[Senate Hearing 115-543]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-543

        MEDICAID FRAUD AND OVERPAYMENTS: PROBLEMS AND SOLUTIONS

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

                                 HEARING

                               BEFORE THE

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS


                             SECOND SESSION

                               __________

                             JUNE 27, 2018

                               __________

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky                  HEIDI HEITKAMP, North Dakota
JAMES LANKFORD, Oklahoma             GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming             MAGGIE HASSAN, New Hampshire
JOHN HOEVEN, North Dakota            KAMALA D. HARRIS, California
STEVE DAINES, Montana                DOUG JONES, Alabama

                  Christopher R. Hixon, Staff Director
                Gabrielle D'Adamo Singer, Chief Counsel
              David N. Brewer, Chief Investigative Counsel
                Jerome F. Markon, Senior Policy Advisor
               Margaret E. Daum, Minority Staff Director
               Stacia M. Cardille, Minority Chief Counsel
                  Courtney C. Cardin, Minority Counsel
                     Laura W. Kilbride, Chief Clerk
                   Bonni E. Dinerstein, Hearing Clerk

                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Johnson..............................................     1
    Senator McCaskill............................................     3
    Senator Carper...............................................     5
    Senator Hassan...............................................    12
    Senator Heitkamp.............................................    15
    Senator Jones................................................    19
    Senator Daines...............................................    21
Prepared statements:
    Senator Johnson..............................................    33
    Senator McCaskill............................................    35

                               WITNESSES
                        Wednesday, June 27, 2018

Hon. Eugene L. Dodaro, Comptroller General of the United States, 
  U.S. Government Accountability Office..........................     6
Brian P. Ritchie, Assistant Inspector General for Audit Services, 
  Office of Inspector General, U.S. Department of Health and 
  Human Services.................................................     8

                     Alphabetical List of Witnesses

Dodaro, Hon. Eugene L.:
    Testimony....................................................     6
    Prepared statement...........................................    39
Ritchie Brian P.:
    Testimony....................................................     8
    Prepared statement...........................................    73

                                APPENDIX

Health Care Who Pays Chart (percentage)..........................    85
Health Care Who Pays Chart (dollars).............................    86
Health Spending Chart............................................    87
Medicaid Spending Chart..........................................    88
Improper Payment Chart...........................................    89
Majority Staff Report on Medicaid Fraud..........................    90
Minority Staff Memo..............................................   114
CMS Press Release................................................   121
CMS Fact Sheet...................................................   123
Humana Underwriting Guide........................................   127
Information submitted by Mr. Dodaro..............................   170
Responses to post-hearing questions for the Record:
    Mr. Dodaro...................................................   181
    Mr. Ritchie..................................................   198
Attachments to QFRs..............................................   202

 
        MEDICAID FRAUD AND OVERPAYMENTS: PROBLEMS AND SOLUTIONS

                              ----------                              


                        WEDNESDAY, JUNE 27, 2018

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:30 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson, 
Chairman of the Committee, presiding.
    Present: Senators Johnson, Daines, McCaskill, Carper, 
Heitkamp, Hassan, Harris, and Jones.

             OPENING STATEMENT OF CHAIRMAN JOHNSON

    Chairman Johnson. Good morning. This hearing will come to 
order.
    I want to thank Gene Dodaro and our witness from the 
Inspector General (IGs) office, Mr. Brian Ritchie, for taking 
the time and for preparing your testimony. I am looking forward 
to your answering our questions.
    This hearing is on ``Medicaid Fraud and Overpayments: 
Problems and Solutions.'' I am really looking for--solutions 
would be nice. Last week, in anticipation of this hearing, 
where we delayed it a week for a number of reasons, we did 
issue our staff report, primarily based on the Government 
Accountability Office (GAO) and IG findings, just kind of 
summarized all the good work you have done. And what I would 
like to do is I have a series of charts. Members have paper 
copies at their desks. I just want to quick show why this is 
such an important issue.
    The first chart\1\ just shows who pays for health care as a 
percentage of total health care spending. You can see the trend 
since 1940 where patients were paying more than 80 cents out of 
every dollar. Today it is around 11 cents out of every dollar. 
And government has gone from not quite 20 percent to almost 50 
percent. Insurance is the remaining 40 percent.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 85.
---------------------------------------------------------------------------
    So what we have seen is a huge shift from patients being 
connected to the payment of the product to that disconnect. And 
when patients do not pay for products, they do not even know 
what they cost, and so there is not that discipline of a free 
market really disciplining the cost increase in health care. 
And from my standpoint, that is the root cause of our broken 
health care financing system, which is why health care costs 
have really risen dramatically.
    The next chart\1\ is who pays just in dollar terms. A 
little bit different-looking chart, but it basically makes the 
same point. We do have investment at the very bottom. But you 
can see what 
Americans spend totally pretty much has been the same dollar-
wise--these are inflation-adjusted dollars--but government's 
role has dramatically increased and, again, the third-party 
payer in terms of insurance has also increased dramatically.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 86.
---------------------------------------------------------------------------
    The result of all this is the next chart,\2\ health care 
spending as a percent of GDP. When you remove the discipline of 
the free market system in terms of ensuring the highest 
possible quality, lowest possible cost, best possible level of 
customer service, you see costs rise dramatically.
---------------------------------------------------------------------------
    \2\ The chart referenced by Senator Johnson appears in the Appendix 
on page 87.
---------------------------------------------------------------------------
    Now, we also can do far more--and this is a good thing--in 
terms of our medical system. We have so many miracles. So that 
also drives costs. But I have to believe the fact that 
consumers really do not care--they do not know what things 
cost, and they really do not care, other than their insurance. 
They really care about how much they pay for insurance, but the 
individual health care items, they really do not care. And so 
as a result, we have gone from in the 20s, 3.1 percent of grodd 
domestic product (GDP) being spent on health care, to in 2016 
17 percent, and there is really no relief from that in sight.
    Now, what I would say, truthfully, if Americans are 
spending their own money and in freedom were deciding to spend 
17 percent of their disposable income on improving their 
health, I would not have a problem with that. But because they 
are not spending their own money directly for this, I think 
this is a real distortion of the marketplace.
    The next chart\3\ is total Medicaid spending, which is 
really the subject of the hearing today in terms of why we have 
to be very careful with taxpayer dollars. You can see going 
back to 1965--and, again, these are just nominal dollars. They 
are not inflation-adjusted. But I did a chart inflation-
adjusted, and it looks the exact same. Medicaid was not even 
mentioned by Lyndon Johnson when he unveiled Medicare, but you 
can see the dramatic increase in Medicaid spending. Just in the 
last 10 years, it has more than doubled, from right around $200 
billion to $430 billion. That is just Federal Government 
spending.
---------------------------------------------------------------------------
    \3\ The chart referenced by Senator Johnson appears in the Appendix 
on page 88.
---------------------------------------------------------------------------
    Now, in our report we show that total taxpayer spending on 
Medicaid in 2017 was $554 billion. I think it is 2017, correct? 
Which, when you take a look at what the Federal Medicaid 
percentages should be, somewhere between 58 and 60 percent, we 
are only seeing $124 billion spent by the States versus $430 
billion spent by the Federal Government. That is a 22/78 
percent split. So I am going to dig more into those numbers. 
What happens--and it drives me nuts being an accountant--
numbers come from different sources, and it is very difficult 
to reconcile. That is something, as I am preparing for the 
hearing, that just jumped off the page for me. Why is that such 
a disconnect from, let us say, the 60 percent Federal match to 
this thing shows almost 78 percent? Maybe, General Dodaro can 
comment on that.
    Our final chart\1\ is, again, really the highlight of what 
GAO and the IG have uncovered in terms of improper payments. 
You can see in 2013 improper payments in Medicaid was $14.4 
billion. In 2017 it was $37 billion, the largest percentage of 
any agency, any program in the Federal Government in terms of 
improper payments. Coming into this role, I always thought the 
term ``improper payment'' was a little odd because it covered 
both underpayment and overpayment. In this case, only 0.8 
percent of the improper payment is underpayment, which means 
99.2 percent is overpayment. So this is payments that should 
not be made, whether they are to ineligible recipients, what 
percent of that is fraud. It is kind of hard to understand all 
that, which is another problem as well.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 89.
---------------------------------------------------------------------------
    So we will be talking about a letter we got from 
Administrator Verma yesterday announcing increased action on 
this, audits, those types of things. I will probably ask 
General Dodaro to kind of speak to his comments on that when he 
makes his opening remarks. But, anyway, this is an important 
issue. We are spending hundreds of billions of dollars. We want 
this money spent well. We certainly want to support 
individuals, help them gain access to quality care, those that 
cannot afford it. And when we have $37 billion of improper 
payments in a program that large, it is something that we need 
to pay attention to and we need to provide oversight of.
    So, with that, I will turn it over to Ranking Member 
McCaskill.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. I have a formal statement that I would 
ask be made part of the record.\2\ I want to make a couple of 
comments.
---------------------------------------------------------------------------
    \2\ The prepared statement of Senator McCaskill appears in the 
Appendix on page 35.
---------------------------------------------------------------------------
    First of all, the Chairman and I agree totally that we need 
to go after improper payments, and so does Senator Carper, who 
has been working on this for many years. All of us think we can 
find efficiencies in these programs, and we should find the 
fraudsters up front so we are not chasing payment. We should be 
more efficient with the technology, which we have struggled 
with in terms of improper payments. But there are a couple of 
things that I think need to be pointed out.
    I certainly agree with the Chairman that transparency on 
costs would help a great deal. Americans are great shoppers. 
You give me a coupon off on a cheeseburger, and I can go online 
and figure out where the very best cheeseburger is and compare 
the coupons available, and I can do that in 2 or 3 minutes 
within a 1-mile radius of anywhere I am in this country. But me 
getting my knee replaced, as a U.S. Senator, I could not get a 
straight answer on what it cost. So we cannot be good shoppers 
if we do not know what things cost, and that is all hidden 
behind the curtain. Anybody who says we have a free market in 
health care is deluding themselves. It is not a free market. 
All you have to look at is the pharmaceutical costs and what is 
happening in this country.
    We did an investigation and determined that the 20 most 
prescribed drugs in the Medicare Part D program have gone up 
consistently 10 times the rate of inflation 5 years running. 
That is because most of them do not have competition. That is 
because the system is rigged with a bogus patent system and 
with a barrier to entry for generics and, frankly, the fact 
that we are refusing to use free market principles by 
negotiating for volume discounts or allowing reimportation of 
drugs. It is ridiculous that we are handcuffing Americans with 
higher costs because we are protecting profits of the 
pharmaceutical industry, to say nothing of what has happened 
with the insurance industry.
    And I do not believe, frankly, Mr. Chairman, that the out-
of-pocket costs for the American citizen has not gone up in the 
last several years. I believe the out-of-pocket costs for 
insurance have gone up and for health care have gone up. I do 
not believe it is any longer on a downward trajectory. And the 
government spending, I think it is really important that the 
government number on this chart shows 49 percent. The majority 
of that is Medicare. So are we going to suggest that we 
privatize Medicare? I am absolutely opposed to privatizing 
Medicare.
    I think there are a lot of things we can do to put 
incentives in the right places in the system. I think we have 
done a little of that in the Affordable Care Act (ACA) where we 
punished hospitals for readmission. So now when you get out of 
the hospital, I mean, you have to sit and listen to--I know 
because when my husband had to check out of the hospital, it 
took us three times, four different people coming in, and 
telling us all the after-care and setting up the next 
appointment. That did not used to happen. But these hospitals 
know now if they are not paying attention to after-care and 
this patient comes back in, they are going to get financially 
dinged. It is working. Readmission is down, and that is a very 
expensive part of our health care delivery system.
    So if we can change where the incentives are, rewarding 
quality not quantity, this fee-for-service (FFS) thing has 
gotten our system all out of whack. A Medicare doctor cannot 
even bill for taking time with patients to explain end-of-life 
care so that someone has the opportunity to say to their loved 
ones, ``Do not keep me on a ventilator. I do not want to be on 
a ventilator.'' And most of these costs are in the last 6 
months of someone's life.
    So there are a whole lot of things we can do to bring down 
these costs, and I am all in on improper payments. But this 
notion that we are going to go after the Medicaid or Medicare 
programs or that somehow the private sector is a shining 
example of good free market behavior in this country, we have 
set up all kinds of ways to make sure they have guaranteed 
profits. That is not the way the free market is supposed to 
work.
    So I just wanted to make those points, and I do want to 
spend some time today talking about the issues, especially the 
enrollment of providers and how badly that is going, and the 
digital systems and how badly that is going in terms of cutting 
down on improper payments. But I also want to spend some time 
today talking about a previous report you did, Mr. Dodaro, on 
preexisting conditions and the behavior of insurance companies 
before we had the protections for people with preexisting 
conditions.
    Thank you, Mr. Chairman. I appreciate the hearing.
    Chairman Johnson. Let me just qualify that the chart 
showing what consumers were paying, patients, that is just 
directly paid to the provider. We pay the bill, whether it is 
our taxes to fund the government funding or whether it is 
insurance premiums to fund the insurance portion. All I am 
saying is direct payment by the patient to the provider, which 
that is where you know what things cost in general. And even 
that is generally done as co-pays, and you still do not even 
know what you are really buying. We have a broken health care 
financing system, and that drives up all these costs.
    So, again, I do not think we really disagree on a lot of 
these things. There are a lot of details. This $37 billion of 
Medicaid improper payments is just one small little chunk but 
one that I think we need to take a look at.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Mr. Chairman, I do not have a statement. I 
would like to say something. These are interesting charts. I am 
glad you provided them. One of the things I am just sitting 
here thinking, it would be interesting to know what is going on 
in terms of the amount of money that is being spent in 
uncompensated care by hospitals. As the government has spent 
more, has uncompensated care come down? It would be interesting 
to know that.
    Thank you.
    Chairman Johnson. We did issue a larger report with a lot 
more charts and graphs to try to answer that. One thing I did 
find--again, I always find it really aggravating--it is hard to 
get the information. It really is. How much do we really spend 
on drugs? What is the profitability of the entire health care 
system? It is far less than I think people imagine. So I would 
love to get more and more accurate information across the board 
on these things because in order to solve a problem, you need 
to start with information, problem definition, acknowledging we 
have the problem.
    So, anyway, I do want to ask consent to have my written 
atatement entered into the record\1\ and the letter I received 
from Seema Verma as well entered into the record.\2\
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Johnson appears in the 
Appendix on page 33.
    \2\ The letter referenced by Senator Johnson appears in the 
Appendix on page 121.
---------------------------------------------------------------------------
    With that, it is the tradition of this Committee to swear 
in witnesses, so if you will both 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.
    Mr. Ritchie. I do.
    Chairman Johnson. Please be seated.
    Our first witness absolutely deserves but does not really 
need an introduction, not before this Committee, but we have 
the Honorable Gene Dodaro, the Comptroller General of the 
United States and head of the U.S. Government Accountability 
Office. General Dodaro.

  TESTIMONY OF THE HONORABLE EUGENE L. DODARO,\1\ COMPTROLLER 
 GENERAL OF THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Mr. Dodaro. Thank you very much, Mr. Chairman. Good morning 
to you, Ranking Member McCaskill, and Senator Carper. I am very 
pleased to be here today to talk about this important topic.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Dodaro appears in the Appendix on 
page 39.
---------------------------------------------------------------------------
    The Medicaid program, serving over 73 million Americans, is 
a very critical part of our health care system as currently 
configured. But I have been very concerned about the payment 
integrity in this program for a number of years, for three main 
reasons: number one, as both of you have mentioned, Senator 
Johnson and Senator McCaskill, in your opening statements, 
improper payments are an issue. There were over $36 billion in 
overpayments for the Medicaid program for 2017. And this does 
not represent what I believe to be the full risk of the 
program.
    There are three components of the improper payment rate. 
One is fee-for-service, and right now that is over a 12 percent 
rate and is a problem. But there are two other components. One 
is managed care. That are measured by the Centers for Medicare 
and Medicaid Services (CMS) is 0.3 percent. About half of total 
Medicaid spending now is in managed care. So the efforts to 
estimate the improper payment rate do not fully represent the 
risk in the managed care portion of Medicaid, which is growing 
every year.
    Also, the beneficiary eligibility component of the improper 
payment rate has been frozen at 3.1 percent since 2014, so they 
have not really gone back in since the Affordable Care Act and 
checked on States' determination of beneficiary eligibility.
    While $36 billion of overpayments is an issue in and of 
itself and that component has been growing in fee-for-service, 
there really is not a full measure of the payment issues and 
payment integrity in the Medicaid program, number one.
    Number two are supplemental payments. These are payments 
made for uncompensated care or high concentrated rates of 
Medicaid recipients. They have been growing as well. In 2017 it 
was up to $48 billion. There are two types. One type is capped 
by statute. The other has not been capped and is discretionary. 
That has almost doubled over the years. There is no 
transparency over supplemental payments, and CMS does not have 
accurate reporting. Also it is not clear to payments are 
efficient and economical, which is one of the requirements. And 
they are potentially shifting, with the lack of transparency, 
shifting some of the costs from the States to the Federal 
Government without CMS even knowing that it is occurring. So 
that is problem number two.
    Problem number three is demonstrations where the law allows 
CMS to permit States to experiment with different approaches in 
Medicaid. Three-quarters of the States have approved 
demonstrations. Right now demonstration spending accounts for 
one-third of the total Medicaid costs. What we have found, 
though contrary to CMS policy, the approved demonstrations are 
not budget neutral. They are actually costing more money 
because they have been very liberal in how they have allowed 
States to set spending limits.
    And the evaluations of the demonstrations have serious 
limitations that have prevented anyone from learning what is 
happening with the demonstrations that could be used by others.
    Now, CMS recently took action on one aspect of this based 
on our recommendations, which is to limit the amount of excess 
spending capacity that could be carried over from one year to 
the next year. They put some limits on that. So from 2016 to 
2018, that one change that was based on our recommendations 
will save Medicaid costs of over $100 billion, and the Federal 
share will be $62.9 billion that would be saved. But that still 
does not fully respond to all our recommendations.
    Mr. Chairman, you mentioned the plan that CMS released 
yesterday. That addresses some but not all of the 
recommendations we have made. We have 83 recommendations we 
have made over the years. Only 25 have been fully implemented. 
We think the plan is a step in the right direction, and I can 
elaborate more on what we see as some of the limitations in the 
plan. But I would say, in order to stay within my limits here 
in the opening statement, that much more urgent and aggressive 
action is needed by CMS in this area, because the CMS Actuary 
estimates that Medicaid spending will be growing at 5.7 percent 
annually. And as you pointed out in your chart, the Federal 
share, the total estimated spending for Medicaid by 2025 is 
estimated to be $958 billion. So it will be knocking on the 
door of $1 trillion a year.
    So based upon that expected growth, known problems of the 
current system, I think it calls for a much more aggressive 
action plan on the part of CMS in order to deal effectively 
with payment integrity issues in the program.
    Thank you very much. I look forward to responding to 
questions at the appropriate time.
    Chairman Johnson. You said $1 trillion in 2028, correct?
    Mr. Dodaro. 2025.
    Chairman Johnson. 2025?
    Mr. Dodaro. Yes. 2025.
    Chairman Johnson. OK. In 2008 we were about $200 billion. 
It has gone from $200 billion in not even 20 years. That is 
rather shocking.
    Mr. Dodaro. This is one of the fastest-growing parts of the 
Federal Government budget. Interest is becoming a problem, too, 
on our debt, but that is a different hearing.
    Chairman Johnson. Yes, a large subject in and of itself.
    Our next witness is Brian Ritchie. Mr. Ritchie is the 
Assistant Inspector General for Audit Services in the Office of 
Inspector General (OIG) of the Department of Health and Human 
Services (HHS). Mr. Ritchie oversees audits of Medicare, 
Medicaid, and the Children's Health Insurance Program (CHIP) 
Mr. Ritchie.

 TESTIMONY OF BRIAN P. RITCHIE,\1\ ASSISTANT INSPECTOR GENERAL 
     FOR AUDIT SERVICES, OFFICE OF INSPECTOR GENERAL, U.S. 
            DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Mr. Ritchie. Good morning, Chairman Johnson, Ranking Member 
McCaskill, and distinguished Members of the Committee. Thank 
you for inviting me here today, and thank you for your 
longstanding commitment to ensuring that the Medicaid program's 
67 million beneficiaries are well served and the taxpayers' 
more than half trillion dollar investment is well spent. I 
appreciate the opportunity to discuss the Office of Inspector 
General's work and what more can be done to ensure that this 
important program operates as intended.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ritchie appears in the Appendix 
on page 73.
---------------------------------------------------------------------------
    OIG shares your commitment to protecting Medicaid from 
fraud, waste, and abuse and has an extensive body of work in 
this area. Our oversight work has identified high improper 
payment rates, inadequate program integrity safeguards, and 
beneficiary health and safety concerns.
    I will use my time today to focus on three critical areas: 
first, the need for accurate beneficiary eligibility 
determinations; second, curtailing inappropriate State 
financing mechanisms; and, third, improving national Medicaid 
data. My written testimony also notes the importance of 
provider screening, fiscal controls, quality of care, and our 
valuable partnerships.
    A strong program integrity strategy starts with prevention. 
Correctly determining beneficiary eligibility prevents Medicaid 
from making improper payments for people that are not eligible 
for the program. However, recent OIG audits in three States 
estimated that more than $1.2 billion in Federal payments were 
made on behalf of beneficiaries that were not eligible or may 
not have been eligible for Medicaid. These three States did not 
comply with requirements to verify applicants' income, 
citizenship, identity, and other eligibility criteria.
    The second area that I want to discuss is the need to 
curtail inappropriate State financing mechanisms. Over the 
years OIG has identified a number of State policies that may 
have improperly shifted costs by inflating the Federal share of 
Medicaid expenditures. States have misused provider taxes, 
intergovernmental transfers, supplemental payments, and 
inflated payment rates to increase the Federal funding that 
States receive. While CMS has tried to limit the inappropriate 
financing mechanisms, more needs to be done. CMS should closely 
review State Medicaid plans and amendments to identify any 
potentially inappropriate cost shifting.
    And, finally, I want to discuss a consistent impediment to 
effective prevention, detection, and enforcement within the 
Medicaid program. The lack of complete, accurate, and timely 
national Medicaid data hampers the ability for CMS, States, 
managed care entities, providers, OIG and GAO, and others to 
quickly identify and address problems in the program. Enhanced 
national Medicaid data would also promote value and improve 
quality of care by allowing OIG and others to leverage advanced 
data analytics to identify vulnerabilities to avoid and best 
practices to replicate. Congress has recognized the value of 
enhanced Medicaid data, but more needs to be done to achieve 
this goal. CMS must ensure that States consistently report and 
uniformly interpret the same data elements. In addition, with a 
large part of the Medicaid population receiving part or all of 
their services through managed care, CMS needs to ensure that 
States report encounter data for all managed care entities.
    So, in conclusion, OIG will continue prioritizing Medicaid 
oversight to prevent and detect fraud, waste, and abuse and 
take appropriate action when it occurs. We are committed to 
ensuring that Medicaid pays the right amount for the right 
provider, for the right service, on behalf of the right 
beneficiary.
    Thank you for your ongoing leadership and for affording me 
the opportunity to testify on this important topic.
    Chairman Johnson. Thank you, Mr. Ritchie.
    I do want to quick correct the record. The numbers I was 
using, the reason I was confused, is we got the 2016 actuarial 
report in 2017, but it was on 2015 spending, the 554, versus 
the Congressional Budget Office (CBO) 2017. So I was conflating 
both the 2017--but one--so never mind on the one. But, again, 
it is just part of the problem here. You just do not have a 
consistent set of numbers and trying to get to the bottom of 
these things is like pulling teeth.
    But, again, I appreciate our other colleagues here showing 
up for the hearing, so I will defer my questions to the end and 
be respectful of their time. Senator McCaskill.
    Senator McCaskill. I am happy to defer also to my 
colleagues.
    Chairman Johnson. Senator Carper.
    Senator Carper. Thanks so much. It is great to see both of 
you. Thank you for your long-time service and for being here. I 
said to some of the staff sitting behind me, Gene, I said if we 
had to pay you by the visit, we would be broke, because you 
come a lot and we are grateful here for your appearances.
    My colleagues have heard me saying and you have probably 
heard me say before that we talk about Matthew 25, the least of 
these, we have a moral imperative to those who are hungry, 
thirsty, naked, people who are sick and in prison, we have a 
moral imperative to those who are strangers in our land. And 
while we have a moral imperative to the least of these, there 
is also a fiscal imperative that is involved. Matthew 25 does 
not say anything about when they did not have any health care. 
My only access to health care was showing up at the emergency 
room of a hospital. They had to give me some kind of care. But 
there is a fiscal imperative to finding a way to meet those 
moral imperatives in a fiscally responsible way.
    One of the things that I learned a long time ago when I was 
new on this Committee was that this Committee, as hard as we 
might work, we can only do so much in terms of oversight over 
the Federal Government. But if we could somehow work with GAO, 
if we could work with the Inspectors General, if we could work 
with the Office of Management and Budget (OMB) and other 
watchdog organizations, we can actually make some progress.
    One of my first questions would be: Where do you think is 
the basis agreement between the two? Where do you see some 
areas of just really strong agreement that you both embrace and 
think we should?
    Mr. Dodaro. Well, I think in listening to Brian's 
statement, we are in almost total agreement on all issues. I 
think on the improper payment issue, there is strong agreement 
that the current approach does not fully account for program 
risk. The supplemental payments that Brian mentioned have not 
gotten enough oversight. There is not enough accurate 
reporting, and as a result it is not clear where costs may be 
inappropriately being shifted from the States to the Federal 
Government and not really based upon actual Medicaid spending 
in those areas. And then the demonstration projects I am not 
sure where we agree or disagree on that area because I did not 
hear him mention that. But the last comment he made was on the 
need for more and better, accurate, and timely data.
    One of the problems that has hindered us all in the past in 
the oversight community has been the fact that Medicaid data 
has been 2 and 3 years old, and that has been very problematic. 
So they have a big effort underway to addresss this issue, but 
it has to be done properly.
    So I do not see too much disagreement between the two of us 
on the analysis of the problems, and I will let Brian speak for 
himself.
    Senator Carper. OK. Thank you. Mr. Ritchie.
    Mr. Ritchie. Yes, I agree. I cannot recall ever picking up 
a GAO report and disagreeing. And I think we coordinate up 
front because we are both watchdogs over the program, and with 
the health care side of GAO, we coordinate on the Medicare and 
Medicaid work. We did not mention the demonstrations, but we 
have certainly had the body of work ongoing, and in the past on 
different waiver programs where we have seen issues. I think we 
just try not to duplicate each other's efforts but yet 
complement it, because the dollars are so valuable and rare 
that we do not want to be doing the same thing.
    I know with Mr. Dodaro's staff, with Carolyn Yocom and 
others, we will coordinate, and we will have our staff 
coordinating to make sure, but I do think the data is the key 
to a lot of this, and national data especially would really be 
helpful. Quality oversight comes at a cost, and you do need 
that data, and both the age of the data and then just the 
consistency of it.
    Some of the things we have found--I think two examples 
really drive it home--are investigators going out on the opioid 
crisis. They had a lead of a provider prescribing drugs, and 
they went and they checked one State. They knew the prescriber 
was abusing drugs in one State. They checked another State. 
They looked at the national provider identifier, and they did 
not find any hits in the claims data and thought, OK, they are 
not prescribing drugs in that State. Later they found out this 
cannot possibly be, and they looked and they found out they 
were using the Drug Enforcement Administrator number. So they 
were interpreting it differently and it did not work. And then 
on the beneficiary health and abuse side, we have a series of 
group home audits where we are looking at potential abuse and 
neglect in group homes. And to do that, we are starting at the 
emergency room, and we are looking at diagnosis codes that 
indicate potential abuse and neglect and backing up. And in one 
of the States, when we looked, the primary diagnosis code was 
not there. So we had to take steps to get around it, but it is 
not there to allow us to quickly do the job. So I think it 
would help all of us, including CMS, States, and the entities 
themselves.
    Senator Carper. Going back to the charts that the Chairman 
shared with us earlier today, they show an increasing 
commitment by the Federal Government, up to now 49 percent of 
the costs of health care are paid by the Federal Government or 
by some government. The charts do not show the number of people 
who are uncovered now, and I think it would probably look a 
good deal different, because back in 1940, 1950, and 1960, we 
had a whole lot of people who did not have coverage, any kind 
of coverage. What we have tried to do is to reduce that, and 
reducing that uncompensated care for providers.
    One of the questions I oftentimes ask when we have 
oversight hearings is: What would you do if you were in our 
shoes? And time and again over the last 17 years the witnesses 
have said, ``I would do more oversight.'' At almost every 
hearing, they say, ``Do more oversight. Keep us honest,'' that 
sort of thing.
    If you were in our shoes, given what we are facing here in 
terms of continued growing costs in Medicaid, what would you do 
if you were in our shoes? Give us three things that you would 
be doing if you were on this side of the dais.
    Mr. Dodaro. Well, I do not want to break the string of 
saying you need more oversight, but I believe that to be the 
case here. I think CMS needs to take much more aggressive and 
assertive action in these areas.
    We have some recommendations to the Congress where we have 
had disagreements with CMS in the past, and I think Congress 
could pass legislation. For example, on the budget neutrality 
issue, they have had a policy that when they approve 
demonstrations, it should be budget neutral. And we have 
repeatedly found that that is not the case. They approve 
demonstrations, and they end up costing the Federal Government 
more. And then when we looked at whether we are learning 
anything from the demonstrations, it is not clear.
    I think we have called for Congress to pass a law to 
require CMS to make sure that there are clear criteria for 
approving demonstrations that are budget neutral so it does not 
add to the costs of the Federal Government without any 
measurable benefits.
    In addition, on supplemental payments, the criteria for the 
use of approving these and how they distribute the supplemental 
payments is a problem, particularly in what is called the 
``non-disproportionate share.'' The disproportionate share is 
mandated by Congress. That is, for uncompensated care for 
hospitals or where they have high concentrations of Medicaid 
payments. These are payments over and above reimbursing them 
for the services. But there are also a lot of these non-
disproportionate share payments. They have doubled over the 
past several years, and what we have seen is that--and Brian 
mentioned this in his comment--they can meet the State share by 
having provider taxes and other intergovernmental transfers so 
that the local governments and provider provide more money. 
That requires the Federal Government to then match, and it does 
not increase the State share at all in that process. And it is 
not clear that the money is going to the people who were giving 
the greatest service or the people who have given more in 
provider taxes and payments up front. So there are questions of 
equity. We have some matters for Congress there.
    So there is oversight and legislative fixes that you could 
do.
    Senator Carper. Thank you. My time has expired. Could we 
get just maybe two quick points from Mr. Ritchie, just really 
quick? Same question. Give us two. If you were us, what would 
you be doing to follow on what Gene said? Very briefly.
    Mr. Ritchie. I think that is the answer, more oversight. 
Our focus is very much focused on prevent, detect, and enforce. 
I think specifically for Congress, I noticed in the report that 
was issued last week, touching on Mr. Dodaro's last point, you 
mentioned maybe limiting the safe harbor on the financing 
mechanisms. I think that is something in Congress' wheelhouse 
that could be done. That is something that States, we have seen 
where they have manipulated it and just shifted. I think any 
financing mechanism that is considered or in place now, I just 
think you need to ask: Are these dollars being well spent, and 
are they providing additional quality care for beneficiaries? 
And in these cases, when we are looking at it, it often seems 
like the intent is really to sort of shift the burden, not to 
provide additional care. And another one, again, prevent, 
detect, and enforce. On the enforcement side we partner with 
the Medicaid Fraud Control Units (MFCUs) a lot, and I know--I 
am not a MFCU expert, so I will throw that out there, but I 
know with our office they work closely with our investigators, 
and MFCUs enforce fraud and then they enforce the beneficiary 
abuse and neglect. And they have a limitation on that side 
where they can only do it in facilities. So on the home and 
community-based services side, they do not have the authority 
to go after those cases. So I think pursuing that, especially 
as the population moves more there. In some of the group home 
work I mentioned before, we have certainly seen a lot of 
potential abuse and neglect. To protect these beneficiaries, 
the MFCUs could play a part to enforce that and ensure the 
safety, and that is something the Congress could help with.
    Senator Carper. Thank you.
    Mr. Chairman, it always comes back to the MFCUs.
    Chairman Johnson. Apparently. Senator Hassan.

              OPENING STATEMENT OF SENATOR HASSAN

    Senator Hassan. Thank you, Mr. Chair and Ranking Member 
McCaskill, and thank you, Mr. Dodaro and Mr. Ritchie, for being 
here today.
    Thousands of Granite Staters rely on Medicaid for really 
critical care. They use it to stay healthy, and they also use 
it to access substance use disorder services. As you know, New 
Hampshire has been particularly hard-hit by the opioid 
epidemic, and Medicaid has been a true lifeline for those 
suffering from addiction, which is why Granite Staters were so 
adamant last year in their opposition to Republican attempts to 
dismantle the Medicaid program.
    Last year Granite Staters and people from all across 
America raised their voices and spoke out against Republican 
attempts to cut and cap Medicaid. They recognized the 
importance of the Medicaid program for kids, for families, for 
older adults. I will note that after we expanded Medicaid in 
New Hampshire, the number of cases in which people got health 
care and then could return to work, having been sidelined by 
chronic illness, were substantial. So protecting Medicaid's 
integrity is critical to protecting the Medicaid program for 
vulnerable populations.
    I agree with your findings that CMS should be doing more to 
ensure that States are doing all they can to ensure the 
integrity of the Medicaid program because millions of Americans 
rely on Medicaid for care. From the reports that form the basis 
of your testimony, it appears that improving provider screening 
and analyzing claims data for patterns of fraud would go a long 
way toward reducing improper payments because most improper 
payments stem from the conduct of providers rather than from 
Medicaid beneficiaries.
    Do both of you agree with that assessment? I will start 
with you, Mr. Dodaro.
    Mr. Dodaro. I think so far the data indicates that, but 
that is because most of the focus has been on the providers. 
They really have not focused on the beneficiary eligibility 
area. That rate has been frozen since 2014. They are planning 
now to start looking at that in 2019 through 2022, so that we 
would learn more about the beneficiary area. So I think both 
need to be attended to.
    Senator Hassan. OK. Thank you. Mr. Ritchie.
    Mr. Ritchie. I am sorry. Could you repeat the question?
    Senator Hassan. So the reports that form the basis of the 
testimony that you provided, it appears that it is critical to 
improve provider screening and analyzing claims data for 
patterns of fraud, because most improper payments stem from the 
conduct of providers rather than Medicaid beneficiaries.
    Mr. Ritchie. Yes, I do not know that we really have work 
specifically targeting that, but I would say our beneficiary 
eligibility concerns are--our three recent eligibility reports 
that I referred to in our testimony, those were cases where the 
State systems did not work, and beneficiaries that did not meet 
the criteria were enrolled. So it was not a case of intentional 
fraud or anything like that, but they were improper payments 
that were made to beneficiaries who----
    Senator Hassan. But I also just do not want to take the eye 
off the ball that there are providers who are engaged in----
    Mr. Ritchie. Oh, absolutely.
    Senator Hassan [continuing]. Fraud and abuse, and I do not 
want to be scapegoating beneficiaries who may think they are 
eligible, even if they are not.
    Mr. Ritchie. I totally agree. And when I mentioned before 
our prevent, detect, and enforce, I mean, prevention to us is 
by far the key. If you can up front get an enrollment system, 
get an eligibility system that keeps bad actors out, that does 
a thorough job of knowing who you are doing business with, we 
have seen cases where States are not collecting the correct 
ownership information, cases where someone gets terminated in 
one State and another State does not have the data to tell so 
they can enroll there. So just a consistent--again, back to the 
data theme, sorry, but to know that these people are not there 
and keep the bad players out, it can prevent a lot of improper 
payments up front so you are not paying and chasing them down.
    Senator Hassan. Well, thank you.
    I do want to change to a different topic, Mr. Ritchie, 
because of recent events. Like my colleagues who have spoken 
already about this, I am outraged at the humanitarian crisis 
that President Trump has created on our Southern Border. 
Pediatricians, psychologists, and health professionals have 
been raising the alarm about the irreparable harm, including 
brain development and long-term behavioral health issues, that 
forcibly separating children from their parents can cause. We 
must strengthen border security, but we have to do that in a 
way remaining true to our American values. And I think we all 
agree here that this is not about politics. It is about our 
moral obligation to stand up and act in the face of clear and 
absolute injustice.
    The President created this crisis, and, unfortunately, his 
Executive Order (EO) seems to have created even more confusion 
at HHS and other agencies scrambling to implement it. And then, 
frankly, Secretary Azar yesterday further confused things by 
testifying that in order for children to be reunited with 
parents who have asylum claims, the parents have to give up the 
asylum claims, which is a violation of so many fundamental 
American values that it is just hard to grasp.
    So, Mr. Ritchie, I am participating in formal requests to 
your office to review the Office of Refugee Resettlement's 
(ORR) response to the Administration's practice of separating 
children and parents. I know this is not your specific area, 
but as a representative of your office, do you know whether you 
plan to investigate the response to this issue of family 
separation?
    Mr. Ritchie. Yes, so you are correct, it is not my area. 
But I do know a bit about this. I know it is a high priority 
within our office, and I did--knowing, obviously, that this is 
such a high priority there and that I was coming here today, I 
asked the people that were doing it a little bit about it, so I 
can tell you what I do know. We obviously have some past work 
on the ORR. Since 2006, OIG has provided oversight of the 
unaccompanied alien children (UAC) program operated by the 
Office of Refugee Resettlement. And what we have ongoing right 
now and planned, we are planning nationwide work that is going 
to focus on the health and safety of the children in the 
facilities. It is underway so the plan is in place. In fact, we 
had sort of boots-on-the-ground investigators and auditors last 
week at four facilities, and they are back now in the office 
planning the work. We could certainly set up a briefing for you 
or anyone else that is interested as soon as that work is 
ready, because we are concerned and want to have the oversight 
of that and see how things are going.
    We also are wrapping up some work at 11 facilities and 
looking at the health and safety controls that were in place. 
That actually is prior to 2018, but it is going to serve as the 
launching point for new work but the data is prior to 2018, so 
it may not reflect the current condition, but it will reflect 
some of the current work that we will be doing.
    Senator Hassan. Well, thank you for the response, and thank 
you for thinking ahead to this hearing and anticipating that we 
may be interested in it and asking about it. What I would ask 
is that you bring a message back to Mr. Levinson and the rest 
of the IG's office. This issue, what is happening to these 
children today, now, every minute, every hour, every day, every 
week, month that they are separated from their parents is doing 
them irreparable harm, and I would hope and expect that the 
Department reprioritize as necessary to get not only boots on 
the ground to find out what is happening, but also to develop a 
policy that is consistent and reflects the urgency and the 
priority that the American people place on reuniting these 
children.
    Certainly the government of the United States of America 
can reunite 2,000 children--and it is a little bit over 2,000 
children if Secretary Azar's testimony yesterday was correct. 
Certainly the U.S. Government can find a way to reunite these 
children, even if it means reorganizing and reprioritizing 
resources. So I hope you will take that message back. I thank 
you for your testimony today.
    Thank you, Mr. Chair.
    Chairman Johnson. Senator Heitkamp.

             OPENING STATEMENT OF SENATOR HEITKAMP

    Senator Heitkamp. Thank you, Mr. Chairman. And I apologize 
I was not here during your testimony, but I can only imagine it 
did not escape your notice that CMS, who is not here today even 
though they have been invited, actually issued a couple press 
releases yesterday with some ideas on how they could better 
facilitate stopping fraud, waste, and abuse. It is really 
unfortunate that they are not here to have that conversation.
    Chairman Johnson. Senator Heitkamp, let me just clarify. I 
did speak with Administrator Verma, and she is happy to come 
in, whenever we do a follow up hearing on this. So she is more 
than willing to testify. So I just want to put that on the 
record. She offered to do that, and we will certainly----
    Senator Heitkamp. Well, is there a reason why she is not 
here today?
    Chairman Johnson. I just do not think she was prepared.
    Senator Heitkamp. That is even more frightening than she is 
not here today.
    Chairman Johnson. From my standpoint, I was happy to first 
hear the testimony from GAO and the IG, and then we will follow 
up on it. Again, it was a press release. I said it was a 
letter. It was a press release and there is a fact sheet, and 
this is going to be ongoing oversight.
    Senator Heitkamp. Well, time is wasting. --
    Senator McCaskill. I think we need to be clear. She was 
invited and declined to come and, instead of coming, issued a 
press release. I think that is fair, and that is what the facts 
are, and I think it is important to put those facts out there.
    Chairman Johnson. I understand, but also the fact is she is 
willing to come and testify in the future, and it will be the 
reasonably near future.
    Senator Heitkamp. I get it, and I voted for her, and I 
think that she is competent. But the bottom line is if she was 
not prepared to testify in front of us, she should not have 
been prepared to send out a press release.
    And so if I can just ask, have you had a chance, Mr. Dodaro 
or Mr. Ritchie, to review her statements?
    Mr. Dodaro. My staff has, and they briefed me on it.
    Senator Heitkamp. And do you believe that this is a good 
start, a finished product, or needs some work and collaboration 
to try and create a network and a consistent amount of 
accountability for trillions of Federal dollars and State 
dollars that are being spent so that we can avoid fraud, waste, 
and abuse no matter who is committing it?
    Mr. Dodaro. Yes, we think it is a step in the right 
direction, but much more neededs to be done. There are details 
that are not in there that I would have expected to be 
included, some milestones. There are some areas not covered, 
like supplemental payments and demonstrations that I would have 
expected to be covered. We have, as I mentioned, 83 
recommendations that we have made to them. They have 
implemented 25 so far. And the plan does not address all of our 
recommendations.
    So much more needs to be done. I think there needs to be 
more aggressive and urgent oversight.
    Senator Heitkamp. I think that my point that I am getting 
at is that when we look at this, we need a structure because if 
we just deal with taking care of the waste, fraud, and abuse of 
today, there are going to be other opportunities for waste, 
fraud, and abuse, and we need to know who is accountable and 
how we are going to hold people accountable for making payments 
that are inappropriate, putting people on Medicaid rolls or 
Medicare rolls that is not appropriate. We have to get a handle 
on this.
    I do not disagree with the looming problem, and the low-
hanging fruit in taking care of our health care costs on the 
Federal Government is stopping waste, fraud, and abuse. And, I 
can tell you, when I was the Attorney General (AG), there was 
this collaborative process with State Attorneys General. Where 
did that go? What do we know about a structure that is in 
place, working with the State, auditors with the State 
Inspectors General, to try and get an overall plan so that we 
can have meaningful accountability?
    The frustration that I have is that we come here and we are 
picking around the edges and getting distracted without really 
thinking about the overall structure of oversight. And, it is 
not acceptable that the recommendations from GAO have not been 
responded to. This is a big-ticket item, behind national 
defense and is probably going to loom bigger than national 
defense. We have to get ahead of this. And to me, the 
frustration that the American people have is that they are 
willing to give people some help. They are willing to recognize 
that providers needs to pay the bills. But they do not want 
this money wasted.
    And so, when you look at structure, Mr. Dodaro, and you 
think, OK, we have these State agencies, they have 
responsibility as well. Fifty percent in North Dakota of this 
money that is spent on Medicaid is State-based money. Where 
have been historically the gaps? Who have you seen on the State 
side do an excellent job in holding people accountable? And has 
the Federal Government learned from State audit programs on 
what we could do more effectively?
    Mr. Dodaro. Yes, well, one of the biggest gaps has been 
that the State auditors have not been involved on a regular 
basis. This is one of the points that I have made. In fact, I 
have brokered meetings between State auditors and CMS in order 
to make sure that they are brought into the program. A lot has 
been focused on the Attorneys General and the fraud units in 
the States, but not the State auditors. The State auditors need 
to be involved much more in this program. They are willing to 
do it, but they need to be brought into the structure. They 
need to be compensated. They can have a big effect on this 
issue.
    Senator Heitkamp. And another place where we share revenue 
in Minerals Management Service, we have an audit program that 
is pretty robust to try and make sure that people are paying 
the appropriate royalty, there is a great example of Federal-
State collaboration where you know who has the lines of 
authority and who has oversight over those lines of authority. 
So it is not like we are without examples on how we could do 
this better.
    Mr. Dodaro. Right.
    Senator Heitkamp. The problem that you have with AGs is 
that assumes automatically all fraud, waste, and abuse is 
criminal or that you are going to take it criminal.
    Mr. Dodaro. Right.
    Senator Heitkamp. Do you think there is appropriate civil 
penalties for fraud, waste, and abuse to provide a substantial 
deterrent?
    Mr. Dodaro. I do not know offhand to be able to answer that 
right now. I could provide something for the record.\1\
---------------------------------------------------------------------------
    \1\ The information submitted by Mr. Dodaro appears in the Appendix 
on page 170.
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    Senator Heitkamp. Maybe, Mr. Ritchie, you know if instead 
of just having to go the very aggressive action of filing an 
indictment and prosecuting people versus, no, do not do that, 
repay the money, is there an effective system of civil 
penalties?
    Mr. Ritchie. That is not my area of expertise. I do know 
our office works with the MFCUs who can pursue cases, and I 
know our office has civil remedies, civil monetary penalties 
and exclusions and things like that available. So I believe 
they can do some of that, but I could get you a better answer 
and consult with my colleagues and get back to you.
    Senator Heitkamp. I think it is important that we not 
ignore some additional legislative tools, whether it is 
additional incentives to work with the States, additional 
incentives, and then putting together with the recommendations 
at HHS a robust and very clear line of authority on audit 
responsibility so that we are not picking around the edges 
here, that we are actually creating a program that will 
solidify the frustration that the American public has and the 
frustration that we have, that we are not getting at waste, 
fraud, and abuse as effectively as what we should.
    Mr. Dodaro. I agree. I think the other biggest gap in this 
whole area--and I mentioned this in my opening statement--is 
the managed care portion of Medicaid. The managed care 
contractors have not been audited on a regular basis. There is 
rule out to start auditing them, but that is half of Medicaid 
spending. So the known overpayments right now are mostly in the 
fee-for-service area, and the beneficiary eligibility audits 
have been frozen since 2014. So there are huge gaps in 
knowledge about the extent of the program integrity issues in 
the Medicaid program, and much more needs to be done.
    I agree with you, they need an overall plan, and they need 
to be held accountable for it. And there are more resources 
that need to be available, including the State auditors.
    Senator Heitkamp. And if I can just make one final comment, 
when you do not do those audits, you do not see the patterns in 
behavior that either could be deterred or they could be, in 
fact, prosecuted and deterred. And so that is why it is really 
important that these audits be current, that these audits see 
trend lines, and that we actually take the appropriate action 
to do prevention, whether it is on the benefit side, whether it 
is on the provider side. This is incredibly frustrating to me 
because it should be the most robust audit program in the 
Congress and in the Administration, and it seems to me it is 
not.
    Mr. Dodaro. Well, that is why it has been on our High-Risk 
List since 2003. It is also why I am here today instead of 
sending another GAO witness because I am personally concerned 
about the program integrity issues of Medicaid and its expected 
continued growth of 5.7 percent a year. As I mentioned earlier, 
by 2025 the estimated total government spending, Federal and 
State, on this is knocking on the door of $1 trillion a year. 
And it is a very important program. I agree it is a critical 
service that needs to be delivered. But we need to get a better 
handle on the integrity of the program to make sure that we are 
not wasting money that could be better used to provide 
legitimate health care services.
    Senator Heitkamp. I appreciate so much what the IGs do and 
what you do, Mr. Dodaro. You guys are doing work. We hope you 
are just not hollering into the empty well, that someone is 
actually listening to you and taking your advice, and that is 
why we are here.
    Chairman Johnson. Let me clarify because I do not want to 
be putting words into Administrator Verma's mouth. She was not 
available. OK? About a month ago, she had to go to her child's 
graduation. My assumption is that when I say ``not prepared,'' 
not far enough along in the process to really have the 
testimony be all that particularly valuable at this point.
    Now, trust me, I wish years ago, whoever the CMS Director 
or Administrator was further along in the process. So from my 
standpoint, this is progress. She has agreed to testify in the 
future. We are holding this hearing to define the problem, to 
put pressure on CMS to come up with--OK, we got the fact sheet. 
We have a little bit of a game plan. We are going to want to 
see more meat on the bones of that fact sheet.
    So this is why we do this. We do put hopefully cooperative 
pressure on the agency to finally start doing this, and it has 
not been done since 2003.
    Senator Heitkamp. Mr. Chairman, if I can just say, I would 
be more sympathetic if she had not conveniently released a 
press release yesterday. I would be more sympathetic. I would 
say, ``Fine, she is taking this seriously. She wants to come up 
with a robust plan.'' Instead, it seems to me that what 
happened here was, ``Oh, this is going to get talked about, so 
I need to have some talking points about this,'' instead of 
actually sitting down with us. She inherited this mess. I get 
that. But this has to be a priority. I talked to her about this 
as a priority. And so my frustration is then do not issue a 
press release.
    Chairman Johnson. Again, I appreciate the heat you are 
putting on CMS. I am putting on the same heat, OK? And so this 
is good. This is exactly what we should be doing. We are 
providing oversight, and it will be interesting when she does 
come to testify, and it will be a matter of do we want it in a 
month, do we want it in 2 months. We will work together with 
you on that.
    Senator Heitkamp. I want a plan.
    Chairman Johnson. So do I.
    Senator Heitkamp. And I want it sooner rather than later.
    Chairman Johnson. Right. I want a lot of meat on the bones 
of that plan. I think our witnesses do as well. Senator Jones.

               OPENING STATEMENT OF SENATOR JONES

    Senator Jones. Thank you, Mr. Chairman. And thank you to 
both the witnesses for being here. I apologize for having to 
attend another hearing on health care costs in the Health, 
Education Labor and Pension (HELP) Committee.
    I want to just follow up a couple of things. One, I want to 
echo what Senator Hassan said about what is going on at the 
border and families. I do not need to repeat all of that. I 
share every concern that she expressed. I really appreciate 
that she did that. And, Mr. Ritchie, I appreciate, as she said, 
your anticipating some of these questions.
    My one quick question to you on that is: Will any of your 
follow up work on that issue with what is going on down there, 
will that also be looking to see whether or not the 
Administration is complying with the injunction that was issued 
yesterday concerning the time limits given to bring these 
families back together?
    Mr. Ritchie. That I am not sure because, again, they were 
just out last week looking, and they are developing the plan 
now. They are probably meeting back in the office as we speak. 
So, again, they can provide a briefing in the very near future, 
as they do it, but the plan is being developed, so we can 
certainly take that into consideration as they go. I know they 
want to do as thorough of an approach as they can. It is a plan 
in development, because the work that they have completed is 
based on prior to 2018. And the other thing that I did not 
mention before is we do have reports that come in from ORR--we 
have been getting them since 2014--of serious incidents of 
abuse and neglect that occur, and we meet with ORR leadership 
on an as-needed basis on those. But, some of that could factor 
into it, too.
    But, again, I am sorry, not my area. I am not part of the 
planning, and so I am not well informed enough to answer that. 
But the plan is being developed as we speak.
    Senator Jones. All right. Mr. Dodaro?
    Mr. Dodaro. Yes, Senator Jones, Senator Hassan, we have 
been asked at GAO as well to look at the process for tracking 
these children in custody. We got the request this week. We 
immediately are starting the work in that area. So we will be 
happy as that work proceeds to follow up with you as well.
    Senator Jones. All right. Great. I appreciate that from 
both of you and urge you to do that. I think that that is one 
of the top priorities that we ought to have as a country, and 
the Administration and Congress ought to both have there.
    I want to then just briefly follow up from Senator 
Heitkamp's speeches, because I share those same concerns. I am 
a former prosecutor in Alabama. I have also had to defend cases 
of fraud and abuse. And so the whole issue of fraud and abuse 
is an important one.
    Mr. Dodaro, you said, in response to the letter that CMS 
issued yesterday, that you would have liked to have seen more 
details, that you would have expected to see more detail. You 
also mentioned something about aggressive oversight, and I 
would like for you, if you could, for the record today just 
expand on that a little bit, of what you would have expected to 
see in that letter, the details, and I know you have a lot of 
recommendations, you cannot go through them all. And then also 
kind of expand on your comments about aggressive oversight.
    Mr. Dodaro. Yes. First, there is a section in the plan that 
talks about improving the quality of information--accuracy and 
completeness of information. I would expect to see more on how 
they are planning to make sure that it is comparable across the 
States, how they are going to use it for oversight and some 
milestones for when these things will occur over a period of 
time. As I mentioned earlier, and Brian has mentioned several 
times, the lack of complete and accurate information is an 
impediment to oversight. So it is important that it be done on 
an aggressive schedule going forward.
    I would have expected to see more in the plan about the 
supplemental payments which are payments, made for 
uncompensated care and other things, to respond to our 
recommendations about making sure they are economical and 
efficient payments based on good data from the States. And, 
that the money is actually going to the right people as it is 
demonstrated within the area.
    I would have expected to see more on the demonstration 
projects that we have said have not been budget neutral, and 
the evaluations have not been thorough. We are not learning a 
lot from the demonstrations, even though they are costing more 
Federal money than they were supposed to in those areas.
    I would have expected to see more on use of State auditors. 
I have had this discussion. They have had some discussions with 
the State auditors, but there is no plan to use the State 
auditors. In some of the States, as I am sure you are well 
aware of, Medicaid is over a third of the total spending for 
the States. The State auditors should be involved on a robust 
basis, and it is in the Federal Government's interest to 
encourage them to do that and provide some resources for them. 
I think it will be a great return on investment.
    One other thing is beneficiary eligibility determinations, 
which they have had on hold. By the time they start it, it will 
be 5 years since they have really done any audits of 
beneficiary eligibility determinations. They are planning to do 
it over a 3-year cycle. There is no reason that this cannot be 
done on a faster basis if they apply additional resources. I 
think waiting until 2021 to finish all the States is too long, 
given the fact that Medicaid spending during that period of 
time is going to grow 15, 20 percent, and still be on the rise.
    So these are the things that I mean about being more 
aggressive, and with the actions that they have said, including 
other actions and moving faster.
    Senator Jones. OK. Well, thank you very much for that. My 
time is winding down. Mr. Chairman, I may have some other 
questions for the record. I would like to just make two points.
    One--and I continue to do this every time I get a chance--
my State did not expand Medicaid. We left a lot of money on the 
table, and I have people in my State--we have a very poor 
State. We have a very unhealthy State. We have a lot of people 
in my State, 200,000 or so by every estimate, that could have 
benefited from the expansion of Medicaid, not to mention the 
economic value that would have been brought by bringing those 
dollars in and expanding those health care deliveries in the 
areas of my State that need it so badly. We are losing health 
care providers in my rural Alabama left and right.
    The last thing--and, Mr. Chairman, I appreciate the charts 
here. Those are always very helpful. You are very good at that, 
by the way. I would note an interesting comment from the 
hearing that is going on in the HELP
    Committee on the same issue about driving down health care, 
that these charts and all at the end of the day on who pays, it 
is the American taxpayer. That is why it is so important. That 
is why Senator Heitkamp was so animated about the fraud and 
abuse and the way we do this and why we should be involved, 
because at the end of the day, whether it is government, 
whether it is insurance or out-of-pocket, it is our 
constituents who are paying for the health care and everything 
we are doing.
    So, with that, I will yield the remaining 27 seconds. 
Actually, I am over.
    Chairman Johnson. Trust me, I understand we all pay it. It 
is just the form of payment. That first chart was really 
talking about what you pay directly to the provider.
    By the way, I actually should have brought our more 
extensive report on just health care spending where we have a 
lot more charts. So we will make sure you have that in your 
office. Senator Daines.

              OPENING STATEMENT OF SENATOR DAINES

    Senator Daines. Chairman Johnson, thank you, and Ranking 
Member McCaskill for having this hearing and compiling this 
very important report. I am very appreciative of the dedication 
of the Committee to uncover these areas for improvement in the 
Administration of Medicaid, which, as we know, is experiencing 
skyrocketing costs.
    Mr. Chairman, this chart here, this reminds me of a steep 
ski jump in Montana, looking at not only where we are at but 
where we are going to be in the next 10 years.
    Chairman Johnson. One I would not want to go down.
    Senator Daines. This would be one that my boys would be 
excited about in a terrain park. I can tell you that.
    Taken by itself, the waste and fraud of the Medicaid 
program nearly exceeds the entire budgets of the Department of 
Agriculture (USDA), the Department of Commerce, and the 
Department of Interior (DOI) combined. I think about how we 
battle here for, for example, the full funding of Land and 
Water Conservation Fund (LWCF) with some $37 billion of 
overpayments. So the interest on that alone could fund LWCF 
fully. I hope we could make some progress on addressing 
Medicaid's soaring expenses so that we can protect taxpayers 
and safeguard the program, this important safety net for those 
who truly need it the most.
    Mr. Ritchie, Homeland Security and Governmental Affairs 
Committee (HSGAC's) oversight report pointed to structural 
incentives in Obamacare and Medicaid expansion for States to 
enroll as many people on the program as possible. The report 
cites the ACA State reimbursement formula, which is driven by 
the number of enrollees, and Medicaid's 100 percent cost 
coverage in the first 3 years.
    Do you agree with the report's assessment that these 
financial incentives may result in States adding people to 
Medicaid who do not truly meet eligibility requirements?
    Mr. Ritchie. We have not done anything looking at the 
incentive, but I would say we have done the recent eligibility 
reports that we mentioned in our testimony and that I mentioned 
earlier, and with those eligibility reports, we found that 
people were certainly enrolled that were not eligible. So there 
is a concern there.
    Also, with the increased 100 percent Federal Medical 
Assistance Percentages (FMAP), or Federal matching funds we 
have done, this is not the first time that Medicaid has been 
set up where they have paid at one level for a service versus 
another level, and we have a history of work where we have 
looked to see if the payments have been appropriate. We have 
seen where they have offered those increased payments, there 
have been inappropriate payments where things have been 
submitted at the higher level versus the other level. So 
certainly the past has shown work where an increased Federal 
participation has led to improper payments. So from our 
perspective, we follow a risk assessment. We see that there is 
certainly risk there. And from an eligibility perspective, 
regardless of the policy decision of whether it is 100 percent 
of Federal poverty level or 138 percent, we think the rules 
need to be followed, that the right beneficiaries need to be 
enrolled, and that is clearly not happening right now.
    Senator Daines. Well, I mean, just look at it. If you are a 
State and you are held accountable, like most States are for 
balancing their budget, which we are not held accountable for 
here, I just testified in front of the Select Committee on 
Budget Reform that needs to be done. It just continues to 
baffle me that Washington, DC., is not held accountable for a 
balanced budget but the States are. And because the States are, 
if you give an incentive to the State where they can offload 
for that FMAP, in Montana, 67 percent FMAP, take either that 
number covered by the Federal Government or move to 100 
percent, what is the incentive? Do you think that could maybe 
factor into a State's decision to move more folks in Medicaid 
expansion because it is not costing the State any money for a 
period of time, at least for 3 years? And then it is 90 percent 
after that.
    Mr. Ritchie. Right. But, again, I mean, we do not look at 
the political decision of doing that, but we do look at the 
criteria, and----
    Senator Daines. And I am not saying it is a political 
decision. It is just, if you are looking at the math----
    Mr. Ritchie. Right, but there is different criteria for 
each category, so people that--like when we did our eligibility 
determination reviews, we found cases where people would have 
qualified for the standard Medicaid, but they were determined 
to be in the higher Medicaid, so that was an issue. We did not 
find it was outright fraud. We found it was system and human 
data entry errors that led to it. But our audit also was not 
designed to do that. But if they meet that 138 percent and they 
qualify for one category, the 100 percent, they meet the other 
category.
    Senator Daines. Mr. Ritchie, for fiscal year (FY) 2017 GAO 
found that Medicaid overpayments were $36.4 billion. If 
Medicaid grows at its current expected pace to $900 billion by 
2025, overpayments, kind of using the rough percentages there, 
it could be as high as $55 billion. I applaud CMS for yesterday 
announcing initiatives designed to improve the Medicaid program 
integrity by taking a more active role in auditing the program.
    As Administrator Verma's Medicaid Integrity Initiative 
begins, Mr. Ritchie, what do you believe are the keys to its 
success?
    Mr. Ritchie. Well, I agree with GAO that I think it is a 
step in a positive direction. I have not had a lot of time to 
sort of go through, and it did not have a lot of the details 
there, but I know in working with CMS it is reflecting some of 
the work that we have done and that we have recommended. I 
think they are taking positive steps there. I think a lot more 
needs to happen and more details need to be there. But, again, 
our key issues and the key things they need to do, the most 
important is prevent, is up front making sure that the 
fraudulent providers, providers that should not be in the 
program are prevented from getting in, and then you have 
prevented improper payments up front, making sure along the 
lines of the prior question that eligible beneficiaries are in 
and the dollars are being spent on the people that need to and 
deserve to be in the program. And then data has been a big 
theme of our discussion today and what I brought up, having 
improved data is it allows everyone that is providing program 
oversight to actually identify and detect the issues of fraud, 
waste, and abuse quickly; and then once you find them, enforce 
it, deal with it quickly, recover the money, and put added 
safeguards in place to prevent additional future payments.
    Senator Daines. Thank you.
    I want to ask a question of Mr. Dodaro here before I run 
out of time. In fiscal year 2013, Federal and State Medicaid 
cost taxpayers about $287 billion, just a little less than 
that. But the program double its expenses to $596 billion.
    Are you concerned that there has been an increased 
overpayment and fraud following the States' expansion of 
Medicaid?
    Mr. Dodaro. I am concerned that the full extent of program 
risks in the Medicaid program have not been adequately 
determined, and by that I mean that part of the growth has been 
in the managed care portion of the program, and there have been 
no audits of the managed care providers except a few that the 
State auditors have done and some other ones, and the IG. The 
beneficiary eligibility determination rate, improper payment 
rate, has been frozen at 3.1 percent since 2004. So there is no 
real good information about whether or not the beneficiaries' 
determinations have been done properly under the expansion 
program, because that program has been suspended. So I am 
concerned about this. That is why I am here today urging 
greater attention to this very important issue. And the growth 
in Medicaid is expected, by the CMS Actuary, to be 5.7 percent 
a year. And as you mentioned and we have in our report, by 2025 
it will be knocking, total costs, on the door of about $1 
trillion.
    So there must be greater attention to this program to 
ensure the integrity of it and its sustainability over a long 
period of time.
    Senator Daines. Thank you, Mr. Dodaro, and thank you for 
remaining concerned, and I ask that you continue to remain 
concerned. I appreciate it.
    Mr. Dodaro. Thank you.
    Chairman Johnson. I want to pick up on two lines of Senator 
Daines' questioning, first of all, the beneficiary eligibility. 
I think, General Dodaro, you said something, we have really not 
looked at it. Isn't it basically true one of the reasons we 
have not really dug into the eligibility is because that match 
with the States, we pretty well relied on the States having the 
incentive to police that themselves because they are spending 
money as well. Is that kind of one of the dynamics? And then, 
of course, when you expand Medicaid and it is a 100 percent 
match, now you literally have given them a great incentive to 
sign up people that necessarily are not eligible, which is why 
in the IG report and we have highlighted in our report, for 
example, in California, about $1 billion worth of Medicaid 
funds for 445,000 ineligible--isn't that kind of dynamic going 
on here? In the past we just really relied on the States 
spending money. They are not going to want to spend money on 
ineligible individuals because they are having to pick up about 
40 percent of the tab. But now with Medicaid expansion, they 
have every incentive to sign as many people up as possible. Do 
you want to comment on that?
    Mr. Dodaro. Yes. The Affordable Care Act required greater 
screening of both providers and there were new eligibility 
determinations for beneficiaries as well.
    Now, from my perspective, when you introduce new 
requirements, there is every reason to believe that there needs 
to be a greater oversight during that period, not less. CMS 
took the approach that basically the States need time to adjust 
to these new requirements over time, so CMS was not going to go 
in and take a look until States have had time to adjust. I do 
not agree with that. I do not think that was the right 
approach. When you make changes, you should be looking more at 
the internal controls that are in place to make sure that those 
new changes are implemented properly so you can take timely 
action. But that is water under the bridge at this point. And 
so this is why I am saying that when they startin 2019 they are 
going to take one-third of the States over a 3-year period 
until they cover all the States.
    My belief is we should do more, have a more aggressive 
strategy. During that 3-year or 4-year period, by the time 
everything is done costs are going to increase over the period 
of time.
    So that is the reason that we are where we are at this 
point, from what I understand.
    Chairman Johnson. When I talked to Administrator Verma, I 
had asked her who is going to be doing the auditing, and my 
bias would be engage private sector auditors. There are plenty 
of them there in every State and in every community. So she 
said they were going to do that. Let us hope so. And if they 
are doing that, they can cover all 50 States immediately.
    Mr. Dodaro. They should use the State auditors. I mean, you 
are sitting next to a former State auditor over here, and----
    Senator McCaskill. And it would not be that hard to put 
into the single audit protocol.
    Mr. Dodaro. Right. They are already auditing it and the 
State auditors know this program better than anybody.
    Senator McCaskill. Yes.
    Mr. Dodaro. And I have dealt with the State auditors for 
Louisian, Mississippi, and Massachusetts. They have started on 
their own, because I have been encouraging them to get more 
involved. But if they are given proper support and resources, 
you could help prevent a lot of these program integrity 
problems. And I would encourage the Congress to----
    Chairman Johnson. But the bottom line, there is no reason 
to do a third, a third, a third. There is really no reason to 
wait. Let us do now and do all 50 States.
    Mr. Dodaro. Yes, well, they are doing it based upon their 
own resources, not figuring how you could deploy resources and 
expertise that is already there resident in each State. And 
each State's program is different.
    Chairman Johnson. So clarify the managed care point. You 
are saying we are frozen. Describe what you are talking about. 
What is frozen at 3.1 percent?
    Mr. Dodaro. The beneficiary eligibility determination is 
frozen; there are three components of the improper payment 
rate. There is a fee-for-service component, and I think the 
latest is about 12.9 percent error rate. And that is where most 
of the $36 billion in overpayments come from.
    Chairman Johnson. That is what you can measure?
    Mr. Dodaro. Yes. The second part has been in place for a 
number of years.
    The second component is managed care. The managed care 
component of this is set at 0.3 percent, which is what they 
figure, because nobody is really auditing the managed care 
providers on how they are providing services. They just have 
been looking at whether or not the States are providing the 
money to the managed care providers, the organizations, but not 
the actual provision--delivery of services, whether the 
services were medically necessary, whether they are following 
all the right rules or procedures. So no one knows.
    Chairman Johnson. So, again, what set--I mean, describe 
what is the set point. What does that that do?
    Mr. Dodaro. The set point is in the beneficiary eligibility 
at 3.1 percent. The managed care rate they do every year, but 
they are not measuring everything that needs to be measured. 
That is the difference between the two. They froze the 
beneficiary eligibility determination at 3.1, which is what it 
was in 2013, I believe, or 2014. For the medicare managed care 
portion, they do an estimate every year, but it does not 
measure everything that needs to be measured for half of the 
program expenditures.
    Chairman Johnson. So another thing I wanted to clarify--and 
I am going to dig into that further. You talked about 
demonstration spending, not budget neutral. It is about a third 
of spending. From 2016 to 2018, you said there was a carryover 
of $100 billion. Just again make me understand that.
    Mr. Dodaro. Yes, because they are not going to allow them 
to carry over the expenditures. When they approve a 
demonstration, they agree in a State of what the spending limit 
could be. So if the State, let us say, just for theoretical 
purposes, sets the limit at $20 billion, but they really only 
spend $18 billion, they get to carry over the $2 billion into 
the next year. Now they are not going to allow them to 
accumulate all that and you cannot carry over all of it, and so 
they are limiting it. As we said that that it is raising the 
costs of the program to the Federal Government without a good 
basis. So they have stopped this practice.
    Chairman Johnson. So it really is use it or lose it, which 
creates its own incentives. But that is better than having this 
simply not being able to spend the money and then just banking 
it in the future.
    Mr. Dodaro. Yes, particularly if the spending limit that 
they set was based in some cases on hypothetical services and 
hypothetical costs that was not the actual costs that they had 
before.
    Chairman Johnson. OK. I do want to get into State gimmicks 
before we close out this hearing, but I will turn it over to 
Senator McCaskill.
    Senator McCaskill. I would like to first briefly talk about 
the fact that we are not doing screening and enrollments, even 
though we passed a law requiring it. It began to be a 
requirement in 2011, and the States are supposed to be 
screening and looking at enrollment requirements for the 
providers.
    Comptroller, your colleagues previously testified in the 
House that the requirement for screening and enrollment for 
Medicaid providers prevents improper payment and reduces fraud. 
Your colleague Ms. Yocom stated, ``If you can screen and enroll 
and ensure your providers act in good faith, you have managed 
most of the fraud. A beneficiary alone trying to commit fraud 
needs a complicit provider. So focusing attention on ensuring 
good screening and enrollment process is critical.''
    Do you agree with her statement? And what we can be doing, 
what can CMS be doing to require these States to do a better 
job on screening and enrollment of various providers that are 
looking to be able to collect Medicaid dollars?
    Mr. Dodaro. Yes, first of all, I agree with Ms. Yocom. She 
is sitting right behind me.
    Senator McCaskill. Thank you, Ms. Yocom.
    Mr. Dodaro. She is my best adviser on this issue and is 
very knowledgeable of the program. She is absolutely right. We 
have made many recommendations to CMS to make more databases 
available to the States.
    Now, one novel thing that is in the plan CMS--or the press 
release from yesterday is the offer for them to do some 
screening for the States on the providers as well, and I think 
that could be helpful if implemented properly as well, because 
they can access more databases. So we have been trying to make 
sure that they give more databases to the States for screening 
purposes.
    For example, on Medicare, there are some of the same 
providers in both programs, and you can use the experience with 
the Medicare screening to help Medicaid as well. So that has 
been one of our recommendations: to improve the accuracy of the 
databases. We have been trying for a while to get better, more 
accurate Death Master File (DMF) information to the States as 
well. And it is particularly important that CMS help because 
beneficiaries may move from State to States.
    Senator McCaskill. Correct.
    Mr. Dodaro. So those are some of our recommendations. I can 
provide a detailed list for the record.\1\
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    \1\ The information submitted by Mr. Dodaro appears in the Appendix 
on page 171.
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    Senator McCaskill. That would be terrific.
    And since you spoke of Medicare, it is my understanding 
that the improper payment percentage is higher in the Medicare 
program than it is in the Medicaid program.
    Mr. Dodaro. That is because they have better measurement 
techniques. I think the Medicare program has good 
methodologies. They do regular reviews. They check on whether 
or not the service was medically necessary and take samples. 
They take national samples every year. So they have a much more 
robust program than the Medicaid program, and it is a little 
easier because it is a national program as opposed to each 
State having its own different design for the Medicaid program.
    So to be fair, it is more complicated to do it in Medicaid, 
but Medicare has a very good program. In fact, what we did, we 
looked at the TRICARE program at the Department of Defense 
(DOD) and compared what they were doing to measure their 
improper payment rate to Medicare and found that DOD was not 
doing anywhere close to what Medicare is doing, so we 
recommended they improve their methodology.
    Senator McCaskill. Well, the fact that the States all have 
different programs and that we have the high improper payment 
number that we have and it is growing, it certainly would be 
one point that you would want to make if we were going to be 
block-granting the money, because if we block-grant the money, 
then we lose all controls, not just dealing with perhaps 
different scenarios or provider taxes based on the State but, 
rather, a situation where we would just send the money out and 
trust them.
    Mr. Dodaro. Yes, it depends on how you design it. If you 
capped it and said, OK, this is all the money that you are 
going to get, then there is an incentive--part of the issue 
here has been an incentive issue because of the Federal match.
    Senator McCaskill. Right.
    Mr. Dodaro. Senator Daines pointed this out, and he is 
exactly right.
    Senator McCaskill. Right.
    Mr. Dodaro. The incentives have not all been aligned 
properly, and I think a lot of the State attention to this has 
increased, particularly in the expansion States, as they see it 
is rapidly growing, being a bigger portion of the budget, the 
Federal match is going to start tapering off from 100 percent--
--
    Senator McCaskill. To 90, though. It never goes below 90.
    Mr. Dodaro. Right.
    Senator McCaskill. Assuming the law does not change.
    Mr. Dodaro. Right, but they still see that they need to do 
more in this area. That is why the State auditors are beginning 
to step up.
    Senator McCaskill. That would be great.
    I want to turn to a report you did back in 2011, and what 
you did at the GAO in 2011 is you looked at application and 
coverage denials in the individual health and insurance market. 
And I have gone back and looked at that because we now have 
this Administration going to court along with the Attorney 
General of my State asking the courts to do away with the 
preexisting condition protection along with many of the 
others--capped payments and the ability to charge women more 
for insurance just because they are women. There is a variety 
of protections that we have in there for consumers that this 
Administration is now actively, along with these Attorneys 
General, trying to get rid of and make sure that they 
completely go away.
    I would like you to talk about the sources of information 
you used for your 2011 report, if you could give us that. What 
data did you use to determine the level of coverage denial in 
the years before, immediately before we put the ACA protections 
in?
    Mr. Dodaro. As I recall, and I will provide the details for 
the record,\1\ but we used data that HHS had been collecting. 
We also went to a few States to see if they had better 
information since they have delegated responsibility for a lot 
of insurance issues. And then we also had information from the 
American health insurance industry as well. So we had those 
three sort of data sources.
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    \1\ The information submitted by Mr. Dodaro appears in the Appendix 
on page 179.
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    Senator McCaskill. And your review found there were two 
kinds of denials. There is an application denial.
    Mr. Dodaro. Right.
    Senator McCaskill. And I put into the record and I would 
ask it be put into the record in this hearing also Humana's 
document\2\ that listed 400 diseases that required application 
denial, along with a number of occupations, including air 
traffic controller, steelworker.
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    \2\ The Humana document referenced by Senator McCaskill appears in 
the Appendix on page 127.
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    So there is an application denial and then there is a 
policy they were writing that allowed them to do a coverage 
denial. So if you had, for example, a heart condition, they 
might insure you, but you would have to pay out of your own 
pocket for anything having to do with your heart condition--in 
other words, completely incomplete insurance, and that was 
called ``coverage denial.''
    So on the application denial, do you recall what the denial 
rate was on average for people who were trying to get 
insurance?
    Mr. Dodaro. Yes, the national figure we had was 19 percent, 
but it varied among insurers.
    Senator McCaskill. OK. So some insurers it was higher, 
some----
    Mr. Dodaro. Some of it was up to 40 percent or more. Others 
were 0 to 15 percent. So there was a lot of variation, but the 
overall national average I believe was 19 percent denial.
    Senator McCaskill. So one in five people that tried to get 
insurance were denied the opportunity to get insurance because 
they had been sick before. Is that an accurate finding of your 
report prior to the ACA protections?
    Mr. Dodaro. Yes, that is, with certain limitations. I mean, 
we do not know whether or not they applied somewhere else and 
got coverage or whether they actually ended up getting coverage 
but had a higher premium rate. So there was not a lot of good 
data available. We had what was available, and it is 
appropriately caveated in the report. But that is what we said.
    Senator McCaskill. And what about the denial of coverage? 
What did you find as it related to the denial of coverage?
    Mr. Dodaro. That was very detailed, very specific. I do not 
have a good answer for that at an aggregate level as well. But 
what I recall on the application denial side, the 19 percent, 
it was not really clear why they denied it. So the only other 
data that was available at that point was from the America's 
Health Insurance Plans and what they said was that the denial 
rate was much higher for medical reasons than non-medical 
reasons, for example, you were not in the right geographic 
area. So that was abouyt 1 percent. About 13 percent of the 
denials were because of medical conditions and their 
underwriting status.
    I can give you for the record the coverage denial detail 
from that report.\1\
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    \1\ The information submitted by Mr. Dodaro appears in the Appendix 
on page 180.
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    Senator McCaskill. I just wanted to bring it out because I 
think people forget--I mean, there was not an effort to pass 
the ACA because all of us were trying to make people's lives 
miserable. The effort was to try to give consumers some 
protections from some gross abuses that had grown up in the 
industry, and people were really searching for coverage and 
could not find it, could not get it. So I think it is important 
that we remember that in context and that we not throw out the 
preexisting condition protection unless and until we can come 
up with something that will replace it with the same level of 
protection.
    Thank you, Mr. Chairman.
    Chairman Johnson. And we will enter that Humana report in 
the record.\2\
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    \2\ The Humana report appears in the Appendix on page 127.
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    Senator McCaskill. Yes.
    Chairman Johnson. Not a problem.
    I have only really got one more line of questioning here. 
It really does have to do with what sometimes is referred to as 
``State gimmicks.'' We refer to it in our report. I am talking 
about, for example--perfectly legal but it ends up costing the 
Federal Government more money and certainly increased the 
percentage of the Federal Government's match to the States. I 
am talking about, for example, State sales taxes or loans the 
State makes to cities that they claim--they get reimbursement 
at their match rate, and then they pay the loan back to the 
State.
    Do you have a sense of how much those and other, I would 
call them, ``gimmicks'' really cost in terms of additional 
Federal spending?
    Mr. Dodaro. We have had some examples that we did in 
reports over the years, but no one really knows because CMS 
does not really collect the type of information necessary to 
make those determinations. That is part of our recommendations, 
is to have more information about what the sources of those 
funds are every year. There are supposed to be limits on how 
much they need to raise from local governments. For example, 
the State share is supposed to only gather up to 60 percent of 
their fair share from local providers or other sources, and no 
one knows whether that limit is really met on a regular basis. 
And that is one of our recommendations.
    I know Brian has done some work in that area, too. I am 
sure he has something to add.
    Mr. Ritchie. Again, we do not have it quantified either, I 
think for the same reasons. We have reports out on a few 
States. Recently we have some ongoing work looking at the safe 
harbor and it is mentioned in your report. But I think the same 
issues, that it is just not being tracked, that we see this, 
and that the safe harbor may be met, but then that still allows 
the general process of the shifting of funds. And back to a 
point I made earlier, I think just for us the general intent is 
the dollars are spent. We just think--asked the question: Is 
this leading to better care for beneficiaries or is this 
leading to a shift in resources? And it is hard as an IG 
because it is not necessarily violating rules. The rule in 
place right now is it is up to the 6 percent. But if you look 
at it we are able to track it from an audit standpoint look and 
see a provider paid taxes, then the Federal share came in, and 
when the additional resources were sent, the supplemental 
payments went back; and the net effect is the Federal 
Government paid and the State really did not sort of come out 
any worse. It was sort of a net zero effect.
    Mr. Dodaro. Yes, the other thing----
    Chairman Johnson. The States actually come out quite a bit 
better.
    Mr. Dodaro. Oh, yes.
    Chairman Johnson. Yes. So is it measurable?
    Mr. Dodaro. If you have the data, you could measure it. And 
they should have the information to check.
    Chairman Johnson. So is that something if I wrote either 
one of your gentlemen or both of you a letter, would you commit 
to doing a study on that to try and quantify it?
    Mr. Dodaro. We could see----
    Chairman Johnson. Who wants to volunteer?
    Mr. Dodaro. Yes, we could see if it is feasible to do.
    Chairman Johnson. OK.
    Mr. Dodaro. We can go back in and look at a sample of 
States, for example, and try to measure it that way. But it 
will take a while to do it because the data is not readily 
available, and you would have to go in and take a look at it. 
But I think we could do a study, but we have also got open 
recommendations that you could support, have CMS collect this 
information, because unless they collect it and do something 
with it, our study is really not going to change the outcome of 
this situation.
    Chairman Johnson. I was struck in your answer on other 
audits in comparison to--again, CMS runs both Medicare and 
Medicaid, correct?
    Mr. Dodaro. Right.
    Chairman Johnson. And I am really giving them praise in 
terms of how they are managing Medicare and doing the audits, 
that type of thing. The fact they are not dog it on Medicaid, 
with some caveats, do you almost get the sense that it is 
willful ignorance?
    Mr. Dodaro. Well, there has always been a deference to 
States, and that can go too far in terms of balancing the 
Federal interest versus States' flexibility. That has been an 
issue historically in our intergovernmental system. You see it 
in many different programs over time. Temporary Assistance for 
Needy Families (TANF) is another example. But, this program, as 
it started out, according to your chart really did not have 
much in expenditures, and letting the States have flexibility 
made sense. But now the stakes are higher, and the costs are 
not sustainable over the long term, and CMS need to change 
their paradigm. And they have been slow to do that.
    Chairman Johnson. But, also, when both parties have skin in 
the game, there literally is an incentive to try and keep down 
the cost. But as one partner has more skin and the other 
partner does not--and that is exactly what Medicaid expansion 
does--it is what these State gimmicks do. It reduces the amount 
of skin in the game the States have, and it now starts shifting 
the incentive to, for example, sign up people that are 
ineligible because you get more Federal money.
    The bottom line is oversight is critical, auditing this is 
critical. Designing the program so you actually have the 
incentives--and I would say the block grant would give every 
incentive to the State for efficient spending because they are 
going to have--according to Graham-Cassidy-Heller-Johnson, it 
would be money block-granted on the basic number of people in 
your State, the poverty rates, those types of things. That is 
not incentivizing you to sign more people up. You are going to 
get a set amount, and you better spend that as efficiently and 
as flexible as possible and do the best for your citizens. So 
to me that completely puts the incentive back where it belongs, 
at the State level where it will be a little more efficient, a 
little more effective, hopefully more accountable versus this 
one-size-fits-all model, which a $37 billion improper payment 
amount shows it is not being done very efficiently and 
effectively.
    Anyway, so you will expect that letter just in terms of the 
feasibility of that study. I think we might be shocked at how 
much money that actually costs us.
    Again, I want to thank both the witnesses for your great 
testimony and for taking the time. General Dodaro, you realize 
we are never going to let you retire. [Laughter.]
    Mr. Dodaro. Well, I have 7\1/2\ years left on my term, and 
then we can negotiate.
    Chairman Johnson. I am amazed at--we are talking about--
Senator McCaskill was asking about a study from 2011, and you 
have that at the tip of your fingers. I am always amazed at 
your ability to recall these things and provide detailed 
testimony off the top of your head.
    And, Mr. Ritchie, again, thank you for all of your work. 
This Committee depends on the good work of Inspectors General 
and the Government Accountability Office. So thank you both for 
your testimony.
    The hearing record will remain open for 15 days until July 
12th at 5 p.m. for the submission of statements and questions 
for the record.
    This hearing is adjourned.
    [Whereupon, at 12:07 p.m., the Committee was adjourned.]

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