[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


     STRENGTHENING MEDICAID PROGRAM INTEGRITY AND CLOSING LOOPHOLES

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 11, 2015

                               __________

                           Serial No. 114-74
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                     Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
BRETT GUTHRIE, Kentucky              GENE GREEN, Texas
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington   JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILLY LONG, Missouri                 JOSEPH P. KENNEDY, III, 
RENEE L. ELLMERS, North Carolina         Massachusetts
LARRY BUCSHON, Indiana               TONY CARDENAS, California
SUSAN W. BROOKS, Indiana             FRANK PALLONE, Jr., New Jersey (ex 
CHRIS COLLINS, New York                  officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................    32
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    33
Hon. Brett Guthrie, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................    35
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    36

                               Witnesses

John Hagg, Director of Medicaid Audits, Office of Inspector 
  General, U.S. Department of Health and Human Services..........    38
    Prepared statement...........................................    40
    Answers to submitted questions...............................   105
Nico Gomez, Chief Executive Officer, Oklahoma Health Care 
  Authority......................................................    47
    Prepared statement...........................................    49
    Answers to submitted questions...............................   108
Trish Riley, Executive Director, National Academy for State 
  Health Policy, and Commissioner, Medicaid and CHIP Payment and 
  Access Commissio...............................................    55
    Prepared statement...........................................    57
    Answers to submitted questions...............................   110

                           Submitted Material

Terminated providers bill........................................     3
H.R. 3444........................................................    11
H.R. 1570........................................................    14
Electronic verification bill.....................................    18
H.R. 2339........................................................    23
H.R. 1771........................................................    28
Statement of the Alzheimer's Foundation of America, submitted by 
  Mr. Pitts......................................................    99
Statement of Sandata Technologies, LLC, submitted by Mr. Pitts...   101
Statement of ResCare, submitted by Mr. Guthrie...................   103

 
     STRENGTHENING MEDICAID PROGRAM INTEGRITY AND CLOSING LOOPHOLES

                              ----------                              


                       FRIDAY, SEPTEMBER 11, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:17 a.m., in 
room 2322, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Guthrie, Murphy, Burgess, 
Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, 
Brooks, Collins, Green, Engel, Capps, Schakowsky, Butterfield, 
Castor, Sarbanes, Kennedy, and Pallone (ex officio).
    Also Present: Representative Mullin.
    Staff Present: Clay Alspach, Chief Counsel, Health; Gary 
Andres, Staff Director; Leighton Brown, Press Assistant; Noelle 
Clemente, Press Secretary; Graham Pittman, Legislative Clerk; 
Michelle Rosenberg, GAO Detailee, Health; Heidi Stirrup, Health 
Policy Coordinator; Josh Trent, Professional Staff Member, 
Health; Christine Brennan, Minority Press Secretary; Jeff 
Carroll, Minority Staff Director; Tiffany Guarascio, Minority 
Deputy Staff Director and Chief Health Advisor; Rachel Pryor, 
Minority Health Policy Advisor; and Samantha Satchell, Minority 
Policy Analyst.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. The subcommittee will come to order.
    The chair will recognize himself for an opening statement. 
Today Medicaid is the world's largest health coverage program. 
Medicaid plays a critical role in our healthcare system, 
providing access to needed medical services and long-term care 
for some of our Nation's most vulnerable patients. The 
Congressional Budget Office estimates that Federal Medicaid 
expenditures will grow from $343 billion this year to $576 
billion in 2025. At the same time, State expenditures have 
grown significantly, today accounting for more than 25 percent 
of state spending in fiscal year 2014.
    Given the growing portion of the Federal budget dedicated 
to Medicaid and the fact that roughly one in five Americans may 
be served by the program in a given year, Congress has a 
responsibility--even a duty--to ensure that the program is 
safeguarded against waste, fraud, and abuse. And while there is 
never a perfect program, the status quo in Medicaid certainly 
can be improved. The increasing size, complexity and 
vulnerability of Medicaid have led the GAO to designate it a 
high-risk program that can too easily be subjected to fraud and 
abuse.
    Both Federal and state governments play critical roles in 
oversight of program integrity efforts. And while I believe 
states are and should be treated as full partners in the 
program, the reality is that Congress has a duty to expect the 
best from states and take commonsense steps to help prevent 
fraud, waste, and abuse at systemic levels. After all, 
protecting the integrity of the Medicaid program is about 
ensuring the program is not only more accountable and 
transparent for taxpayers, it is about safeguarding program 
dollars and encouraging more meaningful access to care for 
patients who rely on the program. And that is why I am so 
pleased today to be discussing several bills that will help 
boost the integrity, oversight and accountability of the 
Medicaid program.
    First, a bill to be introduced by Dr. Bucshon and some of 
his colleagues would fix a problem identified by the HHS 
inspector general ensuring that providers terminated in one 
state don't improperly bill the system or negatively impact 
patients in another state.
    [The bill follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. Second, Representative Brooks and I have 
introduced H.R. 3444, which would operationalize a proposal in 
the President's budget to help reduce Medicaid and CHIP fraud 
in the territories of the United States.
    [The bill follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. Next, Representative Bilirakis has introduced 
H.R. 1570, a bipartisan bill which would bring increased 
transparency and information to Federal expenditures related to 
Medicaid and CHIP in U.S. territories.
    [The bill follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. Fourth, Vice Chairman of the Health Subcommittee 
Brent Guthrie has a bill which would incentivize States to 
require providers of Medicaid personal care services to have 
electronic verification systems in place. This commonsense 
proposal will ensure taxpayers only pay for the services 
delivered to Medicaid beneficiaries.
    [The bill follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. Fifth, I have introduced H.R. 2339, a 
commonsense proposal to give States better options to how 
lottery winnings are calculated for purposes of Medicaid 
eligibility. I hope we can all agree that multimillion dollar 
lottery winners should not be eligible to receive Medicaid, 
which is precisely the problem in current law that my bill 
would fix.
    [The bill follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. Finally, Representative Mullin on the full 
committee has authored H.R. 1771, a bill which would close a 
loophole in current law identified by some GAO reporting. And 
this bill would amend the Social Security Act to count portions 
of income from annuities of a community spouse as income 
available to institutionalized spouses for purposes of Medicaid 
eligibility.
    [The bill follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. It is my hope that through the policies we 
discuss today and through future actions by this committee, we 
can work together on a bipartisan basis to boost Medicaid 
program integrity while making the program more sustainable, 
accountable and transparent. I look forward to hearing our 
witnesses today.
    I would like to yield to Congressman Mullin to introduce 
one of our witnesses.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    The Subcommittee will come to order.
    The Chairman will recognize himself for an opening 
statement.
    Today, Medicaid is the world's largest health coverage 
program. Medicaid plays a critical role in our health care 
system, providing access to needed medical services and long-
term care for some of our nation's most vulnerable patients.
    The Congressional Budget Office estimates that federal 
Medicaid expenditures will grow from $343 billion this year to 
$576 billion in 2025. At the same time, state expenditures have 
grown significantly, today accounting for more than 25% of 
state spending in FY 2014.
    Given the growing portion of the federal budget dedicated 
to Medicaid--and the fact that roughly one in five Americans 
may be served by the program in a given year--Congress has a 
responsibility, even a duty, to ensure that the program is 
safeguarded against waste, fraud, and abuse.
    While there is never a perfect program, the status quo in 
Medicaid certainly can be improved. The increasing size, 
complexity, and vulnerability of Medicaid have led the GAO to 
designate it a ``high-risk program'' that can too easily be 
subjected to fraud and abuse.
    Both federal and state governments play critical roles in 
oversight of program integrity efforts. While I believe states 
are--and should be treated as--full partners in the program, 
the reality is that Congress has a duty to expect the best from 
states and take common-sense steps to help prevent fraud, 
waste, and abuse at systemic level.
    After all, protecting the integrity of the Medicaid program 
is about ensuring the program is not only more accountable and 
transparent for taxpayers; it is about safeguarding program 
dollars and encouraging more meaningful access to care for the 
patients who rely on the program.
    That's why I'm so pleased today to be discussing several 
bills that will help boost the integrity, oversight, and 
accountability of the Medicaid program.
    First, a bill to be introduced by Dr. Bucshon and some of 
his colleagues would fix a problem identified by the HHS 
Inspector General-ensuring that providers terminated in one 
state don't improperly bill the system or negatively impact 
patients in another state.
    Second, Representative Brooks and I have introduced H.R. 
3444, which would operationalize a proposal in the president's 
budget to help reduce Medicaid and CHIP fraud in the 
territories of the United States.
    Next, Representative Bilirakis has introduced H.R. 1570, a 
bipartisan bill which would bring increased transparency and 
information to federal expenditures related to Medicaid and 
CHIP in U.S. territories.
    Fourth, Vice Chairman of the Health Subcommittee Brett 
Guthrie has a bill which would incentivize states to require 
providers of Medicaid personal care services to have electronic 
verification systems in place. This common-sense proposal will 
ensure taxpayers only pay for the services delivered to 
Medicaid beneficiaries.
    Fifth, I have introduced H.R. 2339--a common-sense proposal 
to give states better options to how lottery winnings are 
calculated for purposes of Medicaid eligibility. I hope we can 
all agree that multi-million dollar lottery winners should not 
be eligible to receive Medicaid--which is precisely the problem 
in current law that my bill would fix.
    Finally, Representative Mullin on the full committee has 
authored H.R. 1771--a bill which would close a loophole in 
current law identified by some GAO reporting. This bill would 
amend the Social Security Act to count portions of income from 
annuities of a community spouse as income available to 
institutionalized spouses for purposes of Medicaid eligibility.
    It is my hope that through the policies we discuss today, 
and through future actions by this committee, we can work 
together on a bipartisan basis to boost Medicaid program 
integrity, while making the program more sustainable, 
accountable, and transparent.
    I look forward to hearing from our witnesses today, and I 
yield to --------------.

    Mr. Mullin. Thank you, Chairman Pitts.
    And it is an honor to be able to sit on a subcommittee 
panel with you and introduce a Nico Gomez, our CEO of the 
Oklahoma Health Care Authority. Nico has brought in a unique 
approach to sometimes an agency that can be bogged down with 
bureaucracy by looking outside the box, by understanding that 
there is always a better way to do things. As he openly admits, 
it wasn't his idea but it was his ability to hire good people 
which we constantly refer to in the private sector as being 
extremely smart. And he brought in an outside look by being 
able to get people to enroll at a simpler pace by being online. 
At the same time, and most importantly, it gives people and it 
gives the agency the ability to check the eligibility of the 
participant at any given time with the touch of a button. 
Instead of having to go through and audit them to see if they 
are eligible since it is based on a month-to-month income 
basis, they can simply push the button and find out their 
eligibility.
    I think it is something that not just Oklahoma can benefit 
from but the entire country can benefit from.
    So, Mr. Gomez, it is an honor to have you in D.C., even 
though his flight didn't get in until 3 a.m. This morning. And 
as you can tell, he is still drinking coffee. So Nico thank you 
so much for being here.
    Mr. Pitts, thank you so much for the ability to introduce 
him.
    Mr. Pitts. The chair thanks the gentleman.
    Without objection, the gentleman will sit with the 
subcommittee today in the hearing.
    The chair now recognizes Mr. Green for 5 minutes for an 
opening statement.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman.
    And good morning, and I thank our witnesses for being here 
today, even if you didn't arrive until 3 a.m.
    Throughout its 50-year history, Medicaid has been an 
adaptable, efficient program that meets the healthcare needs of 
millions of children, pregnant women, people with disabilities, 
seniors, and low-income adults. Today Medicaid serves as a 
lifeline to nearly 72 million Americans who depend on the 
program for health coverage. The Affordable Care Act included 
the most significant changes to the program since its creation. 
It expanded coverage, made improvements to promote program 
integrity and transparency, and advance delivery system reform.
    Thanks to these provisions, the uninsured rate is at a 
record low. The program continues to efficiently provide 
coverage to enrollees. Program integrity provisions of the ACA 
mark a shift from the traditional pay-and-chase model to a 
preventative approach in which fraudulent actors are kept out 
of the program before they commit fraud.
    Today we are examining six Medicaid proposals, efforts that 
truly improve transparency and program integrity is something I 
think we all can support.
    The Affordable Care Act took major steps to improve program 
integrity in Medicaid, including new protocols for screening of 
suppliers and providers and additional authority to terminate 
entities that commit fraud. These are significant steps 
forward, and more can be done to ensure these reforms are fully 
implemented.
    We should also continue to examine other ways to further 
strengthen Medicaid for all beneficiaries so that dollars are 
spent on quality care without inappropriately limiting access.
    While we hear from all six proposals during today's 
hearing, I want to take the opportunity to highlight two. Prior 
to the passage of the ACA, if a state terminated a provider's 
participation in its Medicaid program, the terminated provider 
could potentially participate in a program of a different 
state. In the case of Texas, they would probably come to 
Oklahoma and vice verse, leaving the system vulnerable to fraud 
and abuse. The ACA took steps to prevent this from happening, 
but OIG has identified weaknesses in that process.
    One of the legislative proposals will build on the ACA with 
some technical changes. A proposal that would achieve its 
intent to further reduce waste, fraud and improve quality and 
safety in the Medicaid program is something, again, we can all 
support.
    I am concerned that two bills under consideration would 
scale back Medicaid eligibility under the guise of closing 
loopholes. The Affordable Care Act establishes a streamlined, 
coordinated eligibility determination system for Medicaid and 
CHIP as well as premium tax credits and cost-sharing subsidies. 
The approach was designed so that people can qualify for the 
appropriate program without gaps or duplication and move 
between insurance programs when their incomes change.
    H.R. 2339 would undermine this by requiring states to count 
lump-sum income as though it were income that the individual 
has received for up to 20 years after it is actually received. 
The bill is being described as a way to prevent people who win 
large lottery payouts from receiving Medicaid, but this is 
misleading. By counting all lump-sum income as monthly income, 
the overwhelming the majority of people it would affect all 
those who receive things like workers' compensation 
settlements, unemployment, and retroactive disability payments. 
If 2339 became law, a significant number of low-income 
Americans who receive lump sum could be inappropriately 
determined ineligible for Medicaid and lose access to their 
health insurance.
    Coverage gaps due to temporary changes in income are bad 
for patients, providers, and health plans and ultimately is a 
waste of taxpayer dollars. This is a concept MACPAC has 
recommended in several reports to Congress. Gaps in coverage is 
an issue that I have been concerned about for years. For the 
last several Congresses I have worked with my colleague from 
Texas, Representative Joe Barton, to advance legislation to 
require 12-month continuous enrollment Medicaid and SCHIP. 
Proposals that ensure Federal and state taxpayer dollars are 
spent appropriately on delivering quality care and prevent 
fraud, waste, and abuse from occurring should be supported. 
Good program integrity holds all stakeholders accountable 
without unintentionally impeding the access.
    I look forward to working with my colleagues on the 
committee to further strengthen the Medicaid program in key 
areas and build on the success. Again, I would like to thank 
our witnesses for being here today and look forward to the 
discussion on the legislative proposals under consideration.
    And I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the vice chair of the subcommittee, Mr. 
Guthrie, 5 minutes for his opening state.

 OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Guthrie. Thank you, Mr. Chairman. I thank you for 
yielding time.
    I appreciate the committee holding this hearing on efforts 
to strengthen Medicaid by reducing waste, fraud, and abuse. In 
doing so we can ensure the program's longevity and 
effectiveness.
    Earlier this year, I introduced H.R. 2446, which would 
require states to put in place an electronic visit verification 
system for personal care services. Medicaid personal care 
services are becoming increasingly more important as the need 
for them continues to grow. However there is also growing 
concern about the high levels of improper payments in this 
area.
    My bill will help address these concerns by requiring 
states to adopt an EVV system to verify the date, time, and 
site of visit as well as the provider of the services. This is 
critical to ensure that beneficiaries receive the services they 
need.
    Many states already operate EVV systems, and they have seen 
a decrease in improper payments and significant cost savings 
for the states.
    I want to thank the subcommittee for holding this hearing; 
certainly Chairman Pitts for including it in today's hearing. 
And by strengthening Medicaid, we can ensure those who need it 
can rely on it in the future.
    And I would like to yield time to my friend from Florida, 
Mr. Bilirakis.
    Mr. Bilirakis. Thank you. Thank you, sir, I appreciate it 
very much.
    And thank you, Chairman Pitts, for holding the hearing.
    Earlier this year, I, along with the delegates from all the 
territories, introduced the Medicaid and CHIP Territory 
Transparency and Information Act, H.R. 1570. CMS reports 
Medicaid CHIP data for all 50 states and the District of 
Columbia, but not the territories. Three months after 
introduction, CMS has started to report Puerto Rico data but 
not the other territories, and the level of data is less than 
what is reported for states.
    My bill would require CMS to provide the same data for the 
territories as it does for the states. Puerto Rico's Medicaid 
program is facing some huge problems over the horizon. As a 
committee, we have to make some big policy decisions, and 
regardless of your policy views, we have to have all the data, 
all the information to understand the problem and exercise 
proper oversight over their program if we are to attempt to 
address these problems going forward.
    Thank you very much for the time, and I yield back.
    Mr. Guthrie. I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the ranking member of the full committee, 
Mr. Pallone, 5 minutes for an opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman, for convening this 
hearing on the six pieces of legislation before our committee. 
I am pleased to see that some of the bills we are considering 
here today are true efforts to improve program integrity in 
Medicaid in ways that will strengthen the Medicaid program. 
That is a longstanding priority of mine, and there is still 
some technical work to be done, but the draft proposal that 
would build on authority given to CMS and states to terminate 
fraudulent providers from the Medicaid program is a worthwhile 
policy.
    We need to do a better job in this area to make sure that 
providers eliminated in one state are no longer able to cross 
state lines and continue to be reimbursed for bad care for 
beneficiaries, and this legislation will do that. And I look 
forward to working with my colleagues on the proposal.
    The proposed legislation under consideration today that 
would encourage our territories, like Puerto Rico, to invest in 
the creation of Medicaid fraud control units that over the long 
term bring dollars back to beneficiaries is a no-brainer.
    I have to say, however, that another bill, H.R. 1570, 
requiring Web site information about the territories beyond 
Puerto Rico is a dramatic step, and I prefer to start first 
with the request to the agency for that information before 
enacting a law to that effect. While not harmful, this approach 
seems rigid and misguided.
    I appreciate the interest in cracking down on fraud in the 
personal care services and home and community-based care space. 
Ensuring beneficiaries actually receive quality PCS to which 
they are entitled is an issue of serious importance and one 
that I look forward to working with this committee on further. 
HHS and the Office of the Inspector General have published an 
extensive body of work examining Medicaid personal care 
services and has found significant and persistent compliance 
payment and fraud vulnerabilities that we will hear about 
today. I have concerns about H.R. 2446, as drafted, however. I 
do believe this issue should be addressed and look forward to a 
thorough review and assessment of recommendations for 
improvement.
    Unfortunately, we aren't considering just program integrity 
bills today. The ultimate test for all Medicaid legislation 
should be to determine if the proposal supports overarching 
Medicaid objectives to strengthen coverage, expand access to 
providers, improve health outcomes, and increase the quality of 
care for beneficiaries. I believe that the majority of what we 
are looking at for program integrity in Medicaid today achieves 
these goals. However, efforts to scale back eligibility in the 
Medicaid program in any way is not program integrity, and it is 
not closing loopholes. Proposals like the one we have here 
today that purports to address this so-called plight of lottery 
winners in Medicaid I think are completely unnecessary from a 
practical perspective. We have several checks in place and 
states already have the authority they need, but far more 
concerning is that H.R. 2339 is not about lottery winners at 
all; it is about undermining the streamlined coordinated 
eligibility approach the ACA established by allowing states to 
count lump-sum income that an individual may receive as though 
it were income that the individual is receiving for 1 to 20 
years after actual receipt. And by ``lump sum,'' we are not 
talking about lottery winners; we are talking about 
uncompensated care settlement payments, Social Security 
disability back pay. We are talking about eliminating coverage 
for up to 20 years for a child on Medicaid because they have a 
parent that finally got a break with a little bit of income 
from selling the family home. Proposals like these that would 
undermine the coverage for millions of low-income individuals, 
including some of our most vulnerable children and seniors, are 
punitive to beneficiaries.
    Reviewing our final bill here today, H.R. 1771, I am 
pleased that perhaps we can have a discussion about long-term 
care insurance or the lack thereof. I appreciate this 
legislation's effort to ensure spousal impoverishment 
protections remain when one spouse must enter a nursing home.
    As many of you know, I was a strong supporter of the CLASS 
Act that has since been repealed, and I have called repeatedly 
for a real discussion about a long-term care benefit that a 
middle-income family can depend on to be there when they need 
it. We have no long-term care insurance in this country, and 
until we are ready to have a discussion about improving options 
in the long-term care insurance marketplace, I am concerned 
about changes to Medicaid eligibility in this space even for a 
very small amount of individuals.
    Mr. Chairman, I have said repeatedly that the Medicaid 
program is the bedrock of the Nation's safety net. I take 
protecting Medicaid seriously, and I have used some of the good 
program integrity proposals we have to consider here today as 
efforts to advance that goal. However, Medicaid is the lifeline 
of nearly 72 million children, elderly, and low-income 
individuals depend on for health coverage. And I will never 
support a proposal that would take that coverage away.
    So I want to thank you again for calling this hearing, and 
I look forward to working with you further to consider some of 
these initiatives, Mr. Chairman, and having a thoughtful 
discussion. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    That concludes the opening statements. As usual, the 
written opening statements of all members will may be made part 
of the record. And I would like to ask unanimous consent to 
submit the following documents for the record: letters from the 
Alzheimer's Foundation of America and Sandata Technologies.
    Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. We have one panel today. I will introduce them 
in order of your testimony. Thank you very much for coming 
today.
    First of all, John Hagg, Director of Medicaid Audits, 
Office of Inspector General, U.S. Department of Health and 
Human Services; secondly, we have heard from Mr. Mullin the 
introduction for Nico Gomez, chief executive officer for 
Oklahoma Health Care Authority; and finally, Trish Riley 
executive director of the National Academy for State Health 
Policy, and Commissioner, Medicaid and CHIP Payment and Access 
Commission.
    Thank you very much for coming today. Your written 
testimony will be made a part of the record. You will each be 
given 5 minutes to summarize your written testimony.
    So at this time, Mr. Hagg, you are recognized for 5 
minutes.

STATEMENTS OF JOHN HAGG, DIRECTOR OF MEDICAID AUDITS, OFFICE OF 
    INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND HUMAN 
SERVICES; NICO GOMEZ, CHIEF EXECUTIVE OFFICER, OKLAHOMA HEALTH 
 CARE AUTHORITY; AND TRISH RILEY, EXECUTIVE DIRECTOR, NATIONAL 
ACADEMY FOR STATE HEALTH POLICY, AND COMMISSIONER, MEDICAID AND 
               CHIP PAYMENT AND ACCESS COMMISSION

                     STATEMENT OF JOHN HAGG

    Mr. Hagg. Good morning, Chairman Pitts, Ranking Member 
Green, and other distinguished members of the committee. Thank 
you for the opportunity to testify about the Office of 
Inspector General's efforts to reduce fraud, waste, and abuse 
and to promote quality and safety in the Medicaid program.
    Protecting the integrity of Medicaid takes on a heightened 
urgency as expenditures and the number of beneficiaries served 
continues to grow.
    My testimony today focuses on three specific areas of 
concern that the OIG has identified to be problematic.
    First, terminated providers continue to participate in and 
bill Medicaid. Second, there are inadequate safeguards for 
personal care services. And third, the U.S. territories lack 
Medicaid fraud control units.
    Prior to the passage of the Affordable Care Act, if a state 
terminated a provider's participation in its Medicaid program, 
the provider could potentially participate in another state's 
Medicaid program, leaving the second state vulnerable to fraud, 
waste and abuse. To prevent this, states are now required to 
terminate a provider's participation if that provider is 
terminated in another state. The termination has to be for 
cause, for example, for reasons of fraud, integrity, or 
quality.
    Through our work, we found significant problems. 
Specifically, we determined that not all states submitted data 
on terminated providers and that much of the data that was 
submitted did not relate to providers terminated for cause. We 
also found 12 percent of providers terminated in 2011 continued 
participating in other states' Medicaid programs.
    To further complicate states' ability to terminate 
providers, many states do not require providers that 
participate via managed care to be directly enrolled in 
Medicaid. If a state has not directly enrolled a provider, it 
cannot not terminate that provider, and it may not even be 
aware that the provider is participating in its Medicaid 
program.
    The OIG believes that CMS should, one, require states to 
report providers terminated for cause rather than leaving it as 
voluntary; two, ensure that the information reported is 
uniform, accurate and complete; and three, require state 
Medicaid programs to enroll all providers participating in 
Medicaid managed care.
    Another problematic area within Medicaid is personal care 
services. These services allow many elderly people and those 
with disabilities to remain in their homes rather than being 
placed in a nursing facility. As more and more state Medicaid 
programs explore home care options, OIG believes it is critical 
that adequate safeguards exist to prevent fraud, waste and 
abuse in personal care services. Through our work, OIG 
discovered some payments for these services were improper 
because they were either not provided in accordance with state 
requirements, not supported by adequate documentation, billed 
during periods in which the beneficiaries were 
institutionalized, or were provided by attendants that failed 
to meet state qualifications.
    Over the years, we have made a number of recommendations to 
CMS to address Medicaid's deficiencies within the delivery of 
personal care services, including requiring qualification 
standards for care attendants be consistent across states, 
requiring care attendants to be enrolled or registered with the 
states, and requiring dates, times and attendants' identities 
to be listed on Medicaid's claims. Currently, none of these 
recommendations have been implemented.
    Another way the OIG helps protect the integrity of Medicaid 
is by overseeing the state Medicaid fraud control units. Fraud 
control units currently operate in 49 states and the District 
of Columbia, but none are in the five U.S. territories.
    The major barrier to establishing fraud control units in 
the territories is the nature of Medicaid funding. Unlike 
Medicaid funding for the states, the territories receive a 
capped appropriation and routinely use the full amount 
appropriated. This becomes a disincentive to allocate scarce 
Medicaid dollars to the establishment and operation of fraud 
control units.
    Legislation could remove the disincentive. This could be 
accomplished by exempting unit funding from the capped Medicaid 
appropriation. OIG believes that such a change would also be 
cost efficient, specifically in Puerto Rico, which has a total 
Medicaid enrollment of more than 1 million beneficiaries which 
is comparable to Medicaid enrollment of many medium-sized 
states.
    In conclusion it is critical that we strengthenoversights 
to ensure that Medicaid funds are spent appropriately. Thank 
you for your interest in our work and for the opportunity to 
appear before you today.
    [The prepared statement of Mr. Hagg follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. The chair now recognizes Mr. Gomez 5 minutes for 
your summarization.

                    STATEMENT OF NICO GOMEZ

    Mr. Gomez. Good morning, Chairman Pitts and Ranking Member 
Green, and distinguished committee members, good morning. It is 
honor to share Oklahoma's perspectives and experiences on a 
critically important topic like program integrity in an ever 
changing healthcare delivery environment. It is important to 
note that this testimony is that of only one state's program. 
It is not made on behalf of any of the other states or 
associations. Equally important is acknowledgment that 
solutions offered here are not to the exclusive benefit of 
Oklahoma. This testimony highlights and reinforces the need for 
state flexibility rather than uniform mandates.
    Oklahoma maintains a dedication of integrity in every 
aspect of our Medicaid program. Recent changes have included 
improving the process for determining member eligibility, 
provider contracting and enrollment, claims payments, medical 
necessity, asset verification, and service verification. Prior 
to the implementation of the Affordable Care Act, Oklahoma made 
investments toward developing the Nation's first fully 
automated, realtime online enrollment system. Currently, two-
thirds of Oklahoma's applicants for Medicaid are received from 
a personal or public computer through our online system.
    When added to the benefit of our community partners, more 
than 99 percent of our applications processed in the community 
are processed in realtime using a rules-based decision engine. 
In addition to relieving a tremendous administrative burden, 
this system allows for realtime enrollment, while strengthening 
the state's ability to verify reported information with various 
sources, including the Social Security Administration, 
Department of Homeland Security and the Oklahoma Employment 
Security Commission.
    Oklahoma's pride is in its constant dedication to improving 
its program's integrity reflected in its payment error rate 
measurement. The Payment Error Rate Measurement Program is an 
audit conducted by CMS on a 3-year rolling average to measure 
the accuracy of payments made to Medicaid covered goods and 
services. The audit takes into consideration member 
eligibility, provider eligibility, and medical necessity. 
Oklahoma's most recent PERM audit identified a.24 percent error 
rate, .24 percent amongst the lowest of the 17 states with the 
same cycle. Most states are around 9 percent.
    This success is a testament to the engaged provider 
services and training infrastructure as well as Oklahoma's 
continual audits to using PERM criteria in the interim during 
and between PERM audits, something we are very proud of.
    Many of the issues being addressed in the upcoming hearings 
are issues that Oklahoma is facing or has attempted to address 
in the past.
    One issue in particular we have attempted to address on our 
own and now with the help of Congressman Mullin we are able to 
address in H.R. 1771. Since its creation, the statutes and 
regulations governing the Medicaid program have been amended 
numerous times and now consist of complex, interrelated 
provisions that are often difficult to understand. One such 
area surrounds standards to prevent spousal impoverishment. 
Medicaid statutes allow the spouse of a Medicaid applicant for 
long-term care to keep a certain amount of his or her resources 
so that he or she is not required to become impoverished before 
their spouse can receive long-term care. Unfortunately, 
individuals are now using court-recognized loopholes to 
transfer significant resources to a spouse, transfers that 
would normally disqualify them from Medicaid.
    States have denied applicants who are clearly above 
Medicaid's income standards or resource limit standards only to 
have the court order the approval of such applications as a 
result of certain estate-planning loopholes that they recognize 
are contrary to Medicaid's intended purpose but can only be 
corrected by Congress.
    In an attempt to curtail the practice, Oklahoma denied such 
application using this loophole that resulted in the Morris v. 
Oklahoma Department of Health and Human Services. Morris is the 
seminal 10th Circuit decision which directly impacts not only 
Oklahoma but five other states in the circuit, but it also has 
been extended and relied upon in at least three other Federal 
circuits and several state courts.
    The Court's rulings essentially permits a married couple to 
shelter potentially unlimited amounts of assets through the use 
of nonassignable, nontransferable annuities in order for the 
spouse in need of medical care to qualify for Medicaid. In 
reversing the district court, the court of appeals stated, 
although we understand the district court's concerns regarding 
the exploitation of what can only be described as a loophole in 
the Medicaid statutes, we conclude that the problem can only be 
addressed by Congress.
    The passage of H.R. 1771 would be a needed step towards 
preserving shrinking resources that would help empower states 
to ensure those applicants truly in need can still access 
quality services. I would like to thank Congressman Markwayne 
Mullin for agreeing to working with the states remedying this 
and look forward to working together with the committee. And 
with that, I conclude my remarks and am happy to answer any 
questions.
    [The prepared statement of Mr. Gomez follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. The chair thanks the gentlemen.
    I now recognize Ms. Riley 5 minutes for your summary.

                    STATEMENT OF TRISH RILEY

    Ms. Riley. Good morning, Chairman Pitts, Ranking Member 
Green, and members of the subcommittee.
    I have served as the commissioner of MACPAC, the Medicaid 
and CHIP Payment and Access Commission, since its inception in 
2010. As you know, MACPAC is a congressional advisory body 
charged with analyzing and reviewing Medicaid and CHIP policies 
and making recommendations to Congress, the Secretary, and the 
states on issues affecting these programs.
    I am one of 17 members appointed by the GAO.
    While I am also executive director of the National Academy 
for State Health Policy, my comments today solely reflect the 
work of MACPAC.
    We very much appreciate the opportunity to be here today as 
the subcommittee considers changes to the Medicaid program. The 
Commission shares the subcommittee's interest in ensuring 
Federal and state taxpayer dollars are spent appropriately on 
delivering quality, necessary care, and preventing fraud, waste 
and abuse from taking place. When designed and implemented 
well, program integrity policies and procedures should ensure 
that eligibility decisions are made correctly, prospective and 
enrolled providers meet Federal and state participation 
requirements, services provided to enrollees are medically 
necessary and appropriate, and provider payments are made in 
the correct amount for the appropriate services.
    The Commission has identified and shared with you through 
our reports to Congress a number of challenges associated with 
implementation of an effective and efficient Medicaid program 
integrity strategy, including overlap between Federal and state 
responsibilities, insufficient collaboration and information 
sharing among Federal agencies and the states, diffusion of 
authority among multiple Federal and state agencies, lack of 
information on the effectiveness of program integrity 
initiatives, and appropriate performance measures. We also 
identified concerns about lower Federal matching rates for 
state activities not directly related to fraud control; 
incomplete and outdated data; and few program integrity 
resources for delivery system models other than fee for 
service.
    Specifically, the Commission recommended that the Secretary 
of HHS should collaborate with states to create feedback loops 
to simplify and streamline program integrity requirements, 
determine which current Federal program integrity initiatives 
are most effective, and take steps to eliminate programs that 
are redundant, outdated, or not cost-effective.
    In addition, in order to enhance states' ability to detect 
and prevent fraud and abuse, the Commission has recommended 
that the Secretary should develop methods for better 
quantifying the effectiveness of program integrity activities. 
The Secretary should assess analytic tools for detecting and 
preventing fraud and abuse and promote the use of those tools 
that are most effective.
    In addition, the Department should improve dissemination of 
best practices in program integrity and enhance program 
integrity training programs.
    The measures before the subcommittee today also speak to 
other policy objectives of interest to the Commission, 
including simplification, transparency, and the alignment of 
policies across Federal health programs. Even so, I want to 
clarify that MACPAC has not reviewed nor expressed its views on 
the merits of the six specific initiatives that are the focus 
of today's hearing. My written statement provides technical 
comments on the potential implications of these proposals and 
issues that could be addressed as the subcommittee considers 
them.
    Again, thank you very much for this opportunity to appear 
before the committee, and we would of course be happy to 
provide technical information from the staff or to answer 
questions today.
    [The prepared statement of Ms. Riley follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Pitts. The chair thanks the gentlelady. That concludes 
the opening statements. We will now begin questions, and I will 
recognize myself 5 minutes for that purpose.
    Mr. Hagg, the U.S. territories are already required by law 
to have a Medicaid fraud control unit. Is that correct?
    Mr. Hagg. I believe that is correct, yes.
    Mr. Pitt. Given that, can you explain why the territories 
do not already have such units and how H.R. 3444, the Medicaid 
and CHIP Territory Fraud Prevention Act, would encourage their 
creation?
    Mr. Hagg. Yes. I think they don't have fraud control units 
now has to do with how their Medicaid programs are structured 
or how the funding of those programs are structured. In the 
territories, the Medicaid programs are capped, unlike the 
states, where it is open-ended. To create fraud control units, 
the funding that it would take to start up the units and then 
to operate the units would take away from trying to provide for 
services for beneficiaries in the territories. I think that is 
a difficult decision for them, taking away funds that could be 
used to provide services.
    The bill will move the funding that would be required to 
run the fraud control units out of that capped amount. And so 
it should take that disincentive from creating a program away.
    Mr. Pitts. Thank you.
    And, Mr. Hagg, your work found that the lack of uniform 
terminology for the reasons for provider terminations caused 
challenges for state agencies. Can you please explain the 
challenges created, how the policy we are discussing today 
could help resolve those challenges?
    Mr. Hagg. Well, you know as far as uniform terminology, we 
performed two studies involving terminated providers. The first 
was looking at the action CMS had taken to create a central 
data system that would house all of the providers that had been 
terminated. And looking at that data set, we found some states 
didn't submit any data at all. We found some states that 
submitted data, but the data wasn't complete. They were 
missing, for example, an address for the provider. And then as 
far as uniform terminology, we found that some states were 
submitting providers that had been terminated for reasons other 
than cause, reasons other than fraud or integrity or abuse 
issues. So say for example in a state if they terminated a 
provider because of billing inactivity, some states would 
submit that information to the central database, other states 
potentially could look at that database and say, ``We need to 
terminate that provider as well,'' even though there wouldn't 
be a reason to. So only providers terminated for cause should 
be submitted to that central data system; not other ones.
    And so uniform terminology or guidance provided by CMS 
about uniform terminology could help correct that issue.
    Mr. Pitts. Mr. Gomez, according to the GAO, some states 
have indicated that the use of annuities as a Medicaid planning 
tool have increased in recent years, despite congressional 
action most recently as part of the Deficit Reduction Act to 
eliminate this loophole. Has Oklahoma seen an increase in the 
use of annuities in recent years? And if so, why do you think 
this is the case?
    Mr. Gomez. Mr. Chairman, thank you.
    Yes, we have seen an increase in the number of annuities 
as, quite frankly, families have found ways to avoid the 5-year 
lookback on income and assets. And it has allowed also a growth 
in the number of promissory notes too, which this amendment 
doesn't deal with. But it is a growing issue where we have 
allowed the annuity to be able to shelter assets so the spouse 
can in the community--the spouse, the institutionalized spouse, 
will be able to qualify for the program when the assets are 
there to be able to help pay for the services provided.
    Mr. Pitts. Mr. Gomez, do you think it is appropriate for 
millionaires or multimillionaires to be receiving Medicaid 
while at the same time there are disabled children on the 
waiting lists for home and community-based services?
    Mr. Gomez. That is why we are here, Mr. Chairman, is 
because we have, in Oklahoma, have cut the program hundreds of 
millions of dollars over the last couple of years, and every 
time we cut the program, we recognize that there are potential 
families that are getting access to the Medicaid program who 
are not financially qualified. So to answer your question, no.
    Mr. Pitts. So if I told you that states are barred from 
disenrolling multimillionaire lottery winners from Medicaid, I 
would assume that you would find this troubling, yes?
    Mr. Gomez. Yes, I would find that troubling.
    Mr. Pitts. Furthermore, while the Federal Government is 
paying 100 percent of the cost of Medicaid expansion, including 
the medical bills of millionaire lottery winners, there are 
disabled children and HIV patients on waiting lists for some 
Medicaid programs, so do you think it is fair to use Medicaid 
dollars to pay for lottery winners?
    Mr. Gomez. The purpose of Medicaid is to provide coverage 
for low-income families and other categorically related 
individuals who meet certain eligibility requirements. And it 
is an income-based program, so it is very difficult to make an 
argument for anybody above a low-income.
    Mr. Pitts. Can you explain how it is that Medicaid policy 
permits million or multimillion dollar lottery winners to 
retain Medicaid coverage when they can clearly afford to 
purchase their own health insurance?
    Mr. Gomez. Well, the way the system is set up now through 
Medicaid is we look at eligibility on a month-by-month basis we 
are not able to look at it from a, so a person could receive a 
lottery winning within a given month and then come back and 
reapply the next month and be qualified for the program, which 
I don't believe that was the program's intent.
    Mr. Pitts. I see my time is expired.
    I recognize the ranking member, Mr. Green, 5 minutes for 
questions.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Gomez how many recipients, how many people receive 
Medicaid in Oklahoma on any given day?
    Mr. Gomez. Over a given course of a year, we will serve 
about 1 million Oklahomans. Oklahoma only has about 3.6, 3.7 
million Oklahomans, so more than 25 percent of our population 
is utilizing the Medicaid program in a given year.
    Mr. Green. How many people have you identified that are 
either using the lottery exception or even the annuity in 
Oklahoma? Do you have a number?
    Mr. Gomez. Ranking Member Green, I do not have a number, 
but I am happy to provide that to the committee for the record.
    Mr. Green. Do you think it would be more than 100 out of 
the million people?
    Mr. Gomez. I would really hesitate to speculate, but I am 
happy to give you the information.
    Mr. Green. I would love to see that information because I 
would like to see--obviously we want folks who need the program 
to get it, but if we also through up some impediment, we may 
end up excluding people who really do need it but again thank 
you.
    One of the reasons the Affordable Care Act changed from the 
previous asset test of Medicaid into the current modified 
adjusted gross income formulas is to streamline and coordinate 
eligibility between Medicaid and health insurance marketplaces.
    Ms. Riley, can describe the complexity of implementing this 
legislation for purposes of keeping coverage streamlined and 
coordinated? Do you think the legislation moves us backwards in 
a patchwork system where we potentially have 50 different rules 
for eligibility?
    Ms. Riley. Well, I understand the concern of wanting to be 
sure that we have a quality affordable healthcare system and 
that we have investments in coverage that are appropriate. That 
said, there has been enormous undertaking in the states, 
through the Affordable Care Act, to try to integrate the 
eligibility systems between the Federal marketplace and 
Medicaid. And I think giving states options to change some of 
that, could certainly make it more complex.
    Mr. Green. Would this potentially create additional cost at 
the Federal level and particular with the Federally facilitated 
marketplaces in 37 states?
    Ms. Riley. I think it could. Again, this would be a state 
option so it is unclear how each state would tweak its 
eligibility determinations, and as such when integration with 
the Federal marketplace to try to streamline and make 
eligibility smoother and simpler, would require the Federal 
marketplace to have to make a tweak to its Federal system for 
each change that every state makes.
    Mr. Green. Is it correct, and I am reading the legislation 
that it is potentially applying to anything such as Social 
Security disability back payments, workers' compensation, in 
any amount at all and the state would prorate the amount 
monthly for up to 20 years even if you no longer have access to 
those funds?
    Ms. Riley. I am sorry I didn't hear the end of the 
question, I am sorry.
    Mr. Green. Would this legislation potentially applying the 
Social Security disability back payments, workers' 
compensation, or any amount at all that the state could pro 
rate that would amount to monthly up to 20 years even though it 
is not available to them over that 20 years?
    Ms. Riley. Yes. It is my understanding of the bill that it 
would do just that. Certainly we all appreciate the lottery 
issues, but as written lump sums could be SSDI payments, 
disability payments, and others.
    Mr. Green. We have a lot of program integrity bills that we 
are considering today that are focused on niche areas. I want 
to take a step backward and look more globally at the 
landscape, the program integrity in Medicaid. Can you describe 
MACPAC's work on program integrity to date?
    Ms. Riley. I can. We have taken a very serious look at 
program integrity both in our March 2012 report and our March 
2013 report to the Congress. We have seen a real complexity in 
program integrity where there are multiple state and Federal 
agencies that have various aspects of program integrity, 
including the Department of Justice, numerous Health and Human 
Services agencies, and state governments, often competing often 
redundant. And we have suggested that there is a real need to 
streamline those activities, to look where there is redundancy, 
and to find out where the best practices exist among the 
states.
    Importantly, while we invest in Medicare fraud control 
units with a 75-25 match, we do not invest in other activities 
states need to undertake to prevent fraud at that same level, 
notably the administration of the program.
    Mr. Green. Thank you.
    Mr. Chairman, I have some other questions I would like to 
submit to Ms. Riley on highlights, low-matching rates for 
activities not directly related to fraud control, and things 
like that. I appreciate MACPAC's reports and hope that Congress 
can act on those both to save Federal money, but also--because 
in Texas, our match is about 65 percent Federal, about 35 
percent state, and somewhere along the way we need to match 
that. We want the states' participation but we also want to 
make it to where it is we can get that fraud that we are 
looking at.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    We will submit the followup questions to you in writing. 
Please respond.
    The chair now recognizes the vice chairman of the 
subcommittee, Mr. Guthrie, 5 minutes for questioning.
    Mr. Guthrie. Thank you, Mr. Chairman. I appreciate that 
very much. First, I have a unanimous consent request to enter 
into the record a letter from ResCare.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Guthrie. Thank you, Mr. Chairman.
    This is a question for Mr. Hagg. We agree it is important 
to ensure that patients receive the services they are supposed 
to and that taxpayer resources are protected. In that vein, I 
introduced H.R. 2446, which would require states to use 
electronic visit verification for personal care services under 
Medicaid. So I would like to discuss some the work your office 
has done in this area of fraud and abuse of personal care 
services.
    In 2012, in your year 2012 portfolio report on personal 
care services, you outline a series of audits that were done in 
eight locations, seven states and then one city, that 
identified over $582 million in questionable costs. There was a 
wide error rate from zero percent in one state to over 40 
percent in another.
    Can you walk us through some of the issues you found in 
those audits, and what were the most frequent problems you saw?
    Mr. Hagg. Yes, I would be glad to. The main issues we found 
were providers submitting claims that didn't follow all of the 
Federal and state requirements. Some examples would be just 
across-the-board qualifications of the attendants not being 
met, things like background checks, specific training, things 
like that. We found that proper supervision wasn't provided. 
There is a certain level of supervision for the attendants, and 
in some cases, it wasn't always met. We found instances where 
physician approval or authorization hadn't been set up for the 
service to be provided. We found instances where plans of care 
hadn't been approved or set up. Other cases where there was 
just a lack of documentation. Without the documentation, you 
can't tell if it is just sloppy record keeping or if the 
service was never provided. We found a lot of instances where 
we had a bill for a specific beneficiary yet we knew from data 
match that beneficiary was in an institution, a hospital or a 
nursing home, at the same time.
    Those are the main type things. There are a lot of 
different areas across the board, a lot of high error rates, a 
lot of dollars as you point out. But those are I think the main 
buckets of the problems that we found.
    Mr. Guthrie. Thank you. Your report also outlined a number 
of concerns about quality of care for beneficiaries receiving 
personal care service due to some of these problems. Can you 
outline how the Medicaid beneficiary suffers because of some of 
these instances?
    Mr. Hagg. Well, the quality of care issues that came out of 
those reports, what we tried to do in a lot of those audits, 
not in every one but a lot of them, we tried to interview the 
beneficiaries receiving services. And a lot of the responses we 
received back had to do with the attendant stealing from the 
beneficiary or abusing them, or threats of abuse. I think there 
were cases of abandonment where the attendant would be out 
shopping for groceries or someplace with the beneficiary, and 
they would say: My shift is up. It is time for me to go, and 
they would leave them there. Those are the type of quality type 
of issues that we mainly identified.
    Mr. Guthrie. Thank you. And the electronic visit 
verification systems provide information on the date, time, 
duration location of service as well as the type of service 
performed. How do you think the availability of such 
information will help minimize the problems you identified?
    Mr. Hagg. Well, I think it would help. Of the problems that 
I have laid out, some of them I don't think would be addressed 
by the electronic visit verification, but some would. When you 
have cases of lack of documentation, I would think EVV would 
help clear that up. You are either providing the service at 
that location or you are not.
    The same thing with beneficiaries who are in institutions 
at the same time were receiving a bill at the same time. The 
same thing for where we have time sheets of an attendant that 
says they were in a different location yet we have a bill for 
somebody else. I think EVV would help or may help address those 
type issues.
    Mr. Guthrie. Thank you. Those are my questions, and I yield 
back my time.
    Mr. Pitts. The chair thanks the gentleman.
    Now I recognize the ranking member of the full committee, 
Mr. Pallone, 5 minutes for questions.
    Mr. Pallone. Thank you. I understand that we have a piece 
of legislation here to tighten up eligibility in the Medicaid 
long-term care space, and I think this bill has been drafted in 
a way that it is careful, unlike the other eligibility 
legislation under consideration today, and it is drafted to 
guard against unintended consequences that can be harmful for 
beneficiaries.
    However, I still remain concerned about tightening 
eligibility in Medicaid when overall we have no other 
alternative for people of low and moderate income to invest in 
long-term care planning so that a long-term care benefit is 
there for people when they need it. So before we start 
tightening up on Medicaid, we need to have a real conversation 
on long-term care in this country so that we don't take away 
the lifeline for people without having any other options in 
place.
    The reality is that this legislation would change the 
historical consideration of a spouse's income as separate and 
that is a big precedent to set in the absence of long-term care 
reform in this country.
    In addition, I understand that income and resource counting 
in the various eligibility pathways for long-term care in the 
Medicaid program are incredibly complex already.
    Ms. Riley, I know that MACPAC has done a fair amount of 
work in Medicaid, so can you give us an overview of the 
commission's work on long-term care and any recommendations you 
have in that regard?
    Ms. Riley. I am very happy to. Obviously, this is an area 
of great concern for the Commission, given that Medicaid does 
pay, as you say, 61 percent of all the long-term care costs in 
the Nation, and on the converse to the point of the cost 
effectiveness, while long-term care clients represent about 6 
percent of users, they use 51 percent of Medicaid dollars. So 
it is an area of great concern to the Commission.
    To date, we have looked and have reported to you about the 
managed care, managed care initiatives and long-term care, at 
rebalancing between home and institutional care, and about the 
data needs that we really have to address to be able to address 
some of the broader issues.
    On our plate for future work is to look at the merits of 
standardizing functional assessments affecting who gets into 
coverage, to look strongly at the quality measures in long-term 
care, to focus on housing and assisted living, and particularly 
to look at how the new Medicaid managed care regulations may 
impact efforts to manage care and long-term care.
    Mr. Pallone. And I understand used to be the Director of 
Aging in Maine. What areas of recommendations can you share for 
our consideration based on the challenges that you encountered 
in your operational experience?
    Ms. Riley.  I am aging in place. That was a very long time 
ago.
    Mr. Pallone. Well we are all aging in place.
    Ms. Riley. I think the tragedy is that we still have a 
situation where in this country the majority of long-term care 
services are still paid for by Medicaid--we had hoped 30 years 
ago that might not be the case--and that Medicaid funding 
remains a critically important program.
    I think way back in those days we were just beginning state 
recovery efforts, which relate very much to the work here, very 
important efforts to make sure Medicaid is spent properly and 
efficiently and effectively. And I think what one learns 
running the programs is the devil is always in the details. It 
is very difficult to think about how to implement these kind of 
programs, and one needs to think about all the alternatives and 
the administrative demands and the costs of those and weigh 
those against what the benefit will be.
    Mr. Pallone. I can just say I guess many people probably 
already know this, but I just hate the whole spend down 
provision. I think it is awful. I am so tired after 27 years in 
Congress of having these people call up my office who are 
involved in spend down and all the terrible implications of 
that. And I would really like to see them--and I know not to 
take away from the chairman or our Republican colleagues, I 
know they are not going to be in favor of some kind of 
Medicare, new Medicare benefit for long-term care, but I really 
think we need to, we really need to do that at some point 
because the way we operate where we make people spend down and 
then go on Medicaid is just, I can't imagine, I have never 
looked, but I can't imagine any other country in the world 
operates that way. It is just the most stupid thing to do. And 
availability of long-term care insurance is very, very limited. 
If anything, it seems like it is more limited.
    And I know that when we did the Affordable Care Act, that 
we were subject to certain spending limitations. And so we 
really couldn't address this. We tried to do the CLASS Act and 
that got repealed with regard to community-based care. But for 
constitutional care, we just can't continue to operate this 
way. And I just hope at some point, Mr. Chairman, even though 
there may be Republican opposition, that we can have some kind 
of hearing or deal with this larger issue of paying for long-
term care in a different way than we do. So thank you very 
much.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize Dr. Burgess 5 minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman. I will try to find a 
microphone where I can actually see the panelists. It may be 
difficult so I apologize if I am talking to you through 
someone. OK, Mr. Pallone brought up some points and actually 
used the debate to say the Republicans were not interested 
enough in long-term care.
    Look, I haven't been on this committee nearly as long as 
Mr. Pallone. I will in no universe be able to spend the amount 
of years on the committee that Mr. Pallone has spent. But I do 
remember the Deficit Reduction Act of 2005. And we talked at 
that time about things we might do to get people interested in 
purchasing long-term care insurance who could afford it. And 
that was met with a lot of resistance. Now, I buy my health 
insurance in the individual market, and as a consequence, I pay 
for that with after-tax dollars. So those are really expensive 
dollars to have to spend.
    And we do the exact same thing to people who want to 
provide long-term care insurance for themselves or their 
families. They pay for it with after-tax dollars, and there has 
been an absolute stonewall providing any type of recognition 
that this was a benefit or this was an activity that we would 
like to encourage people to do.
    I can think of no more loving gift that a parent can give 
to their children than to carry long-term care insurance so 
that they, the parent, are not a burden to their children. Not 
everyone can afford long-term care insurance. I understand 
that. I pay for a policy myself. I understand how the policies 
are sometimes difficult to find, and, yes, they can be 
expensive. We have made that harder. We made that harder with 
the Affordable Care Act when the CLASS Act provision was thrown 
in at the last minute, very little consideration, no hearings, 
no evidence collected. And as a consequence, companies that 
were involved in providing long-term care insurance, because 
the assumption was then made that, hey, the Affordable Care Act 
is now taking care of long-term care insurance, when it wasn't, 
and we had to abandon the provisions of the CLASS Act because 
they were so bad and a classic insurance death spiral that now 
people are, in fact, left with less than they had before.
    So I apologize. I didn't mean to go off topic, but I felt 
that there needed to be some counterbalance to that debate. Now 
since I am off-topic already let me stay of off topic.
    Mr. Gomez, your Governor, Mary Fallin, who served with us 
here in the House of Representatives several years ago, and we 
miss her, but we do value her service to the people of Oklahoma 
as their chief executive, she signed a bill last March or April 
that was a requirement for prescription drug monitoring, the 
requirement for physicians to check against a database before 
prescribing certain drugs. We have had I don't know how many 
hearings this year in the Health and Oversight Subcommittees on 
prescription drug abuse.
    And we go back and forth with the prescription drug 
monitoring issue. But you guys solved it in your State when 
Governor Fallin signed that into law--well, it will go into 
effect I guess in November. So you haven't quite solved it yet. 
But you are on the road to doing that. When Governor Fallin was 
at the National Governors Association meeting this summer and 
Secretary Burwell was addressing that meeting, she asked 
Secretary Burwell about, would it be possible to require that 
same type of prescription drug monitoring in Medicaid? And I 
guess my confusion then is why does being on Medicaid somehow 
exempt someone from prescription drug monitoring? Or is it that 
this is such a good idea, we ought to use it, since there is a 
Federal jurisdiction for Medicaid, that we should apply it in a 
Federal sense across the country? Can you clarify that for me?
    Mr. Gomez. Let me clarify by what is happening in Oklahoma 
is Governor Fallin and that legislation has empowered the use 
of a realtime database that is available to physicians and 
pharmacies and for us in the Medicaid program to be able to 
monitor prescription drug abuse in the program. And it requires 
physicians to look at, when they make a prescription, to look 
and see if there has been some abusive pattern, physician 
shopping, or ER diversion, something like that, to where they 
have been able to see it.
    Mr. Burgess. Right. We get that. We have authorized the 
monitoring program here in this committee. It is called NASPER. 
We are in a fight with the appropriators, so they have got 
their own--so is there anything that prevents Oklahoma from 
using the database for their Medicaid patients?
    Mr. Gomez. No. We actually have access to the database 
today.
    Mr. Burgess. So the same requirement that will be there for 
anyone else is there for Medicaid patients?
    Mr. Gomez. Yes, sir.
    Mr. Burgess. This is an important point because, I mean, 
the CDC has already pointed out where the prescription drug, 
the difficulties with prescription drugs are expanding, state 
expenses and Federal expenses for prisons, jails, what have 
you, recovery programs. So it is extremely, if we want to talk 
about saving money in Medicaid, it seems to me this is one of 
the places where we should focus.
    Mr. Hagg and Ms. Riley, let me just ask a brief question. 
The problem with third-party liability, a state that is paying 
a Medicaid bill for someone who actually has coverage from 
another insurance company, and there is a GAO report from--now 
it is over 10 years ago. It has been very frustrating to me 
that this cannot be, this is a problem that cannot be fixed, 
but is the issue of somebody who has got coverage with a 
regular indemnity insurance plan and yet the state is picking 
up the tab because that person is also covered by Medicaid. In 
other words, Medicaid should be the provider of last resort, 
not first resort. Can either of you address that?
    Mr. Hagg. I would be glad to try. Over the years, we have 
done a little bit of work involving third-party liability. 
Clearly, there is probably more work that needs to be done. I 
know states go to great efforts through contractors and through 
their own staff to try to identify people on Medicaid who do 
have other insurance with data matches and other actions to try 
to recoup that money that they would have spent for those 
beneficiaries or to try to prevent it from going out the door 
to begin with. I think states do a pretty good job with that. 
But just like anything, there is more work that needs to be 
done.
    Mr. Burgess. Not according to the GAO report, but I may 
talk to you more about that further because it is not an 
insignificant amount of money we are talking about. It can be 
as much as 25 percent in some States.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from California, Ms. Capps, for 5 
minutes of questions.
    Mrs. Capps. Thank you, Chairman Pitts and also Ranking 
Member Green, for holding this hearing. And we have another 
topic that I think we need to address, I hope we can, in terms 
of long-term healthcare needs. But our Nation's Medicaid 
Program is a critical safety net for all Americans who know 
that if they fall on hard times, they will not need to 
sacrifice their access to health care. The Affordable Care Act 
took great strides in streamlining eligibility to the program, 
ensuring that it would be there for those who need it. And many 
of these bills would help--that we are addressing today--would 
help strengthen this program further. And they should be 
supported. But I want to focus on one which I have heard here 
today, H.R. 2339. And I believe that is not one of these that 
should be supported. I am curious about the situation of a 
young child whose parent may receive a lump-sum payment. So to 
be clear, and I think this is a common misperception, the 
parent receives the lump sum. But it is actually the child who 
is the Medicaid enrollee. And that is what the misconceptions 
are about. The Medicaid Program in this case is for the child. 
As we all know, the majority of Medicaid enrollees are 
children. And this is followed closely by low-income elderly 
and by disabled individuals, with a very small proportion of 
parents and low-income adults rounding out the program.
    Ms. Riley, if a child's parent received a lump sum for any 
amount, $50,000 or whatever, and then, of course, that would be 
taxed I am sure, but the child is actually the Medicaid 
enrollee. Would the bill, as drafted, potentially count against 
the child's eligibility not just 1 month, but from then on? I 
will let you answer that question or address it.
    Ms. Riley. As I understand the bill, it would, indeed, have 
that potential. And our staff could certainly do some more 
technical analysis on that.
    Mrs. Capps. How long could that amount potentially count 
against the child's Medicaid eligibility?
    Ms. Riley. As I understand the bill, if it was over 
$50,000, it could count for 20 years.
    Mrs. Capps. So that that lump-sum amount, no matter what 
the parent or adult spent it on, would make sure this child was 
not eligible for a very long time.
    Ms. Riley. That would be how I would read the bill, yes.
    Mrs. Capps. So you are saying it is possible this bill 
could be interpreted in a way that would cause a child to lose 
Medicaid eligibility for the rest of their childhood, even if 
the family's financial status were to change in the next 5, 10, 
or 20 years or even in the next month because that lump sum is 
a precarious amount in some respects.
    Ms. Riley. Right. And it gets stretched over months, yes.
    Mrs. Capps. Right. I think this actually has, as it is 
being interpreted differently by many, I find it very 
concerning in the underlying challenges because it is, the 
truth is that H.R. 2339 could have many unintended 
consequences, consequences that could keep poor kids from care 
really for their lifetime and leave many others in limbo 
because the eligibility isn't an overnight thing. So please 
comment, I have some other time and this is the topic I wanted 
to address, if you would like to make further statement about 
it.
    Ms. Riley. I think that is a possibility. I think the 
definition is broad. And I think it would also depend on how 
each state would interpret it. So it would also be a variation 
in the program across states.
    Mrs. Capps. I see. So this is something that I can't 
support. And I hope my colleagues will reconsider their, if 
they are supporting it, because I think on the surface it may 
seem very attractive, but underneath there's some unintended 
consequences that I think could be very harmful. And it goes 
back to the basic thought that it is the parents who receive 
the benefit when it actually is Medicaid in most cases in this 
case are designed to benefit poor children and those with 
disabilities. Thank you.
    I yield back the balance of my time.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes Dr. Murphy for 5 minutes for questions.
    Mr. Murphy. Thank you, Mr. Chairman.
    Thank you, panel, for being here.
    As we are talking about the integrity here, one of the 
things we had a hearing on in our Oversight and Investigations 
subcommittee, which I chair, was the idea that Medicaid has 
$17.5 billion in improper payments and maintains a high 
threshold of tolerance on that. I want to talk about one area 
where it is not just going after those who are being fraudulent 
but a policy within Medicaid--and Mr. Hagg particularly, get 
your comments on this--in HHS' OIG report from March of this 
year, it was entitled ``Second Generation Antipsychotic Drug 
Use Among Medicaid-Enrolled Children: Quality-of-Care 
Concerns.'' I don't know if you are familiar with this report.
    Mr. Hagg. Not overly, no.
    Mr. Murphy. OK. Then I will give you some information on 
it.
    Mr. Hagg. Great.
    Mr. Murphy. They describe in there that 8 percent of second 
generation antipsychotics, otherwise known as SGAs, were 
prescribed for the limited number of medically accepted 
pediatric conditions, only 8 percent. That means 92 percent of 
claims that were not prescribed for medically accepted 
pediatric indications were off label, off label. There is a 
quality of care concern that was identified in this report and 
medical records where 67 percent of claims for SGAs prescribed 
for children. And there was two or more problems for 49 
percent. I will read you one of the case studies.
    A 4-year-old child diagnosed with ADHD and a mood disorder 
in which--this was reviewed by a child and adolescent 
psychiatrist. They said there was no evidence in the child's 
medical history of any monitoring while the child was taking 
the sampled SGA. The reviewer stated that individual, family, 
and behavioral therapy should have been attempted before 
initiating treatment with drugs. However, there was no evidence 
in the child's medical record indicating that such therapies 
were attempted. They also went on to say that the child was 
prescribed four psychotropic drugs during the review period of 
which two were antipsychotics. The reviewer noted there was no 
appropriate doses prescribed of antipsychotics for this child's 
condition. And the reviewer stated that the treatment with the 
SGA was not appropriate for a 4-year-old.
    Now, it made a series of recommendations. First, to work 
with state Medicaid Programs to perform utilization review of 
SGAs prescribed to children. Second, CMS should work with State 
Medicaid Programs to conduct periodic reviews of medical 
records associated with claims for SGAs prescribed to children. 
And, third, CMS should work with states to consider other 
methods of enhanced oversight of SGAs prescribed to children, 
such as implementing peer-reviewed programs. Apparently, CMS 
concurred with all these recommendations. Are you familiar with 
any of this? Do you know if any progress was made on any of 
these recommendations?
    Mr. Hagg. Unfortunately, I am not familiar with that work. 
I would be glad to take questions back to my colleagues at the 
OIG and get back to you with answers.
    Mr. Murphy. Would you, please? Thank you.
    Either of you familiar with this as state issues?
    Ms. Riley. It is very serious issue. And I know, I believe 
that is the report, Congressman, that spoke specifically to 
foster children and their disproportionate use of these.
    Mr. Murphy. Yes, in 2011, talked about foster children. 
This looked at a wider range of kids. But, yes, you are right 
about that too.
    Ms. Riley. I know that MACPAC has taken that under very 
serious attention and is looking at, particularly around the 
focus on foster children, and we reported on that in our June 
2015 report to Congress.
    Mr. Murphy. So here is something I am thinking for the 
states and also with regard to your office too, sir, we are all 
very concerned about people who are involved with waste, fraud, 
and abuse. But there is a Medicaid policy that says you can't 
see two doctors in the same day, same day doctor rule. So the 
pediatrician identifies, a mother brings a 17-year-old to the 
doctor and says, ``I am very concerned, my son is talking to 
himself; he is hearing voices; he is doing poorly in school; he 
has lost his friends; he is isolated,'' and that pediatrician 
rightfully says, ``We need to have you see a psychiatrist 
immediately. This is a very serious concern. Oh, you are on 
Medicaid? I am sorry, you have to go home.'' This is the rule.
    And so what happens is, I wonder if this is perhaps one of 
the reasons why over 72 percent of antipsychotic drugs are 
prescribed by nonpsychiatrists. You can imagine the outrage if 
I said 72 percent of heart surgeries were performed by people 
who weren't surgeons. So what I see here is while people may be 
operating within the rules of Medicaid, it may be actually 
inviting these kind of improper cases. So when we look at what 
has happened in the past where this committee has rightly been 
concerned, 50 deceased providers and 50 providers who have been 
excluded from Medicaid and people on suspended or revoked 
licenses can all bill Medicaid, my concern is we have rules 
within Medicaid that say just because you have an M.D. or D.O. 
After your name, you can still prescribe. But we end up with 
what I think is a pretty amazing report from the Office of 
Inspector General saying something is wrong here. And I hope 
that this is something that States comment on and your office 
comments on too and recognizes that part of the problem we have 
here is to fix this.
    This committee, everybody in this committee knows we have 
to fix things in mental health. People have got some tremendous 
ideas how we are going to do this. But I hope this is one of 
those areas that Medicaid can also review to fix this harm that 
is happening to our children.
    Thank you. I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    Now recognizes the gentlelady from Florida, Ms. Castor, 5 
minutes for questions.
    Ms. Castor. Thank you, Mr. Chairman.
    And good morning. Like many of the other members, I am very 
concerned with the unintended consequences of H.R. 2339. 
Medicaid eligibility was recently updated. And it was tied to 
the modified adjusted gross income measure to streamline 
eligibility and prevent gaps in coverage. Now, H.R. 2339 
proposes a surgical change in the law to prevent lottery 
winners from maintaining Medicaid eligibility. But as currently 
drafted, children and other individuals may be affected by the 
change. In MACPAC, a relatively quick review of this 
legislation, can the Commission foresee problems with 
implementation and unintended consequences?
    Ms. Riley. We don't take positions on particular pieces of 
legislation. The staff has looked at this. And I think the 
concerns are around the definition of lump sum and the 
discussions we have earlier that, in fact, it could catch 
payments for disability, for an accident, for somebody who has 
been paid a disability payment. We know that there is a 2-year 
wait for people for SSDI. And then there is often a lump-sum 
payment for the person who may, in fact, have medical bills to 
pay. So I think the issue here would be the issue of how broad 
the definition is.
    Ms. Castor. Right. So we have some work to do here. Many of 
the bills on the agenda today target provider fraud and 
individual eligibility. But I would like to ask you all as 
experts whose responsibility is it to enforce Medicaid and the 
Social Security Act statutes when a state does not follow the 
law? Mr. Hagg?
    Mr. Hagg. Well, CMS is responsible for the broad Federal 
oversight of the program.
    Ms. Castor. I know this probably has never happened in 
Oklahoma. But, generally speaking, what is your answer?
    Mr. Gomez. Well, CMS has the oversight. And it is one of 
those things where we have auditors in our office every day 
looking at every aspect of the program, both Federal and state 
level.
    Ms. Castor. OK.
    Ms. Riley. CMS.
    Ms. Castor. And can you give me an example where a state 
was in violation of the law under Social Security Act, Medicaid 
statutes, and they took action and addressed the situation?
    Mr. Hagg. Yes. A lot of the examples that we see in that 
area have to do with state financing arrangements, mechanisms 
the states use to help fund the state's share of Medicaid 
payments. At times, we see states pushing the limits or working 
in gray areas to try to obtain Federal Medicaid funds in some 
cases when they shouldn't be, when it is inappropriate. And 
those are examples when CMS would need to jump in and take 
action.
    Ms. Castor. Ms. Riley, what about when a state limits 
access to care and, for example, children are being denied 
access to pediatricians or specialists? Have you seen an 
example where CMS came in and did some kind of enforcement 
action or exercised their oversight?
    Ms. Riley. Let me get back to you and ask the staff to make 
sure that we do a comprehensive review. But there certainly is 
CMS oversight.
    Ms. Castor. Mr. Gomez, do you know of an example there?
    Mr. Gomez. Speaking for Oklahoma, in my 15 years in the 
Medicaid Program, we have never found, been found to have 
violations.
    Ms. Castor. Here is what I am getting at, and if you all 
can look at this situation, at the end of December, a Federal 
court judge said to the State of Florida that your restrictive 
networks for specialists and pediatricians, they are so 
restrictive that you have, in effect, denied access to care for 
kids to medical services. They weighed in on reimbursement 
rates that are so low that they can't get doctors to 
participate.
    During the 8 months, in the interim, the State of Florida, 
rather than stepping up and saying, ``OK, we are going to 
rectify the situation,'' has said, ``Talk to the hand, no. In 
fact, we are going to continue to limit these networks.'' And 
all of the children's medical directors across the state now 
are in protest because children now are being screened out. 
They don't have access to specialists. And it would seem that, 
especially after the Armstrong case by the U.S. Supreme Court, 
that it really is up to CMS to enforce and step in. I don't 
know what else these kids can do if they have to rely on 
Federal regulators.
    Ms. Riley. And that is the charge of the Medicaid and CHIP 
Payment and Access Commission. It is the broad set of 
activities in which we are engaged. And I am not familiar with 
this particular case. But I am certain--we have a Commission 
meeting coming up, and I can assure you it will be one of the 
topics we talk about.
    Ms. Castor. Kids across Florida would be grateful if the 
Commission would take a look. Thank you.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentleman from New Jersey, Mr. Lance, 5 minutes 
for questions.
    Mr. Lance. Thank you very much. And good morning to you 
all. My last name is Lance. I am sitting here because I would 
like to interact with the distinguished panel. I don't know a 
lot about this issue, but I am certainly interested in it. And 
I come from a small family law practice where, on occasion, 
middle-aged children come into the law practice--my late father 
and my twin brother who practices law now--wishing to 
impoverish their parents. And we throw them out of the office. 
And this is an issue that concerns me greatly.
    Now, am I right, did I hear you say, Ms. Riley, that 60 
percent of all nursing home costs are through the Medicaid 
Program?
    Ms. Riley. Long-term services and support.
    Mr. Lance. And am I right that 37 percent of all child 
births in this country are through Medicaid?
    Mr. Gomez. In Oklahoma, it is about 60 percent.
    Mr. Lance. Sixty percent of child births. Now, Medicaid, as 
I understand it, is a shared program?
    Mr. Gomez. Yes, sir.
    Mr. Lance. Costs borne by the Federal Government and costs 
borne by the State Government?
    Mr. Gomez. Yes, sir.
    Mr. Lance. But it is not equal across this country. And it 
depends on the state--is that accurate?--as to percentages?
    Mr. Gomez. Yes, sir.
    Mr. Lance. And in Oklahoma, what is the percentage?
    Mr. Gomez. This October, it will be 60.99 percent.
    Mr. Lance. Roughly 61 percent is paid by----
    Mr. Gomez. The Federal Government.
    Mr. Lance [continuing]. The Federal Government. That 
certainly is not true in all of the states?
    Mr. Gomez. No, sir.
    Mr. Lance. I live in New Jersey. And we pay more than most 
states. Is that accurate?
    Mr. Gomez. I believe so.
    Mr. Lance. And there are states that pay as much as 50 
percent. And New Jersey is one of them. So this is not a 
program that is equal across the United States.
    Now specifically regarding the impoverishment of parents or 
of a spouse, you are telling me, Mr. Gomez, that the 10th 
Circuit has ruled that there can be no clawback for annuities? 
Is that what are your telling me?
    Mr. Gomez. Yes, sir.
    Mr. Lance. Could you explain that in a little greater 
detail to me? Because this certainly interests me greatly.
    Mr. Gomez. Let me find the note on that particular section.
    Mr. Lance. Take your time. Here in Washington, everybody is 
in too much of a rush.
    Mr. Gomez. The rationale of the court's decision in Morris 
and similar cases has been extended in other courts in at least 
on the 10th Circuit decision to other financial vehicles that 
similarly thwart Medicaid's intended purpose. In particular, we 
have seen an increase in the use of non-assignable, 
nontransferable promissory notes. But that is not the issue, 
but the issue of annuities, to shelter assets, which the courts 
have----
    Mr. Lance. And this means that a couple go to an insurance 
company and give that insurance company $100,000 or $200,000 or 
$5000,000, purchasing an annuity. And then when one of the 
couple go into a nursing home, there is the claim that that 
half of the marital unit is impoverished and the other spouse 
can receive 100 percent of the annuity. Is that what is 
occurring?
    Mr. Gomez. Yes, sir.
    Mr. Lance. And the 10th Circuit said that was legal?
    Mr. Gomez. What they are saying is that, the court's ruling 
essentially permits a married couple to shelter potentially an 
unlimited amount of assets through a non-assignable, 
nontransferable annuity in order for the spouse of medical need 
to qualify for Medicaid.
    Mr. Lance. And is that based upon the fact that we have not 
contemplated that here and the Mullin legislation would rectify 
that?
    Mr. Gomez. Let me go back and say Medicaid statutes allow 
for a spouse of a Medicaid applicant for long-term care 
services to keep a certain amount of his or her resources.
    Mr. Lance. I understand that.
    Mr. Gomez. So the amount of the spouse of the applicant is 
referred to as community spouse and the institutionalized 
spouse. The amount the community spouse is allowed to retain is 
called the community spouse resource allowance, CSRA. So, in 
general, Medicaid will divide that couple's total resources in 
half to determine the CSRA. What the 10th Circuit said is that 
money can be diverted in that where the spend down can be 
achieved and still protect----
    Mr. Lance. Thank you. I am sure this is not a large problem 
in the number of persons who utilize this loophole. But I 
certainly think that it should be closed and closed pronto. And 
I commend Congressman Mullin in his efforts. And I think the 
purpose of the law is not to permit this type of diversion. And 
I certainly think that it borders on fraud and, in my opinion, 
is immoral.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentlelady from Illinois, Ms. 
Schakowsky, for 5 minutes of questions.
    Ms. Schakowsky. Thank you, Mr. Chairman. We have talked 
about that personal care services may be an area that is 
vulnerable to fraud. And we must make sure that beneficiaries 
are receiving the services that they need at the right time in 
the right way. However, I have concerns about a penalty on the 
State's FMAP in an environment with Medicaid, where Medicaid 
Programs really are struggling right now administratively.
    So, Ms. Riley, I know that MACPAC has not extensively 
studied this issue. But the Commission has looked at Medicaid 
administrative infrastructure. Could you tell us, what are some 
of the challenges that are being faced in this space?
    Ms. Riley. In the verification space? The states have an 
array of activities which they pursue. And I think the notion 
of electronic validation raises questions about the cost of 
that. It is, again, the cost-benefit tradeoff. I think there 
are 9 or 10 states that currently have those systems. They have 
said that they are succeeding in getting savings from those 
activities. But I don't, we are not aware of any evaluations 
that have been underway or completed that would tell us really 
what the cost-benefit analysis of that verification activity 
is.
    Ms. Schakowsky. That is what I am concerned about. Because 
if the state doesn't implement the electronic verification 
system, under this legislation that is being considered, they 
face a cut in their Medicaid reimbursement. But there aren't 
any start-up funds or implementation funds before the penalty 
begins to go into effect. So is it possible that when States 
spend Medicaid dollars to build these systems, they are going 
to need to decrease the spending that they have on services? 
Basically, what is the tradeoff?
    Ms. Riley. Well, it is obviously a laudable goal to make 
sure we root out any fraud and abuse in this very important 
area. It is a $16 billion spend. The elderly and people with 
disabilities depend on these services. That said, I think it is 
a good example of one of the issues that MACPAC has raised in 
one of its reports. We pay fraud and abuse and fraud control 
units with a 75/25 match. But we pay for the activities like 
EVV with a 50/50 match. So there are not startup funds, and 
there is sort of a disincentive to do the frontend activity 
with a lower match rate, but a higher match rate to go get them 
when there is a mistake or fraud has occurred. So I think it 
raises an important question that MACPAC has raised in the past 
about whether we ought to invest differently in state 
administrative functions that could better prevent fraud and 
abuse.
    Ms. Schakowsky. So is this decision-making underway right 
now at MACPAC?
    Ms. Riley. It was a recommendation from MACPAC in I believe 
our March 2012 report and a discussion that we have had 
numerous times with the states. It is really frustrating that 
one wants to do more to prevent fraud and abuse. And that 
enhanced match could address. Of course, that is a cost to the 
Federal Government, so it is easy to talk about and difficult 
to do. But I think it is, again, a balancing act of how much to 
invest after the fact to go and recoup from fraud and abuse 
practices versus before the fact to try to prevent them. And 
EVV is a good example of such an initiative.
    Ms. Schakowsky. So how can we get at a real cost-benefit 
analysis then?
    Ms. Riley. I think it would be useful, there are the 10 
states like Oklahoma that are now engaged in EVV. And I think 
it would be a fairly quick kind of study. And I will certainly 
speak with our staff about whether we can take a look at that.
    Ms. Schakowsky. OK. I do want to go back to this issue that 
was raised by Representative Castor about the issue of the 
treatment of lottery winnings and other lump-sum income. You 
spoke to it a bit. I mean, it is one thing to talk about a 
lottery winner and, you know, millions of dollars or whatever. 
But it really does lump, if you will, together these other 
things--and you actually raise the issue of disability. I am 
really worried about that, that, as you pointed out, that 
disabled individuals frequently have to wait a year or more, 
you mentioned 2 years, for their application to be processed 
for disability. And that is after the mandatory 2-year waiting 
year. And, generally, they are paying for other living expenses 
and medical bills during that time. So if they are eventually 
determined to be eligible for SSDI and then get a lump-sum 
payment to cover that waiting period but that then deprives 
them of the Medicaid benefit, then how are they to pay back all 
the expenses that they had while they were waiting?
    Ms. Riley. I think that is a question in the drafting of 
the bill about how broadly one defines ``lump sum.''
    Ms. Schakowsky. I just think that putting those two things 
together, that there ought to be--I totally get somebody 
strikes it lucky and gets the lottery. But I am over my time. 
Thank you.
    Mr. Pitts. The chair thanks the gentlelady.
    I now recognize the gentleman from Florida, Mr. Bilirakis, 
5 minutes for questions.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
    Commissioner Riley, our U.S. territories have Medicaid 
programs. But unlike the states, they have different rules that 
govern their Medicaid Program, such as eligibility or payment 
rules. Can you briefly talk about how their program may differ 
from the mainland if you think CMS should provide this type of 
information on its central Web site like they do for the 
states?
    Ms. Riley. Again, Congressman, we haven't taken a position 
on this. But the MACPAC has long been a supporter of good, 
consistent data from all the states and territories. I think 
this bill includes the same sorts of information states now 
must report. So it is very much related and would be consistent 
with what states now have to report.
    Mr. Bilirakis. Thank you. Thank you.
    According to Puerto Rico's Resident Commissioner, the Ways 
and Means Green Book used to have a chapter on social welfare 
programs from the territories, such as Medicaid. However, that 
chapter has been removed because a nonpartisan Congressional 
Research Service, CRS, could not find enough publicly available 
information to keep it accurate and up to date.
    Commissioner Riley, MACPAC is the nonpartisan legislative 
branch agency that provides Congress with policy and data 
analysis for Medicaid and CHIP. If Congress needs information 
to make policy decisions, for example, if the ACA Medicaid 
funding for Puerto Rico will be entirely spent before 2019, 
what does MACPAC have to do to find information on the 
territories to carry out your advisory role?
    Ms. Riley. That is a very good question. We have a 
wonderful staff who provide detailed information to us. And we 
can certainly take a look at how much we report on the 
territories.
    Mr. Bilirakis. Thank you. Please get back to me on that as 
well.
    Ms. Riley. We will.
    Mr. Bilirakis. Mr. Hagg, do the territories have the same 
Medicaid data reporting requirements as the 50 states and the 
District of Columbia? If so, can you think of a reason why CMS 
would not include the same information about the territories as 
they do for the 50 states and D.C.?
    Mr. Hagg. I believe they do have the same reporting 
requirements. And no, I can't think of a reason why it couldn't 
be shared.
    Mr. Bilirakis. OK. Good. Mr. Hagg, again, I know that you 
don't take positions on pieces of legislation. I understand 
that. But, in general, does OIG typically favor greater 
transparency?
    Mr. Hagg. Yes.
    Mr. Bilirakis. In general.
    Mr. Hagg. Yes. In general, more transparency is better than 
less.
    Mr. Bilirakis. Very good. Thank you.
    I yield the rest of my time to Representative Guthrie.
    Mr. Guthrie. Thank you. Thank you for yielding. I want to 
clarify a question just before, one of the questions was about 
the cost of EVV Programs and on the states, and my legislation 
mandates providers use EVV. It does not mandate that states 
purchase or spend anything to create its own program or moving 
forward. The disparity between EVV and fraud system is not a 
disincentive at all. And states should still have an incentive. 
And there are already people out there that are doing EVV and 
the states aren't building a program, aren't setting up a 
program. It is not separate and distinct. There are people 
currently doing this, so it wouldn't cost the states money. I 
just want to clarify that point. Thank you.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentleman Mr. Butterfield 5 minutes for 
questions.
    Mr. Butterfield. Thank you very much, Mr. Chairman. Thank 
you for holding this important hearing today.
    Thank you to the witnesses for your attendance. Mr. 
Chairman, several weeks ago, we all celebrated the 50th 
anniversary of Medicaid. It was a great day. The benefits of 
Medicaid cannot be overstated. More than 72 million Americans 
rely on this program. Seventy-five percent of children who live 
in poverty in this country depend on Medicaid. Greater than 10 
million school-aged children who live in poverty depend on 
Medicaid.
    I represent, Mr. Chairman, one of the poorest congressional 
districts in the country. More than one out of every four 
people in North Carolina's first congressional district lives 
in poverty. One out of three of our children live in poverty. 
Medicaid is absolutely critical to my constituents. It is 
especially important to children in eastern North Carolina. As 
I child, I graduated from high school in 1965, the year of the 
enactment of Medicaid. And I recall, as a child, as a high 
school student, none of my classmates ever, ever, ever received 
any type of medical treatment or dental treatment because they 
couldn't afford it because 90 percent of our school students 
lived in poverty.
    Democrats on this committee have done our part to 
strengthen Medicaid. I want all Americans to understand and 
appreciate the importance of Medicaid. The Affordable Care Act, 
which was drafted by this committee, it actually strengthened 
Medicaid. I remember the debate so well. It strengthened 
Medicaid's integrity by requiring regular risk-based grading of 
providers and suppliers. The ACA increased termination 
authority to ensure that malicious actors cannot participate in 
the program. And so it is abundantly clear that the ACA 
improved the integrity of the Medicaid Program across the 
board.
    So I am interested in hearing more today about how to 
ensure that the ACA termination requirements are upheld. We 
want to uphold those in each and every state. I am also 
interested in protection Medicaid beneficiaries from 
potentially harmful changes to eligibility.
    Mr. Hagg, Director Hagg, thank you. The integrity of the 
Medicaid Program is critical to ensure that beneficiaries are 
not taken advantage of. It is important that the Federal 
Government and our States work together to ensure Medicaid 
beneficiaries have access to care, reliable care. Can you 
describe, sir, whether the ACA strengthened the law to prevent 
providers terminated for cause from operating in other states?
    Mr. Hagg. It did, yes. There is a requirement that if a 
provider is terminated in one state or Medicare, they are 
required to be terminated in other states as well. So, yes, it 
is a very good upfront program integrity control to ensure that 
bad actors aren't able to access state Medicaid programs.
    Mr. Butterfield. Has the ACA had a positive impact as of 
this date in reducing the number of terminated providers from 
operating in other states?
    Mr. Hagg. Yes, it has. It is a start for sure. It was CMS' 
responsibility to try to set up a central data system that 
would house all the terminated providers so that other states 
could access. Based on our work, we found various limitations 
with that database. We found that, based on some testing we 
performed, there are some providers still that are terminated 
in one state that are still operating in other states. And we 
have made recommendations on how to improve that so those 
things don't happen any longer.
    Mr. Butterfield. If you know, will the draft legislation 
that I am working on in conjunction with Mr. Bucshon address 
the recommendations made by OIG to further eliminate the 
participation of terminated providers?
    Mr. Hagg. Most of the problems we found would be addressed. 
The one difference I would point out is we have recommended 
that providers who operate in managed care environments be 
required to enroll as providers. I believe the legislation 
talks about having the providers register with the state and 
then a process of having the state notify the managed care 
network if that provider should be terminated. That is a good 
start. We believe having them enroll rather than register would 
create that direct legal authority between the state agency and 
the provider.
    Mr. Butterfield. All right.
    Finally, Commissioner Riley, you mentioned in your 
testimony that Federal rules are already in place to prevent 
providers terminated in one state from operating in others. Are 
those Federal rules as a result of the ACA law that we have 
been talking about?
    Ms. Riley. I believe that is correct.
    Mr. Butterfield. Would you agree that the ACA has 
strengthened the Medicaid Program's integrity?
    Ms. Riley. Yes. And I think CMS has restructured and 
strengthened its work with the states as well.
    Mr. Butterfield. Thank you. Thank all three of you.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentleman from Indiana, Dr. Bucshon, 
for 5 minutes of questions.
    Mr. Bucshon. Thank you, Mr. Chairman.
    Along that same line, Mr. Hagg, we were talking about, Mr. 
Butterfield was talking about, does CMS require reporting into 
their system? Because from the information I have, at this 
point, over a year and a half after your recommendation, 4 \1/
2\ years after the ACA requirement, CMS does not require such 
reporting of terminated providers. Is that true or not true?
    Mr. Hagg. That is my understanding as well. We have made 
the recommendation that it be required. I think CMS said they 
concur with our recommendations. But then they pointed to 
information provided to states that talks about being 
encouraged. It doesn't talk about being required.
    Mr. Bucshon. You probably know in government agencies, if 
you encourage something, it never happens; you have to require 
it most likely. And other than that, have they given an 
explanation of why they haven't required it?
    Mr. Hagg. Beyond that, no.
    Mr. Bucshon. OK. Can you also talk about the challenges 
that states may have faced in complying with the Medicaid 
requirements to terminate a provider's participation in their 
Medicaid program if that provider is terminated for cause from 
a Medicaid Program from another state?
    Mr. Hagg. Sure. The challenges are that there needs to be a 
central data set that states can look to to determine whether a 
provider has been terminated in another state.
    Mr. Bucshon. So really CMS needs to have a required 
reporting to a database?
    Mr. Hagg. We believe so, yes.
    Mr. Bucshon. OK. And in your opinion, does the draft bill 
address this challenge, some of the states' challenges do you 
think?
    Mr. Hagg. My understanding, the draft bill makes it a 
requirement, yes. Again, the one thing I would point out is 
that we do recommend that managed care providers enroll rather 
than register.
    Mr. Bucshon. Understood. And we are also talking about for 
cause. So can you give maybe some examples of why a provider 
would be terminated for cause from the Medicaid Program?
    Mr. Hagg. Yes, for cause would be they have committed fraud 
or patient abuse. Or some other type of billing privilege that 
they have abused. Rather than just being an inactive biller, 
that wouldn't be for cause.
    Mr. Bucshon. Is there quality determinations in there too?
    Mr. Hagg. Absolutely, yes. If there is some type of patient 
abuse or a quality care issue, absolutely.
    Mr. Bucshon. And that would be reported to the state or to 
CMS if they had those issues?
    Mr. Hagg. If the state is aware of that, that type of 
abuse, then, yes. If they terminate that provider for cause, 
they should report that provider to CMS.
    Mr. Bucshon. Mr. Gomez, could you talk maybe about the 
process of terminating providers from your state Medicaid 
Program and how that process works in your state?
    Mr. Gomez. We have a 30-day with cause termination and a 
60-day without cause termination.
    Mr. Bucshon. So I am talking about the process of, how do 
you determine that it is for cause? Who does that in your 
state, for example? I am just trying to get----
    Mr. Gomez. We have a Medicaid Fraud Control Unit, as each 
state does, and we rely heavily on them in the determination of 
fraud. And then we actually have through our contracting system 
the ability to go--if we have a new provider coming into the 
state--the ability to go look on the database and see if that 
provider has been terminated in other state.
    Mr. Bucshon. So, for example, I was a physician before. So 
there are physicians that get their privileges terminated at 
their hospital for a variety of reasons, right. Does that type 
of information get to the state?
    Mr. Gomez. It does. We have an agreement with the licensure 
boards in order to be able to share that information. If there 
is a licensure issue, we will be able to take appropriate 
action within our contract.
    Mr. Bucshon. Thank you, Mr. Chairman.
    I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    I now recognize the gentleman from Maryland, Mr. Sarbanes, 
5 minutes for questions.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    Ms. Riley, I apologize if the topic has been touched upon 
already or this question in particular. But I am interested in 
this, the bill that relates to someone converting assets to 
income through purchase of an annuity and the proposed change 
for how that might be handled. I gather that right now there is 
some protections that make the state the ultimate beneficiary 
of annuity proceeds in the case where that spouse dies. So 
there is a way for the state to benefit.
    But now there is a proposal to I guess divide in half the 
proceeds during the period in which both spouses are alive, one 
being in the institution and the other being still at home. And 
I just wondered if you could speak to what you think, first, 
the incidence of, like, how frequently do you have a sense the 
situation is even arising where somebody is doing that annuity 
purchase under circumstances where there is a spouse that is 
institutionalized, and then within that universe, how often it 
is the case that the amounts we are talking about would be such 
that you could argue that they were trying to kind of waste or 
hide or redirect assets that would otherwise create a profile 
that would disqualify the spouse from institutional care?
    And I would imagine, as well, that if somebody for the 
right reasons was converting assets to an income stream, that 
if you required that 50 percent of that be allocated to the 
institutionalized spouse, you might create a situation where 
the spouse that remains at home would actually qualify faster 
for institutional care based on their profile because there is 
a reduced amount of income available to them. So in terms of 
the income profile, you might actually be adding someone onto 
the state's burden who otherwise because of a smartly purchased 
annuity would be able to cover their expenses through that if 
they ultimately ended up in an institutionalized setting. So 
maybe you could comment on some of those issues.
    Ms. Riley. The law currently protects the spouse at home to 
a max of $119,000. I don't believe there is any data that I am 
aware of, we can certainly have the staff look at this, that 
talks about the number of people who would be eligible for this 
kind of annuity. I suspect it is small. And you are correct, 
there remain the estate recovery provisions for long-term care, 
so that the state is compelled by Federal law to go after the 
remaining estate after the death of the spouse.
    Mr. Sarbanes. All right. Thank you.
    I have no other questions.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from New York, Mr. Collins, 5 minutes 
for questions.
    Mr. Collins. Thank you, Mr. Chairman.
    I want to thank all the witnesses as well. We are delving 
into something. And I do think, regardless if there is some 
disagreement, we all do agree no one wants to see the system 
gamed. As Mr. Lance said, you know, he will throw somebody out 
of the office if they walk in to explicitly game the system.
    But a couple other questions, I may delve into that a 
little bit, but my question, Mr. Gomez, the electronic 
verification system that--Oklahoma uses that as I understand?
    Mr. Gomez. Correct.
    Mr. Collins. Give me an idea of what Oklahoma would 
consider the return on that investment, was an investment to 
get into that.
    Mr. Gomez. We actually with that independently evaluated. 
We have been in the EVV system for a little over 5 years. And 
the first 3 of that system, Oklahoma has had a 5-to-1 return on 
its investment through cost savings and cost avoidance.
    Mr. Collins. That is what I expected. And I guess I would 
just point out for anyone who is a little bit worried that 
whether the Federal Government piece is 75/25 or 50/50, I know 
if I am running a State and the return is 5 to 1, I don't even 
need the Federal Government to pay any of it. There is smart, 
and there is stupid. So while we would all like to see perhaps 
if you are in the state the Federal Government paying 75 
percent, I don't know too many things in life that are 5 to 1. 
So, Mr. Gomez, I appreciate that.
    Now, we talked a little bit about annuities. I think Mr. 
Sarbanes made it sound like if there is an annuity, half of 
that annuity goes to the community spouse, and half goes to the 
institutional spouse. But isn't it true that in gaming the 
system, the annuity can give 100 percent to the community 
spouse?
    Mr. Gomez. That is my understanding, yes.
    Mr. Collins. Right. And that is a big difference. So it 
isn't like they are buying this annuity and giving half the 
money to the institutionalized spouse. In fact, the whole way 
of gaming the system is buying an annuity where none of it goes 
to the institutional spouse. The community spouse gets all of 
the benefit going forward, and it doesn't count. I mean, that 
is how you game the system. So I just wanted to be clear. It 
was left kind of hanging there that in the annuity, half of 
that would be going to the institutionalized spouse, and that 
is not the case.
    In your written testimony, Mr. Gomez, you also mentioned 
promissory notes. You didn't really cover that. And I think we 
know what annuities are, and it is certainly clear how that 
could be gamed. Can you maybe in just a very short time, is 
there also an issue on promissory notes?
    Mr. Gomez. Yes. I think what we are seeing as we are 
dealing with the annuities in the state of Oklahoma, we are 
seeing the practice then change to a number of applicants using 
the court's logic to extend that to promissory notes, to where, 
again, they are using, it is the same impact, so it is where 
you are able to shelter some of the wealth from that in a way 
that is not intended.
    Mr. Collins. So I guess it just goes back, there is 
creativity in the financial world as we saw with derivatives. 
That didn't go so well. But there are hedge funds out there. 
The minute smart people get together and say how are we going 
to game the system--whether it is on taxes or, in this case, on 
impoverishing yourself--there is a lot of folks that make a lot 
of money coming up with the next financial product to get past 
the law. And I guess the real issue here is the fact that 
Congress plays a role. Is that really what the courts ruled? It 
was almost like saying: We know this is wrong, but if Congress 
doesn't act, there is nothing we can do.
    Mr. Gomez. Correct. That is what the 10th Circuit 
effectively said.
    Mr. Collins. And I guess, the other thing that came out in 
the hearing, one of the things about going almost last is you 
get to hear the other testimony, is some thought, frankly, by 
the other side that parents aren't responsible for their kids. 
Oh, my God, the parent won the lottery; the kid might not be on 
Medicaid. I think it is the fundamental responsibility of 
parents in the United States to take care of their kids. If 
they have got money and wealth, their kids shouldn't be on 
Medicaid. And if there is a way, because somebody has won the 
lottery literally, their kids shouldn't be on Medicaid. We 
shouldn't apologize for the fact the family is wealthy now; the 
kids aren't going to be on Medicaid. That is what parents do. 
They take care of their kids.
    So, again, back to this piece, and we have nuanced the 
issue of spreading it out over 1 month. But it isn't like you 
count it, if they win $100,000, that $100,000 doesn't count 
every month for the next 20 years to disqualify the child. It 
counts now for 1 month. But if you won a few thousands dollars, 
a state could decide how to implement this. And if they did 
spread it over time, it might be $100 dollars a month, and that 
is not going to disqualify the child anyway. There was some 
insinuation that this one-time winning of, $20 million is $20 
million, but $20,000 would then disqualify this child from 
Medicaid for the rest of their life. But if you took $20,000 
and you then spread it over 20 years, that is $1000 a year. 
Then you spread that over 12 months, you are talking about $90 
a month. That is not going to disqualify a child from Medicaid, 
is it, Ms. Riley?
    Ms. Riley. I don't believe so. I think the example is a 
higher number. And I think that is the issue with the 
definition.
    Mr. Collins. Sure. And if it is $20 million, the kid 
shouldn't be on Medicaid. We do have to be careful in our 
wording. But in this case, as far as I know, it would go back 
to the states to decide how to implement it. States are not in 
the business of hurting their own citizens and certainly not 
hurting children. At some point, at the Federal level, we just 
need to trust the judgments of our elected is officials in the 
50 states and our territories to do what is right by their 
folks and not try to nuance this in a way that, quite frankly, 
is disingenuous.
    Thank you, Mr. Chairman. I yield back.
    Mr. Pitts. The chair thanks the gentleman, now recognizes 
the gentleman from New York, Mr. Engel, for 5 minutes for 
questions.
    Mr. Engel. Thank you, Mr. Chairman.
    Thank you, Mr. Green.
    You know, nobody wants anyone to game the system. I 
certainly don't. And I think that we need to crack down if 
people are gaming the system for sure. But I think we have to 
be careful not to imply that somehow Medicaid needs to be 
denigrated because people are gaming the system. Medicaid is 
something that is very, very important. It is a critical safety 
net. There is some hostility around here toward it, and I think 
that we need to point out how important it is. There are 72 
million Medicaid beneficiaries. There are many Americans who 
face economic hardship or sudden exorbitant healthcare costs. 
And I want to talk about my state of New York. We have made 
significant strides in our efforts to reform Medicaid, both in 
terms of cutting costs and improving the quality of care that 
patients receive. Governor Cuomo, in June, announced that over 
the past year, Medicaid spending per person in New York fell to 
a 13-year low. And during the same period, the Affordable Care 
Act allowed more than half a million additional New Yorkers to 
enroll in Medicaid, which is, I think, a significant step in 
the effort to reduce the number of Americans who are uninsured. 
New York has also had success boosting program integrity 
through the use of corporate integrity agreements. And these 
agreements are extended to providers that had compliance 
issues, an alternative to barring the said providers from the 
Medicaid Program and consequently triggering service shortages 
to beneficiaries. Corporate integrity agreements afford these 
providers opportunities to improve their compliance and set up 
mechanisms through which their compliance can be monitored more 
closely.
    In 2013, corporate integrity agreements allowed New York's 
Medicaid Program to save over $58 million. That is significant. 
So, Ms. Riley, I would like to ask you this, I understand that 
MACPAC has recommended that CMS disseminate best practices 
concerning program integrity so that states may replicate other 
states' successes. Would New York's success, as I just 
mentioned, using corporate integrity agreements be considered a 
best practice worth emulating? And, more broadly, can you speak 
to the value of focusing more of our efforts on sharing best 
practices like the example I have outlined?
    Ms. Riley. MACPAC is very much concerned about that. There 
is quite a disparate set of activities across the states. And I 
think the New York example sounds very intriguing. I think part 
of the problem is we don't have a good definition of what best 
practices are and what works and what doesn't. So it would be 
helpful to be able to have a set of criteria against which to 
measure state activities and then disseminate those that work 
across the country. And it was very much a recommendation of 
MACPAC.
    Mr. Engel. Thank you. So if something works in one state, 
it may not work in every state, but it may work in many more 
states?
    Ms. Riley. That is right. It may not work in Oklahoma, but 
Oklahoma may be able to tweak it a bit so it works better. And 
that certainly is an experience that we have seen in MACPAC.
    Mr. Engel. Thank you. My second question concerns H.R. 
1771. Mr. Sarbanes referred to a little bit. It would modify 
the manner in which spousal income purchase through an annuity 
would be considered in evaluating eligibility for nursing home 
coverage. And let me, Ms. Riley, go to you again. I know that 
MACPAC has done a lot of work regarding long-term care in the 
U.S. Is it accurate to say that Medicaid provides the sole form 
of long-term care insurance in the U.S. today?
    Ms. Riley. It provides 61 percent of all spending on long-
term care services.
    Mr. Engel. As a follow up, can you speak to the importance 
of protections against spousal impoverishment in states with 
high costs of living, like New York? Might this legislation 
have the unintended consequences of leaving a community spouse 
with very meager resources because she happens or he happens to 
live in a high-cost-of-living state like New York?
    Ms. Riley. Well, I think that is always a question in these 
adjustments about the difference in cost of living across the 
country. And that is a very legitimate question. Obviously, 
today spouses are protected up to the limit of $119,000. It is 
interesting to think about the unintended consequence that 
could occur if this bill passes and that would be to wonder if 
people would stop buying annuities and then maybe become 
eligible sooner. It is a question, I think, without an answer 
at this point.
    Mr. Engel. But something we should look into?
    Ms. Riley. I think always the unintended consequences are 
the most difficult to contemplate but need to be considered.
    Mr. Engel. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Virginia, Mr. Griffith, 5 minutes 
for questions.
    Mr. Griffith. Thank you, Mr. Chairman. Thank you very much 
for holding this hearing. As always, these hearings are very 
enlightening. I came in today without any questions related to 
annuities and long-term care insurance, and now I have all 
kinds of questions.
    But let me say this, Ms. Riley has indicated--and I didn't 
look it up--but she has been in this field for quite some time 
and the hope had been that long-term care insurance would help 
offset some of what Medicaid is having to pay. Folks are going 
to look at the money, when you are talking about putting a 
loved one into a nursing home, they are going to look at this 
as a tax avoidance situation, as opposed to tax evasion. A lot 
of folks today have said, this is immoral or nobody wants to 
game the system. The people are going to find a way to hang 
onto their assets if they can.
    And one of the things we have to be careful of, and, Mr. 
Chairman, we may need to have a roundtable discussion among our 
members, we have to be careful that we don't go too far in a 
direction because people are going to figure out a way. And one 
of those ways is to go through a divorce, as long as the spouse 
who is the spouse in the nursing home or incapacitated in some 
way needing the care is competent. Because they want to pass 
assets on to their children, they are going to figure out a 
way. And if the only way left is divorce, they will divorce. 
They will reach a property settlement agreement. They will 
transfer all the money to the healthy spouse. And then the 
healthy spouse will start working on ways to get that to the 
children. People will do that.
    So this is a complicated issue. It is not one where we need 
folks on each side of the aisle pointing the finger at the 
other side of the aisle. We need to see if we can't come up 
with a new paradigm, a new way to do this.
    I don't have the answer, Mr. Chairman. But I have heard a 
lot of concern on a lot of issues regarding promissory notes, 
et cetera, annuities. But we need to figure out a way that we 
can make it so that it is affordable for the average American 
family to have a loved one in long-term care without losing 
everything they have worked for 45 or 50 years. And they are 
going to want to pass it on to their kids. So as long as even 
the incapacitated party is competent, they are going to figure 
out a way. And they are going to game, if you want to call it 
gaming the system, they are going to game the system because in 
the long-term, it is better off for their loved ones. So I 
don't know the answer. But let's not think there is a quick and 
easy solution.
    And I think, Ms. Riley, you would agree with that.
    Ms. Riley. Yes, sir. I think there is some good news and 
that is if one is concerned about the spending in Medicaid on 
long-term care, when I started in this field, Medicaid spending 
for long-term care was about 75 percent of the total bill, as I 
recall. And so we have improved economic conditions, improved 
income supports for older people; some use of long-term care 
insurance has changed that situation.
    Mr. Griffith. And, Mr. Hagg, I got off on that and what I 
was really going to ask about was in your written testimony, 
the OIG has a body of work related to healthcare provider taxes 
and how that impacts Medicaid Programs. I have a bill in that 
would do some lowering. The President's Fiscal Commission 
recommended eliminating the use of provider tax providing for 
non-Federal share of Medicaid funding.
    Can you just discuss that issue in the minute and 40 
seconds I have left?
    Mr. Hagg. We have done some recent work involving 
healthcare provider taxes. In one state we looked at a 
healthcare provider tax that didn't follow the existing rules 
that are in place. To us, it looked like it would have been 
impermissible. In talking to the state about it, the state 
said, they disagreed, they didn't think it was a healthcare tax 
at all. They just said it was a general gross receipts tax, and 
therefore those Federal Rules did not apply. We issued a report 
to CMS. CMS responded by saying they agreed with the position 
we had taken, but they felt like they hadn't done a good enough 
job of providing clear guidance to the states on what was 
expected. So I think sometime about last year they put out a 
letter providing that guidance, and at some point, we plan to 
follow up at the appropriate time to make sure that guidance is 
now being followed.
    Mr. Griffith. Well, I think we need to do something. 
Virginia historically has tried to follow the rules, but for 
those states that have done other things creatively to figure 
out way to make the finances work for their states, they have 
eaten up some of the money and really put Virginia at a 
disadvantage. And so Virginia has consistently rejected a so-
called bed tax but many states have that. We think other states 
are gaming the system to our detriment, and so we would like to 
see it be a level playing field and everyone know what the 
rules are.
    So thank you for your work on that.
    With that, Mr. Chairman, I yield back.
    Mr. Pitts. The chair thanks the gentleman.
    And now the chair recognizes the gentlewoman from Indiana, 
Mrs. Brooks, 5 minutes for questions.
    Mrs. Brooks. Thank you, Mr. Chairman.
    To the panel, thank you all so much for being here and for 
helping us understand these complex issues. I am a former 
United States Attorney and so I have worked with my state's 
Medicaid Fraud Control Unit, I think we called it MFCU is the 
acronym that I recall. It has been a few years, but I 
understand all too well the nationwide prevalence of the 
problem of Medicaid fraud, and I am encouraged by the fact that 
the committee is taking up the issues of program integrity.
    I also am very pleased that Chairman Pitts has introduced, 
and I am working with him, on H.R. 3444, the Medicaid and CHIP 
Territory Fraud Prevention Act because it is important that our 
territories also have Medicaid Fraud Control Units. And I want 
to dive into that a little bit further.
    Can you, Mr. Hagg, really just talk with us, and I know 
Chairman Pitts started out by talking about the units and how 
they are funded and so forth, but can you give us, based on 
your experience with the Fraud Control Units in the states, can 
you explain further why this is a wise investment of our 
Federal dollars to make sure that the territories set up 
Medicaid Fraud Control Units?
    Mr. Hagg. Well, in general, yes, the Fraud Control Units in 
states, they are the groups that are primarily responsible for 
investigating Medicaid fraud. They are also responsible for 
investigating patient abuse when it occurs in healthcare 
facilities. Now we would be supportive in expanding that, their 
authority over patient abuse. Right now, they have authority 
when it occurs in the hospital or nursing home. But if patient 
abuse occurs in a home-based setting, for example, they 
currently don't have the authority to investigate that, and we 
think that is something that should be expanded.
    The Fraud Control Units do a great job. They, I think, 2014 
had about 2 billion in recoveries, around 1,300 or so in 
convictions. It equates to about a return of 8 \1/2\ to 1 for 
every dollar spent, they return about 8 \1/2\. So we think they 
are very important in Medicaid program integrity.
    Mrs. Brooks. Thank you. You anticipated my next question, 
which was actually about the amount of recovery that the units, 
that the Medicaid Fraud Control Units across the country have 
recovered, and that is $2 billion that is reinvested for other 
patients, is that correct? Or how is the $2 billion then when 
it is recovered by the government units that recover it, how is 
that money used?
    Mr. Hagg. I am not sure exactly how that process works. But 
certainly, yes, it is, it is more money available that can be 
used to provide legitimate healthcare services to Medicaid 
beneficiaries that need the services.
    Ms. Brooks. I think just to repeat, that was $2 billion 
recovered.
    Mr. Hagg. Two billion.
    Mrs. Brooks. How many Medicare fraud units are there in the 
country right now roughly?
    Mr. Hagg. There are 50, 49 states and the District of 
Columbia.
    Mrs. Brooks. Thank you. And Mr. Gomez can you just share 
with me the experience in Oklahoma and the work that Oklahoma 
is doing, the benefits, and how do states like Oklahoma feel 
about the fact that the territories don't have Medicaid Fraud 
Control Units?
    Mr. Gomez. Well, I think for Oklahoma we take a lot of 
pride in making sure that we have appropriate program integrity 
pieces in place, and we actually do counsel states with our 
territories and try to share information in terms of how to 
improve the integrity of the system, even if they don't happen 
to have some of the resources that other states or territories 
have. So we do a lot of sharing of information to see what we 
are seeing on certain activities and how can we share that 
information to strengthen other programs.
    So when we find in Oklahoma, when we find weaknesses in the 
program using technology, we try to fix it in the system so we 
can prevent that money instead of a pay-and-chase situation 
preventing on the front end.
    Mrs. Brooks. I think Mr. Hagg brought up while I initially 
was more focused on the fraud aspects and the amount of money 
that would be recovered, I think your point about the Medicaid 
Fraud Control Units being, are they actually the primary units 
investigating patient care issues, Mr. Hagg?
    Mr. Hagg. Patient care issues that occur in healthcare 
facilities, yes.
    Mrs. Brooks. OK.
    And, Ms. Riley, any comments you would like to make based 
on your experience about Medicaid Fraud Control Units and the 
patient care issues?
    Ms. Riley. They clearly are an important front line and 
they rest in attorneys general offices and work closely with 
Medicaid programs, and so it certainly seems that the 
territories could benefit from that kind of support.
    Mrs. Brooks. And so because the territories don't have 
these, is that not happening now then, the patient care issues 
with respect to healthcare facilities, how is that being 
monitored then?
    Ms. Riley. There are a variety of ways that states look at 
patient care, not just through the fraud lens, and there are 
numerous reports and numerous activities of state licensing 
boards as well as Medicaid agencies that look at the quality of 
patient care.
    Mrs. Brooks. Thank you.
    Thank you. I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentlelady from North Carolina, Mrs. Ellmers, 5 
minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman.
    And thank you to our panel, and I will just start off by 
saying I have a few questions here, and I apologize for not 
being here for the full committee. It is getting back to town, 
and being the third day back, we are all pretty busy, and I had 
some other issues I had to take care of. But I want to start, 
Mr. Gomez, asking you about the Deficit Reduction Act, so I 
guess my point is if I ask you a question that has already been 
presented, please indulge me because I apologize for the 
redundancy.
    But in the Deficit Reduction Act of 2005, implemented new 
policies that intended to try to close the loopholes related to 
the use of annuities as a Medicaid planning device. However, 
based on the testimony that has taken place today and just what 
I have listened to, it obviously has not achieved that goal.
    Can you please explain what the DRA did and why that has 
not sufficiently closed the loopholes?
    Mr. Gomez. I think the best way I can explain it is the 
relevant findings of the 10th Circuit Court where we took this 
issue from Oklahoma, so couples can purchase a qualifying 
annuity payable to the community spouse without affecting the 
institutionalized spouse's eligibility for Medicaid benefits. 
So couples can purchase the annuities as a lawful spend down of 
the institutionalized spouse's resources. The court will only 
limit transfers made to the community spouse after the 
applicant has been deemed eligible for Medicaid assistance so 
it allows for the unlimited transfer of resources before the 
applicant is approved. The DRA actually was trying to, had that 
5-year look back and this is a way to get around that.
    Mrs. Ellmers. OK, so along the line of, in the discussion 
again on annuities, the 2014 GAO report of elder law attorneys 
told the GAO undercover investigators that annuities could be 
created quickly and thus are a tool for last minute Medicaid 
planning. Is this something that you have seen in Oklahoma, and 
typically how many months elapse between the creation of an 
annuity and the submission of the Medicaid application?
    Mr. Gomez. Please allow me to get back with you on that 
length of time, I don't know, but we certainly would be happy 
to get that back to you for the record.
    Mrs. Ellmers. Ms. Riley, do you have a comment on that at 
all?
    Ms. Riley. I don't, but we would be happy to look at.
    Mrs. Ellmers. That would be great because that gives us a 
little bit better perspective when we are talking about 
timelines.
    Mr. Hagg, your office, OIG, has a long history of raising 
serious concerns to waste, fraud, and abuse involving personal 
care services and having the discussion I was listening very 
closely to my colleague from Indiana in a very interesting 
conversation.
    You have already made numerous recommendations to CMS.
    What actions has CMS taken in response to your 
recommendations and how can the legislation that we are 
discussing here today really help to fulfill some of the goals 
that haven't been met?
    Mr. Hagg. Involving personal care services, we have made a 
number of recommendations. I think CMS is generally in 
agreement with those recommendations that more guidance is 
needed, that more uniformity is needed. I think there is maybe 
a disagreement in how you go about doing that because of the 
limited Federal Rules that are there now and all the problems 
we found we felt like a regulation was needed to really spell 
out what the Federal Government is looking for. I think CMS 
doesn't want to go that far, and maybe that is part of the 
problem with whether the recommendations have been implemented 
or not. Certainly with the problems we found, electronic 
verification would I think address some of those issues, not 
all of them, but it would address some of them.
    Mrs. Ellmers. Great. Well, thank you very much. And like I 
said, this is a really important hearing for us, and we really 
do appreciate your input on this. Hopefully we will be able to 
craft that legislation in the manner that will make some real 
hurdles and improvement so thank you.
    Mr. Chairman, thank you, again, and I yield back the 
remainder of my time.
    Mr. Pitts. The chair thanks the gentlelady. That concludes 
the questions of the members.
    The members will have followup questions. We will send 
those to you in writing. We ask you to please respond promptly.
    This has been a very interesting, very informative, and 
excellent hearing. We thank you for your testimony, and we look 
forward to working together on behalf of the people to address 
these issues that we have heard about today.
    I remind, members that they have 10 business days to submit 
questions for the record, and members should submit their 
questions by the close of business on Friday, September 25.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
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