[Congressional Record Volume 141, Number 11 (Thursday, January 19, 1995)]
[Senate]
[Pages S1219-S1223]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COHEN (for himself, Mr. Dole, Mr. Simpson, Mr. Stevens, 
        Mr. D'Amato, Mr. Graham, Mr. Coats, Mr. Gregg, Mr. Warner, Mr. 
        Nickles, Mr. Pryor, Mr. Bond, Mr. Chafee, Mr. Ford, and Mr. 
        Domenici):
  S. 245. A bill to provide for enhanced penalties for health care 
fraud, and for other purposes; to the Committee on Finance.


              the health care fraud prevention act of 1995

  Mr. COHEN. Mr. President, I rise today to introduce, on behalf of 
myself, Senators Dole, Simpson, Stevens, D'Amato, Graham of Florida, 
Coats, Gregg, Warner, Nickles, Pryor, Chafee, Bond, and Ford, the 
Health Care Fraud Prevention Act of 1995.
  Mr. President, health care reform has now taken a back seat to some 
other measures that are now before the Congress, as our colleagues in 
the House debate their Contract With America provisions and this body 
debates unfunded mandates, a balanced budget amendment, and entitlement 
reform. Apparently health care reform is going to have to wait. But I 
must say that it is just as important as these other issues as far as 
the American people are concerned. But as we await the debate on health 
care reform, which I believe must come this session, we also have to 
take steps immediately to toughen our defenses against fraudulent 
practices that are driving up the cost of health care for families, 
businesses and taxpayers alike.
  You may recall that last year I introduced a measure which contained 
some additions to the criminal law provisions of our title 18 statutes. 
Those provisions were adopted unanimously by the Senate. They were sent 
over to the House where they were stripped out of the anticrime bill at 
conference because the majority rationalized that these provisions 
should not go on the crime bill but on a health care reform bill. As we 
know, there was no health care reform bill passed last year.
  On a number of occasions, I sought to attach the provisions to 
pending legislation, for example, the D.C. appropriations bill and the 
Labor, HHS appropriations bill. I was prevailed upon to withdraw the 
legislation at that time so as to allow the appropriations bills to go 
forward. And I pointed out at that time, which was at the conclusion of 
last year's session of Congress, that we would lose as much as $100 
billion a year due to health care fraud and abuse. That amounts to $275 
million a day or $11.5 million every single hour.
  Mr. President, I do not think we can afford to delay this any longer. 
Over the past 5 years, we have lost as much as $418 billion from health 
care fraud and abuse, which is approximately four times the total 
losses associated with the savings and loan crisis.
  Just imagine the furor that enveloped this country over the bailout 
necessary because of the savings and loan problems that afflicted this 
country. It is four times that as far as health care fraud is 
concerned, and yet there does not seem to be much of a sense of urgency 
on the part of our colleagues to do much about it.

  Mr. President, I have worked with the Justice Department, the FBI, 
Medicaid fraud units, inspectors general, and others in developing this 
legislation. As I pointed out last year there is a song, I think it was 
by Paul Simon-- [[Page S1220]] not our Paul Simon but the song writer 
Paul Simon--who had a song called ``Fifty Ways To Leave Your Lover.'' 
We showed through an Aging Committee's year-long investigation at least 
50 ways in which to pick the pockets of Uncle Sam and of private 
insurers.
  I will not, because of the length of the report, introduce it now 
into the Record. I will simply ask unanimous consent that at the 
conclusion of my remarks the executive summary of this year-long 
investigation be introduced in the Record and included as part of it.
  Let me simply add a few more examples of the kinds of activities that 
are taking place now while we are debating other amendments, germane 
and nongermane, to the pending unfunded mandates bill. First, let me 
point out that there are roughly a half billion Medicare claims 
processed each year and the overwhelming majority of those are 
submitted for legitimate services by conscientious health care 
providers and beneficiaries--the overwhelming majority. It is the 
minority who are taking as much as $100 billion out of the system.
  Let me give you examples of what is going on. A doctor promoted his 
clinic in television, radio, newspaper, and telephone book ads as a 
``one-stop, walk-in diagnostic center.'' You can walk in, and they can 
take care of any problem you have got. So a person might go in for an 
examination for a shoulder injury and be subjected to a huge battery of 
tests which have nothing to do with the shoulder, resulting in bills of 
$4,000 and more per patient.
  Using the names of dozens of dead patients, a phantom laboratory in 
Miami allegedly cheated the Government out of $300,000 in Medicare 
payments in a matter of just a few weeks for lab tests never performed. 
The lab that was submitting the bills for the tests was basically a 
rented mailbox and a Medicare billing number. That was it.
  Employees of an airline were indicted for filing false and fraudulent 
claims for reimbursement to a private insurance company for medical 
care and services they claimed to have received in another country. The 
allegations are that the employees attempted to mail false and 
fictitious forms totaling close to $600,000 for treatments and services 
never performed.
  A durable medical equipment company, its owner and sales manager pled 
guilty to supplying unnecessary medical equipment such as hospital beds 
and oxygen concentrators to residents of adult congregate living 
facilities and then billing Medicare for more than $600,000. These 
conspirators induced the facilities' managers to allow them to provide 
the equipment by promising to leave the equipment when the patients 
died or were transferred.
  Physician-owners of a clinic in New York stole over $1.3 million from 
the State Medicaid program by fraudulently billing for over 50,000 
phantom psychotherapy sessions never given to Medicaid patients.
  Finally, a medical equipment supplier stole $1.45 million from 
Medicaid by repeatedly billing for expensive back supports that were 
never authorized by the patients' physicians.
  These cases are but a small sample of the fraudulent and abusive 
schemes that are plaguing our health care system daily, freezing 
millions of Americans out of affordable health care coverage, and 
driving up costs for taxpayers.
  The bill I am introducing today will go far in strengthening our 
defenses against health care fraud.
  Specifically, it will:
  Give prosecutors stronger tools and tougher statutes to combat 
criminal health care fraud. It would, for example, provide a specific 
health care offense in title 18 so that prosecutors are not forced to 
spend excessive time and resources to develop a nexus to the mail or 
wire fraud statutes to pursue clear cases of fraud, or to track the 
cash-flow from health care schemes in order to prosecute under money 
laundering statutes.
  It will allow injunctive relief and forfeiture for criminal health 
care fraud; provide greater authority to exclude violators from 
Medicare and Medicaid programs; create tough administrative civil 
penalties and remedies for fraud and abuse so that a range of sanctions 
will be available; and coordinate enforcement programs and beef up 
investigative resources, which are now woefully inadequate. For 
example, the HHS' inspector general states that it produces $80 in 
savings for each Federal dollar invested in their office yet their 
full-time equivalent position level has actually decreased over the 
last few years.
  The FBI recently testified that they have over 1,300 cases pending 
but that regardless of this prioritization, the amount of health care 
fraud not being addressed due to a lack of available resources is 
growing and that health care fraud appears to be a problem of immense 
proportion which is presently not being fully addressed.
  I might point out we have been reading about the extent of global 
international crime, even all the way from Russia, now moving into this 
country and ripping off the Medicare-Medicaid Programs and other health 
care systems by the millions. This is a growing problem of great 
concern to me,  so the FBI needs help. This bill helps agencies like 
the FBI and HHS and DOD inspectors general by financing additional 
health care fraud enforcement resources with proceeds derived from 
forfeiture, fines, and other health care fraud enforcement efforts.

  It will also provide guidance to health care providers and industries 
on how to comply with fraud rules, so they will know what is and what 
is not prohibited activity.
  I have worked closely with law enforcement and health care fraud 
experts in developing these proposals, and am continuing to work with 
industry representatives to ensure that fraud and abuse statutes and 
requirements are fair, clearly understood by health care providers, and 
reflect the changing health care market. Our goal should not be to 
burden health care providers with complicated, murky rules on fraud and 
abuse, but rather to lay down clear rules and guidance, followed by 
tough enforcement for violations.
  Mr. President, when we are losing as much as $275 million per day to 
health care fraud and abuse, we cannot afford to delay any longer. The 
only ones who benefit from delay on this important issue are those who 
are bilking billions from our system. The very big losers will be the 
American taxpayers, patients, and families who cannot afford health 
care coverage because premiums and health care costs are escalating to 
cover the exorbitant costs of fraud and abuse.
  I want to thank Senator Dole for his steadfast support and leadership 
on this issue and I urge my colleagues to support and act expeditiously 
on this legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
additional material be printed in the Record.
  There being no objection, the material was ordered to be printed.

                           Executive Summary


 gaming the health care system: billions of dollars lost each year to 
                            fraud and abuse

       For the past year, the Minority Staff of the Senate Special 
     Committee on Aging under my direction has investigated the 
     explosion of fraud and abuse in the U.S. health care system. 
     This report examines emerging trends, patterns of abuse, and 
     types of tactics used by fraudulent providers, unscrupulous 
     suppliers, and ``professional'' patients who game the system 
     in order to reap billions of dollars in reimbursements by 
     Medicare, Medicaid, and private insurers.
       The consequences of fraud and abuse to the health care 
     system are staggering: as much as 10 percent of U.S. health 
     care spending, or $100 billion, is lost each year to health 
     care fraud and abuse. Over the last five years, estimated 
     losses from these fraudulent activities totaled about $418 
     billion--or almost four times as much as the cost of the 
     entire savings and loan crisis to date.
       Our investigation revealed that vulnerabilities to fraud 
     exist throughout the entire health care system and that 
     patterns of fraud within some provider groups have become 
     particularly problematic. Major patterns of abuse that plague 
     the system are overbilling, billing for services not 
     rendered, ``unbundling'' (whereby one item, for example a 
     wheelchair, is billed as many separate component parts), 
     ``upcoding'' services to receive higher reimbursements, 
     providing inferior products to patients, paying kickbacks and 
     inducements for referrals of patients, falsifying claims and 
     medical records to fraudulently certify an individual for 
     government benefits, and billing for ``ghost'' patients, or 
     ``phantom'' sessions or services.
       This report provides 50 case examples of scams that have 
     recently infiltrated our health care system. While these are 
     but a [[Page S1221]] small sampling of schemes that were 
     reviewed during the investigation, they serve to illustrate 
     how our health care system is rife with abuse, and how 
     Medicare, Medicaid and private insurers have left their doors 
     wide open to fraud.
       Patients--and, in the case of Medicare and Medicaid, 
     taxpayers--pay a high price for health care fraud and abuse 
     in the form of higher health care costs, higher premiums, and 
     at times, serious risks to patients' health and safety. For 
     example;
       Physician-owners of a clinic in New York stole over $1.3 
     million from the State Medicaid program by fraudulently 
     billing for over 50,000 ``phantom'' psychotherapy sessions 
     never given to Medicaid recipients;
       A speech therapist submitted false claims to Medicare for 
     services ``rendered to patients'' several days after they had 
     died;
       A home health care company stole more than $4.6 million 
     from Medicaid by billing for home care provided by 
     unqualified home care aides. In addition to cheating 
     Medicaid, elderly and disabled individuals were at risk from 
     untrained and unsupervised aides;

       Nursing home operators charged personal items such as 
     swimming pools, jewelry, and the family nanny to Medicaid 
     cost reports;
       Fifteen hundred workers lost their prescription drug 
     coverage because a scam drove up the cost of the insurance 
     plan for their employer. The scam involved a pharmacist who 
     stole over $370,000 from Medicaid and private health 
     insurance plans by billing over one thousand times for 
     prescription drugs that he did not actually dispense;
       Large quantities of sample and expired drugs were dispensed 
     to nursing home patients and pharmacy customers without their 
     knowledge. When complaints were received from nursing home 
     staff and patient relatives regarding the ineffectiveness of 
     the medications, one of the scam artists stated ``those 
     people are old, they'll never know the difference and they'll 
     be dead soon anyway'';
       Durable medical equipment suppliers stole $1.45 million 
     from the New York State Medicaid program by repeatedly 
     billing for expensive orthotic back supports that were never 
     prescribed by physicians;
       A scheme involved the distribution of $6 million worth of 
     reused pacemakers and mislabeled pacemakers intended for 
     ``animal use only.'' The scheme involved kickbacks to 
     cardiologists and surgeons to induce them to use pacemakers 
     that had already expired; and
       A clinical psychologist was indicted for having sexual 
     intercourse with some of his patients and then seeking 
     reimbursement from a federal health plan for these encounters 
     as ``therapy'' sessions.
       Our investigation found that scams such as these are 
     perpetrated against both public and private health plans, and 
     that health care fraud schemes have become more complex and 
     sophisticated, often involving regional or national 
     corporations and other organized entities. No part of the 
     health care system is exempt from these fraudulent practices, 
     however, we found that major patterns of fraud and abuse have 
     infiltrated the following health care sectors: ambulance and 
     taxi services, clinical laboratories, durable medical 
     equipment suppliers, home health care, nursing homes, 
     physicians, psychiatric services, and rehabilitative services 
     in nursing homes. Our investigation further concludes that 
     fraud and abuse is particularly rampant in Medicaid, and 
     that many of the fraudulent schemes that have preyed on 
     the Medicare program in recent years are now targeting the 
     Medicaid program for further abuse.


  Greater Opportunities For Fraud Will Exist Under Health Care Reform

       As our health care system moves toward a managed care 
     model, opportunities for fraud and abuse will increase unless 
     enforcement efforts and tools are strengthened. The structure 
     and incentives of a managed care system will result in a 
     concentration of particular types of schemes, such as the 
     failure to provide services and quality of care deficiencies 
     in order to cut costs. In addition, while efforts toward 
     simplification and electronic filing of health care claims 
     offer tremendous savings, they also pose particular 
     opportunities for abuse. Thus, it is crucial that any such 
     system be designed with safeguards built in to detect and 
     deter fraud and abuse.


                       Findings of Investigation

     Deficiencies in the current system expose billions of health 
         care dollars to fraud and abuse
       A. Current Criminal and Civil Statutes Are Inadequate to 
     Effectively Sanction and Deter Hearth Care Fraud:
       Federal prosecutors now use traditional fraud statutes, 
     such as the mail and wire fraud statutes, the False Claims 
     Act, false statement statutes, and money laundering statute 
     to persecute health care fraud. Our investigation found that 
     the lack of a specific federal health care fraud criminal 
     statute, inadequate tools available to prosecutors, and weak 
     sanctions have significantly hampered law enforcement's 
     efforts to combat health care fraud. Inordinate time and 
     resources are lost in pursuing these cases under indirect 
     federal statutes. Often, even when law enforcement shuts down 
     a fraudulent scheme, the same players resurface and continue 
     their fraud in another part of the health care system.
       This cumbersome federal response to health care fraud has 
     resulted in a system whereby the mouse has outsmarted the 
     mousetrap. Those defrauding the system are ingenious and 
     motivated, while the government and private sector responses 
     to these perpetrators have not kept pace with the 
     sophistication and extent of those they must pursue.
       B. The Fragmentation of Health Care Fraud Enforcement 
     Allows Fraud to Flourish:
       Despite the multiplicity of Federal, State and local law 
     enforcement agencies, and private health insurers and health 
     plans involved in the investigation and prosecution of health 
     care fraud, these enforcement efforts are inadequately 
     coordinated, allowing health care fraud to permeate the 
     system. While some strides have been made in coordinating law 
     enforcement efforts, immediate steps must be taken to 
     streamline and toughen our response to health care fraud.


                            Recommendations

       Based on our investigation and findings, we recommend the 
     following to reduce fraud and abuse throughout the health 
     care system:
       1. Establish an all-payer fraud and abuse program to 
     coordinate the functions of the Attorney General, Department 
     of Health and Human Services, and other organizations, to 
     prevent, detect, and control fraud and abuse; to coordinate 
     investigations; and to share data and resources with Federal, 
     State, and local law enforcement and health plans.
       2. Establish an all-payer fraud and abuse trust fund to 
     finance enforcement efforts. Fines, penalties, assessments, 
     and forfeitures collected from health care fraud offenders 
     would be deposited in this fund, which would in turn be used 
     to fund additional investigations, audits, and prosecutions.
       3. Toughen federal criminal laws and enforcement tools for 
     intentional health care fraud.
       4. Improve the anti-kickback statute and extend 
     prohibitions of Medicare and Medicaid to private payers.
       5. Provide a greater range of enforcement remedies to 
     private sector health plans, such as civil penalties.
       6. Establish a national health care fraud data base which 
     includes information on final adverse actions taken against 
     health care providers. Such a data base should contain strong 
     safeguards in order to ensure the confidentiality and 
     accuracy of the information data contained in the data base.
       7. Design a simplified, uniform claims form for 
     reimbursement and an electronic billing system, with tough 
     anti-fraud controls incorporated into these designs.
       8. Take several steps to better protect Medicare from 
     fraudulent and abusive provider billing practices and 
     excessive payments by Medicare. Specifically:
       Revise and strengthen national standards that suppliers and 
     other providers must meet in order to obtain or renew a 
     Medicare provider number;
       Prohibit Medicare from issuing more than one provider 
     billing number to an individual or entity (except in 
     specified circumstances), in order to prevent providers from 
     ``jumping'' from one billing number to another in order to 
     double-bill or avoid detection by auditors;
       Require Medicare to establish more uniform national 
     coverage and utilization policies for what is reimbursed 
     under Medicare, so that providers cannot ``forum shop'' in 
     order to seek out the Medicare carrier who will pay a higher 
     reimbursement rate;
       Require the Health Care Financing Administration to review 
     and revise its billing codes for supplies, equipment and 
     services in order to guard against egregious overpayments for 
     inferior quality items or services; and
       As we revise the health care system, give guidance to 
     health care providers on how to do business properly and how 
     to avoid fraud.
       Adoption of these recommendations will go far in shoring up 
     our defenses against unscrupulous providers, patients, and 
     suppliers who are bleeding billions of dollars from our 
     health care system through fraud and abuse. Since Medicare 
     and Medicaid lose as much as $31 billion annually to fraud 
     and abuse, the savings from reducing fraud in these programs 
     would go far toward paying for much needed reforms in our 
     health care system, such as providing access to health care 
     coverage for the uninsured, prescription drug benefits for 
     the elderly, or long-term care for the elderly and 
     individuals with disabilities.
       We must not wait to fix these serious problems in the 
     health care system until we see what form health care reform 
     takes. We are losing as much as $275 million each day to 
     health care fraud, and effective steps can be taken within 
     the current system to curb this abuse. With billions of 
     dollars and millions of lives at stake, we can no longer 
     afford to wait.
                                                                    ____


                      Section-by-section Analysis

       The Cohen legislation establishes an improved coordinated 
     federal effort to combat fraud and abuse in our health care 
     system. It expands certain existing criminal and civil 
     penalties for health care fraud to provide a stronger 
     deterrent to the billing of fraudulent claims and to 
     eliminate waste in our health care system resulting from such 
     practices.
       Section 101. a. All-Payer Fraud and Abuse Control Program: 
     The Secretary of Health [[Page S1222]] and Human Services and 
     the Attorney General are required to jointly establish and 
     coordinate an all-payer national health care fraud control 
     program to restrict fraud and abuse in private and public 
     health programs. The Secretary and Attorney General (through 
     its Inspectors General and the Federal Bureau of 
     Investigation) would be authorized to conduct investigations, 
     audits, evaluations and inspections relating to the delivery 
     and payment for health care and would be required to arrange 
     for the sharing of data with representatives of health plans.
       b. Health Care Fraud and Abuse Control Account: To 
     supplement regularly appropriated funds, a special account 
     would be established to fund the all-payer program, managed 
     by the Secretary and Attorney General. All criminal fines, 
     penalties, and civil monetary penalties imposed for 
     violations of fraud and abuse provisions of this legislation 
     would be deposited into the account and used for carrying out 
     the proposed requirements.
       Section 102. Application of Certain Federal Health Anti-
     Fraud and Abuse Sanctions to All Fraud and Abuse Against Any 
     Health Plan: The provisions under the Medicare and Medicaid 
     program, which provide for criminal penalties for specified 
     fraud and abuse violations, would apply and be extended in 
     certain circumstances to similar violations for all payers in 
     the health care system. The violations would include willful 
     submission of false information or claims. Penalties would 
     include fines and possible imprisonment. The Secretary could 
     also consider community service opportunities.
       Section 103. Health Care Fraud and Abuse Guidance: Provides 
     mechanisms for further guidance to health care providers on 
     the scope and applicability of the anti-fraud statutes in 
     order to better comply with these statutes. The further 
     guidance would be provided by the modifications of existing 
     safe harbors and the promulgation of new safe harbors; 
     interpretive rulings providing the HHS' Inspector General's 
     interpretation of anti-fraud statutes; and special fraud 
     alerts setting activities that the Inspector General 
     considers suspect under the anti-fraud statutes.
       Section 104. Reporting of Fraudulent Actions Under 
     Medicare: The Secretary is required to establish a program 
     through which Medicare beneficiaries may report instances of 
     suspected fraudulent actions on a confidential basis.
       Section 201. Mandatory Exclusion from Participation in 
     Medicare and State Health Care Programs: The Secretary 
     currently has authority to exclude individuals and entities 
     from Medicare and Medicaid based on convictions or program-
     related crimes relating to patient abuse or neglect. This 
     section would extend the Secretary's authority to felony 
     convictions relating to fraud and felony convictions relating 
     to controlled substances. Currently, the Secretary is 
     permitted, but not required, to exclude those convicted of 
     such an offense. Adoption of this proposal would better 
     recognize the seriousness of such offenses and ensure that 
     beneficiaries are well protected from dealing with such 
     individuals.
       Section 202. Establishment of Minimum Period of Exclusion 
     for Certain Individuals and Entities Subject to Permissive 
     Exclusion from Medicare and State Health Care Programs: 
     Mandatory exclusions contain a minimum period of exclusion 
     for five years. This section establishes a minimum period of 
     exclusion expressly determined in statute for certain 
     permissive exclusions, such as three years for specific 
     convictions.
       Section 203. Permissive Exclusion of Individuals with 
     Ownership or Control Interest in Sanctioned Entities: Some of 
     the current permissive exclusions are ``derivative'' 
     exclusions--that is they are based on an action previously 
     taken by a court, licensure board, or other agency. Current 
     law allows permissive exclusion authority for entities when a 
     convicted individual has ownership, control or agency 
     relationship with such entity. However, if an entity rather 
     than an individual is convicted under Medicare fraud, the IG 
     has no authority to exclude the individuals who own or 
     control the entity and who may really have been behind the 
     fraud.
       This creates a loophole whereby an individual who is 
     indicated for fraud along with a corporation owned by his can 
     avoid being excluded from the programs by persuading the 
     prosecutor to dismiss his indictment in exchange for agreeing 
     to have the corporation plead guilty or pay fines. The bill 
     would extend the current permissive exclusion authority for 
     entities controlled by a sanctioned individual to individuals 
     with control interest in sanctioned entities.
       Section 205. Intermediate Sanctions for Medicare Health 
     Maintenance Organizations: The Secretary would be able to 
     impose civil monetary penalties on Medicare-qualified HMOs 
     for violations of Medicare contracting requirements.
       Section 301. Establishment of the Health Care Fraud and 
     Abuse Data Collection Program: The Secretary would create a 
     comprehensive national data collection program for the 
     reporting of information about final adverse actions against 
     health care providers, suppliers, or licensed practitioners 
     including criminal convictions, exclusions from participation 
     in Federal and State programs, civil monetary penalties and 
     license revocations and suspensions.
       Section 401. Civil Monetary Penalties: The provisions under 
     Medicare and Medicaid which provide for civil monetary 
     penalties for specified violations apply to similar 
     violations in certain circumstances for all payers in the 
     health care system. The violations would include billing for 
     services not provided or submitting fraudulent claims for 
     payment.
       The provisions would also clarify that repeatedly claiming 
     a higher code, or repeatedly billing for medically 
     unnecessary services, for purposes of reimbursement is 
     prohibited and subject to civil monetary penalties. The 
     intent of this provision is to impose sanctions for patterns 
     of prohibited conduct.
       An intermediate civil monetary penalty would also be 
     established for criminal anti-kickback violations.
       One abusive technique now used by some Medicare providers 
     is to waive the patient's copayment for services covered by 
     Medicare. The concern is that routine waivers of copayments 
     result in unnecessary procedures and overutilization (because 
     the beneficiary has no financial stake in the decision to 
     order a medical item or service). The provision would clarify 
     that the routine waiver of Medicare Part B copayments and 
     deductibles would be prohibited and subject to civil monetary 
     penalties although exceptions are provided.
       In addition, retention by an excluded individual of an 
     ownership or control interest of an entity who is 
     participating in Medicare or Medicaid would be prohibited and 
     subject to civil monetary penalties.
       Finally, the amount of civil monetary penalty that can be 
     assessed is increased from $2,000 to $10,000.
       Section 501. Health Care Fraud: Establishes a new health 
     care fraud statute in the criminal code. Provides a penalty 
     of up to 10 years in prison, or fines, or both for knowingly 
     executing a scheme to defraud a health plan in connection 
     with the delivery of health care benefits, as well as for 
     obtaining money or property under false pretenses from a 
     health plan. This section is patterned after existing mail 
     and wire fraud statutes.
       Section 502. Forfeitures for Federal Health Care Offenses: 
     Requires the court, in imposing sentence on a person 
     convicted of a Federal health care offense, to order the 
     forfeiture to the United States of property used in 
     commission of an offense if it results in a loss or gain of 
     $50,000 or more and constitutes or is derived from proceeds 
     traceable to the commission of the offense.
       Section 503. Injunctive Relief Relating to Federal Health 
     Care Offenses: This provision expands the scope of the 
     current injunctive relief section by adding the commission of 
     a health care offense. This provision allows the Attorney 
     General to commence a civil action to enjoin such violation 
     as well as to freeze assets.
       Section 504. Grand Jury Disclosure: This provision allows 
     the disclosure of grand jury information to federal 
     prosecutors to use in a civil proceeding relating to health 
     care fraud.
       Section 505. False Statements: Provides penalties for 
     making false statements relating to health care matters.
       Section 506. Voluntary Disclosure Program: Creates a 
     program of voluntary disclosure to the Attorney General and 
     Secretary to provide an incentive for disclosure of 
     violations and wrongdoing.
       Section 507. Obstruction of Criminal Investigations: 
     Provides a penalty for the obstruction of criminal 
     investigations of federal health care offenses.
       Section 508. Theft or Embezzlement: Establishes a statute 
     that provides penalties for the willful embezzlement or theft 
     from a health care benefit program.
       Section 509. Laundering of Monetary Instruments: Provides 
     that a federal health care offense is a predicate to current 
     money laundering statutes.
       Sections 601-604: Payments for State Health Care Fraud 
     Control Units: Provides language to establish state health 
     care provider fraud control units modeled on the current 
     state Medicaid Fraud Control Units. The jurisdiction of these 
     units would be expanded to include investigation and 
     prosecution of provider fraud in other federally-funded or 
     mandated programs. The proposal also allows the states to 
     choose whether to conduct investigations and prosecutions for 
     patient abuse related crimes occurring in board and care 
     facilities and other alternative residential settings.
       The HHS' Inspector General would continue oversight and the 
     state units would detail its activities in its yearly grant 
     applications. This section also contains a recitation of the 
     units' original authorization language as currently contained 
     in the Social Security Act, and also allows the units to 
     participate in the all-payer fraud abuse control program.

  Mr. DOLE. Mr. President, I want to take a few moments to express my 
support for the Health Care Fraud Prevention Act of 1995, which was 
introduced earlier today by my distinguished colleague from Maine, 
Senator Cohen.
  As Senator Cohen has pointed out, health care fraud and abuse costs 
the American taxpayers literally billions and billions of hard-earned 
dollars each year. Unscrupulous doctors who overbill patients, medical 
suppliers who sell unnecessary or defective equipment to unsuspecting 
customers, clinic operators who submit false Medicaid reimbursement 
claims--all these scams have the effect of driving up the 
[[Page S1223]] cost of health care for families and businesses alike.
  To combat these activities, the act establishes a new health care 
fraud statute in title 18 of the United States Code. This statute 
provides for an array of penalties, including imprisonment and fines, 
for those who knowingly scheme to defraud a health care plan. This 
statute is patterned after the existing mail and wire fraud statutes.
  The act also gives the Secretary of HHS greater authority to exclude 
health care scam artists from the Medicaid and Medicare programs, while 
establishing tough civil penalties for fraud so that a range of 
sanctions will be available.
  In addition, the act directs the Attorney General and the Secretary 
of Health and Human Services to establish an all-payer national health 
care fraud control program. Under this program, both the Secretary and 
the Attorney General would be authorized to conduct investigations and 
audits of health care delivery systems. To pay for these 
investigations, the act establishes a ``Health care fraud and abuse 
control account.'' Criminal and civil fines imposed on violators would 
be deposited into the account and then used to finance future law 
enforcement efforts.
  Of course, the vast majority of health care providers are good people 
committed to the well-being of their patients. Their hard work and 
commitment should not be tarnished in any way by those few bad apples 
who attempt to game the health care system for their own personal 
benefit. This legislation won't put an end to the health care fraud 
racket, but it will help to ensure that our law enforcement authorities 
have the tools to get the job done.
  Not surprisingly, the Health Care Fraud Prevention Act was crafted 
with the help of law enforcement officials, including officials at both 
the FBI and the Department of Justice.
  Finally, I want to commend my distinguished colleague from Maine for 
bringing this important issue to the attention of the Senate. Today's 
legislation is the product of a 2-year ongoing investigation conducted 
by the staff of the Special Committee on Aging. And last year, Senator 
Cohen successfully offered many of the provisions contained in this 
bill as an amendment to the 1994 Crime-Control Act. Unfortunately, the 
amendment was dropped in conference.
  To his credit, Senator Cohen has continued to speak out on this 
issue, and I fully expect that his persistence will pay off later this 
year when the Senate has an opportunity to consider this important 
legislation.
  Mr. DORGAN. Mr. President, let me say as I begin, to my friend from 
Maine, the work he has done on this issue in Medicare fraud is 
extraordinary work. During the period between the end of the last 
session and the beginning of this session, I saw some newspaper reports 
about Medicare fraud. I bothered to once again review the work he did 
in the last session, the bill he introduced in the last session on this 
issue. I hope we make progress on this issue that he is leading on, in 
this session of the Senate, because I think what he is doing is very 
important. There is too much fraud. The fact is, we are not detecting 
enough of it and not prosecuting enough of it vigorously, so I support 
his efforts and thank him for making those efforts.
  Mr. PRYOR. Mr. President, I rise to support S. 245, the Health Care 
Fraud Prevention Act of 1995. Health care fraud and abuse in our health 
care system is draining billions of dollars a year from American 
families, businesses, and government. The Department of Justice and 
other experts have estimated that as much as 10 percent of our national 
health care bill is lost to fraud and abuse. Every dollar stolen from 
the health care system--be it from Medicare, Medicaid, or a private 
health care plan--means one less dollar for patient care or for lower 
insurance premiums. With health care costs still escalating, the last 
thing we need to be doing is allowing criminals to steal from the 
system.
  Fraud also tarnishes the good names of honest health care 
professionals and companies. While the vast majority of providers are 
honest and hard working, the crooks cast a cloud over the entire health 
care system.
  Mr. President, there are too many examples of fraud in our health 
care system. For example, seven New York physicians were recently 
excluded from the New York Medicaid program for their part in a scheme 
that stole over $8 million from the program. As part of this Medicaid 
fraud scheme, indigent individuals with no legitimate medical need for 
prescription drugs would enter the doctors' clinics and obtain 
prescriptions for expensive drugs. They, in turn, would resell the 
prescriptions to people on the street. In exchange for the 
prescriptions, the ``patients'' would subject themselves to unnecessary 
medical tests and procedures for which Medicaid could then be 
fraudulently billed.
  In other cases, it is not so clear that there has been fraud, but 
rather that a health care plan has been taken advantage of. As an 
example, I received a letter from a constituent of mine, Jennie H., not 
too long ago. Jennie wrote that Medicare had paid a medical supplier 
$2,136 for 300 adult incontinence pads that were delivered to her 
mother. That works out to almost $7.12 for each pad, far more than what 
they would cost at the drug store.
  Much studying has been on the health care fraud problem in recent 
years. In addition to the report issued last year by my friend from 
Maine, Senator Cohen, the incoming chairman of the Senate Special 
Committee on Aging, reports by the General Accounting Office, the HHS 
inspector general, and congressional committees have also documented 
the extent and range of the problem. They have detailed abuses ranging 
from the billing of services never provided to the illegal sale of 
controlled substances.
  This is a subject about which I too have long been concerned. When I 
was chairman of the Senate Special Committee on Aging, I held several 
hearings on fraud and abuse in the health care system. In addition, the 
health care bill reported out of the Finance Committee last year 
included an antifraud provision that I helped develop.
  Mr. President, now is the time to take action against health care 
fraud. While I would have preferred to see the health care fraud 
problem addressed as part of health care reform, it is clear that we 
cannot wait for that to happen. Each day we wait to give crime fighters 
the authority and tools they need to combat fraud in a coordinated and 
effective manner means millions of wasted health care dollars.
  The bill which I have joined Senator Cohen in sponsoring today 
represents a balanced, bipartisan approach to combating health care 
fraud and takes the best provisions common to the bills debated last 
year, such as the President's proposal. It establishes an improved, 
coordinated effort to combat fraud and abuse. It expands certain 
existing criminal and civil penalties for health care fraud to provide 
a stronger deterrent to the billing of fraudulent claims and to 
eliminate waste in our health care system. I encourage my colleagues to 
support this legislation.
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