[Congressional Record Volume 141, Number 103 (Thursday, June 22, 1995)]
[Extensions of Remarks]
[Pages E1309-E1310]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


           HEALTH CARE ANTIFRAUD AND ABUSE INITIATIVE OF 1995

                                 ______


                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Thursday, June 22, 1995
  Mr. STARK. Mr. Speaker, today I am introducing H.R. 1912, the Health 
Care Fraud Prevention and Paperwork Reduction Act. This bill 
establishes an effective national program to control fraud, waste, and 
abuse in our health care system.
  When Willie Sutton was asked why he robbed banks, he responded: 
``Because that's where the money is.'' Today's criminals continue to be 
attracted to where the money is--in health care. State officials in 
Florida report that drug traffickers are changing professions because 
the money is bigger in health care fraud and the risk is less.
  Fraudulent activities involve both Government programs and private 
payers. Federal outlays for Medicare along totaled $162.5 billion in 
fiscal year 1994, and are expected to exceed $177 billion in 1995 and 
$198 billion in 1996. GAO estimates that fraud and abuse in the health 
care industry accounts for an estimated 10 percent of our yearly 
private and public expenditures. In 1994, this would have approached 
$94 billion. That amounts to approximately $258 million a day or $11 
million every single hour.
  The bill would establish an all-payer health care fraud and abuse 
program, coordinated by the Office of the Inspector General [OIG] of 
the Department of Health and Human Services. In fiscal year 1994, the 
OIG generated savings, fines, restitutions, penalties, and receivables 
of over $8 billion. This represents $80 in savings for every Federal 
dollar invested in their office, or $6.4 million in savings per OIG 
employee.
  H.R. 1912 would extend Medicare and Medicaid's proven enforcement 
remedies of civil monetary penalties and criminal penalties to private 
payers. The policies are proven and represent 25 years of experience in 
fighting fraud and abuse under Medicare. The bill is an improved 
version of the antifraud measures included in last year's health reform 
legislation.
  Equally important as preventing and detecting fraud and abuse in the 
health care system is the deletion of waste. Forms, other paperwork, 
and burdensome administrative requirements increase the patient costs 
and frustrate the provider.
  The bill would improve the efficiency and effectiveness of the health 
care system by establishing standards and requirements for electronic 
transmission of certain health information. H.R. 1912 would reduce the 
administrative cost of the current system and make health insurance 
documents easier for patients and providers to understand. A uniform 
health claims card would be distributed to each beneficiary of a health 
plan, and all medical records and reporting would be transmitted using 
a uniform electronic format.
  Hearing after hearing has outlined the heavy fraud, waste, and abuse 
in health care, yet little is done to remedy the problem. Ample 
evidence exists to show that this activity is costing us millions of 
wasted dollars each day. We must not wait to enact tougher penalties 
and enforcement procedures for health care fraud nor should we wait to 
simplify the administrative processes associated with our health care 
system. The wasted dollars are far too valuable. This bill should be 
passed this year.
  The following is a summary of the bill:
                Anti-Fraud and Abuse Initiative of 1995


                         title: fraud and abuse

Subtitle A: Amendments to anti-fraud and abuse provisions applicable to 
           Medicare, Medicaid, and State health care programs

       I. Amendments to anti-kickback statutory provisions
       A. An intermediate civil monetary penalty of up to $50,000 
     would be established for anti-kickback violations
       B. The current criminal fine would be increased to no more 
     than $50,000
       II. Amendments to exceptions to anti-kickback statutory 
     provisions
       A. Current exception for discounts would be modified to 
     prevent providers from giving discounts in the form of a cash 
     payment
       B. Current exception for bona fide employment relationships 
     would be modified to require that any remuneration be 
     consistent with fair market value, and not be determined in a 
     manner that takes into account the volume or value of any 
     referral
       C. Current exception for waiver of coinsurance would be 
     modified to allow for such arrangements if--
       (1) A waiver or reduction of coinsurance is made pursuant 
     to a public schedule of discounts which the person is 
     obligated as a matter of law to apply; or
       (a) The person determines in good faith that the individual 
     is indigent, or
       (b) The person fails to collect coinsurance or deductible 
     amounts after making reasonable efforts, and
       D. An exception would be provided for certain arrangements 
     where providers are paid wholly on a capitated basis
       III. Amendments to civil monetary penalty statutory 
     provisions
       A. A civil monetary penalty would be established for the 
     following improper conduct:
       (1) Offering inducements to individuals to receive from a 
     particular provider an item or service
       (2) Engaging in a practice which has the effect of limiting 
     or discouraging the utilization of health care services
       (3) Substantially fails to cooperate with a quality 
     assurance program or a utilization review activity
       (4) Substantially fails to provide or authorize medically 
     necessary items or services that are required to be provided 
     under the health plan, if the failure has adversely affected 
     (or had a substantial likelihood of adversely affecting) the 
     individuals
       B. Civil monetary penalties would be increased to no more 
     than $10,000 for each false or improper item or service
       C. The assessment would be increased to three times the 
     amount claimed and interest shall accrue on the penalties and 
     assessments after a final decision
       D. If within one year the Attorney General does not 
     initiate a criminal or civil action the Secretary could 
     initiate a civil monetary penalty proceeding
       IV. Private Right of Action
       A. Any person that suffers harm as a result of any activity 
     of an individual or entity which makes the individual or 
     entity subject to a civil monetary penalty may bring a civil 
     action
       V. Amendments to exclusionary provisions in fraud and abuse 
     program
       A. The Secretary would have the additional authority to 
     exclude individuals and entities based on felony convictions 
     relating to fraud, theft, embezzlement, breach of fiduciary 
     responsibility or other financial misconduct in connection 
     with the delivery of a health care item or service
       B. The Secretary's current discretionary exclusion 
     authority would be extended to permit the Secretary to 
     exclude individuals who retain an ownership or control 
     interest in a sanctioned entity
       C. Minimum period of exclusion for certain violations 
     already specified in statute would be established
       VI. Amendments to quality of care sanctions
       A. Practitioners or persons who violate quality of care 
     obligations as determined by the Peer Review Organization 
     would be subject to a civil monetary penalty of not more than 
     $10,000
       B. The additional requirement that the practitioner be 
     shown to be ``unwilling or unable'' to meet PRO quality of 
     care obligations before the Secretary may exclude the 
     individual from participating in Medicare would be deleted.
       VII. Revision of criminal penalties
       A. For providers who violate specified fraud and abuse 
     provisions, penalties would include fines, treble damages, 
     and imprisonment
       VIII. Amendments to criminal and civil laws
       A. A criminal violation for health care fraud would be 
     created for the following crimes
       (1) Whoever knowingly executes a scheme to defraud any 
     health plan or person, in connection with the delivery of or 
     payment for health care items or services
       (2) Penalties would include a fine and a prison term of not 
     more than 5 years
       B. Forfeitures for violations of fraud statutes
       (1) If the court determines that a Federal health care 
     offense is of a type that poses serious threat to a person's 
     health, or has significant detrimental impact on the health 
     care system, the court could order the person to forfeit 
     property used in or derived from proceeds from the offense 
     and is of value proportionate to the offense

  Subtitle B: Establishment of all-payer health care fraud and abuse 
                            control program

       I. The Secretary of Health and Human Services (acting 
     through the Inspector General of HHS) and the Attorney 
     General would establish and coordinate an all-payer national 
     health care fraud and abuse control program
       II. The Attorney General and Inspector General would be 
     authorized to conduct investigations, audits, evaluations and 
     inspections relating to the delivery of and payment for 
     health care and to have access to all records available to 
     health plans relating to the program
       III. Coordination with law enforcement agencies and third 
     party insurers
       A. The Secretary and the Attorney General would be required 
     to consult with, and arrange for the sharing of resource data 
     with State law enforcement agencies, State Medicaid fraud 
     control units, State agencies responsible for the licensing 
     and certification of health care providers, health plans, and 
     public and private third party insurers
       IV. General provisions regarding all-payer fraud and abuse 
     program
       A. All health plans, providers, and others would be 
     required to cooperate with the national fraud control program 
     and to provide [[Page E 1310]] such information as is 
     necessary for the investigation of fraud and abuse
       (1) Procedures would be established to assure the 
     confidentiality of the information required by the national 
     fraud and abuse program and the privacy of individuals 
     receiving health care services
       B. Health plans and providers would be required to disclose 
     information that the Secretary deems appropriate, including 
     information relating to the ownership, control and management 
     of a health care entity
       IV. Establishment of fraud and abuse account
       A. Civil money penalties, fines, forfeitures and damages 
     assessed in criminal, civil or administrative health care 
     cases, along with any gifts and bequests would be deposited 
     in an ``All Payer Health Care Fraud and Abuse Control 
     account''
       B. The assets in the Account would be used, in addition to 
     such appropriated amounts, to meet the operating costs of the 
     national health care fraud control program

Subtitle C: Application of fraud and abuse authorities under the Social 
                      Security Act to other payers

       I. Application of civil monetary statutory penalties to all 
     payers
       A. The provisions under the Medicare and Medicaid programs 
     which provide for civil monetary penalties for specified 
     fraud
      and abuse violations (as amended by this Act) would apply to 
     similar violations with respect to all payers
       B. The following activity would be prohibited and subject 
     to a civil monetary penalty not to exceed $10,000:
       (1) Expelling or refusing to re-enroll an individual in 
     violation of federal standards for health plans or State law
       (2) Engaging in any practice that would reasonably be 
     expected to have the effect of denying or discouraging 
     enrollment in a health plan on the basis of a medical 
     condition
       (3) Engaging in any practice to induce enrollment in a 
     health plan through representations which the person knows or 
     should know are false

      Subtitle D: Advisory opinions on kickbacks and self-referral

       I. Issuance of Advisory Opinions
       A. The Secretary would require an individual requesting an 
     advisory opinion to pay a fee equal to the costs incurred by 
     the Secretary to issue the opinion.

        Subtitle E: Preemption of State corporate practice laws

       I. Preemption of State Laws Prohibiting Corporate Practice 
     of Medicine
       A. No provision of State or local law would apply that 
     prohibits a corporation from practicing medicine.


    TITLE II: INFORMATION SYSTEMS AND ADMINISTRATIVE SIMPLIFICATION

       I. Uniform health claims card
       A. Each beneficiary of a health benefit plan, including 
     Medicare, would be issued a uniform health claims card
       B. Each card would include a uniform health claims 
     identification number which would be the Social Security 
     number of the beneficiary
       C. The card would be in a form similar to that of a credit 
     card and would have information encoded in electronic form
       II. Requirement for entitlement verification systems
       A. The Secretary would provide for an electronic system for 
     the verification of an individual's enrollment in a health 
     plan, including Medicare and entitlement to benefits
       B. The Secretary would establish standards respecting the 
     requirements for certification of entitlement verification 
     systems
       (1) The system would be required to be able to coordinate 
     benefit information among health plans and Medicare
       (2) The system would also be required to accept inquiries 
     from health care providers and health benefit plans 
     electronically through the use of electronic card readers, 
     touch-tone telephones, or computer modems
       (3) Health benefit plans that fail to provide for an 
     electronic verification system would be subject to civil 
     monetary penalties
       III. Uniform claims and electronic claims data set
       (A) All claims submitted by providers would be transmitted 
     using a uniform electronic format to be developed by the 
     Secretary
       (B) The Secretary would develop a single, uniform coding 
     system for procedures and diagnoses
       (C) The Secretary would provide for a unique identifier 
     code for each health service provider and health plan
       (D) Health service providers and health plans that fail to 
     submit a claim for payment in a form and manner consistent 
     with the standards would be subject to civil monetary 
     penalties
       (E) All claims for clinical lab tests would be submitted 
     directly by the person or entity that performed the test.
       IV. Electronic medical records and reporting
       (A) The Secretary would promulgate standards for hospitals 
     concerning electronic medical records
       (B) As a condition of Medicare participation each hospital 
     would be required to maintain hospital clinical data in 
     electronic form in accordance with these standards
       (C) State quill pen laws that require medical or health 
     information to be maintained in written form would be pre-
     empted
       V. Uniform hospital cost reporting
       (A) Each hospital would be required to report information 
     on costs to the Secretary in a uniform manner consistent with 
     standards established by the Secretary
     

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