[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


   EFFORTS TO COMBAT WASTE, FRAUD, AND ABUSE IN THE MEDICARE PROGRAM

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

                                 HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON OVERSIGHT

                                 OF THE

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 19, 2017

                               __________

                          Serial No. 115-OS05

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]  



                      U.S. GOVERNMENT PUBLISHING OFFICE                    
33-613                      WASHINGTON : 2019                     
          
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                       COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California              SANDER M. LEVIN, Michigan
PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
TOM REED, New York                   LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
KRISTI NOEM, South Dakota            JUDY CHU, California
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan

                     David Stewart, Staff Director

                 Brandon Casey, Minority Chief Counsel

                                 ______

                       SUBCOMMITTEE ON OVERSIGHT

                    VERN BUCHANAN, Florida, Chairman

DAVID SCHWEIKERT, Arizona            JOHN LEWIS, Georgia
JACKIE WALORSKI, Indiana             JOSEPH CROWLEY, New York
CARLOS CURBELO, Florida              SUZAN DELBENE, Washington
MIKE BISHOP, Michigan                EARL BLUMENAUER, Oregon
PAT MEEHAN, Pennsylvania
GEORGE HOLDING, North Carolina

 
                            C O N T E N T S

                               __________
                                                                   Page

Advisory of July 19, 2017 announcing the hearing.................     2

                               WITNESSES

James Cosgrove, Director, Health Care, Government Accountability 
  Office.........................................................     5
Jonathan Morse, Acting Director, Center for Program Integrity, 
  Centers for Medicare and Medicaid Services.....................    27

                    MEMBER SUBMISSION FOR THE RECORD

Miami Herald article and the corresponding DOJ press release.....    49

                        QUESTIONS FOR THE RECORD

Questions from The Honorable Brian Higgins, to James Cosgrove....    59
Questions from The Honorable Vern Buchanan, to Jonathan Morse....    60
Questions from The Honorable George Holding, to Jonathan Morse...    63
Questions from The Honorable Brian Higgins, to Jonathan Morse....    63

                   PUBLIC SUBMISSIONS FOR THE RECORD

Alliance of Specialty Medicine...................................    66
American Medical Rehabilitation Providers Association (AMRPA)....    70
Council for Medicare Integrity...................................    76
Dennis Byron, statement..........................................    79
Federation of American Hospitals.................................    80
Partnership for Quality Home Healthcare..........................    83
Secure ID Coalition..............................................    85

 
      EFFORTS TO COMBAT WASTE, FRAUD, AND ABUSE IN THE MEDICARE PROGRAM

                              ----------                              


                        WEDNESDAY, JULY 19, 2017

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:02 a.m., in 
Room 1100, Longworth House Office Building, Hon. Vern Buchanan 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman BUCHANAN. The Subcommittee will come to order.
    Welcome to the Ways and Means Oversight Subcommittee 
hearing on ``Efforts to Combat Waste, Fraud, and Abuse in the 
Medicare Program.''
    Nearly 60 million Americans, including four million in my 
home state of Florida, rely on Medicare programs to provide 
care. We have a responsibility to all of them and to the 
taxpayers to ensure that care is high quality and that CMS is 
paying accurate and appropriate amounts to those providing the 
care. As it stands now, the Center for Medicare Services has 
not been in a position to ensure that that is the case.
    A couple of weeks ago, I had a very helpful discussion with 
staff from CMS Center for Program Integrity about their efforts 
to address improper payments. One issue we discussed is the 10 
percent error in the rate. So just to put that in perspective, 
the way I look at it, when you have a large program, 600 
billion--650 billion, 10 percent is over a billion dollars a 
week in improper payments, and that is really what we are 
talking about, how can we drive that down.
    So 10 percent error rate that is reported includes fraud, 
as well as overpayments, as well as underpayments. Put 
directly, that 10 percent number doesn't really tell us much 
about the program's integrity. The problem with accurate and 
complete documentation makes up a substantial portion, and it 
is impossible to extrapolate how much of the payments are 
actually lost to trust funds and how much merely represent 
administrative errors. CMS treats them the same.
    When we try to understand how much fraud is in Medicare, 
the answer: We simply don't know. Understanding payment errors 
is important, as every dollar reported lost in error serves to 
undermine the good works of the program and could represent a 
dollar that should be spent providing care to beneficiaries.
    However, different types of errors require different 
analytics and different solutions. Last week, the Department of 
Justice and the Department of Health and Human Services 
announced charges of more than 400 individuals who claim more 
than $1.3 billion in fraudulent payments. Bad actors are real, 
and it is important that we continue to provide support for the 
effort to combat fraud.
    However, errors other than fraud require different 
approaches. This makes efforts to distinguish between fraud and 
improper payments important. In the end, we need to look for 
ways to reduce all types of errors and ensure that the 
mechanisms created to do this are working as intended.
    Today, we are looking at how CMS addresses improper 
payments to Medicare. Over the past decade, enrollment in 
Medicare Advantage has tripled. A third of all seniors on 
Medicare rely on it, and this number continues to grow. Because 
of this, we need to better understand the processes in place to 
oversee the program and what we can do to improve it.
    To that end, I look forward to the hearing and the 
witnesses today. I now yield to the distinguished Ranking 
Member from Georgia, Mr. Lewis, for the purposes of an opening 
statement.
    Mr. LEWIS. Good morning. Thank you, Mr. Chairman, for 
holding this hearing. I also would like to thank our witnesses 
for being here today and for taking the time to be here.
    As you know, Mr. Chairman, this subcommittee's work touches 
many areas, and protecting and preserving Medicare is one of 
our most important duties. Last year, Medicare paid nearly $700 
billion for health services--$700 billion for health services.
    This program is a lifeline for over 57 million elderly and 
disabled beneficiaries, and we must ensure that Medicare 
remains sound and strong for all who rely on it. I deeply 
believe that preventing fraud is key to this mission.
    In 2016, the Medicare fee-for-service program paid an 
estimated $41 billion in improper payments, and the Medicare 
Advantage program paid about $16 billion in improper payments. 
We must work together to bring these numbers down. We cannot 
let the bad actions of a few ruin the promise and commitment of 
Medicare for generations yet unborn.
    Yet as we recommit to fighting fraud, we should be 
cautious. Our first priority should be to ensure that 
beneficiaries have access to quality and life-saving services.
    As Medicare transforms to reward quality instead of 
quantity, this administration must continue President Obama's 
work to fight new forms of fraud, and we must continue to act. 
We all must continue the Affordable Care Act investment and 
innovation in preventing fraud before it happens. Reducing 
fraudulent, wasteful, and improper payments is a critically 
important part to keeping the promise to protect the life of 
the Medicare Trust Fund for all who rely on it.
    This is not a partisan matter. It is a question of 
preserving the sacred trust of our seniors, families in need, 
and people living with disabilities. It is a question of doing 
what is right and what is just.
    And again, Mr. Chairman, thank you for holding this 
hearing. I look forward to the testimony of our witnesses. And 
I yield back.
    Chairman BUCHANAN. Without objection, other Members' 
opening statements will be made part of the record.
    Today's witnesses panel includes two experts, John 
Cosgrove, Director of Health Care at the Government 
Accountability Office; Jonathan Morse, Acting Director, Center 
for Program Integrity, Center for Medicare and Medicaid 
Services.
    The Subcommittee has your written statements, and they will 
be made part of the formal hearing record. You have five 
minutes to deliver your oral remarks, and we will begin with 
you, Mr. Cosgrove.

 STATEMENT OF JAMES COSGROVE, DIRECTOR, HEALTHCARE, GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. COSGROVE. Chairman Buchanan, ranking member----
    Chairman BUCHANAN. Turn on your mike.
    Mr. COSGROVE. Is it on now? Sorry.
    Chairman Buchanan, Ranking Member Lewis, members of the 
subcommittee, I am pleased to be here today as you discuss 
Medicare program integrity issues.
    In 1990, GAO first designated Medicare as a high-risk 
program, in part due to the risk of improper payments. These 
are payments that were either made in error or for incorrect 
amounts. Sometimes they may be the result of fraud, and 
according to HHS' most recent estimate, Medicare improper 
payments totaled nearly $60 billion.
    My remarks today will focus on program integrity in 
Medicare part C, also known as Medicare Advantage, the private 
health plan alternative to the fee-for-service program.
    Chairman BUCHANAN. Could you speak up just a little bit, 
please.
    Mr. COSGROVE. Absolutely.
    Back in 1990, relatively few Medicare beneficiaries were 
enrolled in such plans. Since then, enrollment has grown 
substantially, and Medicare Advantage is a popular option. 
Today, one in three beneficiaries are enrolled, and payments to 
plan total about $200 billion. These magnitudes underscore the 
importance of addressing the 10 percent of plan payments that 
HHS estimates are improper.
    In Medicare Advantage, improper payments largely stem from 
beneficiary diagnoses that are unsupported by beneficiaries' 
medical records. That is because CMS uses these diagnoses to 
adjust plan payments up or down, a process known as risk 
adjustment, to pay plans more for sick beneficiaries and less 
for healthy ones. If the beneficiary diagnoses that plans 
report to CMS are wrong, then plans can be paid too little or 
too much.
    To identify and recover improper payments from plans, CMS 
conducts audits known as risk adjustment data validation, or 
RADV audits. In a RADV audit, a contractor checks the medical 
records for a sample of plan beneficiaries to see if the plan 
reported diagnoses are accurate and supported.
    The first RADV audits checked payments from 2007 for 32 
plan contracts. CMS' intention is to conduct about 30 annual 
audits that would identify any improper payments to a plan 
based on a sample of beneficiaries, then extrapolate the 
finding to estimate the total amount of improper payments made 
to that plan, and finally, recover the overpayments. CMS has 
now additional RADV audits underway for payment years 2011, 
2012, and 2013.
    We believe, based on our work, that fundamental changes are 
necessary to improve the RADV audits and recover additional 
substantial amounts of improper payments. First, RADV audits 
should be better focused on those plans with the highest 
potential for improper payments. Second, the RADV process must 
speed up for a variety of reasons, including a lengthy appeals 
process. None of the RADV audits has been completed. Third, 
recovery audit contractors, known as RACs, called for in the 
Affordable Care Act should be incorporated into the audit 
process. The RACs would work on a contingency basis and extend 
the resources available to conduct RADV audits.
    HHS agreed with our recommendations, and CMS has begun 
considering steps to address them, but the details of how the 
agency will address our recommendations have yet to be filled 
in.
    I also want to describe our concerns about the shortcomings 
in CMS' efforts to validate and use the encounter data that 
plans must now submit to the agency. For years, MA plans have 
been somewhat of black boxes. We knew how much the plans were 
paid and who they enrolled, but very little about the services 
that they actually provided. Before 2012, plans simply 
submitted the beneficiary diagnoses needed for risk adjustment. 
However, starting in 2012, CMS required plans to submit 
encounter data, which are similar to fee-for-service claims 
data, and contain information on all diagnoses and the medical 
services and items provided to the beneficiaries. In 2015, CMS 
began using diagnoses from these encounter data, along with 
other plan submitted data on diagnosis to risk adjust plan 
payments.
    In January of this year, we reported that CMS had made some 
progress in validating plans encounter data, but that certain 
important steps identified in our earlier report had not yet 
been fully addressed. For example, CMS had not fully 
established benchmarks for the completeness and accuracy of the 
data or it conducted analyses to compare submitted data with 
established benchmarks. We also found that CMS had not yet 
established specific plans for using the data for program 
integrity or other purposes that had been outlined, except for 
risk adjustment.
    We, therefore, continue to believe that CMS should 
implement our July 2014 recommendations by thoroughly assessing 
the data for completeness and accuracy and by establishing 
specific plans and timeframes for using these data for other 
purposes.
    This concludes my prepared remarks. I would be happy to 
answer any questions.
    [The prepared statement of James Cosgrove follows:]
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    Chairman BUCHANAN. Thank you.
    Mr. Morse, you are recognized.

   STATEMENT OF JONATHAN MORSE, ACTING DIRECTOR, CENTER FOR 
                    PROGRAM INTEGRITY, CMMS

    Mr. MORSE. Chairman Buchanan, Ranking Member Lewis, and 
members of the subcommittee, thank you for the invitation and 
the opportunity to discuss the Centers for Medicare & Medicaid 
Services program integrity efforts in the Medicare program.
    We share this subcommittee's commitment to protecting 
beneficiaries, ensuring taxpayer dollars are spent 
appropriately, and identifying and correcting improper 
payments.
    As required by statute, each year, CMS estimates the 
improper payment rate and projected dollar amount of improper 
payments for the Medicare program. CMS takes seriously our 
responsibility to make sure our programs pay the right amount 
to the right party for the right beneficiary in accordance with 
the laws and regulations.
    It is important to remember that while all payments made as 
a result of fraud are considered to be improper payments, 
improper payments typically do not involve fraud. Rather, for 
CMS programs, improper payments most often occur when there is 
insufficient documentation to determine whether the service was 
medically necessary.
    CMS' approach to program integrity in the Medicare fee-for-
service and Medicare Advantage programs are determined by 
inherent differences in the programs themselves. I want to 
spend some time highlighting our program integrity work in 
Medicare fee-for-service and our approach to Medicare 
Advantage, and also the cross-cutting work we do with the help 
of our public and private partners, including our colleagues at 
the GAO and the Justice Department.
    To estimate the Medicare fee-for-service improper payment 
rate, CMS reviews a statistically valid random sample of 
Medicare fee-for-service claims. Most recently, the Medicare 
fee-for-service improper payment rate was 11 percent in 2016. 
Unlike Medicare fee-for-service in Medicare Advantage, CMS 
makes prospective monthly per capita payments to the MA 
organizations. As a result, CMS uses a different methodology to 
calculate the Medicare Part C improper payment rate. In 2016, 
the Medicare Part C improper payment rate was 9.9 percent.
    The Part C improper payment rate estimate is based on 
medical record review conducted by the CMS' annual risk 
adjustment data validation, or RADV, process, where the 
unsupported diagnoses are identified and corrected as risk 
scores are recalculated.
    In an effort to reduce the Medicare improper payment rates, 
CMS has instituted many program improvements, and is 
continuously looking for ways to refine and improve our program 
integrity activities. We are always working to more closely 
align payments with the cost of providing care, encouraging 
healthcare providers to deliver better care, and improving 
access to care for our beneficiaries.
    CMS estimates that, through our program integrity 
activities, Medicare prevented or recovered $17 billion in 
fiscal year 2015. For example, our fraud prevention system 
resulted in $604 million in fraudulent payments being stopped, 
prevented, or identified last year. CMS also recently updated 
the version of the FPS, which is now called FPS 2.0, which 
improves our model development time and expands CMS predictive 
analytics capabilities.
    CMS also saved Medicare approximately $400 million in 2016, 
using the National Correct Coding Initiative, or NCCI edits, 
which promote correct coding methodologies and control improper 
payments in Medicare Part A, Part B, and for durable medical 
equipment.
    CMS also conducts various medical review activities to help 
prevent improper payments. For example, CMS uses Medicare 
Administrative Contractors, or MACs, to review claims submitted 
by providers and suppliers on a prepayment basis. In fiscal 
year 2015, MAC prepayment medical review resulted in nearly $5 
billion in improper payments being prevented. Overall, these 
efforts help us to avoid pay and chase, as well as promote 
provider compliance.
    CMS and the Justice Department have also developed a 
partnership with private health plans and State Medicaid 
programs to fight healthcare fraud, known as the Healthcare 
Fraud Prevention Partnership. The partnership provides 
visibility into the larger universe of healthcare claims beyond 
those encountered by any single payer. The goal of the 
partnership is to exchange data and identify trends and 
patterns that will uncover fraud, waste, and abuse.
    CMS now has 79 public-private and State organizations as 
part of the partnership. And just last week, HHS, along with 
the Justice Department, announced the largest ever healthcare 
fraud enforcement action by the Medicare Fraud Strike Force. 
The takedown involved 412 charged defendants across 41 Federal 
districts for their alleged participation in healthcare fraud 
schemes involving approximately $1.3 billion in false billings. 
Over 120 defendants, including doctors, nurses, and 
pharmacists, were charged for their roles in prescribing and 
distributing opioids and other dangerous narcotics. In 
addition, HHS suspended the Medicare payments of 295 providers.
    CMS also takes seriously our commitment to combatting the 
opioid epidemic, and works to address abusive prescribing 
through data monitoring, information sharing with Medicare Part 
D, and law enforcement.
    CMS appreciates the work of the GAO on their 
recommendations of ways to improve Medicare program integrity. 
We look forward to continuing to work with them to improve and 
protect the Medicare Trust Fund, while providing beneficiaries 
with high quality care. I look forward to answering the 
subcommittee's questions on how we can improve our commitment 
to protecting taxpayer funded dollars, while also protecting 
beneficiaries' access to care.
    [The prepared statement of Jonathan Morse follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman BUCHANAN. Thank you.
    And I thank both of you for your excellent testimony.
    We will now proceed to a question and answer session. In 
keeping with my past precedent, I will hold my questions until 
the end.
    I now recognize Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    I want to work through, first, a couple of conceptual 
things, because we were actually trying to take some of the GAO 
report and make some charts, but it probably would have been 
easier just to pick up the phone and call you.
    First off, in my fee-for-service compared to, we will call 
it the managed care option, it is, what, a two-thirds/one-third 
mix right now?
    Mr. COSGROVE. That is correct.
    Mr. SCHWEIKERT. If I look at payments in error, doesn't 
mean they are fraud, payments in error, I pay too much, pay too 
little, most of those sit in the fee-for-service side, correct?
    Mr. COSGROVE. Because of the volume of dollars----
    Mr. SCHWEIKERT. But even as a ratio.
    Mr. COSGROVE. The improper payment rate is fairly similar 
across fee-for-service and Medicare Advantage.
    Mr. SCHWEIKERT. And the collection side for both an 
overpayment and underpayment? The cleanup, recapture.
    Mr. COSGROVE. On the Medicare Advantage side, let me speak 
to that right now, that is the intention of the RADV audits. 
There is a national RADV audit that is done every year to 
estimate the improper payment rate. But to go into the 
collection, I was talking about the annual RADV audits that are 
done. Those began with the 2007 payment year. When we did our 
report, I think something like $14 million had been recovered, 
and more was expected, based on the determination of the 
appeals.
    Mr. SCHWEIKERT. And we are right now auditing what year?
    Mr. COSGROVE. We are in 2017, which is why we think these 
need to be speeded up.
    Mr. SCHWEIKERT. We are in 2017? So the RADV audit, if I 
would ask for it right now, saying where we are, you are 
actually doing current year?
    Mr. COSGROVE. The most recent payment year that is going 
under the RADV audits, I believe, is 2013, unless you have----
    Mr. SCHWEIKERT. Yeah. That is what I was saying--sorry, we 
must have had a miscommunication. So it is 2013 you are doing 
in 2017?
    Mr. COSGROVE. Correct.
    Mr. MORSE. Yes.
    Mr. SCHWEIKERT. Okay. Now, if I were to come back to you 
and say, all right, those are our payments in error world, and 
sometimes there is no malicious intent, sometimes it is poorly 
documented, sometimes it is too much, too little. Okay. In 
actual fraud, can you help me understand my fraud mix on 
something such as, the--you called it the takedown, but what 
just happened. How much of this was actually in the fee-for-
service side, how much was in the managed side?
    Mr. MORSE. For the takedown, I mean, it would be--most of 
it would be in Medicare fee-for-service, however, it is--I 
don't think the Justice Department or the Inspector General's 
Office distinguished between how those providers were being----
    Mr. SCHWEIKERT. Can you speak up for me?
    Mr. MORSE. I don't think the Justice Department or the 
Inspector General's Office was distinguishing how they were 
being paid. They were looking at Medicare fee-for-service. It 
could be Medicare Advantage plans, it also could be Medicare 
Part D, which is the prescription drug program, as well.
    Mr. SCHWEIKERT. Is there a disproportionate portion of this 
that might have been in D? I am trying to understand where we 
actually have mechanisms that are working, why in some ways in 
the report GAO says, ``We should do more audits,'' and then 
says, ``But the audits are poorly modeled.'' I mean, that is 
actually in your report saying we need more audits, but the 
audits have problems.
    Mr. COSGROVE. Right.
    Mr. SCHWEIKERT. So I am just trying to work through what my 
solutions are.
    Mr. MORSE. So we appreciate the GAO's recommendations. 
Actually, in fiscal year 2015, we released an RFI for a Part C 
RAC as required under statute. One of the things that we 
actually contemplated and proposed to the various stakeholders 
was changes to the methodology, in part, in response to the 
GAO's recommendation. So we are taking those under advisement 
and are working to implement everything----
    Mr. SCHWEIKERT. Okay. In my last 50 seconds, if I were to 
ask for just what we have documented as fraud, what is my mix? 
How much is durable equipment? How much is in pharmaceuticals? 
How much is blatant miscoding, patients that were never there? 
If I were to look at what are our areas of fragility, what are 
we seeing in actual fraud?
    Mr. MORSE. We look at--you know, the challenge from our 
perspective is we look at improper payments, whether it is 
fraud, waste, or abuse. The challenge----
    Mr. SCHWEIKERT. The question is purely on fraud.
    Mr. MORSE. But the challenge of fraud is we won't know if 
it is fraud until the Justice Department or the Inspector 
General's Office makes that determination as part of the legal 
requirements. So it is postpayment and end of settlement into 
the----
    Mr. SCHWEIKERT. So we are in a world where we don't really 
know what fraud is until Justice actually does their work?
    Mr. MORSE. Fraud requires that intent element.
    Mr. SCHWEIKERT. So how do you build a model that quickly 
reacts to noise in the data systems you told us you are 
building?
    Mr. MORSE. Sure. What we look at are potential sort of just 
suspicious payments, abhorrent billing patterns, things that 
would just be outside the norm that we want to flag, but for us 
to also identify if it is potentially fraud, we have to do sort 
of on-the-ground investigating, we have to collect the medical 
records. It is a much more time-consuming process.
    Mr. SCHWEIKERT. I am way overtime, but thank you for your 
tolerance, Mr. Chairman.
    Chairman BUCHANAN. I now recognize the Ranking Member, Mr. 
Lewis.
    Mr. LEWIS. Thank you, Mr. Chairman. I want to thank the two 
of you for being here and for your testimony.
    Mr. Morse, I want to thank you for your dedication as a 
career civil servant, as well as the nearly 4,000 other career 
employees still at the agency.
    Like many people in this room, I am very concerned that the 
administration has not yet appointed a Director of Program 
Integrity. We need someone at this post to combat fraud, and 
the position has been vacant for 6 months.
    Waste, fraud, and abuse must be taken seriously, and it is 
not clear that this administration has a vision of how Medicare 
should be moving forward in these matters.
    From the oversight perspective, waste, fraud, and abuse are 
very different. Are they all issues of program integrity? They 
are not the same.
    So, Mr. Morse, can you discuss the differences between 
waste, fraud, and abuse, and how to address them through 
policy?
    Mr. MORSE. Sure, I would be happy to. So we as an agency 
look at waste, fraud, and abuse collectively, because the 
challenge becomes for us, we are not really trying to 
distinguish necessarily between the two, we are just trying to 
make sure that Medicare is correctly paying, regardless of 
whether it is fraud, waste, or abuse. So we have implemented 
the improper payment rate for Medicare looks at just improper 
payments writ large. And as I mentioned in our testimony, as 
Chairman Buchanan mentioned in his opening statement, most of 
our improper payments are actually documentation errors. About 
60 percent of them are documentation errors, which really means 
a physician or another provider may have forgotten to sign 
something that was important for the order that we consider to 
be required. That doesn't mean that the payment was fraud, 
waste, or abuse; it just means that it was improper. So by our 
standard, it still is an improper payment, but that service 
could have been medically necessary. It could have been 
received by the beneficiary and needed. We are just doing it--
we do that as part of the--our statutory obligation to monitor 
improper payments.
    When it gets to waste and abuse, we have a number of 
initiatives that we have in place that really help us identify 
what is potentially more problematic. We have got our fraud 
prevention system, which as I mentioned at the outset, is an 
advanced data analytics system, which looks at all of 
Medicare's Part A and B claims before we pay them, and it tries 
to identify any sort of abhorrent billing patterns and looks 
for changes in the data, spikes in billing patterns, things 
that maybe should not be combined in a particular service, and 
those get flagged for our potential followup, potential 
auditing of the medical records on an onsite investigation.
    We also receive numerous complaints from, whether it is the 
Inspector General's Office with potential leads, beneficiaries, 
other healthcare providers. We have got a number of measures 
around provider enrollment where we very carefully monitor 
provider behavior. We provide systems that run sort of in the 
background 24 hours a day, 7 days a week, that look for things 
like whether or not a felony conviction of a particular 
provider, whether they have lost their license.
    So we do a number of potential background checks to look at 
potential waste and abuse as well.
    Mr. LEWIS. How do you go about weeding out bad players? 
There are certain institutions or groups located in one State 
or maybe one county, one city, and they just pick up and move 
someplace else under a different name.
    Mr. MORSE. That is a great question. And, actually, it is a 
moving target, and it is a challenge for us, because one of the 
things that we have learned is that as our advanced data 
systems get more advanced, the fraud schemes have to get more 
advanced as well. So one of our challenges is to stay ahead of 
that.
    We have got field offices in several of the large cities. 
We, again, do a lot of data analytics work. We look at a lot of 
the claims data, identify potential leads. We work very closely 
with law enforcement, both at the State level and at the 
Federal level, and really, spend a lot of our time and effort 
trying to identify where those emerging trends might be 
occurring. Based on something that we may have seen in one 
particular area, we can take that data and try to flag it and 
sort of put that into our different data systems around the 
country and see if we end up seeing similar patterns.
    Mr. LEWIS. Thank you very much, Mr. Morse. Thank you.
    I yield back, Mr. Chairman.
    Chairman BUCHANAN. Mrs. Walorski, you are recognized.
    Mrs. WALORSKI. Thank you, Mr. Chairman.
    Mr. Morse, according to this report, and many of us are 
talking about reports today, this is the HHS report, Office of 
Inspector General, on Medicare Part D, and it is on this issue 
of opioids that you touched on just at the end of your 
testimony, and I appreciate that. But what I think is 
interesting about this and draws a red flag for me is one of 
the things they talk about in here is a prescriber in my home 
state of Indiana wrote an average of 24 opioid prescriptions 
each for 108 beneficiaries in a year, costing Medicare Part D 
$1.1 million just to that Indiana physician. And I guess--I am 
not a health person professional, it draws a red flag to me.
    And I guess my question is, and I know you were probably 
getting to this on your statement, but what processes does CMS 
have in place to flag and investigate these suspicious 
prescribing practices like this, and what do you think needs to 
be done to improve the system? Because I am guessing that you 
are going to say that here's what we do, and then you are going 
to say we need to do more. And so my question is, what is the 
``more''? And to have gone through--whatever the filters are, 
to have gone through one doctor in my State to be able to 
produce these kinds of records I think is astounding. So just 
from your professional opinion, where do we go on this? What 
else has to happen? And then what do we need to do as Congress 
to help you get those filters?
    Mr. MORSE. Thank you. So, we have reviewed that opioid 
report from the Inspector General's Office also, and it is 
quite concerning.
    We have got a number of efforts underway in Medicare, both 
through the service and in Medicare Part D, that try to address 
opioid-prescribing abuses, as well as it has obviously been a 
major focal point of this administration, of the Secretary of 
the past administration. CMS has an opioid strategy that it 
published in January of 2017 on this very issue in looking at 
sort of all the various levers that an agency as a payer can 
potentially be sort of pulling to help to address the opioid 
epidemic.
    From the program integrity side, we have a number of things 
we look at. We work with the Medicare program on the 
overutilization monitoring system. This looks at it largely 
from the beneficiary perspective, but looks at does the 
beneficiary potentially have too many prescriptions? Are there 
too many, potentially in this case, opioid prescriptions being 
prescribed in overlapping ways? And how do we kind of make sure 
that that is not----
    Mrs. WALORSKI. Right. But obviously, the filters that you 
are talking about didn't catch this. And so from your 
perspective, if you had the magic wand and you could say, look, 
I am over this, I studied this, I am the professional, here's 
exactly what we need to do, let's at least try this, what would 
it be?
    Because the other thing disturbing about this, is that 
there are a half of a million beneficiaries receiving high 
amounts of opioids.
    Mr. MORSE. That is correct.
    Mrs. WALORSKI. So the filters aren't working. Whatever was 
done prior to January of 2017 is not working. So we take that 
off the chart here, and we say that you say what is it that we 
are not seeing here, and what can we in Congress do to help you 
get there?
    Mr. MORSE. We also have abusive prescribing authorities 
within Program Integrity at CMS----
    Mrs. WALORSKI. Do you use them often?
    Mr. MORSE. We have used them only a handful of times at 
this point, because part of it is we need to be able to 
establish sort of that pattern and the practice. And when we 
see a pattern and the practice, it often is then referred to--
--
    Mrs. WALORSKI. How long is a pattern and a practice? So who 
is your doctor here that took this to the limit and over the 
top? He is writing an average of 24 prescriptions each for 108 
people in a year, and that wasn't flagged.
    Mr. MORSE. But when we do see something like that in our 
data, we flag it for law enforcement. So, I mean, that is how 
those cases begin, though. So in that case, you know, there may 
have been data that is from CMS in this particular case. There 
may have been data from CMS that we then flag for our law 
enforcement partners, who then begin those investigations.
    So when the behavior is that egregious, if it is something 
that we can see in our data, it is something that we need to be 
able to send to the Inspector General's Office, the State law 
enforcement, to DOJ, and then they begin sort of the more 
serious criminal and civil prosecutions.
    Mrs. WALORSKI. So what happens now as a result of this 
report? Because still, what you are describing is what is 
happening pre-2017. As a result of these egregious violations, 
what new things are going into play now?
    Mr. MORSE. Well, we are actually very pleased that the CARA 
legislation from about a year ago was passed, and CMS is 
working to implement the Medicare lock-in program. So lock-in 
is something that has been used very effectively by both State 
Medicaid programs, as well as by private payers to be able to 
lock in a single beneficiary and a single prescriber. So 
essentially, it helps monitor that overutilization, and it 
helps sort of prevent that abuse from happening.
    Mrs. WALORSKI. Sure. I appreciate it.
    Thank you, Mr. Chairman.
    Chairman BUCHANAN. Mr. Holding, you are recognized.
    Mr. HOLDING. Thank you, Mr. Chairman.
    I think we are getting a pretty solid impression that CMS 
audits are not timely, and this is unfair to both the plans and 
the taxpayers.
    So starting with focusing on Medicare Advantage, and CMS's 
use of the Risk Adjustment Data Validation (RADV) audits, Mr. 
Morse, could you talk a little bit about how an audit process 
works for Medicare Advantage, and how often does CMS conduct 
these audits?
    Mr. MORSE. Sure. I would be happy to do that. So CMS 
started with a pilot in 2007 where we identify the plans. So we 
look at 30 plans each year. The plans are then notified for the 
audit, and they have about 20 weeks to respond to us, would 
then submit medical records. And in order to do that they have 
got to go back to all the various providers who make up that 
patient's medical record and submit the documentation to the 
plan and then to us.
    We then begin the review of the medical records, and make 
the determination of whether the diagnoses are there for which 
we paid the plans. We calculate any payment variation by 
removing diagnoses that were not supported by the medical 
record. So for example, if there is a diagnosis of a 
hypertension in the medical record that we have paid for the 
plan but not in the medical record, we will make a cost 
adjustment to downgrade that medical record because 
hypertension was not one of the factors that was mentioned in 
the medical record.
    So the auditing process itself takes at least 18 months. We 
do multiple rounds of documentation review and medical record 
review. And it is a very sort of thoughtful and time-consuming 
process for us to be able to go through and make sure that we 
are calculating everything correctly.
    Mr. HOLDING. So I have in my notes that the most recent 
data related to the RADV is from the 2007 plan year, and that 
that currently is under appeal. Is that correct?
    Mr. MORSE. That is correct, yes.
    Mr. HOLDING. So what takes so long to do these audits? And 
when you go into the audits what is your goal? I mean, are you 
hitting your goal as far as the timeframe is concerned? And if 
so, I mean, what is taking so long?
    Mr. MORSE. Sure. Thank you. Let me take the first part of 
your question. So the length of time--in part, the 2007 audit 
was a pilot program, so essentially, it was a demonstration as 
to thinking through the methodology----
    Mr. HOLDING. Does it demonstrate that it doesn't work?
    Mr. MORSE. To demonstrate the methodology and make 
determinations as to whether or not it is a fair and accurate 
way to calculate overpayments.
    So we did the demonstration in 2007. We then needed to be 
able to solicit stakeholders' feedback in subsequent years to 
make sure that this payment methodology was going to be 
accurate and would be one that we would be able to use going 
forward.
    We are in the process of identifying the actual overpayment 
amounts in 2011, 2012, and 2013. And in those years, as part of 
the methodology that we determined from the 2007 pilot, we also 
will be extrapolating against the findings, so essentially, 
they will be extrapolated overpayments at that point.
    Mr. HOLDING. So getting to the second part of my question, 
what do you anticipate is a reasonable timeframe for these 
audits to take place? What is your goal?
    Mr. MORSE. We certainly would like the audit timeframes to 
be in the roughly 18 months to 2 years, just given they are 
done manually, and they are labor intensive for us to do, 
because it takes clinical expertise to be able to go through 
the medical record, make sure everything is there, make sure 
that everyone is reading it accurately and that we agree on the 
assessment and then make the calculation----
    Mr. HOLDING. Do you use any statistical software, 
predictive statistical analysis that can identify and kind of 
batch these things for you to look at manually?
    Mr. MORSE. We do. We use software for both the data 
collection in getting the medical records in, as well as a 
notice to calculate the overpayments. But the actual review of 
the medical records themselves has to be done by someone with 
clinical knowledge, because you have got to look at a patient 
medical record and know, you know, is that diagnoses supported 
by the findings? And that actually takes a real person. We 
can't duplicate that with just software and data analytics.
    So there is data analytics in the program, certainly, but 
that work is actually done by people.
    Mr. HOLDING. All right. Thank you.
    Mr. Chairman, I yield back.
    Chairman BUCHANAN. Mr. Crowley, you are recognized.
    Mr. CROWLEY. I thank the chairman. Thank you for yielding 
me the time, and thank you for holding this hearing here today.
    Regardless, I think, of party line, we can all agree that 
fraud is a serious crime, and given human nature, as our 
Founding Fathers recognized as well, are prone to corruption 
from time to time, that as we change the system, there are 
always those who are looking to exploit or manipulate it for 
nefarious purposes.
    I hope we as a committee can use today's hearing to explore 
what steps HHS and CMS are taking to ensure we continue the 
progress we have been making to combat waste, fraud, and abuse 
in the Medicare program.
    I want to thank both of our witnesses for being here today, 
for the valuable information they are presenting to us as a 
subcommittee.
    Mr. Morse, though the future of the ACA has been in the 
news every day, I think most people don't realize the extent to 
which the ACA changed the fraud-fighting landscape in the 
Medicare system. It gave increased funding to combat fraud, 
provided new tools to screen providers so they can prevent 
criminals from getting into the system on the front end, 
improved data analytics, and instituted more payment review to 
check for problems before our money goes out the door.
    Mr. Morse, can you talk about how the Medicare program has 
improved as a result of these ACA provisions? And what would 
have been the status of the Medicare program integrity without 
these tools added by the ACA?
    Mr. MORSE. Thank you, Mr. Crowley. So, Congressman Crowley, 
I would say the ACA is just one of a number of pieces of 
legislation, though, passed through this committee that have 
been actually extremely helpful to us in fighting fraud, waste, 
and abuse in Medicare.
    And if you look at just after the ACA passage, the Small 
Business Jobs Act of 2010 allowed us to be able to implement 
the Fraud Prevention System, which is the advanced data 
analytics system that we use. It works somewhat similar to sort 
of what the credit card companies use to be able to flag 
potential bad actions or suspicious--essentially, suspicious 
behavior.
    The CARA legislation that I just referred to with 
Congresswoman Walorski a moment ago, allows us to be able to do 
lock-in for Medicare, which we are currently implementing for 
the Part D program. So locking in a single beneficiary to a 
single prescriber. We have got the--MACRA has been extremely 
helpful for us as we are beginning to remove the Social 
Security number now for the beneficiary ID cards.
    So we do have a number of authorities, even outside the 
ACA, that have actually been extremely helpful.
    Mr. CROWLEY. No. And I recognize those additions, but I was 
just focusing specifically, because those other provisions are 
not under attack, so to speak, in the same way that the ACA has 
been, and maybe we are coming to the end of that attack, but we 
will see. Only time will tell.
    And I would hate to see these ACA provisions and the 
program integrity efforts initiated by the Obama administration 
be reversed. So that is why I was specifically speaking about 
the ACA provisions as it pertains to attacking fraud and abuse 
within the system itself.
    Our witnesses have highlighted the gains we have achieved 
in combatting waste, fraud, and abuse in the Medicare program, 
through the ACA and through executive action, as well as the 
other bills that you have mentioned, Mr. Morse, and HHS and CMS 
under President Obama in particular. Our role as Congress 
should be to strengthen the integrity of the Medicare program, 
strengthen Medicare Trust Fund, and protect taxpayers from 
billions of dollars of loss that had played out.
    So I think it is in the interest of the taxpayer to look at 
the benefits of the ACA as it pertains to health benefits 
itself, but these other benefits that are derived in terms of 
fighting waste, fraud, and abuse. So I thank you all for your 
testimony today.
    I thank the chairman for this hearing today. Thank you.
    Chairman BUCHANAN. Mr. Meehan, you are recognized.
    Mr. MEEHAN. Thank you, Mr. Chairman.
    I want to thank the panel, not just for your presence here 
today, but for the important work that you do. I know it is not 
easy, and you have got a big responsibility, but we are also 
grateful for you allowing us to get the benefit of your 
experience and wisdom so we can determine how things can be 
done better.
    Some of my colleagues have recognized we are seeing not 
only a growth in concern about fraud, but also the opioid 
epidemic. Both on the front end with overprescribing, and also 
a growing concern about those who have entered into the 
treatment space, and questions about how people are being 
recruited. And I know you don't get into the value of the 
services, but there are real questions about the competency of 
what is being delivered and payment schemes as well.
    In general, a recent report from the Permanent Subcommittee 
on Investigations in the Senate found that only a small 
percentage of potential incidents of fraud and abuse on the 
Part D program were brought to the attention of the medic were 
actually investigated. In fact, from 2015 statistics, there 
were 8,900 total actionable complaints, yet only about seven 
percent were investigated.
    In light of the opioid epidemic and the real concerns that 
have been pointed out here, can you explain why 93 percent of 
the cases of potential fraud and abuse regarding prescription 
drugs did not seem to be acted upon?
    Mr. MORSE. So when we are looking at potential fraud and 
abuse, we also have to look at and balance that with sort of 
the burden on the providers. So one of the things we need to be 
careful of is really describing whether or not it is just fraud 
and abuse in looking at the prescribers' billing patterns. 
Anything that is flagged for us that is potentially abusive 
behavior and really egregious behavior is actually referred 
often--if it is not referred to the law--whether it is referred 
to the medic or not, also goes through to law enforcement, to 
the private plans to take action, but we also have to balance 
that with sort of the latitude that we need to be able to give 
prescribers in their prescribing patterns as well.
    So, the challenge for us is really kind of balancing that 
fine line of being thoughtful for allowing, you know, 
beneficiaries who often need a certain amount of prescriptions 
and certain amounts of, whether it is opioids or other pain 
medication, to be able to, you know, receive those, you know, 
receive that medication following the CDC guidelines that were 
published about 1\1/2\ years ago with something that 
potentially, you know, moves into the fraud, waste, and abuse 
area.
    When it is something that is potentially fraudulent, we do 
our best to make sure that we flag that, either for action 
ourselves and also to be able to be action that is taken by law 
enforcement, Inspector General's Office----
    Mr. MEEHAN. You know, you mentioned some standard there. 
What kind of metrics do you use? How do you calculate where a 
prescription may be in a volume that is appropriately related 
to a particular condition versus those who we know are 
overprescribing, particularly in the opioid area, where we 
believe the prescriptions are not going to a particular 
recipient, but are finding their ways out into an open market 
and leading to further abuse?
    Mr. MORSE. So the volume question is one that I have to 
refer to my colleagues in the Medicare program who set sort of 
the requirements for what Medicare will pay for under certain 
prescription drug guidelines. So it is not really a program 
integrity question for me, per se. We just then enforce what 
the guidelines are and what has been set through the Medicare 
program. And then the Part D plan sponsors who administer the 
prescription drug program under Part D will do the same, you 
know, in their programs as well.
    Mr. MEEHAN. Okay. I am not sure I completely understand 
that. But tell me, if there is a seven percent rate right now 
of investigations, so to speak, does that reflect the complete 
utilization of the resources at your disposal or should we be 
doing more? Or is there a more effective way to get at a higher 
percentage? What is the right balance there?
    Mr. MORSE. I think one of the things that we are very much 
looking forward to is the implementation of lock-in, which 
allows--as I mentioned before, it has been very effectively 
used by the private plans and by State Medicare----
    Mr. MEEHAN. Would you speak on that in the remaining 
moments? Because the private plans seem to do a better job than 
the government at getting to the bottom of this. Why do they do 
a better job? What metrics are they using? And why aren't we 
doing that with the government programs?
    Mr. MORSE. One of the things that we have seen that we have 
been actually working with the plans to think about is so--is 
they do a couple things. One is limits on, you know, 
potential--the volume of potential drugs, and then they use 
lock-in.
    The lock-in program that was enacted through this committee 
under CARA is one of the most effective tools that we have seen 
and that we are working to implement now, so----
    Mr. MEEHAN. Well, thank you.
    Mr. Chairman, my time is up, and I yield back.
    Chairman BUCHANAN. Mr. Bishop, you are recognized.
    Mr. BISHOP. Thank you, Mr. Chairman, and thank you for your 
leadership on this issue. And thank you to the panel for being 
here today and sharing your time with us. It is enlightening, 
and we appreciate it.
    Last Congress, I was on the Judiciary Committee, and we 
were actively involved in addressing the opioid epidemic. And I 
know that you have heard questions from this panel about that, 
and it is simply because all of us have had some real concerns 
in our districts and across this country at the duration of the 
epidemic and how quickly it is moving.
    Last year, the House Judiciary Committee equipped law 
enforcement and first responders with ways in which to deal 
onsite with the overdosing that is going on. Thousands and 
thousands of situations where police and first responders had 
no way to respond, and Congress came up with a plan and a 
solution, and we provided the community programs resources to 
enhance diversion programs, lots of great solutions, but there 
is so much more to be done.
    And in the midst of this crisis and what is going on with 
the news with the DOJ and the crackdown you have seen on 
prescription drugs, I know that you are in the heat of this 
battle as well and doing the best you can to address the 
problem.
    Mr. Morse, I understand in the cases where Medicare data 
finds that the ratio of beneficiaries to providers is 
abnormally high, CMS has a process in place to set up what you 
call a moratorium area. And I am wondering--Mr. Meehan raised 
the issue earlier--what specifically the evidence is considered 
to developing something like this? Can you tell us a little bit 
about how you do that, historically how you have applied this, 
and whether or not you have seen an uptick in this process of 
developing moratoria areas around the country?
    Mr. MORSE. Sure. When we thought about doing a moratoria, 
the concept began from us looking at data around potential 
patterns of services that were being abused. So whether it is--
as far as a fraud, waste, or abuse, it was services that we 
were looking at that we were finding some significant improper 
payments, and most often, home health, what is called 
nonemergency ambulance transportation, so someone using an 
ambulance service that is not going to an emergency room, so 
often to go to a doctor's appointment in some way. And then for 
something like durable medical equipment.
    One of the things that we have found is, you know, by 
placing a moratoria or a cap on the number of providers in that 
area, it helps us to limit sort of what the universe is of the 
providers who are supplying those particular services. In order 
to make those determinations, we look at the number of 
beneficiaries to the number of providers, both in that area and 
then in surrounding areas, and then also in other parts of the 
country, because not every area is going to have--so if we put 
a home health moratoria in Illinois, for example, some parts of 
Illinois are more rural than others, so we also look at 
specific ZIP Code by ZIP Code, what does it look like, making 
sure that we have enough beneficiaries or enough providers to 
serve those beneficiaries, as compared to sort of any other 
parts of the country that might be relevant in terms of the 
size.
    In some of those States where we have, you know, put the 
moratoria in place, the number of--again, just for home health 
as an example--the number of home health providers dramatically 
will exceed what we have found to be helpful and when we think 
it has been an indicator of potential fraud and abuse.
    Mr. BISHOP. Can you talk about the history of imposing 
these moratoria across the country? Has there been an uptick in 
your decision to do that over previous years?
    Mr. MORSE. No. Actually, in recent years, the home health 
moratoria has held fairly steady. We have increased them. The 
home health moratoria has been increased from a county-based 
system to a State-based system, so they are statewide in five 
States. In part because we were finding that home health 
organizations were setting themselves up just right outside 
sort of the jurisdiction that we were putting the moratoria in 
and then, essentially, just eluding the idea of the moratoria. 
So we put them in statewide where we thought that the number of 
providers would still be sufficient for those beneficiaries. 
But otherwise, they have largely held steady the last couple of 
years.
    We found them to be an effective method of at least capping 
that number of suppliers and providers in that area, because 
often the concern otherwise is if there is a huge uptick in the 
number of providers and suppliers in any one particular area, 
and there is sort of a limited or finite number of 
beneficiaries needing the services, does that potentially 
contribute to some fraud or abusive behavior?
    Mr. BISHOP. Thank you for your efforts. We appreciate it.
    Mr. Chairman, I yield back.
    Chairman BUCHANAN. Mr. Curbelo.
    Mr. CURBELO. Mr. Chairman, thank you very much for this 
hearing, and I thank the Ranking Member as well.
    This issue is of critical importance to my community in 
south Florida. Most people know south Florida is one of the 
most beautiful parts of this country, a lot of hard working 
entrepreneurial people. But we have another distinction, which 
isn't as attractive or as desirable. And I will just read the 
first line from a Miami Herald article published recently. 
``With Federal agents leading Medicare fraud busts nationwide 
and in the nation's Medicare fraud capital of Miami, last week, 
a drug-dealing Miami doctor pleaded guilty to conspiracy to 
commit healthcare fraud, $4.8 million.''
    Now, people in my community are sick and tired of having 
this reputation, and people in my community ask me, how come a 
Visa and American Express and MasterCard can prevent fraud, yet 
we are always reading about the Medicare fraud that is being 
chased in the newspaper?
    And I want to know today, from both of our witnesses, if 
there is any more authority that Congress can give CMS to 
remedy this situation.
    By the way, Mr. Chairman, I would like to submit for the 
record this Miami Herald article and the corresponding DOJ 
press release.
    Mr. SCHWEIKERT [presiding]. Without objection.
    [Member Submission for the Record follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Mr. CURBELO. And we are very pleased, we are very pleased 
that there was this massive Medicare fraud bust all over the 
country recently, but that is an indication of a far greater 
problem, and this is what we are catching. We can only imagine 
what we are not catching.
    So I want to know, Mr. Morse, is there anything else that 
this institution can do to empower you to focus more on 
prevention so that we can hopefully stop reading all these 
articles about chasing fraud and putting people in jail?
    Mr. MORSE. Thank you for that question. Actually, this 
institution has done a fantastic job of doing that already. The 
Ways and Means Committee has increased HCFAC funding for 
Medicare in recent years. You have given us the authority--
actually, as you talk about the ability of credit cards to find 
fraud, we use actually a similar system from the Small Business 
Jobs Act of 2010, which allows us to do very advanced data 
analytics and identify potential patterns of fraud and abuse 
there. We have found that to be extremely effective. That 
program alone has saved over $1 billion in the last 2 years in 
terms of preventative dollars before they go out the door.
    One of the challenges that you speak to, though, is the 
complexity of actually detecting and preventing fraud, because 
a lot of it takes on-the-ground investigations. It takes 
looking through a medical record from a provider, making sure 
that that medical record actually meets what the beneficiary 
actually received in terms of the services or needed in terms 
of services. And that often is--it is labor intensive. It is 
potentially burdensome on the provider. So we do very 
cautiously balance that burden, you know, with our 
investigative work.
    But we actually have been very appreciative with everything 
the committee has done. Even most recently, in MACRA removing 
Social Security number from the beneficiary ID card in Medicare 
is going to help us along for identity theft. We have a number 
of authorities that we found to be extremely helpful, and we, 
you know, continue to do better and continue to make progress 
going forward, but----
    Mr. CURBELO. So, Mr. Morse, you don't think there is 
anything we can do on the front end as these potential 
providers, candidates to become Medicare providers are 
applying? Because I hear from legitimate healthcare providers 
all the time: The easiest thing to do is to set up a Medicare 
fraud scheme because you automatically get approved.
    Now, you have told me here today that it is a burdensome 
process to get approved as a Medicare provider? How do I 
reconcile that with what I am hearing from healthcare providers 
back home?
    Mr. MORSE. We have got a number of provider screening 
requirements that are already in place. So we screen for 
whether or not a provider is potentially, you know, a felon or 
they have any sort of felony conviction. We make sure that they 
are properly licensed in their jurisdiction. And then we also 
do, even if they are enrolled, we do continuous monitoring in 
the background. We have data systems that actually do that 
electronically without actually any burden on the provider, the 
provider doesn't know this is going on, and we are able to kind 
of look and make sure that that provider is maintaining their 
compliance with our program standards.
    But, you know, we will then take action if we find that 
there is any potential abuse of billing or any issues that 
arise from that provider's behavior.
    Mr. CURBELO. Thank you, Mr. Morse.
    And, Mr. Chairman, I want to thank you again. Whatever it 
takes, I think this Committee, this Congress needs to empower 
these agencies to remedy this situation for taxpayers, for 
Medicare beneficiaries. It is very demoralizing to read on a 
weekly basis in Miami these articles about people running these 
schemes that have cost the taxpayers billions and billions of 
dollars, and by the way, threaten the solvency of Medicare, 
Social Security, and many other of our entitlement programs.
    I thank our witnesses. We need to do much better. Thank 
you, Mr. Chairman, for this opportunity.
    Chairman BUCHANAN. [Presiding.] Thank you.
    I want to thank our witnesses. A couple of questions. When 
we talk about a number of $60 billion, is that a ballpark? 
Could it be $80 billion, $90 billion? Do we really know what 
that number is? I mean, is that just an estimate?
    Mr. MORSE. Thank you. Actually, so building on the 
conversation that we had with you a couple of weeks ago, it 
really is an estimate, because we are required under statute to 
estimate improper payments, and there is the IPERA legislation 
that gives guidance in terms of the things that we need to be 
able to measure for improper payments. So especially on the 
fee-for-service side, a lot of that improper payment error rate 
of that 60 billion, roughly 43 of it is Medicare fee-for-
service. Of that 43 billion about 60 percent of that is 
documentation errors. So for us to look at that----
    Chairman BUCHANAN. What about the other 40 percent, what 
happens there?
    Mr. MORSE. The other 40 percent is potentially more suspect 
behavior, and it is more challenging for us to make those 
determinations, in part, for the----
    Chairman BUCHANAN. It is an overpayment, but it might not 
beput in the category of fraud.
    Mr. MORSE. That is the challenge, yes, is making those 
determinations over--at that time, as to what constitutes the 
overpayment. Is it potential abuse or fraud or is it simply 
just an overpayment and something that Medicare otherwise 
should have paid, even if the documentation didn't line up at 
the time?
    Chairman BUCHANAN. So Medicare pays out a lot in terms of 
overpayments. What do they get back? Do we have any sense of 
that number?
    Mr. MORSE. We have prevented--well, we look at the improper 
payment rate as just an estimate. So the improper payment rate 
is just a random sample of a number of claims.
    We, from the program integrity side, at CPI, have a number 
of initiatives, many of which have been through authorizations 
from legislation from this committee, look at our potential 
return on investment.
    In 2015, we determined that we prevented or identified 
about $17 billion in improper payments to Medicare alone. That 
is mostly--almost all Medicare fee-for-service.
    Chairman BUCHANAN. Someone mentioned earlier, one of the 
Members, about auditing and going back four or five years. What 
is the likelihood of collecting anything when you go back that 
far?
    Mr. MORSE. But it is our duty to go back that far 
regardless. I mean, the challenge is, you know, making sure 
that the trust funds are--we are able to recover the dollars, 
to the extent that we can, that have gone out the door, if we 
do----
    Chairman BUCHANAN. What was the $60 billion number three 
years ago or four years ago? Has that number climbed? Has it 
stayed the same percentage? The programs increased. Is it that 
you use just a standard 10 percent? Is that what it 
historically has been or did it used to be seven or eigth and 
it has gone to 10 percent?
    Mr. MORSE. Medicare--the fee-for-service improper payment 
rate in Medicare has actually come down in recent years as we 
instituted a number of provisions. So 2 years ago, it was just 
over 12 percent. This past year, it was 11 percent. So we are 
working to, obviously, get it as low as we can be because, 
clearly, it is too high, even from our perspective.
    Chairman BUCHANAN. One of the thoughts I have is that there 
is a saying, if you can't measure it, you can't manage it. And 
we need to make sure we have good, accurate information in 
terms of trend lines and where all this is going.
    Because, obviously, 10 percent of a huge program, 700 
billion, someone mentioned 650, that is $70 billion a year in 
overpayments of fraud. That is outrageous. That is why it 
caught so much of my attention in these big programs, Social 
Security and Medicare.
    It doesn't take a big percentage to get to a gigantic 
number, and that is why I think we need to use whatever 
resources we can to take the trend line and move it in the 
other direction.
    What could we do as a Committee or in terms of policies to 
help get that number moving in the other direction? Because I 
am concerned. I mean, take a number, 60 billion, let's say we 
are still out of pocket 20, 30 billion, net, net, net. That is 
still way too much money that could be used for other things.
    Mr. MORSE. We actually--I mean, so we appreciate everything 
this committee has already done. You know, even in the time 
that I have been at CMS--the couple years that I have been at 
CMS, Ways and Means Committee has increased our HCFAC funding, 
the Healthcare Fraud and Abuse Control account funding, which 
is a funding source and authorization for a lot of Medicare's 
program integrity dollars.
    MACRA legislation has been extremely helpful for us. The 
Small Business Jobs Act has been helpful for us, the CARA 
legislation. So we actually feel as though the committee has 
been extremely supportive of program integrity work.
    Chairman BUCHANAN. One thing I would just keep in mind 
because it is such a big number is we need to have a mindset of 
continuous improvement. It doesn't matter what the number is 
until it gets to zero, which it probably never will, obviously. 
We need to be moving in that direction.
    Mr. Cosgrove, what are your thoughts on what we could be 
doing better or differently? What could we do as a Committee to 
help you guys be more successful in getting that number down, 
that percentage down?
    Mr. COSGROVE. I think that CMS has made a lot of 
improvements. We have made several recommendations to CMS that 
they need to do a better job in cases of setting objectives and 
monitoring performance, so that for the activities that are 
underway currently, they know how well they are working and how 
they can be improved.
    One recommendation that we put into our high-risk report 
was intended to help move past pay and chase by doing more 
prepayment reviews before the money actually goes out to the 
provider. Currently, the prepayment reviews are done mostly by 
the MACs, by the Medicare administrative contractors.
    There was a demonstration where the recovery audit 
contractors, who typically do postpayment reviews and collect 
fees on a contingency basis, did some prepayment reviews. We 
recommended that CMS seek legislative authority to allow the 
RACs to do prepayment reviews.
    We think that prepayment reviews are more effective and 
efficient than trying to collect the money later on, and that 
this would add additional resources to the battle against 
improper payments. So I think that is one area to consider, 
allowing the RACs to do prepayment reviews.
    Chairman BUCHANAN. Well, I think that is something we 
should look into. I think anybody knows, in business, once the 
money goes out, it is tough, especially if you are going four 
or five years later to get it back. So if you can prevent it 
from going out--if it is something that is a legitimate service 
or equipment that has been provided, it is different--but it is 
not.
    Okay. Well, let me just close with, I would like to thank 
our witnesses for appearing before us today. Please be advised 
that Members have two weeks to submit written questions to be 
answered later in writing. Those questions and your answers 
will be made part of the formal hearing record.
    And with that, the Subcommittee stands adjourned.
    [Whereupon, at 11:08 a.m., the Subcommittee was adjourned.]
    [Member Questions for the Record follow:]
    
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