[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

IMPROPER MEDICARE PAYMENTS: $48 BILLION WASTE?

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HEARING

before the

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION,
EFFICIENCY AND FINANCIAL MANAGEMENT

of the

COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

JULY 28, 2011

__________

Serial No. 112-79

__________

Printed for the use of the Committee on Oversight and Government Reform

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

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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director

Subcommittee on Government Organization, Efficiency and Financial
Management

TODD RUSSELL PLATTS, Pennsylvania, Chairman
CONNIE MACK, Florida, Vice Chairman EDOLPHUS TOWNS, New York, Ranking
JAMES LANKFORD, Oklahoma Minority Member
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
FRANK C. GUINTA, New Hampshire ELEANOR HOLMES NORTON, District of
BLAKE FARENTHOLD, Texas Columbia

C O N T E N T S

----------
Page
Hearing held on July 28, 2011.................................... 1
Statement of:
Levinson, Daniel R., Inspector General, Office of the
Inspector General, Health & Human Services; Michelle
Snyder, Deputy Chief Operating Officer, Centers for
Medicare & Medicaid Services; Kay Daly, Director of
Financial Management and Assurance; and Government
Accountability Office, accompanied by Kathleen King,
Director, Health Care, Government Accountability Office.... 8
Daly, Kay................................................ 26
Levinson, Daniel R....................................... 8
Snyder, Michelle......................................... 15
Letters, statements, etc., submitted for the record by:
Connolly, Hon. Gerald E., a Representative in Congress from
the State of Virginia, prepared statement of............... 73
Daly, Kay, Director of Financial Management and Assurance,
prepared statement of...................................... 28
Levinson, Daniel R., Inspector General, Office of the
Inspector General, Health & Human Services, prepared
statement of............................................... 11
Platts, Hon. Todd Russell, a Representative in Congress from
the State of Pennsylvania, prepared statement of........... 3
Snyder, Michelle, Deputy Chief Operating Officer, Centers for
Medicare & Medicaid Services, prepared statement of........ 18
Towns, Hon. Edolphus, a Representative in Congress from the
State of New York, prepared statement of................... 5

IMPROPER MEDICARE PAYMENTS: $48 BILLION WASTE?

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THURSDAY, JULY 28, 2011

House of Representatives,
Subcommittee on Government Organization, Efficiency
and Financial Management,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m. in
room 2154, Rayburn House Office Building, Hon. Todd Russell
Platts (chairman of the subcommittee) presiding.
Present: Representatives Platts, Issa, Lankford, Towns,
Norton, Cooper and Connolly.
Staff present: Ali Ahmad, deputy press secretary; Adam
Bordes, senior policy analyst; Gwen D'Luzansky, assistant
clerk; Mark D. Marin, senior professional staff member; Tegan
Millspaw, research analyst; Sang H. Yi, professional staff
member; Beverly Britton Fraser, minority counsel; Mark
Stephenson, minority senior policy advisory/legislative
director; and Cecelia Thomas, minority counsel/deputy clerk.
Mr. Platts. This hearing of the Subcommittee on Government
Organization, Efficiency and Financial Management will come to
order.
First, I appreciate everyone's patience and understanding
with both the change in time from 9:30 a.m. to 10 a.m. and also
a slightly late start as we were wrapping up our conference
meeting in the Capitol.
The purpose of today's hearing is to continue this
committee's examination of improper payments made by the
Federal Government.
In 2010, the government estimates there was $48 billion in
improper payments within the Medicare Program. This figure
represents approximately 38 percent of all identified improper
payments made by the Federal Government in fiscal year 2010 and
is likely only a partial accounting of Medicare's total amount
of improper payments.
Medicare is considered a high risk program by the
Government Accountability Office. It is known to be susceptible
to fraud, waste and abuse. Last year, the Medicare Fee for
Service Program reported more improper payments than any other
Federal program. Many of these improper payments are a direct
result of insufficient internal controls and financial
management.
The Centers for Medicare & Medicare Services process almost
5 million claims every day, relying on automated systems to
identify improper claims. Most claims are paid without any
individual review of the claim or the medical records
associated with it. This leads to improper payments resulting
from claims without sufficient documentation, insufficient or
fraudulent documentation, incorrectly coded claims or services
that are not reasonable or necessary.
CMS has been making efforts to better identify and decrease
the amount of improper payments within Medicare. In 2009, CMS
followed the recommendations of the Office of the Inspector
General to implement stricter and more thorough methodologies
to calculate payment error rates.
Using this new methodology, CMS identified more improper
payments in 2009 and 2010. CMS is also working to calculate
improper payments made through Medicare Part D, the
Prescription Drug Program. CMS had not previously calculated
the improper payments for Part D and will do so for the first
time for the current fiscal year 2011.
CMS also plans to increase its oversight of Part D by
performing more audits including onsite audits and face to face
evaluations. CMS has also announced that it will evaluate the
fraud and abuse programs put in place by third party insurance
companies administering Part D. CMS's efforts to increase
oversight are certainly commendable, however, more must be done
to strengthen the internal controls, especially in CMS's
contract management.
In 2006, CMS began using recovery audit contractors to
identify and recover improper payments. The recovery audit
contractors have identified numerous vulnerabilities in CMS's
programs. Unfortunately, CMS has only taken steps to address
about 40 percent of these significant vulnerabilities.
GAO has also found pervasive deficiencies in CMS's contract
management internal controls. GAO issued nine recommendations
to improve internal controls in 2009 but a year later, found
that CMS had only taken steps to address two of the
recommendations. Improper payments cost the taxpayers billions
of dollars each year. This hearing is part of a continued
effort by this committee to prevent improper payments and other
instances of waste, fraud and abuse in government.
I certainly welcome the opportunity to hear from our
witnesses today on CMS's progress to identify and prevent
improper payments in Medicare and would conclude with just the
focus that given the ongoing debate with deficit reduction, the
ongoing debate over the debt limit and the broad picture of
spending here in Washington, how we need to do better with the
American peoples' money, when we are looking at debt reduction
plans that talk about reducing spending by $10 billion, $20
billion, $30 billion in the coming years and then when we look
and have, what we know of, at least $125 billion each and every
year improperly made by the Federal Government, almost 40
percent of which is identified within the Medicare Program, we
have a lot of work to do.
We are grateful for the witnesses being here today who will
help us in this partnership approach to getting this work done
and going forward in a positive way.
[The prepared statement of Hon. Todd Russell Platts
follows:]

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Mr. Platts. With that, I yield to the ranking member from
New York, the former chairman of the full committee, Mr. Towns.
Mr. Towns. Thank you very much to Chairman Issa, the
chairman of the full committee, and to you, Chairman Platts,
chairman of the subcommittee.
We should be clear about one thing. Improper payments by
Medicare or any other agency may be over payments or under
payments. They may be fraudulent payments or valid payments
lacking proper documentation. They could also be inadequate
payments for valid charges.
In today's context of a looming breach of the Federal debt
ceiling, it might be tempting to view Medicare's improper
payments as an easily identifiable budget savings but that is
not the case. Solving the problem of improper payments does not
necessarily translate to government savings or a lower Federal
deficit. Still, eliminating improper payments is the right
thing to do and we should do it. I think we can all agree on
that.
I thank Chairman Platts for holding this hearing and I
thank our witnesses, Inspector General Levinson, Ms. Snyder,
Ms. Daly and Ms. King, for sharing their expertise with us
today.
According to GAO, governmentwide improper payments totaled
approximately $125 billion in 2010. Medicare alone accounted
for nearly $48 billion of that as my colleague indicated. That
is almost 40 percent of the improper payments in the entire
government. I find these figures deeply troubling and that is
why we look forward to hearing from our witnesses today.
President Obama has taken many positive steps toward
reducing improper payments since the beginning of this
administration. In 2009, the President signed Executive Order
13520 which sought to increase transparency in agencies'
accountability regarding improper payments. In 2010, the
President also issued two memorandums that instructed OMB and
agencies to make it a priority not only to find improper
payments, but to recapture the money that was paid.
Additionally, the administration announced last year that
the Centers for Medicaid and Medicare Services would cut the
fee for service plan improper payment rate in half by 2012. I
certainly would like to hear more about CMS's progress in this
matter.
Mr. Levinson, of the Inspector General's Office, is one of
the watchdog agencies that is responsible for identifying
problems and recommending solutions for improper payments in
Medicare. GAO is the other watchdog. Between these two and
independent innovation by CMS, I am looking forward to hearing
about how and when we can eliminate improper payments.
I am encouraged by the progress the administration has made
in the last 2 years in reducing improper payments. Whatever it
is that this committee needs to do to assist in terms of the
reduction, I would let you know that we stand ready to do just
that.
Thank you very much for being here and I look forward to
your testimony.
Thank you and I yield back.
[The prepared statement of Hon. Edolphus Towns follows:]

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Mr. Platts. I thank the gentleman.
Members will have 7 days to submit opening statements and
extraneous materials for the record. Unless any other Member
wanted to make a brief opening statement, we will move to our
witnesses.
We are honored to have four distinguished public servants
here with us today. Daniel Levinson is the Inspector General of
the U.S. Department of Health and Human Services. He also
serves on the Executive Council of the Council of the
Inspectors General on Integrity and Efficiency where he co-
chairs the Committee on Inspection and Evaluation.
We are also delighted to have Michelle Snyder, Deputy Chief
Operating Officer for the Centers for Medicare & Medicaid
Services where she is responsible for leading CMS's improvement
initiatives for promoting excellence in operations.
From the Government Accountability Office, we have Kay
Daly, Director of Financial Management and Assurance for the
Government Accountability Office where her responsibilities
include financial management systems, improper payments,
contracting cost analysis and health care financial management
issues.
Along with Ms. Daly, we have Kathleen King. Ms. King won't
be making an opening statement but is available for questions
as part of today's hearing. Ms. King is the Director of Health
Care for the Government Accountability Office and is
responsible for leading studies of the health care system and
specializes in Medicare management and prescription drug
coverage.
Pursuant to the rules of the committee, all witnesses are
sworn in before every hearing. So if I could ask each of our
witnesses to stand and raise your right hands.
[Witnesses sworn.]
Mr. Platts. Let the record reflect that the witnesses
answered in the affirmative.
We will set the clock for about 5 minutes. We do have your
written testimony which will be made a part of the record. If
you can, stay close to the 5-minutes. If you need to go over a
bit, that is fine. We look forward to them getting into
questions.
General Levinson, would you begin, please?

STATEMENTS OF DANIEL R. LEVINSON, INSPECTOR GENERAL, OFFICE OF
THE INSPECTOR GENERAL, HEALTH & HUMAN SERVICES; MICHELLE
SNYDER, DEPUTY CHIEF OPERATING OFFICER, CENTERS FOR MEDICARE &
MEDICAID SERVICES; KAY DALY, DIRECTOR OF FINANCIAL MANAGEMENT
AND ASSURANCE; AND GOVERNMENT ACCOUNTABILITY OFFICE,
ACCOMPANIED BY KATHLEEN KING, DIRECTOR, HEALTH CARE, GOVERNMENT
ACCOUNTABILITY OFFICE

STATEMENT OF DANIEL R. LEVINSON

Mr. Levinson. Good morning, Chairman Platts, Ranking Member
Towns, Chairman Issa and other members of the subcommittee.
Thank you for the opportunity to testify about OIG's efforts to
monitor and help to reduce Medicare improper payments.
In 2010, CMS reported Medicare errors totaling nearly $48
billion. My written statement describes in more detail OIG's
work analyzing CMS's error rate estimates and our targeted
reviews of Medicare improper payments. My testimony this
morning summarizes OIG's recommendations in this area.
Although our recommendations are tailored to specific
vulnerabilities, the actions we recommend to CMS fall into the
following four categories: increased prepayment and post
payment review of claims; strengthen program requirements to
address vulnerabilities; increase oversight and validation of
supporting documentation and educate and issue more guidance to
providers.
OIG has consistently recommended that CMS enhance both
prepayment and post payment review of claims. For example,
OIG's analysis of claims for diabetes testing supplies
identified $209 million in improper payment. Prepayment edits
can help reduce improper claims for these testing supplies.
In certain areas, CMS should strengthen program
requirements to address integrity vulnerabilities. For example,
we have recommended that CMS establish a payment cap on
chiropractic claims to prevent improper payments for
maintenance therapy.
We also have recommended increased review of supporting
documentation to verify that requirements are being met. For
example, OIG found that Medicare spent $95 million on claims
for power wheelchairs that were either medically unnecessary or
lacked sufficient documentation to determine medical necessity.
One of our recommendations is that CMS review records from
sources in addition to the wheelchair suppliers such as the
prescribing physician.
Provider education is also critical to ensuring compliance
in protecting beneficiaries. We found that 82 percent of
hospice claims for beneficiaries and nursing facilities did not
meet at least one Medicare coverage requirement, requirements
that are in place to protect beneficiaries' health and well
being. Medicare paid about $1.8 billion for these claims.
We recommended that CMS provide hospices with guidance on
the rules for certifying terminal illness and a checklist of
items that must be included in the plans of care.
For our part in provider education, this year, OIG
conducted free training seminars in six cities to educate
providers on fraud risks and share compliance best practices.
We also published a road map for physicians to provide guidance
on complying with fraud and abuse laws. I have copies of this
available this morning for each and every Member.
Although not all improper payments are fraudulent, all
payments resulting from fraud are improper and our efforts to
combat fraud are achieving historic results. OIG's
investigations resulted in $3.8 billion in court-ordered fines,
penalties, restitution and settlements in 2010. To prevent
improper payments from compromising the Medicare Trust Fund,
OIG refers credible evidence of fraud to CMS to implement
payment suspensions, helping to turn off the spigot to prevent
payment for fraudulent claims.
Improper payments cost taxpayers billions of dollars each
year. The Executive order on reducing improper payments states
that the Federal Government must make every effort to confirm
that the right recipient receives the right payment for the
right reason at the right time. OIG is committed to this goal
and thank you for support of our mission.
I would be happy to answer your questions.
[The prepared statement of Mr. Levinson follows:]

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Mr. Platts. Thank you, General Levinson.
Ms. Snyder.

STATEMENT OF MICHELLE SNYDER

Ms. Snyder. Good morning.
Thank you, Chairman Platts, Ranking Member Towns and
Chairman Issa, for being with us today and members of the
subcommittee for this opportunity to discuss the Centers for
Medicare & Medicaid Services' efforts to reduce improper
payments to Medicare.
CMS is committed to reducing the amount of improper
payments and the rate and ensuring that our programs pay the
right amount for the right service to the right person in a
timely manner. Like other large and complex programs, Medicare
is susceptible to improper payments. In accordance with the
Improper Payments Information Act, CMS calculates an improper
payment rate for the Medicare Program annually. While these
improper payments represent a fraction of total program
spending, any level of improper payment is unacceptable and CMS
is aggressively working to reduce errors.
There is confusion about what improper payments are and
what they are not. Improper payments are errors that generally
result from one of the following situations: the provider fails
to submit any documentation or submits insufficient
documentation to support the service paid; the provider
incorrectly codes the service on the claim or the documentation
submitted by the provider shows that the services provided were
not reasonable or necessary.
Improper payments do not always represent an unnecessary
loss of Medicare funds, rather they are an indication of errors
made by either the provider in filing a claim or
inappropriately billing for that service. Improper payments are
usually not fraudulent. CMS is committed to reducing improper
payments in our programs and we have developed many corrective
actions to resolve and eliminate these improper payments in the
future.
The traditional Medicare Fee for Service Program represents
the majority of Medicare spending. This program is administered
by CMS through contracts with private companies that process
close to 5 million claims each day or approximately 1.2 billion
claims in a fiscal year. CMS uses the comprehensive error rate
testing process to estimate an improper payment rate for the
Medicare Fee for Service programs.
Between fiscal years 2009 and 2010, CMS was able to reduce
the improper payment rate by 1.9 percent from 12.4 percent in
2009 to 10.5 percent in 2010. The CERT Program provides
valuable information to assist in the development of corrective
action to reduce improper payments in the future. We believe
the best way to address these documentation problems is through
robust provider education and outreach efforts, performing more
review of provider medical records to ensure services billed
meet Medicare policies and payment rules and enhanced systems
edits and automated analytic tools.
Some of our recent provider education efforts include the
development of comparative billing reports, issuance of
quarterly compliance reports and conducting routine forums to
discuss Medicare policies and documentation requirements. We
also recently implemented nationally the National Recovery
Audit Program. This program allows recovery auditors on a
contingency fee basis to identify overpayments and under
payments in a previously submitted and paid claim.
The Permanent Medicare Fee for Service Recovery Audit
Program has corrected a total of $685 million in improper
payments in a 12 month period. The program also provides
valuable information about areas where increased education and
outreach is needed and where prepayment medical review is most
productive. These tools also assist in the development of
automated edits to detect and reject claims where medical
services are physically impossible and medically unlikely.
In Medicare Parts C and D they differ significantly from
the Medicare Fee for Service Program and require different
approaches to measure and address improper payments. CMS
prospectively pays Medicare Parts C and D plans a monthly
capitated payment for each enrolled beneficiary. These per
person capitated payments are risk adjusted on a beneficiary's
health status.
The Part C improper payment rate in fiscal 2010 was 14.1
percent, a reduction of 1.3 percent from the fiscal year 2009
rate of 15.4. Most of the Part C improper payments are the
results of errors related to the fact that the supporting
medical records submitted do not include the necessary
diagnosis data to support the CMS risk adjusted payment.
Again, we are working very closely to implement a number of
audit strategies in the Medicare Parts C and D programs. This
year, we are happy to report that in November of this year, we
will be reporting a composite Part D rate which will be the
first time that we have reported the rate. We believe the
information, as we have gone through establishment of that
error, will help us to start to push that error down because of
what we have learned through that measurement process.
We have a number of strategies in place I would be happy to
talk about as we proceed through the hearing this morning. I
would also like to assure you that we are examining techniques
used by the private sector, by insurance companies and others
to better inform our efforts to combat improper payments.
We are eager to learn from successful private sector
efforts to reduce errors and improper payments, and have indeed
begun to form partnerships across the health care sector to
ensure that we have the best information we can to make a
difference in the Medicare Program and to help them also learn
from our experiences in what is a very large payment program.
While CMS has made significant progress in reducing waste
and errors in our programs, we understand more work remains. I
am confident that the systems controls and ongoing corrective
actions that CMS is undertaking, plus the help of our partners
and the Office of the Inspector General, and other parts of the
Department, will help us in continuing this undertaking that
will result in continued reduction in improper payments.
I look forward to working with the subcommittee to ensure
that CMS carries out this important work and to answer an
questions you may have.
Thank you.
[The prepared statement of Ms. Snyder follows:]

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Mr. Platts. Thank you, Ms. Snyder.
Ms. Daly.

STATEMENT OF KAY DALY

Ms. Daly. Chairman Platts, Ranking Member Towns and other
members of the subcommittee, I want to thank you for the
opportunity to be here today to discuss improper payments in
the Medicare Program, as well as CMS's efforts to remediate
them.
In 2010, Medicare covered about 47 million elderly and
disabled beneficiaries and had estimated outlays of about $516
billion. It makes it one of the largest Federal programs.
Medicare consists, as you know, of four parts: Medicare Parts A
and B, commonly known as fee for service; Part C is the
Medicare Advantage Program; and Part D is the Medicare
Outpatient Prescription Drug Program.
An improper payment is defined as any payment that should
not have been made or that was made in an incorrect amount and
includes both overpayments and under payments. For fiscal year
2010, HHS reported an estimate of almost $48 billion in
improper payments in Medicare. The $48 billion in estimated
improper payments was attributable just to Medicare Fee for
Service and Medicare Advantage.
From a governmentwide perspective, the Medicare Program
does represent about 38 percent of the $125 billion in
estimated improper payments that had been reported by the 20
Federal agencies that covered 70 programs. HHS's estimated
amount of improper payments for Medicare is incomplete because
it has yet to report a comprehensive improper payment estimate
for the Medicare prescription drug benefits. That program had
reported outlays of about $59 billion in fiscal year 2010. As
Ms. Snyder just indicated, HHS expects to report a
comprehensive estimate for the prescription drug benefit in
fiscal year 2011.
It is important to recognize that the $48 billion in
improper payments reported by HHS in fiscal year 2010 is not an
estimate of fraud in Medicare. Reported improper payment
estimates includes many types of over payments, under payments
and payments that were not adequately documented.
In addition, because the improper payment estimation
process is not designed to detect or measure the amount of
fraud in Medicare, there may be fraud that exists in the
program that is not encompassed in the reported improper
payment estimates.
In 2010, CMS created the Center for Program Integrity to
serve as a focal point for all national Medicare program
integrity issues. The CPI as it is known is responsible for
addressing program integrity issues and vulnerabilities that
lead to improper payments. They collaborate with other CMS
components to develop and implement a comprehensive, strategic
plan, objectives and measures to carry out the program
integrity mission and goals.
CMS has also begun a number of initiatives related to five
strategies that have been identified in our previous reporting.
These strategies are key to reducing Medicare improper
payments. However, CMS still faces significant challenges in
designing and implementing internal controls to effectively
prevent or detect and recoup improper payments.
Effective implementation of prior recommendations we made
from provisions in recently enacted laws and recent guidance
related to these five fee strategies could help remediate
fraud, waste, abuse and improper payments in the Medicare
programs. The five key strategies are strengthening provider
enrollment standards and procedures; improving prepayment
review of claims; focusing post payment claims review on the
most vulnerable areas; improving oversight of contractors; and
developing a robust process for addressing identified
vulnerabilities.
For example, having mechanisms in place to resolve
vulnerabilities that lead to improper payments is key to
effective program management, but our work has shown that CMS
has not yet established an adequate process during its recovery
audit demonstration project or in planning for the subsequent
recovery audit of national programs to ensure that the
vulnerabilities that had been identified were promptly
resolved.
In conclusion, with the amount of estimated improper
payments and the unknown amount of potential fraud, waste and
abuse in the Medicare program, it is critical for CMS to act
quickly and decisively to reduce them. As it implements
recently enacted laws and other issues for Medicare, CMS has an
opportunity to use new tools to help further address fraud,
waste, abuse and improper payments in this program.
Chairman Platts, Ranking Member Towns and the other members
of the committee, this completes my prepared statement and I
would be glad to answer any questions you might have.
[The prepared statement of Ms. Daly follows:]

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Mr. Platts. Thank you, Ms. Daly and thanks to all our
witnesses for your testimony.
We will now move into questions and I will yield myself 5
minutes for that purpose.
I want to first acknowledge the effort, Ms. Snyder, of CMS
and we appreciate that you and your colleagues are dutiful in
trying to identify and prevent improper payments and be good
stewards of the American taxpayers' money.
In your written testimony, your statement is, ``While
improper payments represent a fraction of total program
spending, any amount of improper payment is unacceptable and
CMS is aggressively working to reduce these errors.'' I read
that to say it is only a fraction and any amount, as if this is
a small amount. Well, 48 billion is, you are right, about 10
percent or so of total CMS expenditures, but that is a huge
amount of money, not just any amount, it is a huge amount.
I don't want to minimize the efforts to prevent it but when
I share back home that the total number for the whole
government that we know of is estimated at $125 billion every
year, my constituents think I misspoke. When we talk about the
individual program, Medicare that is about 38 percent of that,
it is staggering.
One of the issues in your testimony, and each of you
referenced it here today or in your written testimony, was that
when we hear improper payments, we think fraud, the worst, and
we do appreciate that is not the case. A lot of this is just
insufficient documentation or the wrong documentation. Is there
an estimate of the $48 billion that is fraud related either in
overbilling, duplicate billing or fraudulent billing? Is there
an estimate of that percentage?
Ms. Snyder. Before I answer that, my mother is a Medicare
beneficiary and trust me, I hear exactly what you just said
when I go home. It is a big number.
Mr. Platts. As is my mom and she asks me lots of questions
when she gets her statement, what is all this?
Ms. Snyder. Exactly. Sometimes it makes you not want to go
home for Thanksgiving.
In relation to your question about a fraud rate, one of the
toughest problems we have had at CMS is to find the methodology
that actually allows us in a scientific way and in a replicable
way to estimate what amount of the improper payments are really
fraud. It is something we have struggled with. We have gone to
the private sector, we have talked to them and said, how do you
estimate fraud? We have looked at literature when people make
comments that a certain amount is fraud, we have looked behind
it to say how did you measure it because we want to do that.
What we found is there isn't a methodology. Our Center for
Program Integrity started a new program and just awarded a
contract and we are going to try to estimate levels of fraud.
We will start with two areas that we believe are fraud prone.
We know they are fraud prone because of the work that has often
been done in terms of investigations by the Office of Inspector
General and reports from the Government Accountability Office.
That is durable medical equipment areas and home health. Just
because of the work over the years, we know there are huge
issues there.
We are hoping we will be able to actually say here is a
methodology that will work that you can apply to different
kinds of service categories and estimate an actual fraud rate.
We hope to have that work done over the next 6 to 8 months. We
have invited the private sector to be part of the board that
helps develop this methodology and hope we will be successful
because we think this is something that will not only work for
CMS, but will work for the private sector as well. If we
develop something that works, we will share it.
Mr. Platts. I appreciate the challenge of having that
methodology to estimate. Do you have what your actual fraud
numbers were for 2010 that you found were fraudulent, 2010 or
2009?
Ms. Snyder. I can submit to the record a number of
collections, we have cases that went to the Department of
Justice, we have investigations through the OIG where we have
actually collected dollars back. It amounts to many hundreds of
millions of dollars that come from those particular cases and
they are estimated, but that is a specific case number.
Mr. Platts. Rather than trying to estimate going forward,
what is the track record that you know is fraudulent in the
last 3 years, 2008, 2009, 2010? How much do we know is
fraudulent because we caught the perpetrators of the fraud?
Ms. Snyder. If you would let me submit that number for the
record? It is in the hundreds of millions of dollars.
Mr. Platts. Per year?
Ms. Snyder. Probably over the 3-year period. Particularly,
we have shown recoveries from the task forces in which we have
been involved with the Office of the Inspector General, with
the Department of Justice. There are particular dollars that
have come back to us from those stings and those activities. It
is several million dollars over that 3 year period. I don't
want to give you a wrong number but it is significant.
Mr. Platts. Whatever the number is, if it is hundreds of
millions, we know that is a portion of what the actual fraud
is. That is what we have caught and been able to identify.
Again, we are talking real money here that we need to go after
in addition to what I will call the administrative problems,
the documentation, other types of improper payments.
I would yield to the gentleman from New York, the ranking
member, for 5 minutes.
Mr. Towns. Thank you very much, Mr. Chairman.
Let me ask, the background check, if we strengthen that,
would that cut down on the amount of waste, fraud and abuse, if
we strengthen the background check initially?
Ms. Snyder. I assume you are talking about providers who
participate in the Medicare program?
Mr. Towns. Yes, the providers.
Ms. Snyder. That is a suggestion that has come to us.
Again, usually the Government Accountability Office has
certainly cited that as a possibility, as has the Office of the
Inspector General. What we have found one of the best ways to
prevent fraud, waste and abuse is to keep bad actors out of the
program from the very beginning.
Part of keeping bad actors out of the program from the very
beginning is making sure we do appropriate provider
certification and screening. Part of that is taking a look at
an application and looking to make sure you have a license,
have you been debarred somewhere else, have you lost your
license somewhere else, are you indeed a real operation, do you
have a real building, so going through a number of screening
criteria and doing it upfront and never giving the person a
Medicare provider number is one of the best ways to proceed,
absolutely.
We are in the process right now of where we are going to
recertify the 1.4 million providers that participate in the
Medicare Program. We hope to have that mostly done or a large
part underway by 2013. There are certain kinds of providers
where we have recently said in regulation that we do want to
have the opportunity to do background checks, fingerprinting,
to take a look at them through that scope.
In fact, recently we just hired a contractor who will start
to take information about providers particularly in areas we
know we have had problems and start to look at all the kinds of
public information we have to bring it together to look at and
say, is this somebody Medicare should be doing business with.
It is an excellent technique and we are employing it.
Ms. King. If I might add, we agree that keeping the bad
actors out is one of the most effective ways to prevent fraud
and also improper payments in the program and there are
provisions in the Affordable Care Act that give CMS
considerable authority to strengthen the enrollment process.
They have infact separated providers into different
categories of risk with home health and durable medical
equipment being in the highest category. They have strengthened
the ability to look at providers getting into the program. That
is work that we have ongoing to look at what is going on there.
Mr. Towns. Let me ask in the context we are talking about
this morning, correction, what does it really mean when you
talk about making a correction? Just go right down the line,
what does it mean to you?
Mr. Levinson. Mr. Towns, I think the Executive order states
exactly what the goal is for every dollar expended and that is
to get it right. If there is missing information, if the record
is not complete, there is simply no assurance that the dollars
spent are appropriately spent. In that sense, it is an error.
Is it necessarily fraud? No. Those are two very different
concepts. I would underscore that some of the most successful,
sophisticated frauds reveal no improper payment at all because
the paper record is so well done. While the improper payment
amount is likely to include cases of fraud, it would be
counterintuitive to think that they don't, it doesn't really
capture a fraud figure.
Mr. Towns. Ms. Snyder.
Ms. Snyder. Correction I think, to us, is very similar to
what Mr. Levinson is saying but it really means when you look
at the claim that is filed, remember we got several million of
them going through the system a day, when you look behind the
face of that record, what you will find is a justification for
the expenditure and that you give folks every opportunity to
make sure that record is correct before you declare it to be an
improper payment.
To us, it means the service occurred, it was an appropriate
service, it occurred in the right setting and that we paid you
the right amount for it. If that is not the case, then it is an
improper payment and needs to be corrected. You need to bill me
correctly, you need to make sure you are providing the service
in the right place. You, the provider, need to do the right
thing. You are a partner with the Medicare program.
Mr. Towns. Ms. Daly.
Ms. Daly. I would have to echo some of the sentiments that
Mr. Levinson and Ms. Snyder have just spoken. I think having
the right documentation to pay the bill, making sure the
patient is due for the services and so forth are all very
important. All of that needs to be done correctly in each step
of the process.
Making it all done right the first time saves a lot of time
and effort and avoids what is commonly referred to the pay and
chase mode where if it is not done correctly the first time, it
is considered to be payable and we have to spend a lot of time
and effort to make corrections.
Ms. King. To add to that, when we talk about a corrective
action, we are thinking about is when a vulnerability has been
identified, you know people are doing things they shouldn't,
you put a process in place to try to prevent that in the future
either by strengthening your enrollment standards,
strengthening your prepay audits or doing it on post pay.
Mr. Towns. Mr. Chairman, my time has expired but let me ask
just one question. If you have a situation where a group comes
to you and says, this is a problem, can you make that
adjustment? For instance, I was looking at the power
wheelchairs. I know there have been issues that have been
raised over and over again which to me seems to be a legitimate
kind of concern, but nobody is responding to it. Do you respond
when a group comes and says this is a problem, you look at it
and see it is a legitimate problem, can you then make an
adjustment?
Ms. Daly. Let me take a stab at that because that is a
particularly interesting one to me, the power wheelchairs.
The first place that we go is to look at what is the
statutory requirement of that benefit category, how has it been
defined. For power wheelchairs are part of what is called a
homebound benefit which was established in the statutes which
basically say you have to be able to use that power wheelchair
inside your home. You have to be unable to walk more than three
to four steps inside the confines of your apartment, your
house, whatever it may be.
When you take a look at that and folks come to you and say
this power wheelchair enhances the quality of my life because
it lets me go to the mall, to church on Sunday, however it
might allow you to get outside the walls of your apartment,
that certainly is a valuable thing to the quality of that
individual's life.
However, if you look at the statute behind it and the legal
requirements, by definition, you don't meet the requirement of
the law in order for that power wheelchair to be provided to
you. That is a particularly tough one because, yes, if you are
a doctor on one hand if you are somebody's daughter and you go
in to a doctor and say, my mama could really use this, as a
doctor you want to provide that. However, the ability to do
something about that is limited by what is in statute in that
particular example.
The second place you look is to see is there regulatory
policy around this. Is there a regulatory policy or any ability
if it makes sense to make some change and then take a third
look at it to say, is it a matter of policy that we have
interpreted, that we have put something in place, so how much
room do you have to work with that particular group of
providers or that particular service to change it.
It is a pretty rigorous process. We do listen to folks.
They come in, talk to us and we look to see what makes the best
sense for the beneficiary, but what makes the best sense to the
beneficiary in terms of the laws and regulations that are in
place that bound that particular benefit category.
One of the things we found with wheelchairs, when we have
looked back at them we have a really high error rate. It is
pretty much for the reason I described. It does not satisfy the
definition of the benefit. We are looking at ways we can put
some controls in place on the front end of it so that we are
not paying and chasing for power wheelchairs or power mobility
devices that don't meet the requirements of the benefit.
Mr. Towns. Thank you, Mr. Chairman, for your generosity.
Mr. Platts. The gentleman from Oklahoma, Mr. Lankford, for
5 minutes.
Mr. Lankford. Thank you, all of you, for what you do. My
mom is also one of those Medicare recipients. She will never
have the opportunity to meet people like you serving behind the
scenes and say thank you, so I would pass that on from her and
millions of other seniors. What you do is a great service to a
lot of people, so we appreciate that and the dedication you put
into it.
The fraud, like you I go home on Thanksgiving and that is
what we are going to talk about, Medicare fraud, friends she
has bumped into and things she perceives to be fraud and all
those things. Let me flip to the other side of it.
I also hear from doctors and hospitals who are very
frustrated with recovery audit contractors. There is a
perception in their minds that they walk through the door and
they are guilty and they are going to stay there until they
prove they are guilty, no matter how long it takes.
They understand they are paid by the paperwork, so they are
going to stay, dig through and find some nurse who was in a
hurry who did not put the date on the form and they are going
to get fined for it. They fight and fight and fight, sometimes
for years through the process; this code was active and now
suddenly, it is not and they are getting hammered sometimes
thousand and millions of dollars in fines when they are the
good providers. I am talking good hospitals.
How do we fix this? Because they hate the Federal
Government because those recovery audit contractors are their
enemies and they are going to stay until they make money off
them. They are not there for their benefit. They are there for
our benefit as far as recovering things, but that hospital
says, I am the good guy, how come I am getting hammered? How do
we fix that?
Ms. King. We did an evaluation of the demonstration of the
Recovery Audit Program and I think we did identify some
missteps in terms of some of the initial actions that were
taken by the RACs. It is our understanding that CMS has
instituted a process, a committee inside CMS that has to prove
the issues that the RACs are going to undertake.
Mr. Lankford. That has not trickled down actually yet,
because I can tell you as recently as of the last couple weeks,
I have been in communication with yet another hospital in my
district that is fighting the same thing. It is a bounty hunter
coming through their doors and they are determined to find
something wrong, and they will. They are not happy at all
because they are adding additional staff in compliance areas
for things that are not fraud.
My understanding is these contactors are paid even if later
they determine that it wasn't true, it really was correct. Is
that correct?
Ms. King. Actually, that was the case in the demonstration
but it is not the case in the national program. If something is
overturned on appeal, then the RAC does not get paid.
Mr. Lankford. That is a good fix for a start on that, but
how do we develop this relationship because they are no longer
our friends, we are setting out as an enemy to them.
Ms. Snyder. We have heard that, so the good news is that is
not new news to us but it is a continuing concern.
In the demonstration which went on for 3 years, we did
learn a lot of things and we learned a lot better about how to
manage the contractors. Some of the things Ms. King referenced
like having a committee that says, is this legitimate, before
you go after somebody, making it clear to the RAC contractors
if this is overturned on appeal, you are going to pay back the
money and the provider gets back the money.
We actually recently hired two of what I call someone to
watch the RAC, a validation contractor if you will. They do
spot checks of the RAC's work, the particular contractor's work
to say, were you inappropriately aggressive, were you looking
at the wrong things, did you really use standard accounting
practices.
I think it, again, is a continuing education, an outreach.
We have regular standing forums with our provider community,
one of the topics that's always on those calls, and we get
hundreds of providers who call into those forums. We talk about
the issues with the RAC program and have said to folks, if you
think your area RAC is being overly aggressive, if you have
continuing problems with them, let us know and we will look
into it.
In reference to the particular hospital that you just
mentioned, if you would give me the name of the hospital, we
will reach out to them and look to see if it is a matter of
what I will call hard feelings because they don't like the
program, whether or not those corrective actions have reached
out in that particular setting, and redouble our efforts to
make sure folks understand the intention is not gotcha. The
intention of this really is making sure we are paying
appropriately. I would be very happy to reach out to that
community.
Mr. Lankford. I would completely agree it is a good thing
for us to be aggressive in this process but they perceive it
very much as gotcha and the smallest minutiae that is going
with it. I have had several hospitals I have talked to about
it. The one I most recently talked to didn't want me to bring
up their name on it because they feel there will be punitive
action against them even harder next time. They are very
careful to say, we are cautious on how we move on that because
they have so much power on us now, our functioning and
operation. This is not one of your large major hospitals, but
it is a good charitable hospital.
That is no way to live and operate, so I want you to stay
aggressive on it. This system is not working for them at all.
Mr. Levinson. If I can add a couple of things, we actually
will be looking at the RAC process in our office later this
year in the sense of looking at CMS's oversight of the RACs. I
wouldn't want my comments to be part of some effort to say RACs
are necessarily a bad idea.
As our work starts in this area, there are a couple of
observations worth putting into the mix as we try to understand
the pros and cons of RACs. One issue is that the RAC process is
really a variation on the model of pay and chase because the
money has already gone out the door. RACs are trying to recover
money and that, in a sense, certainly is good, but it is a
continuation of a model that the government is trying to get
away from. We are trying to catch the problems before they
leave.
The other is in the brief work we have been able to do in
the first few years with the RAC process, RACs referred only
two case of potential fraud to CMS in the 3-years of the
demonstration between 2005 and 2008, even though they found a
billion dollars in improper payments.
It is important to understand that the incentives need to
be aligned in a way so that while improper payments are
identified, in as least intrusive and most productive way, that
it also is a process that should reveal where fraud occurs and
because the RACs don't see any money coming from identifying
fraud, those cases wind up being referred for investigation.
Mr. Lankford. We are catching paperwork mistakes and not
fraud.
Mr. Levinson. There is actually disincentive in a sense
potentially to refer cases of fraud because then they are taken
out of the universe of improper payments. I think these are the
kinds of very important issues that need to be teased out as we
look at the RAC program.
Mr. Lankford. Thank you.
Mr. Chairman, thank you for allowing a couple extra
moments. I yield back.
Mr. Platts. I thank the gentleman and I would associate
myself with the gentleman's comments because your term of
bounty hunter is also what I hear whether it be from an
institution or individual providers where they feel they are
not innocent until proven guilty, that they are guilty of
wrongdoing and in essence, they are trying to prove 6 months
ago when they treated a patient, they did it by the book, did
provide the service they were paid for, yet are put in the
position of having to prove their innocence as opposed to
assuming their innocence.
I yield to the gentleman from Tennessee, Mr. Cooper.
Mr. Cooper. Thank you, Mr. Chairman.
The headline of this hearing is the $48 billion in improper
payments, but already we have parsed that and have a better
understanding because apparently a relatively small percentage
of that is fraudulent but it is also possible to have
fraudulent payments that are not covered by the $48 billion.
I would like to ask what percentage of the $48 billion are
overpayments as opposed to under payments or mispayments?
Essentially what we are doing when we put out a figure like $48
billion, we are talking about the quality of the red tape. Good
quality of the red tape doesn't show up in that $48 billion
number. If there is a flaw in the red tape, then wham, it is in
the $48 billion. I am guessing, and perhaps I am wrong, that
most of the $48 billion is still overpayments.
Ms. King. The vast majority.
Mr. Cooper. That is still a real concern to taxpayers. It
is interesting that in your data, when you are comparing fee
for service problems with managed care problems, actually
managed care problems are slightly higher at this point. You
think with managed care, you get more management and better
quality red tape but apparently that is not true. It will be
fascinating to see what the Medicare Part D numbers are now
that you are finally able to evaluate that.
To put this in context, people also need to know that fee
for service problems usually indicate overpayments and over
utilization of services where sometimes managed care problems
indicate under utilization of services, denial of care. It is a
completely different human result. One injures the taxpayer,
the other injures the patient.
Again, to put it in context, we had a hearing this morning
regarding the Pentagon. I think the Pentagon is still number
one on the GAO's list of high risk government agencies because
they have never been auditable. After decades of trying, they
are still not even close to being able to be auditable. When
the Simpson Commission asked how many contractors the Pentagon
had, the official response was somewhere between 1 million and
10 million.
I am in no way justifying Medicare problems but that is
astonishing incompetence when you can't tell within an order of
magnitude who your payees are because somebody has to write the
contractor a check. They don't do this work for free.
Another area of serious concern is Medicaid. It is just not
nearly as centralized as Medicare because that is farmed out to
the States. That gives you at least 50 different opportunities
to have confusion, mismanagement and lack of accountability,
fraud and improper payments.
One of the fundamental issues that has barely been touched
in this hearing is the Federal Government has actually paid
people very promptly under the Federal Prompt Pay Act. That is
what creates this situation of pay and chase. At least in the
health care area, you have some of the slowest payers on the
planet.
In the private sector, private insurance companies will
stretch out accounts receivable for 180 days or longer.
Meanwhile, the good old Federal Government steps up and pays
you in 30 days. That makes the process of pre-certification so
tough. No one has ever written us a thank you note saying thank
you for paying us in 30 days. They take that for granted.
Meanwhile, even the GAO set up two fake DME companies and
was able to scam the system. A lot of folks in the small
business and provider communities do not want to say thank you
for coming through with payment within 30 days. That creates
the situation where we have to chase the improper payment.
I am in no way defending the bounty hunters or the RACs but
sometimes the Federal Government is an easy touch too. That
balance has to be struck in a proper way. I am glad you are
improving your system so you are able to get a better handle on
that.
I see that my time is about to expire, Mr. Chairman. Maybe
I should just stop there. Thank you.
Mr. Platts. I thank the gentleman, the first of us four to
actually be dutiful with the time and it is appreciated.
I would comment with the gentleman with the issue with
fraud is we don't really know what percentage, we don't know
that it is a small percentage. We don't really know because it
is not geared to signal out fraud. I don't know we can say it
is a small percentage of the improper payment number. Even if
it is just 10 percent, that is still close to $5 billion but we
don't really know what the percentage is. That is why I asked
what has been identified as we know for certain was fraud in
the past 3 years, to start to look at that issue, how to better
identify it.
Also, your point about the Department of Defense is well
made and we are looking at a hearing in the fall on DOD and the
issue you touched on. GAO has well recognized the challenges at
that department.
With that, I yield to the gentleman from Virginia, Mr.
Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
I want to thank everyone for being here. I want to add to
the testimony. My parents have been major consumers,
unfortunately, of Medicare for about 25 years. When we were
voting on health care reform last year, my dad said to me, you
need to know that in those 25 years, I am talking major, major
stuff, never once has there been an error, never once have they
had to be reminded to meet an obligation, never once have they
arbitrarily denied something that was important to us in sharp
contrast to the private insurance system.
He said, at least speaking for us, we are very satisfied
customers and by the way, it has allowed them, in their
eighties now, to live autonomous, productive lives, managing
their health care frankly because of Medicare. Let us remember
that as a context as we now look at a feature of Medicare that
is not so good.
I think we have to begin with accepting the fact that $48
billion is a staggering sum of money. It is unacceptable for
two reasons. We owe it to the taxpayers to do something about
it. It is their money. Second, frankly, it feeds into the
narrative which I reject that we cannot afford Medicare.
What do you mean we can't afford it? If we can get $48
billion to zero times 10, you have a huge significant chunk of
savings in the program that doesn't touch benefits. It is
critical that we get our arms around this.
Nothing happens without being measured. Ms. Snyder, have we
in fact set an ambitious goal knowing we will never get to zero
but to get to zero? Is the goal to get to zero and are there
milestones and metrics that allow us to do that?
Ms. Snyder. Yes, sir. The administration has set what I
think is an incredibly aggressive goal, to cut the error rate
in half by 2012, so we would be right around 6 percent. Again,
I think most folks will argue when you get to 6 percent, then
it is going to be cut it in half again to 3 percent.
I think one of the difficulties in driving down the error
rate is that you put interventions in place against a sample
that was drawn and evaluated, and then within 3 months of that
being in place, you start drawing a sample again of claims. It
is the ability for interventions to actually take effect that
is one of the greatest challenges in terms of driving down the
rate. That is going to make it tough but we know we are on the
hook to do it and we are going to do our best to get there.
Mr. Connolly. I would simply say nothing happens without
stretch goals in government. I ran a very large government
across the river. I really would like to see you come back with
very ambitious stretch goals, understanding that getting to
zero is a noble goal, never attainable, but if you press the
system to get to that goal, we will have far more dramatic and
positive results.
Ms. Snyder. In response to what you are saying, it is very
important to know that probably 10 million of the claims inside
the billion claims are the ones that are the biggest dollar
ones. They are the hospital inpatients, so focusing there, we
hear you.
Mr. Connolly. I want to sneak in two more questions. One is
in looking at the data, Medicare Advantage compared to Fee for
Service surprisingly is 35 percent higher in improper payments.
Why is that?
Ms. Snyder. Medicare Advantage, when we looked behind the
numbers on that, we found is when we pay a capitated rate, that
capitated rate is based on a risk score. In other words, inside
your files, if you have Medicare Advantage plan, you have to be
able to have medical justification or documentation that says
you are a really sick guy and I need to pay you more for it.
When we started looking behind the patient panels, we found
there wasn't documentation necessarily that said you are a
really sick guy, so when I figure out your capitated payment,
it should be a higher rate. When we look at that, some of it
was missing documentation similar to fee for service, but part
of it is trying to determine what the sickness score, if you
will, of a particular plan and what the rate adjustment should
be against the fact that the patient panel may not be as sick
as reported.
Mr. Connolly. Do some of the measures we took in health
care reform help you in that regard with respect to Medicare
Advantage?
Ms. Snyder. I think the risk adjustment pieces of it and
knowing how to look inside of that, and those metrics coming
out of the Affordable Care Act will be very useful to us.
Through a series of audits, we are trying to take the
measurement, go back against the audit and figure out what the
reduction and capitation really should be so it is a real
dollar financial number.
Mr. Connolly. Mr. Chairman, given your incredible
generosity, would you allow me one more question and I don't
think it is a long one.
It is my impression in talking with the U.S. Attorneys
Offices that Medicare fraud has increasingly moved up as a
priority for them and consumes a lot of their time in terms of
bringing charges against organized fraudulent activity on
Medicare. Mr. Levinson, Ms. Snyder and Ms. Daly, is my
anecdotal impression confirmed by data and what is your
interaction with the U.S. Attorneys Office to ensure that while
we don't want to be bounty hunters, on the other hand, people
who are deliberately organizing and orchestrating fraud against
the U.S. Government and taxpayers need to be brought to
justice. What is the interaction and what is the data?
Mr. Levinson. Mr. Connolly, the interaction is robust,
especially over the last several years as these anti-fraud
strike forces have taken hold in cities around the United
States. There has been a very ambitious effort to root out
systemic health care fraud especially in places where it exists
like south Florida, Los Angeles, parts of the Gulf States, New
York and Detroit.
That is in large part why you are hearing more about it,
more resources are being expended. It does require careful
coordination between the Justice Department, the prosecutors,
and OIG as the investigators. Let me put in a plug that this is
funded on our part by the Health Care Antifraud Account that
was established in HIPPA and has grown. It certainly has helped
us to recover more than $6 for every dollar put into the fund
back to the trust fund and the Treasury.
It has been very successful thus far and we are continuing
to build on that. A very critical part of the fraud piece in
health care fraud does have to do with enrollment, making it
too easy for folks masquerading as health care providers to get
into the program, to get a provider number. Title VI of the
Affordable Care Act does strengthen that whole enrollment
process so if we can get that initial piece, if we can keep the
wrong people out of the program in the first instance, that
makes a huge impact on the fraud problem.
Mr. Connolly. Thank you very much. Thank you, Mr. Chairman,
for your indulgence.
Mr. Platts. You are welcome.
The gentlelady from the District of Columbia, Ms. Holmes
Norton.
Ms. Norton. Thank you very much.
This hearing has been very informative and educational,
particularly when you get into what is actual fraud. I would
like to break down what overpayments really mean. Do they mean
cheating? Do they mean miscalculating? Do they mean paperwork?
When I hear overpayments, that would seem to say somebody is
putting in for too much money relative to the service provided.
What is your view of that, any of you?
Ms. Daly. Congresswoman Norton, I would like to clarify
that overpayments can mean all of the things you mentioned. It
can be for the wrong amount, it could be a duplicate payment,
it could be a payment that was made to someone who was
ineligible to receive it, it could be someone eligible to
receive it, or they received the wrong amount. It could be any
number of things under contractual, statutory or regulatory
restrictions for that payment. There is a broad swath there it
can cover.
Ms. Norton. I understand the limitations of statistics, but
I must say the reporting of these numbers in this way does add
to what I think Mr. Connolly was referring to. When people hear
a word like overpayment, they are used to that meaning. They
don't even think in terms of their own overpayment of their
credit card bill. They think the government is overpaying
people who should not be paid.
I would urge you to find a category, I recognize we have to
break down these categories, but find a category that would
make the public understand how much of this overpayment comes
from malfeasance. I think that would turn the public off more
than anything else.
Yes, we want the rest of it to be reported, but it does a
disservice to the most popular and perhaps most important
Federal program, especially since not everyone seems to be for
that program, at least not here in Congress, when words like
that are used. I recognize this may put an additional burden on
you, but I do think it is a burden worth taking on. I would ask
you to look at that. Ms. King?
Ms. King. If I might, it is a difficult thing to do because
if you are talking about malfeasance or fraud, that has a legal
definition and involves a deliberate attempt at wrongdoing.
Ms. Norton. You are doing pretty well. I saw your
statistics on referral of cases to the U.S. Attorney. The
public is interested in wrongdoing, Ms. King.
Ms. King. I understand.
Ms. Norton. Yes, they are interested in mistakes, too,
because they hold the government accountable for being
efficient, but the first thing of interest is somebody cheating
us with this program that is so important to us. I understand
how impossible it is to get a definition that meets with a
statistically valid notion. That is why I only asked you to
look at it.
I was just perplexed about Medicaid Part D, that only in
January was the government beginning, this is the first of the
really large programs, to look at overpayments for Part D, the
drug program. What have we been doing with that program?
Ms. King. It began in 2006.
Ms. Norton. Yes. We have not been doing the same kind work
on overpayments, under payments, etc. for Part D that we have
been doing for the rest of Medicare?
Ms. Snyder. Why don't I try to answer that? I am sure my
colleagues from GAO can help me out on this one.
I don't think we would say we haven't looked at error
inside the program. We essentially have spent the last 3\1/2\
to 4 years figuring out what you should report and how to
separate the particular components of the measurement. In fact,
we have looked at four different aspects of the Part D program
and found error in all four of those aspects. Three of them,
low income subsidy payments, actual computations within the
system that pays the drug benefit itself, was well under 1.5 to
2 percent.
The area that seems to be driving inside the Part D drug
benefit comes back to if you go to the point of service, where
the beneficiary goes in to get their prescription filled, what
is not there at the pharmacy is supporting documentation for
that order to be filled. We found in terms of the prescription
drug events, that was the biggest issue, documentation at the
point of service. I think that number, I hope I have this
right, was around 13 percent. That was the biggest number in
Part D.
Ms. Norton. That is the same issue, often documentation,
with the rest of Medicare. In January 2011, CMS awarded a
contract to identify incorrect payments and recoup payments in
Medicare Part D. That program wasn't paid for, unlike the
health care laws which we just passed. That means the taxpayers
have been really paying through the you know what for this one
for errors.
Is your testimony that it has taken that long to develop a
system for doing the very same thing you were doing with rest
of Medicare?
Ms. Snyder. I think my testimony on that is like any error
rate program, you want to make sure you are getting it right
because it is a partnership with the provider.
Ms. Norton. You just began in January. I commend you. This
is an administration that has been here for a couple of years.
I am not sure if in prior hearings there were reports on
progress to measure Medicare Part D in the same way that we
measure other parts of Medicare. Have there been? Has the
Congress been kept informed or did this just pop up, this is
something we ought to look at because we have been working on
it and maybe we ought to report it to the Congress?
Ms. Snyder. I think we, as part of the Improper Payment
Act, are required to report on all of our programs. Certainly
in terms of being a high risk agency because of the Medicare
Program generally, any major new program that comes to CMS, we
would look at it and be required to report an error rate on it.
It has taken us a little while to get there.
I think the good news is that will be a composite error
rate reported this November with our audited financial
statement.
Ms. Norton. Can I ask one more question? Will you be able
to go back or will this reporting begin as of 2011 or 2010? How
far back will you be able to go on error rates?
Ms. King. Just forward in Part D.
Ms. Norton. That means in 5 or 6 years, people got off
scot-free. I understand startup so I am not blaming you. But my
goodness, you can imagine and perhaps some of that information,
some of that experience will help us to develop going forward
how to better track that data.
Thank you very much. We will never get back that money.
Mr. Platts. I thank the gentlelady.
One bright note I would highlight on Part D is when it was
passed, the estimates of its cost had been about 40 percent
lower than what was initially anticipated, so there is a
positive message out there about how that program is being
operated.
I yield myself 5 minutes for questions. I have a couple
follow-ups to my colleagues.
Mr. Lankford talked about the recovery audit contractors
and Ms. King, you referenced it is a contingency fee approach
but if what they find is overturned on appeal, then the RACs
are not allowed to keep that. That assumes there is an appeal
made. I guess my question is, how easy is an appeal done, what
is the cost of doing it?
I am wondering if someone is found to have made improper
payments, are they going to just give up the money, don't
bother doing an appeal so the RAC still gets paid even though
it may not have been a legitimate improper payment?
Ms. King. That is sort of a tough question to answer. I
think the RACs initially, and I presume so in the national
program, are sort of going after big ticket items. If you are a
provider and an inpatient hospital service, there is a lot of
money on the line, I would think you would be more likely to
appeal than not.
Mr. Platts. Ms. Snyder, do you have anything to add to
that?
Ms. Snyder. I would say there has been a robust appeals
process. The provider community hasn't been shy about pushing
back. When they have pushed back, we have looked at it and it
has resulted in certain changes, certain edits in our system,
to help folks bill right on the front end. The ultimate with
this would be if we are doing it right moving from a pay and
chase environment to pay it right to begin with, ultimately RAC
contractors would be much more limited in our set of
interventions on improper payment because we would be paying it
right to begin with.
Mr. Platts. One of those aspects of paying right up front
is the certification of the providers, that they are legitimate
medical providers. The ranking member talked about that as
well.
You mentioned that you are recertifying all providers? Can
you expand on what that involves and how quick a process is it
to recertify all providers?
Ms. Snyder. We are going to do it in stages. If you are a
new provider coming into Medicare, then there are more
stringent requirements on the very front end. We divided it up
into different groups, new folks coming in, people who are
already Medicare providers, about 1.4 million providers.
We have hired a contractor to help us with that. We
automated applications so people can come back and give us
their updated information like billing places, actual physical
locations, all the things that help us determine whether or not
you are a legitimate provider. We have already started the
recertification and we plan to have 100 percent of the
community either completed in terms of recertified or
significantly underway by January 2013. There are very specific
project plans in-house in our Center for Program Integrity that
is responsible for that activity.
I think we have done something like 25 newsletters and
articles to the provider community. We have been doing open
forums with them to say this is coming, this is what we need
you to do to work with them.
Mr. Platts. In going through this process of
recertification or just in general, if you find a provider who
is not legitimate, can you expand on how you pursue them or how
you work with the Department of Justice if they have been
fraudulent and what type of penalties usually would be pursued?
Ms. Snyder. If it is a new guy, we don't give him a billing
number or we give him a temporary billing number which means
that within 3 months, we have to make sure they are indeed a
good guy. That is like a stop loss policy. That is one of the
new policies in place.
The other is as we go through looking at recertification,
we are also sending out people to do face to face visits with
folks, particularly in areas where we know there have been a
problem. We always go back to the durable medical equipment
suppliers. We not only do a face to face visit with you, and we
are going to show up randomly over a period of time to make
sure you are indeed a legitimate provider.
We have a new tool that we are more than willing to use,
suspension of payment if need be which is different from the
philosophy in the past. The philosophy for Medicare all along
was we take any willing provider. That philosophy now has
changed because as you stated, $38 billion is a big number.
We refer people immediately. We referred something like 40
providers in the last quarter to the Office of the Inspector
General to say take a look at this. We may sometimes continue
payments because law enforcement wants to build a case. There
are a number of ways we are stopping payment to begin with or
at least limiting the damage.
Mr. Platts. You mentioned face to face which I think is
important and recognize that within your own entity, the
ability to go out and have a face to face with the 1.4 million
providers. I don't know if it has ever been looked at but
perhaps it sounds like about a 2-year process to go through
recertification, once every 10 years we have an entire fleet of
individuals out on the street doing census where they literally
are walking the neighborhoods in every town, every city, every
community in this country. It is a pretty simple approach that
when they are in the neighborhood, Medicare partners with the
Census Bureau to say, we have these 10 providers that say they
are located in this neighborhood. As you go through that
neighborhood, make a visit to confirm there is an entity there
operating. It uses a resource already walking that street.
We are 9 years away from the next census but at least once
every 10 years there is someone showing up at a provider's
location to say yes, there is a doctor's office here operating,
another way we are trying to weed out the bad guys.
A lot of outreach has been talked about with providers.
When my mom has services provided, she gets a statement of
services. She is extremely grateful for the services provided
and the payment of those services. She looks down that list and
she looks at the cost and is overwhelmed by how much the
service was in total cost.
Is there an effort in those statements that clearly says if
something is not right on here, that there is an easily
identified 800 number? Is that part of every statement?
Ms. Snyder. Yes, sir. We have statements that run all the
time on those notices of beneficiary payment that say if you
have a question, call 1-800. Our Center for Program Integrity
has just started, and it has gotten a lot of interest on the
part of the beneficiary community, if you have a question and
think there is something wrong with your bill, you think there
is something funny going on, please call 1-800. We set up a
component within the 1-800 number to receive those calls.
We then run them against the other kinds of data analysis
and modeling we do to see is there something going on here. We
have received a number of those complaints. We are logging them
in. I shouldn't call them complaints but questions. We log them
in so we can get back to the beneficiary to close it out or get
back and say we really can't answer this now because we have to
take more of a look.
Mr. Platts. You have tens of millions of partners out there
who can help you on the front lines in identifying something
that is fraudulent and bring it to your attention.
A final question before I yield to the ranking member if he
has other questions or comments, the issue of medically
unnecessary services. General Levinson, you talk about this in
your testimony and payment for services deemed not medically
necessary, so the taxpayers are paying, the Medicare
beneficiary is paying 20 percent on average for that, something
they don't need, and perhaps it is even unsafe because they
went through a procedure they didn't need and were put at risk
in getting that service.
You referenced the 6-month period and the tens of millions
of dollars of improper payments related to being medically
unnecessary. Can you expand on what your recommendations were
to try to try to address that aspect of improper payments and
where you see CMS is in responding to your recommendations?
Mr. Levinson. It is crucial that there be the documentation
in order to demonstrate that indeed this was exactly the kind
of service or product actually needed by the patient, by the
beneficiary. As you point out, this is a burden that is placed
on both the taxpayers and beneficiaries when you don't have
that medical necessity determination.
I think the power wheelchair example is a pretty good one
because there are different types of power wheelchairs.
Obviously the more sophisticated are going to be more
expensive. If the paperwork doesn't demonstrate and you look at
the actual beneficiary, there is no reason to provide a premium
kind of power wheelchair that has features that really aren't
necessary, that is a cost to the government, to the beneficiary
and it raises questions about gaming the entire system. That is
just an example and this does constitute a significant portion
of the improper payments.
Mr. Platts. Ms. Snyder, your perspective on that aspect of
improper payments and how you are trying to prevent it up front
rather than chasing after the fact?
Ms. Snyder. I think for us one of the best ways to prevent
it is if we find there was over utilization of services or
unnecessary services, we translate that into an edit that goes
into the front part of our payment system. We literally have
over a thousand edits in the claims payment system. Part of
those are to push out a claim if it appears, based on a
diagnosis code and the service being requested, if it doesn't
match, it kicks it out, so you don't pay it.
The wheelchairs are a good example, but I think another
really good example is people with ulcers, bed sores. There is
a special mattress surface and we often find it is appropriate
for a certain kind of mattress to be prescribed but they go to
what I will call the deluxe mattress, the person with really
significant sores and who needs that kind of surface to be well
rather than going to a different kind of surface that may be
appropriate to the medical condition of that person.
It is not reasonable and necessary. There is a service that
is necessary but what actually gets prescribed for the person
is not reasonable and necessary. If we start to see kick-ups in
payment, and this is part of the front end of our data
analysis, you see a kick-up in a particular benefit category,
then you start to look behind that and say what is really going
on here. There should be a service of some sort but is the
intensity of the service actually one that should occur. If we
can track that and do it from all kinds of leaks from all kinds
of folks, we then put that edit in the front of the system to
shut it down.
Mr. Platts. Thank you.
Mr. Towns, any other questions? I yield to the gentleman
from New York.
Mr. Towns. Thank you very much.
GAO made nine recommendations. You have actually
implemented two. Is there any reason why you have not
implemented the other seven? Have you responded to them in some
way?
Ms. Snyder. We are actually setting up a meeting with our
GAO colleagues next week because we thought we had closed seven
of the nine. I think partly what has happened is we have done
some internal kinds of things in terms of policy statements,
some training and development that quite frankly we have not
shared with the GAO.
We think we are a lot closer to having the bulk of those
recommendations closed. As I said, I think next week we are
sitting down with them to give them some documentation we have
done. We have totally rewritten a training manual. Part of this
is about contractor closeout and how one audits overhead rates,
how one tracks cost allocation systems and a bunch of very
technical contracting kind of work.
I think the one open recommendation we are totally in
agreement about is out of about $4 billion worth of contracting
activity we do, there was a question of about $88 million of
incurred costs. When we went through those incurred cost
contracts, we believe we are at a point where probably $86
million of that is actually allowable. We think there is about
$2 million that is not. We put some of those in what we call an
interim audit file where we want to do more intense looking.
We really do owe GAO an answer on that. We have given them
different numbers at different times as we worked through that
audit process, but I really think we are a lot closer to having
the bulk of those closed. I really look forward to sitting down
with GAO next week and going through that.
There is an internal policy document that we did not share
with them that we should that is sitting with our Office of
General Counsel and the Office of Financial Management which
addresses a number of the weaknesses. My guess is it will get
us most of the way there. I think there will be areas where CMS
will be taking the position that we believe we are willing to
incur the business risk on this rather than putting in a set of
resources. GAO may or may not agree with that but we certainly
need to sit down together and work through that. I think we are
closer to closed than not.
Mr. Towns. GAO?
Ms. Daly. Congressman Towns, I appreciate the opportunity
to discuss this and I agree with what Ms. Snyder said. We have
not received documentation to confirm whether or not CMS had
indeed taken the actions we had recommended related to the
contract weaknesses we identified. We are very encouraged to be
having meetings with them to review what steps have they taken
to address issues such as having appropriate contract
closeouts, improving their invoice review procedures, all of
these things that are critical to protecting and making sure
those contract actions are legitimate.
Ms. Snyder. We really appreciated the recommendations we
got from GAO. We think we can strengthen our internal controls
by acting on them and are happy and glad to do that. We are
glad to have the benefit of that review.
Mr. Towns. In talking to administrators in the health care
field, they are saying that electronic records might solve a
lot of the problems or would it further complicate the problem?
What will it do with the problem? Do you feel that is the case?
Ms. King. I don't think we know for sure yet. I think it is
too soon to tell. Certainly they are going to provide better
documentation. There should be better documentation on file, so
that would be a positive step but I think before there is
further implementation and we have an opportunity to look at
it, I don't think we can say it would solve the problem for
sure.
Mr. Towns. Thank you very much, Mr. Chairman.
I yield back.
Mr. Platts. I thank the gentleman.
Before we wrap up, just a couple of other quick things.
One, to follow up on Mr. Towns' focus on the internal controls
and contract management aspects, I am glad to hear we are
further along than maybe we thought in that area and just in
the testimony today where we have recovery audit contractors,
we have validation contractors to cover the recovery audit
contractors and even when improper payments are identified by
the recovery audit contractors, they don't collect, and I
forget the term for the contractors that actually do the
collection. We have a lot of contractors. Managing those
contractors is key if we are going to get a true handle on
improper payments. That partnership between CMS, GAO and the
IG's Office is critical.
Just to refocus on Ms. Norton's issue of Part D, I
appreciate this is an ongoing effort, that we are now in the
first year where we will have a good assessment of Part D
improper payments and if we apply a rough average of the fee
for service, Part C, 10 percent, 12 percent, 14 percent,
somewhere in there, we are still talking about $5-$6 billion
perhaps of improper payments in Part D on top of what has
already been identified.
It is all the more important that effort move forward as it
is and we are dutiful in how to address those.
In closing, I guess I would emphasize what I think just
about all of us have hopefully conveyed, the importance of what
you do and the gratitude of our constituents for Medicare
ensuring that our seniors are getting the medical care they
need and that we do right by them. We certainly want to
recognize CMS's efforts in ensuring that is the case and also
the partnership between all three entities represented here,
CMS, the IG Office within the Department and GAO. I hope that
the three of you and your entities will see this committee in a
very positive partnership manner because that is really the
intent of this hearing.
I think, Ms. Snyder, you referenced not playing gotcha. I
sometimes forget the references because I have been chairman
with him as my ranking member on two occasions and he has been
chairman with me as his ranking member and the bottom line is
we have a shared focus which is just to have good government
and to partner with all of our colleagues in government to
achieve that. I hope that comes through as our intent with this
hearing and going forward to continue to partner and how we can
further partner in the months and years to come, especially if
there are legislative issues.
One that was mentioned concerned statutory language with
the power wheelchairs and how you have to start there. If there
are issues you identify at CMS that perhaps the intent of
Congress is not fulfilled accurately or appropriately in the
way the statute was written versus what you think we were
trying to do, you probably will learn that before us because of
implementing the statute, we hope you will come back to our
committee or Ways and Means and Energy and Commerce with
Medicare and Medicaid and partner with Congress.
That is what we are hoping to do in every aspect and at the
end of the day, as far as this subcommittee's focus, we hope to
do our best to ensure that every dollar of the American
people's hard earned funds sent to Washington are handled and
used in a responsible, accountable fashion.
I know that is what the four of you as public servants are
after and are appreciative of your efforts. We look forward to
going forward in a positive way with you.
We will keep open the record for 7 days for any additional
information, specifically those numbers on actual fraud dollars
identified in the past 3 years. That would be great. We look
forward to continuing at the committee level with Members as
well as their staffs in how we can work with you.
With that, this hearing stands adjourned.
[Whereupon, at 11:48 a.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Gerald E. Connolly and
additional information submitted for the hearing record
follow:]

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