    [Senate Hearing 114-435]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-435

                      REDUCING UNNECESSARY DUPLICATION IN
                 FEDERAL PROGRAMS: BILLIONS MORE COULD BE SAVED

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

                                     HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                   HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 14, 2015

                                   __________

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

                           Printed for the use of the
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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                        RON JOHNSON, Wisconsin Chairman
    JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
    ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
    RAND PAUL, Kentucky                  JON TESTER, Montana
    JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
    MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
    KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska

                        Keith B. Ashdown, Staff Director
           Patrick J. Bailey, Chief Counsel for Governmental Affairs
                Sean C. Casey, Senior Professional Staff Member
                  Joshua P. McLeod, Professional Staff Member
                    Roland R. Foster, Senior Policy Advisor
                  Gabrielle A. Batkin. Minority Staff Director
               John P. Kilvington, Minority Deputy Staff Director
         Troy H. Cribb, Minority Chief Counsel for Governmental Affairs
            Deirdre G. Armstrong, Minority Professional Staff Member
                 Brian F. Papp, Jr., Minority Legislative Aide
                         Laura W. Kilbride, Chief Clerk
                       Lauren M. Corcoran, Hearing Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator Johnson..............................................     1
        Senator Carper...............................................     2
        Senator Ernst................................................    11
        Senator Heitkamp.............................................    13
        Senator McCaskill............................................    15
    Prepared statements:
        Senator Johnson..............................................    19
        Senator Carper...............................................    21

                                   WITNESSES
                            Tuesday, April 14, 2015

    Hon. Eugene L. Dodaro, Comptroller General of the United States,
      U.S. Government Accountability Office; accompanied by Cathleen
      Berrick, Managing Director, Defense Capabilities and
      Management; Cynthia Bascetta, Managing Director, Health Care;
      Paul Francis, Managing Director, Acquisitions and Sourcing
      Management; Barbara Bovbjerg, Managing Director, Education,
      Workforce, and Income Security; Mark Gaffigan, Managing
      Director, Natural Resources and Environment; David Powner,
      Director, Information Technology; Philip Herr, Managing
      Director, Physical Infrastructure; and James McTigue, Director,
      Strategic Issues...............................................     3
    Prepared statement of Mr. Dodaro.................................    24

                                    APPENDIX

    Responses to post-hearing questions for the Record from Mr.
      Dodaro.........................................................    55

                      REDUCING UNNECESSARY DUPLICATION IN
                 FEDERAL PROGRAMS: BILLIONS MORE COULD BE SAVED

                                  ----------

                            TUESDAY, APRIL 14, 2015

                                         U.S. Senate,
                               Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 9:31 a.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson,
    Chairman of the Committee, presiding.
        Present: Senators Johnson, Lankford, Ernst, Sasse, Carper,
    McCaskill, Heitkamp, and Peters.

                 OPENING STATEMENT OF CHAIRMAN JOHNSON

        Chairman Johnson. Good morning. This hearing will come to
    order. I want to welcome our Comptroller General of the U.S.
    Government Accountability Office (GAO), the Hon. Gene Dodaro.
    Thank you for all your good work. You mentioned earlier this is
    like your second home, your second office. We certainly
    appreciate all the good work you and your agency provide this
    Committee and the Congress.
        I do have an opening statement\1\ which I will, with
    unanimous consent, offer to enter into the record.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Chairman Johnson appears in the
    Appendix on page 19.
    ---------------------------------------------------------------------------
        Senator Carper. OK.
        Chairman Johnson. We do want to make sure that this hearing
    is over no later than 10:25. We have a briefing with Secretary
    Kerry on some relatively important matters as well.
        I just want to say this is, I think, a very important
    subject. This particular report you have been doing these
    things for 5 years. This is your fifth year. You have
    identified 440 different areas of duplication, already saved
    $20 billion. There is $80 billion more to be saved over the
    next 8 or 9 years.
        This is an area that we need to explore, figure out exactly
    how to implement more of these. Apparently only about 37
    percent of these recommendations have been implemented. So that
    is certainly what this Committee wants to explore, but we are
    really interested in hearing what you found out in 2015.
        With that, I will turn it over to our Ranking Member,
    Senator Carper.

                  OPENING STATEMENT OF SENATOR CARPER

        Senator Carper. Mr. Chairman, thanks so much for pulling
    this together. To Gene, thank you very much to you and the team
    that you lead. We are delighted to see you, always delighted to
    hear from you.
        Whenever we talk about duplication, I think about Tom
    Coburn, and I know his spirit is here with us today. We
    actually talked a little bit about maybe he could come and
    share that side of the table with us this morning. It did not
    work out. But we are grateful for all the work that he has done
    and laying a good predicate.
        The issuance of today's report continues GAO's now 5-year
    examination of the Federal Government to identify major
    instances of fragmentation, overlap, and duplication. One of
    the big ones deals with the Department of Homeland Security
    (DHS). As you know, Mr. Dodaro, we have like a hundred and some
    committees and subcommittees that own a piece of the Department
    of Homeland Security. It is hugely wasteful, and I am not sure
    how we resolve that, but one of my goals for as long as I am
    here is to ratchet down that oversight and to give them at
    least a little bit of relief.
        Throughout the five reports, GAO has provided a number of
    recommendations for Congress and the Executive Branch that, if
    implemented, have the potential to reduce significant waste and
    make our government more efficient.
        Unfortunately, many of the topics discussed in GAO's
    reports are complex and are difficult to solve. The issues cut
    across various departments and longstanding Federal programs
    that each have their own constituencies and, in many cases,
    provide the public with much needed services.
        I also find it important to keep in mind that while we must
    be careful to root out instances of unneeded duplication, the
    fact that more than one agency or program is focused on an
    issue does not always mean that we are wasting money and
    duplicating our efforts. Cybersecurity, protecting water
    quality, and assistance for disabled Americans are just a few
    areas that come to mind where it makes sense to have multiple
    Federal agencies bringing their expertise to bear to address
    critical needs.
        What the GAO report tells us is that we need sustained
    leadership and oversight in both the Executive Branch and
    Congress to decide where there is unnecessary duplication that
    can be eliminated or where we need better coordination among
    government programs with similar missions.
        As Gene will testify today, we have had significant success
    in recent years through this focus on duplication. GAO
    estimates Executive Branch and Congressional efforts to address
    suggested actions from GAO's past reports have resulted in
    approximately $20 billion in financial benefits from fiscal
    years (FYs) 2011 through 2014, with another expected savings of
    $80 billion through 2023. And we need all those savings.
        One good example of this success was the passage last year
    of legislation that this Committee worked on extensively, the
    Federal Information Technology Acquisition Reform Act (FITARA).
    Much of this legislation was based on GAO's good work
    identifying duplication and waste in the Federal Government's
    purchase of information technology (IT), which totals about $80
    billion a year.
        FITARA will ensure that agencies continually look across
    their IT investments to eliminate wasteful spending. It also
    requires agencies to close unneeded data centers, and it
    requires the Administrator of the General Services
    Administration (GSA) to develop a strategy for the government
    to leverage its buying power for software. All these efforts
    should add up to billions of dollars in savings.
        I am going to hold it right there because we want to hear
    from you and we have a briefing coming up at 10:30 that we all
    want to get to. So, Gene, welcome and thank you so much for all
    of your work and leadership.
        Chairman Johnson. Thank you, Senator Carper.
        I also want to certainly pay tribute to Senator Tom Coburn.
    Oftentimes we tack on amendments to a piece of legislation and
    take votes on them, and they are messaging votes. This was far
    more than that. This was an amendment passed on a debt ceiling
    increase in 2010 that has had a real impact, provided us
    excellent information, and provided real savings, tens of
    billions of dollars of savings. So, again, this hearing really
    is a tribute to Senator Tom Coburn. We were hoping to have him
    as a witness here today, but we are obviously happy to have
    you, Mr. Dodaro.
        It is the tradition of this Committee to swear in
    witnesses, so if you will stand and raise your right hand. Do
    you swear that the testimony you will give before this
    Committee will be the truth, the whole truth, and nothing but
    the truth, so help you, God?
        Mr. Dodaro. I do.
        Chairman Johnson. Thank you. Mr. Dodaro.
        Senator Carper. Who are these people in the front line
    here? Is this is your A Team? Some of them look pretty
    familiar.
        Mr. Dodaro. I only travel with the A Team. [Laughter.]

     TESTIMONY OF HON. EUGENE L. DODARO,\1\ COMPTROLLER GENERAL OF
       THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE;
      ACCOMPANIED BY CATHLEEN BERRICK, MANAGING DIRECTOR, DEFENSE
        CAPABILITIES AND MANAGEMENT; CYNTHIA BASCETTA, MANAGING
        DIRECTOR, HEALTH CARE; PAUL FRANCIS, MANAGING DIRECTOR,
        ACQUISITIONS AND SOURCING MANAGEMENT; BARBARA BOVBJERG,
     MANAGING DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY;
        MARK GAFFIGAN, MANAGING DIRECTOR, NATURAL RESOURCES AND
     ENVIRONMENT; DAVID POWNER, DIRECTOR, INFORMATION TECHNOLOGY;
     PHILIP HERR, MANAGING DIRECTOR, PHYSICAL INFRASTRUCTURE; AND
               JAMES MCTIGUE, DIRECTOR, STRATEGIC ISSUES

        Mr. Dodaro. Good morning, Mr. Chairman, Ranking Member
    Senator Carper, Senator Sasse, Senator Ernst. I am very pleased
    to be here to talk about our 2015 report.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Hon. Dodaro appears in the Appendix
    on page 24.
    ---------------------------------------------------------------------------
        As you mentioned, Chairman, it is our fifth in the series--
    we identify 24 new areas that have 66 recommendations for
    actions going forward to either reduce or eliminate, overlap,
    duplication, and fragmentation in the Federal Government or
    achieve cost savings or enhance revenues. Just a few quick
    examples from the report:
        First, in looking at oversight of consumer safety, we found
    a patchwork approach has developed over the years where there
    are at least 20 different agencies involved in some aspect of
    consumer protection. We found the system to be fragmented and
    having overlapping jurisdictions. We are recommending that the
    Congress take action to establish a formal coordinating
    mechanism for oversight of consumer protection. We think this
    will result in many inefficiencies being dealt with and a more
    efficient system and, importantly, better protection for the
    American public because it will eliminate regulatory gaps in
    consumer protection issues.
        In the area of non-emergency medical transportation--for
    people that--because of their age, disability, or income
    constraints are not able to get to medical appointments, so
    multiple Federal agencies provide rides. We found 42 different
    programs at 6 different agencies providing these services and
    not a lot of coordination going on. Here there is a
    coordinating council, but it has not met since 2008. Also,
    where we found coordination going on at the State and local
    level, two big Federal players are not really participating as
    much as they should be, and that is the Medicaid program and
    the Veterans Administration (VA) programs.
        So there are a lot of opportunities for cost sharing, ride
    sharing and achieving greater efficiencies. This is very
    important because our aging population continues to grow. This
    is an area where the Federal Government can achieve a lot more
    efficiencies and get people the medical treatment that they
    need.
        Also, we found in looking at the defense health system area
    a small system the U.S. Family Health Plan within the larger
    system. It was set up in the 1980s when some of the public
    health organizations were transferred, and were given
    responsibility for providing health care to defense families
    and retirees. The U.S. Family Health Plan remains a health care
    option required by statue to be available in certain locations.
        Well, in the 1990s, TRICARE came around. We now have the
    TRICARE managed care system throughout the United States and
    this system--the Department of Defense (DOD) U.S. Family Health
    Plan--is providing the same services to the same people who are
    getting TRICARE services in the same areas of the country. So
    we think with a carefully crafted transition to protect the
    beneficiaries, millions of dollars can be saved in
    administrative costs and savings to DOD.
        Another area we point out is the Strategic Petroleum
    Reserve. This was set up following the oil embargoes in the
    1970s so that we have an emergency supply of oil should we need
    it given disruptions that might occur in the provision of oil
    from abroad. But as U.S. production has increased--we are now
    at record levels of production--there are plenty of reserves
    not only in the Strategic Petroleum Reserve but in private
    sector reserves, and we are far in excess of international
    requirements for the reserves. We think the Department of
    Energy (DOE) should reexamine the need for the size of this
    reserve, which could show that there may be the potential to
    reap billions of dollars in savings from selling some of the
    reserve, and reduce dramatically the administrative costs to
    keep the reserve operating. Also its infrastructure is in need
    of repair and replacement and these repairs may cost less if
    you do not have the same size of reserve.
        Also, there is a group of designated cancer hospitals that
    were set up in the 1980s, when most cancer treatments were
    provided in the hospital versus outpatient care. This special
    system was set up to pay these hospitals at their cost as
    opposed to the prospective payment system of negotiated costs
    under fee-for-service. Given cancer treatment has evolved over
    the years and most people are receiving it as an outpatient
    service, we compared this old system to current approaches and
    included the cancer status of the patients and found that if
    these hospitals were treated the same as other teaching
    hospitals that provide cancer treatments, the Federal
    Government could reduce costs by $500 million a year by putting
    these hospitals on a more equitable basis.
        Now, with regard to areas that we have identified in the
    past, as you mentioned, Mr. Chairman, there were 440 actions;
    39 percent have been partially addressed, 20 percent have not
    been addressed at all, and 37 percent have been fully
    addressed. And both of you have cited the savings that has
    resulted, $20 billion so far, and about another $80 billion in
    the works that will be saved as a result of actions taken. But
    there is plenty of money still left on the table to be
    addressed in these areas.
        A couple governmentwide issues that I have talked with this
    Committee before about I would reiterate. One is strategic
    sourcing across the Federal Government. Most of the private
    sector entities that we studied have most of their spending,
    about 90 percent of it, under strategic sourcing where they
    examine whether they can consolidate providers, and use their
    buying power to leverage better costs at the local level. The
    last time we looked at it the Federal Government only had about
    5 percent of its procurement spending under strategic sourcing.
    We think this has enormous potential. Even a one-percent
    reduction in spending would result in $4 billion in savings.
    The Office of Management and Budget (OMB) has taken some
    actions in this regard but not yet set metrics or goals to
    achieve these savings, so we think the Congress' intervention
    in this area would be helpful.
        Information technology acquisitions. I was here before this
    Committee in February talking about adding IT acquisitions and
    operation to out high rise list. Senator Carper, you mentioned
    the Federal Information Technology Acquisition Reform Act. That
    holds a lot of promise if effectively implemented for billions
    of dollars in savings, and so I would continue to urge this
    Committee to have active oversight over IT spending. Many
    savings and reductions in wasteful spending in this area can
    occur over time.
        Also, at DOD, we point out continued activities that could
    result in reducing their overhead costs, reducing some of their
    health care costs, and reducing the cost of acquiring weapon
    systems through implementation of our recommendations.
        We also have a number of recommendations in the Medicare
    and Medicaid areas and health care spending where there is an
    opportunity to revamp some of the payment policies that would
    save billions of dollars and provide greater oversight over
    activities. Particularly at the State level in the Medicaid
    program where tens of billions of dollars are being approved in
    demonstration projects that do not have Congressional oversight
    and in our view are not budget neutral and cost the government
    more money.
        And, of course, I have talked about the problem with
    improper payments in the Medicare and Medicaid programs. We
    reiterate in our report the number of recommendations we have
    to reduce those improper payments. Last year in Medicare it was
    $60 billion; in Medicaid, $17 billion.
        We also have recommendations for a number of areas for
    benefit offsets that would be more appropriate and in
    accordance with the law. For example, we found circumstances
    where certain beneficiaries are receiving unemployment and
    disability insurance at the same time, and so the Federal
    Government is replacing lost revenue twice, and this could be
    rectified through a change in law.
        Also, in tax collections, we have recommendations where, we
    found a lot of people who have passports owe Federal taxes, one
    percent of the people who had passports when we looked at it
    have $5.8 billion in delinquent taxes. And if we decided that
    you cannot have a passport unless you pay your taxes, The
    Congressional Budget Office (CBO) estimates we could increase
    revenue by $500 million over a 5-year period of time. And we
    have other areas where we think delinquent taxes could be
    collected.
        So the bottom line is, some good progress has been made.
    Where there has been big progress, though, it has involved the
    Congress passing legislation. Most of these areas where we cite
    savings, it took congressional action to achieve those savings,
    even though the agencies were moving in the right direction. So
    I would encourage this Committee and the Congress as a whole to
    continue to focus on these areas, and I think we will be a more
    efficient and effective government as a result.
        So thank you very much, Mr. Chairman, and the Committee. I
    appreciate being here today.
        Chairman Johnson. Well, thank you, Mr. Dodaro.
        I have three specific questions on some of the areas of
    duplication and fragmentation you talked about. Let me go right
    to the last one you mentioned, the duplicate payments of
    disability payments versus unemployment. Now, in normal State
    unemployment systems, you simply cannot collect unemployment if
    you are disabled, if you are not available for work. Is that
    correct?
        Mr. Dodaro. That is correct. But in a lot of the disability
    programs, the goal is for those people who can be rehabilitated
    to go back to work. And there are some rules that say they can
    work for a certain limited period of time so they could get off
    the disabled rolls. And so some people end up having employment
    status even though they are receiving disability payments, and
    this is where this gap can occur.
        Chairman Johnson. OK. But, again, this is an unintended
    overlap.
        Mr. Dodaro. Yes.
        Chairman Johnson. This is not something that was
    contemplated in legislation. This is an unintended consequence.
        Mr. Dodaro. That is exactly right, Mr. Chairman. And, we
    think it could be easily rectified through legislation without,
    unduly affecting anyone, and CBO estimates about $1.2 billion
    that could be saved.
        Chairman Johnson. Again, a billion here, a billion there,
    you end up with real money, right?
        Mr. Dodaro. Right.
        Chairman Johnson. In terms of cancer outpatient, are you
    basically saying because when this program was first set up it
    incentivized payment for inpatient cancer treatment versus now
    the market has moved toward outpatient, which is more cost-
    effective? Is that the discrepancy there?
        Mr. Dodaro. Yes. When the system was set up--and this was
    set up in the 1980s--there was concern, as Medicare moved to a
    prospective payment system where they would pay under a fee-
    for-service approach, that it would not sufficiently cover the
    costs of inpatient cancer care. So these hospitals get
    reimbursed for their full cost as opposed to the negotiated
    payments for both inpatient and outpatient care. And the
    Centers for Medicare and Medicaid (CMS) has reformed their
    payment process to take into account more recent and
    contemporary cancer treatments. So if everybody is treated on a
    level playing field, you could save $500 million a year.
        Chairman Johnson. OK. I want to talk a little bit about the
    Department of Defense Family Health Plan. I know in the private
    sector it is not unusual where you have a husband and wife
    working at two different companies, and they both take family
    insurance. You basically have duplicated coverage. Is that the
    case here? Or is it simply we have two different systems and--
    it is not like we have dual coverage, but we have dual
    administration. There is no need to have two separate health
    systems.
        Mr. Dodaro. That is exactly right. In this case, you have
    two separate systems that serve the same potential population,
    and the people can be served in either system. What is unique,
    though, is that the DOD Family Health Plan in legislation was
    given commercial provider status. So DOD cannot even get
    information from them on their costs, their profit margins, and
    administrative costs. They negotiate a fee every year with
    them. It takes about 8 months, according to DOD, so there is a
    lot of administrative effort and cost that goes into this. They
    have to keep separate data systems. We talked to the people who
    provide TRICARE managed coverage across the United States and
    they said that they could easily provide coverage to these
    beneficiaries. DOD would realize millions of dollars in
    administrative savings. And, importantly, this system is not
    integrated into the DOD system. For example, if you are in
    TRICARE, DOD can send you to a military hospital for treatment
    ahead of time. Not so with this separate system.
        Chairman Johnson. How many people are in that separate
    system?
        Mr. Dodaro. It is about 134,000 people.
        Chairman Johnson. OK. I do want to, because my time is
    always short. In terms of actually implementing your
    recommendations, again, I mean, 37 percent fully implemented.
    That is not bad. Thirty nine percent partially implemented.
    What prompts agencies to implement your recommendations? What
    are things that we could potentially do to get higher levels of
    implementation? What are the road blocks?
        Mr. Dodaro. Well, first of all, a number of our
    recommendations require legislative action. So I think more
    focused attention by the Congress can really help in this
    regard. One of the barriers is that you have entrenched
    constituencies of these programs that have evolved over years,
    and so they are difficult to deal with. More visibility over
    time for these issues will help.
        The agencies can be prompted to act by a wide variety of
    reasons. Some of our recommendations have been consistent with
    things that they want to do over time, but they need
    legislative support, like, the DOD health care system that we
    talked about. So the agencies also have initiatives underway--
    they are facing enormous budgetary pressures to bring down
    their costs, so some of our suggestions are welcome cover for
    them to reduce some of their costs over a period of time.
        The big barriers, though you can see this in our
    statistics. Forty percent of actions that require one agency to
    take action to reduce overlap and duplication are fully
    addressed. Where multiple agencies have to act to address
    duplication or overlap across agencies, only 25-percent of
    actions have been fully addressed. This is where Congress and
    OMB come into play. They need to take a more active role. Where
    the agencies have more parochial interests and do not have the
    authority like in this consumer protection area that I
    mentioned, because a number of these agencies are independent
    regulatory agencies it is more difficult. They are not subject
    to OMB regulatory review processes, and so OMB's reach is
    limited, and only the Congress can help address these issues.
        We also found, anomalies in the Consumer Protection area.
    For example, the responsibility for labeling of toy firearms
    and imitation firearms, rests with the National Institute of
    Standards and Technology (NIST). It is a legacy of things that
    happened in the past--to have our scientists focus on that
    activity when the Consumer Product Safety Commission (CPSC)
    takes care of all other labeling for toys and has presence
    where they are imported. It does not make sense.
        There is a lot of opportunity here to rectify things that
    have developed over the years that have just become generally
    accepted.
        Chairman Johnson. Certainly I want our staff to work with
    your agency to very specifically delineate what legislation
    needs to be passed, work with you in terms of exactly how to
    write the legislation. I do not know to what extent you already
    have all that out, but let us really prioritize this. Let us
    get those specific pieces of legislation, and let us come up
    with, again, a very well defined, delineated list, and let us
    start working on that.
        Mr. Dodaro. We would be happy to do so.
        Chairman Johnson. Thank you. Senator Carper.
        Senator Carper. Thanks.
        Mr. Dodaro, I have more questions certainly than I have
    time, and what I will do is follow-up in writing on some of
    these questions.
        What I would like to do, I want to talk a little bit about
    the Internal Revenue Service (IRS). Tomorrow is April 15, and
    it is on the minds of a lot of people, and the question about
    how can we enable them to do their jobs more effectively. But
    before I do that, you have heard me talk about how do we
    leverage the effectiveness of this Committee, along with GAO,
    along with OMB and the administration, in finding ways to get
    better results for less money. How do we waste less money? And
    what I have always looked for is a way to realign our efforts,
    and your work especially with the high-risk list is always very
    helpful for us every 2 years. I call that our ``to-do list.''
        The administration's budget had some things in it that I
    thought were very good and maybe some that were less appealing.
    But they have a number of recommendations in their budget that
    are actually designed to force us to do more of what works and
    less of what does not, and also there were some recommendations
    in the President's budget that deal with duplication. And some
    of them the administration can do by themselves, but others
    require us, either authorizing language or funding in some
    cases.
        Do any come to mind that you would want to prioritize with
    respect to what the administration is saying we ought to do in
    this area where you concur, GAO concurs, that we have some work
    to do ourselves?
        Mr. Dodaro. Yes. The first thing that comes to mind is the
    government pension offset for Social Security recipients,
    particularly for spouses and survivors. In law, Congress has
    said that if you are receiving another government pension, that
    is supposed to be something that is offset when you are
    calculating Social Security benefits because you are really not
    paying into the Social Security system. This is particularly
    true for State and local employees who have their own
    retirement systems.
        At the Federal level, the Office of Personnel Management
    (OPM) gives all the statistics on Federal employees to Social
    Security so these benefits can be offset. But there is no
    mechanism to get State and local pension information. We have
    suggested it could be done through IRS. The administration has
    a proposal--that it has put forth multiple times to do exactly
    what we think needs to be done in this area. There are
    estimated savings of between $2.4 and $6.5 billion, depending
    upon how the mechanism is set up and the extent to which it is
    retroactive.
        The administration also has had proposals in the science,
    technology, engineering, and math (STEM) studies--to reduce the
    number of programs, and they brought that down from 209
    programs to 158 programs. They are targeting for 136 programs.
    So we are supportive of that effort.
        Strategic sourcing is another area that I mentioned in my
    opening statement that they are proposing for savings. They
    have identified different categories of spending across the
    Federal Government to focus on although we think they need to
    be more aggressive in setting targets and tools for the
    agencies to have good plans on going forward.
        So those are some of the areas that first come to mind. I
    would be happy to provide others for the record.
        Senator Carper. Thank you. Commissioner Koskinen is going
    to be with us tomorrow from the IRS, and you have given us at
    least one more issue that we might want to raise where we can
    be helpful to them and be consistent with what you all are
    recommending.
        Speaking of the IRS, we have this huge tax gap problem, and
    you have testified to it before. Folks who work at GAO have
    testified to it before, and we are talking about not billions
    of dollars or tens of billions but hundreds of billions of
    dollars. And looking ahead to tomorrow but also thinking about
    today's hearing, one of the issues that we are going to explore
    with the IRS is how to become more effective and more efficient
    when the Commissioner testifies tomorrow.
        As you know, the IRS budget has seen a dramatic decline
    during the last 5 years. The President's budget requested an
    increase in funding and also gives the agency the flexibility
    it needs to redistribute itself to taxpayer service and provide
    more resources toward program integrity. In fact, I understand
    that for every $1 the IRS invests in program integrity and
    enforcement, the return I am told is about $5, $6, $7 by
    improving its ability to curb identity theft, fraud, and other
    problems.
        My question is: Do you agree that improving the IRS budget
    could improve its capabilities to actually carry out its
    mission?
        Mr. Dodaro. There is no question that additional money
    focused on enforcement can yield additional revenues over time.
    But in making that decision, we have suggested that Congress
    also look at ways that IRS can more effectively use the
    resources that they have.
        Senator Carper. Good.
        Mr. Dodaro. We have identified, for example, that they do
    not have good information on return on investment. We know
    overall that investment can yield more revenues, but which
    initiatives yield better income?
        For example, we looked at field exams versus correspondence
    audits, which are less resource intensive. We found if you
    moved about $124 million from field exams into correspondence
    audits, you can get $1 billion more back in revenue. We think
    there is a lot more that could be done within the IRS to target
    their resources more effectively over time.
        I am concerned, though, that they have had cuts in both
    enforcement and service over time. My best advice to the
    Congress is to watch this very carefully, because I am
    concerned over time it might lead to an erosion of voluntary
    compliance if people cannot get the information that they need
    in order to comply, and that would be very hard to get back.
    Right now it is at a fairly high level. Even though we have a
    huge tax gap, voluntary compliance is not where we want it to
    be, but it can be worse over time.
        Also, there are things Congress can do to make IRS more
    efficient. We have a recommendation that they be given the
    ability to set standards for paid tax preparers outside the
    ones that they already do. Most of the people go to paid tax
    preparers to get their taxes done. The last time we looked at
    this--we did undercover work with 19 tax preparers. We found
    only 2 of the 19 gave us the right answers. Oregon had a
    program where they were regulating paid tax preparers, and they
    found better revenue yields.
        Also, we have recommended that Congress give IRS expanded
    math error authority to correct tax returns where they have
    data that clearly shows errors. The public would have an
    ability to appeal that, but it would save IRS from starting an
    audit and using all kinds of resources when they know right
    away that they have other data that shows that the taxpayer
    made either an honest mistake or an error.
        Also, we have made recommendations that the Congress give
    IRS the authority to require more electronic filing of records.
    And we have other recommendations to improve efficiency.
        Senator Carper. Well, those are great, and we appreciate
    every one of them and want to follow-up with you. And tomorrow
    our hearing is very timely. Thank you so much.
        Mr. Dodaro. Sure.
        Chairman Johnson. Thank you, Senator Carper.
        A little editorial comment. If we simplified our Tax Code,
    that would make it a little bit easier to comply as well.
        Mr. Dodaro. That is also one of our recommendations.
        Chairman Johnson. There you go. I agree with that one.
    Senator Ernst.

                   OPENING STATEMENT OF SENATOR ERNST

        Senator Ernst. Thank you, Mr. Chairman.
        Thank you, sir. It is good to have you back again today. I
    appreciate it.
        I enjoy these reports, and I am glad that you do them. I
    have noticed, though, that the number of programs that are
    identified for cost savings and those that are identified with
    fragmentation, they seem to decline every year. In 2011, I
    think there were 81 programs identified, and then in this
    current report there are 24. If you could just maybe walk
    through the process of how you choose those programs that are
    selected, if you think--are we moving in the right direction
    then? Are these just the programs that we are most likely to
    achieve or maybe some thoughts on how we get to these programs?
        Mr. Dodaro. Right, and I would be happy to. When the
    legislation was first passed, as the Chair and Ranking Member
    mentioned, Senator Coburn was very interested in trying to move
    quickly. So what I agreed to do was to have GAO take a 3-year
    effort to try to comb through the entire Federal Government and
    identify the largest areas that we felt fit these categories.
        So we did a pretty good intensive sweep. It was very
    resource intensive. We started with the budget figures. Where
    does the money go? And we have a lot of institutional knowledge
    about government programs. Some of the area were based on work
    we had done in the past, and we were able to aggregate it.
        But to your point, the number of areas will continue to
    decline in my opinion because we focused on the biggest areas
    in the first 3 years. The law requires us to have a regular
    process and schedule for producing these reports. Also, I felt
    it was very important to have a tracking system and a scorecard
    on what we have recommended to the Congress, and for the
    Executive Branch to keep these areas before our elected
    officials so that they could take action. We have seen that in
    a number of these cases, it takes a number of years to get
    action on our recommendations.
        So that is the reason for the decline; it was a big effort
    up front to comb through the Government. Now we are doing
    targeted reviews.
        Senator Ernst. Very good. At least we are moving in the
    right direction. I feel very good about that.
        One thing that I did notice, there were comments about the
    serious mental health illnesses, and this is something, I have
    a very big passion overall when it comes to mental illness, but
    then also specifically with veterans. And so to see that the
    Department of Health and Human Service (HHS) and the VA, they
    have not been necessarily working together--and maybe you can
    speak to that, where you did identify that HHS is opposed to
    facilitating interagency coordination across the mental health
    programs and why HHS and the VA--why they are opposed to
    evaluating these programs. That seems very counterproductive to
    me.
        Mr. Dodaro. Yes.
        Senator Ernst. If you could address that, please.
        Mr. Dodaro. Cindy Bascetta, who is in charge of all our
    health care work and has a long history working in this area,
    can give you the details. But I was very disappointed in the
    agency's response to not coordinate outside the agency in this
    particular area, and I believe congressional oversight would be
    helpful.
        Senator Ernst. Wonderful. Thank you, Cindy.
        Ms. Bascetta. Good morning.
        Senator Ernst. Good morning.
        Ms. Bascetta. We have ongoing work that is continuing to
    look at the coordination within the Department of Health and
    Human Services as well as across the Federal Government, and
    they have changed their tune a bit about our prior
    recommendation. So we do think that there will be increased
    action within Substance Abuse and Mental Health Services
    Administration (SAMHSA) to do much more in the way of
    leadership.
        Part of their initial hesitance was that they argued that
    CMS, in fact, was a payer but not a provider of services, which
    is true, but our report was not focused on the payment issue.
    It was focused on finding out which programs are most effective
    and gathering and disseminating that information across the
    programs that had the subject matter knowledge, including the
    civilian and the military and VA programs. We wanted them then
    to feed into a process where there would be a feedback loop.
    Those programs that were most effective would be reimbursed,
    and those that were not as effective or not evidence-based, if
    you will, would not receive reimbursement.
        So there is a long way to go in terms of measurement, but
    we are hopeful that there is more attention now being paid to
    this important area.
        Senator Ernst. Very good. I think that is very frustrating
    when you have agencies, when there are better ways of doing it,
    they are not implementing those. And I would echo that if there
    is legislation that we can work on to force the issue along, I
    am happy to do that. But this is a vulnerable population that
    we need to ensure is getting the best possible treatment, if at
    all possible.
        And then just briefly, I have been informed a little on a
    different topic, but I have been looking into the program and
    project management within the Federal Government, and it seems
    that there could be some opportunities there to increase
    efficiency in this area and cost-effectiveness. And it seems
    that there is no set career path for project managers, just a
    few exceptions at the DOD and other Federal IT projects. But
    there is no job series that can track this, education
    requirements for that. I think that would be helpful in a way
    if we did have a program track for project managers. If you
    could speak to that.
        Mr. Dodaro. Sure. Paul Francis, who heads up our
    acquisition work across the Federal Government, can speak to
    that. We have been concerned about the acquisition workforce,
    and we pointed out this area. You are absolutely on the right
    track here, and greater attention is needed.
        Senator Ernst. OK. Thank you.
        Mr. Dodaro. Paul.
        Mr. Francis. Good morning.
        Senator Ernst. Thank you, Paul.
        Mr. Francis. I think when we talk about DOD, even though
    they have a lot of problems, they end up being probably the
    best agency at these types of things. So, with that caveat, in
    the Department of Defense we do find the program managers
    (PM)--rotate in and out of positions. If they stay in that
    career path, particularly if they are military, they are going
    to be career limited. So we have made recommendations that the
    Department of Defense make that a career path so people can
    succeed.
        And we also find that program managers for the government
    are not as well equipped to do negotiations with their industry
    counterparts. So they do not necessarily have the business
    acumen and the types of understanding of what incentives
    contractors come to the table with. So they need quite a bit of
    education and training and years in that career path to be able
    to be an equal partner at the table.
        Chairman Johnson. Thank you, Senator Ernst.
        Senator Ernst. Thank you.
        Chairman Johnson. Senator Heitkamp. And we are in good time
    right now as long as Senator Sasse does not come back. But if
    you can keep it to 7 minutes, I would appreciate it.

                 OPENING STATEMENT OF SENATOR HEITKAMP

        Senator Heitkamp. Thank you, Gene. It is always
    informative, and I want to thank you and your staff for the
    tremendous work that you do. We know the challenges that you
    have, the same challenges that all these agencies have, which
    is trying to meet our expectations with the staff that you
    have. And so I just want to applaud this effort and applaud
    your work.
        I want to focus on CMS. In your report you said CMS could
    save billions of dollars by improving the accuracy of its
    payments to Medicare Advantage programs through methodo--you
    know that word. Yes, I will get there. [Laughter.]
        Adjustments to account for diagnostic coding differences
    between Medicare Advantage and traditional Medicare.
        Now, the Medicare program is a program that is going to be
    stressed into the future. We look at that booming deficit, and,
    it is not an understatement to say we do not necessarily have a
    deficit problem; we have a health care growth problem. So we
    should be looking for every penny of efficiency and savings
    that we can find.
        Can you elaborate on what you mean? And billions of dollars
    sounds like a pretty sizable sum. What do we need to do to get
    that done?
        Mr. Dodaro. Yes, right. What happens is you have the
    Medicare fee-for-service program.
        Senator Heitkamp. Right.
        Mr. Dodaro. And then you have the Medicare Advantage, which
    is on a capitated rate. But the Medicare fee-for-service
    providers have a different diagnostic coding system than the
    Medicare Advantage system. So in our analysis, the same person
    in both systems would look sicker in the Medicare Advantage
    system than they would in the fee-for-service system.
        Now, our whole philosophy as a government is to pay people
    who need more medical care or are sicker, if you will, at a
    higher rate than people who are healthy people and do not need
    it. So in order to make the systems comparable, there is a risk
    adjustment factor where they take into account the
    characteristics of the beneficiaries.
        We found they were not using the most recent data available
    to make this adjustment factor. They were not considering
    certain illnesses and diseases or other characteristics of the
    population. They were not considering which of the
    beneficiaries might also be eligible for Medicaid programs. And
    so we believe a better methodological adjustment factor could
    be put in place that would save the government billions of
    dollars.
        Senator Heitkamp. Is this a problem across the board with
    Medicare Advantage? Or do we see some providers actually
    billing differently than other providers?
        Mr. Dodaro. Let me ask Cindy to come back to the table. She
    is our health care expert. But while she is coming, the one
    area that I am also concerned about that our report touches on
    is the growth in managed care for Medicaid, where there are no
    real program integrity factors in place. So that is another
    area I am very concerned about because in Medicaid, managed
    care is growing exponentially. So some of these lessons for
    Medicare also potentially----
        Senator Heitkamp. The lessons for Medicare Advantage should
    be learned when we are moving toward managed care in Medicaid.
        Mr. Dodaro. Exactly.
        Senator Heitkamp. Cindy.
        Ms. Bascetta. Your question was whether----
        Senator Heitkamp. My question is: Do we see a variance
    between different providers under the Medicare Advantage
    program?
        Ms. Bascetta. No. As the Comptroller General said, they are
    paid under a capitated rate. The difference is in the risk
    scoring, which is a relative measure of the health needs of the
    beneficiary.
        Senator Heitkamp. So the problem is institutional and
    systemic across the board.
        Ms. Bascetta. It is, yes.
        Senator Heitkamp. OK. The other thing, I want to make a
    point to Senator Carper's point. I once upon a time in a former
    life took over as tax commissioner for Senator Conrad. We
    started a program called ``Fair Share,'' where we invested $1
    of resources to the Tax Department and returned $10 and over a
    period of 10 years proved time and time again that those
    investments, when targeted and used appropriately, could, in
    fact, advance a revenue goal. And so there is a lesson learned
    from State government.
        But I want to get to the report because there is a lot in
    there and, it is frustrating for those of us who look at it and
    say, Why are not we doing all of this as soon as possible? But
    when you do the report, do you say this is a no-brainer, this
    would be easy to do, it is low-hanging fruit and we ought to
    prioritize that project maybe over some of the stuff that is a
    little more difficult to do?
        Mr. Dodaro. Yes, well, we are basically taking all the work
    that we do in GAO. What is in this report is really a small
    subset of the work that we do every year. We respond to about
    900 requests a year from Congress and do a lot of different
    work. And about 80 percent of our recommendations actually are
    implemented over a 4-year period of time. So what you have in
    this report is really the----
        Senator Heitkamp. Twenty percent.
        Mr. Dodaro. Yes.
        Senator Heitkamp. But what I am saying, within the 20
    percent, have you ever said let us rank them and tell people--
    --
        Mr. Dodaro. No, we have not done that. We have identified
    ones for cost savings and tried to identify available scoring
    on these actions. But, our belief is that, they are all
    important areas and they could yield efficiencies. And they are
    not concentrated in jurisdiction in any one committee. They are
    across the Federal Government's activities.
        Senator Heitkamp. I get what you are saying, but I hope you
    understand what I am saying, which is that there are probably
    some things that are easier to implement than other things that
    you are recommending in your judgment, and these are things
    that it would not be, irresponsible of the Senate to say we
    want this done not tomorrow but yesterday?
        Mr. Dodaro. Yes, right. I think the easy things to do are
    in the 37 percent that have already been implemented.
        Senator Heitkamp. So all the 20 percent are equally
    difficult. Is that what you are telling me?
        Mr. Dodaro. Right.
        Senator Heitkamp. Well, thank you, and I will yield back my
    time.
        Mr. Dodaro. But I will give thought to what you said.
        Chairman Johnson. Thank you, Senator Heitkamp. Senator
    McCaskill.

                 OPENING STATEMENT OF SENATOR MCCASKILL

        Senator McCaskill. It is hard for me to know where to
    start. As you know, I feel like a bee in a flower patch when
    you are here, Comptroller. But, I want to try to spend just a
    few minutes on strategic sourcing.
        It is frustrating to me, strategic sourcing. I do not know
    why this is hard for government. DOD, DHS, Department of
    Energy, and VA spent about $537 billion on Federal procurements
    in fiscal year 2011. That is 80 percent of Federal
    procurements, but only 5 percent of those procurements are
    managed using strategic sourcing. And I am going to channel our
    Chairman here. In the private sector, as much as 90 percent of
    the procurements are strategically sourced.
        If we just shaved one percent, off procurement spending
    just from these four agencies, we would get over $4 billion in
    savings. This is the definition of low-hanging fruit. Every
    year it is on the list. Every year, because these agencies are
    not bottom-line motivated, it just seems to go through the
    cracks.
        Let me give you one example for the record on a hearing
    that we had on food sourcing. In 2011, my Subcommittee at the
    time held a hearing looking at the Federal Government's food
    service contracts, which are about $6.8 billion a year. The
    contractors--and, by the way, if this went on at CMS, there
    would be huge headlines. But the contractors are not giving us
    back the rebates that they are contractually required to give
    us. Just like the drug companies are contractually required to
    give back the drug rebates in the Medicaid program, the food
    companies are required to give us back the rebates as part of
    the contract.
        Two years ago, in front of this Committee, Joe Jordan, the
    head of the Office of Federal Procurement Policy (OFPP), said
    OMB was on top of it. He said the largest food service
    contracting agencies formed a team under Strategic Sourcing
    Leadership Council to gather data and to determine the best
    path forward. OMB told us they would have a report on this data
    in 2014, and we have heard nothing.
        Have you heard anything? Do you have any insight on this
    that could alleviate some of my frustration about how hard this
    appears to be for no good reason?
        Mr. Dodaro. I share your frustration. I have been recently
    briefed by the head of OFPP, who came over and they tried to
    identify these different categories of spending that they are
    going to try to focus on; they are going to try to focus on IT
    first. But I urged them to move more aggressively in this area,
    and pick other categories as well.
        I think the Congress should negotiate with OMB on targets
    for reduced spending. Without targets for reduced spending,
    there is no incentive to move in this area.
        Now, that being said, there are also other problems--the
    private sector has better data on what they are spending the
    money on than the government has.
        Senator McCaskill. Right.
        Mr. Dodaro. So, the data are limited. Paul Francis has been
    following this for years, and he will have additional insights.
    But I think unless there are these negotiated targets for
    reduced spending in those areas that are congressionally
    imposed, you are not going to see any big movement in this area
    at all.
        Senator McCaskill. And if you would, Mr. Francis, also
    address how effective you think it might be. DHS has done this,
    but you all cannot determine whether or not it is having any
    real impact. That is, making it one of the considerations on
    the Senior Executive Service (SES) bonuses--which, by the way,
    until very recently was like the sun coming up, an SES getting
    a bonus in government. It was never performance based. It was
    you get it if you get up and brush your teeth in the morning.
        So do you think that it would be more effective if we also
    required that strategic sourcing efforts be part of a bonus
    calculation?
        Mr. Francis. OK. So let me start with the broader issue of
    strategic sourcing, then come back.
        I think our first report on strategic sourcing was 2002, so
    movement has been extremely slow. We are doing a little bit
    better than 5 percent now. I think DHS is actually at 20
    percent. They are probably one of the best agencies.
        The reluctance has been to get into areas other than
    typical commodities.
        Senator McCaskill. Right.
        Mr. Francis. We seem to have five different ways to buy
    pencils, but we will not go into engineering services. That is
    the hard stuff. So we have said just go in there and try and
    see what you can get.
        Gene is right about the targets. Unless it becomes
    important, it is not going to get done. And agencies get
    complacent. If they have the budget to pay for something, that
    kind of becomes the fair price; ``We have the money for it.''
        Senator McCaskill. Right.
        Mr. Francis. As the government moves toward strategic
    sourcing, I think we have to worry about complacency, because
    in the world of contracting, we tend to say--once we get a
    contract, we are done.
        Senator McCaskill. Right.
        Mr. Francis. And industry is not done. They work every
    year, and anything that is a special service, they try to make
    it a commodity so they can get the market pressure to get them
    a better deal.
        So I worry a little bit going forward that in the
    government--we are going to get contracts in place and then
    say, ``We are done,'' which we are not.
        I do not know about direct links to bonuses, but they
    should be in SES contracts. Even DOD spends more money on
    services than it does products. Civilian agencies, way more,
    probably two or three times more on services. That type of
    emphasis I think should be in the contracts because that,
    coupled with targets, is a way to get attention on it.
        Senator McCaskill. Well, I think it would be terrific, Mr.
    Chairman--and I will yield the rest of my time because I know
    we are running short--if we would think about maybe doing a
    hearing on strategic sourcing as it relates to personal
    services contracts, because I think that is the Rubicon that we
    have not passed yet. That is where we probably need to shine a
    brighter light. Something for you to consider.
        Chairman Johnson. Well, and, of course, as you pointed out,
    there are a lot of dollars there, just low-hanging fruit. So we
    will certainly take that under advisement. Of course, you have
    a Subcommittee, too, that you can work on some of that.
        I appreciate Senator Lankford and Senator Peters coming
    here. I announced early on we have an important briefing coming
    up, and so I told Senator Booker--he wanted to ask one
    question, but we are just running out of time. And in fairness,
    I really cannot let you ask questions either. I fully encourage
    you to submit those questions for the record. I think we have
    all got a lot of questions, because there is so much good work
    done by Mr. Dodaro and his office.
        Let me just conclude the hearing by thanking you, Mr.
    Dodaro, and all the members of your staff for doing great work.
        This hearing record will remain open for 15 days until
    April 29, 5 p.m., for the submission of statements and
    questions for the record.
        This hearing is adjourned.
        [Whereupon, at 10:23 a.m., the Committee was adjourned.]

                                A P P E N D I X

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