida and the Houston area for allegedly billing 
Medicare for services that were not needed and providing 
kickbacks for patient referrals. Last Wednesday was the 
sentencing of a Houston-area woman after her 2013 conviction 
for defrauding Medicare. These stories are all too frequent in 
communities around the Nation.
    To make matters worse, in the past year, the Office of 
Inspector General has documented evidence that Medicare has 
paid for services to those who are deceased, in prison, and not 
entitled to benefits, all this while Medicare's main trust fund 
is on a crash course with insolvency in a short 12 years.
    President George W. Bush established the Federal Medicare 
Fraud Strike Force in 2007 that changed to a much more 
aggressive approach to Medicare fraud, and it is starting to 
bear fruit. In response, the Centers for Medicare and Medicaid 
have taken strides to address this growing problem. The agency 
has used its authority to impose a temporary moratorium on the 
enrollment of certain providers in high-risk areas, including 
preventing new ambulance companies from billing Medicare in my 
home State of Texas; however, more must be done to protect our 
seniors and taxpayers.
    While a moratorium on new providers may very well prevent 
unscrupulous providers from entering the program, it doesn't 
stop those who have already enrolled and are improperly 
billing. More must be done to move from the outdated pay-and-
chase approach to a new 21st century approach that stops 
improper payments before they go out the door.
    I am also concerned about the CMS lack of leadership and 
interest in problems that are especially embarrassing for the 
Medicare program. Preventing payments for services to those who 
are dead or are in jail involves a straightforward fix, yet it 
is still a problem, regrettably still a topic for discussion at 
this hearing. And that is the focus of this hearing, not merely 
identifying the fraud and abuses, but identifying what can be 
done using new technologies and successful strategies to 
prevent and deter fraud in the future.
    First, I commend my colleagues on this Committee, Members 
on both sides of the aisle, who have introduced bills to make 
commonsense changes. For example, my colleagues and fellow 
Texans, Mr. Johnson and Mr. Doggett, have been working on a 
legislative fix for nearly a decade to take Social Security 
numbers off of Medicare cards. And you see bipartisan efforts 
throughout this Subcommittee. It is frustrating that such a 
simple fix has yet to happen. I look forward to the day when I 
can tell my seniors in my district that they no longer must 
worry about having their Social Security number compromised 
simply by carrying the Medicare card they need to access their 
health care.
    Second, we are interested in hearing recommendations from 
the OIG and the Government Accountability Office. These 
watchdog entities have identified vulnerabilities and proposed 
solutions in the areas of improper payments, and CMS oversight 
of claims paying and fraud fighting contractors. Many of these 
recommended fixes support bills that Members of Congress on 
this Committee are championing.
    Third, we will hear from CMS about its program integrity 
efforts. While we are interested to hear what the agency has 
done, we are perhaps more interested in what it plans to do 
going forward.
    The written statements from our witnesses make clear that 
much work is left to be done. Lawmakers have ideas, OIG and GAO 
have made recommendations, and CMS has its plans. So let's 
identify the ideas and solve our problems and get to work now 
to put them in place. It is not important who comes up with 
these ideas on fighting fraud, waste and abuse. What is 
important is that we act on these good ideas. It is my intent 
that we move forward on a bipartisan basis, working with CMS, 
to protect our seniors, bolster the Medicare trust fund, and 
ensure appropriate use of taxpayer funds.
    Before I recognize the Ranking Member, Dr. McDermott, for 
the purposes of an opening statement, I ask unanimous consent 
that all Members' written statements be included in the record. 
Without objection, so ordered. I now recognize our Ranking 
Member, Dr. McDermott, for his opening statement.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I want to commend 
the chairman for having this hearing. I think the controlling 
of costs as we move forward in health care is going to be the 
toughest issue we face. This administration has been serious 
about combating fraud, waste and abuse. The joint effort of 
Attorney General Holder and Secretary Sebelius through the 
Health Care Fraud Prevention and Enforcement Action Team, so-
called HEAT, there have been measurable results. The team has 
recovered in excess of $4 billion every single year since 2011. 
That is real money.
    There was a time when a hearing on Medicare fraud such as 
this would have focused solely on the dollar amounts recouped 
at the back end after the fraud had been perpetrated, and any 
money that could have been recouped would have been long spent. 
Then came the Affordable Care Act, which gave regulators 
additional new powers to prevent fraud rather than just 
reactively address it, powers such as expanded payment 
suspension authority and the requirements to effectively police 
who gets into the Medicare program, ensuring Medicare 
participation is reserved for scrupulous providers and 
suppliers.
    So now when we talk about our fraud prevention efforts, we 
speak a different language than even 5 years ago. We speak of 
payment suspensions in greater numbers, we speak of high risk 
or moderate risk providers and suppliers, we are talking about 
fingerprinting owners of the high risk providers and suppliers, 
we speak of the fraud prevention system and the predictive 
analytics designed to monitor for potential fraud on a real-
time basis.
    Notwithstanding all the efforts that have been made at 
transforming Medicare and Medicaid into programs that hold 
participating providers and suppliers accountable, as the 
chairman has said, much more work needs to be done.
    With alternative delivery system models, what does fraud, 
waste and abuse really look like? With the expanded waiver 
authority that essentially granted Federal agencies the ability 
to issue wide-open waivers, what new fraud schemes will emerge?
    So our important work in this area is not done. Much more 
work remains. I know the GAO will continue to play an important 
role in helping us with our oversight responsibilities, and the 
OIG and CMS will use their expanded authorities to root out the 
fraud, waste and abuse to preserve the Medicare and Medicaid 
programs for the future.
    I look forward to working with the chairman on a bipartisan 
basis on these issues. I yield back the balance of my time.
    Chairman BRADY. Thank you, Doctor.
    Today we will hear from three distinguished witnesses: 
Gloria Jarmon, Deputy Inspector General for audit services at 
the Office of Inspector General, the Department of Health and 
Human Services; Kathleen King, Director of Health at the 
Government Accountability Office; and Dr. Shantanu Agrawal, 
Deputy Administrator at CMS and Director of Center for Program 
Integrity.
    We have reserved 5 minutes for each of the opening 
statements and we will explore the testimony further during 
questions. Ms. Jarmon, you are recognized.

  STATEMENT OF GLORIA L. JARMON, DEPUTY INSPECTOR GENERAL FOR 
  AUDIT SERVICES, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF 
                   HEALTH AND HUMAN SERVICES

    Ms. JARMON. Good afternoon, Chairman Brady, Ranking Member 
McDermott, and other distinguished Members of the Subcommittee. 
Thank you for the opportunity to discuss OIG's work related to 
Medicare oversight and reducing fraud, waste and abuse. We have 
a lot of work in this area. Today my statement focuses on our 
recent work related to improper Medicare payments and billings 
and oversight of Medicare contractors.
    CMS needs to continue to take steps to reduce improper 
Medicare payments and improve its oversight of the various 
Medicare contractors. Improper Medicare payments cost taxpayers 
and beneficiaries about $50 billion a year. In recent work, OIG 
has identified millions in improper payments made on behalf of 
persons not entitled to Medicare, such as incarcerated, 
unlawfully present, deceased, or entitlement-terminated 
individuals. While some progress has been made by CMS in these 
areas, it needs more accurate and timely information to trigger 
payment edits and better procedures to detect and recoup these 
improper payments.
    OIG has also uncovered a stream prescribing patterns for 
hundreds of general care physicians and questionable billings 
by thousands of retail pharmacies. Medicare also paid millions 
for prescriptions from unauthorized prescribers, such as 
massage therapists and athletic trainers. This is especially 
concerning in light of OIG's increasing investigations into 
drug diversion. Verification of prescriber authority edits and 
enhanced monitoring are necessary to safeguard Medicare Part D 
and ensure patient safety.
    Recently we have also reported improper payments to 
hospitals of millions of dollars related to vulnerabilities we 
identified as part of our nationwide hospital compliance 
reviews. In addition, we found that Medicare could have saved 
about $638 million over just a 2-year period by establishing a 
hospital transfer-of-payment policy for hospice transfers and 
strengthening billing requirements. OIG has made specific 
recommendations to reduce these and other improper payments, 
but those steps alone will not adequately safeguard Medicare.
    CMS must continue its efforts to improve its oversight of 
Medicare contractors. CMS relies on contractors to administer 
various parts of Medicare, including claims payment, 
identification and recoupment of overpayments and benefit 
integrity functions. Our work has identified vulnerabilities 
associated with CMS's oversight of contractors.
    First, CMS has not fully leveraged data to improve 
oversight. Part C and Part D plans report fraud and abuse data 
on merely a voluntary basis. CMS does not mandate such 
reporting. Under this system, we found that less than half of 
the Part D plans have actually reported fraud data, and 
reporting varies significantly from plan to plan. In addition, 
CMS has made limited use of the data it has received in 
overseeing Part C plans and has not fully used reported fraud 
and abuse data for monitoring Part D. As a result, CMS is still 
missing opportunities to discover and alert plans and law 
enforcement to emerging fraud and abuse schemes.
    Second, we have found that while CMS's performance reviews 
of Medicare Administrative Contractors, or MACs, were 
extensive, they were not always timely. If the performance 
reviews are not performed--completed and performed timely, the 
information they contain may not be available to support future 
contracting decisions.
    To improve contractor oversight, we have made several 
recommendations to CMS that are included in our compendium of 
priority recommendations on our Web site.
    While my testimony focuses on our work to help CMS improve 
program operations, I would like to make a request that would 
help OIG better meet our growing oversight responsibilities. 
OIG is responsible for oversight of about $0.25 of every 
Federal dollar spent, but our mission is challenged by 
declining resources at a time when our oversight 
responsibilities are increasing.
    By the end of this fiscal year, OIG expects to reduce 
Medicare and Medicaid oversight by about 20 percent. During the 
same time, 2012 to 2014, outlays for Medicare are expected to 
grow by about 20 percent. To ensure that we can continue to 
provide needed oversight as these programs expand, we ask for 
the Committee's support of our 2015 budget request.
    In summary, we remain very committed to carrying out our 
responsibilities in the area of improving Medicare oversight to 
reduce waste, fraud and abuse as comprehensively and 
effectively as possible with the tools and resources we have 
available.
    Thank you for your interest and support. I would be happy 
to answer your questions.
    [The prepared statement of Ms. Jarmon follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]     

     Chairman BRADY. Thank you. Mrs. King.

     STATEMENT OF KATHLEEN M. KING, DIRECTOR, HEALTH CARE, 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. KING. Mr. Chairman, Ranking Member McDermott and 
Members of the Subcommittee, thank you for inviting me here----
    Chairman BRADY. Ms. King, is the microphone on there?
    Ms. KING. I thought--I had a green--oh. Sorry.
    Chairman BRADY. I know.
    Ms. KING. Thank you for inviting me to talk about our work 
regarding Medicare fraud, waste and abuse.
    CMS has made progress in implementing several 
recommendations we identified through our work to help protect 
Medicare from fraud and improper payments, but there are 
additional actions they should take. I want to focus my remarks 
today on three areas: provider enrollment, pre- and post-
payment claims review, and addressing vulnerabilities to fraud.
    With respect to provider enrollment, CMS has implemented 
provisions of the Patient Protection and Affordable Care Act to 
strengthen the enrollment process so that potentially 
fraudulent providers are prevented from enrolling in Medicare 
and higher-risk providers undergo more scrutiny before being 
permitted to enroll.
    CMS has recently imposed moratoria on the enrollment of 
certain types of providers in fraud hotspots and has contracted 
for fingerprint-based criminal background checks for high-risk 
providers. These are all positive steps; however, CMS has not 
completed certain actions authorized by PPACA, which would also 
be helpful in fighting fraud. It has not yet published 
regulations to require additional disclosures of information 
regarding actions previously taken against providers, such as 
payment suspensions. And it has not published regulations 
establishing the core elements of compliance programs or 
requirements for surety bonds for certain types of high-risk 
providers, including home health agencies.
    With respect to claims for payment, Medicare uses pre-
payment review to deny payment for claims that should not be 
paid and post-payment claims review to recover improperly paid 
claims. Pre-payment reviews are typically automated edits in 
claims processing systems that can prevent payment of improper 
claims.
    We found some weaknesses in the use of pre-payment edits 
and made a number of recommendations to CMS to promote 
implementation of effective edits regarding national policies 
and to encourage more widespread use of local pre-payment edits 
by Medicare administrative contractors, or MACs. CMS agreed 
with our recommendations and has taken steps to implement them.
    With respect to post-payment review, we recently completed 
work that recommended greater consistency in the requirements 
under which four post-payment review contractors operate when 
it can be done without impeding the efficiency of efforts to 
reduce improper payments. CMS agreed with our recommendation 
and is taking steps to implement them.
    We also recommended to CMS that they collect and evaluate 
how quickly one type of post-payment review contractor, the 
zone program integrity contractor, and takes action against 
suspect providers. CMS did not comment on this recommendation.
    We also have further work underway on the post-payment 
review contractors to examine whether CMS has strategies in 
place to coordinate their work and whether these contractors 
comply with CMS's requirements regarding communications with 
providers.
    With respect to vulnerabilities to fraud, we have made 
recommendations to CMS over the last several years, and CMS has 
implemented several of them, including establishing a single 
vulnerability tracking process and requiring MACs to report to 
them on how they have addressed vulnerabilities; however, CMS 
has not taken action to address our recommendations to remove 
Social Security numbers from Medicare cards, because display of 
these numbers increases beneficiaries' vulnerability to 
identity theft. We continue to believe that CMS should act on 
our recommendations, and we are currently studying the use of 
electronic card technologies for Medicare, including potential 
benefits on limitations and barriers to implementation.
    Because Medicare is such a large and complex program, it is 
vulnerable to fraud and abuse. Constant vigilance is required 
to prevent, detect and deter fraud so that Medicare can 
continue to meet the health care needs of its beneficiaries.
    This concludes my prepared remarks. Thank you, Mr. 
Chairman.
    [The prepared statement of Ms. King follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman BRADY. Thank you, Ms. King. Dr. Agrawal.

 STATEMENT OF SHANTANU AGRAWAL, M.D., DEPUTY ADMINISTRATOR AND 
 DIRECTOR, CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE 
 AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Dr. AGRAWAL. Thank you. Chairman Brady, Ranking Member 
McDermott and Members of the Committee, thank you for the 
invitation to discuss the Centers for Medicare and Medicaid 
Services Program Integrity efforts.
    Enhancing program integrity is a top priority for the 
administration and an agency-wide effort at CMS, and we have 
made important strides in reducing waste, abuse and fraud with 
the strong support of this Committee and Congress. I know that 
this also is an area of particular interest to the Members of 
this Committee, and I look forward to hearing your input and 
working with you on strengthening program integrity in the 
Medicare program.
    Before proceeding, I would like to take a moment to 
introduce myself. I am a board certified emergency medicine 
physician. For the past several years and concurrently with 
other positions I have held, I continue to work as an emergency 
medicine doctor, both in large academic centers and in area 
community hospitals.
    Shortly after completing my medical training, I joined a 
management-consulting firm, where I had the opportunity to help 
hospitals, health systems and biotech and pharma companies 
improve the quality and efficiency of health care delivery.
    In 2011, I joined CMS to serve as the chief medical officer 
of the Center for Program Integrity, where I had the chance to 
apply both my medical knowledge and private sector health 
experience to helping CMS fight fraud and ensure quality care 
for the millions of patients insured through Medicare and 
Medicaid. I view program integrity through the lens of these 
experiences and as a physician who fundamentally cares about 
the health of patients.
    Our health care system should offer the highest quality and 
most appropriate care possible to ensure the well-being of 
individuals and populations. CMS is committed to protecting 
taxpayer dollars by preventing or recovering payments for 
wasteful, abusive or fraudulent services, helping to extend the 
life of the trust fund, but the importance of program integrity 
efforts extend beyond dollars and health care costs alone. It 
is fundamentally about protecting our beneficiaries, our 
patients, and ensuring we have the resources to provide for 
their care.
    Numerous experts have cited the waste endemic to our system 
caused by multiple factors, from inefficiencies in care 
delivery to outright fraud. Underlying the issues and numbers 
are real patients. We are all too familiar with the stories of 
a patient getting inappropriate care or services due to the 
malfeasance of others to defraud our system. When providers and 
suppliers are influenced by their own financial interests or 
incentives, this can lead to up-coding or other gaming of 
Medicare and Medicaid.
    Fraud is not merely deception for dollars through falsified 
billing. It threatens beneficiary health through blatantly 
unnecessary services, substandard or non-existent care, 
dangerous prescribing through pill mills, and a host of other 
schemes.
    Examples of such waste and abuse are driving our agency and 
my team to rethink the way it approaches program integrity. Due 
to new authorities and resources provided by Congress over the 
past few years, CMS is changing the program integrity paradigm 
to one of focus on prevention and collaboration to identify and 
combat waste, abuse and fraud in our system, and in partnership 
with other stakeholders.
    As deputy administrator, I will continue to lead CMS on 
this course with three main areas of intention: coordination 
across the agency and the broader health care system, 
excellence in program integrity operations, and a clear view 
towards improving the costs and appropriateness of care.
    First, coordination. The Center for Program Integrity is 
responsible for leading and coordinating agency efforts to 
reduce waste, abuse and fraud. Collaboration with stakeholders 
external to the agency is vital to--as well for the 
identification of vulnerabilities and increasing our impact. 
Led by the interagency HHS-DOJ partnership, HEAT, the Federal 
Government made its highest recovery of funds this past year, 
$4.3 billion in fiscal year 2013. This resulted in the highest 
return on investment in the HCFAC program, $8.10 for every $1 
invested. We are continuing to build on existing partnerships 
with private sector pairs, health care organizations and 
providers through our public-private partnership. Results from 
the initial data exchanges under the partnership have helped 
identify fraudulent schemes and specific providers impacting 
private and public payers, and led to CMS administrative 
actions such as revocations, as well as law enforcement 
referrals.
    Second, operational excellence. CMS's robust measures of 
the return on program integrity appropriations, the result of 
audit and investigation activities, and the impact of advanced 
data analytic systems, all of which shows strongly positive 
returns on investment. I intend to build on this foundation by 
managing performance and strategic decision making based on the 
areas of greatest risk and return. In particular, CPI's work on 
provider enrollment and screening has enhanced program 
integrity while lowering burden for providers.
    Finally, the cost and appropriateness of care. CMS has a 
comprehensive Program Integrity strategy that includes multiple 
tools and interventions that are used individually and in 
tandem to tackle specific vulnerabilities. By applying these 
tools across Medicare and Medicaid in a coordinated way, CMS 
can impact the overall cost of care. We can and should aim to 
do even more.
    As just one example, CMS has been piloting the use of a 
fraud prevention system, which is applying predictive analytics 
technology to all streaming Medicare fee-for-service claims to 
identify not only potentially fraudulent providers for 
investigation, but all providers who are billing 
inappropriately and may require education or medical review.
    Thank you for your time and opportunity. I appreciate your 
support in achieving these goals. I look forward to hearing 
your ideas on how we can work together as we continue to focus 
on beneficiaries and strive every day to protect their health 
and well-being.
    [The prepared statement of Dr. Agrawal follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman BRADY. Thank you, Doctor.
    Thank you to all the panelists.
    Dr. Agrawal, you have highlighted a number of actions CMS 
has taken to reduce waste, fraud and abuse, and we appreciate 
them. While your fellow panelists acknowledge that your agency 
has made progress, the inspector general, General 
Accountability Office identify a number of areas for 
improvement. I am particularly troubled by the inspector 
general's revelation that Medicare pays $23 million for 
services to those who have died, according to the testimony, 
$117 million lost to those unlawfully present, and $33 million 
paid to those in prison. And there is more fraud within the 
fee-for-service area: overprescribing by physicians, the 
hospital transfer of payment issue, which is more than half a 
billion dollars lost to Medicare. These are problems that hurt 
seniors and erode public confidence in the Medicare program, 
and to my mind, reading the testimony, are preventable. I truly 
believe that preventing fraud is a bipartisan issue and has 
been a long-standing challenge, and my hope is that we can work 
collaboratively with CMS.
    And since this is your first time before the House and 
before the Committee, can I get a commitment from you that your 
agency will work with me and our Committee to stop the nearly 
$50 billion in improper payments each year?
    Dr. AGRAWAL. Thank you for the question. Focus on improper 
payments is absolutely very important for the agency. We 
appreciate the work of the OIG and the GAO in identifying 
further vulnerabilities that we can work on. I think we can all 
agree, and it has been stated, that these are areas that we 
have made important progress in. That is not to say that we 
should stop being aggressive on these issues.
    I think there are numerous factors in our more recent kind 
of programs that have provided important progress. So work that 
we have done on enrollment and screening standards on advanced 
analytics have, I think, really started to and made significant 
strides in addressing improper payments as well as the other 
access--improper payment issues that OIG and GAO have 
identified. We will continue to work on those and look forward 
to working with this Committee in doing so.
    Chairman BRADY. It will go easier if you just start with 
yes. Just so you know.
    Dr. AGRAWAL. Yes, sir.
    Chairman BRADY. Doctor, I want to thank you for your 
willingness to work. As a followup on the fundamental 
challenges that you have and will face is moving CMS from a 
pay-and-chase fraud-fighting model. I am glad you mentioned it 
in your written statement, but I am concerned your efforts 
focus mostly on recouping money that has already gone out the 
door. Many Members on this panel, again, bipartisan, believe we 
should be copying what private payers are doing already to 
prevent, detect and deter fraud, stopping payments before they 
go out the door. And so what actions is CMS taking to move in 
that direction, and how do we as a Committee measure that 
movement and those results?
    Dr. AGRAWAL. I think that is a very important question. We 
have taken a lot of steps to both emulate the private sector 
where appropriate and work with the private sector in our 
common program integrity challenges. As one example, we have 
recently completed a demonstration on the use of prior 
authorization to mitigate improper payments as well as other 
fraud, waste and abuse issues, and there is language in the 
President's budget that would allow us to expand that program.
    Another example, I think a notable one, is the health care 
flawed prevention partnership, which specifically brings up 
private payers together with CMS in order to jointly and in a 
coordinated manner, detect and prevent fraud. Under that 
partnership, we have already engaged in numerous data exchanges 
and also sort of qualitative exchanges around best practices. 
It has led to some real actions for us.
    The way that I think you could measure them is similar to 
how we measure them. We look at identified savings from HFPP 
activities as well as other activities and specific outcomes, 
like revocations and law enforcement referrals.
    Chairman BRADY. Ms. Jarmon, in her testimony, laid out a 
number of recommendations, but more importantly what seems to 
be a fairly simple sharing of data that would have prevented 
improper payments in a number of areas. Why aren't those being 
done?
    Dr. AGRAWAL. Well, sir, I think there are multiple examples 
of where we are sharing data. We are sharing data with State 
Medicaid agencies, with the private sector, with law 
enforcement and that--and all of those examples are really by 
directional sharing of data, so we are getting data from them 
and learning from all of these entities as well as providing 
our data to these other parties.
    There is certainly more that we can do, and we continue to 
expand our data-sharing activities. I am happy to continue to 
work on those, but I think there are really notable examples in 
numerous programs where data exchange is central to those 
programs.
    Chairman BRADY. Thank you.
    Ms. King, I understand GAO generally directs CMS to make or 
recommend changes with which the agency has administrative 
authority, and that General Accountability Office 
recommendations that require legislation are directed to us in 
Congress. Can you give us--so that we can track these and so we 
can measure the progress and know where we need to focus; can 
you give us a rough percentage of the GAO unimplemented 
recommendations that CMS has authority to implement, and your 
sense of why it has not yet acted?
    Ms. KING. We do track all of our recommendations over time, 
and we keep them open for a considerable period of time, and I 
don't have the exact numbers at my fingertips, but our track 
record is pretty good on whether they have been implemented, 
and we have supplied to your staff a list of the open 
recommendations.
    Chairman BRADY. But approximately how many are there? I am 
not trying to pin it down. I am just trying to figure out----
    Ms. KING. Oh, jeez. Off the top of my head, 20 to 30.
    Chairman BRADY. To put it in perspective, these 20 to 30 
recommendations, what potential impact do they have? How 
important are these recommendations not yet implemented for 
either stopping improper payments or recouping them once done?
    Ms. KING. Well, I don't think we make a recommendation 
unless we think that it is going to have a real effect. We 
identify a problem and we identify a way that it can be fixed. 
And some of those recommendations are actually not on the 
improper payment side, they are for all of Medicare, and some 
of them go to changes in payment policy and some of them go to 
changes in management, and others do go to improper payments.
    And I think on the improper payment side, I think a good 
many of those recommendations have been implemented or are in 
the process of being implemented. And we don't close a 
recommendation until we are satisfied fully that it has been 
implemented.
    Chairman BRADY. Can you share that information with us?
    Ms. KING. Yes, sir.
    Chairman BRADY. Great. And we will make sure the Committee 
has it.
    Ms. Jarmon, I have introduced legislation with my 
colleague, Dr. McDermott, to expand your authority to exclude 
individuals and companies from participation in Medicare and 
other Federal programs.
    Our intent is to prevent individuals who are responsible 
for fraud from jumping to another company before sanctions are 
handed down and prevent a company from creating a shell company 
that could further commit fraud and shield a parent company 
from liability. That is the intent of the legislation.
    I think these situations--we can all agree need to be 
prevented. Several types of providers have understandably 
expressed concern that this expansion could leave companies 
that serve seniors at serious legal risk, even if they have no 
role in fraudulent activity exposed to the OIG overreach.
    So how do you respond to these concerns?
    Ms. JARMON. Well, we--well, I would like to note that OIG--
we don't have the resources to actually go--even go after all 
of the people who maybe should be excluded. So the chance of us 
even going broader is very limited.
    We do--we are very careful about how we use the authorities 
that we have. We have guidance on our website as far as 
reasonable factors to consider when determining--when deciding 
to do an exclusion, which includes the seriousness of the 
misconduct or the alleged fraud and whether it hurt--harms 
beneficiaries or the health plan.
    And this exclusion authority is very important to us 
because we do need the authority to be able to exclude people 
who actually leave the organization before the citation who 
have been accused of fraud.
    So that was a loophole in the prior legislation that is 
very important that we fixed so that the wrongdoers would be 
able to be excluded. So we are very careful----
    Chairman BRADY. Thank you.
    Dr. McDermott and I are very serious about closing this 
loophole and----
    Ms. JARMON. Thank you.
    Chairman BRADY [continuing]. And stopping this jumping from 
company to company, and it--continues to be a problem.
    So now I recognize the Ranking Member, Dr. McDermott, for 5 
minutes for his questions.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Ms. Jarmon, I appreciate your testimony and recognize that 
you are with the Office of Audit Services component of OIG.
    And I have questions that are more appropriately perhaps 
addressed to the Office of Counsel within OIG; therefore, I 
want to make a statement and I will submit several questions 
for the record. I will look forward to the responses from the 
OIG.
    I remain concerned about the application of our current 
fraud and abuse laws, given our movement to new payment 
methods. My concern exists on several levels.
    First, I believe that Federal regulators have sufficient 
experience with some models such that these arrangements should 
not be afforded protection under broad waiver authority, which 
is unclear exactly how the False Claims Act applies and where 
whistleblowers can be reticent--may be reticent to bring qui 
tam cases.
    Instead, regulators should put forth, I believe, an 
appropriate exception under the self-referral law and make 
modifications to other laws, including the gain sharing civil 
monetary penalty laws necessary to provide parameters for such 
conduct.
    As an example, I am aware that OIG has issued no fewer than 
15 advisory opinions--I have read some of them, not all of 
them--on various incentive compensation programs between 
hospitals and patients--and physicians.
    And, Mr. Chairman, I would like to enter into the record 
these advisory opinions that OIG has issued since 2001 in the 
area of incentive arrangements between hospitals and 
physicians.
    Chairman BRADY. Without objection.
    Mr. MCDERMOTT. Rather than issue a case-by-case advisory 
opinion, it seems to me that more structure should be put in 
place around such arrangements.
    This would allow regulators to better monitor these 
arrangements and would afford participants some level of 
certainty that participation in such arrangements would not be 
problematic under the fraud laws.
    My bill, H.R. 1487, called the Improved Care of Lower Cost 
Act of 2013, seeks to require regulators to provide more 
structure around certain arrangements that regulators have been 
approving for over a decade on a case-by-case basis to allow 
broad participation by providers, but also ensure an adequate 
scrutiny by regulators.
    This case-by-case thing--as we spread the Accountable Care 
Act over the country, they are going to have endless case-by-
case things, and I think it ought to be done systematically.
    Second, I remain concerned that there are new fraud, waste 
and abuse schemes that we may not be fully aware of, given the 
different incentives under emerging payment models. So everyone 
agrees and usually mentions that we need to be concerned about 
stinting on care for Medicare beneficiaries.
    One of the ways you can save money is don't give care. But 
what about monitoring whether a few unscrupulous providers 
would game the system by manipulating quality measures since 
these measures have taken on an increased importance in this 
new era of health care?
    All a patient would have to say is, ``I like the doctor and 
they have got good quality,'' but that doesn't mean they have 
gotten the care they needed.
    This conduct seems to me to be much harder to identify than 
a false storefront, for example. This type of fraud is just as 
detrimental to our beneficiaries as to the solvency of the 
Medicare trust fund.
    And I will submit these questions in writing to the 
counsel.
    I am also a co-sponsor of a bill, H.R. 2914, the Promoting 
Integrity in Medicare Act, which would retain, but narrow, the 
in-office ancillary services exception under the Physician's 
Self-Referral Act so that the law and implemented regulations 
would more closely approximate what Congress intended.
    CBO has suggested that the change reflected in this 
legislation would save the Federal Government $3.4 billion over 
the next 10 years.
    Ms. King, can you provide the GAO's key findings related to 
the in-office ancillary services exception and the existing 
policy in this area?
    Ms. KING. Yes. We have done a few reports on that, and what 
we have found is that, in instances where there is an ownership 
interest, that the utilization is higher.
    And, in our view, the self-referral component of it is one 
of the primary driving forces behind the higher utilization.
    And we have made a recommendation to CMS that they more 
closely track when services are provided in a self-referral 
situation, but they did not agree with us on that. And we wish 
they had and we wish they would.
    Mr. MCDERMOTT. Could you give us their reasoning that they 
gave you when they didn't agree with you?
    Ms. KING. They said that they thought it would be really 
complicated to track.
    Mr. MCDERMOTT. It would be complicated to track.
    Ms. KING. Yes, sir.
    Mr. MCDERMOTT. And since it is complicated in this day of 
computers and programming and all the rest, they couldn't 
figure out how to do it? Is that what you are telling me?
    Ms. KING. Well, sir, I can't speak for them, but that is, 
you know, what they responded to us.
    Mr. MCDERMOTT. Dr. Agrawal, does that make sense to you?
    Dr. AGRAWAL. Sir, I appreciate the question, and I 
appreciate the issue that you are raising.
    I would say that Stark and self-disclosure laws don't 
actually fall within the activities of the Center for Program 
Integrity. I am happy to take your comments back and connect 
you with the right expert at CMS.
    Mr. MCDERMOTT. All right. If you would, I appreciate it.
    Because I think that, when there is this much money on the 
table as there is in health care today, it is bound to attract 
some folks who don't have the best interests of the patients or 
the government or the taxpayers at heart.
    And it is going to be difficult for us--certainly with 
Medicare, we have got problems already. We are going to have 
more problems with the Accountable Care Act.
    And I think it is important that these fraud laws be 
updated to move from fee-for-service application, which is what 
we have had in the past, to now these more complicated other 
payment arrangements for physicians.
    Physicians are hired by hospitals or get into relationships 
with hospitals. That whole of the fraud thing changes--or at 
least it seems to me it changes.
    And I want us to look carefully at that and make the kinds 
of changes we need to so that we don't come here 5 years from 
now and say, ``Here is $100 billion that has been wasted'' or 
50 billion or whatever. I want us to try and stop it before it 
starts.
    I yield back the balance of my time.
    Chairman BRADY. Thank you, Mr. McDermott.
    Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you.
    Mr. McDermott, I agree with you. They refuse to do 
anything.
    Dr. Agrawal, I understand you are now in charge of the CMS 
Program Integrity mission. Is that true? True or false?
    Dr. AGRAWAL. Sir, I am in charge of the Center for Program 
Integrity. Yes.
    Mr. JOHNSON. Okay. You may not know, but in recent years, 
the House has twice overwhelmingly passed bills to take the 
Social Security number off the Medicare card.
    My colleague, Lloyd Doggett, and I have been trying to get 
this done for years. And it seems to us that CMS, who tells 
seniors they must carry their Medicare card with their Social 
Security number in their wallet, refuses to protect seniors 
from becoming victims of identify theft. And, you know, you 
talk big about doing things over there, but you guys haven't 
done anything.
    Do you care about protecting seniors from identity theft?
    Dr. AGRAWAL. Unequivocally, yes, sir, we care about 
protecting seniors from identity theft.
    Mr. JOHNSON. Well, when are you going to do that?
    Dr. AGRAWAL. We have taken a number of actions to do so. We 
have, for example, beneficiary education activities, campaigns, 
in order to make them more aware of identity theft issues, 
given them real tactical solutions and ideas for how to not be 
victimized by identify theft.
    Beyond that, sir, when it looks like somebody has become a 
victim of identify theft, we have a way of tracking their 
existing numbers and incorporating that through our compromised 
numbers database into other analytical work that we have 
underway.
    So we are able to use that information in our activities to 
help prevent fraudulent billing under their HCCN.
    Mr. JOHNSON. Yeah. But how are you going to stop them from 
stealing their Social Security number off of your Medicare 
card?
    Dr. AGRAWAL. Well, I appreciate the issue and I realize its 
importance to this Committee.
    I also know that you are very aware of the dialogue that 
the agency has had with the Committee and the operational kind 
of requirements in order to be able to remove the Social 
Security number from the card.
    I think, given the right resources to be able to do it, we 
would be very open to further discussion on--on----
    Mr. JOHNSON. Well, you could at least just put the last 
four digits on there instead of the whole number.
    Does CMS support our bipartisan bill, H.R. 781, the 
Medicare Identify Theft Prevention Act of 2013? Yes or no?
    Dr. AGRAWAL. Sir, I would have to review the specifics of 
that bill to give you a----
    Mr. JOHNSON. How long have you been there?
    Dr. AGRAWAL. Pardon me?
    Mr. JOHNSON. How long have you been there?
    Dr. AGRAWAL. 2 months.
    Mr. JOHNSON. Well, you ought to know it by now.
    When are you going to do something about it? I would like 
to know what your plan is and when CMS will try to do the right 
thing.
    Ms. King, GAO told us that CMS has efforts underway to 
modernize their IT system and that these efforts could be used 
to remove Social Security numbers off Medicare cards, yet CMS 
has not included removing Social Security numbers. And you just 
talked about it.
    Is it still true that you agree with that?
    Ms. KING. Yes, sir, it is. I mean, I think--CMS' position 
on that, at least at the time that we did our work, is that 
they knew that it was really complicated and they had revised 
their cost estimates, but they believed that they needed 
additional funding to do it.
    Mr. JOHNSON. Well, I am not sure about that. But I want you 
to know that both Lloyd Doggett, who is a Democrat, by the way, 
and I agree that something needs to be done. We have been 
working on this for what seems like 8 years, and you guys 
haven't moved off that center.
    Thank you, Mr. Chairman. Yield back.
    Chairman BRADY. Thank you.
    Just as a note, the money saved from not paying felons, 
those who are dead and those who are here undocumented would 
pay for the implementation of removal of those Social Security 
numbers.
    Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Chairman.
    And I do appreciate what you and our Ranking Member have 
done in terms of moving forward with this and setting the stage 
for it, and I share both the sense of the urgency and the 
potential of doing something.
    You may have noticed occasionally we are cranky around here 
and we don't always see eye to eye, but what has been outlined 
today and what you are going to hear is an area, I think, of 
tremendous consensus.
    And beyond the consensus, I think there is a commitment and 
a passion to get something done. It doesn't make any difference 
about how you feel about the Affordable Care Act or global 
warming. These are incontrovertible facts. And we are looking 
at $50, $60 billion, whatever the number is.
    Now, the individual areas in the vast payment scheme are 
maybe understandable, but the target number needs to be 
addressed aggressively.
    And you are going to hear from some of my colleagues. I am 
not going to steal their thunder. Just because of the luck of 
the draw, a couple of my colleagues come after me, and I will 
let them elaborate on their bills.
    But I am happy to have been a co-sponsor of the Prime Act. 
I think my friend Mr. Roskam and a number of people have zeroed 
in--there is about 60 bipartisan co-sponsors with provisions 
that would probably welcome some refinement, but the essentials 
there are solid and need to be pursued.
    I have been working for several years with Mr. Gerlach on a 
universal access card. And I think if anything, it started a 
little timid. It has been--you know, it has been very careful 
and calculated to try and move this forward, and I think he is 
going to weigh forth.
    And I couldn't agree more with Congressman Johnson about 
getting the flipping numbers off the Social Security card. We 
understand that it takes resources and takes time and you have 
had a lot going on, but we are into a phase now of 
implementation of the Affordable Care Act and you have had 
time.
    And I think that there is--this is something that is not 
rocket science, and I think people would be open to what needs 
to happen in terms of some modification of a budget going 
forward.
    But it is going--these things collectively are going to 
save far more than they are going to cost, and it speaks to the 
integrity of the system and the protection of the people that 
we represent.
    Now, Mr. Chairman, I would hope that we could continue with 
a little deeper dive on some of these proposals. I would hope 
that these would be at sort of a level.
    I have talked with some of my colleagues about what would 
happen if we took some of--and we have had this conversation--
we take some of the things that are second- or third-tier 
issues that don't have to, you know, stop the planet, they--the 
leadership doesn't much care in either party, to break some of 
this stuff loose, be with it on the floor.
    Maybe that would be a going-away present--Mr. Roskam and I 
talked about this last week--to Members of Congress, that this 
would be kind of a wrap-up session that we would have on the 
Thursday or Friday when we leave, to have one of these 
specifics on the floor that could bring people together, that 
would make a difference, that would be a signal to the people 
out there who are cheating and, more important, to the people 
that we are representing.
    So I will get off my high horse. I won't go any further 
because you need to hear from the people who are the principal 
authors and who have put huge amounts of work into it.
    But I would respectfully request, Mr. Chairman, that our 
witness friends could be able to give a little deeper analysis 
on each of these items that they are going to hear from about 
how--about what we need to do to do that.
    And the last thing I would recommend is that we think about 
working with CBO on some scoring mechanisms, because things 
that actually save money we ought to be able to apply present-
value accounting, particularly if we can hold agencies 
accountable for the savings, that this isn't a pipe dream, but 
this is something that is beyond theoretical, and that we have 
the hammer to go back and make sure that they deliver. Then 
maybe we can cut some slack in terms of CBO scoring.
    I appreciate your courtesy, Mr. Chairman. If there is 
something that my colleagues don't get to, I will submit it to 
our witnesses in writing. But at this point I will yield back.
    Chairman BRADY. Thank you, Mr. Blumenauer.
    Two comments, if I may.
    One, this is a bipartisan concern. This is the first 
hearing of what we hope will be deeper dives, as you have laid 
out, and the goal is to begin moving legislation in these 
areas.
    Second, I agree with you completely on the scoring 
challenge. Often very good ideas that we know will work and 
improve and save money elsewhere are not given the score we 
think they deserve.
    We are eager to work with you and CBO on those issues. So 
thank you.
    Mr. BLUMENAUER. Thank you.
    Chairman BRADY. Mr. Roskam is recognized.
    Mr. ROSKAM. Thank you, Mr. Chairman, for your leadership 
and convening this hearing, and for Mr. Blumenauer and his 
thoughtful setting of this discussion.
    I think most Americans when they hear these numbers are 
actually scandalized by them. It is very difficult to absorb.
    We are in this very clinical, antiseptic setting, but this 
is a situation that is bad. It has been bad and it is actually 
getting worse. This is not getting better. And these are the 
numbers--these are objective numbers.
    So CMS's own numbers in 2010 said that this number, in 
terms of fraud and abuse and waste and so forth, was $48 
billion. A year later, it jumped up, according to GAO, to $64 
billion. The latest estimate from the FBI is $75 billion plus 
and climbing.
    So, Doctor, with due respect, in my view, you don't get to 
use words like ``top priority,'' ``robust,'' and ``strongly 
positive.'' They should be out of your lexicon. This is a 
scandal. This is an embarrassment.
    And there is an irony in that Ms. Jarmon in her opening 
statement makes an inquiry of this Committee, ``Would you 
please support our request for a budget, an appropriation?'' 
And the irony is you have got all the money already.
    So can you imagine the level of confidence that would be 
buoyant in our country if we were able to come together? And 
you have brought us together in ways that we have never been 
brought together before.
    As Mr. Blumenauer alluded, we can hardly agree what time it 
is between the two of our parties. We cannot agree on what day 
of the week it is. Yet, we are nearly unanimously scandalized 
by just these big, big numbers.
    I have got three inquiries of you. And I recognize you are 
the new person on the job. You have been there 2 months. So I 
am measured by that, but here are three legitimate issues that 
are upon us that have broken through.
    One is the Medi-Medi data sharing. This is this whole 
notion of Medicaid and Medicare being in communication, if 
there is fraud in one area, communicating that in another area. 
Right now only 10 States are participating. In my view, that is 
ridiculous.
    What is your remedy to that?
    Dr. AGRAWAL. Thank you.
    I think the Medi-Medi program is very important for our 
activities. It does, as you pointed out, allow us to exchange 
data with the States so that we can, again, find those 
providers and schemes that are crossing the line between 
Medicare and Medicaid and kind of committing schemes against us 
all.
    Expansion is an important element of that, and we have been 
working to expand the numbers of States that participate in 
Medi-Medi. This is, I would just point out, a voluntary 
program, and there are a number of other data exchange 
activities that the States are engaged in.
    We have heard consistently from them that, while they would 
in some cases value participation, they have to weigh that 
against other priorities and data exchanges that they have.
    So we are very open to more expansion, have actually added 
more States since that figure of 10. And I could get you a more 
updated number.
    Mr. ROSKAM. So the next time we meet in a hearing setting 
so that you can claim those superlatives that I admonished you 
from using before, what is your plan in terms of the Medi-Medi 
goal?
    Let's say you are back in a hearing in 6 months. There are 
currently 10 states that are participating. What is reasonable 
for us to assume. I am not asking pipe dreams.
    What is a reasonable number for you to coax, cajole, urge 
States to participate if only 20 percent of the Nation is 
participating now?
    Dr. AGRAWAL. I am not sure that I could give you a specific 
number----
    Mr. ROSKAM. Sure you can.
    Dr. AGRAWAL [continuing]. That would--you know, to kind 
of--for a followup hearing.
    I think what is important to note is that Medi-Medi is just 
one of the many activities that we perform with the States.
    We also collaborate with them in the Medicaid Integrity 
Institute, which is all about best practice and knowledge-
sharing.
    We work with them on specific cases that might fall out of 
the Medi-Medi context, but are active investigations either 
that we have initiated or that they have.
    So I am not sure that participation alone in Medi-Medi is 
the best measure of how well that----
    Mr. ROSKAM. Yeah. But it would help. I mean, my Home State 
of Illinois just paid out $12 million to people who are dead.
    Dr. AGRAWAL. Yes, sir. I--I also am aware of that.
    Do you--I think I go back to the answer that I had about 
Medi-Medi. If you are asking specifically about Illinois, I 
could certainly look into what activities we have with them.
    Mr. ROSKAM. So here is my question: If only 10 States are 
participating and we are losing $75 billion a year, according 
to the FBI, doesn't it follow that, if we had every State 
participating, that this gets better? And don't you play a key 
role in whether every State participates or not? Am I over-
characterizing this?
    Dr. AGRAWAL. I think it is fair to say we, too, want more 
States to participate. I think----
    Mr. ROSKAM. What is your plan to have that happen? That is 
my question.
    Dr. AGRAWAL. So we have lots of outreach activities with 
the States to let them know about the existence of the program, 
to indicate the sort of portion of the Medi-Medi budget that we 
are willing and able to handle versus what they would need to 
undertake, and we engage, you know, with States in numerous 
different venues in order to be able to do that.
    Again, I believe States are under a lot of pressure to also 
produce data for CMS, including the T-MSIS program. So there 
will be exchange of data. And I am not sure, again, that Medi-
Medi is the singular kind of measure of that collaboration----
    Mr. ROSKAM. But you are not satisfied----
    Dr. AGRAWAL [continuing]. Of examples.
    Mr. ROSKAM. You are not satisfied with 10 states, are you?
    Dr. AGRAWAL. Oh, we always want more states to collaborate.
    Mr. ROSKAM. How many more? Next time we meet, how many more 
is a reasonable number?
    Dr. AGRAWAL. Sir, I am not sure I could give you a 
particular number.
    Mr. ROSKAM. Okay. Let's switch gears.
    Provider legitimacy, this notion of a provider being 
illegitimate, losing a licensing, being a hustler and so forth, 
being thrown out of a system and, yet, that doesn't sync up 
with other systems. There was a ProPublica piece not long ago, 
I am sure you are familiar with it.
    Could you speak to that?
    Dr. AGRAWAL. Sure. And I think that is a great example of 
data exchange outside of the Medi-Medi program.
    So, for example, as a result of the ACA, Medicaid programs 
are now required to share their termination data with CMS, and 
we are then able to take relevant action in Medicare, if that 
provider is indeed enrolled in Medicare, as well as take a 
reciprocal action in other State Medicaid programs.
    I think there are very good examples. We have had 
compliance in sharing that kind of data increase dramatically 
since the beginning of the program. We get a lot more 
information from the States in terminations that they are able 
to perform.
    Now, I would point out licensure decisions are very 
different from enrollment in Medicare or Medicaid. Those are 
conducted by non-CMS-affiliated bodies. Those are State 
licensure boards. They operate very independently of us.
    We certainly can take an action if a license is revoked, 
but we, as such, have no more authority in that process than 
anybody outside the licensure board.
    Mr. ROSKAM. Okay. We would love to help you.
    I yield back.
    Chairman BRADY. Thank you.
    Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman.
    I commend you for holding this important hearing. And it is 
one that really should be non-partisan and, hopefully, we will 
have an opportunity to work in a bipartisan way.
    You are never going to find any Member of Congress 
defending fraud, waste and abuse, whether it is Medicare or any 
other Federal program. But I think we need to approach this in 
the proper context.
    It is not just Medicare fraud that we are talking about 
here. We are talking about system-wide health care fraud, and 
Medicare is a subset of that.
    I would assume that, if we are detecting fraudulent 
practices, fraudulent billing, in Medicare, it is much larger 
than that and it involves private payers and those involved in 
the health care system.
    Is that right, Dr. Agrawal?
    Dr. AGRAWAL. Yes. I think that is a very important point.
    Part of the reason for the creation of the health care 
fraud prevention partnership is this very notion that fraud 
crosses the public-private divide, and the fact that private 
payers have joined the partnership really does indicate that 
they face these challenges, too.
    Mr. KIND. And that--the private partnership program right 
now, how successful do you think that has been working, the 
collaboration with the private sector and the private payers? 
And what more do you think could be added to it in order to 
enhance its success?
    Dr. AGRAWAL. Thank you. I appreciate the question.
    It has--the collaboration has been extensive. For example, 
next week a number of private payers are going to be coming to 
the command center at CPI as part of partnership activities.
    We have over 30 partners at this point between private 
payers, national health care agencies, and law enforcement 
bodies.
    We have conducted numerous data exchanges within the 
confines of the partnership, specific data exchanges, not just 
qualitative data around best practices, though we have done 
that as well.
    And each of us has then used that data--each participant 
has used that data to go and take action wherever appropriate 
in our own systems, and CMS has been able to do that. So I 
think the partnership has really continued to mature.
    Mr. KIND. Mr. Roskam did point out some startling numbers 
as far as trend lines, from $48 billion to $75 billion or so. 
But I also sense there is a little bit of the dial being moved 
in the right direction as well.
    I mean, because of the existing tools now in the Affordable 
Care Act and some pre-existing authorities, we have got the 
HEAT strike force that has been out there.
    I think, since passage of ACA, over $20 billion has been 
recouped or recaptured of Medicare fraud, 1,400 individuals 
have been charged up and criminal charges are pending against.
    So there are some instances that we can point to showing 
some progress is made, but, obviously, there is no reason for a 
victory lap or satisfaction from any of us here.
    My question for you, Doctor, coming from the profession 
yourself, we just had a huge CMS physician reimbursement data 
dump recently.
    Where do you think this is going to lead as far as looking 
at over-utilization practices and possible fraudulent 
detection?
    Dr. AGRAWAL. Thank you.
    I think that data release was a very important element of 
the administration's overall approach to transparency and 
health care data. Since then, we have heard from a lot of 
external stakeholders about their use of the data, how they 
would like to leverage it.
    I think that kind of innovation, you know, among 
stakeholders is very important. It also fits into an overall 
kind of set of programs that we have at the Center for Program 
Integrity.
    Another example that we are implementing now is the 
Sunshine Act that will allow more transparency into the 
financial interactions between industry and physicians. I 
think, you know, all of these programs are designed to give 
beneficiaries and other stakeholders a view into data.
    And one group that we have heard from pretty extensively is 
the physician community, especially, for example, in emergency 
medicine where physicians have written back to CMS saying, 
``Thank you. This is data I did not have before.'' And it would 
facilitate their own practice.
    Mr. KIND. I think, to be fair to them that was only a small 
piece of the information out there. What is lacking in that is 
quality measurements, protocols of care, things of that nature, 
and the overall success rate and how doctors are practicing 
medicine.
    But, finally, let me ask with the remaining time, from you, 
Doctor--and I would also like to hear Ms. Jarmon and Ms. King's 
opinion--we are trying to move the system--the payment system 
away from fee-for-service and volume-based--outcome and value-
based. And, obviously, we are seeing a lot of effort in bundled 
payments as well.
    What are the implications of that new payment model when it 
comes to the detection of fraud and how successful? Because, 
obviously, under the fee-for-service model, there is a lot of 
reporting and a lot of steps that people are being reimbursed 
for.
    Is this going to make it easier or harder for us to detect 
fraud, moving to a more bundled form of payment system or a 
value-based system, ultimately?
    Dr. AGRAWAL. Yeah. Thank you for that question as well.
    I think the movement, obviously, towards value is extremely 
important. It is a central tenet of the ACA. And that movement 
is important for health care overall.
    I think, while I will sort of leave the specifics of new 
payment models to the experts at CMS who handle the new payment 
models, what I would just want to clarify is that none of the 
payment models that are new and innovative preclude us from 
performing the activities that we already have in place for 
fee-for-service.
    We are still able to conduct the medical review that we 
conduct. We can still open up investigations and take 
appropriate actions whether a provider is participating in just 
traditional fee-for-service or one of the newer models.
    So we still have and continue to have the same level of 
oversight and have the same level of authority. So I think, as 
the new systems mature, certainly it will be an opportunity for 
all of us to learn more, but the oversight and the controls are 
still very much there.
    Mr. KIND. Okay. Thank you.
    Chairman BRADY. Dr. Price.
    Mr. PRICE. Thank you, Mr. Chairman.
    And I want to thank the panelists as well. Having practiced 
medicine for over 20 years before I got here, I think, as I 
mentioned, often we lose sight of the patients in all of this.
    We all want to save money. None of us want to have fraud 
exist out there, pay for folks that are scamming the system.
    But sometimes that money that is taken is taken from folks 
who are actually trying to provide care and potentially 
destroying the quality health care for seniors.
    And so it is important that we have a feedback mechanism to 
be able to tell whether or not we are actually doing the right 
thing.
    Ms. King, there was a GAO report that was released earlier 
this month on the competitive bidding program for durable 
medical equipment, DME, including home oxygen supply and the 
like.
    These are services that affect real lives, whether or not 
individuals can actually live a comfortable life or whether or 
not they live at all. And, again, we all want to hold 
contractors accountable.
    We are into round 2. Nearly 2 years into round 2, the OIG 
found that there were problems and concerns that they had with 
round 1 and, yet, CMS went ahead with round 2. GAO said that 
was a good idea.
    Recently your report said that there was decreased 
utilization of durable medical equipment, there was decrease in 
suppliers, and no adverse effect to the beneficiaries.
    So, you read the top line of that and you jump up and down 
and you say, ``Hallelujah. That is a wonderful thing.''
    Are you aware of any of the concerns that have been voiced 
about this by the COPD--the Chronic Obstructive Pulmonary 
Disease Foundation?
    Ms. KING. Not specifically the COPD Foundation, but we have 
done a considerable amount of work on the implementation of 
competitive bidding for DME and----
    Mr. PRICE. Did you interview them for your report?
    Ms. KING. I don't know, but I can get back to you on that.
    Mr. PRICE. How did you decide who you interviewed for your 
report?
    Ms. KING. We laid out the methodology in our report--and we 
have a very transparent methodology--and we contacted a number 
of people in the industry and met with them several times. But 
I don't recall whether they included the COPD folks.
    Mr. PRICE. I don't think you did. I would encourage you to 
talk to them. They disagree strenuously with the conclusions 
that you have made and the recommendations that you provided.
    Did you use data that you had or did you use CMS data in 
your evaluation?
    Ms. KING. We got claims data from them and did our own 
analysis.
    Mr. PRICE. Claims data?
    Ms. KING. Yes, we did.
    Mr. PRICE. No clinical data?
    Ms. KING. No. They had clinical data and they set up 
areas----
    Mr. PRICE. They have claims data. They have claims data. 
Right?
    Ms. KING. Yeah. And they----
    Mr. PRICE. That is what we are looking at, looking at 
claims. We are looking at money, which is wise. We need to do 
that. But oftentimes we don't look at patients.
    Did you ask or did you find out or did your data tell you 
whether or not a patient that fell off, wasn't utilizing the 
service anymore--whether they needed the service anymore? Could 
you tell that?
    Ms. KING. CMS did their own beneficiary satisfaction work 
and we evaluated that, and in their work they did not find 
significant access problems. And we----
    Mr. PRICE. That wasn't what I asked.
    I asked: Did you ask whether or not patients fall off? Do 
they go to self-pay? Do they pay for the service themselves, or 
have they been transferred to a nursing home? Is there any way 
to know whether they have been transferred into a nursing home 
in the data that you used?
    Ms. KING. Not that I am aware of.
    Mr. PRICE. That is correct.
    These are chronic diseases. These are chronic diseases. And 
CMS says it only tracks data for 120 days. If you don't have a 
current claim within 120 days, they don't care.
    You could have gotten the pennies together in your sofa and 
paid for the oxygen to keep you alive or you could pull it out 
of our pocket or you could go to a nursing home. CMS doesn't 
know.
    So I would suggest that we have got a long way to go toward 
getting the right data when you are talking about quality.
    When the Federal Government is defining quality, then 
anybody that doesn't do what the Federal Government wants to do 
is fraudulent. I would suggest that is not the right place to 
define quality.
    Let me just touch on--I have got a few more seconds here.
    Ms. Jarmon, you mentioned about the in-office ancillary 
self-referral increase utilization. You are aware that there 
are studies in individuals that have been done that demonstrate 
that that is not the case, that there is no increase in 
utilization in use of in-office ancillaries.
    Are you aware of that?
    Ms. JARMON. No. I was not aware of that.
    Mr. PRICE. All right. Well, we will get that for you, and 
we will be happy to see the change in the next report.
    Ms. Jarmon, talking about the number of counties that have 
the kind of high incidents of home health outliers, 3,143 
counties in the country, 25 counties have the highest 
incidents.
    Wouldn't we do a whole lot better job if we would just 
concentrate on those 25 counties?
    Ms. JARMON. When we are doing our work, we do try to focus 
on the areas where there is higher risk. So we do try to focus 
on those areas in our analysis.
    Mr. PRICE. The work wouldn't demonstrate that, though, 
because we continue to have that same statistic, that same 
statistic, year after year after year. So I would encourage you 
to focus where the real problems are.
    Thank you, Mr. Chairman.
    Chairman BRADY. Thank you.
    Mr. Pascrell.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    I am encouraged that we get some bipartisan support. One 
area that has been of particular interest to me is the hip and 
knee replacements.
    I first became involved in this issue in 2007 when five of 
the Nation's biggest makers of artificial hips and knees agreed 
to pay $311 million in penalties to settle Federal accusations 
that they used so-called consulting agreements, better known as 
bribes, and other tactics to get surgeons to use their 
products, regardless of the effect of the product.
    So this may be the cost of doing business, but it is 
serious, because in the next 10 years, if we are going to spend 
$65 billion on knee and hip replacements, Medicare and Medicaid 
will pick up most of the cost.
    So if we are not concerned in this particular issue in 
avoiding the debacle that happened just 10 years ago, what are 
we?
    Strong action needed to be taken, and instead of anyone 
going to jail, no one went to jail. Five companies got deferred 
prosecution agreements where they simply paid a fine and agreed 
to be monitored by private firms.
    That is not the subject of what I am going to get into 
today, but let me tell you, your hair would stand up. Go back 
and read those cases.
    I introduced two bills that I believe get at the root of 
the issues here.
    First is the Accountability and Deferred Prosecution 
Agreements Act, which will require the Department of Justice to 
establish guidelines for the use of deferred prosecution 
agreements. I plan to introduce this bill later this week.
    And second is the National Knee and Hip Replacement 
Registry Act, which would establish a registry to help identify 
failing implants into identified--we are talking about senior 
citizens that got shafted over and over again, had to be re-
surged because of what we did not do. Make no mistake. Problems 
with faulty joint implants are no means behind us.
    Just last year one of the largest medical device companies 
agreed to pay $2.5 billion to settle lawsuits filed by 
thousands of patients who had to undergo--we are talking mostly 
seniors. That is what we are talking about. And in the next 10 
years, again, we are going to spend $65 billion.
    By the way, do you agree that we should have a registry in 
this country so we know who is stealing from other people?
    Dr. AGRAWAL. Sir, on the hip and knee registry, you know, I 
think we would be open to reviewing the proposal and offering 
you any guidance that would be helpful.
    I do think that we are aligned in certain other ways 
already. I alluded earlier to the Physician Payment Sunshine 
Act.
    We will be able to see through that program as just one 
example of financial interactions between medical device 
companies and physicians, and I think that will be a level of 
data transparency that is important----
    Mr. PASCRELL. Do you believe, Doctor, that collecting 
patient data in a registry on knee and hip replacements could 
help us to identify ineffective knee and hip devices so that we 
can cut down on unnecessary surgery? Do you agree with that or 
you don't agree with it? It is a pretty simple question.
    Dr. AGRAWAL. I think that we are happy to review any 
proposal that comes from this Committee and help you in the 
evolution of that proposal.
    Mr. PASCRELL. Well, it would seem to me, if you know the 
history--and I was trying to give it to you in capsule form, 
unfortunately.
    Back in 2007--much of it occurred before 2007. And you 
folks have not--even though you just came on the job, you folks 
have not done anything about this, encouraging anything. This 
is a major part of your budget. This is a major part of the 
fraud.
    It would seem to me that we should be interested in these 
kinds of things. Correct?
    Dr. AGRAWAL. Yes, sir. I think we are interested. As I have 
alluded to a couple of times now, I think the Sunshine Act will 
get at this issue as well.
    Mr. PASCRELL. Mr. Chairman, I think that, when we speak of 
trying to make the system better and when we speak about trying 
to save money--because there is tremendous amount of fraud and 
the many people who committed the fraud never went to jail. 
Okay?
    Talk about our system of justice about, when you have a 
buck in your pocket, you stay out of jail; when you don't have 
a buck, you sure the hell will go to jail.
    And one way to stop this is to look at this registry, which 
I am talking about here so that one hand knows what the other 
is doing. And I think it would reduce health care costs, 
period, not only in this area, but also in other areas.
    And I yield back. And I thank you.
    Chairman BRADY. Thank you, Mr. Pascrell.
    Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman.
    And thank you to our witnesses here today for sharing your 
insight. It is a tough job out there that I think you are 
trying to do.
    And it is frustrating from our standpoint. I get especially 
frustrated when I hear from providers wanting to do the right 
thing and, yet, it is so cumbersome, it is so complex, that 
even doing the right thing has become so difficult. And I am 
afraid that that is just getting worse.
    And we know that Medicare is on an unsustainable path. At 
least that is my opinion. And we need to make some changes.
    We did hear about the embarrassing situations of improper 
payments, Ms. Jarmon.
    Any of you, how do these improper payments happen?
    What can you tell us is being done to fix this, Dr. 
Agrawal?
    Dr. AGRAWAL. Sure. One thing I would just want to clarify 
is certainly the improper payment rate is a huge focus for the 
agency and we are focused on reducing the improper payment 
rate. I just want to differentiate that rate from a measure of 
fraud.
    The improper payment rate is not a true measure of fraud. 
It is really more a measure of perhaps waste and abuse. A lot 
of the major drivers of the improper payment rate are 
insufficient documentation, which is often caused by providers 
sometimes not understanding regulatory requirements. But if we 
got the documentation that was required, chances are those 
claims would have been just fine.
    Mr. SMITH. So services for a dead person, how does that 
happen?
    Dr. AGRAWAL. Yeah. So there are--you know, we utilize----
    Mr. SMITH. Would that be fraud or would that be improper 
payment?
    Dr. AGRAWAL. It could be either. I think, obviously, you 
know, establishing fraud depends on establishing intent, and 
that really is a law enforcement determination. What we do is 
we look at drivers of improper payment and try to go after the 
biggest drivers.
    With respect to dead beneficiaries or dead providers in 
specific, we work very closely with the Social Security 
Administration to get information on their Death Master File to 
be able to link that information to our own data so that we can 
stop claims from being paid for those beneficiaries or to those 
providers.
    Mr. SMITH. So would you say that current measures are 
sufficient? More measures are needed? Lack of enforcement? How 
would you sum up what the current situation is or needs to be?
    Dr. AGRAWAL. Well, I think, if you were to look at the 
improper payment overall, certainly, you know, there is more 
that we can do and we are working on various initiatives to 
decrease the improper payment rate.
    Again, because documentation issues drive a huge portion of 
that rate, we are working with providers to educate them on 
real documentation requirements.
    Some of the other things that drive the rate are medically 
necessary services, but being provided in the wrong place. So, 
again, that does come down to education and working with 
providers.
    Mr. SMITH. The wrong place, could you elaborate?
    Dr. AGRAWAL. Sure. So there might be a service like a 
stress test, for example, that is provided in an inpatient 
setting that could be provided in an office or outpatient 
setting.
    That inpatient claim could potentially lead to an improper 
payment, you know, depending on how it was documented and all 
that.
    But, you know, nobody is contending necessarily that the 
service should not have been provided. It should just have been 
provided in a more medically reasonable location.
    So a lot of that, again, does come down to working with 
providers. I take your point very seriously about provider 
burden and agree, as a physician myself, that we should do 
whatever we can to lower burden as feasible while still meeting 
our obligations to protect trust fund dollars and educating 
providers as best we can on the front end so mistakes are not 
made.
    Mr. SMITH. Well, I would also add, as I have in previous 
hearings in working on health care issues, especially in rural 
America, there are arbitrary regulations that I think might be 
intended for greater efficiencies and, yet, the result is the 
exact opposite.
    And I am afraid patients actually suffer as a result of the 
Federal bureaucracy supposedly in the name of striving for 
efficiency, but services are worse. I think it is arbitrary and 
I would hope that we could have your cooperation as we do move 
forward on trying to find some efficiency there.
    We know that hardworking taxpayers need protection, so to 
speak, and that we have, I think, many options ahead of us, 
hopefully, we will pursue that will have the Federal Government 
step back instead of step forward and into the lives of so many 
patients because I think it is counterproductive.
    Thank you. I yield back.
    Chairman BRADY. Thank you.
    Mr. Gerlach.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Thank you all for coming and testifying today.
    The amount of fraud and abuse in the program is staggering. 
We all know that. And I relate it back to just where I am from, 
Pennsylvania. The Commonwealth of Pennsylvania State budget is 
about $32 billion a year.
    So, really, what we are talking about here is fraud and 
abuse in one program of the Federal Government that has doubled 
the size of the Commonwealth of Pennsylvania's budget each 
year. That is staggering.
    And I am really concerned that, in the years that I have 
been on this Committee and we have had these kinds of hearings, 
very little progress has been made to deal with it from the 
witness side of things, where the same questions have been 
asked by Mr. Johnson year after year after year, why there are 
still Social Security numbers on these cards. Still don't have 
a solid answer as to what you are doing about it.
    And, frankly, not to take it personally, you ought to be 
embarrassed. You ought to be embarrassed for the agency you 
work for and for the American people. Now, that doesn't mean 
you are personally responsible for that. So please don't take 
that as a personal slight to any of you.
    But it ought to just remind you, as you sit here today, how 
important these issues are and how important it is to make 
progress on these issues. And I hope a year from now you are 
not back testifying and you are giving the same answers to the 
same questions and no progress has been made.
    A number of us on this Committee--my lead cosponsor, Mr. 
Blumenauer, and other Members of this Subcommittee--have 
cosponsored H.R. 3024, which will create a smart card program 
within the Medicare program to deal with this issue, having 
both a provider and the beneficiary have a card without a 
Social Security number on it that would be swiped at the time 
of the medical transaction to try to reduce fraud and abuse 
and, in particular, deal with fraudulent billing, phantom 
billing, duplicate billing, dealing with unlawfully present 
beneficiaries, dealing with deceased beneficiaries, dealing 
with identity theft.
    We think this kind of technology, which is already being 
used in the Department of Defense to prevent people from 
getting access to certain buildings of the department or into 
computer systems, being used by perhaps yourselves--I 
understand all Federal employees have a Homeland Security 
technology card that they use.
    Other health care delivery systems around the world are 
using smart card technology to deal with waste, fraud and 
abuse. Yet, here in the United States we don't have that as 
part of our program and we also include the Social Security 
numbers on our cards.
    So a number of us not only here in the House, but, also, on 
a bipartisan, bicameral basis, have sponsored this kind of 
legislation to bring smart card technology into the program. 
And we have asked GAO--Ms. King, I know you are well aware--we 
have asked GAO to do some preliminary background evaluation of 
the idea.
    Ms. King, can you give us an update as to--the work you are 
doing in GAO with this particular idea, where you might be in 
that process and when do--what you think there would be a 
completion to that so that we can move forward with evaluating 
that information from you and then move forward legislatively?
    Ms. KING. Yes. Thank you for that question.
    At your request and the request of several other Members of 
Congress, we are looking at the use of electronic cards in 
Medicare, and we are looking at several aspects of that.
    We want to try and find out what--the potential benefits 
and any limitations, if there are any, with the use of them, 
what issues might be involved in the implementation of smart 
cards, and we also want to evaluate where they are in use in 
other settings. And we hope to finish up that work about the 
end of the year.
    Mr. GERLACH. Okay. And then will you come back to us with a 
report and recommendations relative to the idea?
    Ms. KING. We will.
    Mr. GERLACH. Okay. Doctor, on that same idea, are you 
currently out of your shop looking at the use of digital 
technology solutions to more accurately authenticate providers 
and beneficiaries at the time of the medical transaction rather 
than continuing this pay-and-chase process we have today, 
having more front-end verification methods in place, could 
include smart card technology, could include other types of 
technology, to, again, address this issue?
    Dr. AGRAWAL. Yes. Obviously, we do look forward to seeing 
GAO's findings. That will certainly help the agency as well.
    We did conduct a little while ago a swipe card pilot with 
DME ordering. That basically required or allowed providers to 
swipe an electronic card at the time of the order being placed 
in the office and then a beneficiary taking that card 
essentially to a DME supplier to be able to connect the order 
in the office to the supply that was actually given.
    And I think the outcomes of that program have highlighted, 
you know, some of the challenges that might emerge in this 
report as well.
    Number one; there are obviously some operational 
constraints that we should be aware of on the part of the 
provider.
    I think we have to be very careful in instituting any kind 
of alternative technology approach, that we not place too much 
of a burden on providers, whether it is a resource burden or 
other kind of technology acquisition burden.
    Second, I would just highlight or emphasize that, in any 
new technology implementation, we not get in the way of the 
physician-patient relationship.
    This was actually some specific feedback that we got to our 
pilot, that certain physicians saw that as an intrusion, having 
to swipe a card when they were seeing a patient.
    Obviously, beyond that, there are other operational 
constraints of implementation, but I would just ask the 
Committee to keep these things in mind.
    Mr. GERLACH. We will look forward to your information. 
Thank you.
    Mr. BLUMENAUER. Mr. Chairman, just a point of 
clarification, please.
    Chairman BRADY. Yes.
    Mr. BLUMENAUER. I would note that this particular project 
of Mr. Gerlach--he has unfortunately decided that he is not 
going to be with us next year. And I am pained with the notion 
that we are not going to get a report for 6 months.
    Is it possible to get some sort of interim report in the 
next few months that could feed back into the work we are doing 
here, that we might be able to wrap this up? He has invested 
years in this very positive idea. Is there some way that we 
could get a little something sooner?
    Ms. KING. We are not at the point right now of being able 
to tell you what our preliminary findings are, but I think we 
will be before the end of the year.
    Mr. BLUMENAUER. Yes.
    And I am just saying respectfully, because we have a 
different timetable here----
    Ms. KING. I understand.
    Mr. BLUMENAUER [continuing]. If there is some way--even not 
a final preliminary, but something that would give guidance 
sooner, late in the summer or early in the fall, would make a 
big difference.
    Chairman BRADY. And, Ms. King, I imagine every one of us 
would add our support for that request as well.
    All right. Thank you.
    Mrs. Black.
    Mrs. BLACK. Thank you, Mr. Chairman. And I do sincerely 
appreciate the opportunity to participate in this hearing. And 
I thank you for your leadership on this issue. This is a very 
important issue in understanding the fraud, waste and abuse in 
the Medicare program.
    Myself and all my colleagues that have spoken here do have 
serious concerns about the future of Medicare, the program, and 
appreciate viewing some of the recommendations that have been 
made by the GAO that has been published in order for CMS to 
address some of these fundamental structural changes that are 
facing our growing system.
    I think it was our colleague, Mr. Roskam, that made mention 
of $75 billion. When I think about billions of dollars that 
potentially cannot be accounted for, it is a tremendous, 
tremendous amount of money. I certainly appreciate the good 
work that is done by both the GAOs and the Inspector General as 
well.
    Just recently I sent a letter to Ms. Tavenner on this very 
topic to understand why CMS has not adopted two recommendations 
made by GAO to reduce improper payments issued by CMS. One of 
them goes back pretty far, and we still don't see that there 
has been a resolution on this.
    It goes back to a 2007 GAO recommendation that was a 
requirement for contractors to develop thresholds for 
unexplained increases in billing in order to implement the 
controls under an automated payment system.
    And prior to issuing these payments under a fee-for-
service, thresholds have not been developed to explain 
unexpected increases in billing.
    And that seems to me to be one that just ought to jump out 
and ought to be one that takes priority to say, ``Why is that 
happening?'' and, ``Let's put thresholds there so we can at 
least catch that,'' as has already been said by the previous 
questioner.
    Dr. Agrawal, would you be able to help me understand why 
this still has not been put into place?
    Dr. AGRAWAL. Sure. So we have the fraud prevention system, 
which is a predictive analytics system that allows us to look 
at claims in real-time.
    One of the models in that system does look at the type of 
spike billing that you are talking about, essentially, 
significant changes in billing behavior in a relatively brief 
period of time.
    We also have other models that look at just the absolute 
dollars that are going out. So, you know, some that look at the 
change and others that just look at high-dollar amounts.
    We could perhaps work with the GAO to close that 
recommendation, but I do believe we have addressed it.
    Mrs. BLACK. Well, if you have, I think it would be a great 
idea to work with GAO because it continues to show up, the 
recommendations.
    Dr. AGRAWAL. Yes, ma'am.
    Mrs. BLACK. And if we go all the way back to 2007 and we 
see this continue to be a recommendation that hasn't been 
closed, then there is a question about why that is.
    A lot of money is spent with the GAO in trying to get these 
recommendations to you all. Understanding that you are very 
busy on administering the program, I think when the 
recommendations are given, they need to be taken seriously and 
we don't need to see them being open year after year.
    I want to go to just one other one. And I am interested in 
the recommendation that was made by GAO regarding the home 
health agencies with known high rates of improper billing. The 
GAO recommended that the CMS conduct post-payment reviews, and 
that also seems to have not been done yet.
    Can you speak to that?
    Dr. AGRAWAL. Yes, ma'am. So we receive regular reports from 
our zone program integrity contractors that conduct 
investigations against various providers that have, you know, 
risen in priority.
    Each one of our zone program integrity contractors does 
conduct post-pay reviews of home health agencies in their 
zones. Again, this perhaps may be a recommendation that we 
could close.
    In specific, you know, the Committee is aware of the 
moratorium that we have implemented in home health services in 
a number of different geographies as a result of those 
activities and other activities.
    As just one example, we have revoked over 100 home health 
agencies in just Miami alone in the last year, half of them 
after the moratorium was put in place. So home health care is 
something that we are closely looking at.
    We, in fact, do conduct post-pay audits and payment 
suspensions and pre-pay reviews just in alignment with our 
other authorities. So I would be happy to work with them to 
perhaps close that recommendation.
    Mrs. BLACK. Just an observation that--you did talk about 
several of these recommendations that you all are trying to 
address.
    I think that, since you are fairly new with the 
organization, the agency, that it might be a good change in 
culture to go back and look at these and be able to report back 
to this Committee in particular, but to Congress in general, to 
let them know that you are taking these recommendations 
seriously.
    Because, as I say, there is a lot of money that goes into 
researching these recommendations and giving them to CMS, and I 
would hope that we would have you close those out.
    If you are really doing these, let us know. And let us 
know, also, how much has been saved. If you can help us to know 
that, that is very helpful.
    Thank you, Mr. Chairman.
    Chairman BRADY. Thank you, Mrs. Black.
    And to the witnesses, thank you for being here.
    The bipartisan frustration you hear expressed is not 
because fraud in Medicare is new. It is not. It is growing as 
the program is growing. It, at times, seems super human and 
immortal, and it is not. Much of the fraud and abuse we have 
seen is preventable.
    And so, one, this won't be the last time you are before the 
Subcommittee. We are dead serious about both aggressive 
oversight to ensure that the recommendations by the Inspector 
General and GAO are implemented in a timely way by the agency. 
I appreciate your support and commitment to work with us to do 
that.
    Second, the Subcommittee hopes to develop and advance a 
package of legislative bills related to fraud. So if you have 
views on the legislation that you heard from the Members today, 
I would encourage you to get with them immediately because we 
intend to move on the area of fraud.
    With that, I would like to thank all of the witnesses for 
their testimony today. Appreciate the continued assistance 
getting answers to the questions that are asked by our 
Committee and Members.
    As a reminder, any Member wishing to submit a question for 
the record will have 14 days to do so. Any questions that are 
submitted, I ask the witnesses to respond in a timely manner.
    With that, the Subcommittee is adjourned.
    [Whereupon, at 3:35 p.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]
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