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Hearing Of The Federal Fincancial Management, Government Information, Federal Services, And International Security Subcommittee Of The Senate Homeland Security And Governmental Affairs Committee - Eliminating Waste And Fraud In Medicare And Medicaid

Statement

By:
Date:
Location: Washington, DC

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SEN. CARPER: (Sounds gavel.) The subcommittee will come to order. Senator Coburn and I welcome each of you today. We will be joined, I think, by several of our colleagues, including Senator McCain, somewhere along the line. We just are concluding a vote. And I checked on the floor before I came over here and they told me we're likely to have some more here later this afternoon. And one or two might be Coburn amendments; you never know. He's offered a few. (Laughs.) Okay.

SEN. TOM COBURN (R-OK): (Off mike.)

SEN. CARPER: I'm going to give a brief opening statement and then call on Dr. Coburn to do that if he would like, and others if they show up before we start -- ask for our witnesses to begin.

Over the last couple of months, President Obama and those of us who are privileged to serve here in the Congress have been tasked with responding to any number of challenges that are not likely to be solved overnight. Near the top of that list has been the budget crisis that we find ourselves in. On the day that President Bush took office, the federal government enjoyed, as I recall -- that was literally the day I stepped down as governor and came over here. But we enjoyed billion-dollar budget surpluses literally as far as the eye could see, and were on our way to pay down maybe the national debt -- at the time I think it was about $6 trillion.

It didn't work out that way, and since then we've seen the budget surpluses disappear, as we know, replaced by some of the biggest budget deficit in our history. And the one we're facing in this year is even better than those. In January, when President Bush left office, our nation and our new president were left to face the cost of two wars, dealing with tax cuts that were previously adopted, an increase of more than 50 percent in government spending to try to revitalize our economy and jolt it back to life and some $10.6 trillion in national debt, which is roughly, what, twice the national debt we had in January of 2001.

Getting our budget deficit under control is not going to be an easy task. It will require tough choices and discipline. It will also require that we make certain to the greatest extent possible that every dollar that we collect from taxpayers is spent wisely and effectively. All too often, however, agencies are failing to meet their responsibilities in this regard. According to the most recent data from agency financial statements, the federal government made more than $72 billion in avoidable, improper payments in 2008, up from about $42 billion in the previous year. Some of those improper payments were overpayments; in fact, most of them were. Some were underpayments. But improper payments occur when the federal funds go to wrong recipient, or when a recipient received an incorrect amount of funds, or when funds are used in an improper manner, or when documentation is not available to explain why a payment was made in the first place.

So in essence, agencies potentially took tens of billions of dollars in taxpayers' money and may have ended up just wasting it. Those dollars could have been spent to promote energy independence or to invest in education or health care. They could have even been given back to middle-class families, middle-income-class families, small businesses, through tax cuts. Instead, we can't be certain that we had anything useful at all out of some of those outlays or improper payments.

The major focus of this hearing today is fraud and abuse in two areas: Medicare and Medicaid. And strikingly improper payments in these two programs alone made up almost half the federal government's $72 billion total of improper payments. Right now, Medicare and Medicaid account for 5 percent of GDP, and when you add in Social Security, these three entitlement programs currently add up to about 9 percent of our GDP. In about 40 years, I'm told, Medicare, Medicaid and Social Security, if we don't do anything about it, may end up accounting for some 19 percent of GDP, which is roughly what we now currently spend to run the entire federal government. As we look to reform our health care system this year, reining in health care costs must be one of our top priorities. And right now the trajectory that we're on is unsustainable -- unsustainable. The U.S. spends more than $2 trillion on health care every year. Conservative estimates assert that at least 3 percent is lost through fraud each year, at least 3 percent. Three percent of $2 trillion, if I've got my math right here, is about $60 billion per year. Other estimates are as high as 10 percent, which is over $220 billion per year.

Well, we look forward to hearing from our witnesses today and what I hope will be an informative discussion on fraud and abuse in Medicare and in Medicare. We hope to hear from all of you what we're doing well to prevent fraud, what we're doing well to prevent waste and abuse. I want to hear from you what we can do to improve, and we want to hear from you what we can do to help -- what we can do to help.

I'd also note, before closing, that I intend in the coming days to introduce legislation with a handful of our colleagues, and I certainly hope Dr. Coburn is among those, legislation that I believe will help Medicare, Medicaid and programs throughout government deal with improper payment problems.

Our bill, the Improper Payments Elimination and Recovery Act, would improve transparency, so that the government and the public have a better sense of the scale of the problem agencies are facing. It would also hold agencies accountable for their progress in reducing and eventually eliminating improper payments. And finally, our bill would significantly expand the use of recovery auditing within the federal government.

Medicare, as many of us know -- we've talked about it here before -- Medicare is in the process of setting up recovery auditing programs in all 50 states. We found out when we started this about three years ago, when Medicare started it about three years ago, the first year -- just in I think California, Florida, Texas, they did begin doing recovery audits, first year they didn't recover much of anything, second year recovered a little bit; third year I'm told they recovered close to $700 million in just three states. And we're encouraged that they're now going to do that in the other 47 states. And who knows, maybe if we can have great success in recoveries in Medicare in 50 states, maybe we can do the same thing in Medicaid. But we look forward to working with our witnesses and with the rest of our colleagues on this committee. This is an issue that's near and dear to the heart to Senator Coburn -- Dr. Coburn, and myself.

And I'm pleased to have been his partner when he sat in this seat and I sat over there, and I hope we can continue to be partners on this and a bunch of other issues as we go forward.

Dr. Coburn.

SEN. TOM COBURN (R-OK): Thank you, Senator Carper. I have a statement I'd like to be added to the record, if I may.

Welcome, all of you. Hard problem -- one of the reasons it's a hard problem is Medicare and Medicaid are designed, by their very design, designed to be defrauded. And the idea of post-payment review and recovery audits are all sensible approaches, but one of the things that we're not doing is payment reform because if we had payment reform by the Congress, what we would see is a less "defraudable" system. The other thing we're not doing is putting enough people in jail. If in fact you defraud the federal government, consequently there ought to be a harsh penalty for that. And we've not gone to the length that there is a deterrent. Even under the terrible system that we have today, there's still no deterrent. You know, there's fines and penalties and paying back money, but you all know how bad the problems are.

The other problem with recovery audits is, you know, they're really pretty one-sided. And so you could have done everything wrong, and examiners see that in a different light, and yet, you have limited options on that, and, you know, what I'm afraid is we're going to be three years behind on the recovery audits and we're going to be taking money from people that may or may not deserve it (have ?). So my goal would be today, to get from this hearing, is to find out how bad the problem is. I think Senator Carper's numbers are way under what the real world is on fraud, in Medicare for sure and Medicaid for sure. And we know that it's at least three times the average of other federal departments, which is somewhere around 3 to 5 percent.

And how do we approach that? Should we keep working on the details of auditing and evaluating, or should we go for something bigger, like payment reform, where it's much more transparent, it's much more clear whether somebody did or did not. We can't even get contracting through the Congress on DME payments, which is one of the -- competitive contracting, which is one of the biggest areas of abuse. So my hope is is that we can hear your thoughts, how big you think the problem really is and what we do about it and start thinking out of the box a little bit. We know recovery audits are going to be work, that they're expensive, they're painful for both sides, and maybe we set up a system that doesn't require that, or requires much less.

And with that, I notice that the ranking member's here, and I will yield.

SEN. CARPER: Welcome, Senator McCain. Thanks, Dr. Coburn.

SEN. JOHN MCCAIN (R-AZ): Thank you very much, Mr. Chairman. I want to thank the witnesses and I want to apologize for being a few minutes late. In this very heavy tourist season, it's hard to get on an elevator nowadays. (Laughs.)

SEN. COBURN: Especially when you're known.

SEN. MCCAIN: And I'm glad all of our constituents are here representing their various interests. I want to thank the witnesses, and I'd just like to follow up a bit on Dr. Coburn's comments.

Our information is that in fiscal year 2008, $19 billion in improper payments from Medicaid program and $17 billion from Medicare -- I'd just be interested if the witnesses are in agreement with that. We get that I think from the Office of Management and Budget. And last year, nearly 500,000 payments, estimated somewhere between ($)76 million and ($)92 million, were made to durable medical equipment, DMEs as the insiders say, that submitted claims using identification numbers of doctors who've been dead? I mean, this kind of thing is -- you know, most Americans --and I will ask that my prepared statement be made part of the record -- think that we understand cost overruns, we understand why something might end up costing more to treat a patient that has unforeseen complications, a staph -- something like that. I don't think Americans are aware of the outright fraud that maybe exists, and so maybe waste is important, but shouldn't we place the highest priority on the fraudulent practices that have already been uncovered by you all as witnesses?

So I want to thank you, Mr. Chairman. Some of these numbers, when we get into it, and some of these cases are really, really astonishing. So I think this hearing is important and I want to thank the witnesses for being here today and all of their hard work. I know it's not easy.

Thank you, Mr. Chairman.

SEN. CARPER: Okay. Thank you so much for being with us and for being a part of this.

Before I recognize and introduce our first witness, I would simply say I think one of the better issues that came out of the Bush administration, George W. Bush administration, was the idea of the idea of an improper payments act that would actually call on agencies to identify their improper payments through overpayments and their underpayments, and over time in this decade, more and more agencies have begun to do that, so we have some idea how big the problem is.

A couple of pieces of the puzzle are still to be filled in. I think Medicare Part D prescription drug program is not covered yet under improper payments. I think a good deal of maybe Homeland Security, Department of Homeland Security, does not report yet. And those need to be done. And so the idea of having improper payments law where agencies actually comply with reporting improper payments, that's all well and good. And the fact that more and more of them are complying with the law, that is good. But now that we find out how big the problem is, or some idea how big the problem is, the key is to go out and get the money, as much of it back as we can. Where people have defrauded the government, the taxpayers, there has to be a price to pay for that -- not just paying back the money, but a greater price than that.

So we've been working on this for a while, we're going to continue to work on it, and given the kind of budget deficits we face, we need to work even harder.

So we're delighted to be able to introduce our witness, Kay Daly.

You look so familiar. Have we seen you before? How do we know you, huh? Tell our witnesses, go ahead. Tell our senators. How do we know you?

MS. DALY: I was very fortunate to have been detailed to the subcommittee staff when I worked at GAO.

SEN. CARPER: That's right.

MS. DALY: And still do work at GAO.

SEN. MCCAIN: You're probably glad we've made so little progress.

SEN. CARPER: (Laughs.) No, she was a keeper. But she went back and got a big promotion, and we're happy and proud of you. She joined GAO in 1989, has participated in a number of key oversight efforts there, including the response to Hurricane Katrina, and work related to fraud and abuse in health care programs at the Department of Health and Human Services. Kay Daly is a certified public accountant and a certified government financial manager with a degree in business administration from Old Dominion University. She's graduated from Senior Executive Fellows program at Harvard University's Kennedy School of Government.

Welcome. Nice to see you again, Kay.

Deborah Taylor is the acting chief financial officer and acting director of the Office of Financial Management at the Center for Medicare and Medicaid Services, affectionately known as CMS. Before assuming these positions, Ms. Taylor served for five years as deputy director at the Office of Financial Management. She's also served as a deputy CFO and director of Accounting Management Group at CMS. Before joining CMS, she was the assistant director for Health and Human Services Audits at GAO. She's a certified public accountant as well -- has a degree in accounting from George Mason University.

Welcome. Thanks, Ms. Taylor.

Mr. Lewis Morris, chief counsel, the Department of Health and Human Services Office of Inspector General, where he's worked for 25 years in a number of roles. He's also served as special assistant U.S. attorney for the Middle District of Florida, the Eastern District of Pennsylvania, and the District of Columbia. He serves on the board of directors of the American Health Lawyers Association.

And finally, James Sheehan -- is it "She-han"? -- Sheehan joins us from New York, where he works as his state's Medicaid inspector general. Before taking on that role in April of 2007, he was the associate U.S. attorney for civil programs at the Eastern District of Pennsylvania in Philadelphia. Tells me he knows Joe Biden's oldest son, Beau; actually worked with him there, when Beau was in the U.S. attorney's office. Mr. Sheehan had worked in the U.S. attorney's office in Philadelphia I think since 1980. He focused on health care fraud during his career there and has supervised more than 500 fraud cases. He has degrees from Swarthmore College and Harvard Law School.

My youngest boy -- one of the schools we visited with Swarthmore. He's now a freshman down at William & Mary, but when we went to Swarthmore and visited that campus, they said to my son, Ben, they said, "Here at Swarthmore we have a saying: If you can't get in to Swarthmore, try Harvard." And you're one of those people who can -- who not only got into Swarthmore but also tried Harvard. That's a pretty good combination. (Laughs.)

All right, Ms. Daly, you're up first. Welcome. Your whole statement will be made part of the record, and you can summarize as you see fit. And try to keep within roughly five minutes, if you would, thanks.

MS. DALY: Thank you very much for the opportunity to be here today to discuss the governmentwide problem of improper payments in federal programs. And I want to also talk about agencies' efforts to address the key requirements of the Improper Payments Act of 2002, as commonly referred to as IPIA. For fiscal year 2008, 22 agencies reported improper payment estimates for 78 programs. That totaled about $72 billion. This is an increase from the fiscal year 2007 estimate, primarily due to a $12 billion increase in the Medicaid program's estimate and 10 newly reported programs with improper payment estimates totaling about $10 billion. Although overall improper payments rose by about ($)23 billion, we view this as actually a positive step because it indicates that agencies have increased their efforts to identify and report on improper payments, and that will ultimately improve the transparency over the full magnitude of improper payments.

So given the increase in funding for many of these programs under the Recovery Act, I think it the establishing the effective accountability measures is going to be critical for many of these programs, too.

Now, many agencies did report last year that they had made progress to reduce improper payments in their programs since the initial IPIA implementation in 2004, and for agencies that have reported for every year from 2004 to 2008, they had reduced their error rates in 24 programs. Thirty-five programs reported reduced error rates in 2008; this compared to their 2007 estimates. And while this can be viewed as a positive sign, and it is promising that -- I think there's some major challenges remaining with those programs. For example, we found that the $72 billion improper payment estimate did not reflect the full scope of improper payments across all agencies. Just as the senator pointed out, there were 10 programs that were identified as susceptible to improper payments, with outlays of over $60 billion, that did not report an estimate.

We further found that IPIA noncompliance issues continue to exist at several agencies. Specifically, independent auditors for four agencies reported IPIA noncompliance issues related to areas such as their risk assessments, testing of payment transactions and development of corrective action plans to reduce those improper payments. And we also found that agencies are facing challenges in implementing internal controls to identify improper payments but, more importantly, to safeguard against them. That's what really, I think, the act is ultimately getting at. Over half of the agency inspectors general had identified management or performance challenges, including internal control deficiencies that could increase the risk of improper payments.

Now, the focus of the hearing today is on Medicare and Medicaid programs. Both of those programs have been on GAO's high-risk list because they are highly susceptible to fraud, waste and abuse, and CMS, the agency responsible for administering and overseeing them, was only able to provide improper payments estimates for the Medicare fee- for-service program, Medicare Advantage, and the Medicaid programs. Those three estimates, as Senator Carper pointed out, are roughly about 50 percent of that $72 billion in improper payments. CMS did not provide an estimate for the Medicare prescription drug benefit program that had outlays of over ($)46 billion.

I also want to point out that Medicaid was at the top of the list of all federal programs when it comes to the size of their improper payments estimates, and that's particularly alarming because additional funds are going to be going to this program under the Recovery Act.

So in closing, I think it's important that we recognize that measuring improper payments and taking actions to reduce them aren't simple tasks. The ultimate success of the governmentwide effort to reduce them will hinge on every federal agency's diligence and commitment to identifying, estimating, determining the causes of and taking corrective actions to reduce improper payments.

So this concludes my statement, Mr. Chairman, and I would like to thank you and the other members of this subcommittee for your continuing commitment to addressing this problem. I think it will take such a sustained commitment for there to be real progress in this area, and we at GAO stand ready to help you in any way we can.

SEN. CARPER: Okay. Thank you so much.

Ms. Taylor, you're recognized.

MS. TAYLOR: Thank you. Good afternoon, Chairman Carper, Senator McCain and Senator Coburn. I am honored to be here today to discuss with you CMS's efforts to measure and reduce improper payments in the Medicare, Medicaid and CHIP programs, as well as discuss some of our efforts to oversee these programs and combat fraud.

On the measurement front, much has been accomplished since the last time CMS appeared before this subcommittee. For Medicare last year, we reported an error rate of 3.6 percent, a significant decrease from the 4.4 percent reported in 2006, and a reduction of greater than 50 percent from the 10 percent rate reported in 2004. This is a cumulative savings to the Medicare and taxpayers of over $10 billion.

For the first time ever, in fiscal year 2008, CMS issued a partial error rate for the Medicare Advantage program. That error rate, unfortunately, was 10.6 percent. And although that rate is high, we had a similar experience in the first years of the Medicare program. We're hopeful that we can also significantly reduce this rate by working with the plans to improve their ability to respond to audits and submit the required documentation. CMS also issued the first complete error rate for the Medicaid and CHIP programs in fiscal year 2007. The rates for the Medicaid program included for the first time managed care and eligibility determinations. The Medicaid rate, again, was 10.5 percent, and the CHIP rate was 14.7 percent.

We are working with states currently to develop state-specific corrective action plans which we hope will address the root causes of these errors and should ultimately be able to reduce the overall error rate in these programs. Another important tool that CMS has is in the process of expanding the Recovery Act program. And thanks to the passage of the tax reform in health care -- Relief in Health Care Act of 2006, which mandates the use of recovery audit contractors in all states by 2010, CMS awarded contracts to four recovery auditors for the national program. The Recovery Act, during the three-year demonstration, returned over $990 million in gross overpayments to the Medicare trust fund. We are currently phasing in this approach --

SEN. CARPER: Would you say that number again? Say that number again, that last sentence. The full sentence, please.

MS. TAYLOR: Sure. During the three-year demonstration that we had on the Recovery Act program, we were able to $990 million in overpayments.

SEN. CARPER: Thank you.

MS. TAYLOR: We are currently doing a phased-in approach of the Recovery Act program. Phase one began in February of this year in 24 states, and phase two will begin in February for the remaining 26 states. We are currently working closely with the national and state health care associations to ensure that providers have a complete understanding of the national expansion.

And lastly, CMS has focused significant efforts over the past two years to strengthen oversight of one of the most vulnerable programs, the durable medical equipment benefit. The majority of the fraud which occurs in that benefit is perpetrated by unscrupulous providers and suppliers who have been able to obtain Medicare enrollment numbers and take advantage of the program vulnerabilities, thereby costing the program billions each year.

Specifically, CMS is implementing more front-end safeguards to ensure that fraudulent suppliers of DME cannot participate in the Medicare program. We're using a three-pronged approach in this area. The first is accreditation standards; second is surety bond efforts, which will begin October 1st of this year; and we are currently phasing in competitive bidding. All of these efforts are designed to keep unscrupulous suppliers from participating in and billing the Medicare program.

We continue to set standards for measuring and reducing recovery -- recovering improper payments in Medicare, Medicaid and CHIP programs, and while we are proud of our efforts, we recognize there is still room for improvement. Increased funding to reduce fraud and abuse of these critical programs is a priority. We look forward to your continued support in this area. We are committed to thoroughly analyzing the results of all our efforts to further reduce improper payments in these programs and ensure that this funding is focused towards the most productive activities. We look forward to continuing working cooperatively with you on this effort, and I will take any questions.

SEN. CARPER: All right. Thank you, Ms. Taylor.

And Mr. Morris, you're recognized.

MR. MORRIS: On behalf of the Office of Inspector General, thank you for the opportunity to discuss the OIG's health care anti-fraud strategy and suggest measures that may help strengthen the integrity of the federal health care programs. The United States spends more than $2 trillion on health care every year. The National Health Care Anti-Fraud Association estimates that of that amount, at least 3 percent, or more than $60 billion each year, is lost to fraud. Improper payments for unallowable, miscoded or undocumented services and excessive payment rates for certain items and services also waste scarce Medicare and Medicaid resources. For Medicare and Medicaid to serve the needs of the beneficiaries and remain solvent for the future generations, the government must pursue a comprehensive strategy to combat waste, fraud and abuse.

Based on OIG's investigations as well as our audits and evaluations of the Medicare and Medicaid programs, we believe an effective health care integrity strategy must embrace five principles. These principles are equally applicable to our oversight, CMS's program integrity efforts, and Congress's legislative agenda. Let me go through those five principles.

First, we must scrutinize those who want to participate as providers and suppliers prior to their enrollment in the federal health care programs. A lack of effective enrollment screening gives dishonest and unethical individuals access to a system they can easily exploit. As my written testimony describes in more detail, criminals too easily enroll in Medicare and steal millions before detection. We advocate strengthening enrollment standards and making participation in the federal health care programs a privilege, not a right.

Second --

SEN. CARPER: Question: You said criminals enroll in Medicare -- as providers or as participants receiving care?

MR. MORRIS: As providers and suppliers.

SEN. CARPER: Thank you.

MR. MORRIS: I would also add that, regrettably, beneficiaries are now becoming involved in some of these fraud schemes. But largely we're concerned about screening at the enrollment stage of providers and suppliers.

The second principle we believe is important to consider is establishing payment methodologies that are reasonable and responsive to changes in the marketplace. OIG has conducted extensive reviews of payment and pricing methodologies and has determined that the payments pay too much for certain items and services. When pricing policies are not aligned with the marketplace, the programs and their beneficiaries bear additional costs. In addition to wasting health care dollars, these excessive payments are a lucrative target for the unethical and the dishonest. These criminals also can reinvest some of their profits in kickbacks. That's using the fraud's funds to perpetrate the fraud scheme. Medicare and Medicaid reimbursement systems should be designed to ensure that payments are reasonable and responsive to the market. Although CMS has the authority to make certain adjustments to fee schedules and other payment methodologies, some changes require congressional action.

Third, we need to assist health care providers to adopt practices that promote compliance with program requirements. Health care providers can be our partners in fighting fraud by adopting measures that promote compliance with program requirements. Although compliance programs alone will not solve the problem, they are an important component of a comprehensive strategy to combat waste, fraud and abuse in the health care system.

The importance of health care compliance programs is well recognized. Based on a recent survey by the Health Care Compliance Association, over 90 percent of hospital systems have integrated compliance measures into their systems. New York requires providers and suppliers to implement an effective compliance program, as defined by the OIG, as a condition of participation in its Medicaid program.

Accordingly, we recommend that providers and suppliers should be required to adopt compliance programs as a condition of participating in the Medicare and Medicaid programs.

Fourth, we believe we must vigilantly monitor the programs for evidence of fraud, waste and abuse.

The federal health care program has (compiled ?) an enormous amount of data related to the delivery of health care services. Unfortunately, they often fail to use these claim-processing edits and other information technology to identify improper claims.

To state the obvious, Medicare should not pay an HIV clinic for an infusion when the beneficiary has not been diagnosed with that illness or pay twice for the same service or process a claim that relies on the identification number of a deceased physician.

I addition to improving program data systems, it is critical that law enforcement have real-time access to all relevant data. Currently, we receive data weeks or months after claims have been filed, making it more difficult to detect and thwart new scams.

We also recommend the consolidation and expansion of various adverse action databases. Providing centralized, comprehensive databases of sanctions taken against individuals and entities would strengthen program integrity.

Fifth, we need to respond swiftly to detected fraud, impose sufficient punishment to deter others and promptly remedy program vulnerabilities.

Health care fraud attracts criminals because the penalties are lower than other organized crime-related offenses, there are low barriers to entry, schemes are easily replicated and there's a perception of a low risk of detection. We need to alter the criminal's cost-benefit analysis by increasing the risk of swift detection and the certainty of punishment.

As part of this strategy, law enforcement must accelerate the response to fraud schemes. Although resource-intensive, the Anti- Fraud Strike Force is a powerful tool and represents a tremendous return on the investment.

As my written testimony describes in more detail, the HHS/DOJ Strike Force in South Florida has proven highly-effective in attacking DME and infusion fraud and stopping the hemorrhaging of program dollars.

In conclusion, the OIG and its laws enforcement partners have a comprehensive strategy to combat waste, fraud and abuse in the federal health care programs.

However, sophisticated fraud schemes increasingly rely on falsified records, elaborate business structures and the participation of doctors and patients to create the false impression that government is paying for legitimate health care services.

Applying the principles described above can help protect the integrity of the programs and keep them solvent for future generations.

Thank you.

SEN. CARPER: Thank you for that excellent testimony.

Mr. "Shaheen" -- Sheehan, excuse me -- we're anxious to hear about what you've done in New York. I'm very encouraged. Sometimes Senator Coburn and I like to bring agencies before this committee that have done a very good job and -- to hold them for -- as an example. Other times we bring them before us because they need to do a much better job. And I think in your case, in New York, what's happened under your leadership could be an example for the rest of us. So we're happy to hear about it and anxious to hear what you've done.

MR. SHEEHAN: Chairman Carper, thank you very much. Senator Coburn.

We really -- we the Medicaid inspector general's office in New York really appreciate the opportunity to be the only state representative at the table today. (Laughs.) One-sixth of the national program, and we recognize that.

And I -- the -- if you look at our anti-fraud effort in New York, we have 600 people actually working on anti-fraud efforts in New York state, which is the second biggest agency of that type in the country.

We also in the last fiscal year identified recoveries of over $550 million in the New York state Medicaid program. And I tell people I owe my job to The New York Times, because New York Times and Senator Grassley paid a lot of attention to New York back in 2005 and 2006, and as a result, the agency that I'm the head of was created and the governor invited me to come up and run it.

I want to talk about a little bit different things than some of my colleagues at the table today. The issues that we face in health care are -- especially in health care fraud -- are complex. And I want to talk a little bit about the kinds of cases that we're seeing come up.

And we talk about improper payments and we talk about fraud, and there's obviously a continuum, but in a lot of these cases, although it's clear the payment is improper, the question is, how do you allocate individual responsibility, which is what the enforcement mechanism is all about?

So, for example, we have a laboratory company which bills the program for an unreliable test, which causes patients to get unnecessary surgery. We have pharmacies which deliver --home-deliver prescriptions to patients who died weeks or months before. We have nursing home owners that bill the Medicaid program for their Lexus or their Mercedes on the theory that occasionally they drive patients to the hospital in the car.

We have managed care plans in New York state that billed Medicaid for prenatal services for males, all right. If you read The New York Post, there is one of those that did happen, but in general, even in New York, it's not a major event.

We also had providers who -- we send out a letter saying pay us back. They credit a refund, then six months later they sent us a bill for another -- for the same claim for the same service.

And all these things reflect the issue of identifying responsibility in large organizations and making them take responsibility. And I've worked on a lot of these cases, and they follow a predictable course. All right? They're investigated for a number of years. They eventually result in either criminal declination or an indictment which has a relatively limited effect on the provider. There's large amount of money in civil settlements. By the time the settlement occurs, the individuals who are in charge of the company at the time the bad stuff happened have moved on to other enterprises -- they're not there anymore.

The government issues a press release stating, quote, "Providers that attempt to defraud federal insurance programs will be held accountable to the full extent of the law," close quote. The defendant issues a press release announcing, quote, "The settlement resolves a five-year-old government investigation and puts it behind us," close quote. The stock goes up.

I know this happens because I worked on a number of these cases in my career, and it's not a reflection on anybody who does the work -- just say, "This is how it works."

We in New York think there's a better way to address these issues. We need to move from a system which encourages some providers to look for excuses to a system which requires and supports having effective and appropriate billing and compliance systems in place.

Too often, law enforcement agencies describe their work as combating fraud. I think we have to look and say, how are we going to get providers to do what they know they need to do? So I'm going -- like Mr. Morris, I have a five-point plan, which, even though we didn't collaborate in advance, is remarkable close.

The first one is requiring and supporting effective compliance programs and professional compliance officers. New York, by law, requires it, as Lew said. The Medicare program suggests model compliance programs. We want the health care providers to identify and resolve issues themselves, and the best of them already do that. So we want to spread that to the rest.

Second, we want to hold the senior executives and board members in large organizations accountable for failing to have systems that prevent improper billing. So it's not the issue of, "Did you order this improper billing?" because most of them don't do that. The issue is, do you have a system in place that is reasonably designed to detect and prevent improper payments? All right? So that's -- and the inspector general's office has done a great job of articulating standards and making suggestions and getting consensus statements, and we think that's a great idea.

Third, we think it's important to elevate, support and use the administrative tools of payment suspension, pre-payment review, audits, sanction and individual entity exclusion when improper payments are discovered. All too often these remedies are postponed while other things go on. But the key to us is not just the severity of the sanctions, it is making sure the response is prompt and addresses the money that's going out the door.

Fourth: recognizing the most effective deterrents requires regulator communication to -- in persuasion of those whose behavior we want to influence. And most health care providers are risk-averse. They -- you really don't go to medical school for 20 years of education to do something you know is going to get you in trouble. There are a few that do, but -- CMS has historically advised individual providers of their rankings on issues of concern. Frequent and predictable interventions, we think, are more effective than occasional, severe sanctions.

And fifth: develop and communicate consistent measure of effectiveness and program integrity, which capture cost-avoidance and reduction as well as recoveries, and minimize the costs imposed by reviews and investigations. You're much more likely to get cooperation when people know what the rule is on the front end and know that there is going to be a follow-up than if they have (the money ?), they've had it for three years -- I guess, Senator Coburn, as you said -- and then said, "Give it back to us."

So that's our five-point program.

We really appreciate the opportunity to speak to the committee today.

SEN. CARPER: You bet. Thank you very, very much for that testimony.

Now, we've been joined by Senator McCaskill, and before we get into the questions would -- do you have a short you'd like to give? And then we'll get right into the questions.

SEN. CLAIRE MCCASKILL (D-MO): I'll wait for questions.

SEN. CARPER: All right. Fair enough. We're delighted that you're here.

In the time that I spent in my last job as governor we were real active in the National Governors Association trying to learn from one another. In fact, we actually created a clearinghouse of best practices. And it sounds to me like maybe what you've created in New York is a best practice that other states might emulate. Is that going on?

MR. SHEEHAN: What -- is the best practice communication --

SEN. CARPER: Yeah. And is what you're doing in New York regarded as a best practice among the states?

MR. SHEEHAN: I'd like to think that some of the things we're doing in New York are regarded as best practice.

CMS has actually done a very good job with the money they've been given over the last three years, creating the Medicaid Integrity Institute, bringing us together in program integrity across the country, training, sharing ideas, regular conference calls, all those things that the Governors Association has done as well.

So one of the things that's happened in the last three years that I think is really good is that process of communication internally so that people know what works in other states. And we've been trying to do our share of that.

SEN. CARPER: When you think about what -- what would you say -- what could a state like Delaware or Oklahoma learn from what you're doing? And then my next follow-up's going to be, and what can we the federal government learn from what you're doing?

I used to say, as governor, I'd say, "Somewhere" -- whatever problem or issue we were dealing with in Delaware, some other state had already dealt with it and successfully. And our challenge was to find them and figure out how we could replicate that in our state.

MR. SHEEHAN: We are very fortunate in New York in having a really robust data system which allows us to do very effective data mining. And it's tough to build that if you don't have both a lot of claims and a lot of resources to support it.

But one of the things we've done in New York that other states are starting to pick up on -- every year we issue a comprehensive work plan -- an idea we stole from the inspector -- federal inspector general's office -- that identifies for each kind of provider -- these are the issues we're going to focus on. These are the issues you're compliance function ought to pay special attention to this year.

Our first one was last year. Other states have started to pick up on it and use it as a basis for their plans. Our next one comes out, I think, at the end of this week.

And again, it's a matter of communicating to people, this is what we think is important, please pay attention. And then you have -- you've given people fair notice. And what is impressive to me is people do conform their behavior to the message that they receive.

So that's a major one. And then there are some other cost control and reporting mechanisms that we have developed that I think other states have picked up.

And on the federal side -- Mr. Morris talked about the issue of access to data on a real-time basis, and I cannot tell you how important that is in our effort. All right? One of the things that I love about the staff that I have in New York -- I will get e-mails at 10:00 on a Saturday night. They're so -- they so much enjoy the work of data analysis and data mining, and they have access to it for purposes of their work -- that they will be working in weekends and coming up with great ideas and sharing them with other people.

And I -- it's impressive to watch. Remember the -- I've talked about the billing for pregnancy care for males. That was discovered by a nurse who is one of our data miners. She went to the computer and she said, "There are certain things we know don't happen, so let's test our computer system, see if it's really working the way we think it is." And so she went in and she put males, prenatal care. And what you should see is "no information found." What she found is 300 claims. All right? And so she went through and said, okay, 120 of these sound like female names -- probably a data entry error. But even after she was finished there was over 100 male persons who had, according to the billing system, received payment for prenatal care.

That's the kind of thing -- not only do you need the systems and the real-time access to data, you need people to get excited about working on it. And I think that's -- law enforcement would benefit form that kind of tool.

SEN. CARPER: All right. Thank you.

Senator Coburn and I have worked on changes to the Improper Payments Act. I think we're going to reintroduce some legislation in the next couple of weeks that will seek to improve on what we've done before -- better ensure that agencies are actually complying with the law -- trying to make sure that we go after money that's been misspent, improperly spent, and sometimes spent wastefully, and not just to go after money, but recover -- actually provide an incentive for agencies to go out and recover this money, maybe even by allowing them to keep a portion of it themselves to help pay for, among other things, their investigative work and to help actually maybe use a little bit of it for their programmatic expenses, too. So that actually incentivizes them to want to get in the game.

But let me just ask you to -- if you were in our shoes and you were trying to fashion legislation to further improve the strength of the improper payments law -- any of you -- I don't care who wants to go first -- but just talk to us about some things that we definitely should include in the legislation.

Anybody at all.

MR. MORRIS: If I could offer one thought -- and this relates to the recovery audit contractors, as well as the unintended consequence of incentives.

In the -- from the perspective of law enforcement, we always want to be very mindful not to have it appear they were operating on a bounty system. I mean, we all had the belief that that parking ticket we got at the end of the month was because someone was trying to make their quota. And if we are going to preserve the integrity of the law enforcement efforts so the citizenry believes we go after a bad guy because they're bad, not because we have a quota, I think we always have to be mindful of those incentives.

I would tell you that -- and we are working with CMS constructively on this issue, but we have had concerns that the recovery audit contractors have a powerful incentive to identify issues as overpayments because they recover a portion of those funds, and not as frauds. If they're identified as frauds, that matter is then referred to law enforcement, and it could be some time before they would see, if any, recovery from their work, their audit work.

Based on the pilot project, I believe it's the case that we received no referrals based on the recovery audit contractor's work. And I must tell you, although I had empirical evidence, it strikes me as implausible that based on all of those millions of dollars recovered, not any of them triggered fraud.

So as we think about --

SEN. CARPER: You said none of them were attributable to fraud? Is that --

MR. MORRIS: None of them were referred to us to develop as fraud matters. They were all resolved, I believe, as overpayments.

And Ms. Taylor, you could probably speak more specifically to that.

MS. TAYLOR: Right. I mean, Mr. Morris is correct. None of them -- I don't believe we had any cases that were referred to law enforcement for fraud types of activities.

The Recovery Audit Program really was focused initially in what I would call payment kinds of issues where either it was the setting of the service was not appropriate or it was more or less looking at issues related to perhaps too much of one thing being prescribed for an individual. So it wasn't necessarily fraud, but it was things where it did look like an improper payment was being done. But we certainly are willing to work with the IG in the future to ensure that if our recovery auditors have any evidence that this might be fraudulent that we do refer it over to them.

SEN. CARPER: Sure, sure, jump in, please.

SEN. COBURN: The problem is being a provider is they know how to skirt the individual definition of fraud. But we don't come back and look at repetitive skirting of that, which is fraud.

And when you have a system on recovery audits that doesn't look at that, you're not going to find it. And I guarantee you find the same guys, same gals doing exactly the same thing, just up -- they're up-coding one, or they're doing this, and it's fraud. It's intended fraud, but they know if you look at the record -- on that one you really can't go after them for fraud, just overpayment.

So looking at the pattern of behavior rather than the actual behavior becomes important to the fraud definition.

SEN. CARPER: Let me just yield to Dr. Coburn, and we'll bounce it over to Senator McCaskill. You're recognized, so please proceed.

SEN. COBURN: Thank you, Mr. Chairman, I have some questions that I've prepared I'd like to enter into the record now and have you all answer them as -- and through written.

SEN. CARPER: Without objection.

SEN. COBURN: I want to spend my time, if I can, especially with Mr. Sheehan, but I'd like all of you to answer this.

If we were to start over -- and the predicate for my question is is when I go and talk to the insurance companies in this country, their improper payment rate and their fraud rate is about four-tenths of 1 percent. And we're sitting at 25 times that. So there's got to be something with our system, either the way we've designed it or the way we manage it, that makes it completely different than everybody else that's paying medical bills. So what would you change? If you could tomorrow tell us start over, what would we give you that would lessen the ability for you to even have to have your job? How would you describe it? (Laughter.)

I wouldn't want take your job away from you, but I mean, it's a serious question -- is -- I'm convinced if everybody works as hard as they can and everybody has the same goal that we're going to get down to 3 or 4 percent of a trillion -- well, it's ($)2.4 trillion, of which 61 percent now is federal government . You know, that's a ton of money. So how do we change -- how do we think out of the box to get to where we're not chasing our tail?

MR. SHEEHAN: I think one of the advantages that private companies -- thank you -- one advantage that private companies have over the government, whether it's federal or state is they can pick their contract partners. They can use their ability to evaluate the prior performance and the bona fides and the background to see if this is someone they want in their organization (or ?) their network, and for a variety of reasons that's much harder for a public entity to do.

But I think the issue of who do you let in and who do you let stay in the program is really important. And that's one area where -- CMS is focused on, the federal inspector general is focused on and we're focusing on. We let people in because they have a license or a degree or a business.

SEN. COBURN: Well, they have to apply. They have to get Medicaid-certified or Medicare-certified.

MR. SHEEHAN: That's right.

SEN. COBURN: They have to get a number.

MR. SHEEHAN: And in New York, for example, we go out and inspect every single new DME provider. We inspect every new transportation provider. We inspect every new pharmacy in the southern part of the state, which is New York City -- expensive and time-consuming. We think it has a big effect in reducing bad claims in the front end.

And the second piece of that is, who do you let stay in? And do you re-review that provider, because it may be a pharmacy that's Mr. Morris's pharmacy today, it's somebody else's pharmacy tomorrow, but his name is still on the paper because no one has ever looked at it. So we think you need to have a robust enrollment process that goes -- does a look back further down the road to make sure we know who these people are.

And just as you have credentialing activities within hospitals, one of the concerns that we have in New York state is we exclude lots of people from the Medicaid program. What happens to them next? Right? What are the -- the assumption was they all went to Texas or Florida, right? And there's some merit to that, but I suspect there are quite a few that are still working there --

SEN. COBURN: They renamed themselves.

MR. SHEEHAN: Right. Exactly, exactly.

So that -- the idea of identifying the bad players and also focusing on the front end of who you let in is really --

SEN. COBURN: The question is is, why do they rename themselves? Because it is a honey pot easy to take the honey out of. And so that's where I'm trying to go with this. How do we make -- how do we change the system in terms of payment reform to where it's not a honey pot?

MR. SHEEHAN: The difficulty, I think -- and I've looked at a number of systems around the world for this. The Germans for a long time had a pot of money and they said we'll base payment on the number of services you provide. So what happened is the number of services went way up. And everybody -- they brought the patients back 20 times for backaches and headaches.

In Quebec they cut off the payments when you reach a certain peak; whether it's in November or August, they don't pay any more. So what people do is bill the system through August and then they leave Quebec as the winter's coming and then return in January.

I think every -- and managed care we felt would affect this, too. The problem is every payment system which tries to be fair, that is, to recognize the effort and input of the providers, also can be gamed as long as you have human beings playing with it.

And I do think that the entry and control process is a significant part of it. And, you know, the essence of third-party payment is that you're going to have situations where for Medicaid we can't really charge the people because they don't have any money.

And so the question is what is -- you know, what -- where do they fit in that picture?

SEN. COBURN: Okay. Mr. Morris?

MR. MORRIS: If I could offer -- just to supplement -- that I absolutely agree that keeping the bad guys and then throwing them out for good is critically important. This is why ideas like databases, adverse action databases are so important, so that it's easy for the Medicaid program, for employers -- I mean shouldn't a nursing home be able to know what the track record is of someone that is about to be giving direct care to a senior citizen? That's part of it.

But I think even more critical is being able to adjust payment systems as we discover that they are being abused. To follow on Jim's point, whatever payment system you set in play, there will be opportunities to exploit it. Fee-for-service: over-utilize. Capitated payment: underutilize.

What you need is to be able to use data and market surveys and other ways to affirmatively go out and see whether the practices are changing to respond.

If I could give you an example: When we started paying on a capitated or a DRG basis for hospital services, we bundled lab services into that payment. Initially they were performed within 24 hours. Well, everybody shoved those tests out beyond 24. Then we made it 72 hours. And the tests were done beyond 72 hours, because the hospital system responded to that parameter.

SEN. COBURN: Yeah, they're treating the system instead of the patient.

MR. SHEEHAN: Exactly. And so, one of the things we need to recognize is that is going to be, regrettably, part of the nature of the system -- a lot of money, lot of opportunities, lot of consultants. And rather than try to legislate every opportunity for mischief, give CMS greater flexibility to be more responsive, to update fee schedules, to impose competitive bidding practices. And let them get to that mischief early on. So part of this is having a payment methodology and payment systems which are much more responsive so we aren't that pot of honey that attracts the criminals.

SEN. COBURN: Okay. I have one quick question for CMS.

We know there's a disparity in both outcomes and cost. Where we have better outcomes we actually see lower costs. Have you all tracked your fraud records with the areas where you see better outcomes and lower costs?

MS. TAYLOR: I don't believe we have. That's not something we have looked at.

SEN. COBURN: That, to me, would tell me where to work. Because if there's a correlation you don't need to be spending your time in Minnesota or Iowa where we know we have lower cost and better outcomes. You need to be working in the areas which we know, like Florida, which have poor outcomes and higher costs, and it's almost a ratio of the providers to the number of beneficiaries, and you'll know where to go.

But it would be interesting for you all to out that out to us, is, here's where we see greater outcomes at lower costs and better long-term viability of the patients. And we know that fits with the lower cost of Medicare, not a higher -- actually we spent less money to get that -- and then correlate that with where you're seeing the highest fraud and improper payments.

MS. TAYLOR: We certainly can do that, and I think that's certainly a good point.

SEN. COBURN: That's the data mining that --

MS. TAYLOR: Right.

SEN. COBURN: -- Mr. Sheehan's talking about, because that's going to tell you where to go. And that's going to tell you where the priority -- it's not necessarily the populous states. It's where you can go by the quality parameters. And the cost parameters we're seeing now -- that's where not to go, the places where it's highest where to go. I have several other questions, but my time is up.

Thank you, Mr. Chairman.

SEN. CARPER: There'll be another round, if you'd like.

Senator McCaskill.

SEN. MCCASKILL: Thank you, Mr. Chairman.

SEN. CARPER: Senator McCaskill has great interest in issues like this.

SEN. MCCASKILL: Yes. And I want to compliment Dr. Coburn for thinking like an auditor.

SEN. CARPER: (Laughs.) He's been doing it for a while.

SEN. MCCASKILL: He's thinking like an auditor.

SEN. COBURN: I am. I have a degree in accounting.

SEN. MCCASKILL: There you go. There you go.

I sent a letter to CMS in January and I want to not be cynical about this. I haven't been here long enough to be cynical, but I got the -- I sent the letter -- I don't know -- way back in January -- January 16th. And I got the response by fax machine at 5:00 last night. It feels a little more than coincidental to me. And I am not, frankly, understanding the responses I got. And my questions are on Medicare D and what we have done in regards to the required financial audits. But more importantly, what I am most upset about in the response I got -- we know, from work done by the IG's office, that 25 percent of these bids have errors in them. Now, these are the bids that we sign off on for Medicare D plans. And half of those, they made unreasonable assumptions or errors that resulted in them making too much money.

Now, there's ways that we can reconcile that with these various companies that are offering Medicare D plans, as it relates to the government. But these seniors are being overcharged. And I want to put into the record the response I got from CMS about the seniors that are being overcharged.

Now, this is -- they're being overcharged because these plans have done it wrong, not because of some vagaries in the market but because they've done it wrong. And here's what the response says: "The beneficiary knows the premium cost before enrolling in the plan. Furthermore, beneficiaries have access to detailed plan information. Therefore, if a beneficiary is not satisfied with the plan's premium they may enroll in a less expensive plan for the coming year."

Are you kidding me? I mean, seriously, do you think my mother is supposed to go through her plan and figure out somehow that she's been overcharged and that all she has to do the next year is pick a cheaper plan?

I want to know what you all plan on doing to get the money back to these seniors who have been overcharged on these premiums, overcharged in terms of what they're paying for these prescriptions, and what mechanism are we going to put in place so they get their money back? They are very ill-equipped to be able to recover this money. And I was shocked at this answer, because it basically said, tough; we're not worried about them. And I would like some response, Ms. Taylor.

MS. TAYLOR: I will apologize. I am not the expert in our Part C and D programs. I do know that when we review the bids we do ask them to re-base the next year, so their bids should either go down so that their premiums would go down for the beneficiaries. But I don't know all the ins and outs. I would have to get you an answer for that on the record.

SEN. MCCASKILL: Can't we require them to pay back their beneficiaries? Can't they cut them a check?

You know we've done the numbers on this now, and profits went up for the drug companies after we put Medicare D in. They went up about $6 billion a year on the backs of the United States taxpayer. And they've stayed that high since we put Medicare D in.

I mean, can't we force them to make refunds to these seniors? Isn't that a reasonable thing to do before they're allowed to participate again?

MS. TAYLOR: I honestly don't know the answer to that. I don't know if we can ask them to reimburse beneficiaries.

SEN. MCCASKILL: Well, I just know that the most vulnerable population we have in this country is being taken advantage of. And if we're not going to be their champion, if the federal government is not going to go to bat for them, nobody is.

And I'm just concerned that after months of waiting for an answer to this, the answer I get from CMS is well, you know, they just need to pick a cheaper plan next year and maybe that -- it won't make any difference if it's a cheaper plan if it's still wrong. They're going to be paying more than they should.

And I -- the IG recommended that if in fact we discover there are errors in the bid plan, that they be required to have an independent outside actuary certify their plans for the following year. Is that something that makes sense to -- and I don't know, Mr. Morris, if you're in a position to comment on that or Ms. Taylor, if you're in a position to talk about that, but that seems like at minimum a reasonable requirement, that they would be penalized by requiring an outside actuarial analysis of their bids, once it's discovered that they've overcharged.

MS. TAYLOR: I know that we do some review of the bids. Our actuarial contracts do look at bids, but to the extent that we would have them required to do an outside, independent review of those bids, I don't believe we're doing that at this time.

SEN. MCCASKILL: Well, I would -- I'll have another set of questions based on the responses I got. And I'm hopeful -- I know it's a time of transition in government. I know that many positions are changing and so forth. And I don't mean to be unreasonable, but it's just hard to understand this response, in light of what it represents in a practical standpoint. You know, it's just somebody who's not paying attention to the practicalities of the situation.

Yes, Mr. Morris?

MR. MORRIS: Senator, to answer your question in part -- and I also am not an in-depth expert in Part D, but I can tell you two things. One, we have been very concerned about the inadequacies in some of these bids and the inability through the year-end reconciliation to get a level playing field. Not only do we think it's important to have good data coming in on the Part D side, but this applies across the board.

There are so many places where we're relying on self-reported information. For example, wage index reports from hospitals, which affect how we then build our Part A, D or G system. The idea of -- if they've done it wrong repeatedly, to force them to bring in an outside actuary has a lot of appeal to it. We'd be pleased to provide you whatever technical assistance you'd like.

I'd offer one other thought along these lines. There is within the current law the authority to impose -- I believe it's a penalty for erroneous information provided as part of a Part D bid. The problem is that if you don't also have an assessment that's tied to the volume of the error, the penalty is going to be well overtaken by the profit you make in the error. So including in the law an assessment that allows you to collect back more than the profit realized by this knowing error would create a disincentive to putting together bad bid reports.

SEN. MCCASKILL: And they don't have the ability to do that now? We need a change in the law for that to happen?

MR. MORRIS: That's my understanding, yes. There's currently a penalty, but there is not an assessment.

SEN. MCCASKILL: Okay.

It did go on to say that -- which is -- in some ways makes it worse, that well, if we did that, then when they didn't make as much money as they should, they'd have to pay them more. Excuse me, the companies have taken the risk, not the seniors. The companies are doing business with the government. If they get it wrong to their detriment, tough. If they get it wrong to the detriment of the seniors, they need to pay and they need to pay the seniors.

And that's not occurring now and we've got to get that fixed, Mr. Chairman. I think it's just outrageous. We're talking billions of dollars over the period of time this program has been in -- that seniors are paying to these companies, false profit. But it spends the same way for these companies.

Also, I was curious about the audit situation. We had a handful of audits. There is a requirement that 165 financial audits should have been done for contract year 2006 and I think there were a handful that were begun in November of last year. Now we have a bunch of them done. I'm curious, does that mean that money has shown up that you didn't have before or what is the -- are you in good shape now in terms of having the resources to do the audits the law dictates?

MS. TAYLOR: We are in better shape. I wouldn't say we have all the money, but we certainly are in better shape than we were at the beginning. Certainly for the 2006 audits, we had to straddle them over two fiscal years because we did not have the resources at the time. But we are currently in the process -- I believe almost all of those 2006 audits have begun, except for maybe a handful. We do have 50 audits in-house that we are looking at currently and we have begun to start 2007 audits.

SEN. MCCASKILL: I'm curious, your productivity since January has skyrocketed. Did you add personnel -- audit personnel during that period of time or are these being done by contracts?

MS. TAYLOR: Part of the reason was we -- these are contracts. These are accounting firms that we hired to do these audits. And part of it was them getting up to speed on the C and D payments and the audits and the program. So a lot of the up-front was getting them trained on the audit protocols that we are requiring them to do.

SEN. MCCASKILL: And so I'm going to be much less frustrated, you're telling me, going forward that these audits that we've mandated in the law are being done on a timely basis?

MS. TAYLOR: I hope so.

SEN. MCCASKILL: Okay. Well, I'll get another set of questions to you. I particularly am going to be interested in how we get money back for seniors. And I hope the next answers is -- we put on the hat that we're thinking about the people the program's supposed to benefit instead of the companies that are getting fabulously wealthy off the backs of these seniors.

Thank you, Mr. Chairman.

SEN. CARPER: You bet. Thank you very, very much.

I want to go back to a question that I asked and we never -- I don't think we ever fully answered it. And the question I asked is if you're advising us on changes to make to the Improper Payments Act, what might they be?

And among the changes that I mentioned is I think under current law, when post-audit recovery is done, agencies -- I don't believe they're allowed to keep a portion of the recoveries to pay for their recovery activities. I don't believe they're able to use that money to strengthen their financial management. I don't think they're able to use any of that money for -- to use for programmatic purposes.

And notwithstanding the caution flag that Mr. Morris raised about the bounty situation emerging, those are some changes we're contemplating making, I think probably will make.

One of the things that intrigues me in public policy is how do we harness market forces in order to compel good behavior, encourage and incentivize good behavior? We've seen in the case of surplus properties, federal properties that -- we have a lot of federal properties that aren't used. We pay security -- pay money to keep them secure. We pay money for their utilities and so forth. A lot of properties we don't use, we'll never use.

And one of the reasons why that happens is because agencies, if they sell them they have to go through the cost of upgrading them, repairing them, rehabbing them, knowing they're not going to get anything back out of those properties. They don't have any money to help pay for that stuff. So there's -- keep anything for programmatic purposes, so they just hold onto the properties until the whole situation languishes. We're trying to figure out how to incentivize agencies to unload surplus properties and hopefully to get a decent amount of money back for the taxpayers and also something for them, too.

We're looking to be able to provide a similar kind of incentive here, so that we don't have to ride herd on every one of the agencies. They want to be out there looking for opportunities, not making them up, but looking for opportunities to recover these dollars that are being literally pilfered away from us not just as a government but as a country.

What are some of the changes we ought to make in the Improper Payments Act? Are there any cautions that you would raise about any of those, please?

Ms. Daly, why don't you go first?

MS. DALY: Well, thank you, Senator Carper. I think -- we've been working with your staff for some time now in trying to develop provisions for the improving IPIA. And one of the key points, I think, that we talked about, and I believe we sent you a letter on last year, was about strengthening management accountability in that act. I think it's one of the areas that has a lot talked about, but we're not sure how much action is actually going on for the people responsible for running these programs. And if we make it more personal accountability under there, that might be something that would be very helpful.

Another thing --

SEN. CARPER: I'm sorry, in Sarbanes-Oxley -- I think one of the things we did in Sarbanes-Oxley is we said literally the CEO of a company, when they submit -- a company verifies or certifies that they have scrubbed their books, they've done the right thing, literally the CEO has to sign his or her name on the dotted line. Some of them don't like that very much, but that's what they have to do.

MS. DALY: That's right. It makes it personal and that -- you take it much more seriously, other than just as an institution.

One of the other areas we think might be important too, and we've seen some inspector generals and agency auditor offices do this, is look and see how well each agency is complying with IPIA on an agency and program perspective and that way, it provides a good snapshot on the ground level of what's going on at each one of those agencies. So that's something else we think might be very important, that would be useful.

SEN. CARPER: Okay.

Mr. Sheehan?

MR. SHEEHAN: I spoke about a five-point plan, but I have a sixth point, which matches your --

SEN. CARPER: So this is a five point plan with six points?

MR. SHEEHAN: It has six points --

SEN. CARPER: A bonus, huh?

MR. SHEEHAN: -- best way to do it. I'm going to sound the same way as Mr. Morris on the issue of bounty, because both of us have been in court rooms and both of us have been before trade groups on that issue. And it's an emotional and visceral issue that goes beyond rationality, because people expect their government to be fair and straightforward. And if the -- once you have a bounty piece, that's cross examination in every case. It just raises that specter of doubt.

But I have an incentive plan for you and the incentive plan is: As it stands now in Medicaid for all the 50 states plus the District of Columbia and Puerto Rico, if I identify an improper payment, if I identify a fraud as the Medicaid Program, I then have to give back to the federal government its percentage share, which makes sense from one perspective, right, because it's federal money on the front end.

But let's talk about what that incentive creates. Let's suppose I'm looking at two hospitals. One is in very bad financial shape but is incapable of submitting its great bill. One is in very --

SEN. CARPER: I'm sorry, they're in very bad shape but they're --

MR. SHEEHAN: They're in very bad shape, but they can't get their act together to submit bills properly. And as they get deeper and deeper, they start doing things that are more and more problematic, all right?

The second one --

SEN. CARPER: You say problematic. Unlawful or --

MR. SHEEHAN: Well, let's -- it's somewhere in that range between improper and fraudulent, right, because desperate people do desperate things. Hospital number two, very solvent, has some billing issues that are straightforward improper payments.

What the statute does now is say if I go to hospital B and I collect the money, I give back the federal share, away we go. We're done. If I go to hospital A, which has much greater risks and I know I can't get the money back, right, essentially the state is then going to have to pay back the federal government its share going forward.

And what we would like to be is partners at risk on the recovery side. So if we go look at a hospital and say we've got these problems, here's where we are, they need to change it, we're not being penalized as a state, because we then are paying back the feds their 50 percent share and eating it in our program.

And I will tell you that in state government I've heard those conversations, you know? If we change our audit plan and look at the most vulnerable, that are also the most problematic, we're going to end up eating that on the state budget side. So the incentive is not for us as an agency, but the incentive is for the states to say let's either elevate the percentage or let's make the state and the feds partners on the recovery.

So if we can get the money back, then we take our respective shares. But don't make us pay you back and then -- because it changes the direction that the audit and enforcement program focuses on that.

SEN. CARPER: Fair enough, yes. Thank you.

Mr. Lewis? Mr. Morris, excuse me. I keep calling you Mr. Lewis. It's because your placard says Mr. Lewis Morris. Mr. Morris?

MR. MORRIS: If I was the artist, I'd be very happy, Lewis Morris, Morris Lewis.

At any rate, this may not be directly on point but maybe some of this thinking will inform your question. The inspector general's office has a robust self-disclosure protocol.

We encourage providers to find problems themselves and come tell us about them -- Mr. Sheehan has a comparable program in the New York Medicaid program -- the thinking being that many of the problems, from simple overpayments to abuse to out-and-out fraud, are not going to get detected by us. They're either too buried in the system, our resources aren't expansive enough to find them. And so we have been thinking about ways to create incentives for those providers to come forward, to reduce their error rate.

If they're going to have to pay doubles, plus potential sanction in the form of exclusion from our program or the like, they're not going to come forward. They'll take the risk of sweeping it under the carpet and hoping they don't get caught. We like to make the argument that we will catch you, but the more sophisticated of their lawyers will tell you otherwise.

As we have developed the self-disclosure protocol, we've come to realize that collecting back singles, you've got to do that. This is our money. But when it comes to those multiples, this added-on penalty, if we take a much more modest sanction, you know, .2 percent, .5 percent, it's attractive to the provider because they put this problem to bed, it's great for our program because we get money back into the trust fund that we would not otherwise have had.

And so the suggestion I would have is as we're thinking about ways to reduce error rates, we need to martial the commitment of not just the federal programs, who should be looking at their own systems to ensure that we are paying accurately the first time, but think about how to also align, for example in the health care system, the providers, the suppliers, the practitioners whose money -- you know, they're really holding the vast majority of all these erroneous payments.

We need to find ways to have them actually come forward and tell us they've found a problem, they're giving the money back, they're fixing the problem, but knowing that they're going to be treated fairly, so they work with us as partners.

SEN. CARPER: Okay. Good. Anyone else?

Ms. Taylor, anything you want to add on this question, please?

MS. TAYLOR: I would certainly echo the compliance piece of that. And certainly from a CMS perspective, Kay mentioned having it in manager's plans that they're responsible for these error rates. It is in my plan. It is in my managers' plans.

And we work very closely with our Medicare contractors to ensure that their contracts are built on what the error rates are for the providers that they serve and pay in those areas. So to the extent that the error rate is high in a certain state, that contractor knows they need to do better outreach and education of providers.

SEN. CARPER: All right? Anybody else on my question?

I have a series of questions I'm going to sort of read through. Some of these you've already spoken to -- a couple of you have, directly or indirectly. But I'm going to go through them anyway and ask you, to see if you want to add anything.

But the first one was what are the biggest challenges facing CMS, OIG, New York state in combating fraud, waste and abuse in our Medicare, or in your case, Medicaid programs, respectively? Again, biggest challenges facing CMS, OIG, New York state?

MS. TAYLOR: Yeah, I'll go first.

I would say the biggest challenge facing us is resources. We administer huge programs, very complex programs with very little administrative resources to do the oversight that we need to do.

Secondly, we have systems barriers that we need --

SEN. CARPER: Let me interrupt. If we amend our law so that it allows that some portion of the recoveries to be used to strengthen those kinds of systems, does that make sense?

MS. TAYLOR: That would certainly help, yes.

SEN. CARPER: Okay.

MS. TAYLOR: Secondly is our systems. And we've talked about real-time access to systems. For us, our systems were built as the programs were developed. So we have Part A, we have Part B systems, we have Part C and we have Part D systems. We right now we are looking at ways to be able to put those systems together to be able to look across the benefits on a provider and an individual basis. So that for us is a big challenge in being able to get real-time data and data that talks to each other.

And the last item, I guess I would say, is certainly being able to partner more with our folks in the states and law enforcement and being able to have a little more mechanisms to be able to share information across.

SEN. CARPER: Okay. Thanks.

Mr. Morris, what are some of the biggest challenges facing OIG, with respect to fraud, waste, abuse in Medicare --

MR. MORRIS: First, to echo Ms. Taylor, is data, access to data, reliable data. This is both data from CMS as well as, I had mentioned, the notion of adverse action databases, so we know who it is we're dealing with and we can work with our state partners to make sure they aren't crossing state lines to prey on a different program.

And then resources. If we have great data but don't have the foot soldiers to interpret it and we don't have the agents to go out and make the investigations, it's all for naught.

I would also mention, although I'm not a member of the Department of Justice, if we've got great auditors and great investigators but we don't have great prosecutors to carry that ball across the line, it's also for naught. When we're thinking about an effective law enforcement strategy, we have to recognize its -- the data to recognize the problem, the foot soldiers to quantify the problem and then the prosecutors to stop the problem.

SEN. CARPER: That's a good point. Thank you.

Mr. Sheehan?

MR. SHEEHAN: I'll do the rule of three here, with only three. The first one is the real challenge for law enforcement, I think, and for program integrity over the next five years, is -- and we're already seeing this -- as we move to the world of electronic medical records, one of our old ways to look at -- to figure out what actually happened between a patient and a physician was to look at the paper record with the paper entries.

I walked into the doctor's office about a week ago. He had a template that showed -- that had every finding normal, right? So the template had every finding normal. It had, you know, before he took my pulse, he had a number in there. Before he did blood pressure, he had a number in there.

I said, "What are you doing?"

He said, "Well, it's a template; as I go through and I find different findings, I enter a different one." All right, but think about that as an electronic medical record issue. And so many electronic medical records and billing systems we're seeing now already populate fields. So the kinds of proof we did five or 10 years ago to find out what's going wrong and the training today of our people is going to be less and less relevant. And you have these proprietary systems that we have to figure out how to make work.

We're going to see, I think, a significant amount of fraud that is based upon electronic medical records, electronic claims records, electronic systems that are proprietary and difficult for the federal government and the state government to figure out. And we've discussed this internally. We don't know what the answer is, but it's a huge challenge.

The second one is information.

How do we let the public know what the issues are? You know, what kinds of conduct, when they go to see their doctor, when they get an explanation of benefits, when they hear about a problem from a friend or a colleague, what information is useful to them and what should they do with it?

If you look in this country at explanations of medical benefits, whether private insurance or public -- I mean, I've been doing this work for 27 years, I can't read them. And it doesn't really -- one of our greatest resources in the electronic age is having people communicate to us directly about what they see, what they find, what they know. And we haven't figured out how to go beyond telephone hotlines to using the information that is out there in sort of the social world to tell us here's what you should know.

And the third thing is to communicate to the good guys, that are compliance officers that work in large organizations or board members. What questions do you ask and what should people be telling you and what should you ask for? Because our best allies in this whole process, to me, are the beneficiaries and the providers who want to do the right thing.

And they're -- you know, in every case the reason we win our cases is because there are good people saying this is the truth, this is what happened, this is the right thing to do. And we need to find a way to support them, encourage them and bring them in.

MR. MORRIS: If I could just echo that one point about boards of directors and upper management being held accountable. We have been working very closely with the American Health Lawyers Association and others to inform boards of directors of health care systems how critically important it is that they understand not just the bottom line financially but the quality of the care being provided by their institutions and be able to ask management, how do you know we billed it right? How do you know that we are a system of integrity? What internal controls are in place?

Because if a board is providing that kind of oversight of its organization, as it should, it's fiduciary duty, we have a tremendous ally in the fight against waste, fraud and abuse. And so thinking about ways, like Sarbanes-Oxley, to say to boards of directors, you know, your job is to ensure the mission of this organization and it is to deliver quality health care. That's what you're all about if you're the board of a health care system. How are you doing that?

We've got some products out there, I think, that we could make huge inroads into corporate responsibility by thinking more about how boards of directors should be part of this effort to ensure compliance.

SEN. CARPER: All right. Next question I would ask is one that I think we've spoken to in several instances. I'm going to ask it again and see if it jogs your memories or your minds to add to what's already been said.

You know, we've heard from several of you on the panel about vulnerabilities in Medicare, vulnerabilities in Medicaid that foster waste, fraud and abuse. What can we do at the congressional level, this subcommittee, this committee, the Senate, the House, to address some of those vulnerabilities? Anything further come to mind?

MR. MORRIS: It looks like I draw the straw.

SEN. CARPER: Sure.

MR. MORRIS: In the time we have this afternoon, I don't even want to really begin. I could tell you this: First, we would be delighted to provide you with a great deal of information --

SEN. CARPER: Do you want to answer that on the record?

MR. MORRIS: That probably would be the most efficient. I would just tell you that we do an enormous amount of audits and evaluations, program inspections, with a wide range of recommendations to strengthen the program. Some of those are recommendations we make to CMS and they can implement them. Others do require legislative change. So we'll be pleased to respond on the record.

SEN. CARPER: If you would, that'd be great.

MR. MORRIS: Thank you.

MR. SHEEHAN: Senator, if we could take the same opportunity.

SEN. CARPER: You may.

My next question, as part of a three-year demonstration project that we've been talking about, CMS used recovery audit contractors in three states, California, Florida and Texas, to identify and to recoup overpayments in the Medicare program. The demonstration project has been seen by many, including by me, as a real success with, as I said earlier, nearly $700 million being recouped, recovered to the federal government.

And I understand maybe more than that has been recovered. Some of that is actually still under contention, but clearly $700 million or so is -- has been recovered or is being recovered. It's my understanding that the plans are to roll this program out to all 50 states.

And I'd just be interested to hear the thoughts from any of our panel witnesses on recovery audit contracting, if this is something that could also work in our Medicaid program?

MR. SHEEHAN: If I could, Senator?

SEN. CARPER: Please.

MR. SHEEHAN: The Medicaid program actually has already started what are called Medicaid integrity contractors, which are employed by CMS -- or retained by CMS. And as I understand it, they're rolling out -- in New York they're rolling it out in October of 2009, but they've already been rolled out in various parts of the country. And --

SEN. CARPER: What are they called?

MR. SHEEHAN: Medicaid integrity contractors.

SEN. CARPER: And when did the rollout start?

MR. SHEEHAN: Ms. Brant (sp), do you know when -- what was the start of those? I think it's the beginning of this year.

MS. : (Off mike.)

MR. SHEEHAN: Now the --

SEN. CARPER: What did she say?

MR. SHEEHAN: I'm sorry, it's the beginning of this year, beginning of 2009. So those contractors are just beginning to be rolled out.

Now, obviously there's the coordination issue with each state and how they're going to do their work. And that's going to be hard work on both sides to make it work. I think the key for us, in looking at these contractors, is -- again, I have difficulties with the bounty issue, once again. But I think there are ways to design those audits so that you identify stuff that is relatively straightforward and you give people an audit plan that's going to work and they can find things that you wouldn't find otherwise.

But an important part of that --

SEN. CARPER: Let me say -- let me say to our staff, just make sure we ask on the record for some advising guidance on addressing the concerns on the bounty issue, okay?

MR. SHEEHAN: The second issue, though, is it seems to me it's really critical, when we send out audit contractors, to make sure that we communicate to the health care community at each stage what it is we're looking for, what it is we're finding, what they can do to fix the problem going forward, because -- and that's why I have concerns about the bounty issue.

Again, it seems to me that the interest of the auditors is making sure that bad stuff continues so they get their 10 percent. What we really should be focused on is telling people how to do it right and reminding them and saying the government's going to come around.

And for those who show up three or four times in audits to say it's not just a payment issue; you've got a control issue here that you need to address, and we're going to take a different approach.

SEN. CARPER: Okay. Thank you.

MS. DALY: Senator Carper?

SEN. CARPER: Please?

MS. DALY: I'd like to add in that I think, you know, GAO has long been an advocate of recovery auditing. I think it's something that's been proven well, and certainly in the Medicare program, the demonstration projects have become more successful.

And as it rolls out to the rest of the states, I think there's a lot they could probably learn from the rollout of Medicare that could be applicable to Medicaid. So while Medicaid is still in the demonstration phase, they could use those lessons learned and move that over. So that might be something that could be very useful.

SEN. CARPER: Okay.

MS. TAYLOR: And certainly, Senator Carper, just to sort of clarify the contracting, we do certainly right now have Medicaid integrity contractors in 24 states, including the District of Columbia.

SEN. CARPER: Do you have a list of the states there?

MS. TAYLOR: I don't have them with me, but I certainly can get that to you.

SEN. CARPER: I'd be interested to know if -- yeah, please provide that.

MS. TAYLOR: I will definitely.

SEN. CARPER: I'm especially interested to see if the first state -- the first state that ratified the Constitution might be on that list.

MS. TAYLOR: (Laughs.) Okay. And in all 50 states by the end of this fiscal year, so we are in the process of rolling that out. And certainly I think we'd want to look and see what the contractor success rates there before we make any kind of decision about recovery auditing in the states.

SEN. CARPER: Okay, good enough.

I was talking, as a side here, a couple of minutes ago with members of our staff and saying -- one of our ideas in the future here, not far down the road, would be one where we invite CMS to come and talk with us about the success we've enjoyed the last three years, the work in the three states. Maybe bring in some of the recovery -- the folks actually doing the recoveries, talk about it.

Over in another jurisdiction, I serve on the Finance Committee as well and we have jurisdiction over Treasury, as well as CMS. And for the last several years, Treasury has been allowed to use private sector firms to go out and do recoveries for taxes that were owed but not paid.

And after several years experiment, the IRS has decided that the more cost-effective way to do those recoveries would be not to hire folks in the private sector but to hire people to work in IRS. I think we've asked the budget to provide another 1,000 people to do that work. And they suggest that the return on investment could be very substantial.

So it's interesting that we -- I look at -- I've been watching with some interest what's been going on in the IRS, trying to recover monies. And to have seen the experience with CMS, which is, I think, basically pretty encouraging in the three states.

And the idea occurs to me that we might eventually have a panel where we would have CMS and the recovery auditors saying this is why we think this is working, this is maybe how we can do it better and then have IRS come in, like maybe in the same panel, and say this is why we tried this, this is why it didn't work and this is why we're going to go in-house. I think that might be informative for all of us.

Anyone else on this question, before I move to our next question? Okay.

It looks like -- I think we're going to get through this hearing without being interrupted with those votes, those pesky votes. It doesn't happen every day.

Mr. Morris, Mr. Lewis Morris, I think you stated that the compliance programs are prevalent in hospitals but are lacking in other health care sectors. Which health care sectors in general have not adopted internal compliance programs and practices?

MR. MORRIS: I would like to get back to you with a more specific answer, but once I learned of that question this morning I called up the executive director of the Health Care Compliance Association and asked him the question. He said based on his membership, the lower participating industries include home health, not surprisingly DME, and some small physician practices.

I would also tell you that our Office of Evaluation and Inspections would be pleased to do some work in this area. We could actually go out and survey a group of participating Medicare and Medicaid providers and find out what percentage of them have compliance programs and what they look like. So we could get you a very precise sense of what part of the industry is embracing voluntary compliance programs and what could use some more encouragement.

SEN. CARPER: All right, thank you.

Mr. Sheehan?

MR. SHEEHAN: We just completed a New York review of two industry areas, the hospitals -- and most of the hospitals in New York state actually have fairly concrete compliance programs. What -- the question of whether they work well is -- that depends on the hospital.

But the biggest weakness we saw in compliance was managed care. And that -- the issue is not just what systems they have in place, but is there -- is the industry focusing on this issue and are they getting guidance from CMS and from the inspector general on what that should look like?

I think there's a real opportunity here for us and for the IG and CMS to say here's what a compliance program looks like in a managed care entity. The questions are more complicated. The guidance that's out there is ancient. I guess for IG it's '99 or '98. For CMS, it's like the early 2000s. And the business models are very different.

So of all the areas that need compliance, I think it's the managed care entities that are providing care both from the state Medicaid programs to most of our patients and Medicare Part C.

SEN. CARPER: All right, thank you.

Our vote has just started. But I want to finish with another question or two and then we'll wrap it up.

Ms. Daly, I think you said at one point in your testimony that while the error rate in Medicare's fee for service program has declined over the years, some believe that the estimates we currently have may understate the problem in several areas. Can you elaborate on that?

And I don't know, maybe, Ms. Taylor, you or maybe Mr. Morris can jump in and share your thoughts with us as well.

Ms. Daly, would you go first?

MS. DALY: Once I press the button, yes I can. (Laughs.)

Yes, I think over the years the Medicare fee-for-service error rate -- they have refined. It originally started out the inspector general's office was doing that error rate and then recently, the Office of Inspector General has done some more work to identify what the issues were with it.

With that, I'd like to kind of defer to Mr. Morris then, to provide you more details on that analysis. But at the same time, I did want to point out again that the Medicare prescription drug benefit still doesn't have an estimate for their errors.

SEN. CARPER: Ms. Taylor, do you want to jump in here before we go to Mr. Morris?

MS. TAYLOR: Absolutely. The IG did do a review of our CERT, which is the comprehensive error rate for Medicare fee for service. They did find that there were some concerns about the way we were looking at the DME portion of the error rate.

We did enter into a re-review of our CERT claims related to DME. We found that our policies could be interpreted by different folks performing medical review -- or complex medical review on medical records differently, meaning someone might interpret it as you have to have every piece of the medical record to be able to pay the claim or others were interpreting it as if I had enough information in the medical records, I could use my clinical judgment and allow the claim.

What we found was we had inconsistencies. We agreed with the IG that we need to clarify our instructions, that clinical judgment is not appropriate where it's required to have medical records on hand. So we will be applying that, and I think we already are starting to do that now for this year's error rate.

The other thing that was critical for the IG's review on improper payments when they looked at the CERT rate was they actually took some set of those high-risk DME claims and went and visited the providers and the beneficiaries. And so, this year we will begin looking at some of those high-risk areas and going out and talking to the provider and talking to the beneficiary.

SEN. CARPER: All right, thank you.

Mr. Morris, the last word on this one.

MR. MORRIS: I think Ms. Taylor has summarized it just right. I would tell you that we believe in the IG that it is important actually -- I'm sorry. I think it was on. Is it okay now? Okay.

We think you need to look past what it is that the DME company is offering you. As Mr. Sheehan referenced, the sophisticated criminal knows how to doctor up the record to make it look good. You need to actually get out there and talk to the beneficiary. It is more labor- intensive, it's more resource-intensive. I think it also gives you a much more accurate snapshot of what's going on.

SEN. CARPER: All right.

Well, folks, we're running out of time here. And I hoped we could complete our hearing before the voting began and it looks like we're just coming in right under the wire.

I want to thank each of you for preparing for the hearing today. I want to thank you for appearing today and testifying, responding to our questions. The hearing record will stay open for a while. I'm not sure exactly how long -- (aside) -- five days, a couple weeks?

One week.

And as you receive follow up questions -- several people obviously are going to submit those, including me, we would ask that you respond promptly, please.

The other thing I would say in conclusion, we're going to run out of money in the Medicare Trust Fund. We're literally running out of money. And as -- there's a problem long-term with respect to Social Security. But it's one that -- one we need to act on that, but the need for action for Medicare is soon, sooner rather than later.

There are a lot of things that we need to do in order to restore the integrity of the Medicare Trust Fund. But one of those is -- that's why we're talking about it here today and figuring out where we're spending money inappropriately, figuring out how to go after that money to recover it and ways we don't spark some kind of bounty system here with some unintended consequences.

I'm grateful for the efforts that you're all doing -- I just especially want to say to Mr. Sheehan and folks up in New York state, thank you very much for being a good role model, maybe, for the other states and for those of us in the federal government. I like to sometimes say I would rather see a sermon than hear one. And I think maybe in your case we see the sermon and that's good. Today we heard from the preacher. That's not bad either.

Thank you all for a most illuminating hearing. The other thing I would say -- this is not an easy problem. It's not an easy problem to solve to get our heads around, our arms around and to deal with. And we obviously can't do it with our subcommittee or even on the full committee or the full Senate. This is one that we need just a real collective effort, cooperative effort, a partnership. And I think that we have that going for us and we just have to build on it.

That having been said, thank you all very much for joining us today. And we'll look forward to working with you going forward. Thank you. (Sounds gavel.) Hearing's adjourned.


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