Today, Ways and Means Oversight Subcommittee Chairman Peter Roskam (R-IL) delivered the following opening statement during a hearing on the federal government's use of data analysis--particularly the Centers for Medicare and Medicaid Services' Fraud Prevention System (FPS)--to identify emerging trends and stop Medicare fraud.
"Welcome, everyone, to our second hearing. The reason we're here today is to strengthen one of the most important federal programs, Medicare, which provides necessary healthcare services to millions of our nation's seniors. Every year, Medicare loses billions of taxpayer dollars through fraud and improper payments. And today we're going to find out what the administration is doing to stop it.
"When we first constituted this subcommittee at the beginning of the Congress, the ranking member and I talked about our shared goal of working together, establishing the facts, and making government work better for all Americans. Today I have the unique privilege of holding a hearing on a topic I know my friend Mr. Lewis has worked on for many years, including holding hearings and producing legislation as the chairman of this very subcommittee.
"I know I'm speaking for all of us when I say that we are extremely concerned about Medicare fraud. It remains a serious, evolving threat. There are billions of dollars at stake. And there continues to be a lot more work to be done to get ahead of the criminals and get it under control. So today's hearing is a continuation of the significant work that these members and the Congress have done in the past, and we're going to be taking a look at the administration's current efforts and ways we can improve Medicare payment integrity.
"To begin, I want to emphasize just how big of a problem this is. Last year, the federal government lost $124.7 billion dollars in improper payments across 124 programs. Of that $124 billion, one program accounted for $60 billion--or nearly half of the losses: Medicare. Because the program is so large and susceptible to abuse, the Government Accountability Office has singled it out as a high risk for fraud every year since they started keeping track in 1990.
"Historically, CMS has used a method called 'pay and chase' in processing Medicare payments, first paying for a charge, and then later looking back to check on the validity of the transaction and potentially trying to claw back the money if the payment was made improperly. As you can imagine, that strategy isn't very effective. Time and again we have seen fraudsters bilk the system for a few million dollars, shut down, and pop up under a new name to run their scams all over again. The Medicare program is getting outsmarted by these methods and the proof is in the unacceptably high rate of improper payments each year.
"In 2010, I proposed a new approach to help CMS work smarter. Instead of 'pay and chase,' CMS should use the same kind of cutting-edge predictive analytics technology that private companies use successfully to look at transaction data in real time and identify potentially fraudulent charges--stopping the payment before the money goes out the door. Credit cards use a similar system to identify a potentially fraudulent charge and stop payment while they further investigate the claim. The framework of that idea was later enacted as part of the Small Business Jobs Act of 2010.
"The system created by CMS to incorporate data analytics to protect Medicare is called the Fraud Prevention System, or FPS. In its first year, FPS got off to a rocky start--the Health and Human Services Inspector General could not even certify any of the system's results. In its second year, ending in July 2013, the Inspector General certified that the system had returned one dollar and thirty-four cents for each dollar invested that year, totaling about $54.2 million in savings.
"Now $54.2 million dollars is a lot of money, but it is quite literally a drop in the bucket when compared to the $60 billion that Medicare programs lost last year. As it currently operates, FPS is catching less than 1 percent of improper payments. And I should add that disappointingly, CMS is still primarily relying on the pay-and-chase model to go after money that has already been paid out improperly, rather than stopping improper payments on the front end.
"I continue to think that the idea behind FPS is sound, but taxpayers are entitled to see that idea implemented with excellence. Each dollar we fail to secure from fraud and improper payment is a dollar that isn't going to needed healthcare services for our seniors. And when we look around at what private companies are doing to protect the integrity of their transactions, it's clear that so far, FPS is leaving a lot on the table.
"For the first panel, this subcommittee wants to hear directly from CMS and the Office of the Inspector General about how they are using FPS and other data sources to identify emerging trends in Medicare fraud. And we want to know how CMS and OIG are coordinating their efforts with the Department of Justice to share data and prosecute Medicare fraudsters. I'll note here that regrettably, we invited the Department of Justice to testify about these issues today, but they were unable to provide a witness.
"On the second panel, we'll hear from two witnesses who previously served in the administration at DOJ and CMS, respectively, to get their insights about the government's performance on these issues. Another witness will tell us about how CMS and DOJ are collaborating with the private sector to address fraud issues affecting both Medicare and private insurers. And finally we'll hear about how Visa, a private-sector company, has used predictive analytics to stop fraud. Visa's global rate of fraud is 6 basis points--meaning 99.4 percent of the $10 trillion dollars in payments it processes globally are fraud-free. That's quite an impressive track record, and one we hope to learn a thing or two from.
"We look forward to hearing from all of our witnesses and thank them for their consideration in appearing today."