[Congressional Record Volume 141, Number 159 (Friday, October 13, 1995)]
[Senate]
[Pages S15157-S15162]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      FRAUD IN THE MEDICARE SYSTEM

  Mr. HARKIN. Mr. President, I could not believe my eyes this morning 
when I opened up the front page of the newspaper. And here is the 
headline, Mr. President: ``Gingrich places low priority on Medicare 
crooks, defends cutting anti-fraud defenses.''
  Well, what is this all about, Mr. President? Well, what it is about 
is the House bill, the House bill on Medicare reform, which I think 
ought to be titled, ``The Scam Artist Protection Act.'' But, Mr. 
President, do not take my word for it. Here is a letter dated September 
29 from the inspector general's office of the Department of Health and 
Human Services.
  It says:

       However, if enacted, certain major provisions of H.R. 
     2389--

  The House bill.

     would cripple the efforts of law enforcement agencies to 
     control health care fraud and abuse in the Medicare program 
     and to bring wrongdoers to justice.

  ``Would cripple their efforts.'' And so the Speaker yesterday says, 
``It is all right. No big deal.'' He said that it is more important to 
lock up murderers and rapists than dishonest doctors. Well, it is 
important to lock up murderers and rapists. You bet it is. But what 
does that have to do with Medicare fraud? Talk about using a logic that 
just about takes all right there.
  But even more astounding is this quote attributed to the Speaker. 
When he was pressed on it, he said that they might be willing to 
negotiate on it. He said--this is a quote attributed to the Speaker--
``We can be talked out of it if there is enough public pressure.''
  I will repeat that:

       We can be talked out of it if there is enough public 
     pressure.

  Talked out of what? Talked out of easing the antifraud measures that 
we now have in the law?
  I think in that statement is a tacit acknowledgment by the Speaker 
that they are, indeed, opening the doors to more fraud and abuse in 
Medicare. But he said if there is enough public pressure, we can change 
it.
  If we can slip it through in the dark of night, if we can do it 
behind closed doors, if we can ram it through in a hurry and the public 
does not know about it, we will do it. But if the public finds out 
about it and they put pressure on us, well then, we will change it.
  Mr. President, I am here to start putting pressure on us. The public 
ought to put pressure on us, because what has been happening in 
Medicare is billions of dollars in proportion. The ripoffs, the fraud, 
the waste and abuse is ongoing and getting worse instead of better, 

[[Page S 15158]]
and the few minimal laws that we have that permit the inspector 
general's office to go after the crooks in Medicare are now being 
weakened in the House bill and the inspector general said so. She said 
it would cripple the efforts of law enforcement agencies to control 
health care fraud and abuse.
  Mr. President, I ask unanimous consent to have printed in the Record 
a letter dated September 29 from the inspector general's office 
outlining the provisions in the House bill that would, indeed, cripple 
their efforts.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                              Department of Health


                                             & Human Services,

                               Washington, DC, September 29, 1995.
     Re H.R. 2389: ``Safeguarding Medicare Integrity Act of 
         1995.''
     Hon. Tom Harkin,
     U.S. Senate,
     Washington, DC.
       Dear Senator Harkin: You requested our views regarding the 
     newly introduced H.R. 2389, which we understand may be 
     considered in the deliberations concerning the ``Medicare 
     Preservation Act.'' We strongly support the expressed 
     objective of H.R. 2389 of reducing the fraud and abuse which 
     plagues the Medicare program. The proposed legislation 
     contains some meritorious provisions. However, if enacted, 
     certain major provisions of H.R. 2389 would cripple the 
     efforts of law enforcement agencies to control health care 
     fraud and abuse in the Medicare program and to bring 
     wrongdoers to justice.
       The General Accounting Office estimates the loss to 
     Medicare from fraud and abuse at 10 percent of total Medicare 
     expenditures, or about $18 billion. We recommend two steps to 
     decrease this problem: strengthen the relevant legal 
     authorities, and increase the funding for law enforcement 
     efforts. Some worthy concepts have been included in H.R. 
     2389, and we support them. For example, we support:
       A voluntary disclosure program, which allows corporations 
     to blow the whistle on themselves if upper management finds 
     wrongdoing has occurred, with carefully defined relief for 
     the corporation from qui tam suits under the False Claims Act 
     (but not waiver by the Secretary of sanctions);
       Minimum periods of exclusion (mostly parallel with periods 
     of exclusion currently in regulations) with respect to 
     existing exclusion authorities from Medicare and Medicaid; 
     and
       Increases in the maximum penalty amounts which may be 
     imposed under the civil monetary penalty laws regarding 
     health care fraud.
       As stated above, however, H.R. 2389 contains several 
     provisions which would seriously erode our ability to control 
     Medicare fraud and abuse, including most notably: making the 
     civil monetary penalty and anti-kickback laws considerably 
     more lenient, the unprecedented creation of an advisory 
     opinion mechanism on intent-based statutes, and a trust fund 
     concept which would fund only private contractors (not law 
     enforcement). Our specific comments on these matters follow.


 1. making civil monetary penalties for fraudulent claims more lenient 
   by relieving providers of the duty to use reasonable diligence to 
               ensure their claims are true and accurate

       Background: The existing civil monetary penalty (CMP) 
     provisions regarding false claims were enacted by Congress in 
     the 1980's as an administrative remedy, with cases tried by 
     administrative law judges with appeals to Federal court. In 
     choosing the ``knows or should know'' standard for the mental 
     element of the offense, Congress chose a standard which is 
     well defined in the Restatement of Torts, Second, Section 12. 
     The term ``should know'' places a duty on health care 
     providers to use ``reasonable diligence'' to ensure that 
     claims submitted to Medicare are true and accurate. The 
     reason this standard was chosen was that the Medicare system 
     is heavily reliant on the honesty and good faith of providers 
     in submitting their claims. The overwhelming majority of 
     claims are never audited or investigated.
       Note that the ``should know'' standard does not impose 
     liability for honest mistakes. If the provider exercises 
     reasonable diligence and still makes a mistake, the provider 
     is not liable. No administrative complaint or decision issued 
     by the Department of Health and Human Services (HHS) has 
     found an honest mistake to be the basis for CMP sanction.
       H.R. 2389 Proposal: Section 201 would redefine the term 
     ``should know'' in a manner which does away with the duty on 
     providers to exercise reasonable diligence to submit true and 
     accurate claims. Under this definition, providers would only 
     be liable if they act with ``deliberate ignorance'' of false 
     claims or if they act with ``reckless disregard'' of false 
     claims. In an era when there is great concern about fraud and 
     abuse of the Medicare program, it would not be appropriate to 
     relieve providers of the duty to use ``reasonable diligence'' 
     to ensure that their claims are true and accurate.
       In addition, the bill treats the CMP authority currently 
     provided to the Secretary in an inconsistent manner. On one 
     hand, it proposes an increase in the amounts of most CMPs 
     which may be imposed under the Social Security Act. Yet, it 
     would significantly curtail enforcement of these sanction 
     authorities by raising the level of culpability which must 
     be proven by the Government in order to impose CMPs. It 
     would be far preferable not to make any changes to the CMP 
     statutes at this time.


   2. making the anti-kickback statute more lenient by requiring the 
 government to prove that ``the significant'' intent of the defendant 
                              was unlawful

       Background: The anti-kickback statute makes it a criminal 
     offense knowingly and willfully (intentionally) to offer or 
     receive anything of value in exchange for the referral of 
     Medicare or Medicaid business. The statute is designed to 
     ensure that medical decisions are not influenced by financial 
     rewards from third parties. Kickbacks result in more Medicare 
     services being ordered than otherwise, and law enforcement 
     experts agree that unlawful kickbacks are very common and 
     constitute a serious problem in the Medicare and Medicaid 
     programs.
       The two biggest health care fraud cases in history were 
     largely based on unlawful kickbacks. In 1994, National 
     Medical Enterprises, a chain of psychiatric hospitals, paid 
     $379 million for giving kickbacks for patient referrals, and 
     other improprieties. In 1995, Caremark, Inc. paid $161 
     million for giving kickbacks to physicians who ordered very 
     expensive Caremark home infusion products.
       Most kickbacks have sophisticated disguises, like 
     consultation arrangements, returns on investments, etc. These 
     disguises are hard for the Government to penetrate. Proving a 
     kickback case is difficult. There is no record of trivial 
     cases being prosecuted under this statute.
       H.R. 2389 Proposal: Section 201 would require the 
     Government to prove that ``the significant purpose'' of a 
     payment was to induce referrals of business. The phrase ``the 
     significant'' implies there can only be one ``significant'' 
     purpose of a payment. If so, at least 51 percent of the 
     motivation of a payment must be shown to be unlawful. 
     Although this proposal may have a superficial appeal, if 
     enacted it would threaten the Government's ability to 
     prosecute all but the most blatant kickback arrangements.
       The courts interpreting the anti-kickback statute agree 
     that the statute applies to the payment of remuneration ``if 
     one purpose of the payment was to induce referrals.'' United 
     States v. Greber, 760 F.2d 68, 69 (3d Cir. 1985) (emphasis 
     added). If payments were intended to induce a physician to 
     refer patients, the statute has been violated, even if the 
     payments were also intended (in part) to compensate for 
     legitimate services. Id. at 72. See also: United States v. 
     Kats, 871 F.2d 105, 108 (1989); United States v. Bay State 
     Ambulance, 874 F.2d 20, 29-30 (1st. Cir. 1989). The proposed 
     amendment would overturn these court decisions.
       However, the nature of kickbacks and the health care 
     industry requires the interpretation adopted by Greber and 
     its progeny. to prove that a defendant had the improper 
     intent necessary to violate the anti-kickback statute, the 
     prosecution must establish the defendant's state of mind, or 
     intent. As with any intent-based statute, the prosecution 
     cannot get directly inside the defendant's head. The 
     prosecution must rely on circumstantial evidence to prove 
     improper intent. Circumstantial evidence consists of 
     documents relevant to the transaction, testimony about what 
     the defendant said to business associates or potential 
     customers, etc. These types of evidence are rarely clear 
     about the purposes and motivations of the defendant. The 
     difficulties of establishing intent are multiplied by the 
     complexity, size, and dynamism of the health care industry, 
     as well as the sophistication of most kickback scheme 
     participants. Documents are ``pre-sanitized'' by expert 
     attorneys. Most defendants are careful what they say. In most 
     kickback prosecutions, the Government has a difficult task to 
     prove beyond a reasonable doubt that even one purpose of a 
     payment is to induce referrals.
       If the Government had to prove that inducement of referrals 
     was ``the significant'' reason for the payment, many common 
     kickback schemes would be allowed to proliferate. In today's 
     health care industry, very few kickback arrangements involve 
     the bald payment of money for patients. Most kickbacks have 
     sophisticated disguises. Providers can usually argue that any 
     suspect payment serves one or more ``legitimate purposes.'' 
     For example, payments made to induce referrals often also 
     compensate a physician who is providing health care items or 
     services. Some payments to referral sources may be disguised 
     as returns on investments. Similarly, many lease arrangements 
     that indisputably involve the bona fide use of space 
     incorporate some inducement to refer in the lease rates. In 
     all of these examples, and countless others, it is impossible 
     to qualify what portions of payments are made for nefarious 
     versus legitimate purposes.
       Where the defendant could argue that there was some 
     legitimate purpose for the payment, the prosecution would 
     have to prove beyond a reasonable doubt, through 
     circumstantial evidence, that the defendant actually had 
     another motive that was ``the significant'' reason. For the 
     vast majority of the present-day kickback schemes, the 
     proposed amendment would place an insurmountable burden of 
     proof on the Government.
     
[[Page S 15159]]



   3. creation of an easily abused exception from the anti-kickback 
             statute for certain managed care arrangements

       Background: There is great variety and innovation occurring 
     in the managed care industry. Some managed care 
     organizations, such as most health maintenance organizations 
     (HMOs) doing business with Medicare, consist of providers who 
     assume financial risk for the quantity of medical services 
     needed by the population they serve. In this context, the 
     incentive to offer kickbacks for referrals of patients for 
     additional services is minimized, since the providers are at 
     risk for the additional costs of those services. If anything, 
     the incentives are to reduce services. Many other managed 
     care organizations exist in the fee for service system, where 
     the traditional incentives to order more services and pay 
     kickbacks for referrals remain. In the fee for service 
     system, the payer (like Medicare and private insurance plans) 
     is at financial risk of additional services, not the managed 
     care organization. While broad protection from the anti-
     kickback statute may be appropriate for capitated, at-risk 
     entities like the HMO described above, such protection for 
     managed care organizations in the fee for service system 
     would invite serious abuse.
       H.R. 2389 Proposal: Section 202 would establish broad new 
     exceptions under the anti-kickback statute for ``any 
     capitation, risk-sharing, or disease management program.'' 
     The lack of definition of these terms would result in a huge 
     opportunity for abusive arrangements to fit within this 
     proposed exception. What is ``risk-sharing?'' Is not any 
     insurance a form of risk sharing? What is a ``disease 
     management program?'' Does not that term include most of 
     health care?
       Nefarious organizations could easily escape the kickback 
     statute by simply rearranging their agreements to fit within 
     the exception. For example, if a facility wanted to pay 
     doctors for referrals, the facility could escape kickback 
     liability by establishing some device whereby the doctors 
     share in the business risk of profit and loss of the business 
     (i.e., they would share some risk, at least theoretically). 
     Then, the organization could pay blatant kickbacks for every 
     referral with impunity.
       If the concern is that the kickback statute is hurting 
     innovation, as observed above, there is now an explosion of 
     innovation in the health care industry, especially in managed 
     care. No one in Government is suggesting that HMOs or 
     preferred provider arrangements, etc., formed in good faith, 
     violate the kickback statute. There has never been any action 
     against any such arrangement under the statute.


   4. inappropriate expansion of the exception to the anti-kickback 
                         statute for discounts

       Background. Medicare/Medicaid discounts are beneficial and 
     to be encouraged with one critical condition: that Medicare 
     and/or Medicaid receive and participate fully in the 
     discount. For example, if the Medicare reasonable charge for 
     a Part B item or service is $100, Medicare would pay $80 of 
     the bill and the copayment would be $20. If a 20 percent 
     discount is applied to this bill, the charge should be $80, 
     and Medicare would pay $64 (80 percent of the $80) and the 
     copayment would be $16. If the discount is not shared with 
     Medicare (which would be improper), the bill to Medicare 
     would falsely show a $100 charge. Medicare would pay $80, but 
     the copayment would be $0. This discount has not been shared 
     with Medicare.
       Many discounting programs are designed expressly to 
     transfer the benefit of discounts away from Medicare. The 
     scheme is to give little or no discount on an item or service 
     separately billed to Medicare, and give large discounts on 
     items not separately billed to Medicare. This scheme results 
     in Medicare paying a higher percentage for the separately 
     billed item or service than it should.
       For example, a lab offers a deep discount on lab work for 
     which Medicare pays a predetermined fee (such as lab tests 
     paid by Medicare to the facility as part of a bundled 
     payment), if the facility refers to the lab its separately 
     billed Medicare lab work, for which no discount is given. The 
     lab calls this a ``combination'' discount, yet is a discount 
     on some items and not on others. Another example is where 
     ancillary or noncovered items are furnished free, if a 
     provider pays full price for a separately billed item, such 
     as where the purchase of incontinence supplies is accompanied 
     by a ``free'' adult diaper. Medicare has not shared in these 
     combination discounts.
       H.R. 2389 Proposal. Section 202 would permit discounts on 
     one item in a combination to be treated as discounts on 
     another item in the combination. This sounds innocent, but it 
     is not. Medicare would be a big loser. Discounting should be 
     permissible for a supplier to offer a discount on a 
     combination of items or services, so long as every item or 
     service separately billed to Medicare or Medicaid receives no 
     less of a discount than is applied to other items in the 
     combination. If the items or services separately billed to 
     Medicare or Medicaid receive less of a discount than other 
     items in the combination, Medicare and Medicaid are not 
     receiving their fair share of the discounts.


   5. unprecedented mechanism for advisory opinions on intent-based 
             statutes, including the anti-kickback statute

       Background: The Government already offers more advice on 
     the anti-kickback statute than is provided regarding any 
     other criminal provision in the United States Code.
       Industry groups have been seeking advisory opinions under 
     the anti-kickback statute for many years, with vigorous 
     opposition by the Department of Justice (DOJ), and the HHS 
     Office of Inspector General (OIG) under the last three 
     administrations, as well as the National Association of 
     Attorneys General. In 1987, Congress rejected calls to 
     require advisory opinions under this statute. As a 
     compromise, Congress required HHS, in consultation with the 
     Attorney General, to issue ``safe harbor'' regulations 
     describing conduct which would not be subject to criminal 
     prosecution or exclusion. See Section 14 of Public Law 100-
     93.
       To date, the OIG has issued 13 final anti-kickback ``safe 
     harbor'' rules and solicited comment on 8 additional proposed 
     safe harbor rules, for a total of 21 final and proposed safe 
     harbors. Over 50 pages of explanatory material has been 
     published in the Federal Register regarding these proposed 
     and final rules. In addition, the OIG has issued six general 
     ``fraud alerts'' describing activity which is suspect under 
     the anti-kickback statute. Thus, the Government gives 
     providers guidance on what is clearly permissible (safe 
     harbors) under the anti-kickback statute and what we consider 
     illegal (fraud alerts).
       H.R. 2389 Proposal. HHS would be required to issue advisory 
     opinions to the public on the Medicare/Medicaid anti-kickback 
     statute (section 1128B(b) of the Social Security Act, as well 
     as all other criminal authorities, civil monetary penalty and 
     exclusion authorities pertaining to Medicare and Medicaid. 
     HHS would be required to respond to requests for advisory 
     opinions within 30 days.
       HHS would be authorized to charge requestors a user fee, 
     but there is not provision for this fee to be credited to 
     HHS. Fees would therefore be deposited in the Treasury as 
     miscellaneous receipts.
       Major problems with anti-kickback advisory opinions 
     include:
       Advisory opinions on intent-based statutes (such as the 
     anti-kickback statute) are impractical if not impossible. 
     Because of the inherently subjective, factual nature of 
     intent, it would be impossible for HHS to determine intent 
     based solely upon a written submission from the requestor. 
     Indeed, it does not make sense for a requestor to ask the 
     Government to determine the requestor's own intent. 
     Obviously, the requester already knows what their intent is.
       None of the 11 existing advisory opinion processes in the 
     Federal Government provide advisory opinions regarding the 
     issue of the requestor's intent. An advisory opinion process 
     for an intent-based statute is without precedent in U.S. law.
       The advisory process in H.R. 2389 would severely hamper the 
     Government's ability to prosecute health care fraud. Even 
     with appropriate written caveats, defense counsel will hold 
     up a stack of advisory opinions before the jury and claim 
     that the dependent read them and honestly believed (however 
     irrationally) that he or she was not violating the law. The 
     prosecution would have to disprove this defense beyond a 
     reasonable doubt. This will seriously affect the likelihood 
     of conviction of those offering kickbacks.
       Advisory opinions would likely require enormous resources 
     and many full time equivalents (FTE) at HHS. The user fees in 
     the bill would go to the Treasury, not to HHS. Even if they 
     did go to HHS, appropriations committees tend to view them as 
     offsets to appropriations. There are no estimates of number 
     of likely requests, number of FTE required, etc. Also, HHS is 
     permanently downsizing, even as it faces massive structural 
     and program changes. The possible result of the bill is a 
     diversion of hundreds of anti-fraud workers to handle the 
     advisory opinions.
       For the above reasons, DOJ, HHS/OIG and the National 
     Association of Attorneys General strongly oppose advisory 
     opinions under the anti-kickback statute, and all other 
     intent-based statutes.


    6. creation of trust fund mechanism which does not benefit law 
                              enforcement

       Background: In our view, the most significant step Congress 
     could undertake to reduce fraud and abuse would be to 
     increase the resources devoted to investigating false claims, 
     kickbacks and other serious misconduct. It is important to 
     recognize that the law enforcement effort to control Medicare 
     fraud is surprisingly small and diminishing. There is 
     evidence of increasing Medicare fraud and abuse, and 
     Medicare expenditures continue to grow substantially. Yet, 
     the staff of the HHS/OIG, the agency with primary 
     enforcement authority over Medicare, has declined from 
     1,411 employees in 1991 to just over 900 today. (Note: 259 
     of the 1,411 positions were transferred to the Social 
     Security Administration). Approximately half of these FTE 
     are devoted to Medicare investigations, audits and program 
     evaluations. As a result of downsizing, HHS/OIG has had to 
     close 17 OIG investigative offices and we now lack an 
     investigative presence in 24 States. The OIG has only 
     about 140 investigators for all Medicare cases nationwide. 
     By way of contrast, the State of New York gainfully 
     employs about 300 persons to control Medicaid fraud in 
     that State alone.
       Ironically, the investigative activity of OIG pays for 
     itself many times over. Over the last 5 years, every dollars 
     devoted to OIG investigations of health care fraud and abuse 
     has yielded an average return of over $7 to 

[[Page S 15160]]
     the Federal Treasury, Medicare trust funds, and State Medicaid 
     programs. In addition, an increase in enforcement also 
     generates increased deterrence, due to the increased chance 
     of fraud being caught. For these reasons, many fraud control 
     bills contain a proposal to recycle monies recovered from 
     wrongdoers into increased law enforcement. The amount an 
     agency gets should not be related to how much it generates, 
     so that it could not be viewed as a ``bounty.'' The Attorney 
     General and the Secretary of HHS would decide on 
     disbursements from the fund. We believe such proposals would 
     strengthen our ability to protect Medicare from wrongdoers 
     and at no cost to the taxpayers. The parties who actually 
     perpetrate fraud would ``foot the bill.''
       H.R. 2389 Proposal: Section 106 would create a funding 
     mechanism using fines and penalties recovered by law 
     enforcement agencies from serious wrongdoers. But none of the 
     money would be used to help bring others to justice. Instead, 
     all the funds would be used only by private contractors for 
     ``soft'' claims review, such as, medical and utilization 
     review, audits of cost reports, and provider education.
       The above functions are indeed necessary, and they are now 
     being conducted primarily by the Medicare carriers and 
     intermediaries. Since the bill would prohibit carriers and 
     intermediaries from performing these functions in the future, 
     there appears to be no increase in these functions, but only 
     a different funding mechanism.
       These ``soft'' review and education functions are no 
     substitute for investigation and prosecution of those who 
     intend to defraud Medicare. The funding mechanism in H.R. 
     2389 will not result in any more Medicare convictions and 
     sanctions.

                           *   *   *   *   *

       In summary, H.R. 2389 would:
       Relieve providers of the legal duty to use reasonable 
     diligence to ensure that the claims they submit are true and 
     accurate; this is the effect of increasing the Government's 
     burden of proof in civil monetary penalty cases;
       Substantially increase the Government's burden of proof in 
     anti-kickback cases;
       Create new exemptions to the anti-kickback statute which 
     could readily be exploited by those who wish to pay rewards 
     to physicians for referrals of patients;
       Create an advisory opinion process on an intent-based 
     criminal statute, a process without precedent in current law; 
     since the fees for advisory opinions would not be available 
     to HHS, our scarce law enforcement resources would be 
     diverted into hiring advisory opinion writers; and
       Create a fund to use monies recovered from wrongdoers by 
     law enforcement agencies, but the fund would not be available 
     to assist the law enforcement efforts; all the monies would 
     be used by private contractors only for ``soft'' payment 
     review and education functions.
       In our view, enactment of the bill with these provisions 
     would cripple our ability to reduce fraud and abuse in the 
     Medicare program and to bring wrongdoers to justice.
       Thank you for your attention to our concerns.
           Sincerely,
                                                 June Gibbs Brown,
                                                Inspector General.

  Mr. HARKIN. Mr. President, over the last several years when I was 
Chair of the Subcommittee on Appropriations that funded HCFA and 
Medicare, we held a series of hearings, and I requested GAO to do a 
number of studies on waste, fraud, and abuse in the Medicare system.
  What we have uncovered is mind boggling: HCFA paying for 240 yards of 
tape per person per day--Medicare paying that. Medicare paying over 
some $200 for a blood glucose tester that you can buy down at Kmart for 
$49.99. Medicare is paying thousands of dollars for devices that only 
cost $100. Foam cushions that cost about $50 that Medicare is paying 
$880 each for.
  The list goes on and on and on, and we know it is happening out 
there. We know how medical suppliers are scamming the system, double 
billing going on. We have documentation. GAO has documented this in the 
past.
  Last year, I asked the GAO to do a study just on medical supplies--
just on medical supplies. They started their study in about May or June 
1994, and the study was completed in August of this year. They issued 
their report.
  GAO went to Medicare and said, ``We want to take a representative 
sample of bills that you have paid for medical supplies.''
  You have to understand, Mr. President, that when Medicare pays a bill 
for medical supplies, they do not even know what they are paying for, 
because all of the supplies are put under one code, 270. So Medicare 
pays a bill, code 270, medical supplies, $20,000. They have no idea 
what is in there, because they do not require it to be itemized. 
Imagine that.
  So GAO went to Medicare, got a representative sample, went behind the 
code to the suppliers, to the nursing homes, to the hospitals and said, 
``OK, we want the itemized account.''
  Guess what they found? Now this will knock your socks off. They found 
that that 89 percent--89 percent--of the claims should have been 
totally or partially denied; 61 percent of the money spent should never 
have been paid out--61 percent.
  Then you ask the question: How much did Medicare pay last year for 
medical supplies? The answer, $6.8 billion. If you can extrapolate from 
this sample and say that 61 percent of that money should not have been 
paid out, you are talking about $4 billion--$4 billion. Maybe we cannot 
get it all, but could we get $3 billion? I bet we could. How about even 
$2 billion? We ought to be able to save that. Multiply that over 7 
years, which is what we are talking about here, and you can see that is 
a pretty good chunk of money. And that is just medical supplies, that 
is just tape and bandages, things like that. We are not even talking 
about durable medical equipment. We are not talking about the double 
billing that goes on. That is just one, just medical supplies. It does 
not include oxygen, and it does not include ambulances, orthotic 
devices. It does not include durable medical equipment. It is just the 
bandages, $6.8 billion, and 61 percent should not have been paid.
  A lot of this is fraud. A lot of it comes about because scam artists 
know that they can game the system.
  Why would they do that? Are there not enough penalties? Would they 
not be afraid of getting caught? The fact is that in 24 States, the 
inspector general's office does not even have a presence. They are not 
even in 24 States.
  Right now, Medicare reviews about 5 percent of the claims. So if you 
want to scam the system, you want to put in fraudulent claims, your 
chances are 5 percent that you are even going to be reviewed, and out 
of the reviews, they may or may not do something based upon that. If 
you are in one of the 24 States where there is not an inspector general 
operating, the sky is the limit.
  That is why fraud is so rampant in the Medicare system today. What 
the Speaker says is that is fine, that is a low priority. We do have 
some antifraud legislation on the books, as inadequate as it is right 
now. The House bill weakens it even further, and the Speaker says that 
is fine, but he says if the public catches on to it and they put on 
enough pressure, maybe we will change it.
  I hope the public does put on the pressure, because we do have to 
change it. The House will say, well, they put more money into the IG's 
office, they put $100 million into the inspector general's office. So 
you give more money into the inspector general, then you put the 
handcuffs on it by making it so they cannot prove fraud. That is 
exactly what they have done.
  Mr. President, we have to not put waste, fraud, and abuse in the back 
seat, we ought to put it in the front seat. We have to attack that. I 
do not think it is right, I do not think it is fair for this Congress, 
for the Speaker of the House to say, ``OK, we're going to double your 
premiums for the elderly, we're going to double your deductibles, but 
we're going to let the crooks go, we're not going to crack down on 
them.''
  Oh, yeah, from what I read, they are going to let the doctors off, 
too. They are not going to have to belly up to the bar.
  One other item before I finish on fraud. I have another report from 
the inspector general's office issued just this month in October. Here 
is what they found: 13 percent of nursing homes have been offered 
inducements in exchange for allowing suppliers to provide products to 
patients in their facilities; 17 percent of nursing homes with 
Medicare-reimbursed products have been offered these inducements. The 
inducements range from free trial products to cameras, blenders, and 
diamond rings. Fraud, and yet the Speaker says it is too tough the way 
it is, we have to make it even less tough. We have to ease up. One 
other thing, Mr. President, that has disturbed me, came to my attention 
in the last 24 hours. It has to do with the block granting of Medicaid 
to the States. The Finance Committee--the Senate Finance Committee, of 
which I am not a member, but I follow closely what it has done--adopted 
an amendment offered by a Republican, Senator Chafee, that says, OK, if 
you block grant it to the States, 

[[Page S 15161]]
we still want to have some guarantees. What do we want to guarantee? We 
want to guarantee that pregnant women who fall under the poverty line 
get medical help under Medicaid; we want to guarantee that all children 
under the age of 12 get Medicaid medical help; we want to guarantee 
that all disabled continue to get medical help, as they are today. 
Plus, they want to guarantee that we continue the provisions in law 
that provide that a spouse does not have to spend all of his or her 
money down to nothing and give up their income before Medicaid will 
start paying for their spouse's long-term care in a nursing home. It is 
called the spousal impoverishment provision. It says you cannot 
impoverish a spouse simply because his or her husband or wife is in a 
nursing home. What does it say? It says basically that, minimum, a 
spouse can keep, I think, a little over $14,000 in assets and can make 
a little over $1,200 a month.

  Now, in my view, if a couple saved up all of their lives and they 
have $50,000 in the bank, and one spouse gets Alzheimer's and cannot be 
cared for and has to go to a nursing home and the other spouse has to 
spend that $50,000 until they get to $14,000 and then Medicaid will 
kick in and start paying, that $14,000 is not a lot of money to have in 
the bank for a rainy day when you are getting old.
  So these provisions were left in the Senate-passed Finance Committee 
bill. It passed, as I understand, by a vote of 17 to 3. I picked up 
this publication, the National Journal of Congress, dated Friday, 
October 13, this morning. Here is what it says:

       ``Thursday, Senator Jay Rockefeller said GOP leaders were 
     trying to undo a compromise that preserved the disabled's 
     right to Medicaid,'' the Associated Press reported. 
     Rockefeller and Senator John Chafee won a 17 to 3 Finance 
     panel vote to keep the Medicaid entitlement for poor children 
     and pregnant women, as well as the disabled. But GOP 
     Governors have protested overly prescriptive and onerous 
     provisions in the bill. Roth said Thursday evening, ``It is a 
     matter that is still open.''
       The AP said, ``Sheila Burke, Dole's Chief of Staff, told 
     reporters, ``The disabled will not be an entitlement.'' 
     Chafee and six other moderates wrote Dole, asking him to 
     ``stand fast in your support for at least a minimal level of 
     support provided to our Nation's most vulnerable 
     populations.''

  Mr. President, I hope this is not true. I hope this is not true that 
now the Republicans on the Senate Finance Committee are going to throw 
out the disabled in our country, that they are going to say, OK, all 
right, we will keep pregnant women in and children up to age 12, but 
the disabled, you are out the door, you are not entitled to be covered, 
we are not going to guarantee you coverage--the most vulnerable of our 
population, those who are disabled.
  Mr. President, here is another thing I cannot believe. We got a 
letter the other day, sent to Senator Dole on October 6, signed by 24 
Republican Governors, saying that they wanted the block granting of the 
Medicaid bill. They supported that, but they said there are some things 
they do not like.
  I will read this from the letter of 24 Republican Governors:

       The bill includes a number of overly prescriptive and 
     onerous provisions that will mitigate against the States' 
     ability to implement reforms.

  What are those onerous provisions? They are that the Senate Finance 
Committee, by a vote of 17 to 3, on a bipartisan basis, said you have 
to cover pregnant women who fall under the poverty line with medical 
care, you have to provide for children to age 12 who are in poverty, 
you have to cover the disabled, and you have to have provide against 
espousal impoverishment. The Republican Governors said that is onerous.
  I have to ask this, Mr. President. These Governors have said, ``Turn 
Medicaid over to the States. We will take care of it better than the 
Federal Government can take care of it.'' What makes you think that 
these Republican Governors do not care for the disabled, poor, and the 
women as much as Congress? Well, they cannot have it both ways. If 
these Republican Governors say they do not want these provisions in 
there that mandate that they continue to cover the disabled, then are 
they then saying they want to have the freedom to throw the disabled 
out? If the Republican Governors are saying they do not want the 
provision in there that says we will ensure against spousal 
impoverishment, are they then saying that they, the Republican 
Governors, are willing to throw that out?
  Well, if they are not saying that and if the Republican Governors are 
saying, oh, no, no, no, no, we will make sure we keep provisions 
against spousal impoverishment, we will cover the disabled, pregnant 
women, and the children, why do they care if it is in there? You cannot 
have it both ways.
  These Republican Governors have shown their hand. If we turn Medicaid 
over to the States without these provisions, they are going to go cut 
the disabled, pregnant women, children, and cut back on the provisions 
against spousal impoverishment. It is right here in this letter, signed 
by 24 Republican Governors.
  So I think it is becoming clearer as the days roll by, Mr. President, 
that on the Medicare side, the Speaker and the GOP are turning a blind 
eye to the concerns of seniors. But they are giving a wink and a nod to 
the Medicare crooks.
  When it comes to Medicare, Mr. Gingrich and his allies are willing to 
tell the seniors they have to pay more, double their premiums, double 
their deductibles. They want to take $270 billion out of Medicare and 
use it for a tax cut for some of the most privileged in our society. 
Yet, they are not willing to crack down on those that are scamming the 
system, bilking the system of billions of dollars a year. Oh, no, we do 
not want to do that. Well, I think the public ought to know about it. I 
think the public is becoming aware of it, Mr. President. I think the 
public is now beginning to wake up to the fact that we do not need to 
cut $270 billion out of Medicare.
  The head of Medicare said that maybe $90 billion would get us through 
the next 10 years; $90 billion would provide for the security of the 
Medicare system through 2006. Think about that. GAO said that 10 
percent of Medicare goes for waste, fraud, and abuse. That is about $18 
billion a year. Well, $18 billion a year for 7 years is $126 billion, 
which, over the next 7 years, will go for waste, fraud, and abuse. If 
we cannot get all the $126 billion, can we get $90 billion of it? We 
might be able to squeeze enough out of waste, fraud, and abuse to 
ensure the viability of Medicare at least for the next 10 years. But, 
no, Republicans say, though, they want $270 billion out of Medicare. 
Sock it to the seniors, make them pay double for premiums, double for 
deductibles, and then they will take that money and give a $245 billion 
tax cut for the most privileged in our society. Not fair, not right. I 
think the people and the public are beginning to understand that.

  Now, on the Medicaid side, $187 billion of cuts in Medicaid and then 
block granted to the States. I think the Senate Finance Committee cast 
a conscientious vote last week when they said, ``Look, we will block 
grant to the States but we want to make sure that we cover all pregnant 
women who are eligible for Medicaid, all children who are eligible for 
Medicaid, and the disabled.''
  Now, I understand that they are willing to throw out the disabled. 
That is unconscionable--unconscionable that some would be willing to 
throw out the disabled to say that, ``No, we are not going to cover 
you. You just go plead your case in the States. Go to the Governors.'' 
Well, the Governors told us what they wanted to do in their letter. 
They found those provisions onerous.
  Mr. President, it is becoming clearer, in Medicare it is the seniors 
who get hit. In Medicaid, it is the poor.
  Here it is right here in contrast, Wednesday, October 11, the 
Washington Post. Here it is. This is it, right here. Two stories, side 
by side, that tell it all.
  On the right hand side, it says: ``Leaders Pledge Full Tax Cut By 
Senate GOP.'' Full $245 billion tax cut. ``Leaders Pledge Full Tax Cut 
By Senate GOP.'' The story right next to it: ``Working Poor May Pay the 
High Price for Reform.''
  There you go. It cannot be said any better than that.
  In Medicare, the disabled, if you are disabled, forget it. You will 
not have any protections. We throw you out.
  Well, I hope that is a wrong report. I hope everything I have said 
here today will prove not to be so. I hope that the Senate Finance 
Committee will not jettison the most vulnerable in our society, the 
disabled. If they do, if that is what comes here to the Senate floor, 

[[Page S 15162]]

that we have a Medicaid bill--I do not care how it is wrapped up. If it 
is wrapped up in reconciliation, as you know, we cannot filibuster that 
under the rules. But if they jettison the disabled, I hope and trust 
that President Clinton will veto that the second it lands on his desk 
and say to this country that we are not going to make the most 
vulnerable in our society, those who have disabilities, pay for the 
$245 billion tax cut for the most privileged in our society.
  I yield the floor.
  Mr. President, I ask unanimous consent that the article be printed in 
the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                      [From the Washington Times]

            Gingrich Places Low Priority on Medicare Crooks


                  defends cutting anti-fraud defenses

                          (By Nancy E. Roman)

       House Speaker Newt Gingrich yesterday defended GOP moves to 
     reduce penalties and enforcement efforts against Medicare 
     fraud by saying it's more important to lock up murderers and 
     rapists than dishonest doctors.
       The Georgia Republican cited ``murderers out after three 
     years'' and ``rapists who don't even get tried'' in response 
     to a question at a seniors gathering to promote the GOP 
     Medicare overhaul. ``For the moment, I'd rather lock up the 
     murderers, the rapists and the drug dealers,'' he said. 
     ``Once we start getting some vacant jail space, I'd be glad 
     to look at it.''
       The GOP bill in the House would weaken laws against 
     kickbacks and self-referrals in the Medicare program. The 
     Congressional Budget Office has estimated the seven-year cost 
     of relaxing those laws to be $1.1 billion.
       Gerald M. Stern, special counsel for health care fraud at 
     the Justice Department, said one provision would overturn a 
     common interpretation of Medicare anti-kickback case law and 
     increase the burden of proof in criminal prosecutions.
       Rep. Pete Stark, the California Democrat who drafted the 
     anti-kickback and self-referral statutes, called Mr. 
     Gingrich's comments ``arrogant and gratuitous.''
       ``To put O.J. Simpson, the Menendez brothers and Claus von 
     Bulow in the same category as physicians who get kickbacks 
     and who steal from the government is not the issue,'' Mr. 
     Stark said. ``Republicans are in the position of having 
     weakened protections that we put in [Medicare law] at the 
     urging of the Reagan and Bush administration.''
       Mr. Stark said Republicans weakened the provisions to shore 
     up support from the American Medical Association, a wealthy 
     lobby representing 300,000 doctors.
       Rep. Tom Coburn, Oklahoma Republican and obstetrician who 
     helped draft the new anti-kickback provisions, said the 
     changes simply would put medical professionals on equal 
     footing with other professionals subject to such laws.
       Courts have interpreted the Medicare anti-kickback law to 
     prohibit a payment if ``one purpose'' of it is to induce 
     referrals of services paid for by Medicare.
       The GOP bill would change that to ``the significant 
     purpose,'' which Mr. Stern and others said is much harder to 
     prove in court. Under this standard, he said, the government 
     would not have won two big cases this year that led to fines 
     of hundreds of millions of dollars.
       Kern Smith, an assistant commerce secretary under 
     Presidents Johnson and Kennedy, posed the question about 
     lighter fraud rules to Mr. Gingrich at a forum sponsored by 
     the Coalition to Save Medicare, a group backing the GOP 
     reforms.
       The 73-year-old Democrat said he's gone ``around the 
     country selling your plan'' but found seniors vexed by the 
     new fraud rules. He said they were hard to defend.
       ``I've been around Washington for a long time, and you are 
     giving the Democrats something to clobber you with,'' Mr. 
     Smith said.
       Mr. Gingrich said Republicans are willing to negotiate on 
     fraud and abuse provisions, leaving open the possibility of 
     the bill being changed on the House floor.
       ``We can be talked out of it if there is enough public 
     pressure,'' he said.
       A senior House aide yesterday said the legal standard in 
     the anti-kickback law was changed to make it consistent with 
     other such laws ``without a lot of thought, and it is 
     something that could be changed.''
       Republicans spent much of the summer discussing Medicare 
     changes with seniors, and many found that fraud topped 
     constituents' complaints. Many seniors erroneously thought 
     eliminating fraud and abuse could solve Medicare's money 
     woes.
       Republicans have created other ways to reduce fraud, such 
     as: allowing seniors to keep a portion of money recovered 
     from fraud cases they report; establishing a voluntary 
     disclosure program for corporate managers who uncover 
     wrongdoing in their companies; and increasing the maximum 
     civil penalties for health care fraud.
       The CBO estimates that these changes would save $2 billion 
     over seven years.
       Democrats support some of these changes but argue that 
     relaxing kickback and self-referral laws would undermine the 
     success achieved in reducing Medicare fraud.
       After Democrats upbraided Republicans for going soft on 
     fraud, the House Ways and Means Committee added $100 million 
     to the budget of the Inspector General's Office to prosecute 
     fraud and abuse. The CBO estimates that the additional money 
     would produce $700 million more in Medicare fraud fines.
       Rep. Sam M. Gibbons of Florida, ranking Democrat on the 
     Ways and Means Committee, said it will be difficult to block 
     the softer fraud rules without public outcry.
       ``The Republicans are all marching in lock step,'' Mr. 
     Gibbons said. ``In my lifetime I've never seen anybody march 
     in lock step like this.''

  Mr. HARKIN. Mr. President, I ask unanimous consent that the letter be 
printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                             Republican Governors Association,

                                  Washington, DC, October 6, 1995.
     Hon. Robert Dole,
     Majority Leader, U.S. Senate, Capitol Building, Washington, 
         DC.
       Dear Senator Dole: Collectively we desire to express our 
     gratitude for the working relationship with you and 
     Republican governors. We share your commitment to balancing 
     the budget and returning responsibilities to the states. Your 
     leadership on these matters is acknowledged and admired. We 
     are writing to you to convey our deep concern with provisions 
     that were included in the Medicaid portion of the 
     reconciliation bill approved by the Senate Finance Committee 
     on September 30.
       Since January of this year, Republican governors have 
     worked in good faith with Republican leadership on concepts 
     to bring meaningful, urgently needed reforms to the Medicaid 
     program while achieving the Congressional budget targets. As 
     governors representing the unique needs of our individual 
     states, we have not been in total agreement on all aspects of 
     the program. However, throughout this lengthy partnership, we 
     have consistently argued that the fiscal and functional 
     integrity of the program demand freedom from individual and 
     provider entitlements and other mandates on states. The 
     Senate Finance Committee bill ignores this principle.
       The bill includes a number of overly prescriptive and 
     onerous provisions that will militate against the states 
     ability to implement reforms. Among these are individual 
     entitlements, which create both a huge potential cost shift 
     to states and unlimited potential for litigation; a set-aside 
     for one class of providers; and mandated federal requirements 
     on spousal asset protection.
       Further, we are concerned that the bill reported out by the 
     Senate Finance Committee will be amended on the Senate floor 
     with additional mandates on states. While we support efforts 
     to reduce the deficit and balance the federal budget we will 
     not sit idly by while the costs associated with this program 
     are shifted to the states.
       We have kept our commitments to Republican leadership 
     throughout a difficult process of negotiating reforms that 
     states can implement, while protecting the interests of all 
     of our citizens. We are fully prepared to provide health care 
     for our most vulnerable populations, without prescriptions 
     and mandates from the federal government. We are pleased with 
     the flexibility provisions incorporated in the House measure 
     and intend to work for inclusion of such provisions in the 
     final bill.
       We are hopeful that we can work with the Senate leadership 
     on this most important issue. We urge you to remove mandates 
     and other prescriptive provisions from the Senate bill.
       It is our sincere hope that we can resolve these issues 
     quickly. As those charged with the actual administration of 
     these programs, we cannot support a combination of individual 
     entitlements and mandate provisions that will subject us to 
     unlimited ligation, and still meet the budget targets.
           Sincerely,
         Michael O. Leavitt, Bill Weld, Fife Symington, John G. 
           Roland, Christine T. Whitman, John Engler, Marc 
           Racicot, Gary E. Johnson, George V. Voinovich, Frank 
           Keating, William J. Janklow, George Allen, Jim Edgar, 
           Fob James, Jr., Pete Wilson, Phil Batt, Terry E. 
           Branstad, Kirk Fordice, Stephen Merrill, Edward T. 
           Schafer, Tommy G. Thompson, David M. Beasly, George 
           Bush, Jim Geringler.

  Mr. HARKIN. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HELMS. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________