[House Report 104-641]
[From the U.S. Government Publishing Office]




                                                 Union Calendar No. 320

104th Congress, 2nd Session -  -  -  -  -  -  -  - House Report 104-641

 
  FRAUD AND ABUSE IN MEDICARE AND MEDICAID: STRONGER ENFORCEMENT AND 
                 BETTER MANAGEMENT COULD SAVE BILLIONS

                               __________

                             EIGHTH REPORT

                                 by the

                        COMMITTEE ON GOVERNMENT
                          REFORM AND OVERSIGHT

                             together with

                            ADDITIONAL VIEWS





 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

     WILLIAM F. CLINGER, Jr., 
      Pennsylvania, Chairman
                                     BENJAMIN A. GILMAN, New York
                                     DAN BURTON, Indiana
                                     J. DENNIS HASTERT, Illinois
                                     CONSTANCE A. MORELLA, Maryland
                                     CHRISTOPHER SHAYS, Connecticut
                                     STEVEN SCHIFF, New Mexico
                                     ILEANA ROS-LEHTINEN, Florida
                                     WILLIAM H. ZELIFF, Jr., New 
                                     Hampshire
                                     JOHN M. McHUGH, New York
                                     STEPHEN HORN, California
                                     JOHN L. MICA, Florida
                                     PETER BLUTE, Massachusetts
                                     THOMAS M. DAVIS, Virginia
                                     DAVID M. McINTOSH, Indiana
                                     JON D. FOX, Pennsylvania
                                     RANDY TATE, Washington
                                     DICK CHRYSLER, Michigan
                                     GIL GUTKNECHT, Minnesota
                                     MARK E. SOUDER, Indiana
                                     WILLIAM J. MARTINI, New Jersey
                                     JOE SCARBOROUGH, Florida
                                     JOHN B. SHADEGG, Arizona
                                     MICHAEL PATRICK FLANAGAN, Illinois
                                     CHARLES F. BASS, New Hampshire
                                     STEVEN C. LaTOURETTE, Ohio
                                     MARSHALL ``MARK'' SANFORD, South 
                                     Carolina
CARDISS COLLINS, Illinois            ROBERT L. EHRLICH, Jr., Maryland
HENRY A. WAXMAN, California
TOM LANTOS, California
ROBERT E. WISE, Jr., West Virginia
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York
JOHN M. SPRATT, Jr., South Carolina
LOUISE McINTOSH SLAUGHTER, New York
PAUL E. KANJORSKI, Pennsylvania
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
KAREN L. THURMAN, Florida
CAROLYN B. MALONEY, New York
THOMAS M. BARRETT, Wisconsin
BARBARA-ROSE COLLINS, Michigan
ELEANOR HOLMES NORTON, District of Columbia
JAMES P. MORAN, Virginia
GENE GREEN, Texas
CARRIE P. MEEK, Florida
CHAKA FATTAH, Pennsylvania
BILL BREWSTER, Oklahoma
TIM HOLDEN, Pennsylvania
ELIJAH CUMMINGS, Maryland
            ------
BERNARD SANDERS, Vermont (Independent)

  James L. Clarke, Staff Director
    Kevin Sabo, General Counsel
     Judith McCoy, Chief Clerk
Bud Myers, Minority Staff Director
_________________________________________________________________

    Subcommittee on Human Resources and Intergovernmental Relations

 CHRISTOPHER SHAYS, Connecticut, 
             Chairman
                                     MARK E. SOUDER, Indiana
                                     STEVEN SCHIFF, New Mexico
                                     CONSTANCE A. MORELLA, Maryland
                                     THOMAS M. DAVIS, Virginia
                                     DICK CHRYSLER, Michigan
                                     WILLIAM J. MARTINI, New Jersey
                                     JOE SCARBOROUGH, Florida
                                     MARSHALL ``MARK'' SANFORD, South 
EDOLPHUS TOWNS, New York             Carolina
TOM LANTOS, California
BERNARD SANDERS, Vermont (Ind.)
THOMAS M. BARRETT, Wisconsin
GENE GREEN, Texas
CHAKA FATTAH, Pennsylvania
HENRY A. WAXMAN, California

                               Ex Officio

                                     WILLIAM F. CLINGER, Jr., 
CARDISS COLLINS, Illinois            Pennsylvania
 Lawrence Halloran, Staff Director
 Kate Hickey, Professional Staff 
              Member
        Thomas Costa, Clerk
     Cheryl Phelps, Minority 
        Professional Staff

                                  (ii)
                         LETTER OF TRANSMITTAL

                              ----------                              

                                  House of Representatives,
                                     Washington, DC, June 27, 1996.
Hon. Newt Gingrich,
Speaker of the House of Representatives,
Washington, DC.
    Dear Mr. Speaker: By direction of the Committee on 
Government Reform and Oversight, I submit herewith the 
committee's eighth report to the 104th Congress.

                                   William F. Clinger, Jr.,
                                                          Chairman.

                                 (iii)

                                     

                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Summary..........................................................1
 II. Background.......................................................3
III. Findings.........................................................7
 IV. Recommendations.................................................16

                                 VIEWS

Additional views of Hon. Cardiss Collins, Hon. Edolphus Towns, 
  Hon. Henry A. Waxman, Hon. Tom Lantos, Hon. Robert E. Wise, 
  Jr., Hon. Major R. Owens, Hon. Louise Slaughter, Hon. Bernard 
  Sanders, Hon. Karen L. Thurman, Hon. Thomas M. Barrett, Hon. 
  Barbara-Rose Collins, Hon. James P. Moran, Hon. Gene Green, 
  Hon. Chaka Fattah, and Hon. Elijah E. Cummings.................    19

                                  (v)



  
                                                 Union Calendar No. 320
104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2nd Session                                                    104-641
_______________________________________________________________________

  FRAUD AND ABUSE IN MEDICARE AND MEDICAID: STRONGER ENFORCEMENT AND 
                 BETTER MANAGEMENT COULD SAVE BILLIONS

                                _______
                                

 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Clinger, from the Committee on Government Reform and Oversight, 
                        submitted the following

                             EIGHTH REPORT

    On June 20, 1996, the Committee on Government Reform and 
Oversight approved and adopted a report entitled ``Fraud and 
Abuse in Medicare and Medicaid: Stronger Enforcement and Better 
Management Could Save Billions.'' The chairman was directed to 
transmit a copy to the Speaker of the House.

                           I. SUMMARY

    Fraud and abuse are serious drains on Medicare and Medicaid 
programs. The General Accounting Office (GAO) estimates that as 
much as 10% of annual Government outlays in Federal health care 
programs are lost to fraudulent and wasteful provider 
claims.\1\ If that estimate is correct, it would mean almost 
$32 billion was lost in FY 95. Given that Medicare and Medicaid 
together account for $269.16 billion in Federal health care 
spending in FY 1995, Federal losses to these programs 
associated with fraudulent and abusive practices approached $27 
billion. Finding new ways to curb these losses has been a major 
bi-partisan concern in recent years.
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    \1\ GAO Report: ``Health Insurance: Vulnerable Payers Lose Billions 
to Fraud and Abuse,'' GAO/HRD-92-69, 5/7/92, p. 1.
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    Both the Medicare and Medicaid programs are vulnerable to 
fraud and abuse. There are strong incentives to overprovide 
services; weak fraud and abuse controls to detect questionable 
billing practices; few limits on those who can bill; and 
ineffective enforcement tools. The Medicare program is 
particularly vulnerable because the Department of Health and 
Human Service's (HHS) Health Care Finance Administration (HCFA) 
continues to pay higher than market rates for certain services 
and supplies. This makes the program an attractive target for 
increasingly sophisticated, multi-state or national fraud 
schemes.
    Medicare is also vulnerable because perpetrators know there 
is little chance of being caught. Federal enforcement 
activities have been uncoordinated and ineffectively carried 
out, and HCFA's anti-fraud-and-abuse controls fail to 
systematically prevent the unquestioned payment of claims.\2\ 
Screening of claims for medical necessity and other criteria is 
inconsistently applied. Vendors sanctioned for fraud or abuse 
are not effectively barred from continued participation in 
Federal health programs because the exclusion sanction is under 
utilized. This points to insufficient coordination between 
those charged with enforcing existing anti-fraud statutes.
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    \2\ GAO Report: ``Medicare Spending: Modern Management Strategies 
Needed to Curb Billions in Unnecessary Payments,'' GAO/HEHS-95-210, 2/
95, p. 1-2.
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    HCFA, the HHS-OIG, and DOJ have outlined initiatives for 
curtailing fraudulent and abusive practices in Medicare and 
Medicaid programs. However, the extent to which these 
initiatives will result in improvements to the Federal 
Government's health care anti-fraud capabilities is uncertain. 
HCFA has under development the Medicare Transaction System 
(MTS) to centralize claims review and processing functions now 
handled by 72 contractors.
    The GAO characterized MTS a system ``at risk'' \3\ in terms 
of cost and scheduling. Meanwhile, near-term opportunities for 
more effective anti-fraud programs may be missed while HCFA 
places most of its hopes on the far-off prospect of the MTS.
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    \3\ Status of the Medicare Transaction System: The Health Care 
Financing Administration's Planned Data System to Control Fraud and 
Abuse, Oversight Hearing Before the Subcommittee on Human Resources of 
the House Committee on Government Reform and Oversight, HRIR hearing of 
11/16/95. (Prepared written statement of Frank Reilly, GAO's Director 
of Information Resources Management, p. 2.)
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    Waste, fraud and abuse in Medicare and Medicaid will never 
be completely eliminated. However, billions could be saved by 
stronger enforcement and better management--actions which would 
not place excessive demands on available budgets.

Findings in brief:

    1. There is insufficient coordination among Government 
agencies combatting waste, fraud and abuse in the Medicare and 
Medicaid programs.
    2. HCFA does not require Medicare Part B contractors to use 
software capable of screening out claims for inappropriate 
medical services.
    3. HCFA is reluctanct to exercise its statutory ``inherent 
reasonableness'' authority to adjust reimbursement rates for 
durable medical equipment and supplies because the process is 
costly and cumbersome. This makes Medicare an attractive target 
for fraud and abuse. As a result, the Government too often pays 
more than the market price for certain equipment and supplies 
costing taxpayers billions of dollars.
    4. HCFA's Medicare Transaction System (MTS) project is 
vulnerable to cost overruns and schedule delays due to the 
agency's lack of a disciplined management process.

Recommendations in brief:

    1. Congress should require HCFA, HHS IG, DOJ, State 
Medicaid Fraud Control Units and other appropriate law 
enforcement entities establish a joint program to coordinate 
fraud detection and prevention activities, and to apply the 
exclusion sanction against vendors more effectively.
    2. HCFA should require its contractors to use 
autoadjudication prepayment screens to ensure that Medicare 
does not continue to pay claims for medically unnecessary 
services.
    3. Congress should revise HCFA's ``inherent reasonableness 
authority'' to require a price adjustment for a Medicare item 
or service within 1 year of initiating a review of that item or 
service through the issuance of an interim final regulation.
    4. HCFA should develop a comprehensive management plan to 
address the cost and scheduling challenges associated with the 
Medicare Transaction System (MTS). Until that plan is 
developed, HCFA should focus greater resources on effective, 
near-term anti-fraud efforts.

                         II. BACKGROUND

    Total health care spending in the United States reached 
$949.4 billion \4\ in FY 94, and waste, fraud and abuse in 
health care programs have become issues affecting every 
American. According to GAO, 10% of every health care dollar 
spent in this Nation is lost to fraudulent and wasteful 
provider claims.\5\ Applying this estimate to all health care 
spending, which includes Medicare and Medicaid, means that more 
than $100 billion, or more than $274 million a day, was lost to 
fraud and abuse in FY 95.
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    \4\ ``National Health Care Expenditures,'' Health Affairs, Project 
Hope, p. 1.
    \5\ See Supra note 1.
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    Medicare and Medicaid programs together represent more than 
one-quarter of all U.S. health care spending. Federal outlays 
to Medicare in FY 95 were $159.8 billion \6\ while Federal and 
State outlays to Medicaid were $156.2 billion.\7\ Other Federal 
health care programs such as Civilian Health and Medical 
Program of the United States (CHAMPUS) and Federal Employee 
Health Benefit Plan (FEHBP) cost the Federal Government $3.3 
billion and $16.2 billion \8\ respectively in FY 95. Applying 
GAO's 10% estimate to Medicare and Federal Medicaid outlays 
means that about $26.9 billion was lost to fraud and abuse in 
FY 95.
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    \6\ Historical Tables, Budget of the United States Government, 
Fiscal Year 1997, p. 59. $89.07 billion was the Federal share of 
Medicaid in FY 95.
    \7\ Congressional Budget Office (CBO), 3/96 ``Baseline Report: 
Medicaid.''
    \8\ Appendix, Budget of the United States, Fiscal Year 1997, p. 
923.
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    Medicare, the Nation's largest single payer of health care 
costs, provided health coverage for approximately 37 million 
elderly and disabled in FY 95.\9\ Medicare spending in Part A, 
which includes hospital inpatient, home health and skilled 
nursing services, represents nearly two-thirds of total program 
spending; Part B, which includes hospital outpatient, physician 
and laboratory services, represents about one-third of total 
spending.\10\
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    \9\ See Supra note 2 p. 2.
    \10\ The Henry J. Kaiser Family Foundation: ``The Medicare 
Program,'' 12/95, p. 1.
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    Medicaid, which is jointly financed by States and the 
Federal Government, provided health and long-term care coverage 
for 33.5 million low income women, children, elderly, blind, 
and disabled Americans in FY 95.\11\ Although women and 
children represent almost 73 percent of Medicaid's 
beneficiaries, they represent 28 percent of the program's 
costs. Most of Medicaid spending is provided to the disabled 
and the elderly who represent 28 percent of its population but 
59 percent of the program's costs.\12\
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    \11\ The Henry J. Kaiser Family Foundation: ``Medicaid Facts,'' 12/
95, p. 1.
    \12\ Ibid.
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    Both programs fall within the administrative jurisdiction 
of the Health Care Financing Administration (HCFA) within the 
U.S. Department of Health and Human Services (HHS). Under 
Medicaid, States have the predominate responsibility to 
exercise fraud and abuse controls. Curbing Medicare fraud and 
abuse is a Federal responsibility.
    Medicaid is ``. . . highly vulnerable to fraud because of 
its size, structure, target coverage.'' \13\ GAO reports show 
that medical professionals or businesses that engage in 
fraudulent and abusive practices have targeted both Medicaid 
and Medicare resulting in unnecessary expenditures by both 
programs as well as by private health care insurers. The 
opportunities for fraud and abuse exist because each program 
provides incentives to submit claims for services that are not 
needed, not provided, or overpriced.\14\
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    \13\ GAO Report: ``Medicaid: A Program Highly Vulnerable to 
Fraud,'' GAO/T-HEHS-94-106, 2/25/94, p. 1.
    \14\ Agency Oversight Hearing on HHS: The Mission of HHS: Oversight 
Hearing Before the Subcommittee on Human Resources of the House 
Committee on Government Reform and Oversight, HRIR hearing of 3/22/95. 
(Prepared written statement of Sarah Jagger, Director of Health 
Financing and Policy, General Accounting Office, p. 87.)
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    Medicare contracts with 72 private companies to handle 
claims screening and processing and to audit providers. Certain 
characteristics of the program and the way it is administered 
create a climate ripe for abuse by some providers. For many 
supplies and services, Medicare reimbursement far exceeds 
market rates.\15\ Scrutiny of incoming claims is often 
inadequate to reveal overpricing or oversupply. And providers 
are allowed to participate in the program without sufficient 
oversight of their qualifications or their business and 
professional practices.\16\
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    \15\ See Supra note 2 p. 3.
    \16\ Ibid.
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    In testimony before the Human Resources and 
Intergovernmental Relations (HRIR) Subcommittee, GAO stated, 
``HCFA should be a leader in developing effective ways to 
manage health care expenditures. With Medicare, this would 
entail such things as: exploring opportunities to improve case 
management in settings such as nursing homes where fraud and 
abuse have been a recurring problem; seeking ways to strengthen 
requirements for providers that request authorization to bill 
the program; and developing and requiring contractors to 
implement better computerized checks to flag questionable 
claims or providers.
    ``With respect to Medicaid, we find similar problems that 
need to be addressed. Being a state-administered program, 
however, HCFA's role shifts from that of direct program 
management to one of leadership. This would entail documenting, 
guiding, coordinating, and encouraging the states' efforts. 
HCFA could also address other--overarching concerns revealed by 
our study, such as whether--and how--state laws, federal 
requirements, and other factors inhibit prosecution or attempts 
to recover payment of claims subsequently determined not to be 
authorized by law. Moreover, while all jurisdictions have 
resource constraints that limit oversight, investigation, and 
prosecutorial efforts, an absence of federal leadership has 
kept states from making the best use of the resources they do 
have.'' \17\
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    \17\ Agency Oversight Hearing on HHS: The Mission of HHS: Oversight 
Hearing Before the Subcommittee on Human Resources of the House 
Committee on Government Reform and Oversight, HRIR hearing of 3/22/95. 
(Prepared written statement of Sarah Jagger, Director of Health 
Financing and Policy, General Accounting Office, p. 92.)
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    GAO stated in its March 1995 testimony, ``Administrative 
reform proposals from this and the last Congress present 
features that would help correct [HCFA's] systemic weaknesses 
and oversight problems . . .'' and that HCFA's adoption of ``. 
. . broad-based administrative reforms would significantly 
enhance the detection and pursuit of fraudulent and abusive 
providers.''
    Distinctions should be made among waste, fraud and abuse 
since these terms are often used interchangeably. These are the 
generally accepted definitions:
     Waste: the incurring of unnecessary costs as a 
result of inefficient practices, systems or controls by 
management. Example: HCFA's failure to require its Medicare 
contractors to use automated prepayment computer screening for 
medical necessity of provider claims could save millions, even 
hundreds of millions, of dollars annually.\18\
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    \18\ GAO Report: ``Medicare: Millions Can Be Saved by Screening 
Claims for Overused Services,'' GAO/HEHS-96-49, 2/96, p. 3.
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     Fraud: gaining something of value through 
intentional misrepresentation or concealment of material facts. 
Example: Prescription drug diversion schemes cost the Medicaid 
program billions of dollars; New York State alone estimates 
that it loses $150 million a year to fraudulent prescription 
drug operations.\19\
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    \19\ Waste in Human Service Programs: Other Perspectives: Oversight 
Hearing Before the Subcommittee on Human Resources of the House 
Committee on Government Reform and Oversight, HRIR hearing of 5/23/95. 
(Testimony of Doug Kennedy, New York Post Investigative Reporter.) 
(Original transcipt p. 82, in subcommittee files.)
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     Abuse: any practice not consistent with rules, 
regulations or ethical standards which provides unfair gain for 
those with access to programs or responsibilities in the public 
trust. Example: Medicare was billed $8,415 for therapy to one 
nursing home resident of which over half, or $4,580, was for 
charges added by the billing service for submitting the claim--
a bill-padding practice which is permissible under Medicare 
rules.\20\
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    \20\ See Supra note 2 p. 4.
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    Waste, fraud and abuse in Medicare and Medicaid will never 
be completely eliminated. Any major reductions in these 
unacceptable losses, however, would contribute to the long-term 
financial solvency and stability of these at-risk Government 
programs, both which are growing at an average annual rate of 
approximately 10%.\21\
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    \21\ See Supra note 7.
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    The need to confront waste, fraud and abuse in the Nation's 
health care plans more aggressively is recognized by both 
Democrats and Republicans. In the 103d Congress, the 
Subcommittee on Human Resources and Intergovernmental Relations 
(HRIR), chaired by Rep. Edolphus Towns (D-NY), held three 
hearings on waste, fraud and abuse in Medicare and Medicaid. 
Two hearings focused on Medicaid fraud and prescription drug 
diversion, recommending that HCFA develop a strategy to address 
drug diversion which includes designating a unit within HCFA to 
provide assistance to State Medicaid agencies. A hearing of 
HRIR Subcommittee on July 27, 1994 marked up Section 5401 of 
H.R. 3600, the Health Security Act, directing the Secretary of 
HHS and the Attorney General to establish a program to 
``prevent, detect and control health care fraud and abuse.'' 
\22\
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    \22\ Activities of the House Committee on Government Operations, 
Report 103-884, 1/2/95, p. 218 & p. 294.
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    This bi-partisan effort in the subcommittee continued in 
the 104th Congress. The HRIR Subcommittee, chaired by Rep. 
Christopher Shays, held eight hearings that considered waste, 
fraud and abuse in health care programs:
    1. HRIR Subcommittee hearing on Department of Health and 
Human Services, March 1, 1995.
    2. HRIR Subcommittee follow-up hearing on Department of 
Health and Human Services, March 22, 1995.
    3. HRIR Subcommittee hearing on Waste in Human Service 
Programs, May 23, 1995.
    4. HRIR Subcommittee hearing on Keeping Fraudulent 
Providers Out of Medicare and Medicaid, June 15, 1995.
    5. HRIR Subcommittee hearing on H.R. 2326, the Health Care 
Fraud and Abuse Prevention Act of 1995 and H.R. 1850, the 
Health Care Fraud and Abuse Act of 1995, September 28, 1995.
    6. HRIR and Government Management, Information, and 
Technology (GMIT) joint Subcommittee hearing on the Oversight 
and Review of Medicare's Transaction and Information Systems, 
November 16, 1995.
    7. HRIR Subcommittee hearing on Screening Medicare Claims 
for Medical Necessity on February 8, 1996.
    8. HRIR and GMIT joint Subcommittee hearing on H.R. 3224, 
the Health Care Fraud and Abuse Prevention Act of 1996, H.R. 
1850, the Health Care Fraud and Abuse Act of 1995 and H.R. 
2480, Inspector General for Medicare and Medicaid, May 2, 1996.
    As noted above, the subcommittee reviewed four pieces of 
legislation introduced in the 104th Congress to address the 
challenges of combatting fraud and abuse in health care 
programs, including Medicare and Medicaid: H.R. 2326, H.R. 
3224, H.R. 1850 and H.R. 2480.
    The Health Care Fraud and Abuse Prevention Act of 1996, 
H.R. 3224, was introduced by Congressman Steven Schiff (R-NM), 
vice chairman of the Government Reform and Oversight Committee, 
and Congressman Christopher Shays (R-CT), HRIR chairman. In 
Title I: Federal enforcement authorities are required to 
coordinate their efforts more effectively and establish a 
control account, funded by fines and damages, to help defray 
Federal and State costs of prevention and detection of fraud 
and abuse. In Title II: all health care fraud, whether in 
public or private programs, would become a Federal crime for 
the first time. In Title III: new tools are provided for the 
HHS Inspector General (IG) to better combat Medicare and 
Medicaid fraud and abuse.
    In the 103d and 104th Congress, language similar to H.R. 
3224 was drafted to combat the pervasive waste, fraud and abuse 
in the health care industry. Senator William Cohen (R-ME) 
issued an investigative staff report \23\ in July 1994 which 
recommended:
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    \23\ ``Gaming the Health Care System: Investigative Staff Report,'' 
Senator William Cohen, ranking member, Senate Special Committee on 
Aging, p. 4.
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     Making all health care fraud and abuse a violation 
of Federal law.
     Establishing a data base available to all program 
administrators, private insurers and law enforcement groups 
which will identify persons or providers who have been found 
guilty of fraud.
     Establishing standard penalties for fraud which, 
for a first time offender, require mandatory exclusion from the 
programs for a specified period of time as well as assessment 
of civil monetary penalties.
     Strengthening certification standards and 
procedures for providers.
     Enhancing provider responsibility and 
accountability for electronic media claims; requiring 
contractors to utilize automated computer screening of provider 
claims.
     Making HCFA's pricing of medical equipment and 
services more current, competitive and market sensitive in its 
reimbursement of provider claims.
     Improving anti-kickback laws.
    Congressmen Shays and Schiff have also introduced H.R. 3225 
which would require HHS to adopt timely, market-sensitive 
pricing of equipment and services to avoid overpayment of 
claims made by health care providers.
    The Health Care Fraud and Abuse Act of 1995, H.R. 1850, was 
sponsored by Congressman Edolphus Towns (D-NY), ranking member 
of the HRIR Subcommittee. Title I of H.R. 3224 is similar to 
H.R. 1850 which calls for increased coordination among Medicare 
and Medicaid law enforcement agencies.
    The Inspector General for Medicare and Medicaid Act of 
1995, H.R. 2480, was sponsored by Congressman Jack Quinn (R-
NY). This bill creates a separate IG office for Medicare and 
Medicaid.
    Other legislation with new health care anti-fraud 
provisions includes The Medicare Preservation Act of 1995, H.R. 
2491, and The Health Care Availability and Affordability Act, 
H.R. 3103. Some provisions of H.R. 3224 were included in these 
two bills. Both measures passed the House.

                         III. FINDINGS

1. There is insufficient coordination among Government agencies 
        combatting waste, fraud and abuse in Medicare and Medicaid 
        programs.

    Overlapping jurisdictions of Federal, State and law 
enforcement agencies responsible for investigations and 
prosecutions of Medicare and Medicaid fraud present significant 
coordination problems. The agencies that share jurisdictions 
include: DOJ, including the FBI and U.S. attorneys; HHS IG; 
HCFA Office of Program Integrity; Department of Defense IG; 
Drug Enforcement Agency; Internal Revenue Service; State and 
local authorities; and State Medicaid Fraud Control Units 
(MFCUs). Additional groups involved in combatting health care 
fraud are: Medicaid contractor fraud units; Medicaid 
administrators; U.S. Postal Inspectors; Veterans Affairs IG; 
Department of Labor IG; Office of Personnel Management IG; and 
others.
    During a June 1995 hearing, Dr. Bruce Vladeck, HCFA's 
Administrator, was asked how these multi-jursidictional 
agencies approach Medicare and Medicare fraud cases and ensure 
preventing abusive providers from continuing to bill the 
programs. He reported, ``Again, as you know, the process of 
excluding providers from the [Medicare] system is one that 
under law is the responsibility of the Inspector General. I 
would defer to her in talking about that process.'' \24\ He 
further explained, ``To be blunt, I think there was some 
history within the Health Care Financing Administration growing 
out of past history of an attitude that fraud and abuse 
problems are the Inspector General's, the FBI responsibility, 
and we [HCFA] have other things to do.'' \25\
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    \24\ Keeping Fraudulent Providers out of Medicare and Medicaid: 
Oversight Hearing Before the Subcommittee on Human Resources of the 
House Committee on Government Reform and Oversight, HRIR hearing of 6/
15/95. (Testimony of Dr. Bruce Vladeck, Administrator of the HCFA.) 
(Original transcript, p. 22, in subcommittee files.)
    \25\ Ibid p. 21.
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    Vladeck added, ``As a part of our emphasis--as a central 
part of our emphasis on the importance of program integrity, we 
have invested enormous resources and energy in substantially 
strengthening our working relationships with the Inspector 
General, with the Department of Justice, with the components of 
the Department of Justice such as the FBI and the U.S. 
attorneys, not only in Washington where it is critically 
important, but more importantly in the field, at the level of 
relationships between individual contractors, individual U.S. 
attorneys offices, local FBI offices and so forth. We have 
somewhat more about that in my statement, but frankly, I am 
happy to defer to my colleagues from the Inspector General and 
from the Department of Justice to tell you more about how some 
of those relationships work.''
    Chairman Shays rejected Dr. Vladeck's statements responding 
that ``candidly I am concerned by the attitude that I think is 
coming across to me, and that is revoking of billings is the 
responsibility of the Inspector General.'' \26\
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    \26\ HRIR hearing of 6/15/96. (Testimony of Rep. Christopher Shays, 
chairman of the HRIR Subcommittee.) (Original transcript, p. 39, in 
subcommittee files.)
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    Chairman Shays wanted to know why HCFA did not more 
aggressively urge inclusion of the exclusion sanction more 
often in fraud cases settled by the Department of Justice.
    The chairman asked Dr. Vladeck, ``Is it your attitude that 
when you see someone who has defrauded the system, do you not 
weigh in and say . . . there is no way we should allow this 
person to continue to be in the [Medicare] system?'' \27\ Dr. 
Vladeck responded, ``We generally weigh in when we are asked.'' 
\28\ He added that, ``Historically, there has been no 
participation by us in the settlement.''
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    \27\ Ibid p. 40.
    \28\ HRIR hearing of 6/15/95. (Testimony of Dr. Bruce Vladeck, 
Administrator, HCFA.) (Original transcript, p. 40, in subcommittee 
files.)
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    The need for greater coordination between the Government 
agencies overseeing the Medicare and Medicaid programs was 
expressed by several witnesses. Rufus Noble, Inspector General 
for Florida's Health Care Administration, said, ``There remains 
tremendous need to improve coordination among the various 
organizations that have responsibilities for identifying, 
investigating and prosecuting health care fraud and abuse. 
While some intergovernmental coordination and information 
sharing between public and private organizations occur, more 
could be done.'' \29\
---------------------------------------------------------------------------
    \29\ HRIR hearing of 6/15/95. (Prepared written statement of Rufus 
Noble, Inspector General, Florida Agency for Health Care 
Administration, p. 3, in subcommittee files.)
---------------------------------------------------------------------------
    Sarah Jaggar, Director of GAO's Health Financing Division, 
in a March 1995 hearing said that ``. . . numerous 
jurisdictions have responsibility over Medicaid fraud and abuse 
matters. It is not unusual for a prescription drug fraud case 
[for example] to involve five or more state, local and federal 
agencies in its investigation, prosecution and resolution.'' 
\30\
---------------------------------------------------------------------------
    \30\ HRIR hearing of 3/22/95. (Testimony of Sarah Jaggar, Director 
of Health Financing and Policy, General Accounting Office.) (Original 
transcript, p. 20, in subcommittee files.)
---------------------------------------------------------------------------
    William Mahon, executive director, National Health Care 
Anti-Fraud Association, told the subcommittee that ``fraud is 
most effectively addressed through cooperative public-private 
efforts. Dishonest providers do not defraud either public or 
private health care programs exclusively nor do they defraud 
only one payer at a time. Any discussion of health care fraud 
must also acknowledge the reality that the public's loss to 
health care fraud is two-fold . . . once through fraud against 
tax-funded government program, and again when private health 
insurance plans are the target.'' \31\
---------------------------------------------------------------------------
    \31\ HRIR hearing of 6/15/95. (Prepared written statement of 
William Mahon, executive director, National Health Care Anti-Fraud 
Association, p. 3, in subcommittee files.)
---------------------------------------------------------------------------
    In testimony, HCFA claimed the benefit of ``unprecedented'' 
\32\ coordination between HCFA, Medicare contractors, State 
Medicaid agencies, State Attorneys General and the HHS IG in 
their joint anti-fraud initiative called the South Florida 
Workgroup. Another special project led by the HHS IG, Operation 
Restore Trust, emphasizes ``improved communications between 
federal and state agencies.'' \33\
---------------------------------------------------------------------------
    \32\ H.R. 2326, the Health Care Fraud and Abuse Prevention Act of 
1995 and H.R. 1850, the Health Care Fraud and Abuse Act: Oversight 
Hearing Before the Subcommittee on Human Resources of the House 
Committee on Government Reform and Oversight, HRIR 9/28/95 hearing. 
(Prepared written statement of Dr. Helen Smits, deputy administrator, 
HCFA, p. 3, in subcommittee files.)
    \33\ Ibid.
---------------------------------------------------------------------------
    Operation Restore Trust was launched by the administration 
in May 1995. It is a major demonstration project that involves 
HCFA, HHS-OIG, DOJ, U.S. attorneys, and the State Medicaid 
Fraud Control Units. Operation Restore Trust has targeted four 
areas of excessive and unnecessary spending growth in the five 
States which comprise more than a third of all Medicare and 
Medicaid beneficiaries--New York, Florida, Illinois, Texas, and 
California. A comprehensive evaluation of the effectiveness of 
this program has not yet been conducted.
    Dr. Helen Smits, HCFA's deputy administrator, testified 
that ``this joint effort [Operation Restore Trust] should yield 
substantial savings to the government. We must recognize that 
fraud and abuse is pervasive throughout the health care 
industry in this country; Medicare and Medicaid are not the 
only targets. The private sector faces at least as great a 
problem as the government. As a result, public/private 
partnerships that bring together the best thinking and best 
practices are the key to reducing fraud and abuse.'' \34\
---------------------------------------------------------------------------
    \34\ Ibid, p. 1.
---------------------------------------------------------------------------
    In his subcommittee testimony, Gerald Stern, DOJ Special 
Counsel for Health Care Fraud reported that ``the Attorney 
General in 1993 determined that health care fraud enforcement 
would be her number two new initiative, behind violent crime.'' 
The Special Counsel also advised the subcommittee that the 
Department of Justice's program would involve ``increased 
resources, investigations and prosecutions, greater cooperation 
among investigative and regulatory agencies, and coordinated 
use of all available sanctions, criminal, civil, and 
administrative.'' However, Sterm opposed any legislative 
restriction on procecutorial discretion on the use of the 
exclusion sanction.
    In a September 1995 report, GAO found that ``despite the 
egregious cases of Medicare fraud, corporate providers have 
been allowed to continue their program participation. In one of 
the more significant Federal health care fraud prosecutions to 
date, a clinical laboratory company acknowledged over $100 
million in fraud committed as part of a nationwide scheme 
against Medicare, Medicaid and CHAMPUS over a four year period. 
The lab was allowed to negotiate a civil settlement including 
language that specifically permitted its continued 
participation in all three programs.'' \35\
---------------------------------------------------------------------------
    \35\ See Supra note 2 p. 15.
---------------------------------------------------------------------------

2. HCFA does not require Medicare Part B contractors to use software 
        capable of screening out claims for inappropriate medical 
        services.

    The Social Security Act (SSA) \36\ requires Medicare to pay 
only for items and services that are reasonable and necessary 
for the diagnosis and treatment of a medical condition. The SSA 
also requires Medicare contractors to apply appropriate 
safeguards against unnecessary utilization of items and 
services furnished by health care providers and suppliers.\37\
---------------------------------------------------------------------------
    \36\ 42 U.S.C. Section 1842(b)(3).
    \37\ Section 1842 (a)(2)(B) of the Social Security Act.
---------------------------------------------------------------------------
    HCFA regulations mandate that contractors conduct 
prepayment and postpayment reviews of claims to identify 
inappropriate services and take corrective action when 
indicated. Prepayment medical review can identify certain 
claims before they are paid if they are subjected to 
autoadjudicated computer screening. The screens compare the 
diagnosis on the claim with the acceptable diagnostic 
treatments specified in the medical policy. For example, the 
autoadjudicated screen would deny the claim for a chest x ray 
if the patient diagnosis was a sprained ankle.
    In a survey of 17 of 29 Medicare Part B contractors, GAO 
found more than half were not using medical necessity 
prepayment screens.\38\ GAO reviewed six groups of procedures 
that rank among the most costly Medicare services and reported, 
``Most of the contractors we surveyed routinely pay claims for 
procedures suspected to be widely overused without first 
screening those claims against medical necessity criteria.'' 
\39\
---------------------------------------------------------------------------
    \38\ See Supra note 18 p. 3.
    \39\ Ibid p. 7.
---------------------------------------------------------------------------
    GAO attributes the infrequent use of medical necessity 
prepayment screens to a lack of leadership on HCFA's part. GAO 
stated, ``HCFA does not have a national strategy for using 
prepayment screens to deny payments for unnecessary service 
among Medicare's most highly overused procedures. Moreover, the 
agency does not ensure that contractors implement prepayment 
screens or other corrective actions for these procedures.'' 
\40\
---------------------------------------------------------------------------
    \40\ Ibid p. 13.
---------------------------------------------------------------------------
    According to GAO, HCFA required contractors to review 15% 
of all claims before payment in 1991 but reduced the mandatory 
number of claims reviewed to 4.6% in 1995.\41\ This is despite 
a 32.5% increase in claims and a $54 billion increase in 
outlays. Medical review as a percentage of contractor budget 
has decreased from 10.7% to 7.1% in 1995.\42\
---------------------------------------------------------------------------
    \41\ Ibid p. 4.
    \42\ According to Medicare Contractor Activities charts supplied by 
HCFA dated 10/17/95.
---------------------------------------------------------------------------
    GAO's review of just 7 of the 17 contractors revealed that 
between $29 million and $150 million was paid for claims that 
may have been medically unnecessary.\43\ GAO concluded in their 
report that because the remaining contractors were not using 
medical necessity screens for some of these procedures, they 
may also have paid millions of dollars in Medicare claims for 
services that should have been denied.\44\
---------------------------------------------------------------------------
    \43\ See Supra note 18.
    \44\ Ibid.
---------------------------------------------------------------------------
    In the first quarter of FY 95, fewer than one-half of the 
17 contractors surveyed were using prepayment screens according 
to GAO.\45\ Ten of the contractors lacked a screen for 
echocardiography, although it is the most costly diagnostic 
test in terms of total Medicare payments.\46\
---------------------------------------------------------------------------
    \45\ Ibid p. 7.
    \46\ Ibid p. 8.
---------------------------------------------------------------------------
    GAO found ``for widely overused procedures, such as the six 
we tested, autoadjudication screens can be a low-cost, 
efficient way to screen millions of claims against basic 
medical necessity criteria. Contractor officials said that 
these screens are much less expensive to implement than screens 
that suspend for manual review. Consequently, as funding for 
program safeguards declines, autoadjudication screens can be 
used to maintain or even increase the number of claims 
reviewed.'' \47\
---------------------------------------------------------------------------
    \47\ Ibid p. 12.
---------------------------------------------------------------------------
    HCFA's strategy to protect beneficiaries and the integrity 
of the Medicare program relies on contractors ``. . . who have 
the experience and expertise to identify potential abuse in 
their area and to act quickly to report it. HCFA expects 
contractors to identify items and services that are vulnerable 
to abuse, develop appropriate local medical review policies, 
educate providers and implement prepayment screens.'' \48\
---------------------------------------------------------------------------
    \48\ Screening Medicare Claims for Medical Necessity: Oversight 
Hearing Before the Subcommittee on Human Resources of the House 
Committee on Government Reform and Oversight, HRIR hearing of 2/8/96. 
(Testimony of Gary Kavanagh, deputy director of the Bureau of Program 
Operations, HCFA.) (Original transcript, p. 78, in subcommittee files.)
---------------------------------------------------------------------------
    GAO reported, ``HCFA has chosen to avoid the appearance of 
interfering in local medical practice . . . (although) Medicare 
legislation does not preclude HCFA from requiring its 
contractors to screen claims for nationally overused 
services.'' \49\
---------------------------------------------------------------------------
    \49\ See Supra note 18 p. 13.
---------------------------------------------------------------------------
    However, HCFA testified on its management initiative and 
technologies to improve the claims review process. The 
``focused medical review'' process, adopted by HCFA in 1993, 
concentrates the analysis of claims data on local utilization 
patterns. It requires each of the 29 contractors to target 
services that are vulnerable to abuse in their local area and 
prevent payment of unnecessary or fraudulent claims through 
prepayment screening and development of local and model medical 
review policies. In another example, on January 1, 1996, 
Medicare contractors implemented coding screens based on 
recommendations made by AdminaStar, a firm contracted by HCFA 
in 1994 for that purpose.

3. HCFA is reluctanct to exercise its statutory ``inherent 
        reasonableness'' authority to adjust reimbursement rates for 
        durable medical equipment and supplies because the process is 
        costly and cumbersome. This makes Medicare an attractive target 
        for fraud and abuse. As a result, the Government too often pays 
        more than the market price for certain equipment and supplies 
        costing taxpayers billions of dollars.

    A September 1995 GAO report stated: ``For many supplies and 
services, Medicare reimbursement far exceeds market rates.'' 
\50\
---------------------------------------------------------------------------
    \50\ See Supra note 2 p. 3.
---------------------------------------------------------------------------
    Under the law, HCFA reimburses providers and suppliers of 
durable medical equipment (DME) according to a fee schedule 
that is annually adjusted for inflation.\51\ To change the 
price for an individual item or service, HCFA must observe a 
regulatory process establishing that the fee is not inherently 
reasonable.\52\ Under this inherent reasonable (IR) process, 
HCFA must, through an elaborate and detailed economic analysis, 
prove the Medicare fee is ``grossly excessive'' or ``grossly 
deficient.'' \53\
---------------------------------------------------------------------------
    \51\ Section 1834(a)(10)(B) of the Social Security Act, 42 U.S.C. 
1395m(a)(10)(B).
    \52\ Ibid.
    \53\ Section 1842(b)(8) and (b)(9) of the Social Security Act, 42 
U.S.C. 1395u(b)(8) and (b)(9).
---------------------------------------------------------------------------
    The economic analysis is mandated by the Omnibus Budget 
Reconciliation Act of 1987 (OBRA `87) \54\ and requires HCFA to 
document the following conditions:
---------------------------------------------------------------------------
    \54\ Section 1842(b)(8)(B)(ii)(I)-(IV) of the Social Security Act, 
42 U.S.C. 1395u(b)(8)(B)(ii)(I)-(IV).
---------------------------------------------------------------------------
     The prevailing charges for a service in a 
particular locality are significantly in excess or below 
prevailing charges in other comparable localities.
     Medicare and Medicaid are the sole or primary 
sources of payment for this item or service.
     The marketplace is not competitive.
     There has been an increase in charges that cannot 
be explained by inflation or technology.
     The higher price does not reflect a new 
technology.
     The prevailing prices are substantially higher 
than prices paid by other purchasers in the same area.
    During a May 2, 1996 hearing, Michael Mangano, Principal 
Deputy Inspector General for HHS testified, ``The most 
important message I would like to leave today with this 
committee is that the Medicare program is far too limited in 
how they can act and how quickly they can act. When we identify 
a particular piece of equipment that is just overpriced or what 
we would call `inherently unreasonable,' Medicare can't really 
react fast enough to the marketplace to adjust that price 
downward. Instead, they have to use, at the current time, the 
rule-making process, which usually takes about two to four 
years. It is time-consuming and resource-intensive.'' \55\
---------------------------------------------------------------------------
    \55\ Joint hearing on H.R. 3224, the Health Care Fraud and Abuse 
Prevention Act of 1996, H.R. 1850, the Health Care Fraud and Abuse Act 
of 1995 and H.R. 2480, Inspector General for Medicare and Medicaid: 
Oversight Hearing Before the Subcommittee on Human Resources and the 
Subcommittee on Government Management, Information, and Technology of 
the House Committee on Government Reform and Oversight, HRIR and GMIT 
joint hearing of May 2, 1996. (Testimony of Michael Mangano, Principal 
Deputy Inspector General, HHS.) (Original transcript, p. 42, in 
subcommittee files.)
---------------------------------------------------------------------------
    According to a September 1995 GAO report, the IR process to 
change the price of home glucose monitors took HCFA 995 days to 
complete.\56\ HCFA has begun the IR process with another DME 
item, home oxygen concentrators, which began in November 1994 
\57\ and has not yet issued a final rule setting the new price. 
The GAO study reported if Medicare were able to pay the same 
price for oxygen concentrators as that paid by the Department 
of Veterans Affairs, it could realize as much as $4.2 billion 
in savings over 5 years.\58\
---------------------------------------------------------------------------
    \56\ See Supra note 2 p. 8.
    \57\ Ibid p. 9.
    \58\ Ibid.
---------------------------------------------------------------------------
    The complexity of the process and the length of time it 
takes HCFA to complete the process once begun do not 
effectively protect the Medicare program from waste. The 
resources and time required to change a price make it an 
inefficient procedure. GAO recently concluded, ``HCFA is slow 
and often ineffectual in addressing problems involving 
overpricing . . .'' \59\ Since 1992, HCFA has only invoked its 
IR authority twice to adjust the prices of Medicare items--home 
glucose monitors and oxygen concentrators.
---------------------------------------------------------------------------
    \59\ Ibid p. 7.
---------------------------------------------------------------------------
    The HHS IG characterized the current price adjustment 
system as ``absurd.'' \60\ The IG concluded, ``While some of 
these requirements [of the Social Security Act or the 
Administrative Procedures Act] may serve useful purposes . . . 
some may prevent program managers from taking appropriate 
action to improve program operations.'' \61\
---------------------------------------------------------------------------
    \60\ Ibid p. 7.
    \61\ HHS IG letter to Representative Bill Archer, chairman of the 
House Ways and Means Committee dated May 9, 1996, in subcommittee 
files.
---------------------------------------------------------------------------
    HCFA's inability to adjust prices in a timely manner 
creates a climate for abuse by some providers and results in 
billions of taxpayer dollars lost every year.\62\ As the HHS IG 
so eloquently stated, ``when Willie Sutton was asked why he 
robbed banks, he responded `Because that's where the money is.' 
Today's criminals may be more sophisticated, but in a way they 
remain true to their forebears. They go where the money is.'' 
\63\ The HHS IG estimates that timely adjustment of the prices 
of home glucose monitors and oxygen concentrators could have 
saved $10 million over 3 years and $4.2 billion over 5 years 
respectively.\64\
---------------------------------------------------------------------------
    \62\ See Supra note 2 p. 1.
    \63\ HRIR hearing of 3/22/95. (Prepared written statement of June 
Gibbs Brown, Inspector General, HHS, p. 10, in subcommittee files.)
    \64\ Ibid p. 7.
---------------------------------------------------------------------------
    In a February 1996 report, the IG found that Medicare 
payments for enteral nutrients are excessive, because 
reimbursement rates are set too high. Other examples of 
excessive reimbursement rates include Medicare reimbursement 
for Category I nutrients [the simplest and most widely used 
formulas]. Medicare pays $0.61 per unit, while average cost to 
a nursing home is approximately $0.43 per unit. The IG 
estimates that if enteral nutrients were recognized as a food, 
Medicare would save approximately $170 million annually.\65\
---------------------------------------------------------------------------
    \65\ HRIR and GMIT joint hearing of 5/2/96 (Prepared written 
statement of Michael Mangano, Principle Deputy Inspector General, HHS, 
p. 9, in subcommittee files.)
---------------------------------------------------------------------------
    The IG found in a March 1994 report that ambulatory 
surgical centers were paying $126 for an intraocular lens (IOL) 
insertion while the Medicare reimbursement was $200.\66\ In 
addition, the IG reported in May 1993 HCFA's current 
reimbursement for hospital beds does not reflect the useful 
life of the bed. Medicare pays for the use of the bed on a 
monthly basis and a typical bed can be rented 7.5 to 10 times 
over its useful life, resulting in total Medicare payments of 
around $7,000 while the bed could be acquired for an average of 
$1,000.\67\ All of these examples resulted in excessive 
payments to suppliers.
---------------------------------------------------------------------------
    \66\ Ibid p. 12.
    \67\ Ibid.
---------------------------------------------------------------------------
    In FY 95, the Medicare program paid $5.99 billion in DME 
claims.\68\ This multi-billion dollar industry derives 
substantial benefit from HCFA's inability to adjust prices of 
Medicare items and services on a more timely basis.
---------------------------------------------------------------------------
    \68\ According to information provided by Michael Mangano, 
Principal Deputy Inspector General for HHS, in response to verbal 
request from HRIR Subcommittee on May 3, 1996.
---------------------------------------------------------------------------

4. HCFA's Medicare Transaction System (MTS) project is vulnerable to 
        cost overruns and schedule delays due to the agency's lack of a 
        disciplined management process.

    The Medicare Transaction System (MTS) is HCFA's computer 
modernization project for Medicare claims processing. The 
single automated system will replace the nine current claims 
processing systems used by Medicare contractors. It is 
projected to be fully implemented in 1999.
    The goals for MTS as reported by HCFA are: improved service 
to beneficiaries and health care providers; enhanced program 
safeguards; inclusion of managed care and other alternative 
payment methods; and improved control of Medicare program 
expenditures.\69\
---------------------------------------------------------------------------
    \69\ HRIR hearing of 11/16/95. (Prepared written statement of Dr. 
Bruce Vladeck, administrator, HCFA, p. 1, in subcommittee files.)
---------------------------------------------------------------------------
    Currently, HCFA contracts with 44 fiscal intermediaries and 
28 carriers which operate nine different computer programs to 
process Medicare claims. According to Dr. Bruce Vladeck, the 
current decentralized contractor arrangement is expensive 
because every change in Medicare policy or procedures requires 
modification of all nine systems.\70\
---------------------------------------------------------------------------
    \70\ Ibid, p. 3.
---------------------------------------------------------------------------
    In 1995 testimony before a joint hearing of the HRIR 
Subcommittee and the Subcommittee on Government Management, 
Information, and Technology, Dr. Vladeck reported that HCFA 
began to develop MTS in the early 1990's to meet the need for a 
``single national claims processing and information system for 
the Medicare program.'' \71\
---------------------------------------------------------------------------
    \71\ HRIR hearing of 11/16/95. (Testimony of Dr. Bruce Vladeck, 
administrator, HCFA, p. 27, in subcommittee files.)
---------------------------------------------------------------------------
    Criticism of MTS has focused on HCFA's management of the 
risks associated with such a large procurement project. 
According to testimony during the joint hearing, GAO supports 
HCFA's decision to pursue MTS but has serious concerns about 
possible cost overruns and unrealistic scheduling of the 
project.
    Frank Reilly, GAO's Director of Information Resources 
Management, testified that HCFA has allowed the MTS to proceed 
``. . . despite (1) difficulties in defining requirements, (2) 
a compressed schedule containing significant overlap of system-
development phases, and (3) a lack of reliable information 
about costs and benefits.'' \72\ Based on GAO's review of these 
issues, Mr. Reilly concluded that the MTS goal to improve 
processing of Medicare claims is at risk.\73\
---------------------------------------------------------------------------
    \72\ HRIR hearing of 11/16/95. (Prepared written statement of Frank 
Reilly, Director of Information Resources for Health, Education and 
Human Services, General Accounting Office, p. 2, in subcommittee 
files.)
    \73\ Ibid.
---------------------------------------------------------------------------
    HCFA's schedule for MTS set April 1996 as the completion 
date for current requirements of the system, and August 1996 as 
completion date for future requirements. Concurrently, HCFA's 
contractor will begin building the system prototype to be 
tested beginning in September 1997. After 24 months of testing, 
HCFA expects the prototype to be perfected and fully 
implemented.\74\
---------------------------------------------------------------------------
    \74\ According to MTS timeline provided by HCFA staff in response 
to a 8/2/95 information request from the HRIR Subcommittee.
---------------------------------------------------------------------------
    GAO determined that MTS deadlines will not allow adequate 
time for proper development of current and future requirements 
as well as testing of the prototype system. In testimony, Mr. 
Reilly said that ``the system's future capabilities may be 
seriously constrained'' \75\ because the design may not reflect 
key requirements.
---------------------------------------------------------------------------
    \75\ HRIR 11/16/95 hearing. (Prepared written statement of Frank 
Reilly, Director of Information Resources for Health, Education and 
Human Services, General Accounting Office, p. 10, in subcommittee 
files.)
---------------------------------------------------------------------------
    Delays in the MTS schedule affect cost projections. 
According to GAO testimony, the current cost projections are 
based on 1992 estimates and have not been updated ``in over 
three years.'' \76\ Mr. Reilly testified that ``in our 
experience, problems related to requirements definition, 
schedule and cost often contribute to extensive delays . . . 
[and] . . . large cost increases.'' \77\
---------------------------------------------------------------------------
    \76\ Ibid, p. 64.
    \77\ Ibid, p. 62.
---------------------------------------------------------------------------
    Private sector witnesses echoed concerns about risks in the 
MTS project. Gary Rudin, corporate vice president of EDS' 
Health Care Group, stated, ``MTS is heading towards development 
of a new monolithic system that by the time it is implemented 
may well be obsolete . . . We recommend that the MTS initiative 
be revisited, considering the dramatic changes in health care 
and technology over the last five years.'' \78\
---------------------------------------------------------------------------
    \78\ HRIR hearing on 11/16/95. (Testimony of Gary Rudin, corporate 
vice president of Health Group, EDS, p. 109, in subcommittee files.)
---------------------------------------------------------------------------
    The chairmen and ranking members of each subcommittee have 
requested that GAO continue its review of the MTS project 
specifically focusing on minimizing risks and delivering the 
project on a realistic schedule.\79\ That study is underway.
---------------------------------------------------------------------------
    \79\ Joint letter from the Subcommittee on Human Resources and 
Intergovernmental Relations and the Subcommittee on Government 
Management, Information, and Technology to Charles A. Bowsher, 
Comptroller General, General Accounting Office, dated 4/22/96.
---------------------------------------------------------------------------

                      IV. RECOMMENDATIONS

1. Congress should require HCFA, HHS IG, DOJ, State Medicaid Fraud 
        Control Units and other appropriate law enforcement entities 
        establish a joint program to coordinate fraud detection and 
        prevention activities, and to apply the exclusion sanction 
        against vendors more effectively.

    Informal agreements or joint operations between Government 
agencies cannot effectively combat Medicare and Medicaid fraud 
on a continuing basis nor can they restore the trust of the 
American taxpayers.
    In testimony, Gerald Stern, DOJ's Special Counsel on Health 
Care Fraud, asked for the subcommittee's assistance in the 
Department's efforts to fight fraud in the Medicare and 
Medicaid programs. He said ``better communication among all of 
us has allowed us to choose the most the most appropriate 
sanction or sanctions to address particular health care fraud 
problems.'' \80\ Congress should expand permissive and 
mandatory exclusion authority and HHS OIG and DOJ should use 
the sanction in enforcement actions and settlements.
---------------------------------------------------------------------------
    \80\ HRIR hearing of 6/15/95. (Testimony of Gerald Stern, Special 
Counsel for Health Care Fraud, DOJ, p. 82, in subcommittee files; see 
also, Prepared Written Statement of Gerald Stern, p. 16-17, in 
subcommittee files.)
---------------------------------------------------------------------------
    Congress should ensure effective coordination of public and 
private anti-fraud enforcement by enacting legislation to 
require annual enforcement planning and to permit greater 
information sharing.
    Legislation should require the IG and Attorney General to 
establish a joint program to prevent, detect and control health 
care fraud including State agencies and local law enforcement, 
require IG and AG to consult with regularly State and local 
agencies, and should establish health care fraud and abuse 
control account in Dept. of Treasury.

2. HCFA should require its contractors to use autoadjudication 
        prepayment screens to ensure Medicare does not continue to pay 
        claims for medically unnecessary services.

    Screening guidelines should be established to ensure 
Medicare does not continue to pay claims for medically 
unnecessary services. Sarah Jaggar, GAO's Director of Health 
Financing, urged HCFA ``. . . to hold its contractors 
accountable for implementing local policies and prepayment 
screens . . . [in order] to control payments for widely 
overused procedures.'' \81\
---------------------------------------------------------------------------
    \81\ Ibid.
---------------------------------------------------------------------------
    Ms. Jagger said, ``Problems with controlling payments for 
widely overused procedures persist because HCFA lacks an 
effective national strategy. Although the need for national 
leadership is compelling, HCFA has not exercised its statutory 
authority to take an active role in promoting more local 
medical policies and prepayment screens for widely overused 
procedures.'' \82\ According to Ms. Jaggar, ``If the use of 
autoadjudication screens were expanded to all of Medicare's 
contractors, the savings we identified would likely be hundreds 
of millions of dollars . . .'' \83\
---------------------------------------------------------------------------
    \82\ See Supra note 18.
    \83\ HRIR and GMIT joint hearing of May 2, 1996. (Testimony of 
Sarah Jaggar, Director of Health Financing Policy, GAO.) (Original 
transcript, p. 12, in subcommittee files.)
---------------------------------------------------------------------------

3. Congress should revise HCFA's ``inherent reasonableness'' authority 
        to require a price adjustment for a Medicare item or service 
        within 1 year of initiating a review of that item or service 
        through the issuance of an interim final regulation.

    Michael Mangano, Principal Deputy Inspector General for 
HHS, testified in a May 2, 1996 hearing that ``We have issued 
numerous reports on problems with . . . (durable medical 
equipment) . . . and undertaken a large number of 
investigations. In general, even when the IG or HCFA identifies 
a particular piece of equipment as significantly overpriced 
(i.e., as ``inherently unreasonable''), the Department or 
carriers cannot adjust reimbursement levels without going 
through the regulatory process that . . . is resource-intensive 
and time-consuming . . .'' \84\
---------------------------------------------------------------------------
    \84\ Ibid p. 3.
---------------------------------------------------------------------------
    Mr. Mangano reported, ``There are some things Congress can 
do to improve the Medicare program . . . statutory improvements 
can be made to allow greater program flexibility and to close 
loopholes in the law. HCFA can promulgate rule-makings to 
adjust prices to reflect market conditions . . .'' \85\
---------------------------------------------------------------------------
    \85\ Ibid p. 5.
---------------------------------------------------------------------------
    Mr. Mangano concluded: ``We recommend that the Congress 
enact legislation which would allow HCFA to apply ``inherent 
reasonableness'' in setting reimbursement amounts (this would 
allow downward adjustments).''
    This legislative language was introduced on March 29, 1996 
by Representatives Shays (R-CT), Schiff (R-NM) and Barrett (D-
WI). H.R. 3225 would require the Secretary to issue an interim 
final regulation adjusting the price for a Medicare item or 
service within 1 year of initiating the review of that item 
under HCFA's inherent reasonableness authority.

4. HCFA should develop a comprehensive management plan to address the 
        cost and scheduling challenges associated with the Medicare 
        Transaction System (MTS). Until that plan is developed, HCFA 
        should focus greater resources on effective, near-term anti-
        fraud efforts.

    On April 24, 1996 HCFA issued Request for Proposals (RFPs) 
to design and build two claims processing MTS sites and one 
analysis center.\86\ Issuance of these RFPs is on schedule with 
HCFA's original timetable for MTS which suggests that HCFA has 
not revised its schedule to reflect the concerns raised by GAO 
in testimony.
---------------------------------------------------------------------------
    \86\ ``HCFA Unveils Medicare RFP'', Federal Computer Week, 5/6/96, 
p. 22.
---------------------------------------------------------------------------
    HCFA's lack of response to GAO testimony is troubling to 
both the HRIR and the GMIT Subcommittees. As noted earlier, GAO 
is continuing to study the design and implementation of the MTS 
system ``to determine the extent to which HCFA is managing the 
MTS projecto as an investment that will maximize benefits, 
minimize risks, and be delivered on schedule.'' \87\
---------------------------------------------------------------------------
    \87\ Letter of May 23, 1996 to Reps. Shays, Towns, Horn and Maloney 
from Patricia Taylor, Director, Health, Education and Human Services 
Information Systems Issues, General Accounting Office. In subcommittee 
files.
---------------------------------------------------------------------------
    In the absense of a comprehensive MTS management plan, HCFA 
should focus its resources on specific existing anti-fraud 
techniques which would result in substantial savings for the 
Medicare program. For example, HCFA should require its 
contractors to implement prepayment screens to ensure Medicare 
pays only for items and services that are reasonable and 
necessary for the diagnosis and treatment of a medical 
condition.
    Another opportunity for immediate anti-fraud prevention is 
the implementation of a unique identifier system for Medicare 
providers and suppliers. This would limit providers to one 
universal identification number and require use of the 
universal number by every provider in the submission of a 
Medicare claim. Implementation of this system would inhibit the 
ability of fraudulent providers and suppliers to hide behind 
multiple identifier numbers when submitting claims.
  ADDITIONAL VIEWS OF HON. CARDISS COLLINS, HON. EDOLPHUS TOWNS, HON. 
HENRY A. WAXMAN, HON. TOM LANTOS, HON. ROBERT E. WISE, JR., HON. MAJOR 
 R. OWENS, HON. LOUISE SLAUGHTER, HON. BERNARD SANDERS, HON. KAREN L. 
THURMAN, HON. THOMAS M. BARRETT, HON. BARBARA-ROSE COLLINS, HON. JAMES 
   P. MORAN, HON. GENE GREEN, HON. CHAKA FATTAH, AND HON. ELIJAH E. 
                                CUMMINGS

    This investigative report (the Report) results from a Human 
Resources and Intergovernmental Relations Subcommittee 
examination of the high incidence of waste, fraud and abuse in 
Medicare and Medicaid programs. The subcommittee sought to 
determine the efficacy of Federal efforts to minimize excessive 
or unnecessary health care expenditures. Toward this end, the 
subcommittee considered issues related to the extent of fraud 
and abuse in Medicare and Medicaid; current detection, 
prevention and enforcement initiatives; and opportunities that 
exist, as well as those which must be created by legislation, 
to improve Federal efforts.
    We generally support the Report. However, we are concerned 
that in some instances, its characterization of deficiencies in 
Federal anti-fraud efforts is based on information and 
testimony that is more than a year old. The accuracy of that 
information and testimony is not disputed. Nevertheless, we 
find that it has limited utility as a current measure of the 
effectiveness of the Administration's detection, prevention and 
enforcement initiatives. A full understanding of the efficacy 
of Federal efforts requires the consideration of the evolution 
in those efforts as well as additional facts or factors that 
the Report omits. Our additional views seek to strengthen the 
Report by providing updated and clarifying information 
regarding the Administration's anti-fraud and abuse objectives 
and accomplishments.
    Medicare and Medicaid together accounted for $269 billion 
in Federal health care spending in fiscal year 1995. Of that 
amount, the General Accounting Office (GAO) estimates that as 
much as 10 percent, nearly $27 billion, was lost to fraud and 
abuse. The subcommittee found that opportunities for fraud have 
persisted for several reasons, including the tremendous 
purchasing power of the Medicare and Medicaid programs; 
traditional deficiencies in HCFA's administrative practices and 
management controls; overlapping and unclear jurisdictions of 
Federal and State agencies responsible for health care fraud 
enforcement; inadequate or underutilized civil and criminal 
statutes; a cumbersome and resource-intensive price adjustment 
system; limitations in HCFA's authority to exclude fraudulent 
or abusive vendors from participation in the programs; and the 
propensity of opportunistic and sophisticated crimes against 
the programs to outpace anti-fraud management practices and 
technologies.
    Although Medicare and Medicaid program losses due to fraud 
and abuse cannot be totally eliminated, subcommittee consensus 
was that an effective anti-fraud strategy can recapture 
potentially billions of taxpayer dollars. Given the pending 
shortfalls in the Medicare Trust Fund, reductions in budget 
growth in both programs, and the general trend toward 
government downsizing--the need to preserve scarce resources 
and maximize the use of available budgets has never been more 
acute. Additionally, we believe that the systemic corruption of 
these programs, perpetrated by criminal providers, undermines 
the quantity and quality of care available to Medicare and 
Medicaid beneficiaries--the aged, the poor, and the disabled--
the most vulnerable American citizens.
    Despite fraud and abuse problems, it is important to note 
that at least 90 percent of Medicare and Medicaid claims are 
legitimate, and that the majority of providers are honest and 
support standards for participation and entry in the programs. 
During a May 2, 1996 legislative hearing convened jointly by 
the Human Resources and Intergovernmental Relations and 
Government Management, Information, and Technology 
Subcommittees, Mr. Rick Doherty, testifying on behalf of the 
National Association for Medical Equipment Services, reminded 
Members that ``[t]hese people are really fringe operators and 
are not representative of the industry. The difficulty is 
getting rid of those players without using a broad brush and 
punishing the entire system and the legitimate providers, in 
particular.''
    The U.S. Department of Health and Human Services (HHS) 
Health Care Financing Administration (HCFA) has administrative 
oversight of the Medicare and Medicaid programs. As stated by 
Sarah Jaggar, GAO Director for Health Financing and Policy 
Issues in subcommittee testimony on February 8, 1996, ``HCFA's 
primary responsibility is to pay for medically necessary 
treatment in accordance with policies and good medical 
practice.'' HCFA's responsibility as it pertains to controlling 
fraud and abuse is confined to prevention. Responsibility for 
investigating and prosecuting health care fraud and abuse is 
dispersed among many agencies at both the Federal and State 
levels. Among those Federal agencies with some jurisdiction in 
anti-fraud and abuse enforcement efforts are the HHS Office of 
the Inspector General (HHS-OIG); the Department of Justice 
(DOJ); the Federal Bureau of Investigation (FBI); the Drug 
Enforcement Administration; the Food and Drug Administration; 
the Postal Inspection Service; and the Department of Labor 
Office of the Inspector General. The Federal agencies principal 
to the subcommittee's investigation were the Health Care 
Financing Administration, the HHS Office of the Inspector 
General, and the Department of Justice.
    The longstanding difficulties in integrating the anti-fraud 
functions of HCFA, the HHS-OIG, and DOJ have contributed to the 
prevalence of unnecessary and excessive Medicare and Medicaid 
spending. We concur with the Report's first finding that 
``there is insufficient coordination among government agencies 
combating waste, fraud and abuse in Medicare and Medicaid 
programs.'' However, we also find that the Administration is 
making significant progress in improving coordination. The 
Report insufficiently acknowledges this progress, in part, 
because the subcommittee took a snapshot of the 
Administration's performance prior to its execution of 
initiatives to improve coordination efforts.
    For example, the hearing record establishing the existence 
of deficiencies in the coordination of Federal anti-fraud 
activities was built primarily on GAO and agency testimony 
received by the subcommittee in March and June 1995, which in 
turn reflected information gathered over past months. Operation 
Restore Trust, the Administration's major health care anti-
fraud project, was put in place in May 1995. It is jointly 
carried out by HCFA, HHS-OIG, and the Administration on Aging, 
and involves an intergovernmental team that includes DOJ, the 
U.S. Attorneys' offices, and the State Medicaid Fraud Control 
Units, was put in place in May 1995. In its first year, 
Operation Restore Trust appears to have improved coordination 
between government agencies at Federal and State levels, 
including improved information-sharing between Medicare and the 
54 Medicaid programs in order to detect fraud schemes across 
program lines. Although its effectiveness has not been 
objectively evaluated, we find that consideration of 
accomplishments of Operation Restore Trust is integral to any 
assessment of Federal coordination efforts.
    Second, the Report includes the June 15, 1995 testimony of 
former DOJ Special Counsel for Health Care Fraud, Gerald Stern, 
that in 1993 the Attorney General determined that health care 
fraud enforcement would be a new DOJ initiative, second only to 
violent crime enforcement. The Report also records the Special 
Counsel's testimony that the health care fraud initiative 
involves ``increased resources, investigations and 
prosecutions, greater cooperation among investigative and 
regulatory agencies, and coordinated use of all available 
sanctions, criminal, civil, and administrative.'' However, the 
Report does not describe any specific DOJ initiative to 
integrate its activities with other enforcement entities, nor 
its efforts to coordinate with HCFA's prevention priorities. We 
note that the Special Counsel informed the subcommittee in his 
June 1995 testimony that DOJ chairs an ``executive-level health 
care fraud policy group'' which has convened monthly since its 
formation in November 1993. This group includes senior level 
personnel at HCFA, HHS-OIG and the FBI.
    In addition, the Report recounts an exchange between the 
subcommittee chairman and Dr. Bruce Vladek, HCFA's 
Administrator, in an attempt to demonstrate that deficiencies 
in coordination result in HCFA's failure to make effective use 
of its authority to exclude fraudulent providers from 
participation in the Medicare or Medicaid programs. We are 
concerned that the Report's presentation of the disparate 
responsibilities of the administrative (HCFA) and enforcement 
(HHS-OIG and DOJ) agencies is incomplete, providing 
insufficient detail regarding difficulties HCFA has encountered 
in exercising its exclusion authority.
    The HHS-OIG audits and investigates health care providers 
accused of fraud against Medicare and Medicaid. The OIG is 
authorized to conduct civil, administrative and criminal 
investigations of fraud associated with these programs, and is 
responsible for imposing the majority of health care 
administrative sanctions authorized under the Social Security 
Act. The Omnibus Budget Reconciliation Act of 1981 specifically 
authorizes the OIG, acting on behalf of the agency, to impose 
civil monetary penalties and assessments against health care 
providers who have filed false or improper claims for 
reimbursement under Medicare and Medicaid programs. The 
Medicare and Medicaid Patient and Program Protection Act of 
1987 provides the agency authority to exclude both individuals 
and entities from participation in Medicare and State health 
care programs for fraudulent activities. It amended the 
existing mandatory authorities to cover program-related and 
patient abuse convictions and require program exclusions of no 
less than 5 years. In addition, it enacted discretionary 
exclusion authorities to cover a variety of offenses.
    The HHS-OIG refers investigative findings directly to the 
Department of Justice or individual U.S. Attorneys for possible 
criminal or civil prosecution. There is no specific Federal 
health care fraud statute. However, DOJ prosecutors can use 
traditional criminal and civil authorities, including mail and 
wire fraud statutes, the False Claims Act, and false statements 
statutes to prosecute health care fraud and abuse. Even if 
health care fraud does not constitute criminal activity, DOJ 
may try to recover damages by seeking payment of civil 
penalties and restitution. Once DOJ has completed or declined 
criminal or civil prosecution, HHS can consider imposing 
administrative sanctions. Successful prosecutions may take 
years, involve an investment of considerable staff time and 
resources, and may never result in actual recovery of Federal 
health care dollars lost to fraud.
    Dr. Vladek's testimony that ``[h]istorically, there has 
been no participation by [HCFA] in the settlement,'' refers to 
these factors. The Report notes Dr. Vladek's statement that 
HCFA has ``invested enormous resources and energy in 
substantially strengthening [its] relationship with the 
Inspector General, with the Department of Justice, [and] with 
the components of the Department of Justice such as the FBI and 
the U.S. Attorneys . . .'' Also, the hearing record establishes 
that the DOJ Special Counsel for Health Care Fraud advised the 
subcommittee in his June 15, 1995 opening statement that 
``better communication among all of us has allowed us to choose 
the most appropriate sanction or sanctions to address 
particular health care fraud problems. Increasingly, we pursue 
parallel proceedings so that responsible companies and 
officials are convicted criminally and at the same time civil 
damages--damages and penalties are recovered.''
    Although oversight of the efficacy of Federal health care 
anti-fraud and abuse activities is implicit in the Committee's 
jurisdiction, we recommend that the Congress monitor whether 
improved coordination between HCFA, HHS-OIG and DOJ can be 
demonstrated; and whether that coordination appreciably impacts 
detection, prevention and enforcement efforts.
    We concur with the Report's second finding that ``HCFA does 
not require Medicare Part B contractors to use software capable 
of screening out claims for inappropriate medical services.'' 
It is important to note, however, that this is an explicit 
policy decision and not a requirement with which HCFA is 
failing to comply. We advocate greater use of auto-adjudicated 
screens as a low-cost, efficient method of determining the 
medical necessity of overused services. At the same time, we 
note HCFA's concern that auto-adjudication is not appropriate 
in all cases. This concern was supported in the testimony of 
William Reis, a GAO official who accompanied Sarah Jaggar GAO 
Director of Health Financing Policy before the subcommittee on 
February 8, 1996: ``There are some procedures that simply 
looking at the diagnosis is not an indicator of whether or not 
that claim was medically necessary . . . The only way to know 
if that claim was appropriate is for someone to review that 
documentation.''
    We support the Report's recommendation that HCFA require 
its Medicare Part B contractors to autoadjudicate screens for 
overused procedures. We also recommend that HCFA establish 
guidelines that include a national strategy for greater 
utilization of autoadjudicated screens where appropriate, as 
well as policy for determining an effective mix between manual 
and electronic methods.
    We question the Report's characterization of HCFA's 
difficulty in employing its statutory ``inherent 
reasonableness'' authority as reluctance, as it does in its 
third finding. We concur that durable medical equipment (DME) 
is susceptible to pricing-generated fraud, and that the 
statutory price-setting system is cumbersome and often results 
in HCFA's paying excessive prices. The Report does not 
sufficiently indicate that changing the fee schedule requires a 
complex regulatory process to show existing prices are not 
``inherently reasonable,'' and involves an extensive data 
collection effort, consultation with industry representatives, 
publication of a notice in the Federal Register, a 60-day 
comment period, and publication of a final notice. We find that 
the Administration has demonstrated an interest in correcting 
this problem through its proposed balanced budget legislation. 
We support the Report's recommendation that price adjustments 
should be expedited through the issuance of an interim final 
regulation. In addition, we recommend that Congress work with 
the Administration to develop legislation that simplifies the 
requirements associated with HCFA's inherent reasonableness 
authority to enable HCFA to meet that expedited goal.
    We concur with the Report's fourth finding that ``HCFA's 
Medical Transaction System (MTS) is vulnerable to cost overruns 
and schedule delays due to the agency's lack of a disciplined 
management process. This finding correlates with the testimony 
of Frank Reilly, GAO Director, Information Resources 
Management/Health, Education and Human Services, during the 
November 16, 1995 joint hearing with the Government Management, 
Information, and Technology Subcommittee. Mr. Reilly informed 
the subcommittees that ``while HCFA's approach to developing 
MTS contains several strengths, it also contains important 
weaknesses that are adding unnecessary risk. On the plus side, 
HCFA is attempting to build as much flexibility as possible 
into the system so it can be easily modified . . . HCFA also 
plans to build, test and implement MTS in stages so that 
problems that arise can be addressed more manageably. In 
addition, the system will allow direct access to claims by 
beneficiaries and . . . providers. The problems we see, 
however, seem to come from the lack of a disciplined management 
process. HCFA is not managing MTS as an investment.''
    We note that GAO, while expressing criticism of the 
project's significant risks, found that ``if management 
exercises investment control and other `Best Practices' these 
risks can be greatly reduced.'' We again express the concern 
that the Report has made a static assessment of HCFA's 
performance. For example, current efforts deployed by HCFA to 
mitigate risk, including an integrated project schedule, an 
incremental transition schedule, and independent verification 
and validation of HCFA's development of the MTS project, are 
not noted in the Report. Whether these reforms have effectively 
reduced risk has not been established. GAO will continue its 
review of the MTS project pursuant to an April 22, 1996 letter 
from the chairmen and ranking members of the Human Resources 
and Intergovernmental Relations and Government Management, 
Information, and Technology Subcommittees, requesting an 
evaluation of the extent to which HCFA is now managing the MTS 
project as an investment that maximizes benefits and minimizes 
risks.
    We concur with the Report's recommendation that in the 
advent of a comprehensive MTS management plan that is 
consistent with GAO recommendations, HCFA should ensure that 
effective, existing anti-fraud techniques receive the 
appropriate level of available resources. We recommend 
continued oversight of the efficacy of these interim 
strategies.
                                   Hon. Cardiss Collins.
                                   Hon. Edolphus Towns.
                                   Hon. Henry A. Waxman.
                                   Hon. Tom Lantos.
                                   Hon. Robert E. Wise, Jr.
                                   Hon. Major R. Owens.
                                   Hon. Louise Slaughter.
                                   Hon. Bernard Sanders.
                                   Hon. Karen L. Thurman.
                                   Hon. Thomas M. Barrett.
                                   Hon. Barbara-Rose Collins.
                                   Hon. James P. Moran.
                                   Hon. Gene Green.
                                   Hon. Chaka Fattah.
                                   Hon. Elijah E. Cummings.

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