[Congressional Record Volume 142, Number 136 (Friday, September 27, 1996)]
[Extensions of Remarks]
[Page E1731]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             THE MEDICARE AND MEDICAID RECOVERY ACT OF 1996

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Thursday, September 26, 1996

  Mr. STARK. Mr. Speaker, today I am introducing the Medicare and 
Medicaid Recovery Act of 1996.
  Providers and suppliers are using the Bankruptcy Code as a vehicle to 
defeat the Secretary's effort to recoup overpayments from the Medicare 
trust funds. Specifically, providers and suppliers, who owe financial 
obligations to Medicare, are seeking relief from bankruptcy courts to 
have their outstanding overpayments, which are unsecured, discharge or 
greatly reduced. The Medicare Program has been unsuccessful in efforts 
to halt such action.
  Federal bankruptcy legislation is designed to provide equality to all 
creditors in the distribution of a debtor's assets. However, there are 
three main exceptions to the equal distribution principle that allow 
some creditors to receive more than others. The three main devices for 
some creditors getting more are, first, liens, second, exceptions to 
discharge, and third, priorities.
  With the third main exception--priority--creditors have a demand to 
first payment from any assets the debtors have available for payment to 
unsecured creditors. Creditors with priorities get paid before other 
unsecured creditors.
  The Federal Government has long had a priority for taxes, duties, and 
related penalties. However, it does not have a priority for nontax 
claims, such as Medicare and Medicaid overpayments to providers. The 
Government's priority for nontax claims was abolished in 1979.
  A 1992 report issued by the Office of Inspector General, entitled 
``Federal Recovery of Overpayments from Bankrupt Providers,'' found 
that as of March 1991, the Medicare trust funds lost $109 million due 
to the ability of providers and suppliers to discharge their 
outstanding overpayments. While the report recommends giving Medicare 
claims a priority status in bankruptcy, better cost savings would be 
achieved by excepting these claims from discharge. This bill would 
correct this situation by prohibiting providers and suppliers from 
using a bankruptcy forum to avoid these outstanding obligations.
  This bill addresses a second problem--individuals who owe financial 
obligations to the United States, or who have had a program exclusion 
imposed against them for other reasons, are seeking relief from the 
bankruptcy courts to have their exclusion subject to the automatic 
stay. Currently, the Secretary of HHS is required to exclude from 
participation in the Medicare and State health care programs health 
care professionals who have defaulted on their student loan or 
scholarship obligations owed to the United States. There are also a 
number of other bases for exclusion, such as criminal convictions 
related to the delivery of a health care item or service, or patient 
abuse. The purpose of the Secretary's exclusion authority is to protect 
the public, as well as the beneficiaries of the Medicare and State 
health care programs, from individuals and entities who have 
demonstrated by their past conduct that they are untrustworthy. This 
bill makes clear that the Bankruptcy Code should not be used to defeat 
this congressional purpose.

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