[House Report 113-11]
[From the U.S. Government Publishing Office]


113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     113-11
_______________________________________________________________________

                                     

                                                   Union Calendar No. 7



   ``BILLIONS OF FEDERAL TAX DOLLARS MISSPENT ON NEW YORK'S MEDICAID 
                               PROGRAM''

                               __________

                                 REPORT

                                 by the

              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM




  Available via the World Wide Web: http://www.gpo.gov/congress/house 
                      http://www.house.gov/reform

 March 5, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


                         LETTER OF TRANSMITTAL

                              ----------                              

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                     Washington, DC, March 5, 2013.
Hon. John Boehner,
The Speaker, House of Representatives,
Washington, DC.
    Dear Mr. Speaker: By direction of the Committee on 
Oversight and Government Reform, I submit herewith the 
Committee's report to the 113th Congress. This report was 
adopted by the Committee on February 13, 2013, in a meeting 
that was open to the public.
            Sincerely,
                                              Darrell Issa,
                                                          Chairman.


                            C O N T E N T S

                              ----------                              
                                                                   Page
Executive Summary................................................     1
  I. Introduction.....................................................3
 II. New York's Medicaid Program is the Largest in the Country........5
III. Examples of Problems in New York's Medicaid Program..............6
     Lack of Controls and Misspending in New York's Personal Care 
      Services Medicaid program\1\
     Overpayments to New York Developmental Centers
     Abuses of Medicaid Eligibility Rules in New York
     Excessive Salaries Paid to Executives of Medicaid-funded 
      Organizations
 IV. Patient Abuse Within the Developmentally Disabled System in New 
     York............................................................13
  V. Past Health Care-related Corruption by Elected Officials........14
 VI. Allegations of Problems with State Oversight of the Medicaid 
     Program.........................................................16
VII. Reforms in the Last Two Years and Additional Concerns...........17
VIII.Recommendations.................................................23

 IX. Conclusion......................................................25
Appendix A.......................................................    26
Appendix B.......................................................    26
Appendix C.......................................................    29
Committee Consideration; Statement of Oversight Findings and 
  Recommendation of the Committee; Statement of General 
  Performance Goals and Objectives...............................    32
                               __________
\1\For more information about Personal Care Services in New York and 
Dr. Feldman's testimony before the Committee, see the Committee Staff 
Report entitled Uncovering Waste, Fraud, and Abuse in the Medicaid 
Program, U.S. House Committee on Oversight & Gov't Reform (April 25, 
2012) [hereinafter Committee Staff Report].


                                                   Union Calendar No. 7
113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     113-11

======================================================================



 
   ``BILLIONS OF FEDERAL TAX DOLLARS MISSPENT ON NEW YORK'S MEDICAID 
                               PROGRAM''

                                _______
                                

 March 5, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                           Executive Summary

    New York State's Medicaid program is the largest in the 
country. In fiscal year 2010, New York's $2,700 per resident 
Medicaid spending exceeded per capita Medicaid spending in the 
rest of the country by more than $1,500. When problems have 
been identified, the cost associated has often been large as 
well. Poor program oversight by both the State and federal 
Government has contributed to these problems.
    This report discusses past findings of the Office of 
Inspector General (OIG) of the Department of Health and Human 
Services (HHS), investigative reporters, whistle-blowers and 
this Committee of waste, fraud, and abuse within New York's 
Medicaid program. It also discusses positive steps taken by 
Governor Andrew Cuomo to address many of those problems, 
highlights continuing concerns, and offers several 
recommendations aimed at protecting future tax dollars from 
being misspent. Several of the costly problems discussed in 
this report include:
     In 2010, the Poughkeepsie Journal reported that 
Medicaid was paying extremely high payment rates for residents 
in New York's State-operated developmental centers. The high 
payments resulted from a complicated methodology that was 
initially approved more than two decades ago by the Federal 
Government. This methodology resulted in daily payment rates 
exceeding $5,000 for each institutional resident by 2011. The 
Committee majority estimates that the Federal share of total 
payments going to the State through these facilities was 
approximately $15 billion in excess of a reasonable amount. The 
Centers for Medicare and Medicaid Services (CMS) believes that 
the developmental center payments exceeded Medicaid upper 
payment limits established by Congress. The excessive rates 
have remained in place for two-and-a-half years after the 
Federal Government began asking the State for information about 
the developmental center payment rates.
     Over the past decade, HHS OIG has uncovered ten 
instances in which New York State has improperly claimed at 
least $50 million in Federal Medicaid dollars. Moreover, in the 
past four years, the Federal Government has successfully sued 
New York for unlawful Medicaid expenditures twice, recovering 
more than $600 million.
     In 2009, a whistle-blower sued New York City for 
rampant inappropriate and fraudulent spending in Medicaid's 
Personal Care Services (PCS) program.
     The Committee has learned that Medicaid estate 
planning is a long-standing practice and significant problem 
across the nation and in New York State. The Committee has 
learned that relatively affluent people in New York 
artificially impoverish themselves in order to qualify for 
Medicaid and have taxpayers pick up the cost of their long-term 
care services and supports. At least in Suffolk County, New 
York, a relatively affluent part of the State, a legal 
technique called spousal refusal, which is essentially when one 
spouse abandons all financial care of a sick or disabled spouse 
and leaves him or her as a ward of the State, is widely used.
     The Committee has uncovered excessive salaries 
paid to executives of nonprofit institutions that are nearly 
completely financed by Medicaid. The Committee found that at 
least 15 of these executives received yearly compensation 
exceeding $500,000 and at least 100 others received yearly 
compensation exceeding $200,000.
     Over the past decade, many powerful elected 
members of New York's State legislature, including two recent 
State Senate majority leaders, have been convicted of fraud or 
corruption charges related to health care.
     Reforming Medicaid in New York faces several 
significant challenges. For one, many powerful special interest 
groups in New York benefit from the State's large Medicaid 
expenditures and lobby strongly against changes that would 
reform the State's program. Another challenge is the long-
standing New York practice of increasing Medicaid as a way to 
leverage extra Federal money into the State.
    At the beginning of his term, Governor Andrew Cuomo called 
New York's Medicaid program ``bloated'' and argued that it 
``must be reformed to help [New York] [S]tate begin to make 
ends meet.'' The Committee has also found that despite these 
obstacles, several program reforms are being orchestrated by 
the Cuomo Administration, including:
     The Cuomo Administration has enacted many new 
policies through a Medicaid Redesign program, including the 
first-in-the-nation Medicaid global cap, which places a budget 
constraint on the State's Medicaid spending. There is also 
evidence that the State has had some initial success with 
reducing waste, fraud, and abuse within New York City's PCS 
Medicaid program.
     Finally, after two decades of overpayments, New 
York and CMS are in the midst of negotiations to develop an 
appropriate rate and come to an appropriate amount for the 
Federal Government to recoup for past overpayments in excess of 
reasonable costs.
     Early last year, Governor Cuomo issued an 
executive order which limits executive compensation at 
Medicaid-financed institutions to less than $199,000.
    While New York's actions over the past few years are a step 
in the right direction, it is clear to the Committee that there 
is more that New York and the Federal Government can do to make 
the State's Medicaid program more cost-effective. The Committee 
recommends six specific actions that should be taken 
immediately to reduce Medicaid waste, fraud, and abuse in New 
York's program and potentially save both Federal and New York 
State taxpayers significant amounts of money each year:
     CMS or a qualified government watchdog agency 
should conduct a complete and independent audit of New York's 
Medicaid program, including the work of New York State's Office 
of the Medicaid Inspector General;
     CMS should finalize an agreement with New York on 
a corrected payment methodology that ends the developmental 
center overpayments as soon as possible. CMS should pursue 
recovery of an appropriate portion of previous overpayments in 
excess of reasonable costs for Federal taxpayers;
     CMS' review of New York's Section 1115 waiver 
request, to allow the State to keep a portion of the savings 
its Medicaid reforms are projected to achieve should follow all 
applicable statutory requirements, particularly with respect to 
budget neutrality. CMS should also ensure that the baseline 
from which New York is calculating the savings does not include 
developmental center overpayments or other overpayments;
     New York's PCS program must only enroll 
individuals who meet the eligibility thresholds required by 
law;
     New York's legislature should ban ``spousal 
refusal'' and other abuses of Medicaid eligibility rules, as 
Governor Cuomo has proposed in each of his three budgets. New 
York must also aggressively pursue estate recovery against 
people who abuse Medicaid eligibility rules; and
     New York's legislature should codify Governor 
Cuomo's executive order limiting compensation of executives at 
organizations receiving nearly all their money from tax 
revenue. New York must also aggressively monitor and enforce 
these limits.

                            I. INTRODUCTION

    In June 2011, nearly 53 million Americans were enrolled in 
Medicaid, a joint Federal-State program that finances health 
and long-term care services for a diverse group of 
individuals.\2\ While Federal law currently mandates certain 
minimum coverage standards for state Medicaid programs, states 
can--and very often do--expand eligibility criteria and 
benefits beyond mandated thresholds. Adjusted for inflation, 
Medicaid spending has increased over 250 percent since 1990,\3\ 
and government experts estimate that Medicaid cost American 
taxpayers $440 billion in 2012.\4\ The Federal Government 
reimburses state Medicaid spending, typically equal to half of 
Medicaid expenditures in states with the highest per capita 
income, and about 75 percent in states with the lowest per 
capita income.\5\ In aggregate, the Federal Government 
typically reimburses about 57 percent of state Medicaid 
spending, and in New York the typical Federal reimbursement is 
50 percent.\6\
---------------------------------------------------------------------------
    \2\Kaiser Commission on Medicaid Facts, Medicaid Enrollment: June 
2011 Data Snapshot, available at: http://www.kff.org/medicaid/upload/
8050-05.pdf.
    \3\In 1990, national expenditures on Medicaid equaled $73.7 
billion. (See National Health Expenditures, Levels and Annual Change, 
Table 3, Center for Medicaid and CHIP Services, available at http://
www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/Downloads/tables.pdf.) Adjusted for 
inflation, this would equal about $129.5 in 2012 dollars since the 
average annual consumer price index was 130.7 in 1990 and 229.594 in 
2012. (See Consumer Price Index, Bureau of Labor Statistics, U.S. Dept. 
of Labor, available at ftp://ftp.bls.gov/pub/special.requests/cpi/
cpiai.txt.)
    \4\Spending and Enrollment Detail for CBO's February 2013 Baseline: 
Medicaid.
    \5\Federal Financial Participation in State Assistance 
Expenditures; Federal Matching Shares for Medicaid, the Children's 
Health Insurance Program, and Aid to Needy, Aged, Blind or Disabled 
Persons for FY 2012, 75 Fed. Reg. 69082, 69083 (Nov. 9, 2010), 
available at http://aspe.hhs.gov/health/fmap12.shtml.
    \6\The American Recovery and Reinvestment Act raised the average 
reimbursement rate for the U.S. States to nearly 70 percent for fiscal 
years 2009 through 2011. Between fiscal year 2008 and fiscal year 2009, 
the average State FMAP increased from 59.7% to 70.0%. Kaiser Family 
Foundation State Health Facts, Federal Medical Assistance Percentage 
(FMAP) for Medicaid and Multiplier, available at http://
www.statehealthfacts.org/comparetable.jsp?ind=184&cat=4.
---------------------------------------------------------------------------
    To put the size of the program in context, annual Medicaid 
spending now exceeds Wal-Mart's worldwide annual revenue and is 
more than 50 percent larger than Greece's entire economy.\7\ 
The Committee majority believes an uncapped Federal 
reimbursement makes this the program particularly susceptible 
to waste, fraud and abuse. As explained in an April 2012 
Republican staff report:
---------------------------------------------------------------------------
    \7\According to the World Bank, Greece's Gross Domestic Product was 
slightly under $290 billion in 2011. See Greece, The World Bank, 
available at http://data.worldbank.org/country/greece.

          The policy of an open-ended federal reimbursement of 
        state Medicaid spending significantly reduces the 
        incentives for states to act as wise stewards of 
        federal tax dollars. For example, in order to return 
        $1,000 in fraudulent Medicaid funding for state 
        purposes, a state with a 60% federal Medicaid 
        reimbursement rate would have to identify and recover 
        $2,500 of waste, fraud, and abuse in its program. Since 
        60% of the total recovery would have to be returned to 
        the U.S. Treasury, the state would have to refund 
        $1,500 of the $2,500 it recovered. Moreover, due to the 
        open-ended federal Medicaid reimbursement, many states 
        view Medicaid as an economic growth engine and 
        therefore lack much interest in where the money is 
        going. States would also have to increase resources to 
        uncover the waste, fraud, and abuse. For these reasons, 
        the federal Medicaid reimbursement demonstrates one of 
        the core reasons the Medicaid program suffers from 
        rampant waste, fraud, and abuse.\8\
---------------------------------------------------------------------------
    \8\See Committee Staff Report, supra note 1.

    Each Federal dollar misspent on Medicaid is one less dollar 
for the country to use for better health care for the poor, 
education, infrastructure, national defense, deficit reduction, 
or any other priority. One concern is that some politicians and 
policymakers view Medicaid not only as a program to assist low-
income and disabled persons access health care and long-term 
care services, but also as a way to bring Federal dollars into 
the State.
    The Committee discovered a decades-long problem in New 
York's Medicaid program, which is the subject of this Committee 
Report.

     II. NEW YORK'S MEDICAID PROGRAM IS THE LARGEST IN THE COUNTRY

    New York's spending on Medicaid is the highest in the 
country by a considerable amount. Table 1 shows Medicaid per 
resident spending in Fiscal Year (FY) 2010 on the program's 
three main spending categories--acute care, long-term care, and 
disproportionate share hospitals (DSH)\9\--for California, New 
York, Pennsylvania, and the entire country. The numbers in 
parentheses show how many dollars New York spends per resident 
on Medicaid spending for every dollar spent per capita in each 
of the other three regions. As Table 1 shows, New York's per 
resident Medicaid spending is nearly double that of 
Pennsylvania and more than double that of California and the 
entire country. Appendix A contains a table that shows the 
Federal share of state Medicaid spending for FY 2010 on a per 
capita basis for all 50 States. Federal taxpayers contributed 
$1,657 toward New York's Medicaid program per State resident in 
FY 2010, an amount nearly 20 percent greater than that of 
Vermont, the State with the second highest per resident Federal 
Medicaid contribution, and more than 60 percent greater than 
the median per resident Federal Medicaid contribution.
---------------------------------------------------------------------------
    \9\DSH spending is intended to benefit hospitals that treat a large 
number of uninsured patients and patients with Medicaid. See 
Congressional Research Service, Medicaid Disproportionate Share 
Hospital Payments, December 18, 2012, available at http://www.fas.org/
sgp/crs/misc/R42865.pdf.

                          TABLE 1--PER RESIDENT MEDICAID SPENDING (FY 2010), BY SERVICE
----------------------------------------------------------------------------------------------------------------
                                                                            Long-term
                       Geographic area                         Acute care      care         DSH         Total
----------------------------------------------------------------------------------------------------------------
New York....................................................       $1,404       $1,122         $161       $2,687
California..................................................         $728         $343          $58       $1,129
                                                                   (1.93)       (3.28)       (2.78)       (2.38)
Pennsylvania................................................         $873         $536          $66       $1,476
                                                                   (1.61)       (2.09)       (2.42)       (1.82)
USA.........................................................         $805         $396          $57       $1,258
                                                                   (1.74)       (2.83)       (2.82)      (2.14)
----------------------------------------------------------------------------------------------------------------
The Committee chose the states of California and Pennsylvania to compare to New York because California is the
  largest state and has the second largest Medicaid program, and Pennsylvania borders New York and also has a
  large population. USA represents national figures for the U.S. states plus the District of Columbia.
Source: Data is from the Kaiser Family Foundation.

    Table 2 shows how much certain states spend on Medicaid 
divided by the number of individuals in the state who have 
income below the poverty line. The numbers in parentheses show 
how many dollars New York spends on Medicaid for every dollar 
spent by the three other regions, divided by the number of 
people in poverty. Although a significant amount of Medicaid 
spending is for individuals above the poverty line, Table 2 
provides perspective about State Medicaid spending relative to 
the number of individuals at or below the poverty line. Table 2 
shows that New York's Medicaid expenditures exceed $18,000 for 
each person in poverty, well over double the corresponding 
figure for both California and the entire country, and 62 
percent more than the corresponding figure for Pennsylvania. 
The disparity is especially pronounced for spending on long-
term care services, on which New York spends more than three 
times what California spends and nearly three times what the 
country spends.

                     TABLE 2--MEDICAID SPENDING PER PERSON IN POVERTY (FY 2010), BY SERVICE
----------------------------------------------------------------------------------------------------------------
                                                                            Long-term
                       Geographic area                         Acute care      care         DSH         Total
----------------------------------------------------------------------------------------------------------------
New York....................................................       $9,653       $7,716       $1,105      $18,473
California..................................................       $4,701       $2,213         $373       $7,287
                                                                   (2.05)       (3.49)       (2.96)       (2.54)
Pennsylvania................................................       $6,737       $4,137         $512      $11,386
                                                                   (1.43)       (1.87)       (2.16)       (1.62)
Rest of USA.................................................       $5,385       $2,654         $380       $8,419
                                                                   (1.79)       (2.91)       (2.91)      (2.19)
----------------------------------------------------------------------------------------------------------------
USA represents national figures for the U.S. states plus the District of Columbia.
Source: Data is from the Kaiser Family Foundation.

    Table 3 offers another comparison that demonstrates how New 
York spends significantly more through Medicaid, and 
particularly on elderly and disabled enrollees, compared to 
other States.

                                TABLE 3--MEDICAID SPENDING PER ENROLLEE (FY 2009)
----------------------------------------------------------------------------------------------------------------
                Geographic area                      Aged       Disabled      Adults      Children     Overall
----------------------------------------------------------------------------------------------------------------
New York.......................................      $22,494      $29,881       $4,277       $2,505       $8,960
California.....................................       10,528       16,269        1,073        1,567        3,527
                                                      (2.14)       (1.84)       (3.99)       (1.60)       (2.54)
Pennsylvania...................................       21,268       12,883        3,692        2,748        7,397
                                                      (1.06)       (2.32)       (1.16)       (0.91)       (1.21)
USA............................................       13,149        2,900       15,840        2,305        5,527
                                                      (1.71)       (1.89)       (1.47)       (1.09)      (1.62)
----------------------------------------------------------------------------------------------------------------
USA represents national figures for the U.S. states plus the District of Columbia.
Source: Data is from the Kaiser Family Foundation.

        III. EXAMPLES OF PROBLEMS IN NEW YORK'S MEDICAID PROGRAM

    State and Federal entities and media organizations have all 
found problems in the past regarding wasteful spending in New 
York's Medicaid program. In 2003, then-president of the United 
Hospital Fund, a health care policy and research organization, 
commented that ``Medicaid became a verb--to Medicaid.''\10\ 
According to the New York Times, up to and including Governor 
Pataki, New York governors treated Medicaid like a political 
tool to get additional money from Washington.\11\ Last year, 
the New York Times quoted Paul Castellani, former Director with 
New York's Office of Mental Retardation and Developmental 
Disabilities and now a public service professor at Rockefeller 
College in Albany,\12\ that since 1966, New York took an 
aggressive approach, typified by the budget division's mantra: 
``[i]f it moves, Medicaid it; if it doesn't, depreciate 
it.''\13\ This historical State-approach to Medicaid financing 
may be a reason for the State misspending tens of billions of 
Federal tax dollars over the past few decades.
---------------------------------------------------------------------------
    \10\Joyce Purnick, `Medicaid' as a Verb, Then a Crutch, New York 
Times (July 18, 2005), available at: http://www.nytimes.com/2003/02/24/
nyregion/metro-matters-medicaid-as-a-verb-then-a-crutch.html
    \11\Id.
    \12\Paul J. Castellani, is also the author of From Snake Pits to 
Cash Cows, which was published in 2005 and details the continued 
operation of developmental centers in the State and its implications on 
Medicaid policymaking.
    \13\Nina Bernstein, Cuomo's Medicaid Changes Are at Washington's 
Mercy, New York Times (October 23, 2012), available at: http://
www.nytimes.com/2012/10/24/nyregion/new-yorks- medicaid-program-is-at-
the-mercy-of-washington.html?pagewanted=all&_r=0.
---------------------------------------------------------------------------
    During the administration of Governor George E. Pataki, 
James Mehmet, a former chief Medicaid investigator in New York 
City, estimated that at least ten percent of New York City's 
Medicaid spending was lost on fraudulent claims, while another 
20 percent to 30 percent was misspent on unnecessary 
services.\14\ In 2005, the New York Times criticized New York's 
Medicaid program for ``misspending billions of dollars annually 
because of fraud, waste, and profiteering'' after a year-long 
investigation into the State's program.\15\ According to the 
Times, State oversight authorities failed to detect egregious 
examples of fraud in the Medicaid program, such as a dentist 
who billed Medicaid for 991 procedures in a single day and a 
Buffalo school district that rubber-stamped 4,434 special 
education students--nearly 60 percent of the district's special 
education population--onto the Medicaid rolls in a single 
day.\16\
---------------------------------------------------------------------------
    \14\Clifford J. Levy and Michael Luo, New York Medicaid Fraud May 
Reach Into Billions, New York Times (July 18, 2005), available at: 
http://www.nytimes.com/2005/07/18/nyregion/
18medicaid.html?pagewanted=all&_r=0.
    \15\Id.
    \16\Id.
---------------------------------------------------------------------------
    These problems were mainly undetected or unacted upon by 
the State prior to the Times article. Moreover, the Times 
investigation revealed that New York had virtually no oversight 
of its Medicaid program at the time.\17\ In 2005, largely in 
reaction to the Times investigation, Governor Pataki issued an 
executive order creating the Office of the Medicaid Inspector 
General (OMIG), and he appointed New York's first Medicaid 
inspector general.\18\ In 2006, the New York State legislature 
codified the executive order. In April 2007, in a statement 
nominating James Sheehan to be Medicaid Inspector General, 
Governor Eliot Spitzer said, ``New York State's health care 
spending is the highest in the nation and our system requires 
dramatic reform.''\19\
---------------------------------------------------------------------------
    \17\Id.
    \18\Brian McGuire, Pataki Appoints Inspector General to Oversee 
Medicaid Program Reform, New York Sun (July 20, 2005) available at: 
http://www.nysun.com/new-york/pataki-appoints- inspector-general-to-
oversee/17291/.
    \19\Paul Davies, Gov. Spitzer Snags Top Health-Care Fraud Buster, 
Law Blog, Wall Street Journal (April 6, 2007), available at: http://
blogs.wsj.com/law/2007/04/06/gov-spitzer-snags-top-health-care-fraud-
buster/.
---------------------------------------------------------------------------
    Over the past decade, the Office of the Inspector General 
(OIG) for the U.S. Department of Health and Human Services 
(HHS) found ten specific instances in which New York State 
received improper Federal Medicaid payments in excess of $50 
million, with six of these instances exceeding $170 
million.\20\ Each of these OIG reports pointed out problems in 
New York's Medicaid program, but New York State, under both 
Republican and Democratic governors, disagreed with the OIG's 
findings in all ten reports.\21\ In 2009, New York reached a 
settlement with the Federal Government over false reimbursement 
claims for speech therapy services delivered in New York 
schools, which was the subject of one of the OIG reports.\22\ 
New York agreed to pay the Federal Government $540 million to 
settle the lawsuit, which was filed under the Federal False 
Claims Act.\23\ Although the $540 million amount is the largest 
Medicaid recovery in history, the State believed that the 
settlement was approximately $1 billion less than what the 
State would have potentially had to pay if the matter had gone 
to litigation.\24\
---------------------------------------------------------------------------
    \20\Schedule of Federal Produced Audits and Monetary 
Recommendations 01/01/2001-04/30/2012, Office of the Inspector General 
at the Department of Health and Human Services.
    \21\Id.
    \22\Nicholas Confessore, City and State Agree to Repay U.S. for 
Improper Medicaid Claims, New York Times (July 21, 2009), available at: 
http://www.nytimes.com/2009/07/22/nyregion/22whistle.html.
    \23\Id.
    \24\Id.
---------------------------------------------------------------------------
    The following examples highlight a sampling of waste, 
fraud, abuse, and mismanagement in New York State's Medicaid 
program that have been highlighted or uncovered by the 
Committee:

1. Lack of controls and misspending in New York City's Personal Care 
        Services Medicaid program\25\
---------------------------------------------------------------------------

    \25\For more information about Personal Care Services in New York 
and Dr. Feldman's testimony before the Committee, See Committee Staff 
Report supra note 1.
---------------------------------------------------------------------------
    In 2009, Dr. Gabriel Feldman, a local medical director 
employed by the New York County Health Services Review 
Organization, filed a Federal lawsuit against the City of New 
York under the False Claims Act alleging fraud, abuse, and 
misspending within the Personal Care Services (PCS) 
program.\26\ The PCS program, which cost up to $150,000 per 
enrollee per year, was designed to provide qualifying Medicaid 
beneficiaries services such as cleaning, shopping, grooming and 
basic aid.\27\ The United States Attorney for the Southern 
District of New York joined Dr. Feldman's lawsuit, alleging 
that ``the City improperly authorized and reauthorized 24-hour 
care for a substantial percentage of the thousands of Medicaid 
beneficiaries enrolled in the PCS program'' by disregarding the 
requirements for enrollment.\28\ According to Timothy Wyant, 
the expert hired by the U.S. Attorney's Office to calculate the 
measure of fraud, the total damages caused by the City's 
conduct ranged from $990 million to $2.581 billion using 
conservative assumptions.\29\ The City of New York eventually 
settled this lawsuit with the Federal Government for $70 
million.\30\
---------------------------------------------------------------------------
    \26\First Amended Complaint-In-Intervention of Plaintiff-Intervenor 
United States of America, United States of America ex. rel. Dr. Gabriel 
Feldman v. The City of New York, 09 Civ. 8381 (JSR) (S.D.N.Y. 2011).
    \27\Daniel R. Levinson, HHS OIG Review of Personal Services Claims 
Made by Providers in New York (A-02-07-01054), Office of the Inspector 
General, U.S. Department of Health and Human Services (June 3, 2009), 
available at: http://www.oig.hhs.gov/oas/reports/region2/20701054.pdf.
    \28\Id.
    \29\First Amended Complaint-in-Intervention, Expert Report of 
Timothy Wyant, Ph.D, supra note 26 at 4.
    \30\Anemona Hartocollis, City to Pay $70 Million in Medicaid Suit, 
N.Y. Times, Oct. 31, 2011.
---------------------------------------------------------------------------

2. Overpayments to New York developmental centers

    In May 2012, the OIG released a report\31\ that found 
developmental centers in the State received nearly $1.7 billion 
in Medicaid payments beyond the facilities' reported costs in 
state fiscal year (SFY) 2009 alone.\32\ In September 2012, the 
Committee released a majority staff report motivated by the OIG 
report showing an estimate that New York State received roughly 
$15 billion in excess of reasonable costs over the past two 
decades from large Federal Medicaid over-payments received by 
certain State-operated institutions that treat and house 
patients with developmental disabilities.\33\ (This estimate 
calculates the difference between what Medicaid paid and the 
Committee's estimate of what Medicare would have paid for these 
patients, which is the legal allowable limit. The calculation 
is explained in Appendix C). The minority, while not 
independently verifying the methodology, agrees the figure is 
in the billions of dollars.
---------------------------------------------------------------------------
    \31\Medicaid Rates for NY State-Operated Developmental Centers May 
Be Excessive (A-02-11-01029), Office of the Inspector General, U.S. 
Department of Health and Human Services (2012), available at: http://
oig.hhs.gov/oas/reports/region2/21101029.pdf [hereinafter OIG Report].
    \32\According to the OIG Report, New York claimed Medicaid 
reimbursement totaling $2,266,625,233 in SFY 2009 and the State's 
actual costs for the developmental centers that year totaled 
$577,684,725. See id.
    \33\Staff Report, The Federal Government's Failure to Prevent and 
End Medicaid Overpayments, U.S. House Committee on Oversight & Gov't 
Reform (September 20, 2012).
---------------------------------------------------------------------------
    Although these facilities housed roughly 1,700 patients in 
2009, total Medicaid payments to New York's developmental 
centers were nearly equal to the total payments Indiana's 
Medicaid program made for long-term care services during that 
year and were greater than the total Medicaid long-term care 
expenditures of 36 states.\34\ In SFY 2011, these State-
operated developmental centers in New York charged the Medicaid 
program $5,118 per patient per day, or the equivalent of $1.9 
million per year, for a single patient.\35\ One former New York 
State official dubbed developmental center residents ``cash 
cows'' because of the excessive payments received by the State 
on behalf of the residents.\36\
---------------------------------------------------------------------------
    \34\Kaiser Family Foundation, Distribution of Medicaid Spending by 
Service, FY 2010, available at: http://www.statehealthfacts.org/
comparetable.jsp?typ=4&ind=178&cat=4⊂=47.
    \35\See OIG Report, supra note 31.
    \36\Mary Beth Pfeiffer, State won't release Wassaic resident data, 
Poughkeepsie Journal (Oct. 29, 2010), available at: http://
www.poughkeepsiejournal.com/article/20101029/NEWS01/106070006/State-
won-t-release-Wassaic-resident-data.
---------------------------------------------------------------------------
    In 1991, Elin Howe, the then-Commissioner of the New York 
State Office of Mental Retardation and Developmental 
Disabilities, and New York Governor Mario Cuomo called for the 
closure of New York State developmental centers by 2000.\37\ 
According to Howe, ``[i]ndependent fiscal analyses of closure 
demonstrate that it is the most cost-effective course to 
take.''\38\ Former New York State Senator Nicholas A. Spano, 
then-Chairman of the Committee on Mental Hygiene, concurred, 
recommending that ``all developmental centers in the State of 
New York be permanently closed by the year 2000.''\39\ However, 
Governor Pataki scrapped the plan to close the developmental 
centers by 2000, in large part because the centers generated so 
much revenue for the State.\40\
---------------------------------------------------------------------------
    \37\Mary Beth Pfeiffer, At $4,556 A Day, N.Y. Disabled Care No. 1 
in Nation, Poughkeepsie Journal (June 20, 2010), available at: http://
www.poughkeepsiejournal.com/article/20100620/NEWS01/6200374/At-4-556-
day-N-Y-disabled-care-No-1-nation.
    \38\Id.
    \39\Id.
    \40\See supra note 13.
---------------------------------------------------------------------------
    The payment rates ratcheted up so high because of a formula 
New York first negotiated with the Centers for Medicare and 
Medicaid Services (CMS), formerly the Health Care Financing 
Administration, in 1984 and then amended several times 
since.\41\ The payment rate formula includes a factor that 
allows the developmental centers to maintain nearly two-thirds 
of the payment for a patient after the patient leaves the 
facility.\42\ Since most of the individuals moving out of the 
developmental centers transition into another setting financed 
by Medicaid, taxpayers are effectively paying twice for 
individuals who leave the developmental centers.\43\ In 
addition, CMS believes that the developmental center payments 
exceeded Medicaid upper payment limits established by 
Congress.\44\
---------------------------------------------------------------------------
    \41\Examining the Administration's Failure to Prevent and End 
Medicaid Overpayments: Hearing Before the H. Comm. on Oversight & Gov't 
Reform, 112th Cong. (2012) (testimony of Penny Thompson, Deputy 
Director, Center for Medicaid and CHIP Services).
    \42\See OIG Report supra note 31.
    \43\See supra note 33.
    \44\``[T]he Upper Payment Limit is the maximum a given State 
Medicaid program may pay a type of provider in the aggregate, Statewide 
in Medicaid fee-for-service. State Medicaid programs cannot claim 
Federal matching dollars for provider payments in excess of the 
applicable UPL. . . . To create an upper bound to Medicaid spending on 
fee-for-service hospital rates, Congress imposed an Upper Payment Limit 
based on what Medicare would have paid facilities for the same 
services.'' (See Kip Piper, Medicaid Upper Payment Limits: 
Understanding Federal Limits on Medicaid Fee-for-Service Reimbursement 
of Hospitals and Nursing Homes, The Piper Report (April 25, 2012), 
available at: http://www.piperreport.com/blog/2012/04/25/medicaid-
upper-payment-limits-understanding-federal-limits-medicaid-fee-for-
service-reimbursement- hospitals-nursing-homes/.)
---------------------------------------------------------------------------
    CMS shares a large share of the blame for permitting the 
overpayments to rise. According to OIG:

          CMS did not adequately consider the impact of State 
        plan amendments on the developmental centers' Medicaid 
        daily rate. Specifically, CMS approved more than 35 
        State Plan Amendments related to the . . . rates, 
        including some that pertained only to developmental 
        centers. CMS reviewed the proposed amendments and, in 
        some cases, asked the State for additional information 
        to address concerns CMS had about the rate-setting 
        methodology. However, CMS's efforts did not prevent the 
        rate from increasing to its current level.\45\
---------------------------------------------------------------------------
    \45\See OIG Report, supra note 31.

    At a 2012 Committee hearing on these overpayments, CMS 
agreed that the payment rates were ``excessive and 
unacceptable'' and committed to reducing the payment rates to 
``about one-fifth of its current level.''\46\ While CMS's 
admission was a positive sign, it only occurred after the media 
and the Committee shed light on decades of Federal overpayments 
in excess of reasonable costs and argued strongly that these 
rates should be immediately corrected.\47\
---------------------------------------------------------------------------
    \46\See supra note 41.
    \47\See Committee Staff Report, supra note 1.
---------------------------------------------------------------------------

3. Abuses of Medicaid eligibility rules in New York

    While Medicaid is commonly considered a program for the 
poor, middle-class and upper-class individuals often qualify 
for Medicaid long-term care benefits.\48\ Although not specific 
to New York, David Armor and Sonia Sousa of George Mason 
University have found that nearly 80 percent of the non-
disabled elderly population on Medicaid is above the poverty 
line, and about half of this population is over 200 percent of 
the poverty line.\49\
---------------------------------------------------------------------------
    \48\See e.g., Stephen A. Moses, Medi-Cal Long-Term Care: Safety Net 
or Hammock?, Pacific Research Institute (January 2011) available at: 
http://www.centerltc.com/pubs/Medi-Cal-LTC- SafetyNet_or_Hammock.pdf.
    \49\David J. Armor and Sonia Sousa, Restoring a True Safety Net, 
National Affairs (Fall 2012), available at: http://
www.nationalaffairs.com/publications/detail/restoring-a-true-safety-
net.
---------------------------------------------------------------------------
    A legal industry, dubbed ``Medicaid estate planning,'' 
helps Medicaid applicants and their children shelter savings 
and future inheritances by creatively arranging applicants' 
finances to meet Medicaid eligibility rules. Medicaid estate 
planning, a nationwide phenomenon, has been prevalent in New 
York State for some time, as Ned Regan, the former State 
Comptroller in New York, explained in a 1996 article in City 
Journal:

          At an unknown cost, middle- and even upper-income 
        families often take advantage of these Medicaid 
        services to avoid the major costs of caring for their 
        elders. To qualify for Medicaid, middle-income people 
        often feign poverty by placing money in a trust, by 
        transferring assets to children or a spouse, and by 
        preserving in their own name only assets not counted in 
        eligibility tests--houses and cars. These middle-class 
        Medicaid recipients are yet another addition to 
        Medicaid's powerful political base.\50\
---------------------------------------------------------------------------
    \50\Ned Regan, Medicaid's Fatal Attraction, City Journal (Winter 
1996), available at: http://www.city-journal.org/html/
6_1_medicaids_fatal.html.
---------------------------------------------------------------------------
    Congress has attempted to reduce the problem of improper 
Medicaid estate planning several times over the past few 
decades.\51\ Most recently, as part of the Deficit Reduction 
Act (DRA) in 2005, Congress addressed areas related to 
transfers of assets for less than fair market value.\52\ One of 
the key provisions of the DRA imposed a longer look-back 
period, which is a period of time that states are supposed to 
use to review whether an individual transferred assets to 
another person or party for less than fair market value in 
order to obtain Medicaid eligibility. The DRA lengthened the 
look-back period from 36 months to 60 months.\53\
---------------------------------------------------------------------------
    \51\For example, prior to the Deficit Reduction Act, Congress 
passed the Omnibus Budget Reconciliation Act (OBRA) in 1993. One of the 
key provisions of OBRA, which had a few provisions to address the 
problem of Medicaid estate planning, was to require States to recover 
Medicaid spending on behalf of beneficiaries from their estates after 
death.
    \52\Centers for Medicare and Medicaid Services, Important Facts for 
State Policymakers: Deficit Reduction Act (January 8, 2008), available 
at: http://www.cms.gov/Regulations-and- Guidance/Legislation/
DeficitReductionAct/downloads/TOAbackgrounder.pdf.
    \53\Id.
---------------------------------------------------------------------------
    During a hearing on September 21, 2011, the Committee's 
Subcommittee on Health Care, District of Columbia, Census, and 
National Archives examined abuses of Medicaid eligibility 
rules.\54\ Although the DRA has been in place for many years, 
Janice Eulau, assistant administrator of the Medicaid Services 
Division at the Suffolk County Department of Social Services, 
testified about the ease with which relatively wealthy New York 
residents, can protect their assets by enrolling in Medicaid 
and how roughly 60 percent of Medicaid applicants in Suffolk 
County\55\ engage in estate planning to gain program 
eligibility:
---------------------------------------------------------------------------
    \54\Examining Abuses of Medicaid Eligibility Rules: Hearing Before 
the H. Comm. on Oversight & Gov't Reform, 112th Cong. (2011).
    \55\Between 2007 and 2011, median household income was $87,187 in 
Suffolk County compared to a median household income of $56,951 in the 
State. Between 2007 and 2011, 5.7% of persons in Suffolk County were 
below the poverty level compared to 14.5% of people in the State. See 
United States Census Bureau, U.S. Dep't. of Commerce, State and County 
Quick Facts, Suffolk County New York, available at: http://
quickfacts.census.gov/qfd/states/36/36103.html (last visited February 
2013).

          As a long-time employee of the local Medicaid office, 
        I have had the opportunity to witness the diversion of 
        applicants' significant resources in order to obtain 
        Medicaid coverage. It is not at all unusual to 
        encounter individuals and couples with resources 
        [beyond exempt resources] exceeding $500,000, some with 
        over $1 million. There is no attempt to hide that this 
        money exists; there is no need. There are various legal 
        means to prevent those funds from being used to pay for 
        the applicant's nursing home care. Wealthy applicants 
        for Medicaid's nursing home coverage consider that 
        benefit to be their right, regardless of their ability 
        to pay themselves. . . . [I]ndividuals with resources 
        above and beyond the level prescribed by law should not 
        be allowed to fund their children's inheritance while 
        the taxpayers fund their nursing home care. I strongly 
        believe that this is not a partisan issue. I also 
        believe in the merits of the Medicaid program, but feel 
        just as deeply that these issues regarding resource 
        diversion need to be addressed.\56\
---------------------------------------------------------------------------
    \56\Examining Abuses of Medicaid Eligibility Rules: Hearing Before 
the H. Comm. on Oversight & Gov't Reform, 112th Cong. (2011) (testimony 
of Janice Eulau, Assistant Administrator for Medicaid, Suffolk County, 
New York Department of Social Services).

    Eulau also testified about a technique called ``spousal 
refusal,'' a provision of the Medicare Catastrophic Coverage 
Act of 1988 that is being misused in New York.\57\ Under 
spousal refusal, a couple shifts assets from a sick or disabled 
spouse to a healthy spouse in order to ``artificially 
impoverish'' the sick or disabled spouse and qualify him or her 
for Medicaid. The healthy spouse then invokes spousal refusal 
and declines to provide financial support for the spouse who is 
on Medicaid.\58\ Moreover, under spousal refusal, income earned 
by the healthy spouse is exempt from being considered available 
to the impoverished spouse.
---------------------------------------------------------------------------
    \57\Id.
    \58\Allan Rubin and Harold Rubin, Spousal Refusal to Pay for 
Nursing Home Costs, therubins.com (Feb. 7, 2009), available at: http://
www.therubins.com/legal/refusal.htm.
---------------------------------------------------------------------------
    According to the New York Times, ``[w]hile many state and 
local governments do not openly acknowledge the spousal refusal 
option, New York City actually provides a form letter for 
it.''\59\ In 2009, more than 1,200 people in New York City 
invoked spousal refusal, a significant increase from prior 
years.\60\ The Times article also indicated that the City 
reviewed spousal refusal applications to recover money, but 
only $3.7 million was recovered in 2009, or less than $3,000 on 
average for each individual invoking spousal refusal.\61\ Eulau 
testified that most married people in Suffolk County, New York, 
who apply for Medicaid use spousal refusal, and she confirmed 
to Committee staff that the use of this technique has grown 
over time.\62\ Governor Cuomo's recently introduced 2013-2014 
executive budget proposes the elimination of spousal refusal 
with an estimated annual State savings of $137 million.\63\
---------------------------------------------------------------------------
    \59\Anemona Hartocollis, Full Wallets, but Using Health Program for 
Poor, New York Times (December 10, 2010), available at: http://
www.nytimes.com/2010/12/12/nyregion/12 medicaid.html?pagewanted=all.
    \60\Id.
    \61\Id.
    \62\See supra note 56.
    \63\New York State 2013-2014 Executive Budget Matrix, (viewed 
February 12, 2013), available at: http://www.health.ny.gov/health_care/
medicaid/redesign/docs/2013-14_exec_budget_matrix.xls
---------------------------------------------------------------------------

4. Excessive salaries paid to executives of Medicaid-funded 
        organizations

    The Committee has found that Federal taxpayers have 
subsidized lavish lifestyles for many executives in 
organizations that receive almost all of their funding through 
Medicaid. The Committee's oversight work in this area was 
informed by an August 2011 New York Times article that exposed 
how top executives at the Young Adult Institute (YAI)--a 
nonprofit that runs group homes for the developmentally 
disabled--used Medicaid funds to lease luxury cars, to pay 
tuition bills and living expenses for their children, and to 
reward themselves with generous compensation packages.\64\ In 
fact, four executives at the YAI (Phillip Levy, Joel Levy, Tom 
Dern, and Stephen Freeman) each received compensation in excess 
of $1 million in 2008, with money derived almost entirely from 
Medicaid.\65\
---------------------------------------------------------------------------
    \64\Russ Beuttner, Reaping Millions in Nonprofit Care for Disabled, 
New York Times (August 2, 2011), available at: http://www.nytimes.com/
2011/08/02/nyregion/for-executives-at-group-homes-generous-pay-and-
little-oversight.html?pagewanted=all.
    \65\This information obtained from publicly available 990 forms.
---------------------------------------------------------------------------
    While YAI may be the worst offender, a number of Medicaid-
financed organizations in New York paid exceptionally high 
executive salaries funded with tax revenue. A review conducted 
by the Committee of a sample of Medicaid-financed organizations 
found that at least 15 executives received yearly compensation 
exceeding $500,000 and more than 100 other executives received 
yearly compensation exceeding $200,000 per year.\66\ The 
Committee's study was not a comprehensive or exhaustive search 
of compensation packages received by top employees at Medicaid-
funded organizations, but rather a simple search of publicly 
available IRS 990 Forms for 2008 and 2011.
---------------------------------------------------------------------------
    \66\See Appendix B for Committee's data on salaries for executives 
at nonprofits funded by Medicaid in New York State.
---------------------------------------------------------------------------

  IV. PATIENT ABUSE WITHIN THE DEVELOPMENTALLY DISABLED SYSTEM IN NEW 
                                  YORK

    In 2011 and 2012, the New York Times ran a series titled--
`Abused and Used' chronicling how the large expenditures New 
York's Medicaid program do not necessarily translate into 
quality care received by the developmentally disabled.\67\ For 
example, despite the large payments received by the State for 
the residents of developmental centers, the Times reported that 
patient care is often substandard:
---------------------------------------------------------------------------
    \67\See Abused and Used, New York Times, available at http://
www.nytimes.com/interactive/nyregion/abused-and-used-series-page.html.

          [T]he institutions are hardly a model: Those who run 
        them have tolerated physical and psychological abuse, 
        knowingly hired unqualified workers, ignored complaints 
        by whistle-blowers and failed to credibly investigate 
        cases of abuse and neglect, according to a review by 
        The New York Times of thousands of state records and 
        court documents, along with interviews of current and 
        former employees. Since 2005, seven of the institutions 
        have failed inspections by the State Health Department, 
        which oversees the safety and living conditions of the 
        residents.\68\
---------------------------------------------------------------------------
    \68\Danny Hakim, A Disabled Boy's Death, and a System in Disarray, 
New York Times (June 5, 2011), available at: http://www.nytimes.com/
2011/06/06/nyregion/boys-death-highlights-crisis-in-homes-for-
disabled.html?pagewanted=all&_r=0.

    According to the New York Times, New York State 
consistently failed to take complaints from employees of the 
developmental centers or family members of residents 
seriously.\69\ According to the Times, employees who reported 
problems experienced retaliation by other employees, and the 
length of time it took to settle complaints disincentivized 
employees from filing complaints in the first place.\70\ 
According to the Times, a number of residents suffered 
significant verbal, emotional, and physical abuse at the 
developmental centers.\71\ Several residents at New York's 
developmental centers, and at numerous Medicaid-financed group 
homes across the State, have died directly because of employee 
incompetence or negligence, and in some cases even from 
manslaughter at the hands of their caretakers.\72\
---------------------------------------------------------------------------
    \69\Id.
    \70\Id.
    \71\See supra note 67.
    \72\Id.
---------------------------------------------------------------------------
    The Poughkeepsie Journal reported that a large part of the 
problem of poor resident care appears to be the difficulty of 
firing incompetent or neglectful employees:

          Since 2007, the state has tried to fire employees of 
        a dozen local facilities for the developmentally 
        disabled 20 times. It has failed 18 times. Quite 
        simply, it's nearly impossible to get fired from state-
        run facilities that care for people with autism, Down 
        Syndrome and other mental disabilities, according to a 
        Poughkeepsie Journal review of 1,900 pages of 
        disciplinary documents involving 98 group homes and six 
        institutions statewide. Just 2 percent of cases 
        resulted in termination, with workers keeping jobs even 
        in cases of serious alleged abuse and neglect.\73\
---------------------------------------------------------------------------
    \73\Mary Beth Pfeiffer, Caregivers of Mentally Disabled Keep Jobs, 
even in cases of abuse, neglect, Poughkeepsie Journal (September 17, 
2011), available at: http://www. poughkeepsiejournal.com/article/
20110918/PROMO/109180384/Journal-investigation-Caregivers-mentally-
disabled-keep-jobs-even-cases-abuse-neglect.

    The Poughkeepsie Journal found that workers who left 
disabled people alone in a running vehicle or outside in the 
rain kept their jobs. Additionally, workers who stole State 
property, brought drug paraphernalia to work, or harassed 
disabled residents almost always kept their jobs.\74\ An 
article in the New York Times suggests that the Civil Service 
Employees Association (CSEA) is partially to blame for this 
problem.\75\ According to the New York Times, ``the union's 
approach--contesting just about every charge leveled at a 
worker--contributed to a system in which firings of even the 
most abusive employees are rare.''\76\ Office of People with 
Developmental Disabilities (OPWDD) former spokesman Herm Hill 
said OPWDD's hands were often tied in cases against abusive 
workers because of the disciplinary and arbitration rules 
involving the workers' union.\77\ The union's representation of 
repeat offenders made it possible for employees to rack up 
serious offenses before losing their jobs.\78\
---------------------------------------------------------------------------
    \74\Id.
    \75\Danny Hakim, At State-Run Homes, Abuse and Impunity, New York 
Times (March 12, 2011), available at: http://www.nytimes.com/2011/03/
13/nyregion/13homes.html?pagewanted=all.
    \76\Id.
    \77\Id.
    \78\Id.
---------------------------------------------------------------------------

      V. PAST HEALTH CARE-RELATED CORRUPTION BY ELECTED OFFICIALS

    In the last decade, at least half a dozen elected State 
representatives, including two State Senate Majority leaders, 
have been convicted of theft, bribery, or honest services 
fraud,\79\ related to health care:
---------------------------------------------------------------------------
    \79\Honest services fraud is Federal crime defined in Skilling v. 
United States as ``fraudulent schemes to deprive another of honest 
services through bribes or kickbacks supplied by a third party who has 
not been deceived.'' (Skilling v. United States 130 S. Ct. 2896, 
(2010))
---------------------------------------------------------------------------
     On May 14, 2012, former New York State Senate 
Majority Leader Pedro Espada was convicted in Federal court on 
four counts of theft for stealing over $500,000 from Soundview, 
the nonprofit health care network he founded in the Bronx which 
received Federal funding in excess of $1 million per year.\80\ 
Federal Medicaid money that was intended to be used for health 
care for the city's poorest residents instead paid for private 
family parties, school tuition, luxury car payments and 
$100,000 in lobster, sushi and other meals.\81\ Additionally, 
Espada packed the Soundview board and staff with members of his 
own family and close personal friends.\82\
---------------------------------------------------------------------------
    \80\Espada is expected to face a retrial on four other counts of 
theft, fraud and conspiracy on which the jury failed to agree after his 
six-week trial. See Mosi Secret, Ex-State Senator Guilty of Theft from 
Nonprofit, New York Times (May 14, 2012), available at: http://
www.nytimes.com/2012/05/15/nyregion/ex-senator-espada-guilty-of-
embezzling-from-soundview-health-network. html?pagewanted=all.
    \81\Id.
    \82\Julia Marsh and Dan Mangan, Pedro's board stiffs were his 
puppets, New York Post (March 21, 2012), available at: http://
www.nypost.com/p/news/local/bronx/pedro_ 
board_stiffs_EjyOnu7lWNZZyXtXqtzpBM.
---------------------------------------------------------------------------
     In May of 2012, former New York Senate Majority 
Leader Joseph Bruno was charged with two counts of fraud for 
accepting $440,000 from a businessman who managed the assets of 
a health and welfare fund and sought the then-Senator's 
influence in legislative matters.\83\
---------------------------------------------------------------------------
    \83\Joseph L. Bruno, Times Topics, New York Times (updated May 4, 
2012) available at http://topics.nytimes.com/top/reference/timestopics/
people/b/joseph_l_bruno/index.html?inline=nyt-per (``The indictment, 
unsealed in Federal District Court in Albany, came nearly six months 
after a Federal appeals court vacated Mr. Bruno's previous conviction 
because of a ruling in a separate case by the United States Supreme 
Court that undermined the government's legal claims against Mr. Bruno, 
a Republican from Rensselaer County. But the appeals court said Mr. 
Bruno could be retried on different charges.'')
---------------------------------------------------------------------------
     Former New York State Senator Carl Kruger was 
sentenced to seven years in prison after pleading guilty to two 
counts of conspiracy to commit honest services fraud\84\ and 
two counts of conspiracy to commit bribery.\85\ Mr. Kruger 
accepted bribes from two hospital executives, a prominent 
lobbyist and a healthcare consultant in exchange for taking 
official action on behalf of those parties, including 
sponsoring and supporting legislation, favorably directing 
state grants, and writing to State officials in his capacity as 
State legislator.\86\
---------------------------------------------------------------------------
    \84\See supra note 79.
    \85\Benjamin Weiser, Former State Senator Is Sentenced to 7 Years 
in Vast Bribery Case, New York Times (April 26, 2012), available at: 
http://www.nytimes.com/2012/04/27/nyregion/carl-kruger-sentenced-to-
seven-years-in-corruption-case.html.
    \86\Id.
---------------------------------------------------------------------------
     In 2005, former New York State Senator Guy Velella 
pled guilty to one count of bribery and was sentenced to one 
year in prison for the felony conviction.\87\ He was charged 
with a 25-count indictment alleging the solicitation of 
$250,000 in bribes for steering public works contracts to those 
who paid the bribes.\88\ During the 1990s, his law firm was 
given hundreds of thousands of dollars in legal work by large 
insurance companies while he headed the State Senate Committee 
that oversaw legislation affecting them.\89\
---------------------------------------------------------------------------
    \87\Liz Krueger, Former Senator Guy Velella: Convicted Felon, 
$80,000-A-Year Public Pensioner, Gotham Gazette (October 25, 2004), 
available at: http://www.gothamgazette.com/article/fea/20041025/202/
1156.
    \88\Id.
    \89\Clifford J. Levy and Christopher Drew, In Albany, Ally of 
Insurers Profits From Them, New York Times (February 4, 2011), 
available at: http://www.nytimes.com/2001/02/04/nyregion/in- albany-
ally-of-insurers-profits-from-them.html.
---------------------------------------------------------------------------
     In 2004, New York State Assemblyman Anthony 
Seminerio pled guilty to a single fraud count for influence 
peddling and was sentenced to six years in prison.\90\ 
Seminerio admitted to promoting the interests of Jamaica 
Hospital Medical Center, from which he received over $300,000 
for obtaining State financing and lobbying legislators on 
behalf of the hospital's efforts to take over other 
hospitals.\91\
---------------------------------------------------------------------------
    \90\David M. Halbfinger and William Rashbaum, Ex-Assemblyman From 
Queens Dies In Federal Prison, New York Times (January 7, 2011), 
available at: http://query.nytimes.com/gst/
fullpage.html?res=9D02EFD7143AF934A35752C0A9679D8B63.
    \91\Id.
---------------------------------------------------------------------------
    Outright corruption and favoritism has occurred in New 
York. For example, Kenneth Bruno, son of former New York State 
Senate Majority Leader Joseph Bruno, was hired as a lobbyist 
for the New York Ambulette Coalition on the same day that the 
State Legislature eliminated $4.4 million in Medicaid 
transportation funding that would have gone to the Coalition's 
members.\92\ Within ten days, the funding was restored ``at the 
insistence of the Senate,'' according to a senior State 
official.\93\ Bruno reportedly called his father's top aides 
personally to ask them to restore the funds.\94\ Leaders 
throughout New York State voiced their disapproval about 
Bruno's lobbying deal. Conservative Party Leader Michael Long 
said the deal ``shows the system is broken,'' and Rachel Leon, 
executive director of Common Cause, called the action by 
Bruno's son ``an instant symbol of what's wrong in 
Albany.''\95\
---------------------------------------------------------------------------
    \92\Fredric U. Dicker, It Pays (4.4 million) to Hire Bruno's Son, 
New York Post (April 25, 2005), available at: http://www.nypost.com/p/
news/item_Usy1VfKTPyNavkRCN2mb4K.
    \93\Id.
    \94\Id.
    \95\Fredric U. Dicker, Pol Son Burned--Right & Left Agree: Bruno 
Kin's Deal Is Wrong, New York Post (April 26, 2005), available at: 
http://www.nypost.com/p/news/item_ IwRwuubUpAd1M23lYXtDCK.
---------------------------------------------------------------------------

   VI. ALLEGATIONS OF PROBLEMS WITH STATE OVERSIGHT OF THE MEDICAID 
                                PROGRAM

    Several whistle-blowers within the New York State health 
care system have brought to light serious failures indicating 
that the State bureaucracy historically failed to adequately 
police Medicaid waste, fraud and abuse. Paul F. Stavis, counsel 
to three different New York State health agencies during his 
28-year career, alleged that ``anti-fraud efforts in New York 
have not been taken seriously by the State's executive 
agencies.''\96\ In an April 2011 article in Newsday, Stavis 
cited multiple examples of Medicaid-related fiscal abuse\97\ 
and how both the State's Department of Health (DOH) and the 
State's Office of the Medicaid Inspector General (OMIG) looked 
the other way when faced with evidence of Medicaid fraud.\98\
---------------------------------------------------------------------------
    \96\Paul Stavis, NY too weak on Medicaid fraud, Newsday (April 1, 
2011), available at: 
http://www.newsday.com/opinion/oped/stavis-ny-too-weak-on-medicaid-
fraud-1.2795786.
    \97\See id. Stavis states that New York State law contains a 
loophole that prevents the State from prosecuting certain types of 
Medicaid fraud, which then necessitates the Federal Government's 
intervention when such misappropriation crimes are committed. Stavis 
characterized the inability of New York State to prosecute and the 
resulting need for Federal involvement as an ``embarrassment.'' 
Although Stavis drafted legislation to close the loophole during his 
tenure as counsel for the State, Stavis writes that the New York State 
legislature refused to pass this legislation.
    \98\Id. In addition to outright fraudulent activities, New York 
State historically has had numerous cases of fiscal abuse regarding 
Medicaid. In an outstanding example of fiscal abuse, Stavis cites 
instances where providers diverted Medicaid funds to make donations to 
charities in foreign countries, give nearly $2 million per year to a 
house of worship, fund religious schools, and pay excessively high 
salaries to executives at nonprofit corporations.
---------------------------------------------------------------------------
    According to Stavis, New York State continued to pay 
providers who were suspected of abusing the Medicaid system. 
For instance, the DOH gave a $1 million grant to Pedro Espada's 
nonprofit, Soundview, even after seeing evidence of ongoing 
fraud.\99\ In fact, Stavis brought evidence of Espada's illegal 
activities to the attention of the DOH in 2005 and OMIG in 
2007, years before the former State Senate Majority leader was 
convicted of Medicaid fraud. No action was taken by either 
State office.\100\ The illegal payments continued until 2011, 
when the Federal Government ordered the payments stopped and 
commenced criminal proceedings against Espada.\101\
---------------------------------------------------------------------------
    \99\Jacob Gershman, State Ignored Call to Probe Espada Clinics, 
Wall Street Journal (December 17, 2010), available at: http://
online.wsj.com/article/SB100014240527 
48703395204576023843352497746.html.
    \100\Id.
    \101\See Stavis, supra note 96.
---------------------------------------------------------------------------
    Earlier, this report highlighted the suit Dr. Gabriel 
Feldman brought against the City of New York in 2009.\102\ As a 
medical director, Feldman determined which individuals met the 
qualifications for Medicaid-funded home health care services. 
Despite firm criteria outlining program eligibility, Feldman 
encountered ``tremendous pressure'' from advocacy groups, 
politicians, and family members of clients to approve service 
requests for individuals who did not meet the 
qualifications.\103\ When he refused to grant such requests, 
Feldman found that his decisions were ``knowingly, 
intentionally and routinely being overridden without legal 
basis''\104\ in order ``to admit as many clients as possible 
who apply for the PCS Program regardless of his or her 
condition, fitness or qualification for the program.''\105\ In 
testimony before the Committee, Feldman stated that pre-2011 
``a pervasive culture of non-accountability and non-compliance 
to PCS State regulations made it simply far too easy for local 
social service offices in New York City to spend billions in 
taxpayer money without regard to common sense oversight, 
regulations of the State, or patient safety concerns.''\106\
---------------------------------------------------------------------------
    \102\Is Government Adequately Protecting Taxpayers from Medicaid 
Fraud?: Hearing Before the H. Comm. on Oversight & Gov't Reform, 112th 
Cong. (2012) (testimony of Gabriel Feldman, Local Medical Director, New 
York Personal Care Services Program).
    \103\Id.
    \104\First Amended Complaint-In-Intervention of Plaintiff-
Intervenor United States of America, United States of America ex. rel. 
Dr. Gabriel Feldman v. The City of New York, 09 Civ. 8381 (JSR) 
(S.D.N.Y. 2011).
    \105\Id.
    \106\See supra note 102.
---------------------------------------------------------------------------
    During the Committee's hearing, Feldman used the term 
``Medicaid industrial complex''\107\ to refer ``to the New York 
State Government, the healthcare providers and the unions 
essentially operating as one unified entity and making any 
enforcement and recovery actions largely unsuccessful.''\108\ 
Feldman further explained that the pre-2011 ``system of quality 
assurance, oversight, and rate setting was completely 
dysfunctional'' and there were and still are ``insufficient 
resources and staff in the [Medicaid] Inspector General's 
Office and in New York City's Human Resource Administration, 
devoted to enforcing fiscal discipline and fraud oversight in 
the system.''\109\ Like Stavis, Feldman also indicts the DOH 
for having ``utterly failed in their oversight 
functions.''\110\
---------------------------------------------------------------------------
    \107\Id.
    \108\Letter from Gabriel Feldman to H. Comm. on Oversight & Gov't 
Reform, Response to Questions for the Record (May 10, 2012) (on file 
with Committee).
    \109\Id.
    \110\Id.
---------------------------------------------------------------------------

       VII. REFORMS IN THE LAST TWO YEARS AND ADDITIONAL CONCERNS

    During his first month as New York's Governor, Andrew Cuomo 
called for Medicaid reform, stating, ``New York's bloated 
Medicaid program, which spends at a rate more than twice the 
national average, must be reformed to help our state begin to 
make ends meet.''\111\ The administration of Governor Cuomo has 
taken positive steps to reform some of the problems discussed 
in Section III and Section IV of this report. These efforts 
have been dubbed by the New York Post as ``a break with past 
efforts'' because of the support he obtained from the Service 
Employees International Union and the hospital 
association.\112\
---------------------------------------------------------------------------
    \111\Governor Andrew M. Cuomo, Press Release, Governor Cuomo Issues 
Executive Order Creating Medicaid Redesign Team (January 5, 2011) 
available at http://www.governor.ny.gov/press/01052011medicaid.
    \112\Id.
---------------------------------------------------------------------------
    New York State implemented the first-in-the-nation 
statutory ``global'' spending cap. This State spending cap 
imposes an annual limit on the growth of State Medicaid 
expenditures, not to exceed the medical Consumer Price Index. 
The cap remains in effect, even if the number of eligible 
Medicaid beneficiaries rises. In FY 2012-2013, New York 
experienced a 4 percent increase in Medicaid spending from the 
previous year, one of the nation's lowest rates of increase. 
New York State projects that their newly-implemented Medicaid 
reforms will save the Federal Government $17 billion over five 
years.\113\
---------------------------------------------------------------------------
    \113\Governor Andrew M. Cuomo, Press Release, Governor Cuomo 
Announces that New York Submits Federal Waiver to Invest $10 Billion in 
Medicaid Redesign Team Savings to Transform the State's Health Care 
System (August 6, 2012), available at: http://www.governor.ny.gov/
press/08062012-federal-waiver-health-care.
---------------------------------------------------------------------------
    In the first year of the Cuomo administration, the State 
started a phase-out of fee-for-service home care, an action 
which may ensure greater integrity in the PCS program. This 
effort began in New York City, where the State converted the 
City's fee-for-service PCS program to the State's Medicaid 
Managed Long Term Care program.\114\ According to Dr. Feldman, 
there have been some additional measures ``taken by New York 
City and New York State to ensure proper compliance with 
Federal and State regulations'' for the PCS program.\115\
---------------------------------------------------------------------------
    \114\New York 2013-2014 Executive Budget, NY Rising, (January 22, 
2013), available at: 
http://publications.budget.ny.gov/eBudget1314/fy1314littlebook/
BriefingBook.pdf.
    \115\See supra note 108.
---------------------------------------------------------------------------
    New York and CMS have entered negotiations about reducing 
the developmental center payment rate through the Medicaid 
State Plan Amendment process.\116\ According to the Wall Street 
Journal, ``New York has agreed to give up about $800 million in 
payments to the developmental centers.''\117\ CMS is currently 
reviewing a State Plan Amendment submitted by New York that 
would reduce the payments received by New York through the 
State-operated developmental centers.
---------------------------------------------------------------------------
    \116\Laura Nahmias, Budget Hole Seen After Loss of Aid, Wall Street 
Journal (January 24, 2013), available at: http://online.wsj.com/
article/SB100014241278873245393 04578262311978071202.html.
    \117\Id.
---------------------------------------------------------------------------
    On January 18, 2012, Governor Cuomo issued an executive 
order to address the problem of outrageous executive 
compensation packages at taxpayer-financed organization.\118\ 
The order recognized that ``New York has an ongoing obligation 
to ensure that taxpayers' dollars are used properly, 
efficiently and effectively to improve the lives of New Yorkers 
and our communities,'' and that ``in certain instances 
providers of services that receive State funds or State-
authorized payments have used such funds to pay for excessive 
administrative costs and outsized compensation for their senior 
executives.''\119\ The Governor's order directed that payments 
to ``providers of services that receive reimbursements directly 
or indirectly'' from State agencies ``shall not be provided for 
compensation paid or given to any executive by such provider in 
an amount greater than $199,000.''\120\ The Governor's order 
also stated: ``A provider's failure to comply with such 
regulations established by the applicable State agency shall, 
in the commissioner's sole discretion, form the basis for 
termination or non-renewal of the agency's contract with or 
continued support of the provider.''\121\
---------------------------------------------------------------------------
    \118\Governor Andrew M. Cuomo, State of New York, Executive Order 
38 (Jan. 18, 2012), available at: www.governor.ny.gov/executiveorder/
38.
    \119\Id.
    \120\Id.
    \121\Id.
---------------------------------------------------------------------------
    Governor Cuomo proposed eliminating spousal refusal in New 
York in his first and second budget.\122\ However, powerful 
interest groups, especially the elder law bar, lobbied strongly 
to prevent the change. The interest groups' opposition proved 
successful, and New York did not enact legislation to end the 
abuse of spousal refusal.\123\ In his 2013-2014 budget 
proposal, Governor Cuomo has again proposed changes that would 
reduce the ability of individuals in New York to abuse the 
spousal refusal technique by passing inappropriate private 
costs onto taxpayers.\124\
---------------------------------------------------------------------------
    \122\Carl Campanile, Andy to end `rich' home-care ruse, New York 
Post (March 7, 2011), available at: http://www.nypost.com/p/news/local/
andy_to_end_rich_home_care_ ruse_UO5gsIz0Fcat1zrZ1XwXdP.
    \123\Sanford Altman, Better With Age: NY seniors win as Legislature 
drops provision, Times Herald-Record (April 10, 2012), available at: 
http://www.recordonline.com/apps/pbcs.dll/article ?AID=/20120410/BIZ/
204100328.
    \124\Memorandum in Support, Health and Mental Hygiene Article VII 
Legislation, 2013-2014 New York State Executive Budget available at 
http://publications.budget.ny.gov/eBudget1314/fy1314artVIIbills/
HMH_ArticleVII_MS.pdf.
---------------------------------------------------------------------------
    Through a series of recommendations by Cuomo's Medicaid 
Redesign Team and implemented by the State, New York has 
expanded the definition of an estate for the purpose of estate 
recovery. The State also centralized responsibility for 
Medicaid estate recovery process in OMIG. Like most States, New 
York has not historically been aggressive recovering from 
estates of individuals who utilize Medicaid to pay for their 
long-term care services. In 2004, only 0.8 percent of Medicaid 
expenditures on nursing homes was recovered nationally, and 
only 0.5 percent of Medicaid expenditures on nursing homes was 
recovered by New York.\125\ The hope is that these reforms will 
make it easier for New York to recover from the estates of 
individuals who have inappropriately used Medicaid to pay for 
long-term care services and supports.
---------------------------------------------------------------------------
    \125\Medicaid Estate Recovery Collections, U.S. Department of 
Health and Human Services (September 2005), available at: http://
aspe.hhs.gov/daltcp/reports/estreccol.htm#table1.
---------------------------------------------------------------------------
    In 2011, after what was dubbed ``an unprecedented string of 
corruption cases'' by the Huffington Post New York,\126\ the 
State legislature passed the Public Integrity Reform Act of 
2011.\127\ The new law requires members of the State 
legislature to accurately disclose any outside income, as well 
as the names of clients. It also created a new Joint Commission 
on Public Ethics, with the power to investigation lawmakers, 
their staff and members of the executive branch for legal and 
ethical violations.\128\ According to the New York Times, there 
are ``questions whether the reforms would be weaker than 
expected.''\129\ For instance, the Times points out that a 12-2 
vote of the new Commission in favor of an investigation could 
still lose.\130\
---------------------------------------------------------------------------
    \126\Michael Gormley, The Clean Up Albany Act of 2011 Proposed, 
Huff Post New York (June 3, 2011), available at: http://
www.huffingtonpost.com/2011/06/04/the-clean-up-albany-act-o_n_ 
871329.html.
    \127\Jisha V. Dymond, Governor Cuomo Signs Ethics Bill, Corporate 
Political Activity Law Blog (August 16, 2011), available at: http://
www.corporatepoliticalactivitylaw.com/index.php/2011/08/governor-cuomo-
signs-ethics-bill/.
    \128\Id.
    \129\Danny Hakim and Thomas Kaplan, As Ethics Measure Emerges, So 
Do Questions About Its Teeth, New York Times (June 7, 2011), available 
at: http://www.nytimes.com/2011/06/08/nyregion/ny-ethics-bill-may-lack-
some-teeth.html.
    \130\Id.
---------------------------------------------------------------------------
    New York State is taking steps to improve the protection 
and safety of disabled children and adults in the State's 
care.\131\ In 2011, Governor Cuomo appointed a special advisor, 
Clarence Sundram,\132\ to identify gaps in care that create a 
potentially harmful environment for disabled persons.\133\ The 
resulting analysis became the basis for the reforms. The Cuomo 
reform efforts forced the resignations of top officials in the 
Office for People with Developmental Disabilities (OPWDD) and 
the Commission on Quality of Care and Advocacy for Persons with 
Disabilities.\134\
---------------------------------------------------------------------------
    \131\Andrew Cuomo's worthy attempt to fix shameful, dangerous state 
programs for the disabled, New York Daily News (May 8, 2012), available 
at: www.nydailynews.com/opinion/andrew-cuomo-worthy-attempt-fix-
shameful-dangerous-state-programs-disabled-article-1.1074021.
    \132\Sundram is a national expert on institutions and programs for 
the mentally disabled.
    \133\Memorandum for Program Bill #35, New York Governor's Program 
Bill 2012, available at: www.governor.ny.gov/assets/documents/GPB35-
PEOPLE-WITH-SPECIAL-NEEDS-MEMO.pdf.
    \134\Danny Hakim, State Faults Care for the Disabled, New York 
Times (Mar. 22, 2012), available at: www.nytimes.com/2012/03/22/
nyregion/new-york-state-draft-report-finds-needless-risk-in-care-for-
the-disabled.html?pagewanted=all&_r=0).
---------------------------------------------------------------------------
    New initiatives include enhanced training and recruitment 
and higher employment standards. Strict policies regarding 
abuse and neglect were adopted, with immediate suspensions of 
employees in substantiated cases of physical and sexual abuse. 
New hires now face drug testing, comprehensive background 
checks, and employment screening through an Excluded Provider 
Registry.\135\
---------------------------------------------------------------------------
    \135\New York State Office of the Medicaid Inspector General, 
Restricted, Terminated or Excluded Individuals or Entities, available 
at: www.omig.state.ny.us/data/content/view/72/52/).
---------------------------------------------------------------------------
    The hope is that the reorganizing of management will better 
integrate services with law enforcement and separate operations 
from investigations.\136\ All OPWDD investigators receive law 
enforcement investigative training, and, starting in 2012, new 
State police cadets receive training to support OPWDD 
standards.\137\
---------------------------------------------------------------------------
    \136\New York Office for People With Developmental Disabilities, 
Commissioner's Page, available at: www.opwdd.ny.gov/opwdd_about/
commissioners_page/accomplishments).
    \137\New York State Office for People with Developmental 
Disabilities, Joint Agreement Announced Between OPWDD and State Police 
to Reform Abuse Reporting System (Aug 18, 2011), available at: 
www.opwdd.ny.gov/news_and_publications/opwdd_news/joint_agreement 
state_ police_abuse_reporting_system.
---------------------------------------------------------------------------
    Although long overdue, New York State's current policy is 
to pursue termination of employees found to have committed 
egregious abuse and neglect of patients. OPWDD pushed for and 
obtained CSEA's agreement to negotiate a standardized table of 
penalties to remove arbitrator discretion when an employee is 
found to have committed a serious act of abuse or neglect. New 
State mandates require providers report abuse and neglect cases 
to law enforcement and the State, and to verify backgrounds of 
job applicants against a database the State will maintain.
    The Cuomo administration and the New York legislature also 
established the Justice Center for the Protection of People 
with Special Needs.\138\ When it is in place, the Justice 
Center will maintain a 24-hour hotline to route calls regarding 
allegations of abuse and neglect. An in-house special 
prosecutor and inspector general at the Justice Center will be 
primarily responsible for the investigation of serious 
allegations of a criminal nature.\139\ The Center incorporates 
many of the responsibilities of the defunct Commission on 
Quality of Care and Advocacy for Persons with 
Disabilities.\140\
---------------------------------------------------------------------------
    \138\Justice Center For the Protection of People with Special 
Needs, available at: www.governor.ny.gov/Justice4SpecialNeeds/home.
    \139\New York Governor Andrew Cuomo Press Office, Governor Cuomo 
and Legislative Leaders Announce Agreement on Legislation to Protect 
People with Special Needs and Disabilities (June 17, 2012), available 
at: www.governor.ny.gov/press/061712justice4specialneedsagreement.
    \140\Id.
---------------------------------------------------------------------------
    The Committee minority is greatly encouraged by the 
systemic overhaul of New York State's care for the 
developmentally disabled led by the OPWDD. The Cuomo 
administration engaged new leadership to address the 
mismanagement plaguing the system.\141\ The new OPWDD appears 
to be focused on real improvements with the Commissioner 
providing reports detailing areas of progress at the six-month, 
one-year and eighteen-month intervals.\142\
---------------------------------------------------------------------------
    \141\New York Governor Andrew Cuomo Press Office, Governor Cuomo 
Announces New Leadership for State Agencies that Serve disabled New 
Yorkers (Mar. 7, 2011), available at: www.governor.ny.gov/press/
leadership.
    \142\New York Office for People with Developmental Disabilities, 
Commissioner's Page, available at: www.opwdd.ny.gov/opwdd_about/
commissioners_page.
---------------------------------------------------------------------------
    While those and other reforms are significant steps 
forward, the Committee has some ongoing concerns.
    CMS first inquired about the excessive payment rates in 
2010, over two-and-a-half years ago.\143\ CMS and New York have 
finally agreed to an audit, scheduled to begin this month, to 
uncover the magnitude of the excessive developmental center 
payments. Correcting overpayments of this magnitude should not 
be a multi-year process.
---------------------------------------------------------------------------
    \143\Letter from Sue Kelly, Associate Regional Administrator, 
Division of Medicaid and Children's Health, CMS to Donna Frescatore, 
Deputy Commissioner, NY State Department of Health, (July 13, 2010) (on 
file with Committee).
---------------------------------------------------------------------------
    The Committee is concerned by the lack of State cooperation 
with the Committee's oversight in this area. On July 19, 2012, 
Chairman Issa and Congressman Gowdy sent a letter to Nirav 
Shah, the Commissioner of New York's Department of Health 
requesting information related to the developmental center 
overpayments.\144\ The Committee received indication throughout 
the next few weeks that the State was going to provide the 
requested information. However, the State ultimately decided 
not to cooperate with the Committee's request by citing that 
providing the information would not be in the State's best 
interests.\145\ To date, the State of New York has not supplied 
any of the requested information to the Committee.
---------------------------------------------------------------------------
    \144\Letter from Darrell Issa, Chairman of House Committee on 
Oversight and Government Reform, and Trey Gowdy, Chairman of House 
Committee on Oversight and Government Reform Subcommittee on Health 
Care, District of Columbia, Census and National Archives.
    \145\Email from New York Counsel to Committee on Oversight and 
Government Reform staff (September 4, 2012) (on file with Committee).
---------------------------------------------------------------------------
    The Committee is also concerned by recent allegations 
relating to the State's OMIG, the agency tasked with 
``preventing and detecting fraudulent, abusive, and wasteful 
practices within the Medicaid program and recovering improperly 
expended Medicaid funds.''\146\ In November 2012, the Albany 
Times Union ran a story based largely on the reporter's 
interviews with ten current and former OMIG employees.\147\ 
According to these current and former employees, New York's 
OMIG suffers from misdirection and its investigations lack a 
sense of urgency.\148\ Former employees allege that OMIG has 
recently backed off audits and investigations of organizations 
suspected of Medicaid fraud and abuse for politically-motivated 
reasons.\149\ According to the Times Union article, ``One 
veteran employee said when factoring for the recoveries made by 
outside contractors, particularly one cracking down on third-
party claims, the sums recovered by OMIG staff are pretty 
dismal.' Data from the reports [shared with the reporter] back 
up the contention.''\150\
---------------------------------------------------------------------------
    \146\Office of the New York State Medicaid Inspector General, 
Mission Statement, available at http://www.omig.ny.gov/data/content/
blogcategory/20/192/
    \147\James M. Odato, Fraud agency called adrift: Office of Medicaid 
Inspector General is ineffective and mismanaged, critics say, Times 
Union (November 19, 2012), available at http://www.timesunion.com/
local/article/Fraud-agency-called-adrift-4047131.php
    \148\Id.
    \149\Id.
    \150\Id.
---------------------------------------------------------------------------
    Articles in the Times Union and the New York Times suggest 
that problems began at OMIG when Governor Cuomo replaced James 
Sheehan, who took an aggressive approach to combating problems 
in the State's Medicaid program and was largely credited with 
recouping $1.5 billion in Medicaid overpayments in a four-year 
period, with James Cox, a former Regional Inspector General of 
the HHS OIG as Medicaid Inspector in July 2011.\151\ Sheehan 
believes that he was removed as the Inspector General of OMIG 
because he represented a challenge to a powerful Medicaid 
industry in New York that is a large employment engine.\152\ 
According to Sheehan, ``Medicaid is to New York what corn is to 
Iowa. It's a heavy lift.''\153\ It should be noted that Paul 
Stavis, who also worked for Sheehan in addition to his other 
positions, was also critical of OMIG during Jim Sheehan's 
tenure stating ``Fraud litigation is very difficult and 
expensive and OMIG has not equipped itself to cope with such 
cases. [OMIG doesn't] look for fraud as a matter of 
practice.''\154\
---------------------------------------------------------------------------
    \151\See Nina Bernstein, Under Pressure, New York Moves to Soften 
Tough Medicaid Audits, New York Times, (March 18, 2012), available at: 
http://www.nytimes.com/2012/03/19/nyregion/new-medicaid-inspector-
general-supports-less-adversarial-audits.html?pagewanted=all and supra 
note 148.
    \152\See Nina Bernstein, Under Pressure, New York Moves to Soften 
Tough Medicaid Audits, New York Times, (March 18, 2012), available at 
http://www.nytimes.com/2012/03/19/nyregion/new-medicaid-inspector-
general-supports-less-adversarial-audits.html?pagewanted=all.
    \153\Id.
    \154\Jacob Gershman, Medicaid Fraud Unit Falls Short, Wall Street 
Journal (January 27, 2011), available at: http://online.wsj.com/
article/SB200014240527487032932045761062601 59071844.html 155 See supra 
note 153.
---------------------------------------------------------------------------
    Eight months before the Times Union article, a New York 
Times article reported that audits released by the State show 
that Cox's findings of overpayments fell steeply after 
September 30, 2011, the deadline for the State to meet a $1.5 
billion Federal target imposed when the New York OMIG was 
created in 2006.\155\ According to the New York Times, New York 
was on target to avoid $1.1 billion in the previous year.\156\ 
Cost avoidance is an estimate of public money not spent because 
of education and discussions with providers. However, the Times 
article also pointed out that most of the important audits 
responsible for the avoided cost were started under 
Sheehan.\157\
---------------------------------------------------------------------------
    \155\See supra note 153.
    \156\Id.
    \157\Id.
---------------------------------------------------------------------------
    Sheehan's aggressive approach was not without controversy. 
According to the New York Times, the health care industry 
lobbied for James Sheehan's removal as New York's Medicaid 
Inspector General\158\ and also for legislation that would 
limit ``what are perceived to be overzealous and unfair tactics 
employed by OMIG in audits.''\159\ At a New York State 
legislature hearing in 2010, a lawyer for the health care 
industry accused Sheehan's auditors of ``gangster-style 
tactics.''\160\ This legislation, which cut the government's 
time to reclaim overpayments in half and let providers submit 
corrected bills rather than repay, overwhelmingly passed the 
New York State legislature.\161\ To Governor Cuomo's credit, he 
vetoed the legislation stating that ``the bill seeks to make 
changes to the law that are too far-reaching and would 
potentially allow fraudulent and abuse activity to go 
undetected and unprosecuted.''\162\
---------------------------------------------------------------------------
    \158\Id.
    \159\Governor Cuomo, Statement of Disapproval for Senate Bill 
Number 3,184-A (September 23, 2011), available at: http://
blog.nysarc.org/wp-content/uploads/2011/09/Veto-Message.jpg.
    \160\Gale Scott, Calling Dr. Fraud, Crain's New York Business 
(March 21, 2010), available at: http://www.crainsnewyork.com/article/
20100321/SUB/303219992.
    \161\See supra note 153.
    \162\See supra note 160.
---------------------------------------------------------------------------
    The Committee minority believes that the allegations 
contained in the New York Times and Albany Times Union articles 
are inconsistent with some of the evidence. The minority is 
aware that the number of OMIG investigations has remained 
consistent and in some cases exceeded the performance of the 
agency under Sheehan since the Cuomo administration's 
appointment of Cox. According to information in reports 
published by OMIG, OMIG's cost savings activities, which 
include avoided costs as well as recovered improper payments, 
rose significantly--by 34 percent in 2011, and recoveries, 
which totaled about $700 million in 2011, also continue to 
grow.\163\
---------------------------------------------------------------------------
    \163\Comparison of Recoveries to date, NYS Global Cap report 
November 2012 compared to NYS Global Cap report November 2011, 
available at: http://www.health.ny.gov/health_care/medicaid/
regulations/global_cap/monthly/docs/november_2012_report.pdf and http:/
/www.health. ny.gov/health_care/medicaid/regulations/global_cap/
monthly/docs/november_2011_report.pdf.
---------------------------------------------------------------------------
    The Committee minority believes that while it is too soon 
to tell how OMIG's recovery performance will turn out for 2012, 
a partial year analysis of New York Medicaid Global Cap Reports 
suggests that OMIG is on course to surpass that mark.\164\ 
Using these trends, the minority believes there is not evidence 
in the data to substantiate the claims that OMIG is suffering 
under Cox's leadership.
---------------------------------------------------------------------------
    \164\Id.
---------------------------------------------------------------------------
    The Committee majority staff believes it is impossible to 
use annual figures to characterize a trend since James Sheehan 
was Inspector General at OMIG for more than half of 2011 and 
many audits begun under Sheehan's guidance would not have 
resulted in recoveries until later in the year or in subsequent 
years.

                         VIII. RECOMMENDATIONS

    New York's State Medicaid Plan, like almost all State 
Medicaid Plans, consists of thousands of pages of dense rules 
and reimbursement methodologies. According to Paul Stavis, who 
served as counsel to three different New York State health 
agencies during his 28-year health care career,\165\ New York 
has made its Medicaid program ``so utterly complicated that 
nobody completely understands it. It allows New York [S]tate to 
pull the wool over the feds' eyes.''\166\
---------------------------------------------------------------------------
    \165\The complaints Mr. Stavis brought against New York's Medicaid 
program are discussed in Section III of this Report.
    \166\Mary Beth Pfeiffer, Feds audit N.Y.'s Medicaid rates, 
Poughkeepsie Journal (May 14, 2011).
---------------------------------------------------------------------------
    The Federal Government, particularly CMS, has been culpable 
in New York's historical Medicaid program integrity problems. 
No example better illustrates this failure better than CMS's 
approval of 35 modifications related to the excessive 
developmental center payment rate over the past 25 years. These 
modifications have collectively caused the State to receive an 
estimated $15 billion beyond a reasonable amount for just one, 
relatively small, part of the State's Medicaid program.
    New York State has submitted several waiver applications to 
CMS that relate to the financing of its Medicaid program.\167\ 
The Medicaid Redesign Team (MRT) Waiver Amendment asks CMS to 
allow New York to keep $10 billion of the anticipated Federal 
savings from the waiver. According to the State, it will use 
that money to increase primary care capacity, invest in new 
patient-centered models of care, strengthen safety-net programs 
and institutions, invest in the health care workforce, and 
improve management of chronic disease.\168\
---------------------------------------------------------------------------
    \167\See Achieving the Triple Aim, New York State Medicaid Redesign 
Team Waiver Amendment, New York State Department of Health, http://
www.health.ny.gov/health_care/medicaid/redesign/docs/2012-08-
06_waiver_amendment_request.pdf; See also It's Going to be a 1915 b/c 
Waiver, New York State Office for Persons With Developmental 
Disabilities, People First Waiver (June 6, 2012) available at http://
www.opwdd.ny.gov/opwdd_services_supports/people_first_waiver/
1915_b_c_waiver (``During discussions with CMS in May, OPWDD determined 
that a combination of a 1915 b and 1915 c waiver will provide the 
flexibility needed to redesign the delivery system to provide person-
centered, need-focused supports and services as outlined under the 
People First Waiver. Therefore, OPWDD will pursue a combination of 
these two types of waivers rather than an 1115 Research and 
Demonstration Waiver.'').
    \168\New York State Medicaid Redesign Team (MRT) Waiver Amendment, 
available at: http://www.health.ny.gov/health_care/medicaid/redesign/
docs/2012-08-06_waiver_amendment_request.pdf.
---------------------------------------------------------------------------
    Before considering the merits of these waivers, CMS and the 
State must come to an agreement to reduce the State's 
developmental centers to a rate of about one-fifth of their 
current levels, as CMS indicated was its intention at the 
September 20, 2012 hearing before the Subcommittee on Health 
Care, District of Columbia, Census and National Archives.
    According to Dr. Feldman, ``[w]hile Governor Cuomo has 
taken bold steps to redesign Medicaid in New York State, the 
Medicaid industrial complex is thriving, especially in New York 
City.''\169\ The Committee recommends six specific actions that 
should be taken immediately to reduce Medicaid waste, fraud, 
and abuse in New York's program and potentially save both 
Federal and New York State taxpayers significant amounts of 
money each year:
---------------------------------------------------------------------------
    \169\See supra note 102.
---------------------------------------------------------------------------
     CMS or a qualified government watchdog agency 
should conduct a complete and independent audit of New York's 
Medicaid program, including the work of New York State's Office 
of the Medicaid Inspector General;
     CMS should finalize an agreement with New York on 
a corrected payment methodology that ends the developmental 
center overpayments as soon as possible. CMS should pursue 
recovery of an appropriate portion of previous overpayments in 
excess of reasonable costs for Federal taxpayers;
     CMS' review of New York's Section 1115 waiver 
request to allow the State to keep a portion of the savings its 
Medicaid reforms are projected to achieve, should follow all 
applicable statutory requirements, particularly with respect to 
budget neutrality. CMS should also ensure that the baseline 
from which New York is calculating the savings does not include 
developmental center overpayments or other overpayments;
     New York's Personal Care Services program must 
only enroll individuals who meet the eligibility thresholds 
required by law;
     New York's legislature should ban ``spousal 
refusal'' and other abuses of Medicaid eligibility rules, as 
Governor Cuomo has proposed in each of his three budgets. New 
York must also aggressively pursue estate recovery against 
people who abuse Medicaid eligibility rules; and
     New York's legislature should codify Governor 
Cuomo's executive order that limiting compensation of 
executives at organizations receiving nearly all their money 
from tax revenue. New York must also aggressively monitor and 
enforce these limits.

                             IX. CONCLUSION

    In 2003, the Government Accountability Office (GAO) added 
Medicaid to its list of high-risk programs.\170\ This report 
highlighted significant problems in New York State's Medicaid 
program, and the previous section of this report outlined six 
specific steps that CMS and New York can take to protect 
taxpayer dollars from being misspent through New York's 
Medicaid program. Many of the recommendations discussed in the 
report, such as limiting Medicaid eligibility to individuals 
who meet the program's criteria, limiting executive 
compensation at organizations that receive the vast majority of 
their money through Medicaid, and strong state estate recovery 
programs should be implemented across the country.
---------------------------------------------------------------------------
    \170\See Medicaid Waste, Fraud and Abuse, Threatening the 
Healthcare Safety Net: Hearing Before the Senate Comm. on Finance, 
109th Cong. (2005) (written statement of Kathryn G. Allen, Health Care 
Director, Government Accountability Office), available at http://
www.gao.gov/new.items/d05836t.pdf.
---------------------------------------------------------------------------
    It is also important to note that CMS has struggled 
historically in protecting Federal tax dollars from being 
misspent through Medicaid. CMS has been hampered by poor data 
quality, but the agency has historically failed to often 
adequately detect and address major problems in state Medicaid 
programs. A Committee majority staff report from April 2012 
detailed several examples of how CMS has failed to protect 
taxpayer dollars spent through the Medicaid program.\171\ 
Moreover, as GAO has widely reported, states have resorted to 
creative techniques such as provider taxes and large 
supplemental payments to draw down additional Federal dollars 
into their states through the Medicaid program without net 
State contributions.\172\ These techniques undermine the nature 
of joint Federal-state financial responsibility for the 
Medicaid program by significantly increasing the Federal share 
of Medicaid expenditures and further undermining State 
incentives to run efficient Medicaid programs.
---------------------------------------------------------------------------
    \171\See supra note 1.
    \172\U.S. Gov't Accountability Office (GAO): CMS Needs More 
Information on the Billions of Dollars Spent on Supplemental Payments 
(2008), available at: http://www.gao.gov/new.items/d08614.pdf.
---------------------------------------------------------------------------
    The national debt of the United States now exceeds $16.4 
trillion, with more than $6 trillion added to the national debt 
in just the last four years. Congress faces critical and 
difficult choices about how to put the Federal budget on a 
sustainable path. The ideas in this report, which should 
receive bipartisan support, would alleviate some of the most 
egregious problems in the program and would begin to put the 
Medicaid program on a sustainable path.

   APPENDIX A: PER CAPITA FEDERAL MEDICAID DOLLARS, BY STATE (FY2010)
------------------------------------------------------------------------
                                 Federal                       Federal
            State                spending        State         spending
------------------------------------------------------------------------
New York.....................       $1,655  Alabama........         $769
Vermont......................        1,398  Texas..........          764
New Mexico...................        1,341  Oregon.........          761
Maine........................        1,295  Maryland.......          754
Louisiana....................        1,248  Iowa...........          742
Mississippi..................        1,184  Illinois.......          739
Rhode Island.................        1,170  Montana........          737
West Virginia................        1,143  New Jersey.....          716
Arizona......................        1,111  North Dakota...          713
Massachusetts................        1,107  Hawaii.........          705
Arkansas.....................        1,095  Idaho..........          695
Alaska.......................        1,056  California.....          695
Kentucky.....................        1,033  Indiana........          690
Tennessee....................        1,010  South Dakota...          680
Missouri.....................        1,008  Washington.....          659
Connecticut..................          990  Nebraska.......          650
Pennsylvania.................          972  Florida........          624
Ohio.........................          972  New Hampshire..          623
South Carolina...............          888  Georgia........          601
Delaware.....................          885  Kansas.........          594
Minnesota....................          880  Wyoming........          586
Michigan.....................          865  Utah...........          499
North Carolina...............          855  Virginia.......          496
Oklahoma.....................          841  Colorado.......          494
Wisconsin....................          809  Nevada.........          357
------------------------------------------------------------------------

    Medicaid expenditures by state as well as FMAP rates are 
from the Kaiser Family Foundation's state health care 
facts.\173\ Population figures were obtained from the Census 
Bureau.
---------------------------------------------------------------------------
    \173\Kaiser Family Foundation, Total Medicaid Spending, FY 2010, 
available at http://www.statehealthfacts.org/
comparemaptable.jsp?ind=177&cat=4 (last visited January 3, 2012).

                 APPENDIX B: EXECUTIVE COMPENSATION AT NON-PROFITS FINANCED LARGELY BY MEDICAID
----------------------------------------------------------------------------------------------------------------
                                                                                                        County
                                                                              2008          2010        median
               Organization                           Position            Compensation  Compensation   household
                                                                                                        income
----------------------------------------------------------------------------------------------------------------
A.C.L.D (Nassau Co.)......................  Executive Director..........      $525,704      $552,761     $95,823
                                            CFAO........................       302,883       333,466
                                            Assistant Executive Director       178,026       196,673
                                            Assistant Executive Director       186,836       201,530
Block Institute Inc. (Brooklyn)...........  Executive Director/C.E.O....       201,586       225,114      49,490
The Center for Discovery (Sullivan Co.)...  C.E.O.......................       939,280       649,977      48,303
                                            Former C.F.O................       480,832           N/A
                                            C.F.O.......................       254,595       238,293
                                            Chief of Program............       262,393       257,200
                                            Chief of Admission..........       226,224       228,140
                                            Chief of Health Services....       248,725       223,398
                                            Chief of Development and               N/A       223,658
                                             Fundraising.
Center for Disability Services Inc.         President/C.E.O.............       247,394       274,818      57,715
 (Albany Co.).
Community Services for the Developmentally  President & C.E.O...........      *214,735       256,816      30,230
 Disabled (Buffalo).
Developmental Disabilities Institute, Inc.  Executive Director..........       294,576           N/A      87,187
 (Suffolk Co.).
                                            Associate Executive Director       225,589       280,356
Epilepsy Foundation of Long Island (Nassau  Executive Director..........      *271,509       282,718      95,823
 Co.).
                                            C.F.O.......................       175,174       214,502      95,823
Family Residences and Essential             C.E.O.......................       354,308       422,951      95,823
 Enterprises Inc (Nassau Co.).
                                            C.F.O.......................       218,146       285,323
                                            Chief Compliance Office.....       234,193       251,422
                                            Associate Director..........       175,271       201,718
                                            Former C.E.O................       858,587           N/A
                                            C.O.O.......................           N/A       261,327
                                            Associate Director..........           N/A       215,714
Federation Employment and Guidance          C.E.O.......................       533,323       582,513      51,270
 Services (NYC).
                                            Executive Vice President....       421,275       403,736
                                            C.O.O.......................       460,158       373,300
                                            C.F.O.......................           N/A       316,476
                                            General Counsel.............       222,935       283,784
                                            Chief Development Officer...           N/A       267,569
                                            Sr. Vice President..........       271,870       292,378
                                            Sr. Vice President..........       256,144       277,437
                                            Sr. Vice President..........       204,587       227,979
                                            Sr. Vice President..........       260,302       276,405
                                            Sr. Vice President..........       206,998       221,836
HASC Center Inc. (Brooklyn)...............  Executive Director..........      *231,303       267,715      49,490
                                            Clinical Director...........      *244,929       259,641
Head Injury Association Inc. (Suffolk Co.)  C.E.O.......................       250,349       370,996      87,187
HeartShare Human Services of New York       President and C.E.O.........       479,775       536,796      49,490
 (Suffolk Co.).
                                            Executive Vice President....       317,449       318,481
                                            Executive Director..........       231,284       247,020
Human Care Services for Families &          Executive Director..........       182,488       372,367      49,490
 Children Inc. (Brooklyn).
                                            C.F.O.......................       132,603       234,894
Independence Residences Inc. (Queens Co.).  Executive Director..........       232,213       267,190      56,406
                                            Associate Executive Director       177,627       206,171
Institute for Community Living, Inc. (NYC)  C.E.O.......................       752,330     3,048,520      51,270
                                            C.F.O.......................       244,434       268,968
                                            C.O.O.......................       266,752       399,431
                                            Sr. Executive Vice President       222,110       229,904
                                            C.A.O.......................       198,266       209,545
                                            A.C.F.O.....................       202,156       128,106
Jawonio Inc. (Rockland Co.)...............  C.E.O.......................       545,783       278,049      84,661
                                            Asst. Exec. Director........       185,799       301,497
Kelberman Center Inc. (Oneida Co.)........  Treasurer/Secretary.........      *323,673      *334,139      48,382
Life's Worc Inc. (Nassau Co.).............  Executive Director..........       378,502       395,828      95,823
                                            Assistant Executive Director       182,092       209,280      95,823
                                             of Operations.
LifeSpire Inc. (NYC)......................  Unspecified.................       426,843       409,614      51,270
                                            Unspecified.................       209,651       222,119
Maryhaven Center of Hope (Suffolk Co.)....  C.E.O.......................       923,878       643,484      87,187
                                            Exec. V.P...................       778,990     1,003,980
                                            C.F.O.......................       344,459       429,328
                                            V.P Finance.................       231,698       244,565
NARCO Freedom Inc. (Bronx)................  C.E.O.......................       382,690       386,018      41,057
NYSARC (Albany Co.).......................  Executive Director..........       199,284       287,944      57,715
NYSARC (Chautauqua Co.)...................  Executive Director/C.E.O....       325,040       356,988      41,432
NYSARC (Madison/Cortland Co.).............  Executive Director..........      *214,635       237,848      53,473
NYSARC (Monroe Co.).......................  C.E.O.......................       205,151           N/A      52,260
NYSARC (Montgomery Co.)...................  C.E.O.......................    *1,630,083       512,420      43,254
NYSARC (Nassau Co.).......................  C.E.O.......................      *455,431       458,388      95,823
                                            Unspecified.................      *272,455       308,756
                                            Unspecified.................      *285,394       348,077
                                            Unspecified.................      *199,708       269,151
NYSARC (NYC)..............................  Assoc. Executive Director...       369,195       149,061      51,270
                                            Assoc. Executive Director...       327,896       422,456
                                            Budget Director.............       300,300       371,766
                                            Chief Compliance Officer....       263,995       372,667
                                            Senior Policy Advisor.......       243,661       666,444
                                            Director of Employees.......       211,853       351,703
NYSARC (Putnam Co.).......................  Executive Director..........      *234,195       254,251      92,711
NYSARC (Suffolk Co.)......................  C.E.O.......................       349,775       373,220      87,187
                                            Deputy Executive Director...       197,470       215,494
                                            Deputy Executive Director...       198,699       224,673
NYSARC (Sullivan Co.).....................  C.E.O.......................       174,059       211,092      48,303
NYSARC (Westchester Co.)..................  Executive Director..........       226,741       244,885      80,725
                                            Associate Executive Director       200,793       211,860
Occupations Inc. (Orange Co.).............  President/C.E.O.............       272,147       432,958      70,294
                                            Exec. Vice President/ C.O.O.       239,499       308,483
                                            Vice President..............       119,875       304,884
Ohel Childrens Home and Family Services     C.E.O.......................       302,488       392,365      49,490
 (Brooklyn).
                                            C.F.O.......................       227,906       248,510
                                            Program Director............       185,104       198,473
                                            C.O.O.......................       233,447       263,968
                                            C.O.O.......................       245,055       271,481
                                            Chief Development Officer...       297,179       319,405
People Inc. (Erie Co.)....................  President/C.E.O.............      *424,640       472,419      48,805
                                            Vice President..............      *208,548       205,231
Springbrook NY Inc. (Ostego Co.)..........  Executive Director..........       205,937       217,706      45,334
Staten Island Mental Health Society Inc.    Unspecified.................       547,585       498,311      84,308
 (Staten Island).
                                            Unspecified.................       190,249       209,342
                                            Unspecified.................       233,740       208,732
                                            Unspecified.................       209,513       223,753
Westchester Institute for Human             President/C.E.O.............      *249,868       274,793      80,725
 Development (Westchester Co.).
                                            C.O.O.......................      *204,317       205,910
Westchester School for Special Children     Executive Director..........       271,430       143,378      80,725
 (Westchester Co.).
Young Adult institute (NYC)...............  President...................     2,106,905       954,912      51,270
                                            C.E.O.......................     1,991,753     1,089,518
                                            Co-C.O.O....................     1,070,614       563,307
                                            Co-C.O.O....................     1,191,809       605,039
                                            CFO.........................       404,220       432,339
                                            Unspecified.................       242,973           N/A
                                            Unspecified.................       292,927       319,309
                                            Unspecified.................       221,903       264,948
                                            Unspecified.................       257,510       276,322
                                            Unspecified.................       238,650       288,440
                                            Unspecified.................           N/A      330,755
----------------------------------------------------------------------------------------------------------------
Notes:Compensation amounts were found using publicly available IRS Form 990s accessed through guidestar.
Denotes compensation for the year 2009 since 2008 data was not available through guidestar. Median household
  income was obtained from Census Bureau County Quick Facts and is annual median household income for the period
  from 2007-2011. Median household income for Brooklyn, Staten Island, and the Bronx is from 2009 and was found
  at www.city-data.com.

     Appendix C: Committee's Methodology for Calculating Medicaid 
                              Overpayments

    On July 19, 2012, the Committee sent a letter to Dr. Nirav 
Shah, Commissioner of the New York State Department of Health, 
asking for detailed information regarding overpayments received 
by New York State-operated developmental centers. Despite 
initial assurances from State officials that New York would 
respond to the Committee's request for information, the State 
decided not to comply. Because the State refused to comply with 
its request, the Committee compiled as much available 
information as possible from reliable sources in order to 
estimate the amount of overpayments received by New York 
State's developmental centers since 1990.
    The Office of Inspector General (OIG) at the U.S. 
Department of Health and Human Services (HHS) supplied the 
Committee with a significant amount of information on these 
overpayments. Chiefly, OIG provided the actual payments 
received by New York developmental centers for state fiscal 
year (SFY) 2007 ($1.828 billion), SFY 2008 ($2.107 billion), 
and SFY 2009 ($2.267 billion), as well as the daily Medicaid 
payment rate per patient for New York's developmental centers 
over the entire period. Using the actual payments received by 
New York's developmental centers and OIG's calculations for 
reimbursable expenses, OIG estimated Medicaid overpaid the 
State developmental centers by $1.41 billion in SFY 2009, 
$1.359 billion in SFY 2008, and $1.063 billion in SFY 2007. The 
Committee requested that OIG estimate the developmental center 
overpayments over the past two decades using the same 
methodology it employed for its 2007-2009 estimates; however, 
OIG lacked the necessary information (the same information the 
State of New York has refused to provide the Committee) in 
order to perform the calculations.
    It is important to note that OIG's calculation of 
overpayments relies upon the State's reported costs, and the 
State's reported costs were not verified or audited by either 
OIG or CMS. It is a complex formula with many supplementary and 
substantial add-ons that convert a prior year's reported costs 
into a current year's reimbursable costs. For example, New 
York's total reported costs for SFY 2008 were $581 million. 
After adding the various supplementary factors, OIG calculated 
the reimbursable cost for SFY 2009 was $858 million, about 48 
percent higher than New York's reported costs for the previous 
year.
    Therefore, there is reason to believe that the reimbursable 
costs calculated by OIG are significantly higher than are 
necessary to serve the State's developmental center population. 
According to the OIG report, the total reimbursement cost per 
patient was $1,532 per day for SFY 2009. Since OIG reported 
that the average rate received by similar, privately-operated 
Intermediate Care Facilities (ICFs) was $444 in SFY 2009, a 
$1,532 rate appears very high. Since OIG's report calculates 
overpayments by subtracting these inflated ``reimbursable 
costs'' from the payments received by State-operated 
developmental centers, the overpayments calculated by OIG for 
SFY 2007, SFY 2008, and SFY 2009 are likely substantially too 
low.
    To avoid the shortcomings involved with OIG's somewhat 
nebulous ``reimbursable costs,'' the Committee calculated the 
developmental center overpayments as the amount received by New 
York State-operated developmental centers in excess of the 
Medicaid Upper Payment Limit (UPL). According to Federal 
Medicaid law, the UPL is the maximum a given state Medicaid 
program can pay to Medicaid providers in the aggregate. To 
satisfy UPL requirements, Medicaid payments must not exceed 
what the Medicare program would pay for the same services. The 
Committee therefore estimated the Medicaid UPL using the most 
expensive Medicare payment category (see Footnote ii in the 
Table). Since the Committee's estimates used Medicare rates for 
the most costly patients in skilled nursing facilities (SNFs) 
and not all of the developmental center patients would fall 
into this category, the Committee's Medicaid UPL is almost 
certainly too high. Therefore, since the Committee is 
estimating the overpayments in excess of Medicaid UPL amounts 
and the Committee assumed the highest possible Medicare 
reimbursement rates, the Committee's estimates of the 
overpayments received by New York developmental centers are 
probably too low.
    Medicare's reimbursement rates also vary by geographic 
location, and the State of New York has 14 geographic areas. 
The Committee calculated a weighted average of Medicare 
reimbursements using the geographic breakdown of the State's 
developmental centers in 2010. (This was the only year the 
Committee found an accounting of each developmental center's 
payment). Using developmental center population from that year, 
the Committee assigned Medicare payment regions the following 
weights: 37.19% to New York City, 21.10% to Binghamton, 15.81% 
to Rural New York State, 10.73% to Poughkeepsie, 8.75% to 
Rochester, 3.25% to Albany, and 3.18% to Buffalo. The Medicaid 
UPL estimates shown in the Table below for SFY 1999 through SFY 
2011 were estimated using weighted average calculations. The 
Medicare payment information was easily obtainable only for the 
years after 1998. The average price change from 1999 to 2005 in 
Medicare's reimbursement rate for the most expensive patients 
in SNF was $12. Therefore, for purposes of the Committee's 
estimates, the Medicaid UPL was increased $12 each year from 
SFY 1991 to SFY 1998.
    In order to calculate the estimated payments received by 
New York developmental centers, the Committee multiplied daily 
Medicaid payment rates per patient by the estimated number of 
patients residing in developmental centers at one point during 
the SFY. OIG provided the daily Medicaid payment rates and the 
Committee relied on reports issued by New York's Office for 
People with Developmental Disabilities (OPWDD) and its 
predecessor agency, the Office of Mental Retardation and 
Developmental Disabilities (OMRDD), to estimate patient 
numbers.\174\ The fifth column in the Table shows the 
Committee's estimate of the amount Medicaid paid New York 
State-operated developmental centers beyond the Medicaid UPL 
(the amount Medicare would have otherwise paid). The second to 
last column is the present value of each year's estimated 
overpayment calculated using the consumer price index. Summing 
the overpayments from 1991 to 2011 yields a net estimated 
overpayment of nearly $28.8 billion beyond what was allowed by 
the Medicaid UPL. Finally, the last column shows the Federal 
share of the overpayments since the Federal Government 
reimburses at least half of New York's Medicaid expenditures. 
The total Federal overpayment (in present value terms) between 
1991 and 2011 was approximately $15 billion.
---------------------------------------------------------------------------
    \174\OMRDD reports from 1999 to 2006 contained annual counts of the 
total residents in the State's developmental centers and OIG provided 
the actual reimbursements received by the State-operated developmental 
centers for 2007 through 2009. The sources for 1991, 1994, 2010, and 
2011 are contained in the footnotes below the Table showing the 
estimated overpayments by year. For the remainder of the years (1992, 
1993, 1995, 1996, 1997, and 1998), the Committee used a linear 
interpolation to estimate the number of developmental center residents.

                                 TABLE--ESTIMATED MEDICAID OVERPAYMENT TO NEW YORK STATE-OPERATED DEVELOPMENTAL CENTERS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Estimated    Daily dev.   Estimated                     Overpayment    Federal share
                        State fiscal year                         dev. center   center pay    medicaid    Over-payment    present value         of
                                                                    patients      ratei        UPLii                       (2011 $)iii    overpaymentiv
--------------------------------------------------------------------------------------------------------------------------------------------------------
1991............................................................       v6,350         $389         $319       vi$162.2M         $267.9M          $134.0M
1992............................................................        5,437          442          331          220.3M          353.2M           176.6M
1993............................................................        4,524          552          343          345.1M          537.2M           268.6M
1994............................................................     vii3,611          654          355          394.1M          598.1M           299.1M
1995............................................................        3,294          936          367          684.2M        1,009.9M           504.9M
1996............................................................        2,978        1,093          379          776.0M        1,112.6M           556.3M
1997............................................................        2,661        1,310          391          892.7M        1,251.1M           625.5M
1998............................................................        2,345        1,522          403          957.6M        1,321.5M           660.8M
1999............................................................    viii2,028        1,729          415          972.6M        1,313.2M           656.6M
2000............................................................      ix2,020        1,930          426        1,108.9M        1,448.5M           724.3M
2001............................................................       x1,711        2,165          435        1,080.4M        1,372.3M           686.1M
2002............................................................      xi1,692        2,434          474        1,210.4M        1,513.7M           756.8M
2003............................................................     xii1,599        2,723          457        1,322.5M        1,617.1M           808.6M
2004............................................................    xiii1,610        2,934          483        1,440.3M        1,715.1M           882.9M
2005............................................................     xiv1,696        3,063          490        1,592.8M        1,834.5M           944.4M
2006............................................................      xv1,700        3,284          594        1,669.1M        1,862.4M           931.2M
2007............................................................         xviX        3,715          613        1,526.3M        1,655.9M           827.9M
2008............................................................        xviiX        3,736          658        1,736.1M        1,813.8M           906.9M
2009............................................................       xviiiX        4,116          645        1,911.4M        2,004.1M         1,090.0M
2010............................................................     xix1,417        4,556          645        2,022.8M        2,086.6M         1,277.9M
2011............................................................      xx1,313        5,118          751        2,092.9M        2,092.9M         1,274.3M
                                                                 ---------------------------------------------------------------------------------------
    Total.......................................................  ...........  ...........  ...........  ..............       28,781.6M       14,993.8M
--------------------------------------------------------------------------------------------------------------------------------------------------------
iDevelopment Center payment rates were according to the Office of Inspector General (OIG), Department of Health and Human Services.
iiThe Committee estimated the Medicaid UPL using the Medicare case-mix group with the highest reimbursement rate. For FY 2006 to FY 2011, this group was
  the Rehabilitation Plus Extensive Services (RUX) group. Beneficiaries classified under RUX generally have complex needs and require more assistance
  with activities of daily living, a greater amount of physical therapy, occupational therapy, and/or speech-language pathology services, and more
  complex clinical care. For FY 1999 to FY 2005, the group with the highest reimbursement group was RUC from the Rehabilitation case-mix group.
  Medicare's reimbursement rates also vary by geographic location and the State of New York has 14 geographic areas. The Committee calculated a weighted
  average of the Medicare reimbursement using the geographic breakdown of the developmental centers in 2010. The following weights were assigned: New
  York City 37.19%, Binghamton 21.10%, Rural New York State 15.81%, Poughkeepsie 10.73%, Rochester 8.75%, Albany 3.25%, Buffalo 3.18%. Therefore the
  estimates in this category from FY 1999 to FY 2011 were estimated using weighted average calculations. We used the average historical price change
  from 1999 to 2005 of $12 to estimate that Medicaid UPL increased $12 each year from FY 1991 to FY 1998.
iiiThis column adjusts the overpayment column for 2011 values using the Consumer Price Index.
ivThis calculation uses the State's Federal Medicaid Assistance Percentage (FMAP). Generally, New York's FMAP is 50%. In fiscal years 2004, 2005, 2009,
  2010, and 2011, the Federal Government increased the FMAP so the Federal share of the state's Medicaid expenditures in those years is higher. New
  York's FMAP in SFY 2004 and SFY 2005 was 51.48%. In SFY 2009, New York's FMAP was 54.39%. In SFY 2010, New York's FMAP was 61.24%. In SFY 2011, New
  York's FMAP was 60.89%.
vPaul J. Castellani, From Snake Pits to Cash Cows: Politics and Public Institutions in New York, State University of New York, 2005, page 249.
viAll of the figures in the table are in the millions. This particular figure is $162.2 million.
viiCastellani, supra note v, at 259.
viiiThe 1998-99 Budget for the New York State Office of Mental Retardation and Developmental Disabilities.
ixA Summary of the 1999-2000 Executive Budget Recommendation.
x2000-01 Executive Budget Recommendation for the New York State Office of Mental Retardation and Developmental Disabilities (OMRDD).
xi2001-02 Fiscal Year Executive Budget Recommendations for OMRDD.
xii2002-03 Fiscal Year Executive Budget Recommendations for OMRDD.
xiii2003-04 Fiscal Year Executive Budget Recommendations for OMRDD.
xiv2004-05 Fiscal Year Executive Budget Recommendations for OMRDD.
xv2005-06 Fiscal Year Executive Budget Recommendations for OMRDD.
xviAccording to information provided by the OIG to the Committee, Medicaid made payments of $1,827,939,932 for State developmental centers in SFY 2007.
  Therefore, the Committee did not have to know the number of developmental center residents this year.
xviiAccording to information provided by the OIG to the Committee, Medicaid made payments of $2,107,245,318 for State developmental centers in SFY 2007.
  Therefore, the Committee did not have to know the number of developmental center residents this year.
xviiiAccording to information provided by the OIG to the Committee, Medicaid made payments of $2,266,625,233 for State developmental centers in SFY
  2007. Therefore, the Committee did not have to know the number of developmental center residents this year.
xixMary Beth Pfeiffer, At $4,556 A Day, N.Y. Disabled Care No. 1 in Nation, POUGHKEEPSIE JOURNAL, June 20, 2010.
xxOPWDD Statewide Comprehensive Plan: 2011-2015.

                        Committee Consideration

    On February 14, 2013, the Committee met in open session and 
ordered reported favorably the report, Billions of Federal Tax 
Dollars Misspent on New York's Medicaid Program, as amended, by 
voice vote, a quorum being present.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee conducted oversight of the administration of 
Federal and state funds within New York's Medicaid program. The 
report includes findings from the Committee's investigation and 
recommendations to reduce waste, fraud, and abuse within the 
program.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
report makes recommendations to stop Medicaid waste, fraud, and 
abuse in New York's Medicaid program, and potentially save both 
Federal and New York State taxpayers significant amounts of 
money each year.

                                  
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