[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
__________
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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
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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
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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.
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\1\ The prepared statement of Chairman Johnson appears in the
Appendix on page 19.
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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.
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\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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