Testimony of:  
John Hagg  
Director of Medicaid Audits  
Office of Inspector General 
U.S. Department of Health and Human Services 
 
 
 
Hearing: 
Strengthening Medicaid Program Integrity and Closing Loopholes 
 
House Committee on Energy and Commerce 
 
September 11, 2015 
Rayburn 2322 
9:15 AM 
    John Hagg  
Director of Medicaid Audits  
Office of Inspector General  
U.S. Department of Health and Human Services  
 
  
Good morning, Chairman Pitts, Ranking Member Green, and other distinguished Members of 
the Committee.  Thank you for the opportunity to testify about the efforts to reduce fraud, waste 
and abuse and to promote quality and safety in the Medicaid program.   
 
Our mission at the Office of Inspector General (OIG) is to protect both the integrity of the 
Department of Health and Human Services programs and operations as well as the health and 
welfare of the people the department serves.  Overseeing the Medicaid program is a critical 
component of that mission.  Medicaid spending totals almost $500 billion, and the program 
serves more than 72 million individuals.  OIG advances our mission through a robust program of 
audits, evaluations, investigations, enforcement actions, and compliance efforts. 
 
The Medicaid program provides medical assistance to low-income individuals and those with 
disabilities.  The Federal and State governments jointly fund and administer Medicaid.  At the 
Federal level, the Centers for Medicaid & Medicare Services (CMS) administers Medicaid.  At 
the State level, each State administers its Medicaid program in accordance with a CMS-
approved State plan.   State Medicaid Fraud Control Units (MFCUs) play key roles in protecting 
the integrity of the Medicaid program.  Among their responsibilities, MFCUs investigate and 
prosecute provider fraud and patient abuse and neglect.  MFCUs must be single, identifiable 
entities of the State government and certified annually by OIG as meeting Federal requirements.  
Forty-nine States and the District of Columbia have established MFCUs.  OIGs federal 
investigators also work closely with MFCUs on many criminal and civil cases involving 
Medicaid. 
 
Protecting the integrity of Medicaid takes on a heightened urgency as expenditures and the 
number of beneficiaries served continue to grow. Many states and the District of Columbia are 
expanding Medicaid eligibility to include a larger group of qualifying adults pursuant to the 
Affordable Care Act (ACA) and Medicaid waivers.  Further, States that have not expanded 
eligibility have also seen increases in Medicaid enrollment.  OIG has a substantial portfolio of 
past, ongoing, and planned work addressing the Medicaid program.      
 
As requested by the Committee, my testimony today will focus on three specific areas in need of 
corrective action within the Medicaid program, including terminated providers continuing to 
participate in and bill Medicaid, adequate safeguards being implemented to prevent fraud in 
personal care service and a lack of MFCUs in the U.S. territories. 
 
   
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  Terminated Providers Continue to Participate in and Bill Medicaid  
 
Prior to passage of the ACA, if a State terminated a providers participation in its Medicaid 
program, the provider could potentially participate in another States Medicaid program, leaving 
the second States program vulnerable to fraud, waste, or abuse committed by that provider.  To 
prevent this, the ACA broadly requires States to terminate a providers participation in their 
Medicaid programs if that provider is terminated from another State Medicaid or Medicare 
program.  CMS, in regulations, clarified that this requirement applies only to providers 
terminated for cause (i.e., for reasons of fraud, integrity, or quality). 
 
.  
Note:  State A refers to the State that initiates a providers termination for cause.   
State B refers to any other State where this provider is providing services  
or to where the provider could move. 
 
 
OIG found weaknesses in the CMS process for sharing termination information among the 
States.  The ACA requires CMS to establish a process to make available to State agencies 
information about providers terminated from the Medicare, Medicaid, and CHIP programs so 
that States can identify those providers who are required to be terminated.  To implement this 
requirement, CMS established a data-sharing process that allows State Medicaid agencies to 
voluntarily report to a central database providers whom the agencies terminated for cause from 
their programs and to retrieve information about providers who were terminated for cause by 
Medicaid programs in other States.  We found that not all State Medicaid agencies were 
reporting to the database and that not all of the submitted records met the CMS definition of a 
for cause termination. 
 
OIG also found that providers terminated in one State continued to participate in other States 
Medicaid programs.  Specifically, we found that 12 percent of providers who were terminated 
for cause from State Medicaid programs in 2011 continued to participate in other States 
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  Medicaid programs, notwithstanding the requirement that such providers be terminated in all 
States.  About half of these providers remained listed as participating in Medicaid in other States 
until as late as January 2014, and about one-third of these participating providers received 
payments for services rendered to Medicaid beneficiaries after the providers terminations for 
cause.  
 
Some of the challenges that States face include: not having a comprehensive data source for 
identifying all terminations for cause as well as difficulty differentiating such terminations from 
other administrative actions that a State reports. Of the 41 States that used managed care in 2012 
to deliver Medicaid services, 25 did not require providers who participated via managed care to 
be directly enrolled with the State Medicaid agency. This further complicated said States ability 
to terminate providers.  If a State has not directly enrolled a provider, it cannot terminate that 
provider, and it may not even be aware that the provider is participating in its Medicaid 
program.  Of the 295 providers who were reported by States as terminated for cause but who 
continued to participate in other States, 91 were not directly enrolled with the State Medicaid 
agencies. 
 
To address these issues identified in our reports, we have recommended that CMS: 
 
  Require each State Medicaid agency to report all providers terminated for cause. 
  Ensure that the shared information contains only records that meet CMSs criteria 
for terminations for cause. 
  Work with States to develop uniform terminology to clearly denote terminations 
for cause. 
  Require that State Medicaid programs enroll all providers participating in 
Medicaid managed care. 
 
CMS concurred with our recommendations and has stated that it is committed to improving 
Medicaid program integrity efforts.   
 
 
Adequate safeguards to prevent fraud in Personal Care Services  
 
Personal care services such as bathing, light housework, or meal preparation, allow many elderly 
people and those with disabilities or chronic or temporary conditions to remain in their homes 
rather than be placed in a nursing facility or other institutionalized care setting. Eligible 
beneficiaries can receive these services under Medicaid State plan options or waivers.  The 
services must be provided at home or another approved location and follow a specific plan of 
care.  These services are typically performed by care attendants. 
 
OIG is committed to ensuring that personal care services provided under Medicaid have 
adequate safeguards to prevent fraud, waste, and abuse.  Over the last decade, OIG has issued 
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  numerous reports on the topic of personal care services and conducted numerous investigations 
involving personal care services fraud.  A 2012 report entitled personal care services: Trends, 
Vulnerabilities, and Recommendations for Improvement synthesized our body of work and 
offered new and comprehensive recommendations to address vulnerabilities that we have 
identified. Our work in this area continues to demonstrate that significant problems remain. 
 
OIG also found that payments for personal care services were improper because the services 
were not provided in compliance with State requirements, were unsupported by documentation, 
were provided during periods in which the beneficiaries were institutionalized and were 
provided by attendants who did not meet State qualifications.  We have also found that existing 
program safeguards intended to prevent improper payments and ensure medical necessity, 
patient safety and quality have often been ineffective.  
 
Through our reports, we made a number of recommendations to CMS to address the 
deficiencies we identified, including: 
  Making qualification standards for care attendants more consistent. 
  Requiring care attendants to be enrolled or registered with the State and requiring 
dates, times, and attendants' identities to be listed on claims to Medicaid. 
  Expanding Federal requirements and guidance to reduce variation of 
requirements for claims documentation, beneficiary assessments, plans of care, 
and supervision of attendants across States.   
  Issuing guidance to States regarding adequate prepayment controls. 
  Assessing whether additional controls are needed to ensure that personal care 
services are allowed under program rules and are provided. 
  Providing States with the data to identify overpayments when beneficiaries are 
receiving institutionalized care.   
 
In response, CMS agreed that more needs to be done at the Federal and State levels to ensure 
appropriate billing for personal care services and has agreed to take a number of steps to address 
the recommendations made by OIG. 
 
 
Medicaid Fraud Control Units  
 
Another way that OIG helps protect Medicaid from fraud and abuse and Medicaid beneficiaries 
from harm is by overseeing State Medicaid Fraud Control Units (MFCUs).  OIG evaluates 
MFCU operations, ensures that the MFCUs comply with grant requirements, compiles statistics 
on performance, and manages the awarding of Federal funds to them.   
 
State MFCUs play the primary role for Medicaid in the investigation and prosecution of 
provider fraud and patient abuse or neglect in health care facilities.  MFCUs, usually part of the 
State Attorney Generals office, operate under an interdisciplinary model, employing attorneys, 
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  auditors, and investigators, and are typically responsible for both the investigation and the 
criminal and or civil prosecution of cases.  Each MFCU receives a 75 percent Federal match 
under the program; new MFCUs receive a 90 percent Federal match for an initial 3-year period.  
In fiscal year 2014, MFCUs employed 1,957 staff and spent over $235 million in both Federal 
and State funds. 
 
MFCUs reported a total of 1,318 criminal convictions for fiscal year 2014, including 956 for 
provider fraud and 362 for patient abuse or neglect.  MFCU criminal and civil cases contributed 
to reported monetary recoveries of over $2 billion for the fiscal year.  This translates to a return 
on investment of $8.53 in recoveries for each dollar expended in Federal and State funds.  
 
MFCUs operate in 49 States and the District of Columbia.  Under the Medicaid statute, all States 
 defined to include the District of Columbia and the five U.S. territories  are required to have a 
MFCU as a feature of their Medicaid State plan, unless the State receives a waiver from the 
Secretary. All five U.S. territories and the State of North Dakota do not maintain a MFCU.    
 
The major barrier to establishing a MFCU in Puerto Rico and the other territories is the nature of 
Medicaid funding for the territories.  Unlike Medicaid funding for the 50 States and the District 
of Columbia, the territories receive a capped appropriation to provide both Medicaid services 
and most administrative costs, which would include operation of a MFCU.  Although the ACA 
provided a temporary increase in the amount of Medicaid funding to the territories, they 
routinely use the full amount of their capped appropriation for Medicaid services and essential 
administrative costs.  This becomes a significant obstacle to the allocation of scarce Medicaid 
dollars to the establishment and operation of a MFCU.    
 
The lack of a MFCU in Puerto Rico, the territory with the largest Medicaid program by far, is a 
particular concern.  OIG believes that the addition of a MFCU in this jurisdiction is important to 
protect the program and its beneficiaries from fraud, and to protect residents of health care 
facilities from abuse or neglect.  Puerto Rico has a total Medicaid enrollment of more than 1 
million people, comparable to the Medicaid enrollment in many medium-size States.  OIG has a 
significant investigative workload in Puerto Rico that includes over 117 criminal convictions 
and $12 million in civil settlements from calendar year 2012 to date.   
 
Legislation could remove the disincentive to establish MFCUs in the territories.  This could be 
accomplished by exempting MFCU funding from the capped Medicaid appropriation.  OIG 
believes that such a change would also be cost-efficient, especially in Puerto Rico. Current data 
demonstrate that MFCUs generate positive returns on investment.  Puerto Rico officials have 
expressed interest to OIG in establishing a MFCU but have not been able to get approval for it.  
 
 
 
   
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  Conclusion  
 
We have a substantial body of Medicaid-related work, both underway and planned, to ensure 
that taxpayer dollars are spent for their intended purposes.  This work will examine additional 
critical issues that were not discussed in my testimony today, such as eligibility determinations 
for the Medicaid expansion population, Medicaid payments for medical equipment and supplies, 
health care provider taxes, and Medicaid payments to managed care organizations  
 
Given the growth of the Medicaid program, OIG believes it is critical that we continue to 
conduct effective oversight to ensure that funds are spent appropriately and that steps are taken 
to improve the quality of care for Medicaid beneficiaries.  
 
Thank you for the opportunity to testify about the Office of Inspector Generals work in the 
Medicaid program. 
 
 
 
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