[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



 
   MEDICAID PROGRAM INTEGRITY: SCREENING OUT ERRORS, FRAUD, AND ABUSE

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 2, 2015

                               __________

                           Serial No. 114-48
                           
                           
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                     Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
DAVID B. McKINLEY, West Virginia     DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
LARRY BUCSHON, Indiana               JOHN A. YARMUTH, Kentucky
BILL FLORES, Texas                   YVETTE D. CLARKE, New York
SUSAN W. BROOKS, Indiana             JOSEPH P. KENNEDY, III, 
MARKWAYNE MULLIN, Oklahoma               Massachusetts
RICHARD HUDSON, North Carolina       GENE GREEN, Texas
CHRIS COLLINS, New York              PETER WELCH, Vermont
KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)


  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the state 
  of Colorado, opening statement.................................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     7
Hon. Fred Upton, a Representative in Congress from the state of 
  Michigan, prepared statement...................................    68

                               Witnesses

Seto J. Bagdoyan, Director, Audit Services, Forensic Audits and 
  Investigative Service, U.S. Government Accountability Office...     9
    Prepared statement...........................................    11
    Answers to submitted questions...............................    74
Shantanu Agrawal, M.D., Deputy Administrator and Director, Center 
  for Program Integrity, Centers for Medicare and Medicaid 
  Services, U.S. Department of Health and Human Services.........    23
    Prepared statement...........................................    25
    Answers to submitted questions...............................    78

                           Submitted material

Subcommittee memorandum..........................................    69




   MEDICAID PROGRAM INTEGRITY: SCREENING OUT ERRORS, FRAUD, AND ABUSE

                              ----------                              


                         TUESDAY, JUNE 2, 2015

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:16 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Members present: Representatives Murphy, McKinley, Burgess, 
Blackburn, Bucshon, Brooks, Mullin, Collins, DeGette, 
Schakowsky, Castor, Yarmuth, Clarke, Kennedy, Green, Welch, and 
Pallone (ex officio).
    Staff present: Noelle Clemente, Press Secretary; Jessica 
Donlon, Counsel, Oversight and Investigations; Brittany Havens, 
Oversight Associate, Oversight and Investigations; Charles 
Ingebretson, Chief Counsel, Oversight and Investigations; 
Michelle Rosenberg, GAO Detailee, Health; Chris Santini, Policy 
Coordinator, Oversight and Investigations; Alan Slobodin, 
Deputy Chief Counsel, Oversight; Jessica Wilkerson, Oversight 
Associate, Oversight and Investigations; Jeff Carroll, 
Democratic Staff Director; Ryan Gottschall, Democratic GAO 
Detailee; Ashley Jones, Democratic Director, Outreach and 
Member Services; Chris Knauer, Democratic Oversight Staff 
Director; Una Lee, Democratic Chief Oversight Counsel; 
Elizabeth Letter, Democratic Professional Staff Member; and Tim 
Robinson, Democratic Chief Counsel.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning. I convene this hearing of the 
Subcommittee on Oversight and Investigations. We are here today 
to discuss a continuing and increasingly expensive problem, 
waste, fraud, and abuse in the Medicaid program. I guess one 
way I could put this is, for centuries people have tried to 
deal with the issue is there life after death, and apparently 
there is in Medicaid, and we will get to the bottom of that 
today.
    Last year the Medicaid program provided medical services 
for approximately 60 million people at a cost of $310 billion. 
But during that same year, the Centers for Medicare and 
Medicaid Services estimate that the improper payment rate was 
6.7 percent, or $17.5 billion. This is an increase of almost 
one percent, or over three billion, from the previous year. It 
is a troubling trend, especially as the program continues to 
expand.
    Unfortunately, the Medicaid program is far too accustomed 
to fraud. In fact, the Government Accountability Office has 
designated the Medicaid program as a high risk for fraud and 
abuse since 2003, and it has been the subject of multiple GAO 
and Department of Health and Human Services Office of Inspector 
General Reports over the past several years, including a GAO 
report being highlighted today.
    In 2012 the Committee requested GAO identify and analyze 
indicators of improper and potentially fraudulent payments to 
Medicaid beneficiaries and providers. In a trustworthy study, 
another in a longtime examining Medicaid fraud, GAO has 
reported that CMS needs to take additional actions to improve 
provider and beneficiary fraud controls. GAO found that 
thousands and Medicaid beneficiaries and hundreds of providers 
in just four states: Arizona, Florida, Michigan, and New 
Jersey, were involved in possible improper or fraudulent 
payments during fiscal year 2011. For example, almost 200 
deceased beneficiaries received at least $9.6 million in 
Medicaid benefits. About 8,600 beneficiaries received payments 
by two or more states, totaling at least $18.3 million.
    The Social Security numbers for about 199,000 beneficiaries 
did not match the Social Security Administration databases. 
About 90 medical providers had their medical license revoked or 
suspended in the state in which they received Medicaid 
payments. At least 47 providers had foreign addresses as their 
location of services, including Canada, China, India, and Saudi 
Arabia. About 50 providers who received Medicaid payments were 
excluded from the Federal program for a variety of reasons, 
including patient abuse, or neglect, fraud, theft, bribery, and 
tax evasion.
    GAO acknowledged that regulations issued in response to the 
Affordable Care Act may have addressed some of the improper 
payment indicators found in GAO's analysis. For example, CMS 
created a tool called the Data Services Hub to help verify 
beneficiary application information, but questions remain 
whether this tool has been properly implemented, and if the 
states have been able to effectively use this tool to combat 
waste and fraud. In fact, just a few weeks ago, a Reuters 
report found that more than one in five of the thousands of 
doctors and other health care providers in the U.S. prohibited 
from billing Medicare are still able to bill state Medicaid 
programs.
    The report included disturbing stories, such as a Georgia 
optometrist who claimed he conducted 177 eye exams in one day, 
yet remained on South Carolina's Medicaid rolls for almost a 
year after he pleaded guilty in Georgia. In another instance, 
an Ohio psychiatrist routinely over-reported the time he spent 
with patients, and even billed for no-show patients. CMS 
revoked his billing privileges after he was convicted of felony 
Workers' Compensation fraud, yet he continued to work in the 
Illinois Medicaid program, getting paid $560,000 for services 
or prescriptions he wrote after his Medicare provider 
revocation. Shockingly, on the day he was being sentenced in 
Columbus, Ohio, he also claimed that he saw 131 group therapy 
patients at his Illinois practice.
    Now, these stories, we know, are unacceptable. Medicaid 
fraud undermines the integrity of the program, denies our most 
vulnerable the services they deserve, and waste taxpayers' hard 
earned dollars. I hope we will hear today about the steps that 
can be taken to further combat fraud in the Medicaid program. 
That is what we want to focus on. And GAO has recommended some 
common sense steps that would reduce fraud, such as issuing 
guidance to states, better identifying beneficiaries who are 
deceased, and the availability of automated information through 
Medicare's enrollment database.
    In light of the history of fraud in the Medicaid program, 
and its growing size, however, will these steps be enough? Will 
we be here again in another 2 years discussing the same thing? 
And with the Medicaid program continuing to expand, the 
Committee is concerned that the opportunity and motivation to 
defraud the program will only increase.
    So I would like to thank our witnesses who are here today. 
You have the ability to save the taxpayers a massive amount of 
money. We hope to hear from you today how you plan to do that, 
and we are grateful for your presence.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    We are here today to discuss a continuing and increasingly 
expensive problem: Waste, fraud, and abuse in the Medicaid 
program.
    Last year the Medicaid program provided medical services 
for approximately 60 million people at a cost of $310 billion. 
But during that same year, the Centers for Medicare and 
Medicaid Services estimated that the improper-payment rate was 
6.7 percent or $17.5 billion. This is an increase of almost 1 
percent or over $3 billion from the previous year. This is a 
troubling trend, especially as the program continues to expand.
    Unfortunately, the Medicaid program is far too accustomed 
to fraud. In fact, the Government Accountability Office has 
designated the Medicaid program as a high risk for fraud and 
abuse since 2003. And it has been the subject of multiple GAO 
and Department of Health and Human Services Office of Inspector 
General reports over the past several years, including a GAO 
report being highlighted today.
    In 2012, the Committee requested GAO identify and analyze 
indicators of improper or potentially fraudulent payments to 
Medicaid beneficiaries and providers. In a just-released study-
another in a long line examining Medicaid fraud-GAO has 
reported that CMS needs to take additional actions to improve 
provider and beneficiary fraud controls.
    GAO found that thousands of Medicaid beneficiaries and 
hundreds of providers in just four states--Arizona, Florida, 
Michigan, and New Jersey-were involved in possible improper or 
fraudulent payments during Fiscal Year 2011. For example, 
almost 200 deceased beneficiaries received at least $9.6 
million in Medicaid benefits. About 8,600 beneficiaries 
received payments by two or mate states totaling at least $18.3 
million. The Social Security Numbers for about 199,000 
beneficiaries did not match the Social Security Administration 
databases. About 90 medical providers had their medical 
licenses revoked or suspended in the state in which they 
received Medicaid payments. At least 47 providers had foreign 
addresses as their location of service, including in Canada, 
China, India, and Saudi Arabia. About 50 providers who received 
Medicaid payments were excluded from the federal program for a 
variety reasons including patient abuse or neglect, fraud, 
theft, bribery, and tax evasion.
    GAO acknowledged that regulations issued in response to the 
Affordable Care Act may have addressed some of the improper-
payment indicators found in GAO's analysis. For example, CMS 
created a tool called the Data Services Hub (hub) to help 
verify beneficiary applicant information. But questions remain 
whether this tool has been properly implemented and if the 
states have been able to effectively use this tool to combat 
waste and fraud.
    In fact, just a few weeks ago, a Reuters report found that 
``more than one in five of the thousands of doctors and other 
health care providers in the U.S. prohibited from billing 
Medicare are still able to bill state Medicaid programs.'' The 
report included disturbing stories such as a Georgia 
optometrist, who claimed he conducted 177 eye exams in one day, 
yet remained on South Carolina's Medicaid rolls for almost a 
year after he pleaded guilty in Georgia. In another instance, 
an Ohio psychiatrist routinely overreported the time he spent 
with patients and even billed for no-show patients. CMS revoked 
his billing privileges after he was convicted of felony 
workers' compensation fraud. Yet, he continued to work in the 
Illinois Medicaid program, getting paid $560,000 for services 
or prescriptions he wrote after his Medicare provider 
revocation. Shockingly, on the day he was being sentenced in 
Columbus, Ohio, he also claimed that he saw 131 group therapy 
patients at his Illinois practice.
    These stories are unacceptable. Medicaid fraud undermines 
the integrity of the program, denies our most vulnerable the 
services they deserve, and wastes American taxpayers' hard-
earned dollars.
    I hope we will hear today about the steps that can be taken 
to further combat fraud in the Medicaid program. GAO has 
recommended some common sense steps that would reduce fraud, 
such as issuing guidance to state to better identify 
beneficiaries who are deceased and the availability of 
automated information through Medicare's enrollment database. 
In light of the history of fraud in the Medicaid program and 
its growing size, however, will these steps be enough? Will we 
be here again in another two years discussing the same thing? 
With the Medicaid program continuing to expand, the Committee 
is concerned that the opportunity and motivation to defraud the 
program will only increase.
    I would like to thank our witnesses joining us today-you 
all have the ability to save the American taxpayer a massive 
amount of money, and we hope to hear from you today on how you 
plan to do that.

    Mr. Murphy. And I now recognize the Ranking Member, Ms. 
DeGette of Colorado, for 5 minutes.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you, Mr. Chairman. Good news on a 
bipartisan basis, we are against waste, fraud, and abuse, as 
usual, in the Medicaid program, and everyplace else. I have 
been on this subcommittee now 19 years, and we have had a whole 
series of hearings over the years. And as you accurately point 
out, Mr. Chairman, it goes from administration to 
administration, Medicaid seems to be particularly vulnerable to 
issues like fraud, and we have to continue our oversight. So 
when you say will we be here again in 2 years? Probably. We 
will probably be here in 10 years, because this kind of a 
problem takes ever vigilance by this Committee.
    The GAO report we are talking about today tells us that the 
Medicaid program, like many other large programs, like 
Medicare, defense contracts, and private insurance plans, 
experience thousands of improper, and possibly fraudulent, 
payments every year. Last year CMS found an estimated improper 
payment rate of 6.7 percent, which amounted to about $17.5 
billion for the Medicaid program in 2014.
    Now, as I said, and you said, like many other programs, 
Medicaid fraud is not unique to this Committee. In our report, 
which was published in 2003, which was 12 years ago, we said, 
``Committee hearings last year revealed that the cost of the 
Medicaid fraud program could exceed $17 billion every year. 
This year, 2003, the Committee will examine ways in which 
states could adopt more rigorous enrollment controls to keep 
unscrupulous providers out of their programs, and improve their 
program integrity standards.'' And we had laudable efforts 
since that time. Truly, $17 billion in 2003, and about $17 
billion now, even with the Medicaid expansion, that is not 
something to be proud about, although I guess we should be glad 
it doesn't seem to be getting a lot worse. Nonetheless, 
Congress, and the Administration, and the governors all across 
the country need to focus on improper payments.
    There is something exciting, though, that I think may 
actually make a major difference going forward. Under the 
Affordable Care Act, a number of important measures were 
enacted to prevent or reduce improper payments in the Medicaid 
and Medicare programs. For example, the ACA provided nearly 
$350 million in new funds for anti-fraud efforts. It provided 
new authorities to the Secretary of HHS to help shift from a 
traditional pay and chase model to a preventative approach, by 
keeping fraudulent suppliers and providers out of the program 
before they commit fraud. And now we have in place a host of 
new and enhanced anti-fraud penalties to deter those attempting 
to improperly bill Medicaid or Medicare. These are important 
new tools, and I think they can help safeguard the program. I 
am looking forward to hearing from CMS and GAO on how these 
efforts are working, and how they expect to build upon efforts 
to strengthen Medicaid at both the Federal and State levels.
    I think it is important to put this discussion of improper 
payment rates in context with large scale financing of other 
public and private sector programs. For example, I can cite 
endless examples of major defense contractors receiving 
improper payments from the Pentagon. Last year the Washington 
Post revealed that one company improperly charged the 
government more than $100 million for services. DOD alone 
reported it had made $1.1 billion in improper payments for 
fiscal year 2011.
    Overbilling occurs across all sectors of the government, 
and we have to figure out why that is happening, and how we can 
strengthen our financial controls across the government to 
prevent this kind of overpayment and fraud, and find new ways 
to protect taxpayers. And so I think the GAO does a really 
important job, both here, in helping strengthen the Medicaid 
program, and many other places.
    I have a lot of questions about the finding and 
recommendations, some of which may go beyond the scope of the 
report. For example, and this is in context of the ACA too, the 
audit relies on data from fiscal year 2011. As we implement 
these ACA provisions that have gone into place since that time, 
I would be interested to know, are they really making a 
difference on the data in the 3 or 4 years since that time? The 
other issue we need clarification on is the basis of the four 
states that were chosen for this audit.
    So, as I say, I really want to thank the agencies for 
coming in and helping us. Anything we can do to strengthen the 
controls to prevent overpayment and fraud is great with me, 
because the hard working Americans in all 50 states rely on 
these Medicaid services, and they also rely on the fact that 
their tax dollars are going to best serve this country. Thank 
you, Mr. Chairman.
    Mr. Murphy. Thank you. Now I will recognize Dr. Burgess for 
5 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman. This is an important 
hearing we are having today. Medicaid, a program that is 
entirely under our jurisdiction in the Energy and Commerce 
Committee, is a vital program that covers and provides care for 
some of the nation's most vulnerable populations. This 
Committee does have exclusive legislative jurisdiction over 
Medicaid, and it is our responsibility to ensure that the long 
term sustainability of Medicaid is assured through proper 
oversight.
    Inefficient and misdirected payments within the Medicaid 
program have substantive budgetary, access, and provider 
impacts that ultimately affect patients. If states do not have 
the proper tools available for monitoring enforcement, there 
can be lasting effects on the nation's Medicaid recipients, and 
the providers of their care. CMS has reported improper payments 
well over $17 billion for fiscal year 2014 for the Medicaid 
program, an increase of nearly $3 billion from the prior year. 
That is a trend that should concern all of us. Each of those 
dollars that is spent inappropriately is a dollar not spent on 
a patient, and is, in fact, a wasted taxpayer dollar.
    I do want to point out that the recently passed H.R. 2, 
that this committee had a great hand in getting started, and 
shepherding through the legislative process, and ultimately it 
was signed by the President, but it did have a number of anti-
fraud provisions contained within. Most of those pertained to 
the Medicare system, but I do wonder if some of those examples 
may not also be extrapolated to the Medicaid system. 
Specifically, Mr. Chairman, Section 502, preventing wrongful 
Medicare payments for items and services furnished to 
incarcerated individuals, individuals not lawfully present, and 
deceased individuals. That may be something worthy of study 
that the CMS may want to consider for the Medicaid system as 
well.
    I am also concerned about allowing entities engaging in 
fraud to continue to receive Federal funds. We want to ensure 
provider participation in Medicaid, and patients should never 
be faced with a choice of no care or low quality care from 
those providers. The Office of Inspector General has the 
authority to exclude entities that employ deceptive business 
practices within the Medicaid program. In 2014 Ranking Member 
DeGette and I looked into the practices of certain dental 
management service companies within the Medicaid program which 
not only provide managerial services to dental clinics, but 
also, in fact, actually own these clinics, and have direct 
control over the operations and finances of the clinics. We 
became very concerned because this corporate structure was 
resulting in failure to meet basic quality and compliance 
standards.
    Unfortunately, many of these practices have continued, 
despite Federal Government intervention. The Office of 
Inspector General may initiate a corporate integrity agreement, 
but these deceptive entities may dissolve under bankruptcy, 
only to re-emerge under new management. The Office of Inspector 
General has the authority to exclude individuals and entities 
that have engaged in fraud and abuse related to Federal health 
programs, including Medicaid. Following our investigation, we 
sent a letter to the Office of Inspector General recommending 
that OIG consider excluding any corporate entity that employs 
deceptive practices that result in substandard care.
    So we are grateful that some action was taken over that, 
but it is incredibly important that there be a way to exclude 
someone who is engaged in deceptive practice, and prevent that 
process of dissolving, and then re-emerging in another 
corporate form. We must ensure that states have the proper 
tools available to ensure that tax dollars are never 
fraudulently wasted in the Medicaid program, and that access 
for Medicaid beneficiaries is subsequently protected.
    Mr. Chairman, I thank you for the recognition, for the 
time, and I will yield back.
    Mr. Murphy. Gentleman yields back, and--if there is anybody 
else on our side who wants the remaining 50 seconds? And, if 
not, we will move over to the Ranking Member, Mr. Pallone, for 
5 minutes.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. For decades Medicaid 
has been a lifeline for tens of millions of hard working 
Americans across the country. That is why we must make sure 
that the resources we devote to this program are administered 
efficiently and effectively. Every dollar lost to misuse or 
fraud of our Federal health programs is one less dollar 
available to fund essential lifesaving medical services for 
Americans. Cutting down on waste, fraud, and abuse is, and must 
remain, a priority for CMS, state Medicaid programs, and this 
Committee.
    Some of my colleagues on the other side of the aisle have 
expressed concerns that expansion of Medicaid will put state 
budgets in an untenable position and increase fraud, and that 
is simply not true. Beneficiary access and program integrity 
efforts are not competing goals. Smart, effective regulation 
reinforces both goals simultaneously.
    In the short time since states have had the option to 
expand Medicaid, those states have already realized significant 
qualitative and economic benefits, as uncompensated care rates 
drop, and states are able to collect more revenue. Expansion 
makes good economic sense, and good moral sense. For instance, 
in my home state of New Jersey, projects a nearly $150 million 
decline in charity care in fiscal year 2016, with savings from 
the Medicare expansion totaling nearly $3 billion through 2020. 
Let us also not forget that Medicaid coverage lowers financial 
barriers to access, increases use of preventative care, and 
improves health outcomes. Making the program available to more 
vulnerable Americans is a great achievement, and one that I am 
very proud of having played a part in.
    But, of course, it is now more important than ever that we 
act as good stewards of Medicaid dollars, and ensure that the 
benefits of this program are available for generations to come. 
That is why, when we passed the Affordable Care Act in 2010, we 
included a number of measures to strengthen program integrity 
and reduce fraud in the Medicaid program. In 2011, for example, 
CMS established procedures to screen providers and suppliers 
based on their risk levels so we can prevent fraud before it 
occurs. This has changed the traditional pay and chase model 
towards a preventative approach by keeping fraudulent suppliers 
out of the program before they can commit fraud.
    There are a number of other ACA anti-fraud measures that 
have impacted the Medicaid program positively over the past few 
years. These include new and enhanced penalties for fraudulent 
providers. These new authorities allow the Inspector General to 
exclude from Medicaid any provider that makes false statements 
on an application to enroll or participate in the program. The 
ACA also requires state Medicaid agencies to withhold payments 
to a provider or supplier pending investigation of a credible 
allegation of fraud. The law also significantly increased 
funding to fight Medicare and Medicaid fraud.
    So I want to hear today about how all these measures have 
worked, and about how CMS is implementing regulations to better 
protect patients and legitimate providers. Although the ACA 
made significant steps to reduce fraud and abuse in the 
Medicaid program, I know there is always room for improvement, 
and I am glad the GAO is here today to share their findings and 
provide constructive advice about how can we make the Medicaid 
program even stronger.
    But I want to caution against applying GAO's findings too 
broadly. First, the analysis focused on four states, Arizona, 
Florida, Michigan, and New Jersey, and its findings are not 
generalizable across the country. Second, the report looked at 
data from fiscal year 2011, before many of the ACA anti-fraud 
provisions went into effect. GAO acknowledges several times in 
a report that CMS has since made changes to address improper 
payment issues. Third, I want to make the point that many of 
the potentially improper payments listed in this report are 
likely examples of provider fraud, not beneficiary fraud. The 
GAO report lists examples such as billing under deceased 
beneficiaries' identities, or billing on behalf of currently 
incarcerated beneficiaries. Given that these beneficiaries are 
hardly in a position to defraud the government, I think it is 
likely that many of these are examples of provider fraud.
    So, Mr. Chairman, good program integrity helps to ensure 
that beneficiaries receive the care they need, so I look 
forward to hearing from CMS and GAO how these latest efforts 
are being implemented by the states. I don't know if anybody 
wants my 30 seconds--otherwise I will yield back. Thank you.
    Mr. Murphy. Thank you, I appreciate that. We will proceed 
onward. It is good to see we are all on the same team today, 
focused on this, and our witnesses are part of this too, so I 
would like to introduce the witnesses for today's panel, make 
sure I get the names right. It is Seto Bagdoyan, did I get that 
right? Good, thank you. The Director of Audit Services in the 
U.S. Government Accountability Office Forensic Audits and 
Investigative Services Missions Team. Welcome here.
    And Dr. Shantanu Agrawal--you have been here before, 
welcome back--is the Deputy Administrator and Director of the 
Center for Program Integrity at the Centers for Medicare and 
Medicaid Services.
    I will now swear in the witnesses. As you are aware, the 
committees holding investigative hearing and when doing so, has 
the practice of taking testimony under oath. Do either of you 
have any objections to testifying under oath? Neither of you 
do, thank you.
    So, as the Chair, I would advise you that under the rules 
of the House and rules of the Committee you are entitled to be 
advised by counsels. Do either of you desire to be advised by 
counsel during your testimony today? And both of you say no to 
that, so, in that case, if you would please rise, raise your 
right hand, I will swear you in.
    [Witnesses sworn.]
    Mr. Murphy. Thank you. You are now under oath, and subject 
to the penalties set forth in Title 18, Section 1001 of the 
United States Code. You may now give a 5 minute summary of your 
written statement. You know how to watch the red light in front 
of you. Stick with that, and I guess we will start off with Mr. 
Bagdoyan.

   TESTIMONY OF SETO J. BAGDOYAN, DIRECTOR, AUDIT SERVICES, 
  FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S. GOVERNMENT 
   ACCOUNTABILITY OFFICE; AND SHANTANU AGRAWAL, M.D., DEPUTY 
   ADMINISTRATOR AND DIRECTOR, CENTER FOR PROGRAM INTEGRITY, 
CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF 
                   HEALTH AND HUMAN SERVICES

                 TESTIMONY OF SETO J. BAGDOYAN

    Mr. Bagdoyan. Chairman Murphy, Ranking Member DeGette, and 
members of the subcommittee, I am pleased to be here today to 
discuss results of GAO's recent report on Medicaid beneficiary 
and provider fraud controls. As you know, and as you mentioned, 
Mr. Chairman, Medicaid is a significant expenditure for the 
Federal Government and the states, with combined outlays of 
about $516 billion in fiscal year 2014, involving millions of 
beneficiaries and providers.
    These numbers, as members mentioned, are all expected to 
grow as a result of the expansion of Medicaid under the 
Affordable Care Act. A program of this scope and scale is 
inherently susceptible to error, including improper payments, 
as well as fraudulent activity. In fact, as mentioned again, 
CMS reported an estimated improper payment rate of 6.7 percent, 
or $17.5 billion, for Medicaid in fiscal year 2014, compared to 
5.8 percent, or $14.4 billion respectively, in FY 2013. Also, 
earlier this year we reported that Medicaid remains on GAO's 
high risk list in part because of concerns about the adequacy 
of fiscal oversight of the program, including improper 
payments.
    With this backdrop, I will now discuss our report's key 
findings. Overall we found thousands of Medicaid beneficiaries 
and hundreds of providers were involved in potentially improper 
or fraudulent payments during fiscal year 2011, the most recent 
year for which reliable and comparable data were available in 
the four selected states we reviewed, namely Arizona, Florida, 
Michigan, and New Jersey. These states accounted for about 9.2 
million beneficiaries, and about 13 percent of all fiscal year 
2011 Medicaid payments.
    More specifically, examples of potentially improper or 
fraudulent payments include about 8,600 beneficiaries had 
payments made on their behalf concurrently by two or more of 
the selected states, totaling at least $18.3 million. The 
identities of roughly 200 deceased beneficiaries received about 
$9.6 million in Medicaid benefits subsequent to the 
beneficiary's death. Some 3,600 individuals received about $4.2 
million worth of Medicaid services while incarcerated in State 
prison facilities. 90 providers had suspended or revoked 
licenses in at least one state in which they received payment. 
Associated Medicaid claims totaled at least $2.8 million.
    To its credit, as, again, mentioned in opening statements, 
CMS has taken some regulatory steps to make the Medicaid 
enrollment process more rigorous and data-driven. However, gaps 
in beneficiary eligibility, verification guidance, and data 
sharing persist. For example, in 2013, CMS required states to 
use electronic data maintained by the Federal Government in its 
data services hub to verify beneficiary eligibility. According 
to CMS, the hub can verify key application information, 
including state residency, incarceration status, and 
immigration status.
    However, CMS regulations do not require states to review 
Medicaid beneficiary files for deceased individuals more 
frequently than annually, nor specify whether states should 
reconsider using the more comprehensive Social Security 
Administration's full death master file in conjunction with 
state reported death data when doing so. As a result, states 
may not be able to detect individuals that have moved to, and 
later died, in another state, or prevent the payment of 
potentially fraudulent benefits to individuals using their 
identities. Accordingly, additional guidance from CMS to states 
might further enhance program integrity efforts beyond using 
the hub.
    In closing, our findings underscore that, as Medicaid's 
numbers grow as expected, both the Federal Government and the 
states need to maximize their efforts to promote program 
integrity by preventing and reducing potential for improper 
payments and fraud. Our recommendations to CMS, which the 
agency has accepted, are designed to enhance its toolbox to 
this effect, help narrow the windows of opportunity for 
improper payments and fraud, and provide reasonable assurance 
that Medicaid eligibility controls are functioning as intended.
    Mr. Chairman, members of the subcommittee, this concludes 
my statement. I look forward to your questions. Thank you.
    [The prepared statement of Mr. Bagdoyan follows:]
    
    
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    Mr. Murphy. Thank you. Dr. Agrawal, you are recognized for 
5 minutes.

                 TESTIMONY OF SHANTANU AGRAWAL

    Dr. Agrawal. Thank you. Chairman Murphy, Ranking Member 
DeGette, and members of the Subcommittee, thank you for the 
invitation to discuss CMS's efforts to strengthen Medicaid. 
Enhancing program integrity is a top priority for the 
Administration, and an agency-wide effort at CMS. We share the 
Subcommittee's commitment to protecting beneficiaries and 
ensuring taxpayer dollars are spent on legitimate items and 
services, both of which are at the forefront of our program 
integrity mission.
    I would like to make three major points in my testimony 
today. First, Medicaid program integrity is a shared state/
Federal responsibility, and I feel strongly that states and the 
Federal Government share the goal that the Medicaid program be 
as secure as possible to ensure beneficiaries are protected, 
and the right payments are being made. Second, we have made 
important progress in addressing beneficiary eligibility and 
provider enrollment issues through advanced data systems and 
improved collaboration. And third, it is clear that more work 
remains, that we can build on our accomplishments with improved 
guidance, building more capabilities, and enhanced oversight.
    States and the Federal Government share mutual obligations 
and accountability for the integrity of the Medicaid program, 
and the development, application, and improvement of program 
safeguards necessary to ensure proper and appropriate use of 
both Federal and state dollars. This Federal/state partnership 
is central to the success of the Medicaid program, and it 
depends on clear lines of responsibility and shared goals. 
Although the Federal Government establishes general guidelines 
for the program, states design, implement, and administer their 
own Medicaid programs. Medicaid is currently undergoing 
significant changes as CMS and states implement reforms to 
modernize and strengthen the program and its services.
    While focused on implementation of the Affordable Care Act, 
CMS has been working closely with states to implement new, more 
modern delivery system and payment reforms. In the last few 
years CMS and states have made important progress in improving 
the systems and processes that determine a beneficiary's 
eligibility for Medicaid, and that ensure only legitimate 
providers enroll in and build a program. We have made great 
strides. The error rate in beneficiary eligibility, for 
example, has been cut in half since 2011. We recognize, 
however, that more remains to be done, and continue to work 
collaboratively with states to further improve Medicaid program 
integrity.
    A critical component to preventing waste, abuse, and fraud 
is ensuring that only legitimate providers have the ability to 
bill Medicaid in the first place. While states bear the primary 
responsibility for provider screening and enrollment for 
Medicaid, CMS is engaging in new efforts to work with states to 
make sure that only legitimate providers are enrolling in the 
Medicaid program. The ACA required CMS to implement risk-based 
screening of providers and suppliers who want to participate in 
Medicaid. This enhanced screening requires certain categories 
of providers and suppliers that have historically posed a 
higher risk of fraud to undergo greater scrutiny prior to their 
enrollment or re-validation in Medicare, Medicaid, or CHIP.
    To enroll providers more efficiently, CMS has provided 
states with direct access to Medicare's enrollment database, 
the Provider Enrollment Chain and Ownership System, or PECOS, 
and in response to input from states, began providing access to 
monthly PECOS data extracts that states could use to 
systematically compare state enrollment records against 
available PECOS information.
    CMS also provides guidance, education through the Medicaid 
Integrity Institute, which has reached over 4,200 state 
employees on enrollment and other topics, and oversight through 
state program integrity reviews. Additionally, the ACA, and 
accompanying Federal regulations, have enhanced beneficiary 
eligibility safeguards by establishing a modernized, data-
driven approach to verification of financial and non-financial 
information needed to determine Medicaid eligibility. States 
now rely on available electronic data sources, including the 
Federal data hub and PARIS system, to confirm information 
included on the application and promote program integrity, 
while minimizing the amount of paper documentation that 
consumers need to provide.
    CMS has also developed its most recent comprehensive 
Medicaid integrity plan, in collaboration with our partners, 
including the National Association of Medicaid Directors, and 
is working to implement this plan. This work includes providing 
Medicare data to states for program integrity purposes, 
expanding support and training of state program integrity staff 
in vulnerable areas, such as program integrity oversight of 
managed care and evolving integrated care models, and 
facilitating development of state capacity and access to cost-
effective analytics technology.
    The past several years have brought numerous gains in 
combating fraud, waste, and abuse in the Medicaid program, but 
more work clearly remains. Today the eligibility determination 
process for beneficiaries and provider screening efforts are 
significantly more modern and digital than ever before. We 
thank the GAO for highlighting critical issues in the Medicaid 
program, and look forward to continuing to work with states and 
other stakeholders to establish new initiatives and expand upon 
our existing programs to fight fraud, reduce improper payments, 
and improve oversight. Thank you, and I am happy to answer any 
questions.
    [The prepared statement of Dr. Agrawal follows:]
    
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    Mr. Murphy. Thank you very much. Let me recognize myself 
for 5 minutes and keep this moving. We appreciate your input on 
this, and some ideas here.
    Dr. Agrawal, the improper payment rate for Medicaid program 
was 6.7 percent in fiscal year 2014. That was an increase over 
fiscal year 2013, where it was just 5.8 percent. Now, CMS set 
the target rate for Medicaid payments at 5.6 percent, so CMS 
failed to meet the target rate for 2014, is that correct?
    Dr. Agrawal. That is correct.
    Mr. Murphy. So why was the target rate not met?
    Dr. Agrawal. Yes, there are three major components of the 
PERM rate of the Medicaid improper payment rate. There is a 
fee-for-service component, a Medicaid managed care component, 
and then a beneficiary eligibility component, and what I think 
you see in the error rate is a bit of a mixed picture. So on 
one hand, the beneficiary eligibility rate, which was a central 
topic in the GAO report, did actually decrease, from 3.3 
percent to 3.1. Where we saw the biggest rise was in the 
provider screening and enrollment standards in the fee-for-
service component. What I think the increase shows is that 
states are in various places of implementing those screening 
standards, which has led to an increase in the error rate in 
that part of PERM.
    Mr. Murphy. But for 2015 they have set this improper 
payment rate target at 6.7 percent, and that is the same rate 
it was in 2014. It is actually higher than the improper payment 
rate for 2013 and 2014. So why is CMS actually raising that 
improper payment rate, that error rate, for Medicaid instead of 
lowering it, and setting a target for reduction of errors?
    Dr. Agrawal. Well, I think, you know, we clearly want to 
make progress on the improper payment rate and Medicaid. The 
biggest driver right now are those provider enrollments and 
screening standards. You know, obviously we want to continue to 
make progress on the beneficiary eligibility requirements as 
well. You know, what we find is that states are in various 
different places of implementing their screening and enrollment 
for providers. It is a major driver.
    I think there are a lot of tools that we have to help 
states make progress, including oversight, education, guidance, 
giving access to more data systems. But I think we want to set 
realistic targets and, you know, work on that to make sure 
states can meet them.
    Mr. Murphy. And we want to help you with this. We just want 
to make sure that the information that this Subcommittee gets, 
this Committee gets, can help facilitate that process. But if 
we raise our tolerance level for errors, and then we say, well, 
it is all within what we accept, that's not acceptable, so I 
really want to caution you on that. What I am hoping, that we 
can not have that goal, but really work towards of a goal of 
how to lower it, and then identify those outliers. And, I mean, 
you heard the opening statements. This subcommittee is with you 
on trying to identify mechanisms for this.
    Now, the Office of Management and Budget has designated 
Medicaid as one of 13 programs as higher, with Medicaid ranking 
third, with $17.5 billion in improper payment amounts. So does 
CMS know why Medicaid has been designated by OMB as a high 
error agency, Dr. Agrawal?
    Dr. Agrawal. Yes. There are clearly important factors in 
the size and scope of the program. The fact that the program is 
administered in numerous, different state Medicaid agencies, 
and require a great deal of collaboration. I am sure it does 
also reflect our historical error rate. So I think the 
designation of it being a high risk program certainly makes 
sense.
    I would also add, Chairman, to your last question that part 
of, what we see as the dynamic in program integrity, which is, 
I think, important to think about, is that as requirements 
increase, as the stringency of the program increases, 
oftentimes we also see an increase in the error rate as a 
result, because providers, or other stakeholders, such as 
states, need time to catch up to requirements. I think that is 
a common underlying element to many factors in the error rate, 
but specifically the provider enrollment standards that the ACA 
created.
    Mr. Murphy. Well, let me move on to something else here. 
Director Bagdoyan, the GAO has also designated Medicaid as a 
high risk program since 2003.
    Mr. Bagdoyan. Right.
    Mr. Murphy. What are the criteria that land the Federal 
program into that kind of category, and it has been that way 
for a long time?
    Mr. Bagdoyan. Yes. For Medicaid, Mr. Chairman, the specific 
factor that we cited in our report is the fact that its fiscal 
oversight over the years has been not where it should be, and 
within that, the----
    Mr. Murphy. Fiscal oversight at the Federal level, or 
state, or both?
    Mr. Bagdoyan. That would be at both levels, since it is----
    Mr. Murphy. OK.
    Mr. Bagdoyan [continuing]. A joint program. And then, 
further within that context, of course, the risk of improper 
payments and/or fraudulent activity contributes to that 
designation.
    Mr. Murphy. And part of this too is--we see that you are 
collecting data. You couldn't even get data from some of the 
states because it just isn't there. Is there things we need to 
do or things that you can recommend as well--what we need to 
make sure that states have been presenting data so we can 
analyze it and identify the problem, either one of you?
    Mr. Bagdoyan. I would go first. Obviously data analytics is 
the growing field, and it would be incumbent upon both the 
Federal Government and the states to really pay attention to 
the quality of their data, the collection, the analysis, the 
reliability to make cross-comparisons and other analyses.
    Mr. Murphy. And what we usually have as our tools in 
Congress is a carrot or a stick to enhance that, I am out of 
time here, but I would be looking forward to your comments of 
what we could do, because without the data, you can't provide 
an accurate recommendation to us. Ms. DeGette, 5 minutes.
    Ms. DeGette. Thank you. Dr. Agrawal, in March 2011 CMS put 
into place new requirements for enrolling and re-validating 
Medicaid providers and suppliers, is that correct?
    Dr. Agrawal. Yes, that is correct.
    Ms. DeGette. And the new process separates providers and 
suppliers into categories of risk, either high, moderate or 
limited risk for additional screening before enrollment or re-
validation in the Medicaid program, is that correct?
    Dr. Agrawal. That is correct.
    Ms. DeGette. And, briefly, how does CMS determine which 
risk category an individual provider or supplier will be put 
into?
    Dr. Agrawal. Sure. So these risk categories are done at the 
provider sort of group level, or provider type level. So it 
isn't an individual provider that we would be placing in these 
various categories, it would be a whole class, such as--newly 
enrolling home health agencies are considered high risk.
    Ms. DeGette. I see.
    Dr. Agrawal. And we designated these risk levels based on 
input from multiple sources, including the HHS OIG, based on 
historical levels of fraud or----
    Ms. DeGette. Fraud.
    Dr. Agrawal [continuing]. Issues with those specific 
provider types.
    Ms. DeGette. OK. And do the states also have to implement 
screening requirements before they enroll a provider in the 
Medicaid program?
    Dr. Agrawal. They do. Those requirements are largely 
identical to Medicare's.
    Ms. DeGette. And those go into effect March 2016, 5 years 
after the regulation first went into effect, is that right?
    Dr. Agrawal. Many of the requirements have had to be 
implemented by now already.
    Ms. DeGette. OK.
    Dr. Agrawal. There were already deadlines. I think what you 
are referencing is a re-validation deadline----
    Ms. DeGette. Right.
    Dr. Agrawal [continuing]. Yes, March of 2016.
    Ms. DeGette. OK. And then, after everything is either 
validated or re-validated, it has to be re-validated again 
every 5 years, is that right?
    Dr. Agrawal. That is correct.
    Ms. DeGette. Now, is CMS working with the states to 
implement these new requirements?
    Dr. Agrawal. We are, across the board. So, we have largely 
the same requirements in Medicare and, therefore, are 
undertaking the same work in the Medicaid program. Where 
possible, we have made data assets available to states so that 
they can utilize the results of our screening. For example, I 
referenced PECOS, where we have done a site visit, or 
fingerprint-based background check. States have access to that 
data so that they don't have to duplicate those----
    Ms. DeGette. OK.
    Dr. Agrawal [continuing]. Initiatives.
    Ms. DeGette. And are the states generally on track with 
their implementation?
    Dr. Agrawal. You know, states are in really different 
places, what we----
    Ms. DeGette. OK.
    Dr. Agrawal [continuing]. Find. So, when we do the PERM 
rate measurement every year, or do state program integrity 
reviews, there are certain states that are well advanced in 
their implementation of these requirements, and other states 
that are lagging quite far behind.
    Ms. DeGette. And so I assume those are the states you are 
focusing on, trying to get them----
    Dr. Agrawal. Correct. We can increase the amount of 
oversight, we can offer more technical assistance, education 
efforts, things like that.
    Ms. DeGette. Now, these efforts were not included in the 
data of the GAO report, which went for 2011 data, is that 
right?
    Dr. Agrawal. That is right.
    Ms. DeGette. Yes or no will work.
    Dr. Agrawal. Yes.
    Ms. DeGette. Thank you. Now, Mr. Bagdoyan, in your written 
testimony, which you confirmed in your testimony today in the 
Committee, you said CMS has taken steps since 2011 to make the 
Medicaid enrollment verification process more data-driven. I am 
assuming you are talking about some of these implementations 
that----
    Mr. Bagdoyan. Right.
    Ms. DeGette [continuing]. Dr. Agrawal is----
    Mr. Bagdoyan. Yes.
    Ms. DeGette [continuing]. Talking about.
    Mr. Bagdoyan. That is correct.
    Ms. DeGette. Do you think that these steps will help close 
some of the gaps GAO identified in the report with regard to 
potentially improper fraudulent payments?
    Mr. Bagdoyan. Sure. As I mentioned in my closing, those 
steps will definitely add to the toolbox that CMS and the 
states have, and narrow the opportunities for potential 
improper payments and fraudulent activity. They will probably 
play out over time. As Dr. Agrawal said, some states are in 
different places than others, so----
    Ms. DeGette. And we have to focus on the ones who are----
    Mr. Bagdoyan. That is correct.
    Ms. DeGette. Yes.
    Mr. Bagdoyan. Long term implementation success and 
sustainability will be key in these areas.
    Ms. DeGette. Now, since 2011, do you agree that CMS has 
taken measures to address some of these real concerns that you 
raise in your report, like the deceased providers billing 
Medicaid, providers with suspended or revoked licenses, and 
people inappropriately using virtual addresses? Are they 
working on that now?
    Mr. Bagdoyan. I think they are taking steps. They are in 
the right direction, we believe, but execution and 
sustainability will be, again, key for both----
    Ms. DeGette. I agree.
    Mr. Bagdoyan [continuing]. Federal Government and the 
states.
    Ms. DeGette. Yes. I appreciate GAO's sustained work on this 
issue. Excuse me, that is my child. She programmed my phone to 
bark when----
    Mr. Bagdoyan. Distinct voice that your child has.
    Ms. DeGette. Yes. That is my other one. But I am glad that 
you both agree that the Affordable Care Act has changed the way 
we prevent and address Medicaid fraud, and I look forward to 
it. As we said, Mr. Chairman, we are going to be back here in a 
couple of years, making sure that these ACA requirements have 
been implemented. Thank you.
    Mr. Murphy. Thank you. I now recognize Mr. McKinley for 5 
minutes.
    Mr. McKinley. Two quick questions. One, the CMS has raised 
its proper payment rate target from fiscal year 2015 to 6.7 
percent, from the 5.6 target rate in 2014. Is that a good 
internal control practice, to raise the target rate?
    Dr. Agrawal. Sir, are you asking me?
    Mr. McKinley. Yes.
    Dr. Agrawal. No. I do appreciate the question, and, again, 
I think it is important to set realistic targets and goals that 
do push us to improvement, but at the same time recognize that 
Medicaid is a state and Federal program that states are in 
various places of implementing things like the provider 
enrollment standards, which are the major driver of the 
improper payment rate at this point.
    Mr. McKinley. OK. Let me get to the question I had from 
West Virginia, and it is more of a question, I think, of--
perhaps abuse and errors. Let me frame the argument. In West 
Virginia, \1/3\ of the hospitals we have in West Virginia are 
critical access hospitals. We are a very rural state. And for 
nearly 30 years, since the early '80s, West Virginia's critical 
access hospitals have been using a provider tax to supplement 
and provide resources for them.
    In 2012 CMS hired a different auditor from all of these 
past 30 years, and this new auditor stepped in and said that 
process isn't approved anymore, and we are going to go back 
and--we are auditing you back until 2009, and--trying to 
recover the money that you previously were working under the 
idea that this was the appropriate way to go about getting the 
provider tax revenue coming in. This is going to be an 
incredible hindrance for these hospitals to provide medical 
care in rural areas of West Virginia, when we go backwards on 
them after they were working under the idea that they thought 
they were working properly.
    So we have talked about--can we go forward from here, not 
go back and try to penalize them for following someone else's 
advice, that was also with CMS? Now we go forward. We have 
written letters. We have had conversations with CMS--until 
recently, but CMS really was disengaged with us. Now these 
hospitals are all getting invoices 3 years after 2012, when 
they were told, we are not going to allow that anymore, now in 
2015 they are getting invoices that they say they have to pay 
them within 15 days, or they are going to have the funds 
withheld.
    First, I don't know of any private sector--coming from the 
private sector--I have got 50 years in the private sector. I 
have never heard of someone saying, if you don't pay within 15 
days, we are taking it out of your hide. That just doesn't 
work. There are no details on these invoices. And when they 
have asked, can we get the details of what this invoice 
includes, and they say that they can't have it. They are being 
denied access to what the invoice reflects.
    I hope you understand, this kind of smacks of bullying on 
the part of CMS to rural hospitals. Especially given the fact 
that they were told to use this, this was OK. And now a new 
auditor has a different opinion. So do you think CMS is 
handling this crisis in West Virginia, and probably in other 
rural areas of this country? Do you think CMS is handling this 
sensitively and appropriately?
    Dr. Agrawal. Congressman, I appreciate the question. I can 
tell you that CMS has definitely been focused on critical 
access hospitals and rural hospitals, and the various policies 
we promulgate, including payments and other policies. I will 
tell you, I am not aware of the specifics of this particular 
situation. I understand some of the details now from what you 
have explained. However, I think I would have to connect you to 
the other folks in the agency that are directly working on this 
issue, but I would be happy to take it back.
    Mr. McKinley. If you would, please. We have been given the 
runaround. I have never seen so many fingers pointing in 
different directions. It is not my problem, it is someone else, 
and we have been trying to pursue that. So if you can help us 
on that, we will put you on record. OK. You are under oath that 
you said you were going to help, so----
    Dr. Agrawal. Thank you, Congressman, I appreciate that. I 
will----
    Mr. McKinley. I will remind you----
    Dr. Agrawal. I will think of that.
    Mr. McKinley [continuing]. Of that in the future. But thank 
you, because we need to get this resolved. Remember, a third of 
the hospitals could very well go under if they have to make 
these payments. Thank you.
    Dr. Agrawal. Thank you.
    Mr. McKinley. Yield back.
    Mr. Murphy. Gentleman yields back. Now recognize the 
Ranking Member, Mr. Pallone, for 5 minutes.
    Mr. Pallone. Thank you. GAO reports that CMS has made 
several changes since 2011 to help limit improper payments, and 
these steps may address many of the potential improper payments 
GAO found in their analysis of 2011 claims. In addition, to 
noting in their progress already made, GAO made two 
recommendations to further improve efforts to limit improper 
payments by increasing information and data sharing efforts 
between the Federal Government and the state Medicaid programs, 
and GAO first recommended that CMS help states better identify 
deceased beneficiaries.
    I want to ask a question of each of you, but I have got 
three sets here, so we have got to go fairly quickly. Mr. 
Bagdoyan, can you comment on GAO's findings that led to this 
recommendation?
    Mr. Bagdoyan. Well, we did matching of deceased roles from 
the death master file. That is the complete file that has about 
98 million records, and we matched those against claims data, 
and we discovered those beneficiaries who had been deceased 
before their services were billed for, so----
    Mr. Pallone. OK. And, Dr. Agrawal, what steps is CMS taking 
to implement this recommendation?
    Dr. Agrawal. Yes. We take the recommendations very 
seriously, and, as I mentioned, we do appreciate the report. 
Specifically for the dead beneficiaries issue, there are 
clearly things that we have done, like implement the Federal 
data hub that allows states to check for death and other issues 
on the front end. We are also looking to work with our 
technical advisory groups with the states and recommend more 
guidelines for the states to both access the right data, and 
then access it frequently enough.
    Mr. Pallone. OK. The GAO next recommended that CMS apply 
more complete data for screening Medicaid providers by 
providing states with full access to the Provider Enrollment 
Chain and Ownership System, or PECOS, database. So, again, Mr. 
Bagdoyan, can you describe the PECOS system? Can you comment on 
how states are using PECOS, and why GAO issued a recommendation 
for CMS to provide additional guidance to states?
    Mr. Bagdoyan. Sure. Thank you for your question. With PECOS 
it is a situation where states would need access to the system 
electronically so they can be able to run batch searches, if 
you will. I know it is a little technical term, but right now 
they have to do a manual search on a case by case basis each 
name, each time in order to get a result, whether there is an 
issue or not. So that is the essence of our recommendation, is 
to get them the automated access that would allow them to do 
bigger and wider searches at once.
    Mr. Pallone. Thanks. Dr. Agrawal, what training and 
guidance has been provided to states on using the PECOS system, 
and what additional efforts will you be undertaking?
    Dr. Agrawal. Sure. So we have two different kinds of access 
to PECOS, one that is the sort of provider-by-provider real 
time access to the system, but since this analysis was done, we 
have also been making data extracts available to states so that 
they can use those extracts and compare them against their 
entire enrollment file. We have already made changes to those 
extracts based on state input, and are looking to expand them 
as we go on.
    With respect to guidance, we do offer education in using 
CMS data assets to states through things like the Medicaid 
Integrity Institute. We also offer other technical guidance, 
and sort of case-by-case help as needed, and states can contact 
us for that.
    Mr. Pallone. All right. Let me see if I get my third 
question in. Given that Medicaid is a joint state/Federal 
program, states have a very important role to play in 
preventing improper payments. It sounds like there is a fair 
amount of Federal information available to states, but that not 
all states are taking full advantage of what is available. So I 
will start with Dr. Agrawal. How can states be encouraged to 
use the data available to them?
    Dr. Agrawal. Yes, I think that is a great question. So, 
there are data assets like PECOS and PARIS, where we know that 
all states have access. And I think part of getting them to use 
it offering the guidance, offering the technical input to make 
sure that they are using the data in the right way, and using 
it as frequently as they can. With something like PARIS, for 
example, we were able to release guidance, and ask all states 
to not only input their data every quarter, but also to use 
that data in their enrollment efforts every quarter.
    Mr. Pallone. OK. And, Mr. Bagdoyan, based on GAO's 
findings, how can the states more effectively use the data 
available to them?
    Mr. Bagdoyan. I think I would echo Dr. Agrawal's comments. 
I think, if they are available, once they are available, they 
would be encouraged through guidance, they would be held to 
account to make sure that this works as intended. I mean, 
again, it is a partnership. It is a common model, if you will, 
to make this work.
    Mr. Pallone. All right. Just want to thank both of you. In 
addition to the important tools already added by the Affordable 
Care Act, I am encouraged that CMS implementation of GAO's 
recommendations will further help state Medicaid programs in 
their efforts to address this persistent issue. So thanks 
again. Thanks, Mr. Chairman.
    Mr. Murphy. Thank you. Now recognize Dr. Burgess for 5 
minutes.
    Mr. Burgess. Thank you, Mr. Chairman. One of the hazards of 
having been on this committee for a number of years is you see 
themes repeating themselves. And, Chairman Murphy, I remember 
very well a morning in late September 2008, when we held a 
Health Subcommittee hearing downstairs, and we had some, I 
don't know, 8, 10, 12 witnesses. It was a pretty varied panel. 
Karen Davis from Commonwealth, Steve Parenti from the McCain 
campaign, the late Elizabeth Edwards was one of the panel 
members, and it was all a panel to discuss what is it going to 
cost to provide health care to everyone who lacks health 
insurance in this country. And the estimates were quite varied, 
and they ran from $60 billion a year to $800 billion a year.
    Chairman Murphy, I remember you asking the question, how 
could there be so much variation? And Steve Parenti, on the 
panel, was the only one willing to take it on, and said, well, 
if you provide Medicaid to everyone, and that is how you expand 
your coverage, that is the lower number. If you provide Federal 
employee health benefit plan to everyone, which was being 
talked about by some of the candidates at the time, that is the 
higher number.
    So I guess my point is, everyone knew going into everything 
that became the Affordable Care Act that the way to expand 
coverage without blowing up the cost was Medicaid expansion. 
Why wouldn't you fix some of these problems before you 
undertook to expand a program that, if I understand correctly, 
Mr. Bagdoyan, it was already on a watch list in 2008, and 
certainly on a watch list in 2009, when the law was written in 
2010, when the law was signed. But really, why not put the 
effort on the front end? The way we are going to expand 
coverage is through Medicaid, maybe we could deal with some of 
these problems. What about the fact we have got dead people 
that we are paying money for? What about the fact we have got 
people who are receiving benefits in two states simultaneously? 
That is not supposed to happen, is it, Dr. Agrawal?
    Dr. Agrawal. That is correct.
    Mr. Burgess. Then the whole issue--GAO in 2005 or 2006 put 
out a report about the third party liability--Medicaid will pay 
a claim when a person has private health insurance. And, 
really, Medicaid is supposed to be the payer of last resort, 
not the payer of first resort. And we have never really 
satisfactorily dealt with that problem, have we?
    Mr. Bagdoyan. I am not familiar with the report.
    Mr. Burgess. Well, I will tell you, no, we have not. So 
here we have it here, three very basic steps, don't pay the 
dead people, don't pay people twice, and, hey, if Aetna, 
United, Cigna is supposed to be paying the bill, you get them 
to pay first, before the state reimburses on their Medicaid 
system. Relatively simple steps that could have been done 
before expanding a program massively. And now we are in a 
situation where not every state has expanded their Medicaid.
    And Dr. Agrawal, let me just ask you, when states come in 
with their proposals, if a state is considering expanding 
Medicaid in their state, and some states are, whether I think 
that is correct or not, some states are, when they come in with 
those proposals, are you talking to them about the fact that 
there are some inherent problems in the Medicaid system, and we 
would like to see those fixed before you double your number?
    Dr. Agrawal. Yes, thank you for the question, Dr. Burgess. 
So I think our relationship with the states is such that we are 
talking to them regardless of whether or not they are seeking 
to expand their Medicaid programs. There are current program 
integrity challenges and vulnerabilities, as the GAO has 
pointed out. They exist in the current Medicaid program. Our 
state oversight efforts, whether it is the PERM rate, or state 
program integrity reviews, include all states, not just those 
that are expanding.
    I think, to your larger point, what we are trying to do is 
balance real program integrity interests and needs against the 
needs of socioeconomically disadvantage population that needs 
access to health care and health----
    Mr. Burgess. Let me stop you there, because time is going 
to become critical. In my opening statement I referenced a 
problem that was related to dental care in the State of Texas. 
You have got a real problem. People who should be barred from 
ever participating in the program again simply dissolve into 
bankruptcy, and re-emerge someplace else. What are you doing to 
keep that from happening?
    Dr. Agrawal. There are clearly efforts that we--we do 
conduct collaborative audits and investigations with states 
and, where appropriate, encourage states to take termination 
actions in their programs. I think you referenced the exclusion 
authority by the HHS OIG. We obviously agree that that is a 
very powerful authority. We encourage OIG to implement it where 
appropriate. And where they do, we can take revocation action 
quickly behind it.
    Mr. Burgess. Let me just, before time expires, Dallas 
Morning News over the weekend, an article that I think is part 
of a series of articles about how private nursing homes are 
drawing down dollars by combining with a public entity, and 
some of these are fairly low ratings on the star rating on the 
nursing homes. Are you working with the states to address this 
problem?
    Dr. Agrawal. Yes. I am not aware of the specific nursing 
homes, but we do have survey and certification, and other 
rating functions CMS uses to work with states on these issues.
    Mr. Burgess. Well, $69 million just to these nursing homes 
identified last year, so it is a place where we need to put 
some effort. Thank you, Mr. Chairman, I will yield back.
    Mr. Murphy. Gentleman yields back. Now recognize Mr. 
Kennedy for 5 minutes.
    Mr. Kennedy. Thank you very much, Mr. Chairman. Thank you 
to our witnesses for coming today, and for your testimony at an 
important hearing. I want to touch base a little bit on the 
improper payment rate, and put that in context. Medicaid 
program provides about 70 million low income and disabled 
Americans with vital health care services, and we must do 
everything we can to strengthen it and protect it. As you have 
heard from my colleagues here this morning, no one, Democrat or 
Republican, is in favor of fraud. We clearly want to make sure 
this program is as lean as it possibly can be, and that the 
people that need help and need the services are getting them.
    So, to that end, Mr. Bagdoyan, I would like to begin with 
you. Since its peak of 9.4 percent in 2010, the improper 
payments rate for the Medicaid program has steadily decreased, 
reaching a low of 5.8 percent in 2013, or $14.4 billion. That 
number rose to 6.7 percent in 2014, or $17.5 billion. Is that 
right?
    Mr. Bagdoyan. That is correct, sir.
    Mr. Kennedy. So I want to dig into that number a little bit 
deeper and see if I can better understand the dynamics that 
are, in fact, driving that improper payment rate. The ACA 
provided CMS with a number of new tools to strengthen program 
integrity in the Medicaid program. In 2011 CMS established a 
new risk-based screening procedure for Medicare, Medicaid, and 
CHIP providers. CMS also promulgated new regulations, requiring 
the states to use electronic data maintained by the Federal 
Government to verity and revalidate beneficiary eligibility 
through the data services hub.
    So, Dr. Agrawal, let us break down that payment rate into 
its relevant components. I know you touched on this a little 
bit earlier. If I understand this correctly, Payment Rate 
Measurement Program, or PRM, measures error rates both overall 
for the Medicaid program, as well as for certain subcategories, 
fee-for-service, managed care, and beneficiary eligibility. Is 
that right?
    Dr. Agrawal. That is correct.
    Mr. Kennedy. So what has happened to that beneficiary 
eligibility error rate since 2011?
    Dr. Agrawal. I think that is an important point, and it 
does highlight some of the intricacy in the rate. The 
beneficiary eligibility error rate has actually been cut in 
half since 2011.
    Mr. Kennedy. So the error rate for--beneficiary eligibility 
rate cut in half, declined by three percent. Is that a 
substantial improvement, major improvement, small improvement? 
How do you characterize it?
    Dr. Agrawal. I think, given the issues that GAO has 
highlighted, that is obviously a substantial improvement. More 
work remains to be done, which we are focusing on, but it does 
indicate good progress.
    Mr. Kennedy. And so what is driving that improvement, then? 
Is it the result of, in your opinion, the work CMS has been 
doing to implement the new program integrity tools in the ACA? 
Is it something else? What is behind the success?
    Dr. Agrawal. I think it is work being done at both the 
Federal and state levels between increased collaboration, more 
education and technical guidance going to states, better data 
assets that have been highlighted by Mr. Bagdoyan.
    Mr. Kennedy. Given that large drop in the error rate for 
beneficiary eligibility, what factors are driving the increase 
in the overall PERM rate? And I realize you touched on this a 
little while ago, but if you could flesh that out a little bit 
for me?
    Dr. Agrawal. Sure, no problem. The biggest driver of the 
increase in the rate are provider enrollment and screening 
standards. And, again, as with other PI aspects of program 
integrity, whenever there is a new requirement, certain 
stakeholders, in this case states can experience some 
difficulty in keeping up. So what we have found, that, while 
some states are quite far along, other states are lagging 
behind, and generally that is causing the error rate to rise.
    Mr. Kennedy. And how do we get those other states to pick 
up the pace?
    Dr. Agrawal. Well, we exercise oversight in a variety of 
ways, so I think it is both what can we offer them in terms of 
collaboration that will help, like technical assistance, data 
assets like PECOS, and then where can we exercise real 
oversight? We do that through the PERM rate. We require states 
to submit corrective actions to improve the error rate going 
forward, and also conduct state program integrity reviews, with 
associated corrective action plans where states fail to meet 
requirements. So I think it is a mix of both of those things.
    I think the error rate increase in that particular aspect 
is the reflection of more stringent policy, which in and of 
itself is a good thing. We need that policy.
    Mr. Kennedy. What, if anything, can this committee do to 
help you with that?
    Dr. Agrawal. I appreciate the question. I think holding our 
feet to the fire is appropriate.
    Mr. Kennedy. You are welcome.
    Dr. Agrawal. Thank you very much. I also think encouraging 
states to stay on the right path, take advantage of the various 
resources that we offer, identify improvements that we need to 
make so that they can make progress, would be extremely 
helpful.
    Mr. Kennedy. And, again, just putting this in context, if I 
understand Mr. Bagdoyan, the GAO report, it was four states, 
yes?
    Mr. Bagdoyan. Yes.
    Mr. Kennedy. And it covered 9.2 million Medicaid 
beneficiaries, right?
    Mr. Bagdoyan. That is correct.
    Mr. Kennedy. And I know we talked a little bit about the 
200 or so deceased beneficiaries that received payment. If we 
were to put that--just so I understand it, that is 200 out of 
9.2 million, right?
    Mr. Bagdoyan. My math is not that good.
    Mr. Kennedy. Right. If we wanted to put that in that 
percentage, though, if you take my word for it that my iPhone 
calculator ain't so bad, that is .00002, four zeros and then a 
two--as far as error rates go, nothing is acceptable, but we 
are doing OK if it is 200 out of 9.2 million, right? You guys 
are doing your jobs?
    Mr. Bagdoyan. Well, that is we found is 200 out of the 9.2 
million. That is all I am prepared to say.
    Mr. Kennedy. Well, thank you for your work on this. Thank 
you for your research, and being here today, and highlighting 
an important issue for the hearing.
    Mr. Bagdoyan. Thank you.
    Mr. Murphy. I guess this can go in the category of lies, 
damn lies, and statistics. We appreciate it no matter what it 
is, and we are all in agreement that we want to make sure we 
rid that--Dr. Bucshon, you are next for 5 minutes.
    Mr. Bucshon. Thank you, Mr. Chairman. First of all, I was a 
practicing physician for 15 years, as I had mentioned to our 
witnesses beforehand. I have taken care of all patients, 
regardless of their ability to pay, which is what we do in 
health care. But I just want to highlight that all is not rosy 
with Medicaid. And I know this hearing is about waste, and 
fraud, and abuse, but I am from Indiana, and our medical 
practice routinely wrote off hundreds of thousands of dollars 
from a neighboring state's Medicaid program in billings every 
year because they ran out of money before the end of the year, 
and this pre-dates the ACA.
    The other thing is that the program within our own state 
has been financially challenged historically with a significant 
Medicare provider cut within the last 10 years just to stay 
afloat. That said, Medicaid is a critical program that we have 
to have for our citizens. What can we do? Well, Indiana has 
expanded our Medicaid program using an innovate plan called 
Healthy Indiana Plan 2.0, and I am hopeful that this state-
based plan, as well as state-based plans around the country, 
can be used as a proving ground how to move forward on our 
Medicaid program.
    Some facts about the Medicaid expansion that are not 
surprising to me, but seem to be surprising to those who wanted 
to expand traditional Medicaid, is that ER visits are up, in 
some cases dramatically up, in multiple studies across the 
country. And the hospitals are very happy, but we have made no 
progress because this is the highest cost form of medical care 
available in the country. And so, having a card in your pocket, 
but having no access to primary care physicians or others 
outside of the emergency room is not progress. And the 
encouragement to seek preventative care, as was mentioned 
earlier, may be technically true, but functionally not accurate 
because you can't get preventative care if no one takes your 
coverage.
    States that have expanded Medicaid are already starting to 
look for ways to pay for the program once the Federal money for 
the expansion goes down to 90 percent, and my concern is 
reimbursement cuts will be the way that will happen. And what 
does that do? Further limits access to the citizens in their 
states. And if anyone doesn't think that sometime in the future 
that the Federal Government will look for a way to pay for 
other things by further cutting that expansion money to the 
states on their Medicaid program, then you are not following 
the government very well.
    That said, I do have a couple of questions. And, again this 
is a very important hearing. I saw that we limited the study, 
Mr. Bagdoyan, to the four states. Why did we pick these states, 
and did the GAO try to include other states in your study?
    Mr. Bagdoyan. Thank you for your question, Dr. Bucshon. The 
way we picked our states is we began with the universe of 
beneficiaries per state, and then we also looked at data 
reliability, as well as geographic dispersion. So those were 
the three key factors that we used to pick these states. Now, 
data reliability being a very important factor, we don't have 
reliable data, we can't do our analysis.
    Mr. Bucshon. And that segues into Dr. Agrawal. The data we 
were just talking about, not accurate from states, how do you 
envision the progress we are making in information sharing on 
Medicaid between the states and the Federal Government? How can 
we improve on that situation so if, in the future, we want to 
study this situation, we can pick any one of the 50 states? How 
are we doing?
    Dr. Agrawal. Yes, thank you. I think that is a really 
important question. Data is really central to program integrity 
work. What we have found is access to the right data set can 
really increase the sensitivity and specificity of our leads. 
The agency has made some of the biggest investments we have 
ever made in improving Medicaid data assets in programs like T-
MSIS, which is seeking to dramatically increase the amount of 
data and the kind of breadth of that data that we get from 
state programs.
    In addition, Congress has funded previous programs like the 
Medi-Medi, which encourages Medicare and Medicaid data sharing 
and integration specifically for program integrity purposes, 
and we have been engaged in that process for years now.
    Mr. Bucshon. Is proprietariness among different systems a 
problem? What are the barriers to, it seems like it would be 
simple, right, but there are barriers.
    Dr. Agrawal. There are, and I am not a technologist, but 
there are clearly differences between systems, and getting data 
integration to occur, that is not a trivial task at all, 
especially, you know, amongst 50 different states. So, yes, 
there are some real technical barriers to getting the right 
data formatted in the right way so that it is readily 
accessible.
    Mr. Bucshon. But some of it is not just about money, right, 
where the systems don't want to communicate because of 
proprietary control over data?
    Dr. Agrawal. I am not sure how much proprietary issues 
stand in the way. I think it is more technical implementation. 
And then, yes, resourcing is important to make sure that we can 
adequately make this all work together.
    Mr. Bucshon. Thank you. Mr. Chairman, I yield back.
    Mr. Murphy. Ms. Clarke, you are recognized for 5 minutes.
    Ms. Clarke. Thank you, Mr. Chairman, and I thank the 
Ranking Member, thank our witnesses for their testimony here 
today. I am glad we have had the opportunity today to talk 
about the Medicaid program, and how many people it helps across 
the country. As of February 2015, over 70 million people were 
enrolled in Medicaid. The number of enrollees will continue to 
rise, as 30 states have expanded Medicaid, and even more states 
are considering doing so. We know that fraud and improper 
payments have long been a reality of the Medicaid system, but 
with the passage of the Affordable Care Act in 2010, we have 
made significant steps to strengthen the Medicare, Medicaid, 
and CHIP programs by reducing waste, fraud, and abuse.
    Dr. Agrawal, I would like to ask you about the Affordable 
Care Act anti-fraud measures, and how they have strengthened 
the Medicaid program. In your testimony you noted that the 
Secretary of HHS can temporarily pause enrollment for new 
Medicaid providers and suppliers if she determines certain 
geographic areas face a high risk of fraud. Dr. Agrawal, how 
does the Secretary make that determination?
    Dr. Agrawal. Yes, thank you. So, you are right, the 
moratorium authority is one of many tools granted to CMS for 
its program integrity efforts. We currently have moratoriums in 
place in seven different metropolitan areas in two main service 
categories, ambulance services and home health agencies. And, 
we arrived at those areas, both the service types and the 
geographies, by doing data analysis to look at where there were 
clear areas of market saturation of these provider types, and 
in all of these metropolitan areas we see somewhere between 
three to five times higher the number of providers of these 
categories than, you know, comparative metropolitan areas.
    We also conferred with our law enforcement colleagues in 
DOJ and OIG to assess where hot spots really are, and where 
billing is really concerning for fraud, and it was really a 
multitude of things that led us ultimately to implement these 
moratoria.
    Ms. Clarke. How have they been effective in preventing and 
reducing fraud in those affected areas?
    Dr. Agrawal. So, what the moratoria really do is, 
essentially, pause enrollment. It stops new providers from 
coming into those areas in these specific provider categories. 
That affords both us and law enforcement the opportunity to 
step up our activities in those areas and remove bad actors 
that are already in those areas prior to lowering the 
moratorium, and allowing new providers to enroll again.
    Ms. Clarke. And has that been effective, in your 
estimation?
    Dr. Agrawal. I think we are still doing data analysis to 
look at how effective the moratorium as a singular tool is, but 
what we are finding is that, in those area, which clearly are 
hotspot areas anyway, we have been able to effectuate literally 
hundreds of revocations of both home health agencies and 
ambulance companies. So, we continue to assess the moratorium. 
We are obviously very concerned about access to care, want to 
make sure that the moratoria don't interfere with access. And, 
so, there are a lot of analytics that go on, as well as 
collaborating with the states.
    Ms. Clarke. And how does the affected states, during the 
moratorium period, how does CMS work with them?
    Dr. Agrawal. So, just as we do more broadly, we engage in 
data exchanges, we work with them on collaborative audits and 
investigations, and then we do those access to care analyses to 
make sure that the moratorium is not having an adverse 
consequence.
    Ms. Clarke. Yes, and on that point, how do you make sure 
that Medicaid beneficiaries are continuing to receive the 
services they need?
    Dr. Agrawal. Right, that is of primary importance. Again, 
these areas in service categories were chosen in the first 
place because of really significant market saturation, making 
access not such a huge problem right at the outset. But, as the 
moratoria have gone on, we have worked, through our regional 
offices at CMS, with the relevant states. We have stayed in 
contact with them, exchanged data to make sure that that 
picture has not changed, and thus far it hasn't. Access to care 
continues not to be a major issue.
    Ms. Clarke. And then, finally, ACA significantly increased 
funding to fight Medicare and Medicaid fraud. How will 
additional funding help CMS address program integrity 
vulnerabilities?
    Dr. Agrawal. Yes. We do appreciate the work of Congress, 
and the leadership of this Committee, in providing more 
resources for us. Those additional resources will allow us to 
continue to invest in existing programs, to encourage, again, 
more data collaboration with Medicaid agencies, provide more 
technical guidance and education. And then, where necessary, 
especially to respond to recommendations like this, we will be 
implementing new initiatives and programs to continue the 
Medicaid and Medicare programs.
    Ms. Clarke. Very well. And just out of curiosity, the 
implementation of the data hub, have you used that 
collaboratively in those high concentrated metropolitan areas 
as you also employ the moratoria?
    Dr. Agrawal. Well, the data hub is really more of a general 
Federal asset for states to utilize at the time of beneficiary 
enrollment and eligibility determinations. It is not really 
specifically focused on moratoria area. Rather, we see it as a 
tool that should be utilized across the Medicaid program, to 
ensure eligibility is done correctly the first time.
    Ms. Clarke. Very well. I yield back. Thank you, Mr. 
Chairman.
    Mr. Murphy. Now recognize Mr. Brooks for 5 minutes.
    Mrs. Brooks. Thank you, Mr. Chairman, and thanks to our 
witnesses for being here. I am a former United States Attorney, 
and so have worked with Medicaid fraud control units run by our 
states' Attorney General, and also with HHS OIG agents, and my 
question is really to both of you about the staffing, and the 
number of people that we dedicate--so while you are very 
focused on prevention, I understand, but deterrence is also a 
wonderful tool, and I am curious about the effectiveness of our 
deterrence. Because if we don't prosecute those, and--while 
certainly I know U.S. Attorneys' offices and Attorney Generals 
are prosecuting all across the country, I don't believe they 
have the resources that they need. These are very complex 
investigations. The last thing they want to do is prosecute 
someone wrongfully, and these are very complicated cases.
    So my question is to both of you about whether it is our 
health care providers, or the beneficiaries who are receiving 
improper payments, what is your thoughts on how we are doing 
with respect to prosecutions?
    Dr. Agrawal. So I appreciate the question. Prosecution is 
obviously an important aspect of health care fraud control 
generally. What we have been doing over the last 5 years, since 
the creation of the Center for Program Integrity, is really 
investing resources in preventing these issues from arising in 
the first place. That includes, you know, payment edits, 
audits, investigations, and ultimately removing a provider from 
the program, if necessary, to stop inappropriate billing.
    As part of that work, we are also collaborating closely 
with OIG and DOJ, making sure that they have data that is 
adequate for their cases, providing them whatever additional 
services or resources they need, even using administrative 
authorities that CMS has, as long as, you know, we are 
obviously following those authorities and implementing them in 
the proper way. So I think it is a balance. I think deterrence 
is obviously very important, and we continue to collaborate 
with law enforcement as needed.
    Mrs. Brooks. Mr. Bagdoyan?
    Mr. Bagdoyan. Yes, thank you, Ms. Brooks. The issue of 
prosecution was not within the scope of our audit, certainly, 
but I would see it certainly as part of the toolbox that I 
alluded to in my opening remarks. So, in its totality, it would 
have to have preventative controls, and the ability to 
investigate, and, if appropriate, prosecute.
    Mrs. Brooks. Let me dig a bit further on the investigation, 
though, and I have seen the reports done by those units, and 
the analysis they do, and it is very complex. And I know that 
in your written testimony you talked about the Medicaid 
Integrity Institute, Dr. Agrawal. How many employees do you 
know across the country deal with Medicaid, state and Federal? 
Any idea? Because I saw in a Reuters report that more than 
4,200 employees have been trained, but there are thousands 
more, I would suspect, but I have no idea.
    Dr. Agrawal. Right. So I am not sure exactly what the total 
number of Medicaid employees is. I think the 4,200 number, what 
that really sort of refers to are state employees that we have 
been able to bring over to the Medicaid Integrity Institute to 
engage in an educational experience on some aspect of program 
integrity, whether it is working with law enforcement, or 
provider enrollment in screening standards, beneficiary 
eligibility, whatever the case may be.
    I think there are definitely more than 4,200 out there. 
Right now, our only constraint is the resourcing and the time 
to get as many employees in as possible. But the program is a 
strong one, I think, because it really allows us to spend 
Federal resources. States have to pay very little to nothing 
for an individual employee to be educated and have access to 
those courses.
    Mrs. Brooks. And are all the courses required to be done in 
person, or could you move to an online training program to help 
states who have constrained budgets have more of their Medicaid 
employees trained?
    Dr. Agrawal. Yes, that is a----
    Mrs. Brooks. I think that is a challenge for a lot of 
states.
    Dr. Agrawal. Agreed, that is a great question. We have, up 
until now, done the vast majority of this educational work in 
person because there is a value to that in-person education, 
being able to conduct seminars, real sort of small group 
trainings. However, I think your point is a good one, and we 
are currently looking at ways of using more virtual training, 
as well as potentially putting MII on the road, so that states 
that can't travel, or for their own policies or whatever, still 
have access to the education.
    Mrs. Brooks. Do you have any sense as to the success of 
this institute? I mean, how many folks have gone back and have 
actually prevented fraud?
    Dr. Agrawal. Yes. So, measuring the impact of education, as 
you are probably aware, is really challenging to connect it to 
specific dollars and cents that are saved. What we find, in 
certainly post-course assessments, is a very high rating by 
state officials that indicate that they really did value the 
education that was given. We do also ask them to self-report 
where they feel the education contributed to recoveries or 
savings. We can give that number to you. But, again, I think it 
is hard to connect education to a specific dollar that is 
saved. I think it is often important to do these activities 
merely because that greater awareness at the state level is 
valuable onto itself.
    Mrs. Brooks. Thank you. I yield back.
    Mr. Murphy. The gentlelady yields back. Now recognize Ms. 
Castor for 5 minutes.
    Ms. Castor. Well, thank you, Mr. Chairman, for calling this 
hearing, and thank you to the witnesses. Thank you for your 
attention to program integrity, and rooting out fraud in 
Medicaid. In Medicaid, every dollar counts, because these are 
dollars that go, in large part, to children and their health 
care needs, and our older neighbors in nursing homes, and other 
hard working Americans.
    Now, CMS has issued several new regulations and guidance 
just in the past month, and I would like to ask you about them 
today. Dr. Agrawal, as I understand it, under the proposed 
regulation for Medicaid managed care organizations, managed 
care providers would be subject to the same screening 
requirements as providers for the fee-for-service program, is 
that correct?
    Dr. Agrawal. That is correct.
    Ms. Castor. And that is especially important because many 
states are moving their Medicaid programs to managed care 
models, is that right?
    Dr. Agrawal. That is correct.
    Ms. Castor. In fact, do you know how many states have 
already shifted, and have instituted Medicaid managed care?
    Dr. Agrawal. I think the majority have. They are at various 
levels. States like Arizona, where it is essentially all 
managed care at this point, and other states that have a hybrid 
population between fee-for-service and managed care. But, that 
kind of enrollment requirement is a vulnerability or an issue 
that has been flagged by both OIG and GAO----
    Ms. Castor. Yes.
    Dr. Agrawal [continuing]. And so we are happy to get into a 
proposed rule.
    Ms. Castor. OK. Elaborate on that. Why did CMS make that 
decision?
    Dr. Agrawal. Yes. So, as you mentioned the rise of managed 
care is definitely occurring in all states, with some at 
various levels of integrating managed care. Previous OIG and 
GAO reports have highlighted that as an issue because, up until 
now, providers that provide services in managed care programs, 
through MCOs, aren't necessarily known to the states. They 
don't necessarily have to go through the same enrollment 
standards. Some states require that. Most don't.
    We felt that this was an important vulnerability or an 
issue to address. Hence, that was one piece of the program 
integrity provisions in that NPRM, and we think that requiring 
the same screening standards will ensure beneficiary safety, 
regardless of whether they choose to stay in fee-for-service or 
managed care.
    Ms. Castor. Good. And, Mr. Bagdoyan, is this a policy 
change that the GAO supports?
    Mr. Bagdoyan. I am aware of the rule coming out, but I am 
not familiar with its details. I would go back to my original 
point that steps like this one would, over time, if executed 
and sustained, help narrow that window of opportunity for fraud 
and improper payments. So that would be my assessment at this 
point.
    Ms. Castor. OK. Dr. Agrawal, my understanding is that the 
proposed rule also imposes new internal compliance and program 
integrity requirements on Medicaid and CHIP managed care plans. 
Can you walk us through those requirements?
    Dr. Agrawal. Sure. There are other requirements of managed 
care plans that include elevating issues, or informing the 
state about audit issues, other vulnerabilities that they have 
identified. It is making sure that they have compliance 
programs in place to ensure the integrity of payments, program 
integrity generally. Those are all new elements that the 
majority of states don't have.
    In addition, there is a data sharing element, which 
requires language in managed care contracts to ensure states 
can still get access to managed care data as needed for 
obviously, we are in sort of the rulemaking process. But, if 
finalized in its current form, would make really important 
progress in program integrity.
    Ms. Castor. And your goal is to complement what is already 
in place at some states? Some don't have similar safeguards, is 
that right?
    Dr. Agrawal. Correct. You can think of this as trying to 
build the safeguards in place that have been started in fee-
for-service. So, the same screening and enrollment standards, 
the same kind of access to data, and making sure that those go 
through to managed care plans. So, again, beneficiaries have 
the choice for which to engage in in states that have both, or 
states can make the transition to managed care without 
necessarily feeling that they have to give up program integrity 
along the way.
    Ms. Castor. OK. I would also like to ask you about the 
guidance CMS issued earlier this week on criminal background 
checks and fingerprinting of certain providers in the Medicaid 
program. First of all, who will be subject to the full 
background check and fingerprinting requirement, and how will 
CMS and state agencies determine if a provider represents a 
high risk?
    Dr. Agrawal. Sure. So you are referring to fingerprint-
based criminal background checks that were one of the ACA 
requirements in enrollment and screening for providers. 
Generally fingerprint checks are utilized for provider types 
that are designated high risk. That would be, for example, a 
newly enrolling home health agency or DME company where there 
has been a history of kind of endemic fraud issues. If you are 
newly enrolling in the state in one of those categories, you 
would be subject to a fingerprint-based criminal background 
check. If CMS has already done it, states can utilize our 
results as their own.
    The only other provider types are those that have already 
been issues in the program, and therefore are on an individual 
basis designated high risk if they try to re-enroll.
    Ms. Castor. Thank you very much.
    Mr. Murphy. Mr. Mullin, you are recognized for 5 minutes.
    Mr. Mullin. Thank you, Mr. Chairman. Doctor, can you walk 
me through the process of what happens when a state medical 
fraud unit identifies a provider that is committing fraud 
within the system?
    Dr. Agrawal. Broadly speaking I can. I will sort of tell 
you the steps that I know, but I will just make the point that 
MFCUs, or the Medicaid Fraud Control Units, actually respond to 
the Office of Inspector General, and they work with program 
integrity units at the state Medicaid agency.
    But I, surmising that the relationship is really similar to 
what we have with our Office of Inspector General, we will 
often initiate investigations based on data assets, beneficiary 
complaints, a host of other inputs. And then, if there is any 
indication of fraud, or patient safety issues, we will send 
that over to the OIG, and oftentimes state Medicaid agencies 
with similar policies, engaging their fraud control unit.
    Mr. Mullin. Can the state Medicaid fraud units indict 
providers?
    Dr. Agrawal. I believe they can, working with regional DOJ 
offices.
    Mr. Mullin. Communication with our Oklahoma fraud unit for 
Medicaid, they indicated that they couldn't. They had to 
basically turn it over to you all.
    Dr. Agrawal. Again, they might be referring to Federal law 
enforcement, either, again, OIG or DOJ. As an administrative 
agency, we don't indict providers. We have various 
administrative authorities and actions, but the most severe is 
kicking somebody out of the program.
    Mr. Mullin. So they can go in and be fraudulent, billing 
Medicaid for millions of dollars, and the worst thing that 
happens to them, they get kicked out of the program?
    Dr. Agrawal. Well, again, we have the administrative 
authorities that we have. We are able to suspend payments, 
terminate the enrollment of providers. And then I think, to the 
point that was made earlier, we do work with law enforcement to 
bring other, more criminal justice activities.
    Mr. Mullin. But we hear reports over and over again about 
providers that were kicked out of the program for having 
fraudulent claims, and then they turn back around, change their 
name, and are back in business the following week.
    Dr. Agrawal. So----
    Mr. Mullin. What is the indicator that you communicate with 
the Federal prosecutors and say, look, we want this guy to go 
to jail----
    Dr. Agrawal. Right.
    Mr. Mullin [continuing]. Or do you guys just don't do that? 
You say, well, whatever, she defrauded the taxpayers millions 
of dollars, but it is up to you?
    Dr. Agrawal. Well, specifically with working with law 
enforcement, we make referrals--I think hundreds, if not 
thousands of referrals, and we can actually get you some 
numbers for the last couple of years to show you how many, to 
law enforcement for those cases that are most concerning for 
fraud, and where we believe a law enforcement action would be 
appropriate, at least from our determination.
    But I think, to your larger question about providers 
reinventing themselves, we too have noted that as a 
vulnerability, and, in fact, have promulgated rules that have 
allowed us to close it by, for example, tracking administrative 
actions, and actually applying them to owners who would try to 
reinvent companies.
    Mr. Mullin. Well, it seems like, to me, if more of them 
went to jail, that might prohibit them from going through. So 
do we know how many actually end up doing jail time?
    Dr. Agrawal. I think that is a question for at least the 
OIG, or the state law enforcement officials.
    Mr. Mullin. Is that a number that you guys can provide?
    Dr. Agrawal. Remember, our authorities don't involve----
    Mr. Mullin. So there is a breakdown in communication is 
what I am saying.
    Dr. Agrawal. No, I wouldn't say that----
    Mr. Mullin. I am asking you, because you kick them out of 
the program, then turn it over, then no one pays attention to 
them anymore. And if the Federal prosecutors aren't willing to 
prosecute, then they come right back into your system, no one 
is paying attention to them, and they end up doing the same 
thing over again. Because if the worst thing that happens to 
them is they get kicked out, then it is not there.
    It might be something that we might want to look at. Maybe 
we ought to let the states do this. If they have a unit that 
specifically identifies claims to Medicaid that the state is 
issuing, and they see fraudulent activities, and they turn it 
over to you, you all kick them out, you all turn it to the 
Federal prosecutors, if they end up getting lost in the chain, 
why don't we simplify the process and just let the state 
prosecute them?
    Dr. Agrawal. Just to be clear, states don't have to go 
through CMS in order to get to prosecutors or law enforcement. 
They do have Medicaid fraud control units that they can go to 
directly.
    Mr. Mullin. But they----
    Dr. Agrawal. They have other----
    Mr. Mullin [continuing]. Can't prosecute them, though.
    Dr. Agrawal. Right. As administrative agencies, the state 
Medicaid agency, CMS, we don't prosecute directly, but we don't 
work with law enforcement to do that. I wouldn't characterize 
it as a communication breakdown. I would characterize it as 
different lines of authority. We are happy to work with law 
enforcement. We provide law enforcement with data on a routine 
basis, work with them sometimes for years as they develop, 
investigate, and take action on cases.
    Mr. Mullin. So do you think there is a better way--quickly, 
because I am running out of time, is there a better way to 
handle this, then?
    Dr. Agrawal. I think it depends on what this is that you 
are trying to improve.
    Mr. Mullin. Well, to prosecute the individuals, rather than 
just kicking them out of the program, and not actually sending 
them to prison.
    Dr. Agrawal. Yes. So it is really important, I think, to 
engage in prevention, because prosecution takes, 
understandably, time, and what we don't want is folks billing 
programs that shouldn't be billing programs. And, so it is 
useful to actually kick them out of the program and stop 
dollars from going out the door. At the same time, if we can 
work with our law enforcement colleagues to get the 
prosecution, we can have the deterrence effect, and other 
impact that we want.
    Mr. Mullin. Appreciate it. Thank you.
    Mr. Murphy. Thank you. Mr. Green, you are recognized for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman. Mr. Bagdoyan, Medicaid 
is a large program, as is Medicare. Would it be fair to say 
that as long as these programs existed, there have always been 
at least some improper payments, some people gaming the system?
    Mr. Bagdoyan. That seems to be the historical record, sir, 
yes.
    Mr. Green. I know it wasn't part of your audit 
specifically, but improper payments were not only associated 
with Medicare and Medicaid, but they are a challenge 
government-wide, I assume.
    Mr. Bagdoyan. That is correct. OMB measures that. I think 
maybe the Chairman or the Ranking Member earlier referred to 
the higher error programs that OMB tracks, so yes.
    Mr. Green. OK. Clearly we want to lower the rate of 
improper payments in programs such as Medicare and Medicaid, 
but it is important to put it in context. This Committee 
examined this issue more than a decade ago. Then, as we are 
discussing today, there were improper payments associated with 
Medicaid and Medicare. But do we want to constantly try to 
eliminate improper payments--and we do want to try and 
eliminate improper payments and better controls.
    On page 14 of your report, your audit mentions that CMS, as 
part of the passage of the Affordable Care Act has put in place 
some new tools that may help bring down improper payments. I 
realize that gaps remain, but do you see this as an important 
step in the right direction?
    Mr. Bagdoyan. I would say they are, and they add to their 
toolbox that I referred to in my opening statement.
    Mr. Green. OK. Do you see any new tools as a step in the 
right direction? If so, can you explain how you think they will 
help us reduce improper payments moving forward?
    Mr. Bagdoyan. Well, the two recommendations we make 
available to states, where the action happens, so to speak, 
with the data they need to better screen both beneficiaries and 
providers.
    Mr. Green. OK. I understand more specifically that CMS 
regulations established a more rigorous approach to verifying 
financial and non-financial information that could help 
determine Medicaid beneficiary eligibility. It has created a 
tool called the data services hub. I know that gaps will 
remain, and bad actors constantly try to find ways to game the 
system, however, does the implementation of this new tool, the 
data service hub, give you some encouragement that we can 
reduce the rate of improper payments?
    Mr. Bagdoyan. Again, by all means it is a step in the right 
direction. Getting the data right and reliable is a key step 
there, as well as having states regular and electronic access 
would be also useful.
    Mr. Green. I am guessing some of these new tools are 
already having some positive effect. I understand the GAO's 
audit has some limitation--mainly due to using data that is now 
almost 5 years old. While I applaud GAO's efforts to help 
strengthen Medicaid through its work, it is unfortunate that we 
cannot see how these new and encouraging tools are working 
until we can examine more recent billing data.
    Mr. Chairman, I hope that we continue to work with GAO and 
CMS to see how these new tools CMS is working on can help us in 
taking out the fraud and abuse. Again, I want to thank GAO for 
the excellent work you are doing, and also CMS for responding 
to what we did in the Affordable Care Act to give you those 
tools. I yield back my time.
    Mr. Murphy. Gentleman yields back. Now recognize Mr. 
Collins for 5 minutes.
    Mr. Collins. I come from the private sector. I am a Lean 
Six Sigma guy. I have brought Lean Six Sigma into a large 
municipal government. I think you both know where I am going. 
It is not a good place. This is the most disturbing hearing I 
have attended in 2 \1/2\ years. I hear you saying that making 
67,000 errors per million opportunities is worth a gold star. 
Six Sigma says you make 3.4 errors per million. 3.4, not 
67,000.
    I will be using today's hearing in my stump speeches, in my 
town halls for a very long time. It is everything wrong with 
government. That you are setting a standard of making 67,000 
mistakes for every million times you try to do something, and 
you are going to reward and congratulate yourselves, this is 
disbelief, absolute, utter disbelief of what is wrong with 
government, to have you two individuals, with smiles on your 
face, and congratulating each other over trying to achieve 
67,000 errors per million opportunities. My mind is blown. I 
know if 1,000 airplanes take off, and 67 of them crash, that is 
a 6.7 percent error rate. I don't think we are going to be 
flying on our airplanes if 67 airplanes crash for every 
thousand that take off.
    In the manufacturing world today, whether it was Toyota 
many years ago, whether it was General Electric, or some things 
I have done, we set a goal of Six Sigma, 3.4 errors per 
million. It is achieved every single day in the private sector. 
And here we are in government, talking about 67,000 errors per 
million opportunities, and how this is progress? This is 
disgusting. It is a waste of taxpayer dollars. It is setting 
the bar so low that, yes, I guess, we had a goal of 5.6, we hit 
6.7, so next year let us make it 6.7. Well, if it is 7.2, then 
the next year it is going to be 7.2, and we are going to have a 
hearing, and you guys are going to self-congratulate each other 
on achieving something like that? I don't even know that you 
can't defend the indefensible.
    So, while I am carrying on here a little bit, I know you 
can't defend the indefensible, but maybe I will let you try. 
And I will also say there is a sign in my office, in God we 
trust, all others bring data. I am a data guy, if you can't 
already tell. That means you need good data. And now I am 
reading that the PERM program, the Payment Error Rate 
Measurement Program, at best, it is using a rolling sampling of 
17 states, the data is not consistent, it is not gathered in a 
consistent way. I have one word for that data, and that is 
garbage. Garbage, complete garbage.
    So, I don't know, Mr. Bagdoyan, do you have anything to 
say?
    Mr. Bagdoyan. Well, Mr. Collins, I thank you for your 
comments. I think our audit was thorough, by our audit 
standards, and our findings speak for themselves.
    Mr. Collins. You are familiar with Six Sigma, right?
    Mr. Bagdoyan. I am indeed, yes.
    Mr. Collins. All right. So, what would you think if you are 
in my world, and I am used to 3.4 errors per million, and you 
are at 67,000? How long do you think you would work for me?
    Mr. Bagdoyan. I take your point.
    Mr. Collins. Yes, not very long. And, Dr. Agrawal, again, 
you are--you seem OK with taking the 5.6 to 6.7. Can you defend 
that? I am going to stand up in front of my residents, and I am 
going to talk about this hearing, and they are going to be 
shaking their heads in total disbelief. You are going to be an 
example of everything wrong with government from this day 
forward in western New York when I tell them at 5.6 percent--
you hit 6.7, so the next year you just changed it to 6.7. If 
that is not oh, my God, I am just--again, this is the most 
disturbing hearing I have ever taken place in. So what do you 
say to the third graders when I tell them that?
    Dr. Agrawal. I think I have made it pretty clear from my 
opening remarks, Congressman, that we do view these findings as 
important, and, while we have made progress, there is more 
progress to be made. I don't view it as any other way. I don't 
view it as just sort of being happy with the results and where 
we are.
    Mr. Collins. Well, my time has expired, but I would suggest 
you set different standards for yourselves, ones that respect 
the B in billions. We talk in government about dollars like 
billions don't even matter anymore because we are trillions in 
debt, and I would suggest that, as somebody who has got 
something to do with this, next year, when they try to raise 
the error rate to 7.2 percent, you actually stand up and make a 
name for yourself and say, I am not going to stand by and let 
that happen. With that, I yield back.
    Mr. Murphy. Gentleman yields back. Just to clarify, Dr. 
Agrawal, did you set the standard at 6.7 percent?
    Dr. Agrawal. No. That is a process that involves a 
different part of the, it is obviously kept separate from folks 
that are trying to make the interventions, right, so that there 
is some objectivity to it.
    Mr. Murphy. And, Mr. Bagdoyan, you more or less audited 
this information and provided it for us, correct?
    Mr. Bagdoyan. Yes. We use it as a point of reference, sir. 
We don't set the number.
    Mr. Murphy. So the follow up to Mr. Collins's question that 
is important for us to know, the process of how that is done? 
Because I think you heard unanimity of opinion, none of us want 
to tolerate that, but we need to know how that is happening so 
we can make changes on this very thing. But I thank you. I now 
recognize Mr. Yarmuth for 5 minutes.
    Mr. Yarmuth. Thank you, Mr. Chairman, and thanks to the 
witnesses. I want to get some clarification on this PERM rate, 
because I am not sure I understand it. If you characterize 
these as errors, are these errors that CMS made, or are they 
errors that--just some kind of incorrect payment was made? So 
you would have had, for instance, a bill come in that was coded 
incorrectly, wrong procedure, whatever it is, and--would that 
have been counted as an error?
    Dr. Agrawal. Yes, it would be.
    Mr. Yarmuth. So it wasn't a mistake that you made, it was a 
mistake that somebody who was sending the bill in made, is that 
correct?
    Dr. Agrawal. Yes. I mean, I think it could be argued, and 
in fairness, that we need to have preventative programs in 
place to catch that.
    Mr. Yarmuth. I understand, but this is not necessarily an--
--
    Dr. Agrawal. Correct.
    Mr. Yarmuth [continuing]. Indication of negligence on the 
part of CMS.
    Dr. Agrawal. Correct.
    Mr. Yarmuth. And I have got my problems, as everybody does, 
with CMS, but if somebody sent in a bill on a fee-for-service 
basis for $100, and they were actually only entitled to $90, 
that would be an error under this----
    Dr. Agrawal. That would be----
    Mr. Yarmuth [continuing]. Report? Now, would that total 
$100 be counted in the 14 billion? My point being that----
    Dr. Agrawal. Yes.
    Mr. Yarmuth [continuing]. I think there is the danger 
here--and I am a former journalist. There is a danger here that 
somebody would look at this report and say the mistakes cost 
taxpayers $14 billion in 2013, when, in fact, they didn't cost 
taxpayers $14 billion, they cost them some--could be a very 
small fraction of $14 billion. Am I analyzing that correctly?
    Dr. Agrawal. Right. I think what is really important is the 
measured tone that GAO and Mr. Bagdoyan have taken today, that 
these are all potentially improper payments, and not the data 
inconsistency alone doesn't absolutely establish that. In many 
of the specific claims where these improper payments have been 
noted, states or CMS are able to actually recover those 
dollars, or Federal portions are withheld. So, yes, there is 
obviously complexity underlying this that you are correct to 
point out.
    Mr. Yarmuth. Right. I just want to make that clear, 
because, again, I think there is a danger in taking these 
numbers and blowing them out, at least not with a full 
understanding of what they represent.
    And, Mr. Bagdoyan, looking at the numbers there, I did the 
same calculations that Mr. Kennedy did, and on the deceased 
question, looking at it another way, it was one out of every 
46,000 beneficiaries. Just on the total beneficiary problems, 
it was one out of every 742, and on the provider problems it 
was one out of every 2,753. Now, I think, again, there is a 
danger in looking at it and saying, 8,600 beneficiaries got 
benefits in two states, but----
    Mr. Bagdoyan. Yes.
    Mr. Yarmuth [continuing]. It is a relatively small number. 
I would be negligent if I didn't spend time talking about the 
Kentucky experience, because I know my colleague from Indiana 
talked about how states are worried about paying for the 
Medicaid expansion. I think everybody has some concern over 
what the impact will be, but--in Kentucky--and I need to 
congratulate Governor Beshear and his team. Under the expansion 
of Medicaid, more than 520,000 Kentuckians now have insurance 
who didn't have it before. The ACA, the uninsured rate across 
the state has been reduced by almost half. In my district 
alone, the uninsured rate has been reduced by 81 percent, which 
is a phenomenal occurrence--I think a very humane one.
    But more importantly, the governor just had the Deloitte 
Firm, highly respected accounting and business consulting firm, 
do an analysis and a project as to what the ACA would mean to 
Kentucky over the next 6 years. And, again, most of this is 
because of Medicaid expansion, but the vast majority of the 
newly insured are part of the Medicaid expansion. The Deloitte 
Firm concluded that over the next 6 years the ACA, in Kentucky, 
would create 40,000 new jobs, it would have a positive impact 
on the economy--additional impact on the economy positive of 
$30 billion, and would have a positive impact on Kentucky's 
budget over the next 6 years of $819 million.
    So, I think that it is easy to sit here and say, gosh, what 
are states going to do when they have to pay 90 percent in 
2021, or 95 percent in 2017 or '18? But, in fact, an analysis 
of our situation shows that it is going to have a positive 
impact well into the 2020s. So I wanted to get that on the 
record as part of this discussion, and with that, Mr. Chairman, 
I yield back.
    Mr. Murphy. Gentleman yields back, and I will recognize Ms. 
Blackburn for 5 minutes.
    Ms. Blackburn. Thank you, Mr. Chairman, and I thank you all 
for being here. And, as Mr. Collins just said, this is really a 
frustrating hearing in so many ways for us. In 2003, shortly 
after, we did a field hearing in Tennessee, looking at the 
TennCare program, which was the test case for Hillary Clinton's 
health care, and implemented in Tennessee, and a lot of 
Obamacare has been built on it. And one of the focuses of that 
hearing was the waste, fraud, and abuse, and the fact that CMS 
just couldn't seem to get its act together when it came to 
dealing with waste, fraud, and abuse.
    And when you isolated our state and looked at it, the 
payment error rate, and the eligibility issues with 
verification of who was and was not eligible, and then the 
providers, so to see this continue on, and your willingness to 
accept a failing grade in addressing this is just beyond us. 
Because you are not getting better, you are getting worse, and 
then you change the grading system to accommodate that you are 
not improving.
    And, Dr. Agrawal, if I am understanding this right, you 
moved from 5.6 to 6.7 in that rate, and this was done by 
committee, so there is no one person in charge of this debacle, 
is that correct?
    Dr. Agrawal. I am sorry, ma'am, I don't understand what you 
are asking about.
    Ms. Blackburn. You changed your grading rate. You went from 
a target for--5.6, a target rate, to 6.7 in your improper 
payment rate. And, if I am understanding your answer to Mr. 
Collins, there is no one person that decided that, it was a 
committee, or a group, that decided that. Is that correct? Who 
do we hold responsible for accepting a failing grade?
    Dr. Agrawal. Well, Congresswoman, clearly the target is 
set, but I think what is important is we actually measure our--
--
    Ms. Blackburn. Who sets the target? Who set it?
    Dr. Agrawal. I don't know. We would have to----
    Ms. Blackburn. Who accepts this?
    Dr. Agrawal [continuing]. Go back and identify that person.
    Ms. Blackburn. Who accepts the wasting of taxpayer money? 
You have got an issue that gets worse every year. Let me ask 
you this, we are going to get in behind this. Was it 90 
providers in one state that were found to be receiving 
erroneous payments? Did I understand that right, sir?
    Mr. Bagdoyan. Sorry, it was 90 in the four states we looked 
at.
    Ms. Blackburn. Ninety in four states?
    Mr. Bagdoyan. That is correct.
    Ms. Blackburn. OK. What would happen if we were to say 
there were a zero tolerance policy for improper payments, and 
for waste, fraud, and abuse that is taking place in CMS? What 
would happen? How would you all react? Because Federal agencies 
that deal with taxpayers, they pretty much have a zero 
tolerance policy.
    Or what if we did this, what if we were to look at these 
numbers--according to CMS, improper payments in the Medicaid 
program rose from 14.4 billion in 2013 to 17.5 in 2014. What if 
we were to say, CMS, we are going to charge you back with this 
$17.5 billion until you can get your act together? And you have 
got to take that out of your budget, and you have got to find a 
way to deliver the services and avail yourselves of technology.
    Let me ask you a question too. When it comes to the data, 
and transferring that into information that can be used, have 
you looked? You say you offer guidance and support to the 
states. Have you told the states, we are going to hold you 
accountable for giving us data that can be turned into 
information, and we are going to cut your payments if you don't 
give us the data that can be used? Garbage in, garbage out. It 
is not going to change.
    And the fact that you have a secure job, and a paycheck, 
and think you can't be fired, and then you come in here, and 
what we hear is, going back to my first hearing on this in 
2003, the problem gets worse, the problem doesn't get better, 
and when it does get worse, you just change the metrics and 
say, well, that is OK, we are going to do better next year. No, 
it is not OK. The error rate is not OK. And it is something we 
are going to push forward, and holding you all accountable, and 
look for new ways of doing that. And I yield back my time.
    Mr. Murphy. Gentlelady yields back. I am going to let Ms. 
DeGette take 2 minutes, and Mr.----
    Ms. DeGette. Yes.
    Mr. Murphy [continuing]. Dr. Burgess, and we will proceed 
from there. Thank you.
    Ms. DeGette. Now, in fairness, Dr. Agrawal, were you in 
your job in 2003, in this job?
    Dr. Agrawal. No.
    Ms. DeGette. Mr. Bagdoyan, were you in this job in 2003?
    Mr. Bagdoyan. I was not, ma'am.
    Ms. DeGette. I am going to ask you, because you are with 
the GAO, has the agency tried to institute new metrics to try 
to prevent fraud since 2003?
    Mr. Bagdoyan. I think, as we reflect in our report, and in 
my statement, they have. Those will have to play out over the 
long term----
    Ms. DeGette. Right, and as----
    Mr. Bagdoyan [continuing]. At all.
    Ms. DeGette. And as we discussed when I was asking 
questions, unfortunately, the data that you had for those four 
states was from 2011, so it didn't reflect some of the 
preventative efforts that have happened since----
    Mr. Bagdoyan. That is correct. That was part of the 
necessity of our methodology.
    Ms. DeGette. Right, exactly, because you just didn't have 
the data, right?
    Mr. Bagdoyan. That is correct.
    Ms. DeGette. And, Dr. Agrawal, do you think that it is a 
good idea to have fraud? Do you support that? Because I have 
been listening to these other questioners, they seem to somehow 
imply that either you personally, or the agency, think that it 
is acceptable to have fraud.
    Dr. Agrawal. Obviously, I do not.
    Ms. DeGette. Why?
    Dr. Agrawal. Well, I come at it from the perspective of an 
ER physician. I have taken care of Medicaid and Medicare 
beneficiaries, and other beneficiaries, the uninsured. I do 
this work so that we can preserve resources for the folks who 
need it.
    Ms. DeGette. Thank you. I yield back.
    Mr. Murphy. Dr. Burgess?
    Mr. Burgess. Thank you, Mr. Chairman. I do thank our panel 
for being here, and I know it has been a long morning. Let me 
just ask a question, because I am trying to get a better 
understanding of what is referred to as the PERM program. That 
is a 3 year rolling average of 17 states examined on a yearly 
basis, is that correct?
    Dr. Agrawal. That is correct.
    Mr. Burgess. And, now, what kind of statistical modeling 
was involved in coming up with that formula?
    Dr. Agrawal. So there is a statistical sample done in each 
of these states along the three major categories of the PERM 
program. And, again, we conduct the cycle so that every state 
is measured at least once in the 3 year period. And there is 
statistical analysis behind it to make sure that the results 
are generalizable, and can actually arrive at a national rate.
    Mr. Burgess. How do you select the 17 states to be in the 
particular cohort?
    Dr. Agrawal. They are----
    Mr. Burgess [continuing]. Alphabetical, and then you cut it 
off at 17, and----
    Dr. Agrawal. That is a good question. Actually, I am not 
sure. I don't think it is alphabetical, but there are 17 in 
every cohort, and we make sure that every state is represented 
once in a 3 year period.
    Mr. Burgess. So the four states that Mr.----
    Mr. Bagdoyan. Bagdoyan.
    Mr. Burgess [continuing]. Bagdoyan was concerned about, are 
those four states all in one cohort, or are they evenly 
distributed between the three rolling averages?
    Dr. Agrawal. They are distributed between them.
    Mr. Burgess. Well, I guess, it seems like that is a 
difficult one. I don't understand why that model was selected. 
Is it just simply too difficult to assess every state on a 
yearly basis?
    Dr. Agrawal. I think it would be a real resource constraint 
to try to assess every single state every single year, and it 
does also pose burden issues for the states.
    Mr. Burgess. Everybody knows HHS has the best computers in 
the world, right? So why can't you?
    Dr. Agrawal. I can take that back as a specific question if 
we are going to alter the methodology, but I think the 
methodology itself has been--it is not the--sort of under----
    Mr. Burgess. Yes.
    Dr. Agrawal [continuing]. Your question here. It----
    Mr. Burgess. It just struck me as unusual to do it in this 
fashion. So, again, that is why I was wondering, is there a 
particular statistical methodology that has been followed, as 
far as the sampling, on a rotating basis, 17, 17, 17 year in 
and year out, and how long have you been doing it this way?
    Dr. Agrawal. Since the PERM program started.
    Mr. Burgess. Which was?
    Dr. Agrawal. I believe we had the first rates in '07, but I 
would have to get back to you about that.
    Mr. Burgess. And do you see consistency in those numbers 
over those years that you go back and look at this?
    Dr. Agrawal. What we do is we report a national average 
rate every single year so you can actually follow the rates, as 
people have done in this hearing, sort of talk about the rates 
over time. What we don't report are rates by state, because it 
is very difficult to compare two different Medicaid programs 
that might have two very different approaches to eligibility 
and other things.
    Mr. Burgess. All right, thank you. Mr. Chairman, I am going 
to submit a question in writing about the Dallas Morning News 
article that I referenced earlier in the hearing, and I would 
appreciate a response on that.
    Dr. Agrawal. Sure. Thank you.
    Mr. Burgess. Thank you.
    Mr. Murphy. Thank you. Let me just say this, first of all, 
we are grateful you came to us in a candid way. But I think you 
hear among us, we want to facilitate this. None of us are going 
to tolerate any kind of acceptance of this. And there was a 
concern about whoever made the decision to just raise the 
level, it is not really acceptable. What we want to know is the 
methodology, and work with you, and see what next steps we need 
to take to deal with fraud and abuse.
    Granted, this data is from 2011. Some changes, as Ms. 
DeGette pointed out, may have already been put in place, to 
whatever extent you can tell us about that. We want to move a 
trajectory towards this, because, goodness knows, federal 
dollars are limited, and anybody who is out there being a crook 
needs to be handled appropriately so the money can go to those 
who need it. That is where our compassion should be. It is sort 
of in the category of those who can, those who can't, and those 
who won't. And those who won't play by the rules, they need to 
face the consequences.
    So we will be passing on other questions to you, and, to 
that extent, I want to thank the members for participating, and 
when the questions are submitted for the record, we would 
appreciate it if you could get back to us with prompt 
responses. So, to that extent, I now adjourn this hearing. 
Thank you.
    [Whereupon, at 12:11 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    It was 12 years ago that the Government Accountability 
Office first sounded the alarm that the Medicaid program was a 
high risk for fraud and abuse. The Office of Management and 
Budget has designated it as one of the federal government's 
``high-error'' programs with $17.5 billion in improper 
payments-third on the OMB's list. For decades, Members of both 
sides of the aisle have asked both Republican and Democratic 
administrations a very basic question: how are you going to 
stop the waste of billions of taxpayer dollars? Nevertheless, 
Medicaid continues to waste billions of taxpayer dollars, 
jeopardizing the care of the most vulnerable.
    Put simply: this is unacceptable. Medicaid is supposed to 
provide our most vulnerable with vital medical services, but 
continued waste and fraud undermines this important goal.
    For the past several years, tools have been developed, 
initiatives started, and regulations authored with the goal of 
reducing Medicaid fraud. And still, fraud in Medicaid continues 
to grow, not shrink. We owe it to folks in Michigan to do a 
better job and reverse that trend.
    I appreciate the work and testimony of our witnesses. I 
realize that with over $310 billion spent, some element of bad 
actors may be unavoidable as they normally follow the money. 
But we must do better to protect the integrity of this vital 
program and the care for our most vulnerable. The testimony 
today provides valuable insight as we continue to work toward a 
fraud-free Medicaid system.
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